§ The Secretary of State for Social Security (Mr. Peter Lilley)
I beg to move,That the draft Social Security Benefits Up-rating Order 1997, which was laid before this House on 31st January, be approved.
§ Madam Speaker
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 1997, which was laid before this House on 31st January, be approved.That the draft Social Security (Contributions) Amendment Regulations 1997, which were laid before this House on 10th February, be approved.That the draft Guaranteed Minimum Pensions Increase Order 1997, which was laid before this House on 31st January, be approved.That the draft Social Security (Incapacity for Work) (General) Amendment Regulations 1997, which were laid before this House on 31st January, be approved.
§ Mr. Lilley
The main order uprates nearly all benefits in line with inflation. It is the biggest spending decision that we take in the Department every year. Even with inflation at only just over 2 per cent., uprating benefits will cost £1.7 billion in the coming year. It is right and proper to uprate benefits, because that meets our commitment to the neediest in society.
I am proud that, despite the pressures on public spending, all basic benefits have been uprated every year since I have held office. Of course, it was not always so. Under the previous Labour Government, benefits were not uprated fully in 1976 for past inflation, and pensioners were robbed of £1 billion in today's money. Pensioners may therefore find a recent statement by the shadow Chancellor somewhat disturbing. In a speech last month, in which he spelled out his new, macho approach to public spending, he said:We will keep a tough grip on the cash totals of departmental spending … there cannot be an assumption that totals will be automatically adjusted upwards in the event of changes in inflation.I wonder whether the hon. Member for Peckham (Ms Harman) can reassure pensioners and others about whether their benefits would be automatically adjusted upwards in the event of changes in inflation. I am happy to give her the opportunity to do so. Perhaps she will do so later, although I am not sure what value pensioners would put on an assurance from the hon. Lady, because she has changed her mind on everything, and her party's track record is not good. We shall wait and see.
The fall in unemployment since the previous election is another source of pride. Unemployment is down by more than a million since April 1992, and is now declining even faster. Expenditure on benefits for the unemployed is therefore falling, and is set to fall further. Expenditure on other groups has risen, but three quarters of the growth in spending in this Parliament has been on people who are elderly or disabled, or the long-term sick. Spending has grown on the elderly, because people who reach retirement age can now expect to live for two years longer than people who reached retirement age in 1979. People live longer under the Conservatives.
931 Spending on disabled and long-term sick people has grown because we give more generous benefits. We are proud of the fact that we give four times more help to disabled and long-term sick people than did the previous Labour Government.
The two sides of the House have had their disagreements on analyses of past social security spending, but we can now both agree about future spending levels. In his speech on 20 January, the right hon. Member for Dunfermline, East (Mr. Brown) committed the Labour party to our planned expenditure levels, Department by Department and year by year. It was an amazing tribute to my right hon. Friend the Chief Secretary to the Treasury that the Opposition clearly believed that his figures were right to the last penny. It means that we can have a rational debate about how we should keep within those budgets, on which both sides of the House agree, and we can both be measured against the same yardstick.
I shall spell out the measures that we intend to take to keep within the published targets for my Department. It will be up to the Opposition to say whether they would implement those measures, or what other measures they would introduce to achieve the same savings. In total, the measures which I announced in the Budget debate just before Christmas, but for which we must legislate, will save nearly £300 million in the second year of the spending round, rising to £1 billion in the longer term. So either the hon. Member for Peckham must enact £1 billion-worth of my savings measures, every one of which she has condemned, or she must replace them with alternative measures that save as much. I think that she will find that, when the shadow Chancellor told her to keep within my budget, he was handing her a live grenade with the pin pulled out. We shall wait to see how she deals with it.
The largest of the changes that I announced was the proposal to equalise benefits for lone parents with those available to married couples. It will apply to new claimants only, who will receive the same family premiums and child benefit rate as couples. Existing lone parents will keep their present higher rates unchanged in cash terms. That equalisation is fair and, ultimately, it will save £500 million a year. It requires legislation, which we shall introduce early in the new Session.
I have written three times to the hon. Member for Peckham asking her a simple question: would she implement those changes to equalise benefits for lone parents with those for married couples? If she will not, and if she decides to pay £500 million more to lone parents than we plan, she can get it only by reducing benefits for married couples, for single people without children, for the disabled or the elderly, because they are the only other categories who receive benefits under our budget.
Let us have no pretence from the hon. Lady that she can conjure up £500 million of savings from expensive schemes designed to get lone parents back into work. It is socially desirable to get them back to work, especially from their point of view, and I welcome the fact that the Labour party has copied some aspects of our Parent Plus scheme. Imitation is the sincerest form of flattery, but we are frank enough to admit that it will probably cost money. We have budgeted some £20 million for the scheme.
We have studied similar schemes worldwide and know of no scheme that saves more money than it costs, including the Australian scheme, JET, which the Labour 932 party claims as its inspiration. That scheme has been going since 1989 and has cost £40 million more than it has saved. That is calculated on the basis that everyone leaving the scheme for a job is counted as a saving in benefit terms, although similar schemes in New Zealand and elsewhere suggest that as many as 80 per cent. might have got jobs anyway. It is therefore simply cynical of the Opposition to pretend that they can bank on savings from that source.
We can all agree that the ideal way to curb social security spending is to get people out of unemployment and into jobs. Here, Britain's record over this Parliament has been outstandingly better than that of any major country in Europe. We have created more jobs than all the other major countries of Europe put together.
§ Mr. Lilley
I shall give the hon. Gentleman a chance to listen to a bit more before he takes part in the debate.
We have created more jobs than all the other major countries of Europe put together. We have a higher percentage of our population in work, and that is rising. We have a lower level of unemployment, and that is falling. So, for the best of reasons, expenditure on benefits for the unemployed is now falling in this country, and set to go on falling.
We have achieved that relative success by following a clear strategy—by creating a flexible labour market, deregulating, reducing taxes and cutting social costs on employers, so that our social on-costs add £15 to every £100 in pay, whereas in France on-costs are twice as high, at £31 for every £100 on the payroll, and in Germany they add £41 to every £100 on the payroll.
We are making work worth while, by paying in-work benefits to those with families and high rents to pay. Those policies are working. They are creating jobs, attracting inward investment and winning plaudits from foreign firms moving here. They are securing the ringing endorsement of objective bodies such as the Organisation for Economic Co-operation and Development and the International Monetary Fund.
In contrast, the Opposition's approach is clearly incredible. It is riven with glaring contradictions. Let me mention two. The Saturday before last, the Leader of the Opposition told his local government conference that a Labour Government would spend more on education, which he claimed would be financed by savings on social security achieved by Labour's scheme to get a quarter of a million young people into work.
Yet a week later the shadow Chancellor, in an interview in the Evening Standard, said in the clearest possible terms that, far from saving money, the scheme would cost a net £3 billion—[HON. MEMBERS: "No."] I shall quote his words:I estimate"—[Interruption.] These are the words of the right hon. Member for Dunfermline, East, and Opposition Members would do well to listen to them:I estimate that to meet a commitment to create 250,000 jobs for young people will, over the course of a parliament, cost a minimum of £3 billion … I do not think anybody is in any doubt that a windfall levy will raise that sum of money.933 Either the scheme would save money or it would cost money. Either it would help the Leader of the Opposition pay for more spending on schools, or a minimum of a £3 billion tax on the utilities would be required to pay for it, as the shadow Chancellor admits. They cannot both be right. Which of the two does the hon. Member for Peckham support—her leader or her shadow Chancellor? Will the scheme save money or cost money?
It is no good suggesting that the £3 billion cost cited by the shadow Chancellor is a gross cost that would be offset by savings. If the savings exceeded the cost, there would be no need for an extra tax to finance the scheme. In connection with the Budget proposals that the Chancellor announced before Christmas, I negotiated with the Treasury a "spend to save" programme of anti-fraud measures that will save more than it costs—so we shall not need any extra taxes. It will help us in our task of bringing taxes down.
The simple truth is that the shadow Chancellor is, in that respect, right. The costs of such schemes invariably far exceed the benefit savings. The reason is simple. There is a large dead-weight cost. Last year, half of all those who would have been eligible for his £1,500 subsidy to help them back into work got jobs anyway. So the money spent subsidising them would be wasted.
Then there is a large substitution and displacement cost. Many employers would take on people eligible for the subsidy instead of others whom they might otherwise have taken on, and people in that second group would therefore find themselves unemployed and drawing benefit.
There is also a recycling cost: employers might not keep their subsidised recruits once the subsidy has run out, after only six months, so the net number of additional jobs is likely to be only a small fraction of those who receive the subsidy. I wish that that were not the case and that such schemes were cost-effective but, alas, all the evidence suggests that only narrowly targeted schemes create any extra jobs and that few, if any, result in net savings to the taxpayer.
§ Mr. Michael Stephen (Shoreham)
If the money for those makework schemes is to be raised by a windfall tax, what is the likely effect on employment in the utilities to which the tax would apply?
§ Mr. Lilley
My hon. Friend makes a good point, which it is for the Opposition rather than for me to answer. I venture to suggest, however, that the effect would be negative and that there would be an adverse effect on employment in those industries, to add to the problems that I have already mentioned.
The Opposition's proposals have a second and equally glaring internal contradiction. They claim that reducing the cost of employment by giving employers a temporary £60-a-week subsidy would create extra jobs; yet they simultaneously claim that increasing the cost of employment, by the national minimum wage, not to mention European social costs, would not destroy jobs.
Either employers are sensitive to the costs of employing people, in which case the national minimum wage would be a disaster, or they are not, in which case the hope of reducing unemployment by job subsidy is an illusion. The Opposition cannot have it both ways.
934 I am happy to come down on one side of the horns of the dilemma: the truth is that employers are indeed affected by the cost of employing people and that a national minimum wage, which would permanently raise costs and affect millions of people, would be bound to destroy far more jobs than could possibly be created by a temporary job subsidy of £60 a week that ends completely after six months and covers only a few hundred thousand people.
The more Labour claims that its job subsidies are likely to be effective, the more alarmed we should all be about the far greater impact of the minimum wage, the social chapter, the European social model and trade union power, which it proposes to restore.
The largest element in my budget is not expenditure on unemployment, but the cost of state pensions. We have taken steps to contain the future growth of state pensions and, equally important, we have successfully encouraged the bulk of people of working age to opt for occupational and personal pensions. Today, I have published the latest estimate of the value of United Kingdom pension funds, which has reached a record-breaking £650 billion.
That may be denigrated and sneered at by the Opposition, but it is something that Government Members are proud of. The assets held in pension funds rose by a massive £50 billion in 1995. That increase in a single year is more than the entire year's spending on health and social services. Only because we have encouraged people to save and invest in private pensions is the additional potency of private investment brought to bear in financing future pension needs in this country.
§ Mr. Jeremy Corbyn (Islington, North)
Before the Secretary of State gets totally carried away on the subject of the privatisation of the pensions system, will he tell us what studies have been done by his Department into the amount that is being paid into private pension schemes by people in work, compared with the amount that they would have paid into a national insurance system if the state pension had been uprated properly in line with earnings, as it should have been, instead of the Government stealing so much money from pensioners?
§ Mr. Lilley
There are two aspects to that question. On whether state pensions should have been uprated in line with earnings, Labour Front Benchers—latecomers though they may be—agree that they should not; we welcome that agreement, although we understand that the bulk of Labour Back Benchers do not share in it. It would have cost the best part of £8.5 billion to uprate in line with earnings had we not changed the system.
The trouble with comparing the costs of the state system with those of private provision is that the state system does not involve any investment—and does not, therefore, receive the fruits of investment growth—whereas the private sector does. That is why it is advantageous, where possible, to get people to save and invest and to enjoy the fruits of investment. That is why we are proud of our success in encouraging the bulk of people to do so. Pension and life assurance assets now account for more than one third of net personal wealth in this country.
§ Mr. Bernard Jenkin (Colchester, North)
Is my right hon. Friend aware that, over the past two days, the Select 935 Committee on Social Security has been hosting a Europewide conference on the comparison between funded and unfunded pension systems, which has looked at the hidden liabilities in European pension funds? It is evident—as all the other European parliamentarians attending the conference acknowledge—that the choices that we took during the 1980s, and those that we have taken since, to balance our hidden liabilities into the future, are choices that the others will have to make to stop their public finances falling into crisis.
§ Mr. Corbyn
On a point of order, Madam Speaker. Is it in order for the hon. Member for Colchester, North (Mr. Jenkin) to make an intervention on private pensions without saying that he is, or was, an adviser to the insurance company, Legal and General?
§ Madam Speaker
The Chair does not rule on interventions. If the hon. Gentleman were to rise to make a speech, I would expect him to declare an interest at the beginning, but I cannot rule that he has to make such a declaration on an intervention.
§ Mr. Jenkin
Further to that point of order, Madam Speaker. May I point out to the House that I have had no connection with Legal and General for more than a year?
§ Mr. Lilley
I do not know whether the hon. Member for Islington, North (Mr. Corbyn) wants to intervene to apologise. The House will note his ungracious attempt to slur one of my hon. Friends, and I shall think twice about giving way to him in the future. [HON. MEMBERS: "Oh."] Opposition Front Benchers apparently approve of such behaviour, which tells us something about them.
§ Mr. Robert G. Hughes (Harrow, West)
Is there not collusion between Opposition Front Benchers on these matters? In the corresponding debate last year, my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) suggested that Labour would abandon its commitment to uprate pensions in line with earnings. When he did so, he was accused of peddling wild rumours from central office. We all know who was right.
§ Mr. Lilley
To respond to the important point raised by my hon. Friend the Member for Colchester, North (Mr. Jenkin), I welcome the Select Committee's conference, which I saw was attended by an impressive array of continental experts and parliamentarians. Officials from my Department, and other Departments, have been to the conference and will report to me on the views expressed, which could be very interesting. I know from the Franco-British Council conference on the subject of funded pensions that there is great interest and considerable admiration on the continent for our success in building up private pension provision on the back of solid state-guaranteed pensions for the future.
Britain's strong position was confirmed recently by a new report from the International Monetary Fund, which highlights our enviable position compared with other European pension systems. The IMF estimates that the ratio of public pension liabilities to gross domestic product is 5 per cent. in Britain, compared with 76 per cent. in Italy, 111 per cent. in Germany and 114 per cent. 936 in France. The value of assets held in UK pension funds exceeds those of all other EU member states put together. We believe that we are better placed to provide decent pensions for our pensioners in the future.
