§ The Secretary of State for Social Security (Mr. Peter Lilley)
I beg to move,That the draft Social Security Benefits Up-rating Order 1996, which was laid before this House on 31st January, be approved.
§ Madam Deputy Speaker (Dame Janet Fookes)
I understand that with this it will be convenient to discuss the following motions:That the draft Social Security (Contributions) (Re-rating and National Insurance Fund Payments) Order 1996, which was laid before this House on 31st January, be approved.That the draft Social Security (Contributions) Amendment Regulations 1996, which were laid before this House on 31st January, be approved.That the draft Guaranteed Minimum Pensions Increase Order 1996, which was laid before this House on 31st January, be approved.That the draft Social Security (Incapacity for Work) (General) Amendment Regulations 1996, which were laid before this House on 31st January, be approved.That the draft Child Support (Maintenance Assessments and Special Cases) and Social Security (Claims and Payments) Amendment Regulations 1996, which were laid before this House on 31st January, be approved.
§ Mr. Lilley
This is an important opportunity to debate the central issue facing every developed country: how to control welfare spending. Since the establishment of the welfare state after the war, social security spending has grown by 5 per cent. a year faster than inflation—twice as fast as national income. Social security has been the principal engine of rising taxes and burdens on employers. On average, it costs every working person £15 every working day.
Over the past three years, I have carried through a widespread programme of reform, and as a result I have reduced the planned growth of the welfare budget to little more than 1 per cent. a year. That is half the underlying growth of the economy, and will allow scope for lower taxes, lower burdens on employers and more job creation. The Labour party has opposed virtually all the reforms that I have introduced so far. It even attacked the £1 billion extra savings that I announced following the Budget. Moreover, every measure that it has proposed has involved extra spending.
Next year, planned spending on social security will be £90 billion, which is below the planned spending that I announced two years ago. It will include £3 billion to finance increased benefit rates. Benefits are increasing by 3.9 per cent., yet inflation has fallen to just 2.9 per cent. That is the largest percentage uprating for four years, even though inflation is running at the lowest level for more than two years.
In curbing spending, the fight against fraud remains my top priority. In the past, we had no way in which to measure the scale of fraud, so I developed a method of establishing the extent of fraud by detailed investigation of a representative sample of claimants. We are reviewing fraud benefit by benefit. The first survey showed that, in income support and unemployment benefit alone, fraud was costing the taxpayer more than £1.5 billion a year. I introduced a new strategy to prevent and deter that fraud.
194 The second review, which was of housing benefit, showed that fraud and errors were costing £1 billion a year. I am developing a comprehensive strategy to tackle housing benefit fraud. First, I have earmarked an £8 million challenge fund to develop local authority innovation against fraud. Secondly, I am giving local authorities greater incentives to pursue fraud. I am setting tougher targets with higher rewards and stiffer penalties. Thirdly, we will allow local authorities to make housing benefit cheques payable to landlords to stop tenants absconding with them. For all new claims and those who change address after October 1996, we will pay housing benefit, like most other benefits, wholly in arrears. That will limit overpayment of benefit and will increase recovery.
As well as cracking down on fraud, we are plugging benefit loopholes. Earlier in the month, I restricted access to benefits that were widely abused by bogus asylum seekers. More than 90 per cent. of those claiming asylum are eventually found not to be genuine refugees. While the number of asylum claims in the rest of Europe has been falling, it has been rising in the United Kingdom, partly because of the attractions of our benefits system.
Those problems have been recognised not only by the Government but by the Social Security Select Committee and Amnesty International. Only the Opposition have failed to recognise an abuse that involves about £200 million a year of taxpayers' money going to bogus asylum seekers. The reforms that I have put in place restrict benefits for economic migrants but meet our proper obligations to those genuinely seeking refuge in Britain.
§ Mr. Jeremy Corbyn (Islington, North)
Is there any chance that the Minister will stop spreading the nonsense about the £200 million? He knows perfectly well that, if he removes benefits from asylum seekers who are appealing against a decision to refuse them asylum, the cost to local government of supporting those people under the Children Act 1989 is likely to be far more than £200 million. He is making a xenophobic attack on asylum seekers rather than dealing with the serious problems of poverty among people who have fled from fear and repression.
§ Mr. Lilley
The hon. Gentleman is simply mistaken. Local authorities will, of course, have an obligation to ensure that children in their areas do not suffer hardship, but they can do so by paying the same amount as would otherwise be available in benefits. There will therefore be no greater cost in such cases. However, only a small fraction of asylum seekers have children. There will be no loss in cases involving children, and a burden will be imposed on local authorities only when there is any risk of hardship. In most cases there is not; most asylum seekers do not have children.
While we have been reforming benefits in Britain, the hon. Member for Islington, South and Finsbury (Mr. Smith) has been off to Australia in search of better benefits for the Labour party. There he discovered Australia's JET—or jobs, education and training—scheme, which helps lone parents back into work. The hon. Gentleman recently said:I can give a pretty strong steer that one thing likely to be included in our policy review is the JET scheme. It does seem to work. It does seem to save money".195 The fact is that the Australian scheme has not saved money. Its cost has exceeded by £40 million the savings in benefits for all those who have returned to work. If those who would have returned to work anyway were excluded, the net cost would be even higher. Even that calculation excludes the cost of the Australian child care arrangements, which are essential for the scheme to work, and which would cost more than £1 billion to replicate in this country. Alas, the simple fact is that there are few self-financing options in welfare. The Labour party should not pretend that its expensive policies would come free of cost to the taxpayer.
The Government have long recognised the difficulties of lone parenthood, and the importance of helping lone parents back into work. That is why we have announced a major pilot scheme to help lone parents with skill training and job search, and why we have added 18,000 child care places to the 50,000 that we have generated over the past few years.
However, we also recognise that there are great costs involved in supporting lone parenthood. Total benefits for lone parents are expected to exceed £9 billion this year. That means that every working family, in addition to supporting its own children, is having to pay on average £1,500 in extra taxes to support lone parents.
My strategy for easing that burden is threefold. First, we must improve the incentives for lone parents to work, so I have improved family credit, which is of particular help to lone parents. I extended it to those who work part time, and from last July I boosted it by £10 a week for those working full time. I also introduced an allowance for the cost of child care, which I shall raise to £60 per week from next April. That will be especially valuable to those with more than one child, and to those who work full time. As a result of the changes already made, the number of lone parents who work is rising. About 270,000 lone parents are benefiting from family credit.
The second element in our policy on lone parents is to ensure that more of them receive regular maintenance from the absent parent. The taxpayer should help to support children only if parents have not the means to do so. The Child Support Agency, after a difficult start, is now proving increasingly effective, and is on target to collect and arrange 60 per cent. more maintenance this year than last year. Even absent parents on benefit ought to contribute to the cost of their children, and from April I propose to double the minimum contribution to 10 per cent. of basic income support.
Finally, I want to ensure that the benefit system does not put married couples at a disadvantage relative to lone parents. I can tell my hon. Friends, but Opposition Members may not like to hear it: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. The policy has got to be reversed".Those were not my words but those of the Chairman of the Social Security Select Committee, the hon. Member for Birkenhead (Mr. Field). Of course, he was right.
There are two elements in benefits for lone parents that have no equivalent for couples—one-parent benefit and lone-parent premium. Together, those cost more than £600 million a year.
196 One-parent benefit was introduced in 1976, as a strictly temporary measure in advance of the main child benefit scheme. While the Child Benefit Bill was going through the House, the then Barbara Castle said:there is to be an interim benefit of £1.50 a week for the one-parent family for a year from April 1976 until the child benefit scheme comes into effect".—[Official Report, 13 May 1975; Vol. 892, c. 337.].Since then, changes to the benefit and tax system have made it possible for a lone parent not only to be better off in work but to have a higher net income than a couple in similar circumstances with the same gross earnings, despite the fact that the latter would have an extra adult to support. That cannot be right.
I therefore propose no increase in one-parent benefit or lone-parent premium in April. The Government intend to narrow the gap between the benefits for lone parents and those for couples. I have referred to the Social Security Advisory Committee regulations to enable me to do that at a controlled pace, and in a way that does not produce cash losers.
Those proposals increase the opportunities to combine work and family responsibilities for all families. They improve incentives for lone parents to support themselves and to avoid the trap of welfare dependency, and they reduce the burden on self-supporting married couples.
I also intend to improve work incentives for all workers. From April 1996, employers will qualify for one year's remission from their national insurance contributions for each person whom they take on who has been out of work for two years or more. One of the measures before us cuts national insurance class 4 contributions for self-employed people by 1.3 per cent. from April. Finally, I intend to cut the main rate of employers' national insurance contributions by 0.2 per cent. from April next year.
The major success of Britain's welfare provision is the extent to which we have encouraged people to provide for their own retirement. Most countries finance their pensions schemes largely from tax. This year's tax is used to pay for this year's pensions, and nothing is set aside for the future. The system is "pay as you go". The more elderly people there are, and the fewer people of working age, the more crippling the tax burden that the latter will face as the years go by.
The jewel in Britain's crown is our system of largely funded compulsory second pensions. More than three quarters of employees who are eligible to do so have opted out of our state earnings-related scheme into private schemes. Their money is genuinely saved and invested. It goes into business, and finances the assets that will generate profits to pay for their pensions when they retire, without imposing a tax burden on the British economy. It also strengthens the British economy by injecting a huge and growing stream of long-term savings.
Those savings are immense. The total value of investment in British pension funds has reached nearly £600 billion. That is not only more than the figure for any other single country in Europe but more than that for all the other countries in the European Community put together. Moreover, it is £100 billion more than in the previous year. So although the state is spending nearly £90 billion a year on social security, the value of what the private sector saves for retirement has increased by even more than that in a year.
197 The Organisation for Economic Co-operation and Development recently contrasted Britain's position on pensions and other welfare services with that of other developed countries. It forecast each country's national debt, assuming that it continued with its present pensions system and levels of taxes and charges. That OECD comparison showed that, by the year 2030, the national debt in France and Germany will have more than doubled, and will exceed the national income. In Japan—a country that is aging particularly fast—debt will reach three times the national income. By contrast, Britain's second-tier funded pension places us in an almost unique position. The OECD forecasts that we will have paid off our entire national debt and will start to build up assets. That is an immensely important source of the strength of this country.
§ Mr. David Shaw (Dover)
Is my right hon. Friend aware that, if unfunded pension liabilities were added to the national debt in each of our European partners, only the United Kingdom would get near to meeting the Maastricht criteria on the proportion of debt to national income? Every other country in Europe would be in a very bad state as a result of its massive unfunded pension liabilities.
§ Mr. Lilley
My hon. Friend makes a very interesting point. I have not done the sums; but if what he says is true, it leaves the interesting possibility that we would be the only member of a single currency—were we to opt to take part. It gives the words "single currency" a new complexion.
§ Mr. Lilley
Well, it is something to be borne in mind.
It is right to recognise that unfunded liabilities are a potential burden that countries must bear. We have taken steps to make sure that we have funded our provision, and we hope that others will belatedly follow our example, rather than suggest that we should help them with their difficult tasks.
Labour's policies pose a threat to our success in building up funded private pensions. Labour has proposed a guaranteed minimum pension which, of necessity, involves means-testing people's private pensions. That means that people will lose up to £1 of guaranteed minimum pension for every £1 of private pension income saved. Such a measure would be a huge disincentive to private saving and a savage attack on thrift and prudence. The hon. Member for Islington, South and Finsbury wrote to The Times today, denying that that is Labour's policy. He wrote:Sir, Contrary to the assertions in your editorial 'Lilley's Logic"'—an excellent title, I have to say—Labour has not made a commitment to a guaranteed minimum pension.
§ Mr. Lilley
The hon. Gentleman has reiterated that from a sedentary position. But Labour has proposed a guaranteed minimum pension. Let me remind the hon. Gentleman that the Leader of the Opposition said in his much-hyped party conference speech last October: 198We are looking at ways…to guarantee a minimum standard of living for our pensioners. The aim of the policy is to … guarantee a minimum income that provides dignity in old age. That is new Labour".I challenge the hon. Gentleman to tell us who we should believe. Perhaps he might care to reconcile these two apparently divergent positions.
§ Mr. Lilley
I am sure that the hon. Gentleman had no duplicitous intent, but his letter to The Times is clearly apt to mislead, as it gives the clear impression that the Leader of the Opposition did not promise a guaranteed minimum pension. [HON. MEMBERS: "He did not promise that."] The right hon. Gentleman said "the policy"—he was referring to Labour's policy to provide "a guaranteed minimum income" in old age. If that is not a guaranteed minimum pension, what is?
§ Mr. Lilley
Income support is a form of guaranteed minimum pension, but the hon. Member for Islington, South and Finsbury said that Labour did not promise to provide one. I repeat what the hon. Gentleman said in his letter to The Times today:Labour has not made a commitment to a guaranteed minimum pension.
§ Mr. Lilley
Well, now we know. This is a matter that would have provided Lord Justice Scott with some interesting opportunities to compare and contrast the intentions of the Opposition, and he would have been hard put to say whether their duplicity was deliberate or not.
In any case, the hon. Member for Islington, South and Finsbury does not just contradict the Leader of the Opposition; he goes on to contradict himself. He recently went down under to look at Australia's pensions policy, accompanied by a BBC journalist—Miss Rosie Barnes, I believe.
§ Mr. Lilley
I am sorry. The hon. Gentleman obviously has more information on who accompanied him down under than I do. The BBC, rather unusually, chose to issue a press release, the headline of which was "Labour plans a new second tier pension for all, announces Chris Smith on BBC Newsnight". Yet in his letter to The Times today, the hon. Gentleman says:We do not propose a second tier pension".The third, and most serious, threat in Labour's proposals is its ambition to get its hands, the state's hands and even the trade unions' hands on private pension funds. Labour has always wanted to do that. Harold Wilson planned a state investment fund, and Roy Hattersley—as a Labour Front Bencher—planned to give the state powers to divert pension funds to finance projects deemed to be in the nation's interests. Even the normally 199 admirable hon. Member for Birkenhead has proposed a "stakeholder corporation" on which the trade unions would be allocatedthe appropriate number of seats".Recently, the Leader of the Opposition and the hon. Member for Islington, South and Finsbury went out to Singapore, and they expressed their admiration for Singapore's state-run central provident fund that the right hon. Gentleman, in his great "stakeholder" speech, said had "worked well". The right hon. Gentleman and the hon. Gentleman went on to say that Labour would draw lessons from Singapore's scheme in designing what they called a "stakeholder welfare system" for a stakeholder economy.
That should set alarm bells ringing, because the big difference between our system of pension provision and that of Singapore is that the state controls investments in Singapore. As a result, the central provident fund that the Leader of the Opposition thinks has "worked well" has yielded just 2 per cent. more than inflation as a return for pensioners since 1980. During the same period, the United Kingdom's private pension funds have yielded nearly 10 per cent. a year more than inflation. If the same amount were invested over a working lifetime at these yields in the British and Singapore pension schemes, the British scheme would provide a pension four times larger than that available from Singapore's state scheme. I am happy to say that the hon. Member for Islington, South and Finsbury, who praised the Singapore scheme to the highest out there, has today told The Times that Labour hasspecifically ruled out the Singaporean Central Provident Fund modelthat was to be the model for the stakeholder economy.
That should be good news, but the Opposition are now running down to Australia. After a brief holiday romance in Singapore in which they fell in love with the CFP, the Leader of the Opposition and the hon. Member for Islington, South and Finsbury flitted down to Australia and promptly fell in love with that country's system. The BBC press release goes on to explain why.
§ Mr. Lilley
There is an order relating to guaranteed minimum pensions, and this is very germane to it. The BBC press release said:Chris Smith was particularly interested in Australia's Industry-wide superannuation funds, which are administered jointly by employers and Trade Unions, giving the Unions power over how they are invested.The BBC press release continued:And, if Britain had a central or Industry-wide funds, Chris Smith said they would most likely be invested in a mix of the markets and job-creating schemes to improve the infrastructure.That is the one positive element of Labour party policy that the hon. Member for Islington, South and Finsbury did not bother to tell the readers of The Times about this morning when he ran away from all the previous commitments. I will give him the opportunity to run away from that one now.
§ Mr. Chris Smith
The Secretary of State would do better to listen to what I said to the BBC, rather than what it wrote in its press release. The two are not necessarily the same.
§ Mr. Lilley
If the hon. Gentleman has a dispute with the BBC, I am prepared to row in on his side and seek a correction. I telephoned the BBC and protested about the press release on his behalf. I thought it improper of the BBC to send it out practically in his name. I also said that it read very much like a Labour press release, but if the hon. Gentleman disagrees and wishes to tell us in which respect he disagrees, we will be only too anxious to hear.
The pensioners of this country do not want their private pension funds to be controlled or influenced by the state or the trades unions. They want them invested in a way that maximises the return to them when they retire. They are very satisfied with the high rates of return obtained from schemes under our system since it was given a boost by my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) some years ago. Our next priority is to build on our successful pension strategy, by encouraging more provision to meet the cost of long-term care for the elderly. Our arrangements have always involved a mixture of private and state provision. State provision has been means-tested since 1948 with the value of capital, including the home, taken into account.
Those matters have growing salience because more and more people are living longer and own their homes and have capital and pensions. I well understand the feelings of people who have been thrifty and prudent during their working lives and find themselves using up all their capital to pay for care that people in the same residential home are getting free.
The Chancellor responded to those concerns by allowing people to keep more of their assets. From April 1996, we propose to double the upper capital limit for income support for those in residential care to £16,000 and we are more than trebling the lower capital limit. We are consulting on important proposals to stimulate the development of attractive schemes for self-provision for long-term care.
The measures before us protect the most vulnerable, strengthen work incentives and control spending long term. We are fortunate in this country in that fewer people are out of work than in any other major country in western Europe, more people are in jobs and we have the lowest inflation for a generation.
§ Ms Mildred Gordon (Bow and Poplar)
How will the measures protect the most vulnerable, when absent parents on income support who get £47.90 a week will now have to pay £4.80, bringing them below the subsistence level that the Government set and way below the level that the family budget unit suggested in its researches for the Rowntree Trust? Can the right hon. Gentleman also tell us how much an absent parent under the age of 25, receiving £37.90 will have to pay and how that family is going to live on the meagre amount that is left?
§ Mr. Lilley
It is the children who will ultimately gain from maintenance and it is right that they should be supported by their parents and not by the state. Even for someone on income support, the first priority should be 201 to pay at least a token amount towards support of the children. It is probably to the long-term benefit of children—whether or not the mother is also on income support—for them to know that some of their support is coming from the absent father, as well as the help from the state. The answer to the hon. Lady's second question is that it is the same for that group as for those on the basic rate.
§ Mr. Alan Howarth (Stratford-on-Avon)
Is the House to understand from what the right hon. Gentleman said that he plans to introduce an income support disregard for child maintenance? Otherwise, it seems that the money goes to the Treasury and not to the family or the children, despite what he says.
§ Mr. Lilley
The hon. Gentleman works on the presumption that people are supported by the state unless someone voluntarily provides some support for themselves. Our basic presumption is that parents support their children and the state comes in only to supplement what they can provide, if they do not have the means to provide sufficient. The first call is on the parent and the state only supplements that, rather than the first call being on the state, with parental provision being almost irrelevant.
Mr. Terry Roon (Bradford, North)
§ Mr. Lilley
I have given way to both the hon. Gentleman and the hon. Lady once, so I will give way to the hon. Member for Bradford, North.
§ Mr. Rooney
I admire the Secretary of State's concern for children, but is he aware that, as drafted, the nursery vouchers scheme will be counted as income for any parent who is in receipt of family credit?
§ Mr. Lilley
The Under-Secretary of State, my hon. Friend the Member for Gedling (Mr. Mitchell), cast doubt on that allegation. I will look into it and write to the hon. Gentleman, if I may. I should say that my hon. Friend cast doubt on it in the most emphatic terms.
Yet again, the debate has highlighted the contrast between our social security policies and those of the Labour party. Labour would allow spending to increase to unaffordable levels, which ultimately would betray the people who depend on the welfare system. We are determined to keep spending under control and to focus help on the people who need it most.
Labour flirts with costly schemes for lone parents, which it has picked up far away. We are implementing a three-pronged system to improve work incentives, secure more maintenance and remove benefit distortions. Labour would harm pensioners and taxpayers by extending state controls, raising costs and destroying incentives to save through wider means-testing. We are helping more and more people to provide for a comfortable old age by building up a third tier of personal provision.
In short, Labour seeks to con the electorate by a shadowy, costly and damaging set of proposals. By contrast, we have put in place a principled programme 202 of reform, which is already delivering results. The measures continue our reform. They raise benefit levels for the vulnerable and are combined with reforms to enable us to afford that help. I commend them to the House.
§ 5.7 pm
§ Mr. Chris Smith (Islington, South and Finsbury)
I am glad that, in his final two sentences, the Secretary of State got to the orders and regulations. Perhaps I should begin by saying that I shall be advising my right hon. and hon. Friends to vote against the family law regulations and the child support amendment regulations. We shall not be voting against the general uprating order because it contains a large number of measures that will be of benefit, but we disagree with a number of proposals within it.
First, it may be worth looking at the Government's general record on social security. Since 1979, total Government expenditure on benefit has increased by £30 billion in real terms and the number of people dependent on benefit has doubled from one in 12 to one in six. At the same time, the Government have increased employees' national insurance contributions from 6.5 per cent. to 10 per cent. That is the real record of this Government on social security. So, when the Secretary of State talks, in rather regal terms, about "my reforms", he is ultimately talking about a record of failure.
The income of the richest tenth of the population has grown by more than 60 per cent. in the past 17 years, while the income of the poorest tenth has decreased by 17 per cent. The gap between rich and poor has increased more in Britain than it has in any other major developed country. The number of children in our country who are living in poverty has trebled, from one child in every 12 in 1979 to one child in every four. Even since 1990, when the Prime Minister took office, the number of people who are dependent on income support has increased by 2.85 million people, which is an increase of 40 per cent. That is the Government's record, and it includes the most recent figures. The soft soap that the Secretary of State occasionally gives us should be taken in that context.
The Government have succeeded in creating the worst of all possible worlds. They have made the social security system more brutal by cut after cut to particular benefits, affecting particular groups in our society, yet they have succeeded in massively increasing the bill to the taxpayer.
In the course of half an hour this afternoon, the social security budget increased by £3 billion. At Question Time, the Secretary of State told us that this year's social security budget will be £87 billion. Half an hour later, he told us that it will be £90 billion. If that was meant to be a clarification, and he was referring to one year in one answer and another year in another answer, we welcome it. I shall give him the opportunity to make that clarification.
§ Mr. Lilley
The earlier answer was in relation to the current financial year, while the statement in my speech was about the coming financial year, to which the regulations refer.
§ Mr. Smith
That is a very useful clarification.
203 The Secretary also said that the Labour party opposed the £1 billion of so-called savings that were announced in the Budget. We did not oppose the Government's proposals on fraud, and the lion's share of the claimed savings related to fraud. Clarification of that would be useful. On page 130 of the Red Book, the Government say:By 1998–99 social security anti-fraud measures are expected to save about £2.5 billion a year.Is that figure correct? It does not tie in with other figures that they have given. It would be useful to know by the end of the debate whether that £2.5 billion a year of savings on fraud, which are expected in the next three years, is an actual figure. We should be very interested to know precisely what figures the Government are expecting.
The Secretary of State has also given us a statement that somehow, despite the fact that the bill has increased by £30 billion in the past 17 years, all is at last under control. What about the current year? Page 114 of the Red Book contains a very interesting little sentence. In talking about the control total for 1995–96, it says:Social security spending is forecast to be higher than planned, but this is more than covered by the unallocated Reserve of £3 billion within the Control Total.At a time when the Government tell us that unemployment is falling, why is the social security budget for the current year projected to be higher than was planned at the start of the year? If that is the case, how can matters be, as the Secretary of State keeps telling us, substantially under control?
Should we believe the Secretary of State or the Chancellor of the Exchequer in relation to the future? The Secretary of State has told us a couple of times today that the social security budget is set to grow by 1 per cent. in real terms in the next few years. However, in a much publicised speech a few days ago, when he spoke of something called a strong welfare state—something that is not particularly recognisable under this Government's stewardship—the Chancellor said that thereal growth in social security spendingin the next three years will be 1.5 per cent. Who is right—the Secretary of State, who tells us that growth will be 1 per cent., or the Chancellor, who tells us that it will be 1.5 per cent.? This is not a semantic matter, because 0.5 per cent. of the social security budget is almost £500 million of public expenditure. We are entitled to know whether the Secretary of State's figure or the Chancellor's figure is the correct one.
