HC Deb 19 March 1996 vol 274 cc162-3
9. Mr. MacShane

To ask the Secretary of State for Social Security what is the total amount of benefit paid by his Department to (a) full and (b) part-time employees. [19707]

Mr. Roger Evans

In 1994–95, the amount of benefit paid to employees through in-work benefits—such as family credit, housing benefit and council tax benefit—was nearly £2 billion. In addition, of course, employees may benefit, where they satisfy the conditions, from a range of other benefits, such as child benefit or disability living allowance.

Mr. MacShane

If the Minister adds income support—about which he recently gave a parliamentary answer—to the figure, £3 billion is now paid out to people in work through the benefits system, which is double the 1990 figure. While all hon. Members want to protect people in poverty, is not the plain fact that employees in my constituency who are offered jobs at £1.44 or £2 an hour must turn to the benefit system, which acts as a huge subsidy for low-pay employers and distorts the local labour market? I put it to the Minister that, as a Conservative, a taxpayers' subsidy of that order cannot make economic sense.

Mr. Evans

Evidence from research by the Institute of Employment Studies shows that employers do not know whether the family in question is in receipt of family credit because, of course, family credit is ordinarily paid to the woman. The evidence also seems to suggest that that is not having a distorting effect on the labour market. That is the first point.

The second point is that in-work benefits such as family credit are better for people who are in the condition that the hon. Gentleman described, because they are acquiring and using work skills. Such benefits are also better for the taxpayer, because the cost of paying income support on a full means-tested basis would be considerably greater.

Mr. John Marshall

Does my hon. Friend agree that it is more practical and more moral to help low-paid people through family credit than it is to legislate for their unemployment through the national minimum wage and the social chapter?

Mr. Evans

I entirely agree with my hon. Friend's two points. The basic problem with the minimum wage is that, in effect, it prohibits employment below a prescribed level—the effect of which would be to create unemployment, depending on the level of that minimum wage.