Only 43 per cent. of those who retired in 1979 were in receipt of occupational pensions. Now, the figure is 63 per cent., and it is even higher among those who have retired recently. Some 5.6 million people are holders of appropriate personal pensions. Seventy-three per cent. of pensioners have income from investments and savings, compared with 62 per cent. in 1979, and their average total net incomes have gone up by 60 per cent. more than inflation since then. That is a track record of which we can be proud.
I must mention two other issues before drawing to a conclusion. First, I refer to a recent misleading statement made by the Leader of the Opposition, the shadow Chancellor and the hon. Member for Peckham, who is the shadow spokesman on social security. All of them have said that it is regrettable that we spend less on education than on unemployment. Where they get those figures, I do not know.
§ Mr. Lilley
Yes, they must do. I want to put the actual figures on the record. We spend £36 billion a year on education. The cost of all benefits to unemployed people is some £9 billion and falling. I hope that those hon. Members will correct the misleading statements that they have made when they come before the House.
Since the welfare state was established, the cost of social security has grown twice as fast as the economy. It has taken a rising share of national income and has been the main factor in driving up taxes and in the changes and burdens on business. Because of the reforms that we have introduced, it is now set to take a declining share of national income, leaving scope for lower taxes and setting us on a virtuous circle of lower taxes, a more dynamic economy, generating jobs and getting people off welfare and thus further reducing taxes. We have achieved that because our reforms are focusing help on those in need, cutting out fraud, getting people off welfare and into work and helping to drive up private pension provision for the future. Those are achievements of which we Conservatives can be proud.
By contrast, the Opposition have attacked virtually every reform that we have introduced and every proposal that they have made involves spending more. The simple truth is that the Opposition cannot be trusted to reform the welfare state, because they believe that they have a vested interest in the votes of those who depend on the money from the welfare state. The Opposition tried to do an about-turn on the issue and to pretend that they can both spend more and save at the same time. As a result, they are riven by the internal contradictions that I have spelt out. They claim that they will live within our budget, but refuse to implement or replace the £1 billion of savings that we have announced.
We shall want to hear from the hon. Member for Peckham whether she will implement the changes that we have announced but have yet to legislate for on lone parents, housing benefit, backdating and so forth, totalling the best part of £8 billion.
937 The Opposition claim that their subsidies for employers will create jobs, and then deny that the burdens of the minimum wage, European social costs and restored union power will destroy jobs. They claim that their schemes will save money, but then admit that they will require £3 billion in extra taxation to finance them. Rarely has a party demonstrated as comprehensively as the Opposition its complete unfitness to govern. Let us make sure that it remains on the Opposition Benches and leaves the Conservative party to continue with the most successful reforms of the welfare state in Europe.
§ Ms Harriet Harman (Peckham)
I will begin by setting out our position on today's business. I shall advise my right hon. and hon. Friends not to vote against the general uprating order, because, as the Secretary of State has said, it contains upratings in line with inflation, which are important to those who depend on benefits.
There are many aspects of the Government's approach, however, with which we profoundly disagree. The Government have delivered a double whammy—higher costs for the taxpayer and lower benefits for the claimant. Their failure is clear from their record on social security. Perhaps that is why the Secretary of State was so defensive today and spent nearly all his speech attacking our plans. Clearly, our plans are the only plans that he feels are worth discussing.
The Secretary of State is so defensive about his record that he dare not put it before the House. The fact is that the cost to the public purse is up, and life for those on benefits is harder. The Tories are hitting the taxpayer and hitting the poor. They have failed on welfare because they have failed on work. One in five households of people of working age, not including pensioner households, have no one in work. In our divided Britain, there is poverty from the cradle to the grave: one in three are born into poverty; one in five pensioners die in it.
As this Parliament draws to a close, this debate provides a good opportunity to review the Secretary of State's record. At the last general election, the Tories posed as the party that would cut taxes; this afternoon, Secretary of State said that they had cut taxes. Could he have been referring to the Government's 22 tax increases? They posed as the party that would cut taxes, but instead put them up. They also posed as the party that would cut the social security budget, but instead they increased it. Since he became Secretary of State, the social security budget has risen. It is £15 billion a year more than it was in 1992, and takes one pound in three of all Government spending.
When the Secretary of State is in the mood to admit the increased spending, he blames the elderly. Like the Under-Secretary of State, the hon. Member for Hertfordshire, North (Mr. Heald), he says that it is all the fault of our pensioners and that it is the Government's generosity: they are generous to a fault; the problem is demography, the aging population, more people with disabilities.
The right hon. Gentleman claims that it is generosity to the sick, the elderly and the disabled that has driven up the social security Bill, but it is not. More than half the increase, £8 billion extra a year, is a direct result of 938 the growth of poverty and unemployment, which has led to the growth of income-related benefits. That is the price of Tory economic and social failure. It is not the elderly who push up the social security budget, but poverty.
§ Mr. Lilley
The hon. Lady keeps making that point. The problem is that she does not understand the figures. Her predecessors, the hon. Member for Islington, South and Finsbury (Mr. Smith) and the right hon. Member for Glasgow, Garscadden (Mr. Dewar), did their home work, discussed issues with my officials and got their facts right. I have great respect for them. If she wishes to be informed, I would be glad to help. Indeed, I am happy to give her a table with a breakdown of the £8 billion extra expenditure on income-related benefits that she equates with extra expenditure on unemployment.
Of that £8 billion, precisely £600 million goes on the unemployed. The rest goes on the elderly, the long-term sick and families. It goes, for example, on family credit and extra help for lone parents. The figures are all there; she can study them. The money does not go on the unemployed, and it is grossly misleading for her to suggest it. In particular, she does not seem to realise that people who get disability living allowance are automatically passported on to improved income-related benefits. They get £12.90 extra on the new lower rate of DLA, and that entitles them to an extra £20 a week of income-related benefits.
§ Ms Harman
That was the longest intervention on record. I am well aware of the Secretary of State's figures. He placed similar figures in the Library after Social Security questions.
The point at issue is clear. The Secretary of State tries to categorise, for example, the £10 billion of income support for lone mothers as a good thing because it is a family benefit. The Opposition say that £10 billion of income support for lone mothers, most of whom want to work, is not a sign of success, but of failure. It is why the social security budget has gone up. It has risen because of income support, housing benefit, council tax benefit and the economic inactivity of the one in five households of people of working age who are not in work. It is not acceptable for the Secretary of State to say that the increase in his budget is due to the growing number of elderly or the Government's generosity towards the elderly. That is an unrecognisable description.
Of the £14.8 billion by which the Secretary of State has increased the social security budget since 1992, only £1.6 billion of the extra is accounted for by pensions. It is not good enough for the Secretary of State to rely on patronising, sexist assertions that assume that women cannot understand figures. It is absolutely clear that there is an extra £8 billion in his budget as a direct result of the growth in poverty and unemployment.
It is not the elderly who are pushing up the social security budget, but poverty. It is not the disabled who are pushing up the social security budget, but unemployment—the one in five households of people of working age who are without work. They live on the breadline, and the taxpayer has to pick up the bill for those one in five households, which is why the taxpayer has seen his tax bill increase by the equivalent of 4p on the basic rate of income tax. It is to pay for poverty and unemployment which have increased since the right hon. Gentleman became Secretary of State.
939 The more the Secretary of State spends on benefits for people who should be working, the less the Government invest in the future and in education. His failure has caused the social security budget to increase and its spending to crowd out the sort of public investment that people want. The £8 billion extra that he is spending on poverty and unemployment could have paid for more nursery places, more after-school clubs, more teachers, more books and more computers.
§ Mr. Matthew Banks (Southport)
With no discourtesy to the hon. Lady, may I ask her about one point that she raised on the subject of war pensioners? Many of those who have war pensions, and who are young like me, get fed up with her crocodile tears. One reason the social security budget has blossomed is that the Government have encouraged so many people to apply for war pensions. If I had had £1 for every senior citizen in my constituency for whom I had got a war pension, I would be a wealthy young man.
§ Ms Harman
The bill for social security in this country has not blossomed, as the hon. Gentleman suggests, owing to the Government's generosity to war pensioners. In fact, the Government, behind the backs of war pensioners, tried to cut their pension and deny it to them.
The social security budget has risen owing to the one in five households of people of working age who are not working—the tax bill of the other four families has therefore risen. There is an extra £15 billion on the social security budget this year compared to when the right hon. Gentleman took over as Secretary of State; only £1.6 billion of that increase is accounted for by pensioners. I hope that he will not claim that the extra numbers of pensioners taking up income support is a sign of success, not poverty.
I have looked through the figures that the Secretary of State put in the Library after I first raised the issue. The various allocations that he has made to try to smear over the issue conceals everything and confuses no one.
§ Mr. Lilley
I am sure that the hon. Lady would not want to mislead the House. She has just said that only £1.6 billion of extra spending is on the elderly: in fact, £3.3 billion of the total £14.6 spending is on the elderly, and £7.5 billion is on the long-term sick and disabled. That gives a total of £10.8 billion, so three quarters of the total increase is spent on the elderly, the long-term sick and the disabled.
§ Ms Harman
I shall simply state the figures as they are once more. There is a total of £15 billion extra every year in the right hon. Gentleman's blossoming budget, comprising £0.7 billion extra on child benefit; £1.6 billion extra on pensions; £4.3 billion extra on incapacity and disablement; and the remaining £8.2 billion going on income support, unemployment benefit and all those people of working age who are not in work.
To be without work—to be in one of the one in five households where no one is working—is not only to be without a decent standing of living, but to live on the margins of our society. That sows the seeds of disillusion and despair. To be unemployed when young is to feel that one has been thrown on the scrap heap before one has even begun. The Government have failed the young 940 unemployed: 500,000 people under 25 are unemployed, which is one in six of that age group. In some inner-city estates, half the people under 25 are out of work. In London, where my own constituency of Peckham is situated, 50 per cent. of young black men are officially registered as unemployed. That is why we say that there must be a windfall levy—a tax on the unfair and excess profits of the privatised utilities. We can use the money to break the vicious circle and get 250,000 young people who have been without work for six months off benefit and into proper work or training. When they reject that windfall levy, the Government reject all hope for the young unemployed.
We know that, the longer a person is out of work, the harder it is to get a job. The Government have failed the long-term unemployed—400,000 people have been jobless for more than two years and it costs the public purse £9,000 a year to keep someone trapped in unemployment. That is why we have argued for extra help for the long-term unemployed to get them into work—for a £75 a week national insurance holiday for employers who take on people who have been unemployed for more than two years; for a relaxation of the 16-hour rule to help the long-term unemployed to get the skills or educational qualifications they need to get the jobs that are available; and for a national minimum wage to help make work pay and enable people to move off benefit and into work.
§ Ms Harman
I shall give way in a minute, but I must press on because the Secretary of State made a long intervention that was half as long again as his speech.
The real map of poverty and unemployment stretches far beyond the official unemployment statistics, which have been fiddled more than 30 times by the Government. Among the poorest families in Britain today are those who are hidden from view because they are not on the official unemployment statistics, especially lone mothers. There are I million lone mothers who are trapped on income support, living on around £100 a week. Two million children in families headed by lone mothers are being brought up on the breadline. They face life on benefit for years, and the taxpayer now faces a bill that has risen to £10 billion a year to support lone mothers and their children.
In the Secretary of State's accounts, that is a success—a blossoming of the social security budget—and he calls it family benefits. We call it those mothers who want to work being trapped on benefit at public expense—a sign of the Government's policy failure. In the uprating debate in February last year, the Secretary of State said that there were three steps he would take to halt the rising number of lone mothers on income support. He has failed on all three of those steps, and there are more lone mothers on income support, not fewer.
The Secretary of State has failed to get lone mothers off income support by making absent fathers pay. He has failed to help lone mothers into work. Although he has cut lone mothers' benefit, that has failed to reduce the divorce rate. The Secretary of State is absolutely right in his determination to make fathers pay for their children.
Every child has a right to receive the emotional and financial support of both parents, irrespective of where they live. However, the latest figures from the Child 941 Support Agency show that it has failed: in the past three months, only 15 per cent. of absent fathers paid the full amount awarded. The Child Support Agency has been so badly administered that it has caused real hardship to some, and to many more it has provided an excuse to abdicate responsibility for their children.
Experience from around the world shows that it is difficult to make absent fathers pay under any system. It is an uphill battle. It is not a task from which we should shrink—far from it—but we must be realistic: we cannot leave the children of lone mothers in poverty and allow the benefits bill to increase every year while we wait for absent fathers to wake up to their responsibilities. It is vital that lone mothers are able to work to support themselves and their children.
Here, too, the Government have failed. While more married women are going out to work, fewer lone mothers are in the work force—yet they are the ones who most want and need to work. Lone mothers in Britain are less likely to be in work and more likely to be dependent on benefit than lone mothers anywhere else in Europe. In France, 82 per cent. of lone mothers are in work compared with only 41 per cent.—half as many—in Britain.
The problem is not just financial, with children being brought up on the breadline and the taxpayer facing a growing benefits bill. There is the deeper problem of children being brought up without seeing the world of work, and growing up with the expectation that life is about receiving benefit rather than going out to work.
Lone mothers want to work—especially when their youngest child begins full-time schooling. That is the time when most married women start to look for work. For the past 17 years, this Government—and this Secretary of State for the past five years—have told lone mothers, "Here's your income support. I'll send it to you every week, and come back when your youngest child is 16." That has been the Government's policy for the past 17 years.
Lone mothers do not want to depend on benefit, and it should not have to be like that. I recently conducted a small survey of lone mothers in my constituency, which backed up the national findings. For example, Sheryl is 29. She has two children, aged eight and three, she lives on her own and the children's father pays nothing. Before she had her children, she worked as an administrative assistant. She has been bringing up her children on income support for the past three years. She wants to work, but she cannot because she is unable to match working hours with school hours. She said:My youngest child starts full-time school in January and, once she's settled, I would like to go back to work. But I can't because of all the problems of after-school care, school holidays and teacher training days.The story is the same throughout the country: lone mothers want to work not in spite of the fact that they are mothers, but because they are mothers. Like all mothers, they are driven to give their children a better life.
The Secretary of State does not understand that problem, and he has no policies to address it. Labour in government would take action to break down the barriers that prevent lone mothers moving off benefit and into work. We will invite lone mothers whose youngest child is in the second term of full-time education into job 942 centres to receive advice on jobsearch and on training and child care. We will introduce a national child care strategy, with a network of after-school clubs to help lone mothers match school hours with working hours and make work pay.
§ Ms Harman
Only one child in 80 have an after-school place, and the waiting lists are enormous. [HON. MEMBERS: "Where will the money come from?"] The Minister claims that the Government have provided those places, but Conservative Members ask where the money will come from. Clearly, they are split on that issue.