§ Mr. Alan Duncan (Rutland and Melton)
Perhaps the hon. Gentleman will tell the House who is right on a similar matter. My right hon. Friend the Secretary of State, in considering future years, plans to cut his Department's running costs by £750 million. The hon. Gentleman criticised that proposal, but he quickly had his wrist slapped by the hon. Member for Oxford, East (Mr. Smith). Which of those two Labour Front Benchers is right?
§ Mr. Smith
I entirely agree with my hon. Friend the Member for Oxford, East (Mr. Smith), who told me in a letter of 13 February—not 12 February, as incorrectly reported by the Evening Standard: 204There must be doubts about the wisdom of trying to achieve so much in so short a time",referring precisely to the Government's proposals.
It is terribly interesting that the Secretary of State, in an exchange of correspondence with the Chief Secretary to the Treasury on 24 October last year, said to him:Your proposed settlement on running costs fills me with despair.Now, a few months later, the Secretary of State is telling us that the settlement was all wonderfully well planned in advance and that it is a wonderful way forward for the Department. That is a slightly different version of events from the one we were given in October.
The motions propose freezing one-parent benefit and the lone-parent premium. The saving to the Government from each of those measures will be £5 million out of an overall budget of £90 billion. So the Government must have had some really important objective to include such a tiny measure within those proposals, and they have now told us what it is: an eventual equalisation of the position between single-parent and two-parent families. That is an entirely new doctrine for the Government this year, and it appears to rest on the view that the cost of raising a child in a one-parent household is exactly the same—there is no difference whatsoever—as it is in a two-parent household. One does not have to be a genius to understand that if someone cannot count on the unpaid labour of another member of the household, the costs of bringing up a child are bound to be greater. The Government themselves subscribed to that view at one time.
The 1985 Green Paper on the reform of social security—written, I believe, by the right hon. Member for Sutton Coldfield (Sir N. Fowler), whom I am pleased to see in his place—argued that one-parent benefit should be continuedas a contribution to the additional costs faced by lone parents in bringing up children alone".It went on to say that the lone-parent premium was introduced in order to recognisethe extra pressures faced by lone parents.In the subsequent White Paper, the Government emphasised: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".In 1985, the Government and the right hon. Member for Sutton Coldfield were saying that lone parents clearly faced additional costs and had extra pressures imposed on them, yet the Government are now telling us that there is no difference between them and two-parent families. They said one thing in 1985 and another in 1995.
Lone parents are, of course, in general poorer than two-parent families, even taking account of the number of people in the household, and the gap between lone parents and couples is growing. In 1979, the average median equivalised income of lone-parent families was 79 per cent. of that of couples with children. By 1992, that had fallen to 64 per cent.
The Government ought to know that the comparative position of single-parent families had worsened in relation to that of two-parent families because the information is contained in the Department of Social Security's 205 "Households Below Average Income" report. The Social Security Advisory Committee told the Government the same thing in 1989. It stated:A key feature of these two benefits"—one-parent benefit and the lone-parent premium—is their reliability. When problems are being experienced with maintenance, Income Support, Family Credit or wages (for example, when a child is sick or the care arrangements break down), Child Benefit and One Parent Benefit continue to be paid with unfailing regularity…these benefits are highly valued by lone parents".I am afraid that the Government's tune has changed dramatically in only a few years. They are going down the wrong road in saying that the difficulties faced by single-parent families somehow do not matter—they do.
One-parent benefit in particular is a key part of any benefit-to-work strategy because it is carried through when a lone parent takes work—it is a through-train. It is one of the few parts of the benefit system that acts as a bridge between benefit and work. If we have learned anything in recent years, it has to be that we should be making it easier for people to move from benefit into work, out of dependency and into the work force. Yet the Government, by freezing this particular benefit for such meagre savings, are going in completely the wrong direction.
If the Government do not believe me, they should listen to what the Select Committee on Employment said in its report on mothers in employment. It stated:The difficulties caused by means-tested benefits are worse for lone parent families".It went on to recommend thatthe Government establish a task force which would include representatives of all the relevant departments, to study the special difficulties that lone parents encounter in attempting to enter the workforce and escape the benefit system".Instead of responding positively to that proposal, the Government want to freeze and eventually eliminate one of the key parts of the benefit that assists single parents.
The Secretary of State had one or two remarks to make about the jobs, education and training scheme—the JET scheme—in Australia. In fact, his assessment of the scheme was incorrect. Yes, the costs of the first couple of years of the scheme's operation were greater than the savings on benefit expenditure. If he doubts that, he should ask the permanent secretary at the Department of Social Security in Australia. I did precisely that only four weeks ago.
§ Mr. Lilley
The hon. Gentleman might be interested to know that I sent my previous and present permanent secretaries to Australia. They carried out a rather fuller investigation of the costings than the hon. Gentleman seems to have done. They took into account the two factors that I mentioned, which are not taken into account in anything that the hon. Gentleman has said or in the figures that he is now giving.
§ Mr. Smith
I am afraid that the information that has come back to the Secretary of State from Australia has been overtaken by events. In the current year—the Department of Social Security in Australia will confirm this—more money is saved from the benefit system, because of the number of people who enter the work force or full-time education or training and come off benefit, than is spent on administering the JET scheme. If the 206 Secretary of State doubts that evidence, he should examine the basic figures. The average length of time that a single parent in Australia spends on benefit has gone down during the four years of the scheme's operation.
We need to examine the increase in the non-dependant deductions in housing benefit. The increase is over and above the rate of inflation. That is no small matter because the Government tell us in parliamentary answers that some 500,000 people will be effected by the increase in the non-dependant deduction. If someone living in a household is deemed by the system to be able to contribute to the housing costs, his housing benefit is accordingly reduced. The amount of that reduction is being increased by more than the rate of inflation. That will have two effects.
First, it is a further disincentive for family members to take work and exacerbates the difference between work-poor and work-rich households. It means that people will think twice before deciding to take a job opportunity. Secondly, it will act as a stimulus for family break-up. There is clear evidence that when the sons and daughters of a household reach adulthood, the pressure on them to move away from the family home because of the impact of the non-dependant deduction often increases the break-up of families. That policy comes from a Government who say that they believe in the family, but it will intensify the problem.
There are other housing benefit changes in the pipeline, not specifically in the orders but none the less flagged up in the uprating statement. We are told that there will be a cap on housing benefit payments for people under the age of 25; that they will have to live with housing benefit that represents the cost of shared, rather than real, accommodation. That will force many young people into unregulated, multiple-occupation accommodation. Its possible impact on young people coming out of care is especially worrying. It takes no account of the fact that there are many areas where shared accommodation is scarce, so it will place a serious burden on young people who cannot find shared accommodation.
The cap on housing benefit provides yet another disincentive in the system to people taking up work. If people under the age of 25 who are unemployed and in receipt of housing benefit take jobs that are temporary, or likely to be temporary, they will lose their housing benefit because they are earning money. When those jobs end after six months or a year, they will go back on to housing benefit but at a lower rate than when the employment was first taken up. For many people, that may mean losing not only their jobs but their homes. That is a powerful disincentive to people thinking of taking up temporary, or possibly temporary, work. Through their housing benefit system proposals, the Government will intensify that disincentive.
The proposals also act as a disincentive to moving to take up a job. If people on a higher rate of housing benefit move from their existing accommodation into a new area to take up employment, they may have that employment only for a short period. If they lose those jobs, they will immediately go on to the lower rate of housing benefit.
That measure comes on top of a series of measures that the Government have taken to make the entire benefit system harsher for people under the age of 25. On the introduction of income support in 1988, they withdrew income support from 16 and 17-year-olds. They 207 introduced a lower rate of benefit for the under-25s and aligned income support with housing benefit, thereby cutting help with housing costs for young people.
The jobseeker's allowance will be another blow for young people because people between the age of 18 and 24 who are currently eligible for unemployment benefit receive the same rate of benefit as all other unemployment benefit claimants. As non-means-tested jobseeker's allowance will be aligned with income support rates, benefits for under-25s will be reduced. For single people under 25, that will mean a 20 per cent. cut in benefit.
There is one other housing benefit change in the pipeline—the proposal that the payment of housing benefit should be made in arrears rather than in advance. The reason why housing benefit has been paid in advance is that rent has to be paid in advance. That is a simple proposition.
§ Mr. Smith
The Minister suggests that rent does not have to be paid in advance. I do not know whether he has gone out looking for private rented accommodation in the recent past but he is living in more of a fantasy land even than most of the Government if he believes that rent will not be requested in advance by private landlords.
In addition, the Government should bear in mind the problems for local authorities, which will have to adjust all their computerised systems for the payment of housing benefit to take account of the changes that the Government are introducing. Despite all that, the Government make dramatic claims about the amount of money that they will save by the measure.
In a written answer to me on 29 January 1996, the Government said that the amount that would be saved by the change in the payment arrangements for housing benefit would be £105 million in the first year, 1996–97, and in the second year, £120 million. I would like the Government to tell us how they have calculated those figures because the only direct saving that they make by that change is to shift in the course of one year expenditure from one month into another. That will produce a cosmetic saving in the Government's accounts. They must be relying on the expectation that, somehow, the change will make a substantial difference to the fight against housing benefit fraud. If that is the case, I want to know how they intend to achieve those savings because they are considerable—the largest of any of the measures in the uprating statement.
§ Mr. Smith
No, I have already given way to the hon. Gentleman.
The Government have also announced in the orders that they are to freeze the level of cold weather payments for pensioners on income support. [Interruption.] The Secretary of State expresses some astonishment. The amount for cold weather payments in the motions is the same in cash terms as it was in the current year. I am surprised that he does not know the content of his own orders and regulations.
208 The issue is especially appropriate today because we are reminded by the cold weather of the great difficulty faced by many elderly people struggling to pay their heating bills. There are two things which at the very least the Government should do—quite apart from the relatively small amount of money that it would take to be more generous in uprating the payments in line with the broad uprating of other benefits.
First, the Government should pick up the point that was made at Question Time by my hon. Friend the Member for Croydon, North-West (Mr. Wicks). The Government, sensibly, have said that when cold weather for the specified period is forecast, people will be entitled to cold weather payments. They will not have to wait until after the cold weather to be sure that the benefit will be guaranteed. Why on the earth are the Government not more active about making sure that as soon as the cold weather is forecast, everyone knows about it so that those people in areas that will qualify for cold weather payments can be confident that they will get the money, and can put on their fire for a longer period than they would otherwise want to do? The Government have said that they are prepared to use forecasting but they do so with great reluctance. They ought to use it more often.
Secondly, there is the point raised by my hon. Friend the Member for Barking (Ms Hodge) in her question to the Secretary of State this afternoon. It does not make sense that the residents of Nos. 450 to 472 Lodge avenue have received one cold weather payment this winter, when the residents of Nos. 453 to 469 Lodge avenue have received four cold weather payments over the same period. I appreciate the Secretary of State's point that somewhere and somehow lines must be drawn. However, there are absurdities in the system, of which Lodge avenue is one example. The Secretary of State should examine the system of cold weather payments to see whether it is possible to eliminate those absurdities.
As I have said, I shall be advising my hon. Friends to oppose the child support regulations. We agree with the principle that both parents must accept a financial responsibility for the upkeep and welfare of children. However, the order increases demands on the absent parent who is in receipt of income support. In many cases, the child and the parent with custody will derive no real benefit from the order because the Treasury will get the money. That is the whole point of the Government's action: they have told us that they will raise £10 million in the first year as a result. In the majority of cases, the Treasury, and not the child, will benefit in real terms.
The absent parent will face a sharp reduction in what is already a breadline income. The Government propose to take money from absent parents and give it to the Treasury. Those absent parents presently get no needs allowance for the upkeep of children when their income support is calculated and, according to the calculations endorsed by the Government, that income support is intended to keep only one person together in body and soul. A further deduction will put those parents well below the poverty line. The Government must think about what they are doing. Both parents have a clear responsibility to ensure that their children are provided for, but the absent parent who is in receipt of income support should not be forced to live below the breadline. That is what the Government's order will do.
§ Mr. Smith
I agree with my hon. Friend, who takes a very keen, cross-party interest in the work of the Child Support Agency and in the operation of the Child Support Act 1991. The welfare of children is very important, but we should not forget about the welfare of both parents. In making a change, the Government are forgetting about the welfare of the absent parent.
Some of the orders before us tonight relate to pensions. They bring into focus two aspects of pension provision about which I shall press the Government. The first relates to the claims made by the Secretary of State—in this place today and elsewhere—about personal pension provision in this country. Conservative Members have made much of the £600 billion—it is a wonderful figure—invested by British pension holders, most of whom hold occupational pensions. The number of occupational pensions holders has decreased during the life of this Government and I shall deal with the reasons for that in a moment.
§ Mr. Smith
That is not what the Secretary of State says: he makes the claim for occupational and private pensions. The Government have deliberately encouraged people to opt out of occupational pensions and into personal pensions, and about 1 million people have done so. The Government commissioned an advertising campaign several years ago encouraging people to do precisely that. Between 4 million and 5 million people have also opted out of state earnings-related pensions schemes and into personal pension schemes. Many of those who have opted out of SERPS or occupational pensions and into personal pension schemes may now be worse off than before.
Everyone agrees that there was a problem with mis-selling. I believe that the Government bear a heavy responsibility for deliberately encouraging people to opt for personal pensions when we know that that was not a sensible step in many cases. The Government have made all sorts of complacent claims; I am staggered that they believe that personal pensions are the be all and end all of pension provision in this country. We know not only that a large number of personal pensions were mis-sold, but that personal pension holders often lose 25 per cent. or more of their pensions in administration and commission fees. About £ 1 in every £4 that savers invest in personal pension schemes disappears in administrative costs. That is not good value for the saver.
§ Mr. Nick Hawkins (Blackpool, South)
I hope that the hon. Gentleman will not get so carried away with the Labour party's politics of envy that he runs down the enormous contribution of the financial services industry—in which we lead the world—to the United Kingdom balance of payments and to our national income.
§ Mr. Smith
Far from it—I shall ensure that the financial services industry flourishes still further under a future Labour Government. The pension products that are available to British savers should provide good value for 210 money. People's hard-earned savings should not disappear in administrative fees and charges, which is what is happening.
§ Mr. Corbyn
In addition to the 25 per cent. administration charges, is my hon. Friend aware of another serious danger? The majority of personal pensions that have been sold are nowhere near maturity, but there is no guarantee as to who will support or bail out those individuals who have spent a large proportion of their working lives paying into pension schemes if the pension companies, institutions or funds collapse.
§ Mr. Smith
My hon. Friend makes an interesting point: we need a good and proper regulatory framework to protect all investors in every pension scheme.
While we are discussing personal pensions and the future of pension provision, the right hon. Gentleman has been peddling a myth for some weeks about Labour being interested in a Singaporean, state-directed, state-invested scheme—that is a complete fantasy on the Government's part. At no stage has the Labour party endorsed such a scheme. We have learned lessons from Singapore precisely because the scheme has not yielded a good return for the investor in Singapore. We have said on a number of occasions that we will not proceed down the road of the central provident fund when developing our policies for pensions.
§ Mr. Lilley
Is the hon. Member again denying the words of his leader, the right hon. Member for Sedgefield (Mr. Blair), who said in Singapore:For Singapore the Central Provident Fund has worked well".The hon. Member has just said that it worked badly.
§ Mr. Smith
These days, the Government are very good at selective quotations from documents. In relation to the economy and infrastructure of Singapore, the central provident fund has been successful but for the individual savers of Singapore, the fund has not been a particularly good deal. Such a system would not be a particularly good deal for the people of Britain. If the Secretary of State or his researchers had been on the ball, four weeks ago they would have read a perceptive article, which appeared in The New Statesman and Society and was written by me. The article set out precisely what lessons we thought should be learnt from the Singaporean experience and clearly spelt out why we would not proceed along that road.
§ Sir Norman Fowler (Sutton Coldfield)
I give the hon. Gentleman an opportunity to deny another rumour that is going around—that the Labour party intends to abandon its pledge to uprate pensions in line with earnings. Will he confirm that that is not remotely the intention of the Labour party?
§ Mr. Smith
If I spent my entire time responding to rumours put around by central office and others, I should be doing a better job at tilting at windmills than fictional characters have done in the past. If the right hon. Gentleman had read the comment that I made in response to that challenge in the Sunday Express, he would know that I said very clearly that we are in the process of looking at all our policies in relation to social security 211 and, at this stage, no decision has been made. However, we shall make our policy clear within the next few months.
The Government are peddling another rumour—which also needs to be countered—that somehow the Labour party is interested "in getting the state's hands on your pension funds". Well, we are not. The Government have got their grubby hands on people's pension funds—they have reduced the value of the state earnings-related pension scheme for those people who are in it by more than half over the last eight years. The Government made a deliberate decision in 1987–88 and last year to reduce the value of SERPS to the people who had been paying into it. If people are looking for those who are interested in getting the state's hands on their pension funds, it is the Government and not the Labour party.
We know from what the Lord Chancellor said in the other place a few weeks ago that the Government were prepared to look at an amendment to the Family Law Bill that would ensure that, at the time of divorce, a pension held by one of the parties could be split as a pension rather than frozen as a pension, with the benefits of it being split at a subsequent time. This is an important issue for many people, particularly for women.
The Labour party, many Members on the Cross Benches and many members of the Government in the House of Lords, were pleased when the Lord Chancellor told the other place that he was prepared to look at instituting an amendment to the Family Law Bill to ensure that pensions could be split. In the past few days, we have read in the press that the Lord Chancellor is drawing back from that proposal. Will the Secretary of State tell us what the position is during the course of this debate—as this issue has transcended partisan lines in the other place? Is the Lord Chancellor still actively and sympathetically considering instituting an amendment, or has he ruled it out? I hope that he has not ruled it out, because if he has, it will be a sad day for many people. In summary, we will not be opposing the general uprating proposals.
§ Mr. Lilley
The hon. Gentleman has opposed every substantive reform and change in the benefits system that the Government announced in the Budget and in the social security uprating statement, and many that took place in the past. That is fair enough—if he wants to finance a more expensive system of social security, it is up to him to tell the House and the British people how much it will cost. Does he agree with the hon. Member for Birkenhead, who said that anyone who says that Labour's welfare objectives can be achieved without spending more has something wrong with him, and ought not to be trusted? Does the hon. Gentleman believe that it can be achieved without spending more money?
§ Mr. Smith
Yes, and if the Secretary of State will contain himself for a few weeks, he will learn how we intend to go about it. I also take him up on his claim that somehow the substantive reforms in his package are ones that we oppose. The main substantive reform relates to additional measures to counter fraud, claiming that £120 million in the first year and £235 million in the second year. We are not opposing him on tackling fraud in the system—indeed, we want him to deal with it more effectively and efficiently than he appears to intend.
212 I referred to the other substantive measure when I asked precisely how the Government are going to make the changes in payment arrangements for housing benefits that will amount to £105 million in the first year. If the Secretary of State wants to claim that we oppose every single substantive measure that he is putting forward, he should look at the substantive measures in the package. We shall oppose the unsubstantive, but none the less harmful, change to minimum maintenance in child support.
The measures before us are harmful to housing benefit and to the encouragement of single parents back into the work force. They are harmful in the demands that the Child Support Agency will make on those parents who are already on the breadline and they are harmful to elderly people in the freezing of cold weather payments. They are typical of the Government's salami-slicing approach to social security. With one cut after another, they are creating more dependency. They have no overall vision about the need to have a nation at work rather than a nation on benefit, and that is no way to provide real security for the people of Britain.
§ 6 pm
§ Sir Norman Fowler (Sutton Coldfield)
I do not regard the speech of the hon. Member for Islington. South and Finsbury (Mr. Smith) as the most exemplary illustration of open opposition. When I intervened to ask him whether his party would uprate the basic pension by earnings or by prices, he ran away from my question. but when my right hon. Friend the Secretary of State intervened a few seconds later, the hon. Gentleman gave the game away entirely: if he used the same envelope of costs, there is no way in which he could honour the pledge given previously. I shall return to that point in a moment. If the hon. Gentleman wishes to intervene and correct my assumptions, I shall be glad to give way.
I welcome what the Government have done in this uprating. Although public spending is tight, it is right that substantial resources should be devoted to some of the most vulnerable groups in society. I welcome a number of the increases, particularly the increase in family credit. The aim of family credit was to help low-income families in work. It now helps more than half a million people and has proved to be an excellent innovation.
I also welcome what is being done for pensioners and my right hon. Friend's announcement of the price uprating. Let me dwell on pensions for a few seconds. As my right hon. Friend the Secretary of State said, a debate is taking place not only here, but in every country in western Europe. As people live longer, there will be a greater demand for taxpayers' resources to be devoted to health, social services and pensions. That is why Governments everywhere are examining ways of providing options for people to save for their own retirement. That is why, not last year but 10 years ago, the Government began the process of reform. As a result, Britain is better placed than virtually any other country in western Europe to meet the emerging costs of pensions and social services.
The review of social security in the mid-1980s meant looking at the debt that we shall leave for future generations of taxpayers. In creating the state earnings-related pension scheme, the Labour party created not a funded scheme, but a pay-as-you-go scheme. There 213 is no fund of investments; it relies entirely on the willingness and ability of future generations of taxpayers to finance the second-tier pension promises now being made. The unfunded second tier would be in addition to the unfunded basic pension, so it is entirely sensible for any Government to consider what can be afforded. If Members want proof of that, they have only to look at the Labour party's so-called Commission on Social Justice.
Here I return to the crucial point about the consistency of the Labour party. For years past, Labour Members have argued that the big distinction between them and us is that they will uprate pensions by earnings rather than by prices. We have all fought elections—I fought two and my right hon. Friend the Secretary of State fought one—countering that argument. It was the basis of Labour's appeal to the nation in election after election. In my time as a Minister, the hon. Member for Oldham, West (Mr. Meacher) attacked the Government at every stage for uprating only by prices; yet now we see the unmistakable signs of the Opposition in the process of conducting a major U-turn on policy. There is no doubt about that. Labour's Commission on Social Justice makes it quite clear what they are about—dropping their earnings uprating promise. If that is what they are saying in opposition, the same pressures would have led them to exactly the same conclusion had they been in Government, so their pledge at the last general election, and at previous elections, were bogus and false. The nation needs to take that on board.
§ Mr. Chris Smith
Can the right hon. Gentleman tell us whether it was a bogus or false pledge at the general election when the Prime Minister said—I believe that the right hon. Gentleman was at his right hand—that the Government hadno plans and no intention to extend the scope of VAT."?
§ Sir Norman Fowler
What my right hon. Friend said on tax stands on the record. He also said that income tax would be reduced when and if resources allowed. The hon. Gentleman now wants a debate on VAT. That shows the absurd bankruptcy of his position. We are having a debate on social security and pensions policy, but the main Opposition spokesman wants a debate on anything other than pensions policy. The fact of the matter is—and the hon. Gentleman knows it—that the Opposition's policy is in total shambles. They are now in the process of reneging on a promise that they made year after year to the British electorate. That point needs to be taken on board by the nation, because people need some means of valuing other promises and pledges that the Opposition may make.
There is one very sensible reason why the public want to rely on rather more than state provision. The hon. Member for Islington, South and Finsbury talks about the security of the state. I remind him that in not-too-distant history, under the last Labour Government, the people who lost out most were the state pensioners when Barbara Castle changed the uprating system in mid-stream to make a public spending saving of more than £1 billion. She moved from historic validating by past inflation to forecasts of inflation when inflation was falling. It was a crude device and the people who missed out and suffered as a result of her action were the pensioners.
214 My own view on the pensions approach that we should be adopting is quite clear. The first duty of any Government is to ensure that present pension provision is adequate. That is why I welcome what the Government have done over the years. I welcome what they have done for war widows, to whom we owe a particular debt. It is right the Government should devote extra resources to them, but the issue is wider than that. It is undoubtedly good news that about 60 per cent. of retired people now have some form of additional provision. We should recognise, however, that some of the additional pension provision will be modest, and 40 per cent. still have no additional provision.
One problem is that a group of people currently living in retirement have been unable to build up occupational pensions, through no fault of their own, for a variety of reasons. Perhaps their firms had no occupational scheme. They may have been members of occupational schemes, but because of the scandalous early leaver rules—which again the Opposition did nothing to reform when last in government—they were deprived of the true value of their savings. They may have been caught by historic employment practices. For whatever reason, they have ended up depending on the basic pension. Those people are probably now in their 80s and 90s.
I mentioned family credit earlier. We introduced it because we were unable to help the families that we wanted to help through the general benefit of child benefit. It is open to us to help those pensioners that we want to help through a pension credit system. In other words, we could add to the basic pension of those whose incomes most urgently need supplementing. Instead of relying on a general increase in the basic pension, we could direct resources to where they are needed. Clearly, the basic pension would remain price protected, but those who have no other retirement income, or only a limited amount, could receive pension credit as an additional weekly payment. If the public are concerned about the effect on incentives, the scheme would not need to go on in perpetuity, but would last for today's generation of 80 and 90-year-olds.
The hon. Member for Islington, South and Finsbury sought to lecture the Government in his speech. I remind him of the position that we inherited from the Labour Government. The limit of their ambitions was the state earnings-related pension scheme. They did nothing to improve the rights of those with frozen pensions—those people forced to leave their pension entitlement frozen in value with their previous employer. That was a scandal and the Labour Government did nothing about it. They did nothing to make it possible for members of occupational schemes to transfer their rights, which was another scandal. Those entirely beneficial changes to occupational schemes were introduced by the Government.
The pensions revolution was carried out by the Government during the past 15 years. The result is that occupational pensioners get a better and fairer deal today than they have ever had previously. Those measures were not forced on us by eager pension funds and even less by the Opposition. The Government put the interests of members of schemes first, and that is the sensible way to carry out any pensions policy.
We also sought to give the public more options. Occupational schemes had made the most enormous contribution, but in the mid-1980s they had ceased to 215 grow and expand. They were stuck in the mud and some of the attitudes to members' rights were stuck with them. It was clear that many people wanted an individual pension separate from state provision. Every opinion poll showed that fact, so we introduced the extra option of personal pensions.
I do not defend for one moment the actions of those insurance companies which have mis-sold policies—indeed, I feel more strongly about it than most people. Ironically, several of those companies were prominent in their opposition to the introduction of personal pensions. It is no part of my brief to defend wrong advice, but we should distinguish between the personal pension product and the methods used by some companies to sell the product. Andrew Large of the Securities and Investments Board said in relation to personal pensions:I want to emphasise from the outset that our concern is not with personal pensions products themselves, but with how they were sold. I would add that, because of the action that regulators and the industry have already taken, people can now have greater confidence that personal pension products are being properly sold. They do offer an efficient and flexible way of saving for retirement for many people, provided they are marketed, advised on and sold properly.That is exactly the position. Even the Opposition now say that there is a place for personal pensions in pension provision.
§ Mr. Corbyn
The right hon. Gentleman will recall that as a Minister he did much to undermine the state earnings-related pension and to promote the private pensions industry. Does he feel one iota of remorse about the sales methods that have been used by some companies to sell private pensions? What has he to say to those people who find themselves in a rather insecure private pension scheme which may not fully pay out? What guarantees are available for those people?
§ Sir Norman Fowler
There are no guarantees, in the hon. Gentleman's sense, because personal pensions are money-purchase schemes. Money-purchase schemes cannot provide the kind of guarantee that a two thirds final salary scheme can, but they can provide an additional top-up to an occupational scheme or, if entered early enough and everything else being equal, they will provide a better investment than staying with SERPS. I will deal later with the hon. Gentleman's point about advice, because that is a crucial part of the story.
The Opposition's case so far is a thousand miles from the attitude displayed by the hon. Member for Oldham, West, who opposed the introduction of personal pensions, not because he feared the activities of the insurance companies, but because he was entirely opposed to private provision. His opposition had nothing to do with insurance companies, but everything to do with ideology. The view now being put forward by the Opposition is the exact opposite.
The Secretary of State and the hon. Member for Islington, South and Finsbury both referred to the action being taken to put matters right by those companies whose advisers gave wrong advice. I support the action that has been taken, but a number of additional points should be made. We need to make it clear to the public that personal pensions are an entirely sensible option for many people. It is ludicrous to suggest that all people who have taken out personal pensions have been wrongly advised. Some 216 have been well advised and will benefit greatly from what they have done. There are some exceptionally good and reputable companies providing such pensions.
I feel strongly that we need to review and improve the independent advice that is available to the public generally. It must usually be the wrong decision for someone to come out of an occupational scheme and take out a personal pension. I cannot speak for what happened after I left the Government, but I never intended in any of my speeches to try to persuade people to come out of occupational schemes to join personal pension schemes. It is obvious that if the employer's contribution does not remain the same, there is little or no chance that the returns will be comparable.
It is not just the private sector that gives bad advice on pension provision. One of my constituents is 69, married and still working. He has not yet drawn his basic pension and he is contributing to a larger pension for when he retires. He has been told about his entitlement, but, because his wife received a graduated pension, she will not benefit in any way. Her graduated pension is 6p per week, or £2.60 per year, but the result of her decision to accept the graduated scheme, which she should not have made, is that the family will lose about £500 per year. If that had been a private scheme, there would be demands for explanations. I hope that I may again send the case to the Department of Social Security with a view to ascertaining what can be done. Justice is not served by such cases. There is no point in banging the table and saying that the private sector is wrong when the public sector has also failed to give the right advice or warnings.
A problem with personal pensions is the level of employers' contributions. If employers' contributions were greater, entitlements would be greater. As a former Secretary of State, one must be careful not to encroach on the territory of one's successor. However, when I was Secretary of State I tried to persuade the public sector, including local government, to give a lead and to contribute a little more than the minimum contribution. Every public sector employer in the country united to resist that proposal. Nevertheless, there is much to be said for those who have personal pensions to have a greater contribution made by the employer, including the public sector employers, than the current one.
It is surely beyond doubt that over the past 10 or 15 years the agenda for the reform of pensions has been set by the Government. The hon. Member for Islington, South and Finsbury seeks to make policy, but it was pretty obvious this afternoon that he does so uneasily, glancing over his shoulder to ascertain what he can get past his colleagues. That explains the lack of frankness.
We look forward to the new policy announcement that the hon. Member for Islington, South and Finsbury wishes to put before us in the next few months. I hope that the announcement will be made a few months prior to the general election. We are banking on that, at any rate. I am not putting forward new points. Indeed, I put them to the predecessor of the hon. Member for Islington, South and Finsbury and to earlier Opposition social security spokesmen. In the run-up to the general election, the time has come for the Opposition to come clean on their pensions policy. After all, many things depend on that policy. Opposition spokesmen cannot come to the Dispatch Box and lecture private schemes, personal pension providers and occupational pension providers without coming clean on their own ideas and policies.
217 The Government can claim to have price protected the basic pension. They have also reduced inflation. That was a social evil for pensioners, who saw their savings eroded. The reduction of inflation was a substantial step forward. The Government have reformed occupational pensions to the undoubted and unquestioned benefit of millions of people. In addition, they have provided more options for the public, such as personal pensions.
Against that background, I believe that we are in a better position to face the demands of the first 25 years of the next century than virtually any other country in the western world. A great deal still needs to be done, but we have taken giant steps forward. I congratulate the Government on what they have done in the areas of pensions and social security generally.
§ Mr. Alan Howarth (Stratford-on-Avon)
Incapacity benefit has hardly been referred to so far. When it was set up, Ministers expected that about 220,000 people would come off benefit over about three years. It was part of a quest to reduce public expenditure in that area. How is it that, under the administrative arrangements that have now been established, Ministers will know that that is the position—if it is? Their computer programme makes it impossible for them to distinguish between present incapacity benefit claimants so as to determine who were previously claimants of invalidity benefit. Surely that is not a responsible way to proceed in an important and sensitive area. I believe that responsible Ministers would wish to monitor the impact of their new policy on the long-term sick and disabled as well as on public expenditure.
It seems that Ministers' expectations of the number of claimants falling away, as it were, will not be met. I understand from a parliamentary answer that, over the first six months, only 19,188 claimants were refused incapacity benefit, of whom 6,520 appealed. In terms of administrative costs, the Benefits Agency's medical service has found it necessary to recruit another 220 doctors.
That brings me to my second point on incapacity benefit. We understand that it is the Government's intention to privatise the Benefits Agency's medical service. Private health care firms are tendering to get their hands on a budget of £6.9 billion involving 1.6 million people. What is the rationale for that? The results of a survey of doctors indicate that they do not think that it would be useful for the service to be privatised.
I understand that one of the organisations tendering is a well-known disability insurance group, which ran advertisements during the week of the introduction of incapacity benefit urging people to take out private insurance. It suggested that the benefit would be insufficient. It seems that there lies a considerable vested interest. I hope that Ministers will be careful when they evaluate that group's tender.
I understand also that another bid comes from two civil servants who were involved in the design of the scheme. It is suggested—I am happy to be corrected—that those civil servants have been on paid leave while preparing their bid. I hope that Ministers will consider carefully the propriety and suitability of the civil servants' tender.
I move on, perhaps more substantively, to a proposal for improvement. As Ministers review the operation of the scheme, I hope that they will find justification for 218 introducing a sliding scale of eligibility for people in the 55 to 65 age group. We all know that the real prospect of employment for people in that group who have suffered industrial injury or face continuing disability is extremely poor. Those who do not score the full 15 points know that to be a blighting reality in their life. I hope that Ministers will be able to find the generosity of intention and of fiscal margin to allow people after the age of 55 to qualify for benefit if they score fewer than the 15 points.
I have in mind the sad case of one of my constituents who saw me recently. He had been off work for two years with a spine and neck problem. He took early retirement at the age of 55. His employer enhanced my constituent's pension on medical grounds because he recognised that he was no longer capable of work. Under the old system, my constituenty was able to receive invalidity benefit. As he took the new test, however, with the Benefits Agency's medical service and scored only 14 points, his benefit stopped. It stopped on 3 November, but he did not receive the courtesy of being informed of that until 8 November. In the case that I am outlining, my constituent's wife works. As a result, he receives no benefits. His wife's income is modest and they face a grim future. I fear that all too many people are in the same predicament.
When unemployment was rising, the Government were content over the years that people should go on to the old invalidity benefit. It was presentationally advantageous to keep down the unemployment figures. It suited the Government well enough that people should be able to claim invalidity benefit during the traumatic period of the restructuring of some of the old, heavy and labour-intensive industries. It saddens me that, after those events, the Government reneged on the previous commitment, despite the fact that some six volumes of research commissioned by the DSS contained no evidence to justify the assertion, frequently made by Ministers, that far too many claimants of invalidity benefit were bogus.
The reality is that, as the Government mismanaged the economy, they ran up a borrowing requirement of £50 billion. They needed to rebalance the public finances, and one of the ways in which they did so, to some significant extent, was by cutting contributory benefits for the long-term sick and disabled. They compounded the injury by increasing employees' national insurance contributions by 10 per cent. That is a sad history and I hope that Ministers will be able to alleviate the conditions under which the new incapacity benefit may be claimed.
I now come to the Government's decision not to uprate one-parent benefit and the lone-parent premium. Lone parents have been among the principal sufferers of the widening inequality in society. The uprating—the policy context of the regulations that we are debating—is intended, as the Secretary of State told us, to save £5 billion by 2000 and to make room, as he explained quite explicitly, for tax cuts. We have already seen the 1p in the pound reduction in the basic rate of income tax, which is to be paid for by lone parents, young people and the old and the cold.
In his speech, the Secretary of State did not provide the House with any thorough rationale—let alone a persuasive one—for the decision to freeze one-parent benefit and the lone-parent premium on income support. I do not believe that the policy has anything to do with the growth of social security expenditure, which is an issue—a problem—that he has been right to address systematically.
219 In July 1993, the Secretary of State said that the Government were looking at ways to use the social security system to ensure more responsibility in young people by making the option of single parenthood less attractive. He is indeed fulfilling that pledge.
At the October 1993 Conservative party conference, we witnessed a hideously orchestrated campaign of vilification against single parents, which was one of the most shaming episodes in modern politics. I wrote an article in The Guardian, which was published on the first day of the Tory party conference, in which I asked my former party not to play that game. The difficulty is that my former colleagues do not read The Guardian. I dare say that if they had read it and seen my advice, they would have heeded it and history would have been very different, but that was not to be the case.
We are seeing one more instalment of the policy in the order that we are debating. As my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) pointed out, it is fiscal tokenism. In the year to come, the Government will save only about £5 million by freezing benefits for lone parents. We are seeing the expression of a certain set of values and social and moral purposes that are harsh, unjust and smack of scapegoating. That would certainly seem to be so, given the disproportion of the policy and the fact that the number of unmarried teenage mothers, against whom Ministers' ire was directed in October 1993, had been falling since 1987. It now stands at about 44,000 out of 1.3 million lone parents.
As all the surveys show, the vast majority of lone parents want to work—they are not the feckless or undeserving poor of scapegoat mythology. The Government's survey shows that 90 per cent. of unemployed lone parents want to work—and a growing number are doing so, thanks in no small measure to the Government's policy of family credit, which has had its positive uses. How right it has been—because we should help lone parents.
If some hon. Members so disapprove of lone parents that they do not want to help them, surely they should at least want to help the children of lone parents. Lone parents and their children have a claim on all of us, being—as they are—poor and disadvantaged. That is a moral position, but it is improvident in terms of the economy not to support them because poverty begets poverty, and the burden on social security and the taxpayer grows all the time.
§ Mr. Hawkins
Although I understand the hon. Gentleman's concern, I would have expected him—particularly with his background as a schoolmaster—not to use "scapegoat" as a verb.
§ Mr. Howarth
If that is the only point on which the hon. Gentleman differs from me, I should be pleased, but I am not sure that it is.
The poverty of lone parents is demonstrable. Forty per cent. of lone-parent families have an income of less than £100 a week, compared with only 4 per cent. of two-parent families. Almost six in 10 lone-parent families live in poverty, which is defined as income below 50 per cent. of average income after housing costs. The Government use that measure in certain publications. 220 Relative poverty matters very much indeed, because it means exclusion, alienation, demoralisation and, in all too many cases, under-achievement.
The cost of help through the social security system to lone parents is not excessive by any reasonable standard. As we learnt today, out of a social security budget of £90 billion, some £9.5 billion is spent on lone parents, of which some £5.6 billion goes on income support and another £1 billion goes to lone parents who are in low-paid work. Do the Government really think it wrong to help people who are in poverty? The one-parent benefit is worth £6.30 a week; the lone-parent premium is worth £5.20 a week. These are, if we reflect on them, pitifully small figures. Together, they cost the taxpayer some £600 million a year, and that is eminently affordable. The £5 million that the Government hope to save is almost invisible in the public accounts.
It would be right if the Secretary of State's objective were to provide equivalent opportunities and incentives for lone parents to match their circumstances—as nearly as he can—with those of two-parent families and to ensure them a decent standard of living. If those are indeed his purposes, he should not freeze the two benefits and embark on his strategy of removing the differential in benefits between lone parents and couples with children.
The Secretary of State said that the benefits system gives special assistance for lone parents that couples do not have. It is absolutely right that it should do so. The costs of lone parenthood are higher. A study published at the end of last year under the auspices of the Rowntree Foundation, entitled "The Cost of Children and the Welfare State", found that the costs of a child relative to a single adult in a one-parent family are substantially higher than in a two-parent family. The cost of a child under the age of 11 is 30 per cent. of the cost of a single adult in a one-parent family, but only 20 per cent. in a two-parent family. When a child is over the age of 11, the differential is wider—the figures being 51 per cent. and 33 per cent. respectively.
The freeze will, over time, increase child poverty. As it is, a lone parent cannot adequately or decently bring up children on income support. Research by Elizabeth Dowler and Clare Calvert for the Family Policy Study Centre, entitled "Nutrition and Diet in Lone Parent Families in London", concludes that, on current levels of benefit, lone parentscannot afford to eat healthily.In 1992, 78 per cent. of lone parents were living at or below income support level, compared with 18 per cent. of two-parent families. "Evaluating the Social Fund", a study commissioned by the Government and published in 1992, found that 35 per cent. of lone parents on low incomes lacked adequate bedding, that 31 per cent. lacked hot water, that 58 per cent. had problems with heating and that 38 per cent. had problems with damp.
Lone parents, of all people, should not have their benefits frozen; arguably, indeed, their benefits should be increased. Lone parents already bear a stigma—a stigma that was abating before the Government revived it. Inevitably, child care is a problem for many of them. The Government's disregard in relation to family credit, disability working allowance, housing benefit and council tax benefit is helpful as far as it goes, but it does not extend to children aged over 11—notwithstanding the higher relative costs associated with such children—or to second or subsequent children.
221 We must approve of the requirement to use registered child minders or nurseries, but it means that those lone parents who most need work often cannot be helped by the disregard because they cannot find work whose hours match the requirement relating to child minders and nurseries. Supermarkets, for instance, often tell those applying for work that they must do evening work at first, before being able to work hours that match school or nursery hours or the hours during which registered child minders are available.
If a claimant is on full family credit, the disregard will not help: it is, after all, a disregard rather than an allowance, and cannot raise the level of benefit above family credit.
I feel that there is a case for increasing the disregard of child care costs, and, indeed, for extending it to all benefits. The Government would do that if they were serious, but at present the disregard does not apply to claimants of income support.
I hope that the Government will carefully monitor the nursery voucher pilot scheme. If the pessimists are right, it may take places away from local education authorities and subsidise private nurseries, whose fees could well be beyond the capacity of lone parents on low incomes.
In framing the policy on benefits for lone parents, Ministers—Conservative Ministers certainly—should bear in mind the fact that it may not be appropriate for many lone parents to work. I understand that 63 per cent. of children of single mothers are under five, and it may be in the emotional and intellectual interests of the children for their mothers—or, perhaps, fathers—to stay at home. All too often, the circumstances of lone parenthood are sad: someone may have become a lone parent recently through bereavement, separation or divorce. Benefits policy should not drive such people out of the home and into jobs until they are ready to take such action.
Lone parents face a Kafkaesque maze of benefits, child care interactions, grants and loans. However helpful the whole policy apparatus may be, many become baffled and dispirited as they try to thread their way through that maze.
According to paragraph 12.2.2 of "Evaluating the Social Fund",loan recipients are less likely to own their own homes, more likely to live in more crowded accommodation and on average have lower equivalent incomes than people given grants.Certainly at that time, the administration of the social fund appeared to give less help to the least well off, including many lone parents.
§ Mr. Corbyn
My hon. Friend is making an excellent speech. Is he aware that the disgraceful attacks on lone parents made by the Secretary of State and others at successive party conferences have been very damaging to the self-esteem of those parents and their children, and have led to the stigmatisation of a group that ought to be recognised and supported in the way that my hon. Friend proposes?
§ Mr. Howarth
I agree with my hon. Friend.
The Government are keen to provide work incentives in the benefits system, but it is hard to cross the bridge between income support and paid employment. Too many 222 lone parents fall into unemployment and poverty traps created by means-tested benefits. They have a cash-flow problem: while they wait to be paid by their new employers, they are losing benefit and probably incurring additional child care costs. The Government's new rule that housing benefit must be paid in arrears will exacerbate that difficulty for those who are doing their best to obtain work.
It is commonplace for landlords to ask for a deposit and a month's rent in advance. I fear that it will be harder for lone parents, and others, to make a move if they receive housing benefit in arrears. In any event, because of other changes in housing benefit policy—which are the subject of other regulations—a shortfall between the required rental payment and the housing benefit that is available will become more likely following the introduction of a local reference rent.
Moreover, in the Housing Bill, the Government propose to allow landlords to evict tenants when rents have been in arrears for eight rather than 13 weeks. That will add to lone parents' insecurity and practical difficulties. The lone-parent premium on housing benefit is now less generous than it was in 1988, when the benefits system treated lone parents as couples. That was right: after all, lone parents need accommodation of virtually the same size, and their housing costs are comparable to those of couples.
As my hon. Friend the Member for Islington, South and Finsbury emphasised, one-parent benefit helps people to move from welfare into work. It is disregarded against family credit and disability working allowance. It is perverse, in the Government's own terms, to embark on an erosion of its value; a similar perversity characterised the introduction of a means-tested jobseeker's allowance after six months instead of 12. I assume that both policy shifts result from Treasury short-termism rather than vindictiveness. I hope so, anyway.
Which is a better employment promotion policy? Is it better to take 1p off income tax—as the Secretary of State contended—or to address policy scientifically to the unemployment and poverty traps and redesign the interaction between the tax and benefits systems, over time and as resources permit, to make it easier for people to move from welfare to work? That is what the Labour party proposes. I do not think that there can be any doubt. It is extraordinarily simplistic to suppose that there is some mechanistic and inevitable connection between modest reductions in income tax and the generation of more jobs in the economy. That policy of freezing one-parent benefit runs against any rational welfare-to-work strategy and will compound other labour market difficulties faced by lone parents.
We know from the Government's evidence published in November 1992 in the Employment Gazette that lone parents tend to be less well qualified for the labour market. They lack work experience because of the circumstances in which they have found themselves. Again, because they are caring for children, they cannot so readily accommodate themselves to employers' requirements. They need flexibility to be able to attend to their children's needs, to visit schools, to take their children to the doctor and to look after a sick child. Less flexibility is available to them in terms of travelling to work.
223 Lone parents confronted with those constraints as they enter the labour market face a growing number of employers who insist on irregular hours contracts to suit themselves and who aim to recruit more and more people in temporary work. It therefore becomes harder and harder for lone parents to plan and organise domestic life in manageable relation to work. What may be just in time for employers is all too frequently too late for lone parents.
I welcome of course the Government's new pilot scheme to help lone parents to find jobs or training, and the extra 18,000 after school hours child care places. If only that were more representative of the character and thrust of policy, I would be much happier. Lone parents need sympathetic and intelligent policies to enable them to sustain an adequate and decent existence with their children, and to take their place in employment and in society with confidence and dignity. I fear that the policies that are needed to achieve those ends are not in place.
§ Mr. David Shaw (Dover)
I first bring the House's attention to the fact that today many of my constituents, including those affected by the uprating statement, have had an absolutely miserable day. The headline in tonight's Evening Standard is that Dover has been cut off. According to the contacts that I have made, it has been cut off by the snow and by the weather conditions. I hope that I shall not be stretching your indulgence too much, Mr. Deputy Speaker, if I say that we desperately need to upgrade the A2 road link to Dover and to have the snow cleared. It has been especially bad in Deal, where the high street has been flooded by the sea. The council and emergency services have done wonderful work. I join, I hope, other hon. Members in paying tribute to the emergency services that have had a difficult day in Dover and Deal.
I shall return to the subject of social security before pressing you too far, Mr. Deputy Speaker. Social security uprating is an important annual event. Social security costs £90 billion—one third of Government expenditure. As we all know, that system can easily go out of control. Compared with other European countries, however, our social security system is much improved. We have better funded pensions and significantly lower unemployment.
Sweden used to be the Labour party's model when it came to social security, but Labour has been forced to abandon that model. Sweden's national debt is about 125 per cent. of its annual income. There are doubts as to whether, in the current circumstances, it can repay its national debt. In comparison, the United Kingdom's national debt is about 56 per cent. of its annual income—about half and considerably less than Sweden's debt. We are in a much better position than Sweden.
How did Sweden achieve that? It achieved it through unrealistic upratings of its social security system—we are not going down that path, thank goodness—and by paying for that system from borrowing. One third of its national debt is owned by foreigners. It has borrowed from every capital market in the world that it could. Our borrowing is tiny in proportion to Sweden's. It has got away with it only because it is a relatively small country borrowing 224 on the international money markets. Sweden, the Labour party's previous model on social security, has failed totally and utterly with regard to "socialist" security.
§ Mr. Corbyn
During our memorable visit to Sweden—it is hard to forget it—the hon. Gentleman and I disagreed on just about everything and still do, but will he concede just two points? The social security and the welfare state systems in Sweden have led to it having the highest living standards in the world and being in the best position to weather economic storms created from outside, and there is a consensus that the state has an enormous role to play in ensuring that people do not go destitute when out of work and when they pass the normal retirement age. That is in sharp contrast with his ideas and with what his Government have achieved.
§ Mr. Shaw
I still disagree with the hon. Gentleman, even in the House of Commons at Westminster. Sweden's standard of living owes a lot to its hydro-electricity industry and cheap electricity costs, and, as I said, to the fact that one third of its national debt has been financed from abroad. Individuals in other countries have loaned the money to Sweden so that it can have that standard of living, but the day of reckoning has arrived. Its national debt is more than its national income in a year and it is in a grave financial position.
The pensions issue is one of the most important in social security and in the uprating statement. The impact of both private and public pensions and today's uprating statement is critical. In this country, we are encouraging the building of funds for retirement so that, one way or another, people have their own pension fund, whether it be a communal pension fund through the occupational pension scheme or an individual pension fund through private arrangements. We should never forget that many people save through life insurance with profits policies and that, through those savings, they enjoy another means of income in retirement.
§ Sir Donald Thompson (Calder Valley)
Does my hon. Friend realise that the amount that people are saving through pension schemes—£100 million a year—is greater than Government spending on social security? He and I would agree that that must be protected, but it is a huge amount of personal saving.