§ Ms Harman
I shall anticipate the hon. Gentleman's question, and he shall see whether I answer it correctly.
We have said that more money needs to be spent on after-school clubs. They can be financed through a combination of measures: the lottery, public-private partnerships, benefit transfers, and by charging mothers who can afford to pay. After-school clubs are important for lone mothers and are popular with all parents. What has been lacking is a glimmer of understanding on the Government's part that they should provide such a service.
We will use benefit transfer schemes as a springboard for lone mothers out of dependency and into work. We will have targets for training and enterprise councils to train lone mothers, especially on term-time courses.
We will have one-stop shops like that pioneered by my hon. Friend the Member for Cambridge (Mrs. Campbell), who was in her place earlier. Information technology and the Internet are used to bring all the information that lone mothers need on to an easy-to-use computer with a touch surface. The user touches the screen for information about local jobs, child care and training and how her benefits will be affected. All that information is pulled together to provide a one-stop service, so that lone mothers can be helped to get off benefit, get into work and find their way through the maze of conflicting information.
§ Mr. Hartley Booth (Finchley)
Are we to understand that it is official Labour policy for the lottery to fund social services?
§ Ms Harman
The hon. Gentleman does not understand. After-school clubs are not a social service. There is a big demand for them from parents. It is difficult for children to play out if they do not have a safe environment. Many mothers want to, and have to, work. After-school clubs are important for children to do homework, and possibly engage in other activities that have been squeezed out of the national curriculum, such as more music, art, drama and sport.
The lottery is well designed to provide resources for that, but it is not our only suggestion for financing. We have said that extra after-school club places can be financed through a combination of measures, which I set out. That has been supported by the Kids' Club Network. Until we raised the issue, it was not on the political agenda. When I mentioned after-school clubs, the 943 Secretary of State did not even know what they were, and had to run off to the Secretary of State for Education and Employment to ask about them.
§ Mr. Andrew Mitchell
The hon. Lady is talking consummate nonsense. She knows perfectly well that there is nothing between the two sides of the House on after-school kiddies' clubs. The difference is that, over the past three years, we have created 80,000 places. We are committed to the scheme. In his Budget, my right hon. and learned Friend the Chancellor of the Exchequer put £24 million on the table to develop kiddies' clubs. How much money will the hon. Lady put on the table? Let us have a figure, instead of the re-announcement of Government policies and waffle that we get from the Opposition Front Bench.
§ Ms Harman
I welcome the signs that the Government have moved firmly on to our territory. They have recognised that they cannot defend a situation in which 1 million lone mothers are on income support, and the sole Government policy was to write to them from the Department of Social Security once every three years saying, "Are you still at that address? Are you still getting your income support okay?"
That was the Government's sole strategy for lone mothers. That is why 1 million of them are on benefit, 2 million children are on the breadline, and the taxpayer is picking up a bill for £10 billion every year. That is why we said that something must be done, and that we need a welfare-to-work approach. We offered a number of proposals, which I am outlining.
If the Government had ever recognised that lone mothers needed to work, they would not have simply have said, "Go away and come back when your youngest child is 16." If they understood the role that after-school clubs can play in helping lone mothers, we would not be faced with a situation in which only one in 80 children have access to an after-school club. If the Under-Secretary of State wants to assure me that he agrees with me about the policies that we have espoused and on which he has failed to act, he should vote Labour at the next election.
We will measure and report our progress with monthly figures. What the Government do is present the unemployment figures and say that unemployment is tumbling; what they never do is present monthly income support figures, showing that the number of people of working age who are not working is rising. The truth is that, in all his years as Secretary of State, all that the right hon. Gentleman has ever done is criticise lone mothers, and, of course, cut their benefits.
That brings me to the Secretary of State's third failed plan to reduce the number of lone mothers. Of course he has criticised lone mothers. Do we not all remember what he said at the Tory party conference? Of course he has cut lone mothers' benefits: that is evident. I hope that he will not even seek to deny that.
§ The Parliamentary Under-Secretary of State for Social Security (Mr. Oliver Heald)
What did he say at the Tory party conference?
§ Ms Harman
We remember the Secretary of State's "little list." He stigmatised lone mothers and their children, saying, "There is something wrong with your 944 family, so there must be something wrong with you," to the 2 million children of lone mothers. He has changed his tune, and to some extent I welcome that, but it does not change his record, as everyone knows.
Part of the Secretary of State's record is benefit cuts. Cuts in lone mothers' benefits make the poorest families poorer. In this uprating and in the further measures that the right hon. Gentleman proposes, he plans to cut lone mothers' income by £572 a year. He is not giving them any help so that they can obtain work; instead, they must suffer cuts in benefit.
The Secretary of State must know that, when women cease to be part of a couple and become lone mothers, they become worse off, not better off. Lone mothers are not advantaged; they are disadvantaged. They do not have their partners' income, or their partners' time. The Secretary of State's justification for cutting lone mothers' benefits, and making the poorest families poorer, is that it will deter couples from divorcing or separating; but benefit cuts for lone mothers do not make any couples stay together. Lone mothers are already worse off than married women, yet the divorce rate continues to rise.
§ Mr. David Willetts (Havant)
If the hon. Lady does not support the Government's measures on benefit for single parents, and given that the shadow Chancellor has made it clear that, if she were in office, she would be obliged to stick to the Government's totals for social security expenditure, what other cuts does she propose?
§ Ms Harman
We have said that the way in which to stop what the hon. Member for Southport (Mr. Banks) described as the blossoming of the social security budget, and hence the increased burden on taxpayers, is not to shave the benefits of the poorest families year by year. It has been said that, although the hon. Gentleman has no common sense, he has two brains, so he will know that lone-mother families are the poorest. He clearly agrees with that.
We cannot deal with the problem of the rising social security bill simply by reducing the standard of living of the poorest families. What we must do is go with the grain of what they want to do—what married women are doing—which is to go out to work. That is why it is so shameful that the Government of whom the hon. Gentleman has been a part have adopted a policy of saying "Here is your income support. Collect it weekly, and go away until your youngest child is 16."
Our approach will not be to cut the social security budget by making the poorest poorer. We will employ a welfare-to-work strategy to ensure that those people can obtain work, so that we no longer see an increase, year after year, in the number of lone mothers who are on benefit because they cannot work.
§ The Minister for Social Security and Disabled People (Mr. Alistair Burt)
Will the hon. Lady give way?
§ Ms Harman
No, I will not. I have answered the question.
The problem is that the Government have put the social security budget up. My right hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor, is right to recognise the appalling state of public finances, 945 to recognise that people have been hit by 22 Tory tax increases and to say that our priorities and our approach are different from those of the Government. Our approach is, as I have said, to employ a welfare-to-work strategy. That is why, as I said earlier, we will break the vicious circle by a windfall levy on the privatised utilities to fund a £3 billion welfare-to-work programme for the long-term and young unemployed.
In the debate on social security a year ago, the Secretary of State said that there were three ways in which he would stop the increase in income support for lone mothers. First, he would make fathers pay. He has failed. Secondly, he would get lone mothers to work. He has failed. Thirdly, he would deter people from becoming lone mothers, by ensuring that couples stay happily together by reducing the benefits for lone mothers. He reduced the benefits, but benefit cuts for lone mothers do not make couples stay together. Lone mothers are already worse off than married women, yet the divorce rate continues to rise.
Relationship breakdown is far more complex than a simple financial issue. Does the Secretary of State really think that couples will say to themselves, "Good heavens! The Secretary of State for Social Security has cut lone parent premium and one-parent benefit. Let's not break up. Let's stay together"? The world is not like that. That is why his strategy to reduce the number of lone mothers on income support has failed. Much as he may like to, he cannot regulate from Whitehall the relationships of men and women. What he could do but has failed to do is help lone mothers to do what they want to do—work.
After 17 years of criticism of benefit cuts, the Secretary of State has produced a leaflet, which he sent to all lone mothers on income support. I can see that he is leafing through his file, and that he has the second to latest version. I have the latest one. The most important thing that it does not say is where to go to find a job. The Government simply cannot understand that a maze of obstacles confronts women on income support who want to go to work. A one-stop-shop approach is needed, not one set of advice on benefits, another on work, another on training, and another on child care.
Undeterred, this afternoon I rang the hotline number on the leaflet, and spoke to Lee. He was courteous and polite, but explained that he cannot give any advice about an individual case. He certainly cannot give any advice about availability of jobs, training or child care, as that is nothing to do with the Department. However, he offered further leaflets on benefits.
If the Government's back-to-work strategy for lone mothers is to send them a leaflet and then have a hotline that offers them further leaflets, it will not succeed. It is very expensive. It cost £750,000 to get three columns in the Daily Mail to defend the Government's lamentable record. That is the wrong use of public money.
With our welfare-to-work strategy, we will, as my right hon. Friend the Leader of the Opposition set out, spend less on unemployment—mopping up the cost of Government failure. Then we will be able to spend more on education, investing in the future for success. The failure to get people off benefit and into work forces the benefits bill up, and the Government squeeze benefits: 946 cuts in benefits for asylum seekers, cuts in benefits for war pensions, cuts in benefits for people who are not well enough to work, and cuts in housing benefit.
The Conservatives used to say, "Let the housing benefit bill take the strain." Now they have cut it. They also used to say that unemployment was a price worth paying. From October 1997, they propose that single people under 60, including widows who have lived all their lives with their husbands, will be forced to go into shared accommodation to claim housing benefit. How can the Secretary of State justify that? For the third year running, the Government have cut housing benefit for parents whose grown-up children still live with them. It is not always easy for an adult to live with his or her parents, particularly if he or she is without work. That cut simply makes it more difficult. How can the Secretary of State justify that?
One important way to curb the spiralling housing benefit bill would have been to take the tough action that Labour proposed on the Social Security Administration (Fraud) Bill. The Select Committee on Social Security estimates that one in every five pounds spent on housing benefit are wasted on fraud, but the Secretary of State refuses to implement our proposals for tougher measures.
We must at all times remain vigilant in the battle against fraud on the public purse, no matter where it is committed. Every pound wasted on fraud is a waste of taxpayers' money, which could go to those in need, and a waste of public support for the welfare state. Labour defends the welfare state, and we want to see it better defended against the abuse of fraud.
The changes in the uprating order fail to help our poorest pensioners. It is a scandal that, after a lifetime of work or caring for their family, pensioners are some of the poorest people in Britain today. Pensioners have been hit hard by the Government's policies. The Tories broke their promise and put VAT on gas and electricity. Up and down the country this winter, pensioners are having to choose between heating and eating. That is one reason why we will cut VAT on fuel to 5 per cent.
Almost 1 million pensioners fall through the net altogether. They are entitled to income support, but they do not claim it.
§ Ms Harman
One of the shadow Chancellor's proposals for the windfall levy to help the young unemployed is an environment task force. One of its jobs could be to insulate the homes of elderly people. At one and the same time, that would give useful work to young people who are wasting on the dole, would cut pensioners' heating bills and would improve the environment.
Almost 1 million pensioners fall through the net altogether.
§ Sir Norman Fowler (Sutton Coldfield)
I am sorry to interrupt the hon. Lady's flow. Will she tell us what Labour's policy is on uprating the basic pension, because Opposition Front-Bench Members declined to do so the last time we debated this subject? Is it true, and can it be confirmed, that the Labour party has now abandoned its long-standing pledge to uprate pensions in line with earnings?
§ Ms Harman
We have set out our policies clearly in our document "Security in Retirement", which was passed 947 by our conference. We have said that pensioners are fed up with a Government who made promises that they did not keep, and who promised not to put VAT on gas and electricity and did so. We recognise that the public finances are in a very bad state due to the Government's incompetence.
We will only make promises that we can keep, which is why we have told pensioners that we will cut their fuel bills by reducing VAT on gas and electricity. We have said that we will keep the basic state pension as it is now, not means-tested, and that we will uprate it at least in line with prices. We have had to say that we will not promise to finance a commitment to increase it in line with earnings, not least because the Government have destroyed the public finances. We set that out very clearly in our document "Security in Retirement".
Almost 1 million pensioners fall through the net altogether. They are entitled to income support, but they do not claim it, and lose £14 a week on average. Of those pensioners, 800,000 are women living on their own. They have no state earnings related pension, no occupational pension and no savings: they have nothing.
The Government are making matters worse. The existing 35-page income support form is part of the reason why 1 million pensioners are deterred from claiming their entitlement. Under the misleading title, "Simplification of Procedures"—a document that was sneaked out at the time of the Budget—the Secretary of State announced that yet more obstacles will be put in the way of people who intend to claim income support, including pensioners. The Government are putting more responsibility on claimants for the correct completion of the form, and are requiring more evidence to support claims. The Secretary of State's proposals will deter thousands more pensioners from claiming the money to which they are entitled.
The Secretary of State says that the poorest pensioners do not claim the money to which they are entitled because they choose not to do so: they do not want it. The idea that 1 million pensioners choose to be on average £700 a year worse off is ridiculous. The truth is very different. The message to pensioners from the Government has been clear: "If you claim benefit, you are a scrounger; if you are a pensioner, you are a burden." One million proud pensioners have got that message loud and clear, do not claim their benefit, and suffer hardship as a result.
We argue that the proposals in the Government's Social Security Administration (Fraud) Bill for cross-matching local government and Government data between Departments should be used to get help to pensioners who do not claim their entitlement, yet the Government have refused to accept that. They are prepared to cross-match data to combat fraud, and we support that, but not to help the poorest-paid pensioners who are losing out.
Not only are the 1 million pensioners who do not receive the income support to which they are entitled worse off, but the Government have imposed VAT on fuel, cut in half the value of the state earnings-related pension scheme, and put pensioners in fear of having to sell their homes to pay for long-term care.
The Secretary of State has boasted again about second-tier pensions and occupational pensions, but the fact remains that 12 million people at work today have no occupational pension. Many of the 6 million people whom the Government encouraged to take out personal pensions, especially those on modest incomes, have found that such 948 pensions eat up up to a third of their savings in charges. Many of those who came out of occupational schemes at the Government's urging have found that they are very much worse off, and have been missold personal pensions. Millions of people at work today face poverty in retirement.
The Secretary of State should spend less time lording it over everybody else in Europe, and a little more worrying about people at work today who do not have a proper second-tier pension, and who will therefore fall back on means-tested benefit and have a very low standard of living when they retire. That is why we need a new framework of value-for-money second-tier pensions that fits the changing world of work, where more women are working and there are more part-time workers and small employers. That is why we are proposing a new form of funded second-tier pensions for those who do not have access to an occupational pension, through our plans for a stakeholder pension.