§ Mr. Shaw
I agree with my hon. Friend that people are saving a phenomenal amount of money through private and personal pension schemes, through occupational pension schemes and through life insurance. As a result, many more people will find that their retirement is securely financed by equity investments in British industry. In the past 16 years, that has been one of the key points in the Conservative approach that all hon. Members should support.
We have transformed the incomes of people in retirement. Under Labour and even some previous Conservative Governments, people in retirement relied too much on the state system, which has not funded or served them well, but private pensions, private savings and private life insurance are giving them a much better retirement than before. I am delighted that today 70 per cent. of people retiring have extra income sources other than the state pension. I want more and more of the remaining 30 per cent. to be brought into private pension 225 schemes and into other saving schemes, which can give them the opportunity to have additional sources of income.
In the main, Governments do not operate pension schemes other than a "pay-as-you-go" state pension scheme. Singapore has been mentioned, and it is a bit of an exception, but there is a question mark—even the Labour party recognises this—over the way in which its scheme operates and investment returns are achieved in it, and whether those returns are adequate. "Pay-as-you-go" schemes, however, are a disaster. No fund builds up and the state must still meet the liabilities. That is fine if a country has a young and increasing population, but if it has an aging and decreasing population, it is disastrous. Many European countries are faced with that disastrous position. We have ensured, however, that we shall not be faced with that, even though our population is aging and even though, in recent years, the population increase has levelled out—it is not increasing at the previous rate. We have a much better funded system than other countries in Europe.
I am pleased to say that the uprating does not follow European pension policy. Other European Union states have given commitments to their populations that they simply cannot meet; they cannot afford them. In many European countries, public sector workers have been given extraordinarily generous pension arrangements that are more favourable than those in the private sector. That has led to strikes in France and protests in Germany about pension schemes. Indeed, Germany has had to amend some of its retirement ages. France has still to face up to the problems.
One of the reasons why I am against a single currency is that, as part of the arrangements, we would end up having to foot the pension liabilities of France and Germany. I do not see why British taxpayers and pensioners should have to suffer as a result of the problems in France and Germany, which have been created by their Governments' unrealistic pension commitments.
The United Kingdom has an affordable pensions system, which the Government have made more affordable. Labour's plans for pensions are disastrous. There is a question mark over whether the Labour Front-Bench team wants state direction of pension fund investments. At every general election and in every Labour party policy document on industry that I have seen, the Labour party has referred to short-termism, long-termism and the role that the state can play in guiding investment in the economy. That, to my way of thinking, is a form of state direction of pension fund investments. It would be a disaster. It would reduce the yields on our pension funds and reduce our pensioners' yields from their pensions.
§ Sir Donald Thompson
If inflation is to continue falling or remains stable, as we hope it will, the yield on pensions must be low unless there is a capital injection or an injection as a result of the fund's expansion. That can happen only in the private sector. The public sector always sucks out; the private sector enables things to grow. Consequently, the yields on pensions can increase only if most pension funds are in the private sector.
§ Mr. Shaw
My hon. Friend makes a valid point. In my view—judging from what my hon. Friend is saying, 226 it seems that he shares it—the next general election should be fought on the basis of which party has the policies to increase capital value within pension funds. That ability will be vital to many pensioners. The Labour party has never shown an ability to increase the yields and capital values of investments in the stock market, which determine the level of pension funds and returns on pensions.
That is why the stakeholding policies of the Leader of the Opposition and the Labour party, which many people in the Labour party do not even seem to understand, are rubbish. Stakeholding would kill the dividend returns of British business. It is designed to promote the interests of trade unions and creditors—all very fine and wonderful. Yet the shareholders put the capital in business, and in most of British industry those shares are in pension funds, life insurance policies and private pensions. It is vital that those pension funds should maintain their investment returns and that the Labour party's stakeholding policies should be stopped from damaging those returns.
Labour would definitely attack pension fund moneys. One has only to look at Wobbly Thursday—as it was nicknamed—just before the previous election. When the markets took fright at the possibility of a Labour Government, £6 billion was knocked off share values overnight. Our pension funds were hit to the tune of £5 billion of that £6 billion. The National Union of Mineworkers pension fund lost £500 million in value on Wobbly Thursday, when it was thought that there would be a Labour victory. That is why every mineworker with a pension should vote Conservative if they want a decent pension in future. Their pensions depend on a Conservative Government.
Today we have heard Labour policies—or rather we have not heard them.
§ Mr. Shaw
As my hon. Friend says, we all wonder what Labour's policies on pensions are. What are the guidelines? If Sir Richard Scott had been asked to examine Labour's pension policies and the guidelines, would he have found anything out? How long would the report have been? It would have had to be more than 1,900 pages if he was to find out every approach to policy that Labour is trying to take and every guideline—
§ Mr. Deputy Speaker (Sir Geoffrey Lofthouse)
Order. I do not recall Sir Richard Scott being asked to look into the Guaranteed Minimum Pensions Increase Order 1996. Will the hon. Member get back to the order? He is straying pretty wide from it.
§ Mr. Hawkins
Does my hon. Friend agree that it is a matter of record that in 1985 Labour proposed to repatriate investments held by pension funds overseas and 227 said that the repatriated investments would be placed in a new "national investment bank", which would be used to subsidise and control industries unable to attract investment under normal commercial criteria? The hon. Member for Islington, South and Finsbury (Mr. Smith) was contrasting Government policy in 1985 with that in 1995. Is it not more relevant for the British people to look at Labour's policy in 1985 and ask whether it is still the same today?
§ Mr. Shaw
My hon. Friend has pre-empted my next point. I was just about to point out that not many Labour councils back Labour party policy in that regard. Twenty to 30 per cent. of Labour councils' pension funds are invested overseas. They must therefore be extremely grateful that we abolished exchange controls in 1979 and enabled them to get returns, so that council employees and former council employees could enjoy good pensions. Conservative policies on pensions, which give rise to the uprating statement, have been backed by Labour councils. Our privatisation policy has been backed by many Labour councils' pension funds, to the extent that 10 to 20 per cent. of their investments are in privatised industries. That has meant that the uprating statement could be much more favourable than it would otherwise have been.
Whether run by Labour councils or Conservative councils under the Government, pension funds have enjoyed much better rates of return as a result of our policy of encouraging privatisation and abolishing exchange controls, to enable many investments to be made overseas. Conservative policy on the nation's pension funds has worked.
I should also like to draw the House's attention to fraud in social security and the impact that it has on the uprating statement. There is concern about housing benefit fraud. The Social Security Select Committee has undertaken an inquiry into fraud in the £10 billion housing benefit budget. The situation is absolutely horrendous. The evidence that we have received so far is worrying. Tenants are at it, landlords are at it, and in some cases, council staff are at it.
§ Mr. Shaw
Indeed, I believe that even some Labour councillors have been at it as well. Fraud in housing benefit is at a record level despite the fact that many people are working to try to prevent it and local government has slowly been waking up to the extent of it.
I must tell my hon. Friend the Minister how worried I am by the evidence to the Select Committee, which suggests that discovered fraud is running at 6 per cent. of housing benefit. Some people who have come before the Committee believe that fraud could easily amount to 12 per cent. of housing benefit, because obviously not every fraud is discovered, and it has even been suggested that the fraud level could be as high as 18 per cent. That would take the total to almost £2 billion. That is a horrendous level of fraud—equivalent to a penny on income tax or, as I should like to see it, a penny off income tax. We must get housing benefit fraud down, and we must work harder at doing so.
I went to my local council to discuss the issue last week. In Dover council, officers are worried because there are many pressures on seaside towns with guest houses, 228 and we are going through a difficult time. I understand that there are concerns about criminals trying to buy certain guest houses, and other criminal landlords trying to buy up properties. It is believed that some of them may be laundering drug profits. They seek to get hold of properties and put in tenants at unrealistic rents, which involve in addition the possible supply of drugs.
§ Mr. Hawkins
My hon. Friend will know that that problem affects my constituency too, as well as many other seaside towns. Would he be interested to know that a sitting Labour councillor in my constituency has been heard boasting that he intends to become a millionaire with the profits that he makes from the "DSS hostels" that he owns and operates?
§ Mr. Shaw
That is worrying. I am glad that my hon. Friend has expressed his concern on that subject. Someone came to my constituency surgery who felt that he should be paid full housing benefit of £100 a week rent in Dover. I realise that that is the sort of rent one might have to pay for a flat in London, but even in London one would get a considerable flat for £100 a week. It is certainly not the sort of rent that a housing benefit claimant needs to pay in Dover. Plenty of them live on less.
I am seriously worried about the sort of landlord who may try to charge such a rent, and whether such people are being wholly honest and reasonable in their demands or whether they are part of the alleged criminal fraternity that worries my council officers in the east Kent area. We must do a lot more to discover where the frauds are, and to reduce the present level of fraud.
The other day we heard evidence that there are as many as 77 million national insurance numbers in existence, for a population of only 59 million. We know that there must be some additional national insurance numbers, because widows are entitled to benefits based on their dead husbands' contributions; there will always be more national insurance numbers in existence than the current population of the United Kingdom. In addition, millions of people who have worked here and paid contributions here, but who now work abroad, have a claim on our social security system through their national insurance numbers.
None the less, it is incredible that there should be 77 million numbers for a population of 59 million. The system that has grown up under Governments of all political persuasions started as a manual system, and although it has now been computerised, it still has all the weaknesses of a manual system, with the result that many of the current national insurance numbers should not exist. For example, married women appear under their former national insurance numbers, and some people manage to get hold of numbers to which they have no right. When police and fraud investigators go into houses, they sometimes discover 30 national insurance numbers in a briefcase—fraudulent numbers obtained by sophisticated fraudsters.
We must stop those frauds and gain control of the national insurance number system. We must have social security identity cards, and we must have them soon, because the level of fraud is too high. The Government must use every possible method to ensure that the proposed new system is set up as fast as possible.
229 A clear message comes across from social security—that welfare can easily discourage work, and that it can encourage fraud and abuse. The House must consistently keep up the pressure to ensure that that is not allowed to happen.
The uprating statement represents a fair increase, which in many cases is above both current and forecast levels of inflation. The uprating is taking place at a time when the social security system is more affordable than ever before—certainly more so than those of our European partners. We must thank the Conservative Government and the Secretary of State for ensuring that we have such a good social security system today. It is much better than the system that we had in 1979, and the Government are to be congratulated on reshaping it so successfully.
§ Ms Liz Lynne (Rochdale)
I shall not speak at length on all the orders and regulations, but shall concentrate on a few. Of course, any uprating of social security benefits is welcome, but I am worried about the exceptions—the one-parent benefit and the lone-parent premium. I gather that in the long term the Government may be thinking of merging one-parent benefit into a special rate of child benefit and lone-parent premium into a special rate of family premium. I do not believe that those benefits should be frozen before we know what will replace them.
Let me give the House a few facts about lone parents. The DSS's own research, entitled "Changes in Lone Parenthood 1989 to 1993", says that one third of lone parents without paid work experience severe hardship, that lone parents are generally worse off than anyone else and that poverty is commonplace. Indeed, 40 per cent. of one-parent families live on less that £100 a week, compared with only 4 per cent. of two-parent families. We must judge the Government's failure to uprate those benefits in line with inflation against that background.
To the Government and the Minister it may seem that we are talking about small amounts of money in real terms, but those sums are of real significance to the lone parents who are trying to stave off debt, hardship and sometimes great poverty. I do not know whether the Minister has experienced that level of poverty, or had to try to manage on the sort of money about which we are talking. A cut of even a couple of pounds a week in benefits can seem enormous to people trying to manage on such incomes. Many people cannot afford to put 50p in their gas meters, so they and their children have to wear extra clothes because they cannot afford to have the gas fire on all the time. That is what living on benefits really means.
To cut one-parent benefit in real terms—that is what is happening—is incredibly foolish. That benefit is effective against benefit dependency, because it is not means-tested, so if a lone parent gets work it is not taken away.
I understand that the present Government introduced lone-parent premium. The Minister can correct me if I am wrong, but surely they did that in recognition of the fact that lone parents face extra costs. Household bills are not halved just because someone lives on her own. I believe strongly that both these real-terms cuts in benefits are wrong.
I shall now briefly mention pensions, and particularly the low take-up of income support among pensioners. A recent Department of Social Security report said that 230 one third of pensioners who are entitled to claim income support do not do so. They must be encouraged to claim, especially at this time of year because they will lose their entitlement to cold weather payments if they are not on income support. I honestly wonder how many of those 305 pensioners in 1994 who had hypothermia listed as the cause of death on their death certificates died as a result of missing out on income support and on cold weather payments. We cannot address in isolation the level of the basic state pension and ignore those who will lose out, and the Government must make sure that all pensioners who are entitled to claim do so.
We are debating the Guaranteed Minimum Pensions Increase Order 1996, which will mean that individuals on salary-related schemes are guaranteed a payment this year as good as the state earnings-related pension that they would have received had they not come out of that scheme. I welcome that, but I hope that the Government do not change the rules next year or the year after. I suspect, however, that that is what they will do.
I turn now to the Child Support Agency and the regulations relating to it. The maximum that the CSA can deduct from a person on income support is currently £2.35, but that will rise to £4.80. Between April and August 1995, some 45 per cent. of the 46,000 full assessments—a staggering proportion—were for £2.35 or less. In other words, 45 per cent., or 20,700, of the assessments were made of those on income support.
There is a misguided view around that large amounts of money are being taken from rich fathers who have never paid, but that could not be further from the truth. Everybody wants liable fathers to pay, and nobody disputes that. But let us not pretend that hiking up maintenance from the group of liable fathers to whom I have referred—those on income support—is anything more than redistributing poverty. The Minister must explain how parents will be able to manage from April if he doubles their maintenance payments. At present, they pay £2.35 out of £46.50. In April, the payment goes up to £4.80 from £47.90. I thought that income support was uprated in line with inflation because it was paid to people living on subsistence levels, and that they could not manage on anything less. How can a liable father expect to pay double from his income support when he is on subsistence levels at the moment?
§ Mr. Nigel Evans (Ribble Valley)
Is the hon. Lady saying that people on income support should pay nothing to the Child Support Agency for the upbringing of their children? What is she saying, exactly? Surely those men have the same responsibilities as every other father in the land.
§ Ms Lynne
I agree that all parents are responsible for their children, but to double the payments for those on subsistence levels as the Government are doing is totally wrong and will force liable parents into even more poverty. The hon. Gentleman is right that every parent should pay for their children, and I do not dispute that. But the Government cannot get away with trying to make liable fathers suffer more. Those fathers often suffer because they are not able to visit their child as regularly as they would like, and the child from that family is already suffering emotional damage. We do not want those parents to suffer unnecessarily. Yes, the Government should go after fathers who have never paid a penny— 231 all of us would welcome that. But targeting those fathers on income support and increasing their maintenance is totally wrong. The emotional damage that that does to children is horrendous.
Let us look at the costs of the Child Support Agency. The CSA costs £192 million to run and has raised £76.4 million in new maintenance. The regulations are an attempt to improve those dismal and damning figures by resorting yet again to targeting those who are least able to afford to pay.
Turning to some of the other orders and regulations, the Social Security (Incapacity for Work) (General) Amendment Regulations 1996 propose merely an uprating in line with inflation from £44 to £45.50, which is the amount that people on incapacity benefit can earn by voluntary or therapeutic work, which is restricted to 16 hours. The trouble is that few people are aware of the exemptions, and some people again are afraid to take them up.
Another problem is that the measure is inflexible. If a person earns more than over £44, or £45.50 from April, he will lose all benefit for that week. His benefit is not reduced pound for pound. Despite that, I am pleased that the amount is going up in line with inflation, but we must make sure that more people are aware of the exemptions.
We must also make sure that people do not lose incapacity benefit at the rate they are doing at present. On Saturday a man came to my surgery who had been receiving invalidity benefit, and later incapacity benefit. He was seen by a Benefits Agency doctor a year ago and told that he would never work again because of his medical condition. He then went for the new medical test for incapacity benefit and was told that, despite the Benefits Agency doctor saying one year before that he would not work again, he could not receive incapacity benefit and would have to go to an appeal.
That is happening time and time again. People are being denied incapacity benefit, and are refused money because the medical test has not been strictly adhered to or for various other reasons. That money is later reinstated on appeal. That is a waste of money to the DSS, and it causes a great deal of distress and pain to those who are denied incapacity benefit for a short time. Although I welcome the general uprating, the Government have to look seriously at the damage that their legislation is doing to individuals—not just incapacity benefit legislation, but the Child Support Act 1991. I shall be voting specifically against the child support regulations.
§ Mr. Nick Hawkins (Blackpool, South)
I shall begin by talking about the importance of the campaign against benefit fraud. My constituency has been fortunate enough to be the beneficiary of substantial operations by the anti-benefit fraud squad, and I have been able to participate in dawn raids with the DSS fraud squad. Two operations in two or three years—Operation Sea Breeze and Operation Gold Coast—have made substantial savings for the taxpayer. In seaside resorts all around the country, there has been a continuing campaign by the DSS anti-fraud squad to cut the vast amount of fraud against the taxpayer. As my right hon. Friend the Secretary of State said in opening the debate, it is crucial that we save money by cracking down on fraud so that that money can be spent on those who really need it.
232 There is nothing worse than Labour councillors participating in and assisting the ripping-off of the housing benefit budget. I warn Labour Members that, until they rid their party of the freeloaders—some of whom have been on final shortlists for Labour parliamentary candidacies, although it is acknowledged that they participate in what most ordinary voters and I would regard as an evil trade—they can never be taken seriously in dealing with this or any other matter to do with the public purse.
The Government rightly believe that the best way to help people in need is to stop money going to those who are not entitled to it. Last year, my right hon. Friend the Secretary of State announced an investment of £100 million in the campaign against benefit fraud, which will save at least £400 million in fraud this year. The programme of visits to the homes of benefit claimants and the reviews of claims introduced in July 1995 have already saved £70 million. One can judge from that the huge amount of benefit fraud that is going on.
On a dawn raid, as I was fortunate enough to see, one often finds that the landlord is submitting housing benefit claims for perhaps 12, 14 or 20 residents, but that every single room is vacant. All the names are fictitious. That is the sort of rip-off that is happening in seaside resorts around the country.
Unscrupulous landlords are advertising in magazines that are circulated free in inner-city areas, such as Glasgow, Leeds and Birmingham, and throughout the industrial parts of the country. In effect and sometimes in so many words, they are saying, "Come and claim your dole by the sea." It is an outrageous abuse and it is changing the nature of our seaside resorts.
Not only is there benefit fraud but damage is done to the tourist trade. I will not try your patience, Mr. Deputy Speaker, by extending too far beyond the subject of social security, but when calculating the costs of benefit fraud it is important to assess the damage that is done to the legitimate tourist trade. Once a house in a holiday street in a tourist area, such as Blackpool, Brighton, Bournemouth or Margate, is in multiple occupation or becomes what is known in common parlance as a DSS hostel, the legitimate hotels soon go out of business. Often, the few residents in the hostels are on drugs. Often, the hostels are locked early in the morning and the residents are out on the streets injecting themselves with drugs or drinking. They accost genuine holiday makers and their children. Of course, the hotels go out of business, because they lose bookings as a result.
That is an important matter and I pay tribute to many of my hon. Friends who have done so much work with me and my colleagues in the campaign to change the law and crack down on DSS hostels. My hon. Friends the Members for Blackpool, North (Mr. Elletson), for Scarborough (Mr. Sykes) and for North Thanet (Mr. Gale) are at this moment trying to change the law in a Committee upstairs.
It is important to note that, since April last year, the Benefits Agency has undertaken data matching to cross-check all benefit claims for consistency. In that initiative alone, £16 million has been saved for the taxpayer since last April. A further investment of £230 million is being made this year, which will increase the savings to almost £900 million next year. Measures will focus on preventing fraud and deterring people from attempting fraud.
233 I welcome the steps that are being taken on asylum seekers. This country has always been a haven to those in genuine need of asylum and long may that continue. From January next year, however, only genuine refugees will be entitled to benefits. Those who claim asylum immediately they enter the United Kingdom will be entitled to benefit, but only until the immigration authorities have decided on their case. Those who are already in the UK—
§ Mr. Chris Smith
Is the hon. Gentleman seriously trying to tell us that there is a new definition of a genuine asylum seeker, which is someone who puts in his application at the port of entry, rather than subsequently? If that is the case, he is ignoring the evidence of the facts, which show that the Government accept as genuine refugees a higher proportion of those who put in their applications subsequently.
§ Mr. Hawkins
I acknowledge that, but it is important to note that many people who come to this country initially as students or tourists decide to claim asylum only after many months, if not longer. Often, they are the freeloaders, as the hon. Gentleman knows only too well. Those people will not be eligible until after their claim has been decided. If they are then found to be genuinely entitled to asylum, as many are, as the hon. Gentleman suggested, of course they will be eligible for benefit if they cannot get work.
Given that 70 per cent. of people who claim asylum originally entered the country on tourist or student visas, or as illegal immigrants, surely the hon. Gentleman would not claim that they are all genuine asylum seekers. I see the hon. Member for Islington, South and Finsbury (Mr. Smith) shaking his head and I am glad that he acknowledges that point.
§ Ms Lynne
Does the hon. Gentleman agree that a number of genuine asylum seekers will lose out? As Labour Front Benchers have pointed out, many genuine asylum seekers apply in-country, on the same day as they arrive, the next day or perhaps a week later. They are genuine asylum seekers and they will not receive social security benefits. They will be destitute.
§ Mr. Hawkins
Those who apply the same day, the next day or a week later, will not suffer. [HON. MEMBERS: "They will."] No. I am talking about the important need to crack down on bogus asylum seekers. It is important that the British taxpayer is not ripped off by bogus asylum seekers. Most voters and most of the people support that view. If the hon. Lady and Labour Front Benchers are suggesting that they would carry on paying out benefit willy-nilly to people who apply for asylum, even if those people turn out to be bogus, they will not have the support of the country.
§ Mr. Hawkins
No, I must make some progress, and I have given way to the hon. Lady once.
In the continuing crackdown on benefit fraud, it is important to increase home visits. I am delighted that the Benefits Agency staff will follow up at least 30 per cent. of new benefit claims next year with home visits and that other checks will also be increased.
234 It is also important to develop new technology and I am pleased that, next year, the agency expects to award a contract for the automation of services at post office counters, which will include testing of the benefit payment card, and that, in a separate initiative, local authorities will also be able to use a computer system to cross-check benefit claims. The people will be looking carefully at Labour and Liberal Democrat-controlled local authorities to find out whether they use that system. Once the initiative has been introduced, there will be much criticism if only the Conservative authorities use it.
I am pleased that, since 1993, local authorities have been able to earn funds by detecting fraud against housing and council tax benefits, although Labour-controlled Blackpool council has not been at all prominent in using that opportunity to earn funds for the people of Blackpool. It has a particularly abject record in cracking down on fraud, no doubt for the reasons on which I touched earlier.
I am pleased that my right hon. Friend the Secretary of State has said that the subsidies will be increased for local authorities that detect fraud in housing and council tax benefits in 1996–97. Local authorities will also be able to bid for new money to pay for innovative schemes to combat fraud and no less than £18 million will be made available for such schemes.
On housing benefit, local authorities will have the discretion to make the first payment payable to the landlord, which will undoubtedly stop tenants running off with it before it reaches the landlord. From October, all new claims for housing benefit from private sector and housing association tenants will be paid in arrears. Where payments are made directly to landlords, they will be made four-weekly in arrears, saving £40 million in the first year.
It is important to examine how the Opposition Front-Bench spokesmen approach the need to make savings in our social security budget. I was absolutely fascinated to see the letter from the shadow Chief Secretary to the Treasury to the hon. Member for Islington, South and Finsbury. I am sure that he and the shadow Chief Secretary will have some interesting discussions with the civil service trade unions—many of which, of course, sponsor Labour Members—particularly when the shadow Chief Secretary has clearly acknowledged in his letter many of the measures that my right hon. Friend the Secretary of State has spoken about in this debate, particularly under the heading "Changes to Location".
§ Mr. Chris Smith
I have been listening with care to the hon. Gentleman. Can he tell me the name of one member of the parliamentary Labour party who is sponsored by a civil service trade union?
§ Mr. Hawkins
I am not able to give the hon. Gentleman a particular name, but I have no doubt that research will enable me to answer that question. Perhaps, in the time-honoured phrase, I could write to the hon. Gentleman.
§ Mr. Corbyn
Before the hon. Gentleman gets completely carried away with next week's headlines in the Blackpool local press, I should tell him that no civil service union is affiliated to the Labour party. It would, therefore, be quite difficult for a civil service union to 235 sponsor a Labour Member of Parliament. The only way in which such a union might be involved in such a sponsorship would be if it obtained a consultancy with an hon. Member from the Tory, Labour or any other party; so perhaps the hon. Gentleman should desist from this rather ludicrous line of inquiry.
§ Mr. Hawkins
I understand that the hon. Gentleman is sponsored by Unison, which is a public sector trade union. I do not see—and nor will the people of this country—a huge distinction there. The hon. Gentleman is seeking to make a distinction without a difference.
In his letter, which is of great interest, the shadow Chief Secretary says:There may be scope for rationalising the location of various DSS activities. The development of the site at Longbenton on Tyneside under the PFI clearly points in this direction and the the"—this is perhaps not literate English—closure of other sites".Some proof-reading is required there, but the point is clear.
When Labour Front Benchers examine this issue, they will have to consider what they are going to do about their previous proposals for a flexible decade of retirement. I am fascinated that so many Labour party spokesmen have said that they support a flexible decade of retirement, but that they have unaccountably ignored the fact that the vast majority of people would choose to take retirement at the earliest possible date to which they were entitled. If Labour Front Benchers' proposals for a flexible decade of retirement were to be introduced and allowed everyone who chose to claim a full pension from the age of 60, and of course most people would, the practical effect is that it would cost £13 billion a year.
Have the Labour Front-Bench spokesmen cleared those proposals with the shadow Chancellor? I suspect that they have not. Similarly, the hon. Member for Islington, South and Finsbury refused to say whether the measures that he mentioned in his speech would be reversed by the Labour party. Unless Labour Front Benchers are prepared to answer those questions, their criticisms of the measures cannot be taken remotely seriously.
It is crucial to recognise how strong is our position on pension provision. As my right hon. Friend the Secretary of State recently said, in the inaugural Politeia lecture:The OECD recently contrasted Britain's position on pensions, health and education with that of other developed countries. The OECD forecast each country's national debt assuming they continue where their present pension systems and levels of taxes and charges. By 2030 in France and Germany"—as my right hon. Friend pointed out—the national debt will have about doubled and will exceed the national income. In Japan, where the population is aging particularly fast, debt will reach three times national income. By contrast, Britain's second tier funded pensions place us in an almost unique position. The OECD forecasts that we will have paid off our entire national debt and started to build up assets.My right hon. Friend was quite right to highlight that crucial success of Conservative policy.
§ Mr. Jeremy Corbyn (Islington, North)
So that the hon. Member for Blackpool, South (Mr. Hawkins) does not get too excited, I am happy to say on the record, as it 236 is on the record, that I am sponsored by Unison and have been a member of that union for more than 20 years. I am proud to be a member of that union, and I am not paid anything by it. I am happy to support it in what it does because we need trade unions to deal with the type of Government that we have, who are introducing slave labour conditions in hospitals and many other places, as the current dispute at Hillingdon hospital shows.
§ Mr. Nigel Evans
Is the hon. Gentleman saying that Unison pays nothing towards his local Labour association? If it does, does he not benefit from that?
§ Mr. Corbyn
The hon. Gentleman knows full well what the arrangements are; nothing is paid personally to any Member of Parliament. If he cares to read the declarations of interest, he will note that a sum of money, which is listed, is paid in each constituency to the local Labour party to undertake electoral campaigns. Unfortunately, the same transparency does not apply to the Conservative party, which finds itself unable even to publish its annual accounts or to tell us from which overseas dictator or commodity stockbroker its money comes.
Before I incur your wrath, Mr. Deputy Speaker—
§ Mr. Corbyn
Thank you, Mr. Deputy Speaker.
The subject of this debate should be the levels of poverty that exist in our society, and what is being done to eliminate those levels of poverty. If the few hon. Members who are present in the Chamber to discuss this issue asked you, Mr. Deputy Speaker, to adjourn the House and chose to decamp to the Strand for half an hour, to walk up Charing Cross road or to look under Waterloo bridge, they would find several hundred people literally on the verge of freezing to death because they have no homes to go to. We would find that they are lacking benefits; those desperate people are the under-class of the so-called successful free market society that the Government have created.
In every city in this country one will find beggars, young people who have been thrown out of their homes because their parents can no longer afford to keep them, and all the degradation that exists in a society in which the welfare system is breaking up, as ours is currently doing. Perhaps tonight, when the Secretary of State goes home to his house in the borough where I also live, instead of going in his ministerial car, he will take the bus or, better still, he will walk so that he can see the consequences of the Government's policies.
If we look back and consider the so-called economic success, in 1992–93, there were 14.1 million people who were officially classified as poor, in comparison with the 5 million who were so classified in 1979. In 1979, one in 10 children were living in poverty in Britain. By 1993, one in three children were living in poverty. By the beginning of the 1990s, the fact that a quarter of Europe's poor people were in this country was the Government's great achievement.
If we look at the other end of the scale, we find that the richest 10 per cent. of the population—this will probably please the Secretary of State, who apparently 237 finds this so amusing—have increased their wealth by 67 per cent. The poorest 10 per cent. are 18 per cent. worse off than they were 15 years ago. We have the largest growth in the disparity between rich people and poor people of almost any industrial country in the world, and the Secretary of State is proud of it. He is proud of the levels of poverty; he is proud of the aggrandisement of wealth among the speculative minority. Those issues need to be addressed very urgently, but the uprating statement and the Government's social security policies do nothing at all to achieve that.
The Secretary of State told us that he is proud of the Government's achievements. Every year it seems that he has to find a new scapegoat. First, some years ago, we had the attack on 16 to 17-year-olds: "Take away their benefits; take away their board and lodging allowance; make them dependent on their parents." I will tell the Secretary of State the consequences of that. A young girl came to my advice surgery. She was desperate to get through her A-levels at school. The only way that her family was able to afford to keep together was by her working three evenings a week and two days at the weekend in a supermarket to make ends meet. School children are being forced into part-time work. Students at the university of North London, which I represent, are all hard up and most of them are being forced into one sort of part-time work or another just to survive. That is not a successful society but a desperately unhappy one.
The Secretary of State started off by blaming such people before moving on to blame single parents. He blames them all the time. The hon. Member for Dover (Mr. Shaw) excelled himself when he told me that single parents were the sole cause of Britain's economic decline relative to Japan. When Conservative Members mount Goebbels-like attacks on single parents, they do not realise the damage that it does to those people and to their self-esteem. They do not know about the stigmatisation that happens the next day in school playgrounds. It seems that every year a new enemy has to be uncovered.
The Government moved on to asylum seekers—people who uproot themselves to flee to another country because they are terrified. When they arrive in Britain, they are scapegoated for all our economic ills by the Secretary of State. It is the same Goebbels-like attack.
The hypocrisy of Conservative Members is unbelievable. Like me, they have probably all had letters from British people, residents or nationals who have earned their pensions by working in this country and gone to live abroad. They may have gone back to the Caribbean or to live in Australia or Spain. That is all perfectly legal and legitimate. Hon. Members had the opportunity to restore those people's rights to a full pension at the same rate as was paid in this country. What happened to all the brave Members who signed the early-day motion and wrote to pensioner organisations all over the world that they were with them and recognised all that they had done in two world wars? Those hon. Members did not come here to vote for what they had promised to support—promises that they had no doubt released to their local papers. The hypocrisy is breathtaking.
The Secretary of State moved on to a new enemy a year or two ago. He went for Italian students, who he claimed were coming to Britain to claim benefits falsely. Perhaps hon. Members remember the speech. It was another Goebbels-type speech made at the annual Nuremberg rally—"Let's have a go at these benefit tourists." 238 Who has that hit? It has hit people who for various reasons have worked abroad for more than two years. It has hit people who have gone back to family connections in the Caribbean. It has hurt ordinary people born in this country who have gone to work abroad for a short time. The result is misery.
People come to my advice surgery in desperation and tears because they come back to this country and cannot get a job or benefit. They are being evicted from their houses because they cannot get housing benefit—because they cannot get income support in the first place. The Secretary of State should read the National Association of Citizens Advice Bureaux report on the subject. I know that a copy has been sent to him.
The biggest con is the treatment of pensioners. The Government are keen to say that pensioners' income has gone up by 33 per cent. since the Tory Government came into office, that every pensioner is so much better off. The real increase in the state pension is 40p since 1979, as the Secretary of State told me in an answer not long ago. The Government broke the link between pensions and earnings in 1980 to reduce taxation and short-change pensioners. That is an absolute scandal. Every pensioner has been robbed of more than £20 a week by that one decision, which Geoffrey Howe claimed as his greatest political achievement. Personally, I thought that his only political achievement was when he accused the then Prime Minister of sending him in to bat with a bat she had broken in half before he set out—that was one of the high points of my parliamentary life.
The Government, and others in western Europe, perpetually promote the idea that the only way forward for economic growth is to reduce taxation and costs. We hear the same right-wing nonsense from the Adam Smith Institute and from other institutes all over Europe. They promote the destruction of the post-war consensus that society as a whole has a responsibility to remove people from poverty and to guarantee people reasonable sustenance after they have passed retirement age or if they fall desperately ill or suffer some comparable misfortune. That is all under threat from the philosophies that those institutes promote.
Those ideas are promoted on the basis that we have to live in a global economy and compete with low-wage economies elsewhere. The Government promote the free market economy and promote—indeed, invest in—slave labour economies and companies and multinational corporations which use them and then say that we must cut costs in western Europe to compete. They supported the general agreement on tariffs and trade, which was part of the process of creating a global free market economy. That is what the British people are being offered.
§ Mr. Corbyn
There is no evidence of that on the doorsteps at the moment. If people are so keen to re-elect the Government, I assume that the Prime Minister will leave on a high point, call an early general election and be returned with a resounding majority. If that is the case, he is slow to seize the moment.
Some awful changes are proposed in the benefit arrangements. The Secretary of State's philosophy is wholly appalling. To return to the subject of pensions, 239 I mentioned that the link with earnings had been broken in 1980 and that pensioners' proportion of average earnings is below 14 per cent. and falling rapidly.
Specifically to promote private pensions, the right hon. Member for Sutton Coldfield (Sir N. Fowler) and the Prime Minister—I remember this well because I served on the relevant Standing Committee—reduced the value of the state earnings-related pension scheme by up to half. It was all done to destroy SERPS and promote the private pensions industry.
Belatedly, the Government admit, as my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) pointed out, that up to 25 per cent. of the cost of private pension schemes goes in administration and they have little long-term security. The Government have no plans to deal with the consequences of collapsing private pension schemes. They say that the Organisation for Economic Co-operation and Development has given Britain a clean bill of health because of all the money that we have in private pension schemes. Where is all the money invested? Has it gone into housing or socially useful projects? Or has it been invested in speculation, often overseas?
Secondly, is not forcing people into private pension schemes, in effect, a privatisation of taxation? People are forced to spend money on private pension schemes with all the costs that go with them when a properly funded state scheme and a proper increase in the state pension would do much to eliminate poverty among retired people.
The poorest people in the country are often women over 75. Tragically, they are often widows living in desperate poverty. The Government have no plans to do anything to help them. Likewise, the Government have no plans to assist people who seldom have the opportunity to work throughout their working lives.
What about the equalisation of pension ages? The Government are short-changing all the women who thought that they could retire at 60 and who are now told that they have to retire at 65. Surely to God, at the end of the 20th century, we should be able to look forward to a retirement age of 60 for both women and men, rather than forcing people to go on longer.
Many other issues need to be dealt with, but I shall mention only a couple. The Government have a new obsession with single parents and their problems but do little to help them to get work. They make no improvement in child care facilities and are trying to take away the small single parent benefit that is paid. They ignore the experience of nearby countries. There was no need to go to Australia or Singapore to learn how to deal with the problem. If they went to the Netherlands, they would find considerable Government investment in local authority-generated job creation specifically to ensure that single parents are able to get work because it is associated with good-quality, reliable child care facilities.
My hon. Friend the Member for Bow and Poplar (Ms Gordon) mentioned the Child Support Agency and the way in which the Government planned to penalise absent parents or non-custodial parents on income support. I fail to see what the Child Support Agency is achieving, apart from spreading the misery between parents. So far as I can gather, none of the money that it has collected has assisted any children. A massive bureaucracy has been created and very few people have benefited from it.
240 Many hon. Members mentioned housing benefit and the fraud that is associated with it. I was amazed by the remarks of the hon. Member for Blackpool, South (Mr. Hawkins) on that subject. I did not realise that the Tory Government had allowed such dreadful things to happen for so long. Why does the hon. Gentleman believe that housing benefit is so expensive? Why is it open to such abuses and fraud? As the Government have deregulated rents and refuse to register houses in multiple occupation but just automatically pay housing benefit at whatever level of rent landlords request, housing benefit is clearly on a permanent accelerator. Housing benefit is very expensive and it is essentially a subsidy for landlords rather than a benefit to tenants.
The Social Security Select Committee inquiry into housing benefit has found that massive fraud is occurring. It is being perpetrated largely by landlords because local authorities are underfunded in their administration of housing benefit. The London local authorities spend up to £300 million administering housing benefit and local authorities are not paid the full value of the benefits that they have to pay out. There is a positive disincentive to pay out housing benefit when it is needed and there is no incentive to administer it properly.
§ Mr. Corbyn
It would be much easier for Rachman if he were alive today because he could simply write to the local authority and claim the money—he would not need to use dogs and the other horrific methods that he employed. The Government should be realistic about housing benefit. Perhaps they should consider re-regulating rents so that private sector rents do not continue to go through the roof. In most parts of London, £100 per week would hardly pay for a bedsit and people are paying more than £150 per week for a flat. That is one of the consequences of a housing benefit strategy designed to subsidise landlords whom Government policies have freed from any controls.
One could discuss many issues in the debate, but I shall conclude on one important point. Those of us who grew up secure in the knowledge that the welfare state provided guarantees against unemployment and sickness and guaranteed some degree of dignity in retirement are seeing those guarantees being taken away. Future generations will not thank us for allowing all the gains of post-war consensus to be sacrificed by the Government on the altar of a free market economy.
I believe in the principle of a state-run welfare system. Where the welfare state has operated elsewhere—for example, in Sweden, and in most other parts of western Europe—people enjoy greater security, higher living standards and higher levels of achievement. In this country the living standards of the poor are continually being reduced and too many of our children are under-achieving in under-funded schools because the Government believe that public spending is a dirty word.
I believe that the only way to begin to eliminate poverty is to introduce a national minimum wage and a benefits system which provides real opportunities. The free market offers only the slavery of the competitive economy and the misery of poverty for the many who fail to achieve within it. Conservative Members may feel cocky at 241 present because they have been in office for a long time, but they should recognise that many people do not accept the amoral society that the Government are attempting to create. They must recognise that all over the world the tide is turning rapidly against the principles of the free market economy in favour of a society that cares for everyone—irrespective of his or her birthright—and ensures that all are able to live a decent life. That is something that the Tories simply cannot recognise.
§ 8.3 pm
§ Mr. Nigel Evans (Ribble Valley)
I am grateful that I have caught your eye, Mr. Deputy Speaker, in this important debate about uprating the orders. I believe that those who receive Department of Social Security benefits are not spongers or wasters—the vast majority of recipients are in genuine need. Many people find that situation extremely stressful and would prefer to have a job rather than rely on benefit. However, I also believe that we should take fraud very seriously. It is corrosive and we should not turn a blind eye to it.
I enjoyed listening to the contribution from the jurassic hon. Member for Islington, North (Mr. Corbyn). He is perhaps not new Labour, but he is certainly real Labour—so much so that the Labour spin doctor, the hon. Member for Hartlepool (Mr. Mandelson), who was standing to one side, could not remain in the Chamber for a second longer. No doubt he has gone to cry into his avocado dip. The contribution from the hon. Member for Islington, North was vintage old Labour—it is the sort of politics that we could expect if the nightmare became reality and the Labour party formed the next Government.
The hon. Gentleman banged on time and again about the difference between those who have no money and those who have it. He and his party will never learn that one cannot make the poor rich by making the rich poor. It is the politics of envy and we hear it time and again whenever Labour Members open their mouths. The hon. Gentleman said that the Conservatives need a new enemy every year, but the Labour party sticks with its old enemy: those who happen to have some money. The Labour party cannot wait for an opportunity to take that money away.
§ Mr. Jenkin
I agree with a great deal of what my hon. Friend has said about the speech by the hon. Member for Islington, North (Mr. Corbyn). Did my hon. Friend notice that, at one or two points during the hon. Gentleman's speech, the hon. Member for Islington, South and Finsbury (Mr. Smith) nodded his head? That suggests that the hon. Member for Islington, North has more in common with his Front-Bench colleague than the spin doctor from Hartlepool would have us believe.
§ Mr. Evans
I am extremely grateful to my hon. Friend for pointing that out. While we hear the silence of the lambs on the Front Bench when we ask any questions, I have no doubt that many Labour Members are in agreement. During the summer, the hon. Member for Islington, North said that more than 100 Labour Members do not agree with the leadership style of the right hon. Member for Sedgefield (Mr. Blair). A growing number of Labour Members simply do not agree with his rhetoric—I refer only to his rhetoric because I believe that his policies are completely different again.
242 We were treated to some sheer humbug from the hon. Member for Islington, North this evening. He talked about caring for pensioners, but the Labour party would not know how to care for pensioners. He referred to the fact that pensions are no longer linked to earnings, but to inflation. If pensions had been linked to inflation under the last Labour Government, pensioners' savings would not have been savaged when inflation reached 27 per cent. That was the cruellest tax of all: it indiscriminately whittled away the money that people had saved for their old age. They could not go out and find jobs.
Under the last Labour Government, people's savings were quickly whittled away over five years and their lifestyles and livelihoods were severely damaged. I do not think that the elderly will quickly forget or forgive the Labour party for the way in which they were treated by the last Labour Government.
§ Mr. Jenkin
The last Labour Government committed the great sin of not only allowing inflation to eat into pensioners' savings, but changing the method of uprating so that pensions increased very little during a time of very high inflation. The last Labour Government cut the real value of pensions—that should never be forgotten.
§ Mr. Evans
I am sure that that will not be forgotten. I can at least be charitable to the Labour party and say that it did not single out pensioners for the rough treatment—everyone received rough treatment when the Labour party was last in government. Those who were in work suffered when inflation was at 27 per cent.—for example, those who worked in the national health service had their take-home pay cut in real terms.
The hon. Member for Islington, North talked about single, elderly ladies—for whom he has found some new compassion. However, when the old rating system was in place, single, elderly ladies—who had lost their husbands, who were living alone in their large houses and who wished to stay there because all their memories were there—had their rates shoot up through the roof. No regard was paid to them whatsoever, and many of them had to move out of their homes simply because they could not afford to stay.
We have heard from the hon. Member for Islington, North the old Labour rhetoric of tax and spend—that is exactly what he was advocating today. I am sure that the shadow spokesman, the hon. Member for Islington, South and Finsbury (Mr. Smith), will have an opportunity to come to the Dispatch Box to answer some points about the benefit system generally, about how much more money a future Labour Government would commit to the social security budget and about where they would get that money from.
We must continue our battle against fraud—all hon. Members would want to see it combated and whittled away. The Government are taking action against fraud, and I hope that they receive support from all hon. Members. We have heard about the £100 million that was invested last year to combat fraud, which saved £400 million. However, it has been estimated that as much as £1,000 million could be fraudulently taken away from the £90 billion budget for social security.
People visit our surgeries and tell us stories about people whom they know, who are either working and are claiming, or who are fit and well and are receiving support 243 for invalidity. I urge people to give such information to the Department of Social Security so that it can be properly investigated. There is nothing wrong with that—it is not snitching; it is ensuring that the taxpayers' money is effectively spent and targeted at those who really need it. If the money is going to people who do not need it, less money is available for everyone else.
I welcome the fact that visits to the homes of benefit claimants are being stepped up—that has already saved £70 million. Approximately one year ago, I visited my local social security office in Preston, and we discussed a range of issues relating to benefit claimants. One thing that I had paid little attention to in the past was the fact that a lot of people who work for the Benefits Agency have to make home visits, particularly when someone has reported that his cheque has gone missing or when someone has claimed benefit for the first time—such matters must be investigated properly.
We do not appreciate the danger into which such work puts some who work for the Department of Social Security. I ask the Minister to pay tribute to each and every member of the staff of the Department for the work that they do—some of them face violence on a daily basis, and some of them live in fear. They do a tremendous job and they are some of the unsung heroes of those who are cracking down on fraud. They deserve credit for the work that they are doing.
§ Mrs. Teresa Gorman (Billericay)
Is my hon. Friend aware that in the days when the friendly societies administered most of the welfare in this country—they were used by the state until 1945 to deal with benefits that the state administered—the incidence of fraud was practically zero? We cut out the moral hazard of people cheating the system because the members of each society were self-monitoring it, and those people who were likely to be defrauding the system would be dealt with through the society. There was practically no fraud at all.
§ Mr. Evans
I am grateful to my hon. Friend for pointing that out. I do not think that we will ever get back to a position where everyone is honest—we have to recognise that there is a dishonest element in society. We have to do as much as we can to detect fraud and stamp it out where possible. In a moment, I shall mention areas in which we are doing that. The people—many of them are women—who have to take measures against those who are trying to defraud the system deserve credit for the work that they do. Like my hon. Friend, they are very brave and tough people.
We have heard a lot about asylum seekers. Soon after I was elected, I served on the Committee that examined the Asylum and Immigration Bill. The number of people who were coming into this country, seeking asylum and applying for benefit was growing at such a massive rate that, if the Government had not taken action, the bill would have been absolutely astronomic. I applaud the measures that were taken in trying to crack down on fraud by those who were coming in to seek benefit in the first instance.
A number of people are quite obviously not genuine asylum seekers—they come here as economic refugees because they think that life and conditions in this country 244 are better than they are at home; I could imagine that to be so for a number of reasons. We have to be fair to the genuine asylum seekers; we must ensure that they are treated quickly so that they know where they stand and so that they get the benefits to help them live in this country.
§ Ms Lynne
I agree with the hon. Gentleman that there are bogus asylum seekers, and no one would like to encourage them. However, does he agree with me that genuine asylum seekers will be caught in this net because a lot of them apply in-country, not when they arrive at the port of entry? As the hon. Gentleman was on the Committee, he must own up and accept that genuine asylum seekers will be disadvantaged as well.
§ Mr. Evans
It is 4 per cent. People who come into this country and seek asylum are not always from the traditional countries that one might expect; often, they have decided to come here to better their economic livelihoods. If they are genuine asylum seekers, they must go through the proper procedures. They must not come to this country, spend a couple of months here and then decide—when it is almost time to go home—to seek asylum. I welcome the measures that have been taken.
I welcome the introduction and the utilisation of new technology in the crackdown on fraud, wherever it exists. We have already heard that next year the Benefits Agency expects to award a contract for the automation of services at post office counters. We all remember the debate about the post offices that has raged in the House for a number of years. I welcome the fact that those who wish to have their pensions paid at post offices will still be able to do so.
I recently spoke to one of my local postmasters—they are the front-line staff as well. A lot of the postmasters and mistresses know the people who come to their counters and they know whether they are who they say they are. Over a year ago, one of the postmasters at the Barracks post office in Fulwood was able to help detect somebody who was trying fraudulently to cash a giro cheque. That is the sort of help that we get from post offices. I again applaud the work of our postmasters and mistresses who operate on a daily basis, who help those who genuinely need the money and who help to detect fraud. They also need some help.
There is much debate about ID cards. It cannot be that I mix with only a certain type of person; it seems to me that the vast majority of people would welcome the introduction of an ID card containing a photograph and a laser-etched signature. Time and again, when I speak to groups of people—not just party political groups—they agree that ID cards could help to crack down on crime, including fraud.
When such cards have been utilised by banks and building societies, they have proved to be tremendously successful in reducing credit card and cheque guarantee card fraud. Why is the system not extended generally? I cannot understand why all banks and building societies do not introduce cards with photographs and laser-etched 245 signatures. Why is the system not adopted generally for people who access benefits, so that they can prove who they are? It would assist them as much as anyone else.
We all have ID cards for our own security to get access to the Palace, as do our researchers. We do not mind carrying ID cards. Why cannot we extend the scheme generally so that others can benefit from it? I hope that my hon. Friend will say something about the utilisation of new technology, including ID cards, to help crack down on benefit fraud.
I was delighted by the speech of my hon. Friend the Member for Blackpool, South (Mr. Hawkins). My hon. Friends the Members for Blackpool, North (Mr. Elletson) and for Scarborough (Mr. Sykes) have been working extremely hard to address the benefit fraud in the DSS hostels that are damaging tourism in their constituencies. I hope that, either in the Social Security Committee or at a later stage, the Government will introduce measures that will help to crack down on such fraud.
Almost in conclusion, I welcome the incentives that have been introduced for those entering employment. People who have been out of work for two years or more are now being encouraged to take employment by the one-year national insurance holiday that starts in April. The longer people are unemployed, the harder it is for them to return to work. I welcome that incentive.