We are also proposing to extend choice through our plans for a flexible decade of retirement. Over the past few years, the pattern of work has changed, and many people now want to retire early. If, at no cost to the public purse and without recourse to it later, people can draw their state pension early because they have shown that they have sufficient savings or an occupational pension, greater flexibility and choice can be provided. We must end the "one size fits all" approach to the welfare state.
The welfare state has an important role to play as part of an efficient economy and a just society. There have been huge social and economic changes since Beveridge created the welfare state in 1945, and they present great challenges. The welfare state can meet those challenges, but it needs to be modernised. It needs to move ahead of social and economic change, not lag behind it as the Government have allowed it to do, with lone mothers, for example; become flexible to respond to the diversity of people's lives, with regard to the age of retirement, for example; work alongside a dynamic economy, because the welfare state cannot ever be an alternative to work; be a force for social cohesion in our divided society; and provide a new balance of rights and responsibilities between individuals and the state. It needs a Labour Government, and the sooner the better.
§ Mr. David Willetts (Havant)
I should like to begin by citing some more figures on the balance of social security expenditure—the crucial point on which there have already been exchanges between my right hon. Friend the Secretary of State and his shadow, the hon. Member for Peckham (Ms Harman)—because the figures bear out absolutely what my right hon. Friend was saying.
Of the total social security budget, 44 per cent., £40 billion, goes on benefits for elderly people; 25 per cent., £23 billion, goes on benefits for sick and disabled people; and 19 per cent., £18 billion, goes on benefits to families. Benefits to unemployed people are a relatively modest £8.6 billion. Even adding in the further £4 billion of expenditure for which the Department for Education and Employment is responsible, expenditure on assistance for unemployment people is still overshadowed by all the other programmes that are central to the welfare state.
The Opposition are claiming that there is gold at the bottom of the garden in the form of some extraordinarily high level of benefits paid to unemployed people, out of 949 which they can finance every expenditure programme that passes through their mind. No matter how successful we are in bringing down unemployment, the money spent on benefits for the unemployed, running at 9 per cent. of the social security budget, could not finance every pet programme that an Opposition spokesman wanted to introduce.
The other mechanism for financing the Opposition's pet programmes—the windfall tax—would be equally damaging to the economy. Sometimes, the situation is unclear—we are told on the one hand that measures will be self-financing and then on the other that they will be financed from the windfall tax. That is confusing. I would welcome an intervention from someone on the Opposition Front Bench to explain that confusion.
§ Mr. David Shaw
My hon. Friend has been complimented in the past on perhaps having more than one brain. Does it not require only one brain, or even perhaps half a brain, to understand—although Labour is not admitting this—that, if employers are to be subsidised to take on 250,000 young workers and encouraged to reduce their employment costs, they will, in all probability, get rid of 250,000 older people?
§ Mr. Willetts
I agree with my hon. Friend. That is what the Americans would call a no-brainer. That would be one of the effects.
I should like to contrast the range of measures that the Government have in place to help unemployed people into work with the measures advocated by the Opposition. There are two ways of helping unemployed people into work. One is by straightforward incentives. We have made massive improvements in incentives since 1979. The gap between the average incomes that someone could expect in work and out of work is now such that we can be confident that just about every family would be better off in work. That is a massive improvement on the mess of the social security system in 1979.
I welcome the ingenuity of the Department of Social Security in perpetually seeking further ways of ensuring that incentive effects work. We have helped people to carry on with some entitlement to housing benefit for a few days or weeks when they first get back to work. The back-to-work bonus is an incentive worth up to £1,000 for unemployed people getting back into work. There is a national insurance holiday for employers who take on someone who has been long-term unemployed. All those incentives are the right way to go with the grain of the labour market and help unemployed people back to work.
The second way—I am afraid that this is a rather cumbersome expression—is by much more active management of unemployed people. That means not ignoring them and simply allowing them to sign on every two or three weeks and leaving them alone in the interim, but actively managing and encouraging them, boosting their morale and helping them actively to seek work. That is what job clubs are about. They are extremely cost-effective. That is what restart interviews are for and one of the reasons why the pilots of project work in Medway and Humberside are already showing such good results. I welcome the fact that we are going to extend project work to 100,000 unemployed claimants.
950 Training is oversold as a way of helping unemployed people back to work. Of course training is good if it increases what economists call the human capital of people who have been unemployed or in low-paid work, but it is not a panacea for unemployment. Training is often best deployed with people who are already in work—perhaps low-paid work. As the employer gets to know an employee's aptitudes, he can invest more money in raising their skills and helping them into better-paid employment with that firm.
Too often, training schemes aimed solely at the unemployed play a cruel trick on them. There is sad evidence from research that training schemes can increase an unemployed person's perception of the wage that he should command by more than they increase his skills and qualifications. Paradoxically, they can set him back in seeking work. That is one reason why Labour's much-vaunted attempts to expand training programmes to help unemployed people into work could well have perverse effects.
We recognise that sometimes, when unemployed people find their first jobs, they may be relatively low-paid. That is where family credit comes in. I am delighted to see my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) in his place, because family credit was brought in when he was Secretary of State for Social Services. Family credit addresses directly the problem of people in low-paid jobs whose family responsibilities are such that we cannot expect them to keep their families to a standard of living to be expected in a civilised society on their basic pay. Family credit, which now amounts to almost £2 billion a year, tops up their incomes.
One of the most depressing aspects of the Labour party's feeble attempts to defend its minimum wage policy is the way in which it systematically rubbishes family credit.
§ Mr. Willetts
The hon. Lady says that they do not, but Opposition spokesmen and the recent report from the Institute of Public Policy Research have said that family credit is an indiscriminate wage subsidy that unscrupulous employers use to hold down wages below the level at which they would otherwise be. We are told that the minimum wage will somehow achieve benefit savings by stopping that abuse of the benefit system by employers. That is one of the ways in which Labour claims that the minimum wage will save money.
The research shows how false that charge is. It shows that only 9 per cent. of employers are aware of the exact status of their employees and whether they would be able to claim family credit. We know that only 12 per cent. of those on family credit claim it for more than a year. Family credit is not an indiscriminate wage subsidy. It helps people starting back into work, perhaps in relatively low-paid jobs, who then move up to better-paid work. It goes with the grain of the labour market and is a much more effective way of helping people than the minimum wage.
Have Labour Members justified the minimum wage? They seem to imagine that employers will not mind paying the extra costs of employing someone with a minimum wage of £4 or £4.26 an hour. If employers will pay the higher wage, why does the Labour party also 951 advocate a £75-a-week tax rebate for employers who take unemployed people into work? Presumably Labour Members believe that pricing people into work is effective in those circumstances. That is why they advocate the rebate. If the rebate helps to price people into work, why will the minimum wage not price people out of work? They cannot have it both ways.
§ Mr. Bernard Jenkin
I invite my hon. Friend to shed a little further light on the exchanges between my right hon. Friend the Secretary of State and the hon. Member for Peckham (Ms Harman) on the distribution of the increase of social security between unemployment-related poverty and other programmes. Is it not evident that the hon. Member for Peckham is including any growth in family credit as a negative factor—as part of the unemployment-related problem—rather than as a positive programme which is helping people back into the jobs market?
§ Mr. Willetts
My hon. Friend makes a very good point. To regard family credit, which supports people in work, as a cost of unemployment is perverse, even by the extraordinary accounting conventions that the Labour party seems to use.
We know from research done by the Institute for Fiscal Studies how badly targeted a minimum wage would be. Many of the people who would benefit from the minimum wage live in relatively affluent households. According to the IFS research, the most affluent third of households would gain bigger increases in their incomes from the minimum wage than the poorest third. The Labour party complains about growing divisions in the country, but it advocates a minimum wage that would benefit the most affluent households more than the poorest households. That is extraordinary and perverse.
§ Mr. David Shaw
I can give my hon. Friend an example of how the minimum wage creates jobs. Calais, which is just 22 miles from Dover, has a minimum wage, and unemployment there is so bad—it is double the Dover level—that French people rush across the English channel to get jobs.
§ Mr. Willetts
My hon. Friend is right. The Labour party's policies—the minimum wage and the social chapter—derive from its belief that such issues are better managed on the continent, but the evidence shows that exactly the opposite is true. The Labour party wants to copy policies that have delivered 4.5 million unemployed in Germany, more than 3 million unemployed in France and more than 2 million unemployed in Italy. In this country, with Conservative policies, we have fewer than 2 million unemployed, and falling. The Labour party's policy would be an extraordinary trick to play on the British people.
§ Mr. Willetts
I cannot remember every year's unemployment figures since 1979 off the top of my head. It is the trend that is important, and we have a downward trend in unemployment. Our labour market reforms have made the falls possible and the policies that the Labour party advocates are driving up unemployment on the continent, so the message is clear.
952 The Labour party says that it believes in the importance of education and training. It claims that the windfall tax will be used to finance measures to invest more in education and training. However, its policies would have the opposite effect. If the minimum wage were introduced at £4 or £4.26 an hour, what would happen to someone who has worked hard for an NVQ, some GCSEs or an A-level and who earns £4.50 an hour, such as a senior cook in an hotel? Alongside such a person, the assistant might earn £3 an hour.
The minimum wage would have one of two effects. One is that the unskilled worker in the kitchen would receive the same pay and the skilled cook would want the differential reinstated—that is a good old-fashioned expression from the 1970s that would come back if we ever had a Labour Government. The restoration of differentials would lead to an old-fashioned increase in wage costs that would drive up unemployment. That is why a minimum wage would cost 800,000 jobs at £4 an hour and more than 1 million jobs at £4.26 an hour.
§ Mr. Keith Mans (Wyre)
My hon. Friend has given an excellent example of the effect of a minimum wage. It is relevant to the north-west, especially in Fylde where the tourism industry is strong. The introduction of a minimum wage would cause huge unemployment, because the newly trained would not get jobs. There would be fewer jobs because the tourism industry would be less viable. The young—for example, university students in Lancaster—would not be able to get jobs and learn a trade.
§ Mr. Willetts
My hon. Friend is right. Important British industries, such as the tourism industry, would be significantly threatened by a minimum wage.
§ Mr. Willetts
I shall give way in a moment. I first wish to impale the Labour party on the twin horns of a dilemma. The first horn is the restoration of differentials, which would cause a significant increase in unemployment—
§ Mr. Willetts
Yes, strikes would increase as people demanded their differentials. However, if the Labour party claims that the minimum wage would not cause wage increases, it would be telling people not to bother to obtain qualifications or to stay on at college to be trained, because they would not get any more money if they did so. That is the second horn of the dilemma, and it is extraordinary hypocrisy for the Labour party to talk about its support for education and training.
§ Mr. Booth
Before my hon. Friend leaves the subject of the minimum wage, I remind him that the chairman of the Confederation of British Industry recently gave specific examples of factories in the north-east in which at least 50 per cent. of the work force would have to be put out of work, if the minimum wage were introduced at the levels proposed by the Labour party, because the work would be done in the far east.
§ Mr. Willetts
I agree with my hon. Friend. The gains that have made us a paradise for inward investment, as Jacques Delors put it, would be lost if we imposed the same social costs as they have on the continent.
953 Strangely, the hon. Member for Peckham did not mention another Labour party policy that has implications for education and training, even though it is one of its few specific policies on social security. I refer to the means testing of child benefit for 16 to 18-year-olds, which would be an attack on people staying on at school to get an extra qualification. The electorate are entitled to know the details of the means test for child benefit for those children.
We are all familiar with the arguments about the Princess of Wales and other rich people getting child benefit, but the Labour party faces a practical problem: either it uses the means tests that already exist—the income support means test, for example—or it introduces a new one. In the first case, many families with modest incomes, for whom the decision of a child to stay on at school is financially significant, would lose child benefit. In the second case, the Labour party would have to spend large sums on a new means test, with a new administrative structure and new computer programmes, to take child benefit away from a relatively small section of the population. That is another policy that would do nothing to encourage education and training: it would have the opposite effect.
I accept that, when people get a job after a period of unemployment, or for the first time, they receive low pay; people do not necessarily start work on a high income. It is important to have an open and mobile society so that people can reasonably hope that, if they stick at their work, turn up at work punctually and get an extra qualification, they can look forward to promotion and rising income. All the evidence is that Great Britain is one of Europe's most successful societies in delivering rising incomes to people once they have their first foothold in the labour market.
According to a study by the Organisation for Economic Co-operation and Development, in Sweden, which is one of the models that the Labour party is supposed to admire, only 39 per cent. of under-25s enjoyed a significant increase in their incomes over a five-year period, whereas in Great Britain 62 per cent. of the same group enjoyed an increase in income. The poorest 10 per cent. in 1991 enjoyed, on average, a 25 per cent. increase in income in the following year.
Thanks to research commissioned by my right hon. Friend the Secretary of State for Social Security, we know that people who were in the bottom fifth of the earnings scale in 1979 enjoyed, over the following 15 years, an increase in their earnings of 42 per cent., much better than the 33 per cent. increase in incomes enjoyed by people in the top fifth of the earnings scale; thus, those who started in 1979 at the bottom of the earnings scale did better than average over the following 15 years.
All that paints a picture of a mobile and enterprising society. It is not a continental stakeholder society that believes in standardisation and regulation; it is a flexible labour market in which we aim to help people to get their first toehold in the labour market and, once they are there, through education, training and investment in their futures by their employers, to look forward to their incomes rising.
This country is seeing a transformation of the pensions regime. One change to which my right hon. Friend the Secretary of State referred—I cannot improve on what he 954 said—is the shift towards funded provision and the extraordinary boom—which, we hear today, has reached £650 billion—in funded pensions. What a contrast with the unfunded pensions liabilities that will hold down the public finances and the balance sheets of private companies on the continent.
Another change is happening in the world of pensions. It is a change from defined benefit pensions to defined contribution pensions. Old-style, defined benefit occupational pensions may have been fine in the days when one joined a company and stayed in the same firm for 40 years, but with a more mobile economy and a flexible labour market, fewer people live that sort of life. Once people moved and started shifting around, those occupational pensions often treated people extremely roughly. That is why many more people instead want defined contribution schemes, which allow them to see a pot of funding accumulating in proportion to and in accordance with the contributions being made.
I am aware that, for some people, the administrative costs of taking out a personal pension on its own have been too great, which is why it is important to encourage good personal pensions that are a sensible compromise between traditional, occupational defined benefit schemes and completely individualised personal pensions.
I welcome the fact that, only the other week, we had a further announcement of more liberalisation of the regime for group personal pensions. I hope that what we heard is not the end of the matter, because the biggest obstacle to encouraging the private provision in which all Conservative Members believe—private provision for pensions and private insurance against the vagaries of life—is the regulatory burden faced by people trying to provide such financial services. If we are serious about wanting more people to take out more insurance cover and personal pension cover, saving for their retirement or for a rainy day, we must make it possible for people in the City of London and our other great financial centres to market those products effectively.