I also hope that we can do more to counter agism. After people have reached a certain age—despite the aging population, that age is getting lower—they feel that they are on the scrap heap and that employers do not want them. What a wonderful resource we have out there in people over the age of 40. They can contribute a great deal, and I hope that the Department for Education and Employment will introduce measures to help change our culture so that those people can find work.
Finally, we have to find ways of reducing the amount of money spent on social security generally. In any event, we want fewer people claiming benefits. We must ensure that Britain's enterprise economy continues. It has been developing for the past 16 years and it is still growing apace. We must maintain low inflation as it helps elderly people and those on benefits and provides security for everyone. We must not introduce the social chapter and the minimum wage in Britain. They would be disincentives to firms employing more people because social on-costs would be higher.
The Opposition have to answer certain questions, and we shall be listening carefully. Their carping is pointless. We want to know how much extra money they would spend and from where they would get it.
§ Mr. Harry Cohen (Leyton)
First, in relation to fraud, which we all agree must be tackled and which no one condones, I wonder whether an individual who is accused of fraud can now ask for a Scott-like inquiry. Perhaps he could use the defence that he designedly made off with the money without deliberately intending to deceive. Perhaps such an individual should have the chance to pressure the judge, get an advance copy of the case against him and have it rewritten. Perhaps that is a cynical way to start, but if deception by those at the lower end of the scale is to be punished, the same punishment should apply to Ministers—but that is an argument for another day.
246 The Government have a poor record on social security. The number of people dependent on benefit has doubled from one in 12 of the population in 1979 to one in six. Despite the cuts in benefit, the benefits bill has increased by £30 billion since 1979. There has also been a substantial increase in inequality. According to the Joseph Rowntree Foundation report, the income of the richest tenth of the population has risen by more than 60 per cent. while the income of the poorest tenth has fallen by 17 per cent. The number of children living in poverty has trebled from one child in 12 in 1979 to one child in four today. That is a real scandal for the Government. At the next general election, they should be called to account for forcing so many children into poverty.
The cost of benefits to top up low pay has grown to £2.4 billion a year and mass unemployment now costs the Exchequer £20 billion a year.
I should like to draw attention to the topping up of low pay. We are in danger of getting into the same situation as America, where wages are not always enough and families have to rely on the state. That is a very bad path to follow, but it is the one we are going down as the Government support employers who pay low wages. Low wages are a chronic burden for many of my constituents. They are also a burden on taxpayers who have to pay for them. It costs every taxpayer some £750 a year to top up the wages of people in work. That is a scandal.
§ Mrs. Gorman
I do not for a moment doubt the hon. Gentleman's sincerity, but I want to ask him two questions. Is not a low wage better than no wage? Is not it true that some occupations simply cannot produce enough profit to pay high wages? The hon. Gentleman appears to be decrying the Government's policy—which is to be commended—to top up low wages with income support.
§ Mr. Cohen
In my opinion, a low wage is not good enough. That is why I support a national minimum wage. The real answer to the hon. Lady's question is that many people do not agree that a low wage is better than no wage at all so they stay on benefit because there is absolutely no advantage in getting a job. That is the poverty trap. It is no good taking the Conservative option of cutting their benefits altogether. That throws more families into poverty and punishes their children. That is not just my opinion, but the opinion of people who live in the real world who have to balance their budgets.
We must have a proper level for wages. More than 1 million people now earn less than £2.50 an hour. It is hard to imagine how they can support themselves and their families on that. Two thirds of that number are women. Many youngsters are exploited, which gives them a bad start in life. Often, they have to do menial work. Although that is only to be expected because they are just starting work, it is demoralising to get poverty pay. That also makes it difficult to encourage young people into the world of work.
Poverty pay is also damaging to the middle-aged—the 40 and 50-year-olds who still want to work—because increasingly they are told that if they want to work they must accept the same low wage as a young person would accept. If they do not, they are forced out of the labour market and their skills are wasted. Low wages are a burden and that is reflected in the business before us.
247 A high proportion of people in the dole queue are long-term unemployed and, when they look for work—many of them are still trying, despite being demoralised—they are told that, because they have been out of work for a long time and have nothing worth while on their curriculum vitae, they must be bad workers, so they are not taken on. That is what employers tell them. If the long-term unemployed take work, they are taxed and the marginal rate comes into play. It is hardly worth their while—because they lose their benefits—especially if they move to a low-wage job.
I apologise in advance to hon. Members, but I want to tell a personal story. My foster son, Mark, is a lovely lad and a good father to his children. He is a young man, just 21, and has a second family. He is caught in the poverty trap. He is on benefit, but if he got a job to support his second family he would be caught by the child support rules. I am not disputing that principle, but the poverty trap is so great that I cannot see him being able to get a job that pays enough to make it worth his while after loss of benefits. That is my personal experience; many other families have the same problem. I ask the Minister to address that point and tell me whether anything in the upratings will make it possible for people such as Mark—there are many of them—to get a job. The Child Support Agency's actions lead to just one of the poverty traps that keep people out of work when they want to get a job.
A programme of welfare into work is crucial, and it is the policy of the Labour party. The environmental task force support for small businesses—to help them to take on young people at a wage which is at least the benefit level plus £20 a week—will help those who are trying to break out of the poverty trap that affects so many young people.
It is terrific that the Labour party has proposed a national minimum wage that will tackle the problem of low pay. That will be an issue at the general election. The Government can huff and puff about the effect of a minimum wage on unemployment, but if it is set at sensible level it will have no effect on unemployment whatever. On the contrary, it will lift many families out of poverty. That is crucial.
§ Mr. Nigel Evans
The hon. Gentleman's comrade, the right hon. Member for Kingston upon Hull, East (Mr. Prescott), said that there would be a shake-out if the minimum wage were introduced. How many jobs is he prepared to lose to introduce a minimum wage?
§ Mr. Deputy Speaker (Mr. Michael Morris)
Order. I am sure that the hon. Gentleman will return to that 248 argument on another occasion; I am not quite sure that it is relevant to the motions on social security before the House this evening.
§ Mr. Alan Simpson (Nottingham, South)
Does my hon. Friend accept that many employers are now increasingly concerned about their obligation to pay tax to pay for the benefit system? The good employer, who pays a decent wage, also subsidises the awful employer, who pays a lousy wage. In that sense, disproportionate, unfair and unequal burdens are placed on the best employers to support a social wage that many lousy employers do not pay.
§ Mr. Cohen
My hon. Friend makes an excellent point. The Government's low-wage approach subsidises the worst employers. We must change that approach. I noted your earlier comments, Mr. Deputy Speaker, and I shall move on.
The Government broke the link, which existed before 1979, that ensured that pensions would rise in line with earnings or prices, whichever went up the most. As a result, a single pensioner has lost more than £20.30 a week and a married couple have lost more than £32.70 a week. The Government have robbed pensioners of £10 billion a year by breaking that link.
I received a letter, dated 16 January, from Age Concern, which has recently produced a report called "Short Change"—although £10 billion a year is not short change. The letter states:The report … shows that half of pensioner households depend on pension and benefits for at least 75 per cent. of their income and that two thirds of pensioners have incomes so low they pay no income tax. Though the number of pensioners who receive an occupational pension has increased, only 30 per cent. of all single pensioners receive more than £20 per week from them. A low state pension, inadequate benefits and the 'poverty trap' all conspire to create increasing financial hardship among many older people…Age Concern welcomes the Government's belief that the state pension is 'the cornerstone of retirement', but we believe that it should be raised to 33 per cent. of average earnings for single pensioners and 50 per cent. for a couple…We also want to see more encouragement of take up of benefits. About one third of eligible pensioners did not claim income support to which they are entitledOn that point, the amount of unclaimed benefit is still more than the amount lost through fraud. The Government should be working to ensure that those who are entitled to benefits get them.
Just as in society as a whole, the gap between the poorest and richest pensioners is growing. The gap between the pensions of those who are fully reliant on a state pension and those who have occupational pensions is getting wider. The Government have relied on the occupational element and claimed that more people will have private pensions. That will happen over time, but many people will have gaps in their employment. Some people might have seven or eight gaps in their working lives, and in those gaps their pension contributions will suffer.
249 The Government's reliance on private pensions to top up pensions to a decent level overall is misguided. That is shown in the statistics that are set out in this month's Labour Research, which I bring to the attention of the House. It states:An opinion survey carried out by the European Commission in 1992 found that 66 per cent. of all adults in the UK thought that the main problem facing older people in the UK was 'not having enough to live on/financial difficulties'.That percentagewas well above the average for the whole of the European Union—48 per cent.The article continues by pointing out thatif you depend on the state, or on a minimal personal pension, you will be badly off in the UK, and certainly worse off than in other European countries…UK pensioners who depend entirely on the compulsory element of the pension system…are the worst off in Europe when comparing their pension with previous earnings".Another interesting passage tells us that UK workers benefited from occupational pension schemes. That is where the gap with the Europeans begins to close, but even with an occupational pension scheme UK pensioners receive 77 per cent. of their previous net earnings compared with the EU average of 88 per cent., which includes 92 per cent. in Germany, 87 per cent. in France and 90 per cent. in Italy.
In other words, those who rely on the basic state pension are extremely badly off. Even with the occupational element, pensioners in the UK are much worse off than their counterparts in the rest of Europe. That is especially true of women, who have often had a working life disrupted.
Figures from the Department of Social Security show that, in 1993, only 57 per cent. of single pensioners and 72 per cent. of pensioner couples received occupational pensions. Men are more likely to have one than women. Those who worked for large employers are much more likely to be covered than those who were employed by smaller concerns.
There is an alarming growth of inequality among pensioners. In 1979, the poorest 20 per cent. of pensioners had net incomes of about a third of those of the wealthiest 20 per cent. By 1990, the pensions of the poorest had fallen to only a quarter of the richest. If inequality is growing alarmingly, the Government's case that it can be rectified by relying on private pensions to fill the gap is not proven. Growing unemployment drives a hole through that argument. Unless we increase the basic state pension, many of our pensioners will be condemned to live many years in poverty.
The Government should think again, as should the House, about pension provision. We should increase the basic state pension to a reasonable level to ensure that people can live on it.
§ Mr. Bernard Jenkin (Colchester, North)
As always, I enjoyed listening to the hon. Member for Leyton (Mr. Cohen). Before he spoke, I enjoyed listening to the hon. Member for Islington, North (Mr. Corbyn), who entertained us much with his approach. Perhaps the voice missing from the Opposition Benches—I regret that I did not hear the opening speeches, but I was attending to other matters as a member of the Committee that is considering 250 the Finance Bill—is that of the hon. Member for Birkenhead (Mr. Field). There is a difference in emphasis between the approach adopted by those who occupy the Opposition Front Bench and that of the hon. Member for Birkenhead.
With your permission, Mr. Deputy Speaker, I shall explore what the Select Committee on Social Security has been working on: containing social security costs and the development of a genuine social security system that can bring genuine social security, in its fullest sense, to everyone. I would appreciate the opportunity to do so.
Before leaving the remarks of the hon. Member for Leyton, however, I take up his remarks about comparative pensions across the European Union. There is a little phrase in the tail of his comparisons, which rather exposes them for what they are. He was talking about percentages of average earnings, and the key feature of what we have achieved is that the relatively high percentage of average earnings that most pensioners in the United Kingdom can achieve is based on saved income that is fully financed. That is especially the feature of second and third-tier pensions.
In the EU, however, although even higher percentages of average earnings are paid, they are funded by a completely unsustainable financial system. One of the reasons why economic and monetary union in Europe is becoming such an unstable prospect is that the fundamental gearing of such an economy is so high that it is unlikely that it will be able to fund the promises that have been made.
The hon. Member for Islington, North and other Opposition Members seemed to be describing a failed welfare system. They appeared to be describing a system that was very much the creation of the Labour party. In fact, it is a system that has been expanded beyond anyone's dreams. We are spending a huge amount of national income on the welfare state. Yet according to the words of the hon. Member for Islington, North, we have seen a catastrophic failure. The traditional Labour party's great failure of imagination is that the greater the failure, in its eyes, that the welfare state becomes, the more money it insists, the issue should be spent upon it, and then the worse the problem becomes.
The hon. Member for Islington, North gave a great accolade to Sweden and its welfare state, which is what the hon. Gentleman wishes to see in the United Kingdom. His opinions underline the failure of that line of argument. Sweden having joined the European Union, the issue is not whether it will qualify for monetary union, but whether its currency will survive. If a Government are taxing well over 50, 60 or 70 per cent. of the national income and recycling or redistributing much of it through a welfare system, they destroy the wealth-creating process. There are examples throughout the world. The higher welfare state costs rise, the lower is the propensity to grow and the more social problems are created.
The great truth that right hon. and hon. Members on both sides of the House must embrace, if we are to contain welfare costs and create a welfare system that serves the people instead of imprisoning them in the poverty traps described by the hon. Member for Leyton, is to accept as a first principle that there are limits to the taxation that people are prepared to bear. As it becomes increasingly evident that the taxation and recirculation of wealth by the state tends to be a vain exercise that destroys all the 251 natural incentives that should exist in a market economy, it becomes clear that the intolerance of taxation becomes stronger and stronger.
If evidence were ever required of what I have just described, it is the Government's unpopularity. The Government were determined to maintain public services and, especially, the growth of the welfare state. At the same time it was felt necessary to maintain humanity and decency in our society. It may be argued, however, that those qualities have not been maintained. To maintain the expenditure of the welfare state, we froze the indexation of personal tax allowances. We removed other income tax allowances and increased the burden of personal taxation. We even added to the value added tax system items that were not included before.
If that action had been a success, we would be popular, but increasing taxation to maintain high spending has proved extremely unpopular. It may still be necessary and worth while, but the British people do not wish to tolerate it in the long term, and they are delighted that we are returning to a trend of falling taxation. The Government are to be commended for getting Government finances back on track.
§ Mrs. Gorman
Is my hon. Friend aware that the late Lord Joseph, who served as Secretary of State for Social Services in the Tory Government before the little Labour interlude and our taking office in 1979, was amazed to find what an enormous proportion of welfare spending went towards paying the salaries of the middle classes who ran the system, which did not relieve poverty at all?
§ Mr. Jenkin
There is a great deal in what my hon. Friend says. The system is designed and operated by middle-class people. It provides salaries for middle-class people, who return home in the evening to the leafy suburbs, their two cars and their two kids. It does nothing but maintain an increasing underclass in a state of subservience, ensnared by the poverty traps to which the hon. Member for Leyton referred.
The success of the Government, first and foremost, has been to contain the growth of social security expenditure. My first substantial work on the Select Committee on Social Security was our report on the growth of social security. In the cross-party atmosphere of a Select Committee, it was quite remarkable how members of all parties subscribed to the premise that the endless growth of social security at a faster rate than the growth of the nation's economy was unsustainable. Opposition Members have shown this evening that they still do not accept that basic premise.
The Opposition's response to every measure that the Government have taken to contain the growth in social security—the introduction of incapacity benefit, reforms of the state earnings-related pension scheme and indexation of pensions—has been to fail responsibly to confront the issue that has confronted every party in government: that the state has made promises that simply cannot be honoured indefinitely, and it is honest and responsible to contain those costs.
The most blatant example is, perhaps, the most recent—asylum seekers. I was as concerned as anybody when I heard that we were cutting another aspect of 252 growing social security, so I took the trouble to visit Stansted airport, which is not in my constituency, but is nearby. I did so because of an immigration case in which I had been involved at that airport. It was an open-and-shut case of abuse of our immigration system, and the official at the other end of the telephone, whom I had called during my surgery, explained to me chapter and verse why that was so. He said, "Don't worry. You needn't feel responsible for sending him out of the country, because he's bound to claim asylum." That is precisely what he did and he immediately became eligible for the benefit payments of which my right hon. Friend the Secretary of State is trying to deprive bogus asylum seekers. By enacting that measure, we shall reduce excessive social security expenditure of about £200 million a year to a much lower sum. In doing so, we are merely putting asylum seekers on the same footing as other benefit claimants.
§ Mr. Chris Smith
The hon. Gentleman mentions a figure of £200 million. How much will local authorities now have to spend to pick up the pieces of the Government's decision?
§ Mr. Jenkin
The important message that will be sent to the increasing community of people who decide to come to this country to live off the asylum application and benefit system is that they should not be in this country. The appeals system has become so choked and overloaded, with so many delays, that when I visited Stansted, the immigration service told me that it knew of people who had applied for asylum, had been turned down, were on appeal but had returned to their country of origin before returning to Britain to pursue their claim for asylum. The front-line official to whom I spoke told me—
§ Mr. Deputy Speaker
Order. The hon. Gentleman initially related his remarks to benefits, but he is now going way beyond that; we have been to Stansted three times in the past 60 seconds. Perhaps we could return to the Chamber.
§ Mr. Jenkin
I fly back instantly, Mr. Deputy Speaker.
My visit to Stansted airport demonstrated that the vast majority of asylum applications are bogus. It is absolutely right that we should remove the temptation for people to abuse the asylum application system, by removing the eligibility for benefits for those on appeal.
The problem with which we are confronted in the debate is the failure of state welfare, the ever-rising bill, the ever-rising expense and the increasing social problems. If we installed effective anti-fraud systems in the Department of Social Security and in local authorities that administer housing benefit, they would do a great deal to pay for themselves simply by being effective. I look forward to persuading my colleagues on the Select Committee that, ultimately, we should have a single on-line benefit system, whereby someone who applies for a benefit is already on the system and has only one national insurance number instead of the several that he seems to acquire at the moment. At the touch of a button, an official anywhere in the country could discover his claims history. Duplication and mismatching and the need for complicated and expensive data matching could be removed by a proper on-line database.
253 The real failure of the system, however, lies in the personal fraud that it encourages, and the effect of extensive means-testing on society. The flip side of targeting—ensuring that the money reaches the people who really deserve it—is our creation of so many perverse incentives that it is difficult for people to get out of the system once they are in it.
I do not think that any hon. Member could underestimate the corrosive effect on individuals and families who find themselves trapped in that system. It must be the duty of every party in the House to try to find ways of delivering welfare to those who need it without creating the painful conflicts of interest that lead claimants—for the sake of the very survival of their families—to be less than scrupulously honest about their circumstances, and about what they are doing to try to improve their families' living standards.
We should remind ourselves that Beveridge's original intention was to provide a system that would encourage people to look to their personal resources and talents, and to make an effort to work. The aim was not to discourage that. We need a much more savings-based welfare system—a system that will create personalised savings, and on which people can depend in the future.
§ 9 pm
§ Mr. Alan Simpson (Nottingham, South)
I congratulate my hon. Friends the Members for Islington, North (Mr. Corbyn) and for Leyton (Mr. Cohen) on their speeches. I suspect that one thing we have in common is that we are all children of the welfare state—but the welfare state with which I grew up is not the welfare state with which I am presented today. It is in that context that I welcome the fundamental review being undertaken by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), the shadow Secretary of State. I hope that my hon. Friend will develop at least two of the points raised by the hon. Member for Colchester, North (Mr. Jenkin). I shall deal first with the point with which I disagreed. I shall then turn to the one with which I agreed.
The hon. Member for Colchester, North was right to point out that, when Beveridge wrote about the welfare state, he assumed the existence of a safety net that was not a replacement for employment but an adjunct to full employment. That safety net, however, was designed to ease the transition from benefits to work. Today, the welfare state has been distorted. For many, it has become a permanent alternative to employment.
It is wrong to suggest that the concept of the welfare state is necessarily an undermining and destructive influence on the wealth-creating capacity of a nation. It is clear from the Government's economic record that nothing has destroyed our manufacturing base as much as their economic policies: Hitler's six years of sustained attack and bombardment failed to do the same damage to Britain's manufacturing and wealth-creating base.
The sad double whammy is that the Government have also changed a welfare state based on the presumption of universality of entitlement into one obsessed with means-testing. That obsession is a degrading and demeaning aspect of the welfare state with which the country is now saddled.
I still live in the middle of an inner-city estate which, I feel, carries many of the burdens of the Government's approach, and where people must bear the heaviest 254 marginal tax rates in the land. Those who seek to escape the benefits trap find that the marginal rate that they must pay on every £1 they earn is at least 97p. That is the combination of the payment of basic rate tax and the clawback of benefits—the loss of housing benefit and income support.
For some, the trap is even worse. If those who are entitled to passported benefits such as free school meals or school bus passes lose that entitlement, they may lose up to £1.17 for every £1 that they earn. That will hardly entice people to move from dependency on benefits to work. It is a huge millstone, which has turned the poverty trap into a poverty pit. We are told, however, that the only way out of this is more means-testing. That is the essence of all the regulatory changes that the Government have introduced. They aim to tighten the network of means-tested benefits and to reduce the availability of universal entitlements.
I hope that, in its fundamental review, the Labour party will take on board a number of different considerations. The first is in relation to pensions. We are told that the number of pensioners is growing and that the restoration both of the state pension's value—linking it to increases in earnings or prices, whichever is the greater—and of the state earnings-related pension scheme is unaffordable and unsustainable. If one projects the Government Actuary's figures last year for the next 50 years, one finds that the cost of the restoration of the basic pension would amount to only 0.4 per cent. of gross domestic product. The restoration of SERPS over that period would amount to a further 0.8 per cent. of GDP. The total cost over the whole period would amount to less than the cost of the recession borne by this country in the past three years. It is simply not true that restoring decent pensions would place an unaffordable burden on this society.
We are told, too, that the only way of doing this is if we somehow move to a personal insurance base for pensions. Again, it is worth considering the Government's figures. The most efficient way of delivering a pension is the state pension. The administrative costs involved in the state pension scheme amount to 1.2 per cent. of total pensions—60p per pension recipient per week. Any means-tested benefit, however, has an administrative cost of at least 10.2 per cent.—the cost of income support administration—amounting to £5.45 a week per recipient. My hon. Friend the Member for Islington, South and Finsbury pointed out that the average administrative cost of private pension schemes is now 25 per cent. of contributions. The shift away from a state, comprehensive pension scheme to a series of private personal insurance-based schemes would mean paying considerably more to receive considerably less.
I say that just as a piece of friendly advice to my colleagues on the Opposition Front Bench. If we believe that the answer is to be found in Singapore's stakeholder economy, it is worth consulting the International Monetary Fund report at the end of last year. It points out that the Singapore scheme reaches only 67 per cent. of the work force and that the level of benefits, which incidentally are not index-linked, is extremely meagre.
We will not find a solution to the United Kingdom's problems in relation to poverty or the poverty gap in Singapore. We can, though, find real answers to the problems in many of the conceptual models originally set out by Beveridge. One of the most profound and 255 important of those is enshrined in the social insurance pay-as-you-go approach. The importance lies in the fact that it embodies the principle of acts of solidarity from one generation to another. The presumption is that people in work pay social insurance into a common pot that meets the needs of today's pensioners. It explains why pensioners' rights organisations, with which I have worked in my constituency and nationally, are increasingly voicing arguments in favour of a policy that will restore full employment and deliver universal pre-school education facilities.
Why do those organisations support such a policy? They say that it is simple. Unless we have a properly employed adult population, who will earn wages to pay social insurance into the common pot, out of which we must draw our pensions? If we do not invest in our children's education, who will have the earning, industrial, design or technology skills that will deliver jobs and earnings that will again allow people to pay into the pot? If we do not invest in future generations, why should we expect them to accept a responsibility to make provision for us? It is very simple. The pay-as-you-go principle restores the link between the welfare system and commitments to full employment.
It is enormously important to me that the pay-as-you-go principle allows us to return to the notion that benefits can be provided on the basis of universal entitlement, which are then linked to progressive taxation in ways that also offer a more equitable method of paying for the provision. Pensions are not cheap. About £29 billion is needed to meet the current cost of state pensions. It costs another £38 billion to make additional means-tested provision for pensioners. We must find ways to remove the bureaucracy associated with those undeclared costs to make it possible to deliver a full entitlement to stakeholding in a less cumbersome and costly way.
If one is a pensioner, stakeholding means having the ability to pay one's own eating, heating and housing bills. If one is unemployed, it means having a job through which one pays taxation and into the social insurance fund. Britain pays one of the lowest rates of employer-based contributions in the whole of western Europe. In the United Kingdom, employers pay 3.6 per cent. of earnings into the social insurance fund. In France the figure is 8 per cent., and in Germany it is 9.6 per cent. In cash terms, out of every £100 an employer in the UK pays £10 in social insurance. In Germany an employer would pay £33; in France, £40; and in Italy and Sweden, £50.
We need to return to the concepts of a welfare state based on universal principles. We need a progressive personal taxation regime matched with a progressive industrial tax regime, so that we tax more progressively those who earn not by producing goods but by speculating against wealth. We need to find ways in which to redistribute just a third of the extra £35 billion a year in tax handouts given to the top 10 per cent. of the population. This could be put to much better use paying for proper universal provision for all.
§ Mr. Keith Bradley (Manchester, Withington)
As always, the uprating measures have given us the opportunity for a wide-ranging debate, and this year has 256 been no exception with its 10 very interesting speeches. This year the debate has ranged from Tory pensions policy in 1959, raised by the right hon. Member for Sutton Coldfield (Sir N. Fowler), through to snowbound roads in Dover, which I do not think relate to any part of the uprating measures.
Last year's debate was dominated by proposals for the habitual residence test. I do not intend to refer to that; suffice it to say that the latest available figures show that in December 1995 more British people failed the test than either European nationals or people outside Europe. I would be grateful for the Minister's comments on how the test is working in that respect.
I especially commend the speech of my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth), in which he raised points about incapacity benefit, particularly the introduction of the medical test. I should like to add to questions on the privatisation of the medical service queries about the application of the test for mental illness. There seems to be great evidence of inconsistency in the test across the country. I would be grateful for the Minister's comment. Although the new medical test for incapacity benefit is meant to focus the benefit more precisely, we should always remember, having passed the measure, that the amount of benefit one receives is less than one received on invalidity benefit.
The planned expenditure on social security benefits for 1996–97 will be £90 billion, which includes almost £3 billion to finance increased benefit rates. As the Secretary of State said, that is £600 million higher than he expected because the rate of inflation was higher than he expected—or perhaps hoped.
Although obviously we welcome the fact that many benefits have been increased by the full rate of 3.9 per cent., I must stress the fact that the income of the bottom 10 per cent. of people still fell by 18 per cent. between 1979 and 1993, although average income rose by 37 per cent., and the income of the top 10 per cent. rose by a staggering 61 per cent. People on benefit have clearly suffered from the increased inequalities that have arisen over the years of Tory Government. It should also be pointed out that, yet again, many elements in benefit calculations have not been uprated. Those include capital limits and earnings disregards for means-tested benefits.
At Question Time today, my hon. Friend the Member for Croydon, North-West (Mr. Wicks) mentioned cold weather payments. I remind the House that in June 1991 the right hon. Member for Chelsea (Sir N. Scott) told the House in a written answer:I propose to assure eligible people that if very cold weather arrives, they can turn up their heating. The Meteorological Office can now supply daily a forecast for each of the weather stations which we use which will indicate, with sufficient accuracy, the likely average temperature over the next seven days."—[Official Report, 14 June 1991; Vol. 192, c. 697.]That was supposed to enable people to know whether they would be eligible for the cold weather payments. But will the Minister comment on the way in which forecasts, rather than actual weather conditions, have been used, in a way that denies many people benefit?
The social fund maternity grant has been frozen again, at £100, and the limit governing recovery of benefits from compensation payments has again been frozen at the 1990 level of £2,500. In the debate on last year's uprating order, I asked the Secretary of State why that item had been 257 excluded. I did not receive an answer last year, but now I ask the question again, and I hope that I shall receive an answer this year. A bone of contention for many people is the fact that, as benefits have risen, the clawback when compensation is paid has become even harsher, because the limit has not been increased. Will the Minister explain why that relationship has not been restored?
Before considering further key elements in the Social Security Benefits Up-rating Order, I shall touch on two of the other instruments before us. The first is the draft Guaranteed Minimum Pensions Increase Order. In last year's debate, I suggested that 1995 would be the last year in which such an order would come before us, but I was wrong because the Pensions Act 1995 does not come into force until 1997.
I did not receive an answer to the question that I asked then either, so I shall ask it again: under the new pension arrangements, will there be a pension guarantee similar to that provided by the Guaranteed Minimum Pensions Increase Order? I ask a more specific question too: how many people who are currently protected by the pensions guarantee will not be so protected under the new arrangements?
My hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) asked about pension splitting on divorce. I too press that question, and I ask the Minister to tell us tonight whether the Government support pension splitting, and what timetable they would like to introduce to ensure that its benefits come through to the country as fast as possible.
The amendments to the child support regulations increase the minimum amount of child support payable by the liable parent from £2.40 a week to £4.80 a week. We accept the principle that the liable parent, often the father, should make a contribution, but recent changes to the child support formula have limited the liability of absent parents not on benefit, whereas the doubling of the sum payable by those on benefit hits those on the lowest level of subsistence, who are probably the fathers least able to pay.
The fact that the increase will be paid largely for the benefit of the Treasury rather than paid to the parent with care, or more specifically for the benefit of the child, is important. The extra payment will be deducted pound for pound from the income of a lone parent on benefit. I therefore take the opportunity to urge the Government yet again to consider a child maintenance disregard, so that children really benefit from any additional payment to the parent with care.
Three main areas of concern in the uprating order have been highlighted in speeches tonight: lone parents, housing benefit changes and fraud. First, on lone-parent benefit, the Secretary of State claims that he is concerned neither to penalise nor to promote lone parenthood and, to this end, he proposes to freeze one-parent benefit and lone-parent premium. He has further signalled his intention to narrow the gap between the benefits for lone parents and those for couples. However, one-parent benefit and lone-parent premium together cost £600 million a year—a small fraction of the £9.4 billion spent on benefits generally for lone parents. It has been clearly pointed out that freezing the benefits will produce tiny savings of no real benefit to the Treasury. Although the weekly gain from the benefits for lone parents may appear small, such sums are very important to people with 258 low incomes. Although no direct cut is to be made this year, lone parents will be worse off as the value of the benefit will be eroded in real terms because it has been frozen.
We heard tonight about the research evidence that outlines the extra costs of lone parenthood. In particular, the research published by the Joseph Rowntree Foundation in December 1995 showed that one-parent families face substantially higher costs in relative terms than two-parent families. The research concluded that both the lone-parent premium and the one-parent benefit should be retained.
In contrast, there is no evidence to suggest that benefits for lone parents are so generous that they more than meet the extra costs of lone parenthood, thereby leaving lone parents materially better off than couples with children. Crucially, one-parent benefit—because it is not means-tested—helps lone parents out of the poverty trap and into work. To freeze the benefit appears to run counter to the Government's stated desire to help lone parents back to work.
The Child Poverty Action Group has pointed out that the risk of poverty for the children of lone parents is greater than the risk for children with two parents. Some 78 per cent. of children of lone-parent families are living on or below income support levels in 1992, compared with 18 per cent. of two-parent families. It is hard to see how reducing lone-parent benefits will do anything other than increase child poverty. I urge the Government to reconsider the proposal.
Clearly, we welcome measures that help lone parents back to work, and obviously we welcome the extension of the child care disregard. But it must be pointed out that it is a disregard, and not a payment, that has been extended from £40 to £60 a week. The amount that a person receives will depend on the benefits to which he or she is entitled, so in many cases the amount he or she receives will be substantially less than the £60 disregard. It must be pointed out that those parents who are already fully in receipt of benefits such as family credit will gain nothing at all from the increase in the disregard because there are no benefits to offset against that disregard.
Secondly, it is clear from the debate that our concerns fall in two particular areas: the changes to housing benefit administration and the changes to the eligibility for housing benefit for people under the age of 25. First, on administration, we heard that housing benefit will in future be paid in arrears rather than in advance, with the aim of reducing the incidence of overpayment. However, many housing associations and organisations such as the National Federation of Housing Associations have expressed grave concern about the proposals. Despite the Government's argument that such a move would be to the advantage of claimants, the opposite appears to be the case. Given that most landlords require at the start of a tenancy both a deposit and a payment of rent, the move is likely to create considerable difficulties for those on benefit or low incomes. There are strong arguments for housing benefit to be paid in advance, therefore, although most other benefits are paid in arrears.
Added to that change will be a proposed reduction in the preconditions for eviction from 13 weeks' to eight weeks' rent arrears and shortfalls in rent caused by the reductions in housing benefit following the January 1996 changes. Clearly, the implications of the Government's 259 changes have not been fully thought through. They will cause considerable problems for people trying to take up their first tenancies.
Secondly, on the policy that housing benefit for single people under 25 should be restricted to the average cost of local shared accommodation, the Government clearly believe that there is some difference between 24-year-olds and 25-year-olds. The under-25s are already discriminated against in that they are entitled to lower amounts of income support and housing benefit. That discrimination will shortly be reinforced when young people who have paid contributions will none the less receive lower benefits through contributory benefit under the jobseeker's allowance.
The effects of the proposed measures will add to the discrimination. Furthermore, because their income is lower, it will be more difficult for young people to top up their housing benefit from other sources. That situation will be further exacerbated by the increase—yet again—in the non-dependant deductions for housing benefit. Recent evidence submitted by the Child Poverty Action Group to the Social Security Advisory Committee shows that nearly half those affected are aged over 60 and about five out of six non-dependants were adult children of claimants.
The emphasis on non-dependant deductions is worrying, given the possible interrelationship with the measures to reduce housing benefit for the under-25s. Clearly, the consequences will be increased homelessness and vulnerability for young people, who will have to seek inadequate and inappropriate accommodation.
On the third issue, fraud, the Secretary of State says:to be able to help those in need we have to stop fraud".No one would argue with that, but does that imply that the savings are to be ploughed back into improving benefit levels? There has been no sign of that to date.
Similarly, how much money is going to be saved though anti-fraud measures? My hon. Friend the Member for Islington, South and Finsbury highlighted the apparent discrepancy between the uprating statement and the Red Book—either it is an annual amount of £2.5 billion, or £2.5 billion spread over three years. I have written to the Secretary of State asking for clarification, but I have not received a reply to date. Perhaps the Minister will be able to tell us clearly tonight how much he expects to save on fraud in the next three years.
It is also important to highlight the take-up of benefits. It is estimated that between £1.5 billion and £2.3 billion in means-tested benefits alone were not claimed between 1992 and 1994.
In respect of the anti-fraud measures that we welcome, the proposal to increase home visits to 1 million a year is interesting. Is it not ironic that they were originally reduced and even abandoned in parts of the country because they were too costly? When they take place, at the same time as the investigations into fraud, there could be investigations to ensure that the claimant is receiving all the benefits to which he or she is entitled and that those are promptly and accurately assessed.
We have had a wide-ranging debate on the facts of the changes. We have seen that, although many vulnerable groups may have been protected through the uprating 260 statement because benefits have been uprated in line with inflation, no real measures have been taken to modernise the benefit system and to strengthen work incentives.
Key vulnerable groups, particularly lone parents and young people under 25, have been significantly further disadvantaged by the proposals in the uprating statement. Labour Members believe that the welcome measures which may help lone parents back to work, which I have supported, will be significantly outweighed by the measures to devalue the lone-parent premium and the one-parent benefit and by the significant cuts in housing benefit to people under 25.
Overall, there is absolutely nothing in the uprating system to suggest that the Government wish to reverse the damaging trend of increased poverty and inequality. The facts and figures in relation to that trend are overwhelming. One in three children in the United Kingdom now live in poverty, and nothing that the Secretary of State has announced tonight will alleviate that situation or truly take people out of poverty traps and unemployment traps and ensure that there is a genuine attempt to distribute resources to those most in need of them.
The Secretary of State claims that his approach to the reform of the welfare state is radical and far-sighted. It is in fact no more than the salami-slicing of one benefit after another. The reforms are not targeted, as he has suggested, but are genuine cuts in benefit for those in the greatest need. There could be no clearer evidence of the effect of the cuts than the suffering and horror of disabled people who have been on sickness benefit—they come to our advice bureaux, one after the other—after the introduction of incapacity benefit.
Clearly we shall not vote against the uprating order, because we do not want to deny to many people the uprating of benefits by the rate of inflation, but there are many difficulties with the benefits in the uprating order. We shall certainly oppose the regulations dealing with family law and child support because they do even more damage to families who are in the greatest need.
§ The Minister for Social Security and Disabled People (Mr. Alistair Burt)
As the hon. Member for Manchester, Withington (Mr. Bradley) said, this has been a long and well-informed debate, with many useful speeches from hon. Members. Some of my hon. Friends' speeches, in particular, have got to grips with some very difficult social security issues. I shall make reference to those speeches shortly.
We have also had some illuminating speeches from some Opposition Members. We shall have to wait to see whether the British public like them as much as Opposition Front Benchers did. I shall also return to those speeches.
First, I should like to set this debate in context. At the heart of these measures is the annual increase in benefit rates, which will once again provide general protection for the purchasing power of benefits, with increases in line with inflation at September 1995. The cost of the measures will be £2.7 million in 1996–97. However, as most hon. Members have said, this debate is about more than a mere catalogue of benefit changes. It is an annual opportunity to contrast the way in which the Government approach a crucial sphere of public policy—with foresight 261 and decision—and the pleas of Opposition Members, which are long on analysis but woefully short on commitments.
In recent years, three things in particular have characterised social security debates. The first has been the growing realisation among all of us that social security is no longer the Cinderella of politics. The sheer size and scale of the social security budget commands at least our awed respect, as we recognise that without determined control, often involving difficult judgments, unchecked social security expenditure could monopolise the Government's expenditure options.
The second characteristic has been the quality that my right hon. Friend the Secretary of State has brought to the deliberations on social security as he has sought to pursue a policy of measured reform. Social security is not solely about budgets. It has profound effects on how people live and organise their lives, on how much they can plan for themselves, for their health and their retirement and on the extent to which it is right and proper that the rest of society should be part of those plans as a support in times of trouble. My right hon. Friend the Secretary of State has moved social security into the modern era and taken the intellectual case for reform to the public frequently and boldly.
That debate has been met on occasions by thoughtful responses, often from the hon. Member for Birkenhead (Mr. Field), whose absence was noticeable today—we are sorry for that, and the debate will have suffered accordingly—sometimes by political commentators and, in rare flashes, by timorous soundings from Opposition spokesmen.
The third characteristic of these debates has surely been the growing gap between a Government who are prepared to think and to do, in terms of social security, and an Opposition who find it difficult enough to think of anything practical on the subject and are scared stiff of being called on to do anything.
I deal now with the meat of some of the issues raised today. The first aspect on which I shall dwell is total social security expenditure. My hon. Friend the Member for Colchester, North (Mr. Jenkin) and my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) made especially thoughtful contributions. They put some thought into the very nature and structure of social security and brought out very well the way in which we have grappled with some of the problems. They appreciate that what has happened on the continent and, indeed, in this country since the last world war, could not be sustained for ever in the changing circumstances. They, at least, were prepared to deal with the difficult problems.
By contrast, the most illuminating speeches made by Opposition Members came from the unholy trinity of the hon. Members for Nottingham, South (Mr. Simpson), for Leyton (Mr. Cohen) and for Islington, North (Mr. Corbyn). As I am sure my colleagues realise, what we heard from them was really Labour in action. It was what we know and love from the Labour party. The depth of our enjoyment was matched only by the depth of misery on the faces of Members of the Opposition Front Bench as they realised that, in the unlikely event of their ever coming to office, their hon. Friends on the Back Benches will either be the tail that wags the dog or, more dangerously for the British public, the very dog itself. We certainly enjoyed their contributions. All the way 262 through their speeches, I was waiting for confirmation from Opposition spokesmen of the variety of suggestions gallantly put forward by their colleagues.
The hon. Member for Nottingham, South, whose pieces I occasionally read in New Statesman and Society, set out a coherent socialist philosophy. I am sure that it must be as much a matter of despair to him as it is to the rest of us that his contributions are received wordlessly by his Front-Bench colleagues. I cannot see much of what he has to say that his Front-Bench colleagues should not be prepared to own up to.
I sometimes wonder which hon. Member who represents Islington will really control social security policy in future. The hon. Member for Islington, North gave us his solution to the problem, which is the abandonment of capitalism and the reinstatement of socialism everywhere. As for the hon. Member for Leyton—don't you love him? There is only one Harry. He is a straightforward, decent man whose sincerity everyone properly respects and understands because he cares. I do not agree with his solutions, but he cares.
One of the points that the hon. Member for Leyton raised and which I most want to take up, to show that we recognise the problems that he mentioned and that we want to assist, relates to work incentives. He talked about his foster son. The problem that he mentioned is very real. Our unemployment situation is far better than that of many of our neighbours. The hon. Gentleman might like to incorporate that fact in his thinking when contrasting economic policies. However, when unemployment has been higher than we would wish, the problem is that it naturally squeezes the gap between wages and benefit. It is therefore a matter of concern to all of us that we should develop incentives to get people back to work.
The hon. Member for Leyton is wrong to believe that it is only his colleagues who have come to welfare-to-work; in fact, they have come rather late to it. The strategy of work incentives has been a consistent part of the philosophy of Conservative Members. In the 1994 Budget package, we tried to remove uncertainty at the point of the moving into work. Measures such as the faster processing of family credit claims, housing benefit, council tax benefit, extended payments, the back-to-work bonus and the child maintenance bonus all helped to deal with that uncertainty.
We wanted to provide measures to make work pay better and the longer earnings premium and especially the pilot of earnings top-up may be of interest. Lastly, we wanted to encourage employers to look more favourably on the long-termed unemployed, through reductions in employers' national insurance contributions and measures announced in the orders. We have tried to employ all those measures to deal with a difficult problem that we regard as being as much of an issue as do Labour Members.
§ Mr. Chris Smith
If the Minister is so concerned to encourage people out of benefit and into work, why in these very uprating orders is he freezing one-parent benefit, announcing that he will cap housing benefit for the under-25s and increasing non-dependant deductions for housing benefit, all of which will act counter to a reasonable welfare-to-work strategy?
§ Mr. Burt
I do not believe that they will. I want to talk about lone parents and the effect that the Gentleman has 263 mentioned because it is not significant when taken in comparison with the work incentive measures that we have produced, quite deliberately, for lone parents. If he will allow me, I will come to that.
Incentives for going to work are a matter of great importance to us. Our policies have been outstandingly successful. It is hard to imagine that we have more people employed as a percentage of our population than do most of our European neighbours. Our unemployment is lower than that of any significant European Community country. The reason for that is that we have had to take some of the difficult decisions. The way in which we have dealt with the benefit system has contributed to the better situation.
There was prolonged discussion about lone parents. That was raised by the hon. Members for Manchester, Withington (Mr. Bradley), for Islington, South and Finsbury (Mr. Smith) and for Rochdale (Ms Lynne). I am sick and tired of my right hon. Friend the Secretary of State's position on lone parents being mauled by commentators and Opposition Members. I have a copy of part of his speech to party conference in 1993 because there is a part that is frequently not mentioned when this difficulty is being discussed. He was concerned about the breakdown of families and said:There are now 1.3 million lone parents. Many find themselves lone parents against their will. Widows, divorced and separated people struggle alone, but often successfully, to bring their children up well. They deserve not blame but support.[Interruption.] I could go on. My right hon. Friend went on to say that the fastest growing group was that of people who never married. He talked about his concerns about lone parents and their families and especially the effects on children.
I want to describe what we have done to protect and support the position of lone parents in our society. The hon. Member for Stratford-on-Avon (Mr. Howarth) made several thoughtful points about policies on lone parents. He questioned whether it was appropriate for lone parents with young children to go to work. It is not the Government's policy to force them to work, but to encourage them to do so. We are more generous on that point than most comparable countries. In France, lone parents are expected to take work when their children are only three. In most European Community and OECD countries, except the UK, the proportion of lone parents who work is greater than the proportion of mothers in couples who work. Britain is almost unique in not requiring lone parents to seek work until their youngest child is 16.
The crucial point is that it is only by working that lone parents can improve living standards for themselves and for their children. On average, lone parents in work improve their income by some £30 a week. There is no way that a responsible Government could improve income support by that amount. Lone parents already consume more than 10 per cent. of social security budget. Our aim must be to reduce that figure and not to increase it. If we can achieve that by encouraging lone parents into work, it will benefit both those parents and society as a whole. We have assisted lone parents into work in a number of ways. They receive the same adult credit as two-parent families for family credit and the disability working allowance. We have taken a series of measures in recent 264 years, including maintenance disregard and reducing the qualifying hours for family credit, which have helped lone parents into work.
The Government's aim is to narrow the gap between benefits for lone parents and for couples over time. We intend to have no cash losers and the pace of change must be gradual. The first step is not increasing lone parent benefits in 1996. I shall give the background for that decision, as it has been questioned tonight.
In the past two decades, there has been a huge increase both in the number of lone parents and in their cost to the taxpayer. The benefit system provides special assistance to lone parents which couples do not have. Two components of benefit for lone parents have no equivalent for couples: the one-parent benefit and the lone parent premium, which cost about £600 million per year. In order to start bringing the treatment of one-parent and two-parent families into line, no increase is proposed in either benefit next April.
The Government intend to continue to narrow the gap between benefits for lone parents and for couples over time. The one-parent benefit has always been recognised as something of an anomaly. It was introduced in 1976 as a strictly temporary measure and it has long been recognised that there is duplication between the one-parent benefit for those in work and the extra assistance that lone parents receive through the tax system.
For those lone parents on income support—the lone parent premium—a lot has changed as well. There are far greater opportunities to gain from work. Family credit has been greatly improved and next year it will direct about £2 billion in assistance to lower-paid families. That is a five-fold increase since 1988. In 1988 only one lone parent was working and on family credit for every 10 who were on income support. The ratio is now one in four. The position in society of lone parents who are looking after children has been improved by those measures, and we want their position to improve still further.
The small measures that we have announced tonight do not detract from that long-term policy. However, they begin to tackle the issue that was addressed fairly and squarely by the hon. Member for Birkenhead—Opposition Members did not refer to it and they ducked the challenge issued by my right hon. Friend this afternoon. We must begin to redress the balance between lone-parent families and working couples. We believe that the country wishes that to occur. It is the right balance to strike: it is not an abandonment of single parents.
I turn now to the questions about the child support changes. All absent parents are responsible for maintaining their children, and it is right that those on low incomes should make a small contribution in that regard. Establishing liability at the outset reinforces responsibility for when the absent parents' circumstances improve. Conservative Members do not like to think that people stay on benefit for ever because that is not necessarily a realistic view. Therefore, many people will not remain on low incomes or income support indefinitely.
A key principle of the Child Support Act 1991 is that all parents are responsible for maintaining their children whenever they can afford to do so. There is no reason why those absent parents who receive income support should be treated any differently from those on low incomes. The 10 per cent. rate reinforces parental 265 responsibility and represents a more realistic level of support. As to safeguards and protections, the existing provisions that exempt from payment those absent parents who are sick or disabled or who have responsibility for their children in new families will remain in place. Similarly, the existing provisions for maximum deductions from income support and the priority order for deductions remain unchanged.
Labour Members said a great deal about the need to maintain income support at a particular level below which it should not drop. However, they made no mention of the existing system of deductions for fuel, which allows for a deduction of up to 15 per cent. The child maintenance system will not interfere with that—if it is right and appropriate for fuel deductions, it is equally right and even more appropriate for child maintenance.
§ Mr. Chris Smith
The point is that the needs allowance in calculating income support for people in that position takes account of their need to heat their homes and to keep warm. The needs allowance does not take account of their need to pay added maintenance for their children.
§ Mr. Burt
Labour Members said that it was wrong to derogate from the principle of the income support payment; I said that deductions are already allowed. It is quite appropriate that a child maintenance deduction should be similarly allowed, because it does not breach the principle and it does not involve a higher percentage of deduction than for any of the other needs elements. One either believes or does not believe that parents have a responsibility towards their children—there is no argument between us on that point—but actually to make it count in difficult circumstances is one of the fundamental differences between the Government and the Opposition. When it comes to making difficult decisions, the Government make them; when it comes to talking about difficult decisions, the Opposition funk them on every occasion.
Parents with care who receive income support—it is always claimed that they do not benefit—will benefit from the increased payment in two ways: first, maintenance is a portable income that helps them if they wish to return to work, and even small levels of maintenance can help in this respect; secondly, the payment of maintenance will count towards the child maintenance bonus that is due to be introduced in April 1997. The bonus will obviously accrue at a faster rate than would be the case if the minimum payment were to remain at the existing level. For all those reasons, I believe that we should support the order before the House.
Labour Members have had the effrontery to raise the issue of cold weather payments. If Labour Members do not understand the term "cold weather payments" it is because it did not exist until the Government put it in place. The system of assistance for those in need, who wanted help with their fuel payments, was so rudimentary under the Labour Government that it did not even have a special name. The Government have done much to improve it—there is a whole list of improvements, dating back to 1980.
The cold weather payment rates were increased in November 1995 by some 20 per cent.—which I do not remember being celebrated or supported by Labour 266 Members. Certain benefits are not uprated automatically, and that is one of them, but there is no doubt that the way in which the Government have coped with cold weather payments—they are automatic, they are triggered automatically and they are publicised by local advertisements—puts the previous Labour Government to shame. I am amazed that Labour Members raised that issue.