There is nothing more depressing than talking to a banker who says that the bank has an extraordinary amount of money sitting in interest-bearing deposit accounts because it does not believe that its customers know or are confident about what financial instrument, savings package or insurance product they should buy. I am afraid that regulation in the City of London has got out of hand. We are in danger, through over-regulation, of making it excessively difficult for the people whom we want to encourage to sell financial services around the country to do so effectively. To have a company like the Prudential, for which I have the greatest respect, being fined by City regulators seems to send out exactly the wrong signal. No useful purpose is served by such excessive and heavy-handed regulation.
We can be sure, however, that the way forward is by encouraging personal saving, personal pensions and personal insurance, not by the route to which the hon. Member for Peckham briefly referred when she, somewhat hesitantly, talked about a stakeholder pension scheme. I wanted to hear more about stakeholder pensions. We know where those exist—in Australia, where they are industrywide and involve representatives of the trade unions and employers' bodies, who run them along old-style, corporatist lines.
955 If we are to have a modern economy for the 21st century, I should like to hear the Labour party define those industries. How are we to define an industry within which everybody is supposed to have an industrywide pension scheme? How would Richard Branson's business be defined if it were to participate in such a scheme? Will the Labour party go down the route recommended by the Chairman of the Social Security Select Committee, the hon. Member for Birkenhead (Mr. Field), who sadly is not with us today, but who has clearly advocated in the past that trade union representatives should sit on so-called "stakeholder corporations" to manage those pension funds? If I were an elector thinking about the future of my pension and I had a choice between backing funded pensions that had already accumulated £650 billion of savings or, alternatively, backing a stakeholder pension in an industrywide scheme, partly managed by trade union bosses, I know what I would want for my future. I would know how my pension would be most secure. When it comes to both jobs and pensions, the Conservative party clearly has the agenda for the 21st century.
§ Mr. Jeremy Corbyn (Islington, North)
I suppose that this debate is an annual discussion of the issues surrounding the welfare state and its funding. The Secretary of State seems to take great pride in announcing inflation-level increases in benefits and assuming that everything is all right. Clearly, when he is driven here in his chauffeur-driven car, he does not see people begging around tube stations in London. Nor does he see people waking up under soggy blankets alongside the Thames, or broken-down people desperate to find enough money from somebody to buy themselves a cup of tea during the day.
Since 1979, the Government have presided over an enormous shift of wealth from the poor to the rich, and over the degradation of many people in our society. Poverty blights the lives of about a quarter of this country's population. The latest figures show that between 13 million and 14 million people in Britain live in poverty. That is a sixth of Europe's poor—24 per cent. of the population. Worse still, 4.3 million children are living in poverty—and they call this a Government of success. In 1979, 1.4 million children were living in poverty. That figure was not good, but it is less than one third of the present level.
The wealth of the poorest tenth of the population has been reduced by about 18 per cent., whereas the richest tenth are roughly two thirds better off than when the Tory Government were elected. We are now presiding over a massive shift of wealth from the very poor to the very rich. People in the middle have not felt more insecure or unhappy since before the second world war, because they see the destruction of services all around them. Taxes have regularly been reduced to make the rich better off, so services for the rest of the population have had to be severely cut.
If the 1978–79 income tax regime were in place today, a further £31.4 billion would be available. The top 10 per cent. of taxpayers have enjoyed a reduction in their 956 income tax; indeed, they have received 48 per cent. of total tax cuts. We must seriously examine the issue of distribution between rich and poor within our society.
§ Mr. Patrick Nicholls (Teignbridge)
I am grateful to the hon. Gentleman for having the courage to bring socialism into the Chamber, when it has become so profoundly unpopular. How does he explain the fact that, despite his belief that there would be much more money available if the rich were taxed more—based, presumably, on the assumption that they would simply stay around to be taxed more—Treasury figures, which were first asked for by the hon. Member for Birkenhead (Mr. Field), show conclusively that, when we decrease tax rates on the rich, the rich as a whole end up paying more to the total tax take, therefore making a bigger contribution to helping the people whom the hon. Gentleman wants to help? Is not his problem the fact that he wants to hurt the rich more than he wants to help the poor?
§ Mr. Corbyn
I am not sure from which university one graduates with a degree in gobbledegook economics; perhaps the hon. Gentleman will tell us later. The simple fact is that his party, his Government and his philosophy aim to increase the power of the rich by reducing their tax burden. The knock-on effect is to cut public expenditure for the rest of society. That is why no houses are being built, hospitals are being closed, class sizes have increased and people are begging on the streets.
Visitors to this country who have not been here for 10 or 15 years find the situation shocking. They ask me, "Whatever has happened in London? Why are all these people homeless? Where have all these beggars come from?"
§ Mr. Corbyn
Witty remarks by people such as the hon. Member for Dover (Mr. Shaw), who could not give a fig for the poor anyway, merely discredit him and his party even more, and show them up as what people know them to be and what they have always been—the party of division between rich and poor.
§ Mr. Corbyn
The answer is a society seriously interested in caring for all its population, not just for those who can make a lot of money out of exploiting other people.
§ Mr. Corbyn
No, not a second time, because I want to make a little progress.
Poverty affects every aspect of people's lives. In my constituency, registered unemployment is about 22 per cent. On some estates it is probably 50 per cent., and for young black people it is much higher. When we talk about life to people on income support who are trying to bring up children, we start to see an awful lot of other things.
Constant unemployment means low income for the household, no extras for the kids, poor-quality furniture, lack of entertainment and a pretty miserable existence. It means poor-quality food, undernourished children, short 957 life expectancies and a constant burden on the health service, because, for reasons that we understand, poor people tend to be ill more often than rich people.
§ Mr. Shaw
I hope that the hon. Gentleman understands that there are Conservative Members, including me, who genuinely want to try to create more jobs in the economy. But surely he must realise that in his constituency there is no incentive for businesses and employers to move in. All over London, Labour boroughs have discouraged employers and moved them out, replacing them with high-rise blocks of flats into which they put benefit claimant after benefit claimant, because they want the Labour votes. Labour boroughs have gerrymandered instead of creating jobs and attracting employment into their areas.
§ Mr. Corbyn
My borough has a serious housing problem, which will be solved only by a programme of building and buying homes with affordable rents. The way in which the housing benefit system has been manipulated by the Tory Government over the past 15 years to subsidise extortionate rents charged by private landlords is outrageous.
I can give an example. Of two identical houses side by side, one is rented from the council at a weekly rent of about £55, which is paid by housing benefit because the family are unemployed. The family next door, who are also unemployed, rent privately what used to be a council home for £180 per week. That, too, is paid by housing benefit. Where is the sense in spending that public money on housing benefit, just to please a private landlord?
The council wants to solve the housing problem in the borough. I want to solve it, too. That can be done partly by better management of the property that we have, but, crucially, it can be done by the construction of new homes with affordable rents.
The housing benefit bill in this country is enormous. It does not help the individuals who receive it, because it was designed to help landlords who have benefited from deregulation.
§ Mr. Robert G. Hughes
The hon. Gentleman is making an important point. Of course I acknowledge that there are problems with housing benefit, but when he cited his example he made no allowance for debt charges on the house that is still in council ownership. Surely if one does that, not necessarily for that particular house but overall, it changes the figures substantially. The debt on a house that has been sold will have been paid off, because that is how the regulations work.
§ Mr. Corbyn
I realise that it is some time since the hon. Gentleman was a local councillor, and he may not have heard that the Department of the Environment has ring-fenced housing revenue accounts. The argument that council tenants are subsidised by the rest of the population is simply untrue. The issue is that a great deal of money is being made by private landlords for doing precisely nothing—and they are being subsidised by the state to do nothing. That is an abuse of public expenditure.
§ Mr. Hughes
We have had the joke, but what about the serious answer? Of course I know that housing revenue 958 accounts are ring-fenced; I served on the Standing Committee on the legislation that brought that about, and I understand it well. The point is that there is still a debt charge on the house that the council has not sold. That has to be taken into account in the figures that the hon. Gentleman puts to the House. I realise that he is making a serious point, but the contrast between the two figures is not nearly as marked as he suggests.
§ Mr. Corbyn
The contrast is exactly what I said it was; I gave the figures. The ring fencing of the housing revenue account means that it has to bear the cost of debt charges on money borrowed over 60 years, as most local authority loans are, whereas a mortgage is usually taken out over 20, 25 or 30 years. That is the difference.
Public investment in good-quality housing is good for the people who live in it, and good for public expenditure as a whole. Spending money on housing benefit to prop up private landlords is not good. It is a crass waste of money, as the Government are at last beginning to recognise.
§ Mr. Andrew Mitchell
I always enjoy the hon. Gentleman's speeches, and I have great respect for the integrity that he brings to his side of the debate, especially as it makes his hon. Friends on the Front Bench squirm. Will he make something clear to the House? He has said that extra public expenditure is needed. Will he confirm that he is entirely happy with the Labour party's policy of living within the Government's overall spending totals, in the unlikely event of Labour ever being elected?
§ Mr. Corbyn
I have no idea, any more than any other Opposition Member, what the books will look like when we have won the general election on 1 May. But rest assured that I shall be here, campaigning for better housing for the poor in this country. Whether the Minister will be here as well is for the voters of Gedling to decide.
I shall now move on to the issue of health, and the link between poor health and poverty. The Department of Health now acknowledges that life expectancy for the poorest in our society has worsened. For some very poor people, it is almost as bad as it was in the 1940s.
There have been some interesting articles on the subject in the British Medical Journal. Infant mortality statistics show that death rates for first babies born into the poorest social class, class V, are 70 per cent. higher than in social class I, and that babies born to unemployed parents are almost twice as likely to die as those born to the wealthiest class.
The public health officer's report for Camden and Islington makes chilling reading. Infant mortality, life expectancy and the incidence of notifiable diseases are much worse than the national average. What is worse, the suicide rate for men has risen dramatically with the rise in unemployment and poverty in our society. There is a downside to the idea that all one needs to do is to give more money to the rich and let it trickle down to the poor. There is an increase in absolute poverty and deprivation.
The meanness of the Secretary of State's policy is apparent in many areas, one of which is the treatment of asylum seekers. An extremely small amount, compared with the Department's total budget, used to be spent on supporting people who were quite properly conducting an 959 appeal against the refusal of benefits because they were asylum seekers. They lost those benefits and are living in desperate poverty.
The National Assistance Act 1948 ruling by the court means that local authorities have to support people who face destitution. I welcome that ruling, because it is one way of getting some food into the mouths of desperately hungry people who are fleeing from fear and oppression in another society, but by rights the Department of Social Security, not local authorities, should bear the cost.
Benefit rights for asylum seekers should be fully restored, so that the spirit of the 1948 legislation, to remove the fear of starvation, poverty and homelessness from everyone in our society, can be seen to be a reality. I hope that the Secretary of State will tell us that he is prepared to restore those rights.
§ Mr. Stephen
Does the hon. Gentleman accept that a genuine asylum seeker who claims asylum when he arrives does indeed receive benefits in the time that elapses before his case is decided, but that people who prove to an immigration officer that they are coming here as tourists or students, or on business, that they have tickets to get home at the end of their stay, and that they have the means to support themselves while here, do not get benefits, and nor should they?
§ Mr. Corbyn
The hon. Gentleman has slightly misunderstood the rules. If people arrive here and claim asylum, not at the port of entry but subsequently, they have difficulty in getting benefits. If they have applied for asylum and it has been denied, and they are quite properly pursuing an appeal, which is their right, they have no access to benefits while the appeal is being pursued, which can last for up to three years.
We have a large number of absolutely destitute people in our society because the Government are playing the racist card against people who are victims of terrible situations in other societies. Last week, some asylum seekers from the middle east described to me the torture, pain, horror and terror that they had experienced at the hands of the regime from which they had fled. Their asylum applications had been turned down, they had no benefits, and they were living on gifts from people in local churches or—
§ Mr. Corbyn
The hon. Gentleman says from a sedentary position that they were not genuine asylum seekers, but how on earth can he say that? He did not interview them, and he does not know them.
§ Mr. Corbyn
Hang on a minute.
The account of the torture of those people and their families deserves at least to be listened to and given serious consideration. They have quite properly exercised their right to appeal against the decision, but the problem is that they get no benefits while the appeal is being processed, which may take a very long time. It is 960 disgraceful. It is equally disgraceful that people are on hunger strike in British prisons, yet the Home Office apparently could not give a sod.
§ Mr. Corbyn
No, I am not going to give way any more. I shall move on, because I know that other hon. Members want to speak in this debate, which is not only about asylum seekers.
The hon. Member for Havant (Mr. Willetts) and the Secretary of State spoke about pensions and the so-called pension reform that is being paraded around by the Government and any number of right-wing think tanks as a great success. The problem is that in 1980 the Government broke the link of the annual uprating of pensions with earnings, and switched it to prices.
In the late 1970s, pensions had been increasing as a proportion of average earnings and had reached about 24 per cent. by 1980; today, the figure is down to 13 per cent. and falling. Indeed, one of the Secretary of State's predecessors said that at this rate it would eventually become nugatory.
Many in the Conservative party think that it is right to cut the value of the state earnings-related pension scheme, to create an enormous market for private pensions, and to ignore the consequences, which are that many elderly people are living in desperate poverty with no access to anything other than the state pension and state benefits, many of which they do not claim for various reasons, and that people in middle age who are in work—especially if they change jobs frequently or have occasional periods of unemployment—cannot buy into any kind of occupational scheme. They could possibly buy into a private scheme, but the cost would be phenomenal.
Many people heading for retirement age have no security whatever, other than the state pension and the state benefits system. We are facing an increase in poverty among the elderly in 10 to 15 years' time, rather than the majority being better off, as the Government like to suggest.
I believe passionately in a universal welfare state, and I believe that state pensions should be linked to average earnings and should be sufficient to live on, as they are in most European countries. The notion that the social security system should provide both a safety net and a marketplace for the private pensions industry seems entirely wrong to me.
I support the principle of universal benefits, for several reasons. They are effective, as child benefit has demonstrated, and they are cheap to administer. For example, in 1994–95 administration expenditure on the means-tested targeted directive for the social fund—if ever there was a Tory measure, that was it—was £209 million, out of a total budget of £451 million. How on earth can spending 40 per cent. of the value of the entire benefit merely on making sure that people do not get it be justified?
That is the reality: we are spending huge amounts on making sure that people do not get their benefits. We must get away from the mentality of spending millions of pounds on administration to stop people getting benefits, when we see poverty and misery increasing all around us.
The welfare state is crucial and will dominate political debate in the coming years both here and throughout Europe. I am entirely familiar with the argument being 961 made around Europe: we must cut corporate taxation, so benefits have to be cut to allow corporations to compete with the low-wage economies of the far east. That is the road to ruin and disaster. We should argue the case instead for a high level of provision under a universal benefit system.
It has been clearly demonstrated that if we continue on the present road we will increase the divisions in our society and increase poverty, and it will do nobody any good at all. To see what happens in societies that do not have welfare state provisions such as those that this country was once proud of, one need only look at the way in which the poor are treated in the worst states in the United States and in emergent industrial economies with a limited, if not almost non-existent, welfare state. The social division, misery and unemployment are apparent. It is time for us to change course and to consider protecting and, indeed, extending the welfare state.
Much has been made of employment. The best way of dealing with employment problems and to recognise the insecurity faced by people in work is to introduce a national minimum wage at a decent level. It is wrong that many people are forced by the jobseeker's allowance to take jobs at £1.50 or £2 an hour. If they refuse to do so, they may lose all benefits.
For example, a family on housing benefit and income support living in a private rented flat in London could pay as much as £100 to £150 a week for their flat, and their income support could be £60 or £70 a week depending on their circumstances. If a member of the family refuses a job—however low the wages—he loses housing benefit and other benefits. If he takes the job, the family will lose housing benefit just the same, and many people will be worse off in disgraceful low-paid jobs than they would be on benefit. The use of family credit as a prop to low wages and poor-quality employers is not the right way forward. It is time to change course and to get rid of the jobseeker's allowance. Instead, we must look to people's needs and the elimination of poverty within our society.
I recognise that time is moving on, and my final point deals with the way in which young people are treated in our society. Successive Secretaries of State for Social Security have been almost obsessed with cutting or restricting benefits for young people under 25. The most important change to the benefit system was the Social Security Act 1986, which came into effect in 1988 and was introduced by the right hon. Member for Sutton Coldfield (Sir N. Fowler) with the support of the right hon. Member for Huntingdon (Mr. Major), who is now the Prime Minister.
The main feature of the Act was an age-related system of benefit entitlement. Personal allowances to cover food, bills and other living expenses were generally no longer to be based on need, but instead on age. Young people under 25 received 80 per cent. of the income support that those aged over 25 could receive, while young people aged under 18 were eligible for only 60 per cent. I do not think that we should be treating young people in that way. Changes to board and lodging payments resulted in many people being forced to leave home, and led to them being worse off. The changes have been a major source of homelessness, and all that goes with it.
962 Young people in London—having survived on less than £20 a week thanks to cuts in the housing benefit system—are living in a state of desperation; not for them expensive clothes, videos and holidays. It is time we changed course. I find it very depressing that the Secretary of State can claim credit for his administration of a social security system that costs a fortune to stop people getting benefits, while poverty, unemployment, misery, bad housing, bad health and shorter life expectancy among the poor increase. We should be more concerned with the needs of the poor than with the apparent threats of the very rich to leave this country if they are taxed at a level that they could well afford.
§ Mr. Hartley Booth (Finchley)
The speech of the hon. Member for Islington, North (Mr. Corbyn) brought to mind the whole purpose of debates in this place. He and I last sat together in this Chamber agreeing about the need to deal with a particular group of handicapped children, and I am aware of his concern in that matter, but I know, and he knows perfectly well, that, politically, we disagree vehemently. I hope that the Gentleman will be fair and tell his local authority that, if it wants to help the unemployed and the homeless, it should deal with the 1,000 or more empty properties in the borough. Also, if he wishes to be fair about the minimum wage, he should accept that the freedom we have to pay the going market rate is a safety net in itself.
I can give the hon. Gentlemen a local example from north-east London. In 1983, a group of 18 people from Bangladesh were employed in Hackney, where I had the privilege of being a candidate. The case was well known to me at that time. These 18 people from Bangladesh had had an income there of 5 rupees a day, but were being paid in Hackney what the local Labour council believed to be derisory wages. Those 18 people were thrilled to have wages that were 10 times greater than those that they received in Bangladesh. However, they were all put out of work by local regulations which were the basis of the thoughts of the hon. Member for Islington, North. I hope that he will reflect on that—although he will not perhaps agree with me in the end.
On the first day I came to this place, I was told that the worst thing I could do was to think. I have to say that, during the speech of the hon. Member for Peckham (Ms Harman), I was thinking deeply about her extraordinary rapier thrust early on, that one in five of our people were unemployed. As one knows that there are 23 million were employed people in this country, she has taken the figure of 4 million to be the total number unemployed. She has used the labour force survey figures—not the Government's claimant count or the International Labour Organisation figures, which are slightly higher.
If one believes that more than 4 million people are unemployed, several questions arise which have social security implications and which need answers. If Labour comes to power, will it immediately say that twice the supposed number of people are unemployed? Would it admit that its rhetoric during debates before the election was true? Would it say that 4 million people were unemployed? Would it pay the 2 million people who do not receive unemployment benefit, and who do not receive any of the £8.6 billion spent on unemployment benefit last year? Will that figure be added to the unemployment bill? During the election campaign, we 963 should say loudly that the figures used by the hon. Lady include the sick, prisoners and others who are not available for work but who, of course, would like to have work. That figure is bogus and should not be used.
§ Mr. Henry McLeish (Fife, Central)
I was reluctant to rise, but I feel I must defend my hon. Friend the Member for Peckham (Ms Harman). She said that one in five non-pensioner households had no one working in that household. She did not talk about 4 million, and the hon. Gentleman cannot deduce that figure from her comments. I raise this simply by way of clarification, so that, if he extends his remarks, he can start from the right premise.
§ Mr. Booth
I am grateful for that, but my point is made. Labour Members frequently refer to "4 million unemployed"—that is Labour's official stance. There are cost implications attached to such a statement and they cannot just make it.
I came here not to cross swords with either the hon. Member for Islington, North or the hon. Member for Peckham, but to think more widely about social security. I happen to believe that social security is based on a generalisation and, like all generalisations, it is part mythical. The generalisation is that the money to buy social services and to pay benefits is the source itself of social security. That is the handout mythology. Yes, we pay a lot of money and I hope to develop my argument to show how the amount has increased since 1948–49.
I wish to advance today an alternative principle—that we should have not a handout, but a hand-up philosophy. [HON. MEMBERS: "Ah!"] If Labour Front Benchers are in accord with this view, so be it. It may well be that there are like minds across the Chamber, but we do not need a handout society any more.
Labour Members often criticise and berate our views on individualism, saying that the individualism that we hold to be an important lever is nothing but selfishness. The Labour party may now share many of our Front-Bench principles, but if it were ever in government—God help us—and tried to implement our policies and, as the weeks went by, had to face the daily problems of government, it would fall back on its original principles. It would not respect the individual because it rejects that view. It believes in state solutions—the sort of solutions that are based on planning and entirely reject the individual contribution. Our social security system should be based on the individual and his dignity. It should also be based on the belief that an individual is responsible to his neighbour—the second commandment.
There is a great need for new ideas. I was moved by a visit to Halifax when I was researching urban regeneration policies. I met a man who told me, "I came from the poorest house I knew of in Lancashire during my childhood. My parents were never employed and we were so poor that we only had a skylight in one room of the accommodation and there was no carpet on the floor. We were grindingly poor, but I did not go out and steal and my parents did not teach me to go to the social security, because there was none at the time. They taught me to see life in terms of honest opportunities." Having made a fortune, he was giving it back. He had bought the derelict Crossley mill and split it up into several hundred units for young, start-up businesses.
At the mill, I met a 22-year-old man who had just bought his second printer. He had a little printing works and was employing his father, who had been unemployed 964 for years, and was taking on his grandfather, who had been unemployed for a generation, that very week. The one thing that he had—it was not money, although he had been able to borrow the money for the machine, but he did not have social security benefits—was that self-same idea. He saw life in terms of opportunity. He was a man changed from within. My argument is that our social security system is not just about handing out money blindly, but about getting ideas to motivate people.
Another person who is seminal to my argument was a 28-year-old lady I met in Bristol, who, on the quotient of disabilities, had every kind of problem. She was from an ethnic background, coming from the Caribbean, a single mother and slightly disabled, and had been unemployed for eight years, but she had had an idea. Her one skill was cleaning and she thought that she could get a contract to clean buildings. She went to Full Employ—incidentally, I hope that that organisation will regenerate itself—which taught her how to start a small business. I met her eight months later, when she was employing two people and cleaning two tower blocks. That is the sort of regeneration of the individual from inside—outside the social security system—that I want. I hope that those two examples make my point adequately.
How do we progress? It is no use the Government preaching, and it is no use talking. We need action in the form of legislation. Legislation cannot tell people what ideas to think, but laws can promote conduct, and conduct can change culture and with that comes the flow of ideas. I shall give another example to prove the point that laws and the changes of laws dramatically affect culture.
I had the privilege of speaking at the Konrad Adenauer Stiftung in Hanover not so long ago, where I met the Prime Minister of Saxony. He told me that there had been a huge flow of his cousins—using the term broadly to mean people from east Germany—into Saxony in the preceding year and that they had been poverty-stricken. He had told his burgermeisters, "We have to help these people." They did. They poured out money for people from east Germany—jobs, money, homes and all the rest.
He said that now those same burgermeisters are waiting outside his room saying, "Look, we cannot use these cousins from the east"—the same race and group, the Germans. They were saying, "They have a problem. They come to work late in the morning, go home early in the afternoon and ask for twice or three times the welfare benefits." We have to look for radical reform in the next generation inside the individual and inside the dependency culture that is created by too many handouts.
I gave an example from abroad, but what about at home? In the past months, unemployment figures have fallen. The Department for Education and Employment has been advised that a large number of people—we do not know how many—who are no longer claiming benefit are being flushed out of the system because it has been discovered that they were claiming wrongly. In other words, fraud is being revealed. That is perhaps an example—we hope so of a sensible reform introduced by the Government here, which is changing the culture of those people for the better. It is so much better to be doing real work than to be doing fraudulent work or diddling the system.
I said that I would return to the figures, and I shall do so briefly. I have not brought as many figures to the Chamber as did my hon. Friend the Member for Havant (Mr. Willetts), but they are fascinating. In 1948–49, 965 £0.6 billion was spent on social security, or 5 per cent. of gross domestic product. By 1979, that figure had grown to £16.9 billion, or nearly double the percentage of GDP at 9.7 per cent. By this year, it had grown to £93.3 billion, which is 13.2 per cent. of GDP. There has been a huge rise in the past 20 years: both Front-Bench spokesmen have agreed on that. Several policy thrusts must result from all this. We must target what we spend.
My right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) is present and may well intervene. In his 1987 reforms, he produced an excellent policy initiative of targeting those in most need. However, we also have to encourage individual dignity as a policy principle and we also need to spend less. We cannot afford to spend so much.
How do we do all that? We have to limit some of the demand-led amounts. We have to tell people that they are entitled to benefit, but that there is a limit. We have to help them by giving them ideas and training, even though that idea has been rejected, or at least, qualified. Training, education and new schools are important. We have to ensure that the sort of benefits that we give people fit what we can afford.
In some areas, benefits should be extended, for example for those with special needs. We get people through to the age of 18, but then they often fall off the end of the cliff. We need to attend to the adult employment of those people who, sadly, cannot enter the mainstream of employment. In that area, we must help voluntary organisations much more proactively.
I am guided by the view that no one is without some talent. We must tailor what we can do to the individual. The Government have an astonishing record on spending, have made an admirable effort to tackle fraud, and have achieved an excellent performance in targeting those most in need. They should now recognise that the dignity of the individual is enhanced not by giving people money but by seeking new ways and ideas to enhance people's talents.
The Government have advanced with foresight on private pension provision. I hope that that foresight, which is a quality peculiar to our Front-Bench team, will go further. The hon. Member for Peckham suggested that we had scored a damp double whammy. That is wrong; we have won a triple trophy. We have not only succeeded in giving greater help to the needy but have more people in work receiving more spending money for their pockets. We have the best peacetime Administration of the past 100 years.
§ Ms Liz Lynne (Rochdale)
There have been numerous changes to the social security system in recent years. While some have been minor, our social security system has taken a turn for the worse. Its administration has been centralised and become remote.
Benefit claimants face complicated new rules with, at times, little help to cope with them. A recent report by the National Association of Citizens Advice Bureaux called "Short Changed" highlights the harsh reality of some of the Department of Social Security changes. The drive for savings pays no attention to the needs of claimants. That is borne out by the cut in outreach services, which have 966 been withdrawn in some areas. The national free benefits advice line has been closed and smaller benefit offices have been shut down.
Citizens advice bureaux say that contacting benefit offices by telephone is getting worse. Hon. Members have to contact the Benefits Agency on behalf of their constituents and find it difficult to get through and get answers to their queries about new benefits. Written communications are poor; in sonic cases, they seem to be getting poorer. In several cases in which I have written to the Benefits Agency on behalf of constituents, it has taken too long for me to get a reply. Constituents become worried.
People get letters telling them that they are to be denied benefits. They do not know why and they try to sort it out themselves at a benefit office, if they are lucky and have one to go to. Some claimants do not have one and will not be able to sort things out, so they come to my surgery desperate for help. They do not have any benefit to live on. More and more people face that predicament.
Because of staff shortages, many benefit offices tell people that they must go to an advice agency to get help filling the forms. They say, "We cannot help you; we do not have the time." Advice agencies such as citizens advice bureaux do not have the time or resources, either. They are overstretched. They do not get more money because so many changes have been brought in: incapacity benefit, jobseeker's allowance and the changes in forms and other difficulties. People turn up at advice bureaux that do not have the staff to cope with them. It is increasingly difficult for all advice agencies, because of cuts in Benefits Agency staff.
Claimants need face-to-face contact with someone at a benefit office. Between April and October 1996. 17 Benefits Agency public caller offices were closed and two had their hours reduced. Will the Minister say whether it is true that 17 more are to close in the next six months? If so, that is worrying for face-to-face contact with claimants.
It has been suggested that people could use the telephone if offices are closed. However, many people do not have telephones: 11 per cent. of claimants have no telephone at home. Such people have to go to telephone boxes. If they live in a rural area, there may be only one box. I know from my experience of trying to get through and waiting on the end of the telephone, how difficult it is. When those people wait, they have to put money in all the time. Often, there will be someone outside waiting. If a claimant is holding the line waiting for an answer to a query and not speaking, the person outside will tap on the door, wondering what is happening. It is not fair that offices should close when such claimants need face-to-face contact.