A number of hon. Members referred to pension splitting. This is an important issue, and I am content to put a Government statement on the record. The Government are not unsympathetic to pension splitting. The Lord Chancellor has rightly issued consultation documents on the measures taken in last year's Pensions Act. Those measures should go some way to dealing with people's concerns.
Pension splitting raises serious issues of equity, complexity and cost, which have to be balanced against any perceived advantages. It requires full and detailed consideration, which is why the Lord Chancellor feels that it is quite impossible to deal with it satisfactorily in the timetable of the Family Law Bill. We are unable to accept the amendments moved by Baroness Hollis of Heigham in another place. Therefore, consultation is necessary to give full consideration to all the issues involved in pension splitting.
A number of hon. Members raised the issue of fraud. Labour Members were interested in fraud only tangentially—they wished to push me in relation to the figures that were involved. The more crucial questions of fraud were raised by my right hon. and hon. Friends. When it comes to fraud, the Labour party pays only lip service—and lip service has been paid only since the hon. Member for Sheffield, Brightside (Mr. Blunkett) was sharp enough to cotton on to the fact that, after yet another general election disaster, the Labour party had for too long been tagged with those who cheat and defraud.
The Government have been prepared to take the difficult decisions. It was entirely true to form that today my right hon. and hon. Friends were the only ones who seriously went into the issues and were prepared to raise them. There are difficulties with housing benefit fraud. My hon. Friend the Member for Dover (Mr. Shaw) said that the Social Security Select Committee was looking at the possibility of fraud varying from 6 per cent. to 18 per cent.—a total of some £2 billion a year. It is no wonder that it warrants careful investigation by the House and the Government.
Mention has been made of asylum seekers. That is a difficult and sensitive issue partly because of the image portrayed in the media and supported slavishly by Opposition Members, who suggest that everyone who claims political asylum arrives in the United Kingdom as a penniless refugee. That is not true. The vast majority of those who claim political asylum arrive in the United Kingdom having told visa officers abroad and visa entry clearance officers in the United Kingdom that they were students or business people or that they were on holiday and could look after themselves. They then change their story and claim political asylum. It has been one of the nastiest trades in human misery. Even Amnesty International knows that fraud and abuse take place. The Government do something about it while the 267 Opposition talk about it and do nothing. It is a difficult and sensitive issue. Only the Government have devoted the time, the effort and the determination to deal with it.
§ Ms Lynne
Although I realise that there are many bogus asylum seekers, does the Minister not agree that the rules that the Government are introducing will trap genuine asylum seekers because many of them apply in country. In the past, the Government allowed genuine asylum seekers into Britain. Surely they must do that in future.
§ Mr. Burt
No one is stopping them coming into Britain. It is a question of whether they rely on the generosity of the British taxpayer, having said when they arrived that they would do something quite different. In time, our measures will be seen as straightforward. We should not forget that fewer than 10 per cent. of those who claim asylum turn out to be genuine.
What about the dog that did not bark tonight? Whenever the Opposition were challenged on what they would do with our social security system, there was a deafening silence. It is not fair that when we discuss important uprating orders on social security, the British people are left in the dark about what the Labour party's plans might be.
My right hon. Friend the Member for Sutton Coldfield reminded us that the pensions-earnings link has been a crucial part of Labour manifesto programmes for a long time. When challenged on that, would the hon. Member for Islington, South and Finsbury confirm that it was still Opposition policy? He said that they were thinking about it. Opposition Back-Bench Members should take note of the fact that he fudged it and ducked it.
The hon. Member for Islington, South and Finsbury was challenged on the power of the trade unions in the stakeholder society that the Opposition were so keen to talk about recently. He tried to suggest that the unions would have nothing to do with it and they would not be the stakeholders that the right hon. Member for Sedgefield (Mr. Blair) was talking about just a few weeks ago. That is not the view of the hon. Member for Brent, East (Mr. Livingstone), however. He said recently on television:If the trade unions are saying, 'we aren't prepared to see cuts in the welfare state', there is absolutely nothing a Labour Government can do about it. A Labour Government cannot govern without carrying the trade unions with it … We can't govern without the support of the trade unions.We all know who will make policy in a stakeholder society where the trade unions are major stakeholders.
The hon. Member for Islington, South and Finsbury was challenged again on housing benefit and the state earnings-related pension scheme. When he was asked whether he would actually reverse any of the changes that we have made to social security, the hon. Gentleman bottled it and refused to answer. When challenged, he made no commitment to change anything. The hon. Gentleman takes all the credit from the lobby groups outside for opposing our reforms, but offers them absolutely nothing by way of any solid commitment as to what he would actually do.
Then there was the retreat. About a week ago, when the Government announced plans to review the running costs of the Department of Social Security appeal and 268 suggested that those costs could be reined back by up to 25 per cent., the hon. Gentleman could not respond quickly enough to say how dreadful those plans were. Today we revealed a letter from one of his colleagues saying that those plans were entirely feasible. Did we have an honourable withdrawal from the hon. Member for Islington, South and Finsbury? Did we heck—there was no chance of that.
The debate has again shown a Government with a determination to control public expenditure and to provide the best social security system that can be afforded and with the courage to take essential decisions in contrast with a "say nothing, do less" Opposition, who are devoid of ideas of their own and have tracked the world in search of a policy, only to find that there is no place like home. The hon. Member for Islington, South and Finsbury was committed, like all his predecessors, to think the unthinkable, and he has finally got it right: the unthinkable is that the Tories have got it right. The House should spare the hon. Gentleman further embarrassment.
We have protected those in need and we are determined to reform social security and to provide a solid basis of welfare. I invite all my right hon. and hon. Friends and those Opposition Members who believe in those principles to join us in the Lobby tonight.
§ Question put and agreed to.
That the draft Social Security Benefits Up-rating Order 1996, which was laid before this House on 31st January, be approved.
§ It being after Ten o'clock, MR. DEPUTY SPEAKER put the remaining Questions required to be put at that hour.
That the draft Social Security (Contributions) (Re-rating and National Insurance Fund Payments) Order 1996, which was laid before this House on 31st January, be approved.
That the draft Social Security (Contributions) Amendment Regulations 1996, which were laid before this House on 31st January, be approved.
That the draft Guaranteed Minimum Pensions Increase Order 1996, which was laid before this House on 31st January, be approved.
That the draft Social Security (Incapacity for Work) (General) Amendment Regulations 1996, which were laid before this House on 31st January, be approved.—[Mr. Lilley.]
Motion made, and Question put,
That the draft Child Support (Maintenance Assessments and Special Cases) and Social Security (Claims and Payments) Amendment Regulations 1996, which were laid before this House on 31st January, be approved.—[Mr. Lilley.]
§ The House divided: Ayes 284, Noes 261.272
|Division No. 56]||[10.00 pm|
|Ainsworth, Peter (East Surrey)||Atkinson, David (Bour'mouth E)|
|Aitken, Rt Hon Jonathan||Atkinson, Peter (Hexham)|
|Alexander, Richard||Baker, Nicholas (North Dorset)|
|Alison, Rt Hon Michael (Selby)||Baldry, Tony|
|Allason, Rupert (Torbay)||Banks, Matthew (Southport)|
|Amess, David||Banks, Robert (Harrogate)|
|Ancram, Rt Hon Michael||Bates; Michael|
|Arbuthnot, James||Batiste, Spencer|
|Arnold, Jacques (Gravesham)||Bendall, Vivian|
|Arnold, Sir Thomas (Hazel Grv)||Beresford, Sir Paul|
|Ashby, David||Biffen, Rt Hon John|
|Atkins, Rt Hon Robert||Body, Sir Richard|
|Booth, Hartley||Garnier, Edward|
|Boswell, Tim||Gill, Christopher|
|Bottomley, Peter (Eltham)||Gillan, Cheryl|
|Bottomley, Rt Hon Virginia||Goodlad, Rt Hon Alastair|
|Bowden, Sir Andrew||Gorman, Mrs Teresa|
|Bowis, John||Gorst, Sir John|
|Boyson, Rt Hon Sir Rhodes||Grant, Sir A (SW Cambs)|
|Brandreth, Gyles||Greenway, Harry (Ealing N)|
|Brazier, Julian||Greenway, John (Ryedale)|
|Bright, Sir Graham||Griffiths, Peter (Portsmouth, N)|
|Brown, M (Brigg & Cl'thorpes)||Grylls, Sir Michael|
|Browning, Mrs Angela||Hague, Rt Hon William|
|Budgen, Nicholas||Hamilton, Rt Hon Sir Archibald|
|Burns, Simon||Hamilton, Neil (Tatton)|
|Burt, Alistair||Hampson, Dr Keith|
|Butcher, John||Hannam, Sir John|
|Butterfill, John||Hargreaves, Andrew|
|Carlisle, John (Luton North)||Haselhurst, Sir Alan|
|Carlisle, Sir Kenneth (Lincoln)||Hawkins, Nick|
|Carrington, Matthew||Hawksley, Warren|
|Carttiss, Michael||Hayes, Jerry|
|Cash, William||Heald, Oliver|
|Channon, Rt Hon Paul||Heathcoat-Amory, Rt Hon David|
|Chapman, Sir Sydney||Hendry, Charles|
|Churchill, Mr||Heseltine, Rt Hon Michael|
|Clappison, James||Higgins, Rt Hon Sir Terence|
|Clark, Dr Michael (Rochford)||Hill, James (Southampton Test)|
|Clarke, Rt Hon Kenneth (Ru'clif)||Hogg, Rt Hon Douglas (G'tham)|
|Clifton-Brown, Geoffrey||Horam, John|
|Coe, Sebastian||Hordern, Rt Hon Sir Peter|
|Colvin, Michael||Howard, Rt Hon Michael|
|Congdon, David||Howell, Sir Ralph (N Norfolk)|
|Conway, Derek||Hunt, Rt Hon David (Wirral W)|
|Coombs, Anthony (Wyre For'st)||Hunt, Sir John (Ravensbourne)|
|Coombs, Simon (Swindon)||Hunter, Andrew|
|Cope, Rt Hon Sir John||Hurd, Rt Hon Douglas|
|Cran, James||Jack, Michael|
|Currie, Mrs Edwina (S D'by'ire)||Jenkin, Bernard|
|Curry, David (Skipton & Ripon)||Jessel, Toby|
|Davies, Quentin (Stamford)||Johnson Smith, Sir Geoffrey|
|Davis, David (Boothferry)||Jones, Gwilym (Cardiff N)|
|Day, Stephen||Jones, Robert B (W Hertfdshr)|
|Deva, Nirj Joseph||Jopling, Rt Hon Michael|
|Devlin, Tim||Kellett-Bowman, Dame Elaine|
|Dorrell, Rt Hon Stephen||King, Rt Hon Tom|
|Douglas-Hamilton, Lord James||Kirkhope, Timothy|
|Dover, Den||Knapman, Roger|
|Duncan, Alan||Knight, Mrs Angela (Erewash)|
|Duncan-Smith, Iain||Knight, Rt Hon Greg (Derby N)|
|Dunn, Bob||Knight, Dame Jill (Bir'm E'st'n)|
|Durant, Sir Anthony||Knox, Sir David|
|Dykes, Hugh||Kynoch, George (Kincardine)|
|Eggar, Rt Hon Tim||Lait, Mrs Jacqui|
|Elletson, Harold||Lamont, Rt Hon Norman|
|Emery, Rt Hon Sir Peter||Lang, Rt Hon Ian|
|Evans, David (Welwyn Hatfield)||Lawrence, Sir Ivan|
|Evans, Jonathan (Brecon)||Legg, Barry|
|Evans, Nigel (Ribble Valley)||Lennox-Boyd, Sir Mark|
|Evans, Roger (Monmouth)||Lidington, David|
|Evennett, David||Lilley, Rt Hon Peter|
|Faber, David||Lloyd, Rt Hon Sir Peter (Fareham)|
|Fabricant, Michael||Lord, Michael|
|Fenner, Dame Peggy||Luff, Peter|
|Field, Barry (Isle of Wight)||Lyell, Rt Hon Sir Nicholas|
|Fishburn, Dudley||MacGregor, Rt Hon John|
|Forman, Nigel||MacKay, Andrew|
|Forth, Eric||Maclean, Rt Hon David|
|Fowler, Rt Hon Sir Norman||McLoughlin, Patrick|
|Fox, Dr Liam (Woodspring)||McNair-Wilson, Sir Patrick|
|Fox, Rt Hon Sir Marcus (Shipley)||Madel, Sir David|
|Freeman, Rt Hon Roger||Maitland, Lady Olga|
|French, Douglas||Malone, Gerald|
|Fry, Sir Peter||Marland, Paul|
|Gale, Roger||Marlow, Tony|
|Gallie, Phil||Marshall, John (Hendon S)|
|Gardiner, Sir George||Marshall, Sir Michael (Arundel)|
|Martin, David (Portsmouth S)||Smyth, The Reverend Martin|
|Mates, Michael||Soames, Nicholas|
|Mawhinney, Rt Hon Dr Brian||Spencer, Sir Derek|
|Mellor, Rt Hon David||Spicer, Sir James (W Dorset)|
|Merchant, Piers||Spicer, Sir Michael (S Worcs)|
|Mills, Iain||Spink, Dr Robert|
|Mitchell, Andrew (Gedling)||Spring, Richard|
|Mitchell, Sir David (NW Hants)||Sproat, Iain|
|Moate, Sir Roger||Squire, Robin (Hornchurch)|
|Molyneaux, Rt Hon Sir James||Steen, Anthony|
|Monro, Rt Hon Sir Hector||Stephen, Michael|
|Montgomery, Sir Fergus||Stern, Michael|
|Needham, Rt Hon Richard||Stewart, Allan|
|Nelson, Anthony||Streeter, Gary|
|Neubert, Sir Michael||Sweeney, Walter|
|Newton, Rt Hon Tony||Sykes, John|
|Nicholls, Patrick||Tapsell, Sir Peter|
|Nicholson, David (Taunton)||Taylor, Ian (Esher)|
|Norris, Steve||Taylor, John M (Solihull)|
|Onslow, Rt Hon Sir Cranley||Taylor, Sir Teddy (Southend, E)|
|Oppenheim, Phillip||Temple-Morris, Peter|
|Page, Richard||Thomason, Roy|
|Paice, James||Thompson, Sir Donald (C'er V)|
|Patten, Rt Hon John||Thompson, Patrick (Norwich N)|
|Pattie, Rt Hon Sir Geoffrey||Thurnham, Peter|
|Pawsey, James||Townend, John (Bridlington)|
|Peacock, Mrs Elizabeth||Townsend, Cyril D (Bexl'yh'th)|
|Pickles, Eric||Tracey, Richard|
|Porter, Barry (Wirral S)||Tredinnick, David|
|Porter, David (Waveney)||Trend, Michael|
|Powell, William (Corby)||Trotter, Neville|
|Rathbone, Tim||Twinn, Dr Ian|
|Redwood, Rt Hon John||Vaughan, Sir Gerard|
|Renton, Rt Hon Tim||Waldegrave, Rt Hon William|
|Richards, Rod||Walden, George|
|Riddick, Graham||Walker, Bill (N Tayside)|
|Robathan, Andrew||Waller, Gary|
|Roberts, Rt Hon Sir Wyn||Ward, John|
|Robertson, Raymond (Ab'd'n S)||Wardle, Charles (Bexhill)|
|Robinson, Mark (Somerton)||Waterson, Nigel|
|Roe, Mrs Marion (Broxbourne)||Watts, John|
|Rowe, Andrew (Mid Kent)||Wells, Bowen|
|Rumbold, Rt Hon Dame Angela||Whitney, Ray|
|Sackville, Tom||Whittingdale, John|
|Sainsbury, Rt Hon Sir Timothy||Widdecombe, Ann|
|Scott, Rt Hon Sir Nicholas||Wiggin, Sir Jerry|
|Shaw, David (Dover)||Wilkinson, John|
|Shaw, Sir Giles (Pudsey)||Willetts, David|
|Shephard, Rt Hon Gillian||Winterton, Mrs Ann (Congleton)|
|Shepherd, Sir Colin (Hereford)||Winterton, Nicholas (Macc'fld)|
|Shepherd, Richard (Aldridge)||Yeo, Tim|
|Shersby, Sir Michael||Young, Rt Hon Sir George|
|Skeet, Sir Trevor||Tellers for the Ayes:|
|Smith, Sir Dudley (Warwick)||Mr. Timothy Wood and Mr. Richard Ottaway.|
|Smith, Tim (Beaconsfield)|
|Abbott, Ms Diane||Bell, Stuart|
|Adams, Mrs Irene||Benn, Rt Hon Tony|
|Ainger, Nick||Bennett, Andrew F|
|Ainsworth, Robert (Cov'try NE)||Benton, Joe|
|Allen, Graham||Bermingham, Gerald|
|Alton, David||Berry, Roger|
|Anderson, Donald (Swansea E)||Betts, Clive|
|Anderson, Ms Janet (Ros'dale)||Blunkett, David|
|Armstrong, Hilary||Boateng, Paul|
|Ashdown, Rt Hon Paddy||Bradley, Keith|
|Ashton, Joe||Bray, Dr Jeremy|
|Austin-Walker, John||Brown, Gordon (Dunfermline E)|
|Banks, Tony (Newham NW)||Brown, N (N'c'tle upon Tyne E)|
|Barnes, Harry||Bruce, Malcolm (Gordon)|
|Barron, Kevin||Burden, Richard|
|Battle, John||Byers, Stephen|
|Beckett, Rt Hon Margaret||Callaghan, Jim|
|Beith, Rt Hon A J||Campbell, Mrs Anne (C'bridge)|
|Campbell, Menzies (Fife NE)||Gordon, Mildred|
|Campbell-Savours, D N||Grant, Bernie (Tottenham)|
|Cann, Jamie||Griffiths, Nigel (Edinburgh S)|
|Carlile, Alexander (Montgomery)||Griffiths, Win (Bridgend)|
|Chidgey, David||Grocott, Bruce|
|Chisholm, Malcolm||Gunnell, John|
|Church, Judith||Hain, Peter|
|Clapham, Michael||Hall, Mike|
|Clarke, Eric (Midlothian)||Hanson, David|
|Clarke, Tom (Monklands W)||Hardy, Peter|
|Clelland, David||Harman, Ms Harriet|
|Clwyd, Mrs Ann||Harvey, Nick|
|Coffey, Ann||Hattersley, Rt Hon Roy|
|Cohen, Harry||Henderson, Doug|
|Connarty, Michael||Hendron, Dr Joe|
|Cook, Frank (Stockton N)||Heppell, John|
|Cook, Robin (Livingston)||Hill, Keith (Streatham)|
|Corbett, Robin||Hinchliffe, David|
|Corbyn, Jeremy||Hodge, Margaret|
|Corston, Jean||Hoey, Kate|
|Cousins, Jim||Hogg, Norman (Cumbernauld)|
|Cox, Tom||Home Robertson, John|
|Cummings, John||Hoon, Geoffrey|
|Cunliffe, Lawrence||Howarth, Alan (Strat'rd-on-A)|
|Cunningham, Jim (Covy SE)||Howells, Dr. Kim (Pontypridd)|
|Cunningham, Rt Hon Dr John||Hoyle, Doug|
|Cunningham, Roseanna||Hughes, Kevin (Doncaster N)|
|Dafis, Cynog||Hughes, Robert (Aberdeen N)|
|Dalyell, Tam||Hughes, Roy (Newport E)|
|Darling, Alistair||Hughes, Simon (Southwark)|
|Davies, Bryan (Oldham C'tral)||Hutton, John|
|Davies, Chris (L'boro & S'worth)||Illsley, Eric|
|Davies, Rt Hon Denzil (Llanelli)||Ingram, Adam|
|Davies, Ron (Caerphilly)||Jackson, Glenda (H'stead)|
|Denham, John||Jackson, Helen (Shef'ld, H)|
|Dewar, Donald||Janner, Greville|
|Dixon, Don||Jones, Barry (Alyn and D'side)|
|Dobson, Frank||Jones, Ieuan Wyn (Ynys Môn)|
|Donohoe, Brian H||Jones, Lynne (B'ham S O)|
|Dowd, Jim||Jones, Martyn (Clwyd, SW)|
|Dunwoody, Mrs Gwyneth||Jones, Nigel (Cheltenham)|
|Eagle, Ms Angela||Jowell, Tessa|
|Eastham, Ken||Keen, Alan|
|Fatchett, Derek||Kennedy, Charles (Ross, C&S)|
|Faulds, Andrew||Khabra, Piara S|
|Field, Frank (Birkenhead)||Kilfoyle, Peter|
|Fisher, Mark||Kirkwood, Archy|
|Flynn, Paul||Lestor, Joan (Eccles)|
|Foster, Rt Hon Derek||Liddell, Mrs Helen|
|Foster, Don (Bath)||Litherland, Robert|
|Foulkes, George||Livingstone, Ken|
|Fyfe, Maria||Lloyd, Tony (Stretford)|
|Garrett, John||Llwyd, Elfyn|
|George, Bruce||Loyden, Eddie|
|Gerrard, Neil||Lynne, Ms Liz|
|Gilbert, Rt Hon Dr John||McAllion, John|
|Godman, Dr Norman A||McCartney, Ian|
|Godsiff, Roger||McFall, John|
|Golding, Mrs Llin||McKelvey, William|
|Mackinlay, Andrew||Robertson, George (Hamilton)|
|McLeish, Henry||Robinson, Geoffrey (Co'try NW)|
|Maclennan, Robert||Roche, Mrs Barbara|
|McNamara, Kevin||Rogers, Allan|
|MacShane, Denis||Rooker, Jeff|
|McWilliam, John||Rooney, Terry|
|Madden, Max||Ross, Ernie (Dundee W)|
|Maddock, Diana||Ruddock, Joan|
|Mahon, Alice||Salmond, Alex|
|Mandelson, Peter||Sedgemore, Brian|
|Marek, Dr John||Sheerman, Barry|
|Marshall, David (Shettleston)||Sheldon, Rt Hon Robert|
|Marshall, Jim (Leicester, S)||Short, Clare|
|Martin, Michael J (Springburn)||Simpson, Alan|
|Martlew, Eric||Skinner, Dennis|
|Maxton, John||Smith, Andrew (Oxford E)|
|Meacher, Michael||Smith, Chris (Isl'ton S & F'sbury)|
|Meale, Alan||Smith, Llew (Blaenau Gwent)|
|Michael, Alun||Spearing, Nigel|
|Michie, Bill (Sheffield Heeley)||Spellar, John|
|Michie, Mrs Ray (Argyll & Bute)||Squire, Rachel (Dunfermline W)|
|Milburn, Alan||Steinberg, Gerry|
|Miller, Andrew||Stevenson, George|
|Mitchell, Austin (Gt Grimsby)||Stott, Roger|
|Moonie, Dr Lewis||Strang, Dr. Gavin|
|Morgan, Rhodri||Straw, Jack|
|Morley, Elliot||Sutcliffe, Gerry|
|Morris, Rt Hon Alfred (Wy'nshawe)||Taylor, Mrs Ann (Dewsbury)|
|Morris, Estelle (B'ham Yardley)||Taylor, Matthew (Truro)|
|Mowlam, Marjorie||Thompson, Jack (Wansbeck)|
|Mudie, George||Timms, Stephen|
|Mullin, Chris||Tipping, Paddy|
|Murphy, Paul||Touhig, Don|
|O'Brien, Mike (N W'kshire)||Trickett, Jon|
|O'Brien, William (Normanton)||Tyler, Paul|
|O'Hara, Edward||Vaz, Keith|
|Olner, Bill||Walker, Rt Hon Sir Harold|
|Orme, Rt Hon Stanley||Wallace, James|
|Parry, Robert||Walley, Joan|
|Pearson, Ian||Wardell, Gareth (Gower)|
|Pendry, Tom||Watson, Mike|
|Pickthall, Colin||Welsh, Andrew|
|Pike, Peter L||Wicks, Malcolm|
|Pope, Greg||Wigley, Dafydd|
|Powell, Ray (Ogmore)||Williams, Rt Hon Alan (Sw'n W)|
|Prentice, Bridget (Lew'm E)||Williams, Alan W (Carmarthen)|
|Prentice, Gordon (Pendle)||Wilson, Brian|
|Prescott, Rt Hon John||Winnick, David|
|Primarolo, Dawn||Wise, Audrey|
|Purchase, Ken||Worthington, Tony|
|Quin, Ms Joyce||Wray, Jimmy|
|Radice, Giles||Wright, Dr Tony|
|Randall, Stuart||Young, David (Bolton SE)|
|Raynsford, Nick||Tellers for the Noes:|
|Reid, Dr John||Mr. Jon Owen Jones and Mrs. Jane Kennedy.|
§ Question accordingly agreed to.