Claimants need explanations of letters and of how to fill in forms. It is difficult to do that without a benefit office to go to. There are also problems for people whose first language is not English. They need face-to-face contact, as do people with hearing or communication difficulties. It is difficult for people with hearing problems to get advice and help. They need a benefit office close by. They do not want to have to travel to another one simply because theirs has been shut. Lipreading is often the only way that such people can understand their claims.
Along with the changes and the closures of benefit offices, we have had harsh changes to social security tribunals. It is less likely that people will attend, or be 967 represented at, hearings. Oral hearings are held now only if requested by a claimant within 10 days. Before the changes, I understand that people were told that they were entitled to an oral hearing. Now they must somehow find out that they are entitled and ask for one within 10 days.
The minimum period of notice of hearings has been cut from 10 days to seven. That is five working days. The seven days includes the weekend. That will be difficult for advice agencies. In many cases, they will not have time to prepare a case to take to a tribunal. It is therefore less likely that the decision will be overturned—and 44 per cent. of benefit cases that go to tribunals are won on appeal. It is unfair that a change in the system means that people cannot get oral hearings because they do not have time to prepare their appeals. What will happen in future to such people? We must address that problem.
Appeals are a cost to the DSS budget. Why does it not get it right in the first place? Why does it not ensure that enough staff are available, that forms are filled in correctly, and that it gets the adjudication right in the first place and so does not have to go to appeal? The appeal system costs a great deal of money.
In debating the regulations, we must, of course. consider benefit uprating, but we must also consider the hoops through which people must jump to get benefits in the first place. To name one group of people, the social security system fails pensioners: 1 million pensioners do not claim the income-related benefits to which they are entitled. I have often said in the House, and I say it again, that we need a publicity campaign to ensure that pensioners who are entitled to income-related benefits get them.
A few months ago, an old lady on basic state pension came to my advice surgery to thank me. She said, "I don't want to worry you, dear, but I am finding it difficult to manage and I don't know how to cope any more." I asked her what benefits she was receiving and she told me that she was getting her pension. I asked her what she meant by that, and she said that she was receiving the basic state pension that everyone receives. I asked her whether she was receiving income support or housing benefit; she was not getting anything, because she did not know that she had to claim for those benefits. She was paying for her rent and all her other expenses out of the basic state pension. It is no wonder that she could not manage; she had roughly £6 a week to live on after she had paid all her bills. She had been managing on that for years, because she did not know that she was entitled to those benefits.
That case was not an isolated incident. Several of my constituents who are pensioners come to see me and I tell them what they are entitled to—whether it is a war pension or something else. They suddenly realise that they might be able to live at long last—perhaps not as well as one would have hoped, but in much better conditions than they were living in.
We need a publicity campaign. The Government must mount a campaign to tell pensioners what they are entitled to. I know that the Government say that that is a waste of money and that they cannot afford it, but they have already wasted £180,000 on advertising the Child Support Agency in the Greater Manchester area. The advertisement was unnecessary and inaccurate. On 12 February, the Advertising Standards Authority ruled that the advertisement was wrong. It reads: 968Dear Parent,Even after you pay maintenance you will always have more income if you are in work. Please call.The advertisement gives a Manchester number, but the advertisement is incorrect and the ASA has asked the Government not to make the claim again. If the ASA is asking the Government not to use the advertisement again, there must be something desperately wrong with it. If the Government can find £180,000 for a campaign in Greater Manchester alone, why cannot they find the money for a campaign to tell pensioners which income-related benefits they are entitled to? It is disgraceful.
These orders and regulations are not controversial and I know that we shall not divide the House on them tonight, but the ones introduced in the Budget were controversial. They included harsh new housing benefit rules and rules stating that people under 60 would have to find multiple-occupancy accommodation, or its equivalent in cost—a bed-sit. In future, if a 58-year-old is made redundant, he or she might have to leave the house in which they have lived all their life. Aged 58, that person will suddenly be told that, because he or she is a single person, they cannot live in that house any more and must move out because of the housing benefit changes. If the rent of the house is more than the multi-occupancy rent, that person will be asked to move out and find something cheaper. If they stay in the house, they will have to try to meet the cost from their income support.
§ Ms Lynne
The Minister nods his head and says, "Thank you." But the income support level is a basic subsistence level; claimants will not be able to afford a little extra to top up their rent. In some cases, claimants might need a lot of extra money to top up their rent.
The Government encouraged landlords to convert their houses into self-contained flats. What will the Government do now? Will they go to those same landlords and say, "Sony, we made a mistake. You must now reconvert your property from self-contained accommodation to a property with a bathroom and a kitchen that people must share"? Many people cannot share; many people are incapable of sharing. I know that the Minister is well aware of the fact that people with mental health problems will have great difficulty. I know that the proposal is currently before the Social Security Advisory Committee.
I sincerely hope that the Minister will decide that the rule is unfair and will penalise many people whom he would not want to penalise. I know that he is concerned about elderly people, disabled people and those with mental health problems. I hope that he will use his good offices to try to change those draconian rules.
We have heard about the changes for lone parents. The Social Security Advisory Committee is considering those changes. In April 1998, one-parent benefit and lone-parent premium will no longer be available for new claimants. Some 46 per cent. of lone parents are on an income of below £100 a week. One-parent benefit is an in-work benefit; it encourages people to find work. Surely we want to encourage people back to work. Family credit helps, but low-income benefit for one-parent families is important. It is a stepping stone on the road to employment and, in the long term, it cuts the social 969 security bill. I am worried about the children. We are talking about taking money away from single parents, and the children will inevitably suffer—they will go deeper into poverty.
I shall now say a few words about the regulations dealing with incapacity benefit. I welcome the fact that exempt income is to rise from £45.50 to £46.50 for voluntary or therapeutic work of under 16 hours a week. I am, however, afraid that many people do not like to take such work because they are not sure of the rules and of what exactly is meant by therapeutic or voluntary work. They are desperately afraid that, if they take any sort of work, their benefits might be cut. The rules must be clarified, so that people are encouraged to take therapeutic work. Many people with ill health or disability want to get back into the work force and take up paid work.
Our benefits system does not adequately address the problem of people with partial incapacity. Last year, I asked a written parliamentary question about the percentage of those claiming incapacity benefit who were doing limited therapeutic or voluntary work. I was told by the Government that the figure was not available, as the cost of providing it was excessive. I do not see why that figure is not available. Surely, if we want to get people back to work—starting with therapeutic work—and cut the social security bill, we should find out how many were doing therapeutic work; we should target them and help them back into full-time work.
I am glad that the Government have backed down on some of their proposals for war pensioners—I do not know why they introduced those proposals in the first place. The Government still remain extremely stubborn about people with hearing loss. The Royal National Institute for the Deaf has said that the Government's proposals will mean that the war disablement pension is awarded only if there is an immediate hearing loss equivalent to that of someone in his 80s. If someone has a 50 decibel hearing loss, he will receive the award. But someone whose hearing loss is less than, for example, 45 decibels will still not receive the war pension—even if, when he gets older, his hearing deteriorates to 55 decibels. I believe that such people are entitled to it.
The Government said that they had new medical evidence. However, in a statement in the other place on 4 February 1997, the Minister of State, Lord Mackay of Ardbrecknish, said:My Lords, the open letter which I received from the medical experts concentrated very much on the question of my assertion that there had been a change in medical opinion. As I have explained, I now fully accept that their current view has been held for a long time."—[Official Report. House of Lords, 4 February 1997; Vol. 577, c. 1529.]Fortunately, the Minister in the other place changed his mind and acknowledged that the opinion had been held for a long time. If that is so and if the Government are now saying that no new medical evidence has been brought forward, why have they not changed their mind on awarding war pensions to people with hearing loss? If there is no sign of new medical evidence, it would appear that the Government are simply being stubborn and dogmatic on the issue. These people have fought and have given their health for this country and they should be compensated by this country. It is just another example of the way in which the social security system is taking a turn for the worse.
§ Mr. Patrick Nicholls (Teignbridge)
I did not agree with everything said by the hon. Member for Rochdale (Ms Lynne), which probably comes as a relief to her as it does to me, but she did highlight one especially important area to which I shall return—the position of those who are either on a retirement pension without any other form of income, or on a retirement pension plus income support.
As the debate unfolded, I was struck by its unusual quality. At one stage—much though I love this place—I thought that I would be able to go home early. I came in expecting the cut and thrust of social security debates of past years, but, lo and behold, we were greeted with an assurance at the outset—just to emphasise that the Conservatives set the policy and Labour then adopts it—that there would be no Division. I thought, "That's okay—presumably, we'll all go home early," but it has not worked out that way, and I have a feeling that it will not.
The result is that, instead of having to defend the Conservative position—it has already been conceded—it is legitimate for me to spend a moment or two examining, not the alternatives—it is accepted that there is no alternative to the Conservatives—but the glosses that have been added by Opposition Members.
That is why I so enjoyed the contribution of the hon. Member for Islington, North (Mr. Corbyn), and I say that without a trace of sarcasm. I debated with the hon. Gentleman over several years when we were both members of the Select Committee on Social Security—he thinks I am barking and I know that he is, but the one thing that one can say about him is that he is a man of principle. He brings the unfashionable notion of socialism into the Chamber and puts forward a prospectus for a way of life which, although completely and utterly nuts, is at least consistent. I suspect that, if we looked at his election addresses from every election that he has ever fought, we would see a man who is completely consistent.
It is worth while spending a few moments considering the hon. Gentleman's speech, because it was one of substance—no one would accuse the hon. Member for Peckham (Ms Harman) of having made a speech of substance, on this or any other occasion. His speech had some elements that caused some Labour Members to start twitching—it was like hearing those tunes of glory and sounds of battle in which Labour Members once passionately believed, but which have been Mandelsoned out of them.
The hon. Gentleman's key phrase was a statement that is breathtakingly wrong, but sometimes even Conservative Members let such remarks go by the board—presumably because there was so much wrong in the hon. Gentleman's speech that it was difficult to pick out a specific point. The highlight came when he said that the Conservative Government had given money to the rich. The silence among Opposition Members says something about Labour's house training, because when I have used that line in previous years, they have responded, "Oh, but you do give money to the rich." They do not do that now, having been properly stalinised.
The Conservative Government have never given anything to the rich. What they have done—and not before time—is allow the rich to keep more of their own money. When trying to work out how to look after the poorest members of our society, we must never forget 971 that, when a taxpayer earns his money legally, he owns that money 100 per cent. and every single I per cent. deduction taken by the state takes away his money.
The idea that we are in some way giving to the rich—still a popular idea on the Labour Benches—does not accord with the truth. When I said that to the hon. Gentleman, his response was untypical—he had to use the elitist line, "I don't know what university you went to." I suppose that is what happens when one is called Jeremy. I did not go to university, so I cannot take part in an exchange like that.
However, I do know some things. I believe that, in 1986, the hon. Member for Birkenhead (Mr. Field) asked the Treasury what proportion of the total tax take was contributed by the top tax payers. One never knows with that hon. Gentleman, but it was such a mistake that I suspect it was done deliberately out of mischief. The answer he got was not one of which the hon. Member for Islington, North would approve—and where he comes from, if facts are disapproved of, they become non-facts—because it showed conclusively that, when tax rates are reduced, the total amount of tax paid by the rich goes up.
Those who have been raised to believe stalinist demonology will ask, "How can that be?" I can tell them how. If people are taxed so much that they end up paying 89 per cent. on earned income and 98 per cent. on unearned income; if an old lady who has the temerity to receive a little income from a building society is told that she has to pay a 15 per cent. investment income surcharge; and if a Government are so strapped for cash—as the Labour Government were in 1968—that they have a special top rate of tax on the higher band of 104 per cent., one starts to discover what people do when faced with taxation like that.
At the end of the day, the hon. Member for Islington, North is a toff, and he knows that the decent thing to do is to stay and pay your tax, but people do not do that, and they did not in the 1960s when we had that penal taxation system. So what do they do? They go abroad, which strikes a chord with recent events, given that we are about to chase popular composers abroad—we do not want them in this country any more. If they do not go abroad, they start to evade tax—or they employ people like me to help them to work out advantageous tax schemes, so it is not all bad.
Finally, what they usually do is stop working. During the 1960s, when I was an articled clerk, I tried to instruct a local barrister, and was asked by his clerk what day of the week the case was being heard. "Thursday," I replied, to which the response was, "Oh no, he doesn't work on a Thursday—surely you know that?" Being deferential, I apologised, put the phone down and went to ask one of the other clerks what was going on. I was told that the banister never worked on Thursdays or Fridays because he found it was not worth his while; he only worked on Mondays, Tuesdays and Wednesdays.
It is common ground on both sides of the House that, if we are looking for the money to spend on those who really do need help and those at the bottom of the heap who simply cannot look after themselves, we get that money in one of two ways. Either we do it the way the last Labour Government did it—by printing money or telephoning the International Monetary Fund and having it sent over by the planeload, which is not a particularly good idea, as it tends to put a party out of office for at 972 least 18 years and probably longer—or we run the economy in such a way that wealth is generated and we ensure that we have a rate of tax that leaves those who are far more capable than I of earning huge sums of money with sufficient incentive to stay in the country and contribute the taxes that make caring a reality.
That is the way forward, yet there was not a single hint of that in the hon. Gentleman's speech. When he talked about giving money to the rich, and when he denied—although I suspect that he knows it is the truth—that the rich pay more when tax rates go down, it reminded me of Macaulay's comment on the reason the Puritans hated bear baiting: it was not because of the damage to the bear but because of the pleasure it gave to those watching. The hon. Gentleman's comments expressed that sort of feeling.
Running through the hon. Gentleman's speech was the single aspect in which his remarks chimed with those of the Labour Front Benchers: the debate about people living in poverty. One of the most bogus accusations from Labour Members—it really is a cheek—is one we hear every time we increase benefits. They say in the next breath, "But poverty is on the increase." They justify that by saying that, if anybody is on any form of assistance, that automatically means that they must be living in poverty.
By their own bizarre logic, the more they press for increased benefits, the more they produce a dependency culture. They tell people who are receiving a helping hand from the state that they are, in fact, living in poverty. The statistic that shows how daft that argument was quoted by the hon. Member for Islington, North—that 24 per cent. of the people in this country are living in poverty. That is patent and arrant nonsense, and the hon. Gentleman is so far down the left-wing path, he is probably one of the few people in the Chamber who did not realise that it is nonsense.
§ Mr. McLeish
I wish to explore the hon. Gentleman's claim that the 24 per cent. figure is arrant nonsense. Is he aware that figures published by the Department of Social Security for February 1996 show that 5.8 million people in Britain were claiming income support? The Prime Minister accepts that figure as representative of the poverty level in this country. If we add to it dependants and children, we have a total of about 10 million people who are solely dependent on income support. That amounts to about 20 per cent. of the population. Does he accept the figures provided by the Department?
§ Mr. Nicholls
The figures speak for themselves, which is why I cited them earlier. I am complaining about the assumption that people must be in poverty because they are in receipt of some form of state benefit. That assumption produces the nonsense that today people are just above the level of income support and are therefore not in poverty, but tomorrow, when a beneficent Government increases support and they are in receipt of income support, they are suddenly catapulted into poverty. That may be useful demonology that allows Labour Members to claim that a quarter of the population is living in poverty, but it does not reflect the real world and people's experiences.
I have devoted some time to the speech by the hon. Member for Islington, North because it merited some examination. The same could not be said for the speech 973 by the hon. Member for Peckham (Ms Harman), which—even by her standards—was an extraordinarily lamentable effort. With stunning naivety, she continued to repeat figures after the Minister had passed her a piece of paper that proved that they were wrong. She then suggested that social services could be funded by the national lottery. One can only imagine what would have happened if we had made that proposal—we would have been derided initially and, in due course, the Opposition would have adopted our policy. Mercifully, it is a daft policy and we will not adopt it—so neither will Labour.
Even worse than the naivety of the hon. Lady's speech, was its sheer brazen cheek. I thought that she would not dare to mention the flexible decade of retirement, as that would be misleading and she would create a false impression of what might happen. However, she then referred to the flexible decade of retirement. Why? It is because it sounds marvellous. Many people would like to have the option of retiring at 60 rather than at 65. Yet what is the real situation?
When the hon. Lady was pressed on the matter, she accepted—as she was trying to be Torier than thou—that there could be no increase in taxation. In a letter to my right hon. Friend the Secretary of State, she said:We anticipate … a lower level of basic state pension".She then said that she would have to contact the Government Actuary in order to find out exactly what that would mean. In an attempt to be helpful, the Government unearthed the figures for her. It is estimated that the basic pension would have to be reduced by about £20 a week for a single person and by about £37 a week for a couple. That amounts to a retirement tax of about £1,040 a year.
The hon. Lady did not mention that figure. She gave the impression to the outside world not that Labour is just as good as the Tories and would do everything that we do, but that Labour is even better—and she referred to the flexible decade of retirement in that context. One never knows with the hon. Member for Peckham whether it is cheek, naivety or an unattractive combination of the two, but I have to say that her performance was not particularly impressive.
Overall expenditure on social security is absolutely stunning: £15 per person, per day, and £93 billion per year. That is an extraordinary sum by anyone's standards. Even under this Government, the total social security budget was growing faster than the economy's ability to keep up with it. The process of slowing it down had to begin—that is all well and good. At least the latest set of Government reforms will cut about £6 billion from the budget by 2000. Thereafter, the savings should increase to about £15 billion per year.
Some people will say that that is outrageous, and that we should increase taxation for the rich so that we do not have to make savings of that magnitude. However, it is worth while considering who pays retirement pensions. Pensioners often assume that they are entitled to their pensions because they paid into the kitty—it is the problem of the funded and the unfunded schemes. In reality, there are not enough rich people to soak, even if they were prepared to stand around to be soaked.
About 89 per cent. of taxpayers in this country are basic rate taxpayers. Therefore, the moral obligation of maintaining our pensioners will be discharged by the 974 working population: people who, for the most part, pay basic rate tax. The figures are quite interesting: about 3.8 workers support each pensioner at present, but it is estimated that the ratio will decrease to 2.2 workers per pensioner by 2010. It is perfectly obvious that, if we do not rein in social security spending, the burden will become impossible, and could not be shouldered by the working population. That is why it is so important for the Government to encourage people to have their own pensions, and to make it clear that they cannot be dependent on the state.
The hon. Member for Islington, North said that it would be nice if one could live on the retirement pension. It reminded me of the famous statement by the late Vic Feather, that he would not rest until everyone was earning above the national average wage. It is a great aspiration, but it does not stack up. The hon. Gentleman said that that is what occurs in Europe. The problem is that the Governments of Europe have, for the most part, not faced that consequence. In the not too distant future, they will have to deal with an increasingly greying population without proper pension provision.
That is why the single currency is a problem—people like me can always find a read across to the single currency, while remaining entirely in order. If we enter the single currency and our so-called European partners are faced with the reality of having to pay pensions, they would print money—their money, our money; it is common currency—and the inflationary effects would wreak havoc on pension funds in this country. Although the single currency may seem a rather esoteric and boring subject, pensioners up and down the land should ensure that they have a real stake in that debate.
The position is that about 90 per cent. of retirees have some form of pension other than the retirement pension. That is a good thing, which should continue. The Government can take a great deal of the credit for that situation, which makes us a leader in Europe and the envy of Europe. However, I am troubled by one point, about which I have received a great deal of anecdotal evidence. People do not usually come to my surgeries and say, "I am someone who …," but they do say, "I know someone who is living entirely on the retirement pension"—or, almost inevitably today, on that pension topped up with some form of income support.
There are other passported benefits in those circumstances, such as housing benefit, free prescription charges and the rest. However, I do not think that anyone would claim in this day and age that the retirement pension is a massive sum, as clearly it is not.
I have a question for my hon. Friend the Minister who will reply on behalf of the Government. I have not given him notice of my question, so I do not expect him to provide the figures now. However, I would be interested to know—if not tonight, perhaps by letter—whether the Government have any information about the number of retirees who are dependent solely on the retirement pension or on that pension plus income support. I have not been able to identify that figure through the Library. Do people in that position—it may be a sizeable number—suffer an exceptional degree of hardship? Ultimately, an indicator of a decent society is how we care for those who cannot care for themselves in their twilight years. We must examine that issue.
§ Ms Lynne
The hon. Gentleman obviously realises that 1 million pensioners are not claiming the income-related 975 benefits to which they are entitled, so they receive only their basis state pension and do not get housing benefit. Does he agree that it is time that an advertising campaign was run to make sure that pensioners are aware of the income-related benefits to which they are entitled?
§ Mr. Nicholls
I am mostly with the hon. Lady, but we cannot assume that, simply because people are not claiming everything to which they are entitled, they must be living in poverty. I am not privy to whatever claims the Queen Mother makes on the state, for example, but it is just possible that she has not claimed anything other than her retirement pension. One wishes her well, and she is not living in poverty.
The figures need to be examined. I agree with the hon. Lady, and I am conceding no more than we have already conceded, that the Government spend considerable sums advertising the availability of state benefits. I remember—it is a long time ago, so it shows how long that has been going on—playing my part as a Minister in such advertising campaigns.
My final point may sound like an entirely local problem, but it has a national application. In the west country, we have been visited by people who sound as though they are fugitives from "Blue Peter," because they rejoice in the names of Melody, Happy and Swampy. They have spent much time underground, although they are not retired miners trying to relive the old days. They come from outside the area, and, for the most part, have no confidence in the democratic process as represented by environmental inquiries, unless the democratic process happens to accord with their views.
Those people believe that they can claim the benefit of a democratic system when it goes their way, and treat it with complete contempt when it does not. They descend on an area where for years local people have been hoping for a bypass, as it would transform the quality of their lives. There is no hon. Member with a rural seat, and possibly no hon. Member with an urban seat, who has not seen how a well defined and well judged bypass not only enhances the environment, but transforms the life of the local community.
Local people, who at long last have seen the A30 Feniton bypass becoming a reality, suddenly find that a group of people who, for the most part, hold their views in contempt and have taken no trouble to find out why local people wanted the bypass, put the state, in the form of the police and so on, to massive sums of public expenditure to remove them from below the ground.
So far, so good. One listens to such people on the wireless. To say that they do not grasp the argument does not impugn their sincerity. One might take a laissez-faire attitude and ask whether it matters that the police have to spend time getting rid of them. The answer is that it does matter, because it takes those policemen out of my constituency. The worst part is that it is done on state benefits.
I do not know whether there is a ministerial line with which my hon. Friend has been supplied or is about to be supplied. It will contain phrases such as, "Minister cannot be drawn on this. Minister does not have information about individual circumstances. Minister must be careful of confidentiality. Minister, if he is really pressed, can say that this information would be too expensive to obtain."
976 There are two principal qualifications for Swampy, Melody, Happy and their friends: they must be available for work, and they must be actively seeking work. One is not actively seeking work 25 ft down under the putative Feniton bypass with a steel gate over one's head. That is in no way being available for work. If it is true—I say if, because I do not know for a fact—that initially social security officers were going out on site to hand over the benefits, that is an outrage.
If people want a thoroughly bizarre life style, if they want to live in the community while at the same time reserving to themselves the right to hold in contempt the procedures and principles of that community, in a democratic society they are entitled to do so, but they are not entitled to do so by living off the money that would otherwise go to look after the frail, the helpless and those who genuinely need a helping hand.
This may be a subject for correspondence, rather than being dealt with by my hon. Friend in the debate. If it turns out that people can behave like that when they are in no common-sense way available for work or actively seeking it, and if they are dependent on state benefits, that must stop.
§ Mr. Alan Howarth (Stratford-on-Avon)
The hon. Member for Teignbridge (Mr. Nicholls) seems to believe that, if one privileges the wealthy, one will have what he calls a decent society. I believe that, until employers value those who work for them and until we design pathways that enable people to proceed from welfare to work, we will not have a wealthy society, and we certainly will not have a just society.
The Secretary of State claimed that the policies that we are debating are designed to encourage people to move into work, but I fear that in reality more people will live in anxiety and hardship, and that they will have little reward for taking up work; in some respects, they may find it harder to stay in work.
The Government propose to remove the 50 per cent. subsidy in housing benefit for the difference between a notional reference rent and the actual rent payable. They also propose to restrict housing benefit for single people under the age of 60 without children to single-room rent levels.
That policy will hit large numbers of people who are unemployed or disabled, carers looking after people in another household, widows, as my hon. Friend the Member for Peckham (Ms Harman) stressed, and people who are separated or divorced and do not have their children with them.
We know from a parliamentary answer that 430,000 people under 60 in single-person households are renting in the private sector, but only 70,000 of those are in single non-self-contained rooms. It follows, therefore, that some 360,000 people will be threatened by that policy and will experience apprehension, difficulty and a deterioration in the quality of their lives. Their homes represent their security, dignity and privacy, and the possibility of having some control over their lives.
It reflects a harshness and a lack of humane imagination that the Government are willing to deprive people in middle life, living by themselves on modest incomes, but probably making a valuable contribution to society in 977 activities such as nursing, caring or teaching. Such people are to lose their homes. That is extraordinarily harsh. I hope that the Government are still prepared to think again.
Single people have fared worse than others in recent years. They are disadvantaged in the housing market. They wait for long periods, and may wait interminably, on waiting lists. They find it harder to service the cost of mortgages. The policy that the Government are introducing will ensure that single people stay in relative difficulty.
Relative poverty matters. The failure of the Conservative party to understand imaginatively how people feel about relative poverty and the widening inequalities that have become apparent may explain why there is such disillusionment with the Conservative party.
The policy previously applied to people under 25, restricting their housing benefit to cover only the cost of shared accommodation. The Government justify their extension of that to people under 60 on the grounds of consistency and fairness. Last year, however, when they sought to justify the reduction in housing benefit for single people under 25, they claimed that it was acceptable and appropriate because single people under 25 were in different circumstances in life—they were at a stage of life when they would have more flexibility. The Government cannot have it both ways, and shifting their ground in such a way constitutes a mockery.
Moreover, the Government are extending the policy up the age range to cover people aged between 25 and 60, without, as yet, having evaluated the impact on those under 25. I suspect that they felt impelled to go further because the existing policy had not helped their fiscal position as much as they had hoped. Even before seeing reports on the impact of the policy, however, we can be pretty sure that supply will fail to match demand: there simply will not be the amount of non-self-contained property available for rent that the policy assumes. Rents will rise, and the Government will receive little, if any, fiscal gain. They will merely have caused hardship.
Disabled people are likely to suffer particularly as a result of the restriction of housing benefit, because they may need more living space than others. They may need wheelchair-accessible homes, and space in which to store equipment. The Government should have considered that problem. As it is, they have dithered over the proposal to extend part M of the building regulations to private accommodation, although there are some very good models that they—along with local authorities and developers—could use. The "lifetime homes development" on the Woodlands estate, developed by the Rowntree Trust on the outskirts of York, shows that it is possible to produce beautifully designed housing that is accessible to disabled people—housing in which people can remain throughout their lives—at a minimal additional unit cost. The Government should give a lead, because there is currently an appalling shortage of accessible homes. There are about 80,000 at present, but there are 4.5 million people with mobility problems.
As things are now to be, disabled people will have to leave homes that they have had specially adapted, because they will no longer be able to afford the rents. A disabled facilities grant may have helped to pay for the adaptations, but apparently that money is to be written off. The policy 978 means that fewer disabled people will be able to live independently, as they wish and ought to be helped to do, and it makes a mockery of the Government's professions in regard to care in the community. It makes one wonder why they introduced legislation to allow social services departments to make direct cash payments to disabled people so that they could manage their own personal and domestic assistance. If those people do not have the means to pay the rent, they will not be well placed to organise their households.
I believe that the policy is, if not in breach of the letter, certainly a violation of the spirit of the Disability Discrimination Act 1995. In effect, it constitutes an indirect discrimination, because it will exclude disabled people from renting in the private sector. The Government make some discretionary funds available to enable councils to provide help in certain limited circumstances, but even in that regard they have tightened the rules governing eligibility to benefit. Instead of talking of "vulnerable groups" who may be able to benefit from those discretionary funds, they talk of people being in "exceptional hardship".
The Government have not required information about the availability of those discretionary funds to be supplied to disabled people. They have not thought about helping people who may need assistance so that they can negotiate to obtain support. At the very least, there should be a clear instruction to those who administer housing benefit to ignore income from disability benefits that have been provided to cover expenses other than housing costs. I understand that no such instruction has been forthcoming so far.
The Government's housing benefit policies will also introduce new disincentives to work. If a person loses his job, the review of his housing benefit will be brought forward. The hon. Member for Havant (Mr. Willetts) mentioned that a person in those circumstances would be allowed to retain his previous level of housing benefit for 13 weeks, but thereafter there will be a review and the housing benefit will be cut. The new policy will be a real deterrent to people who might be minded to take temporary work or, perhaps, to try out some new kind of employment in an experimental way. It will deter those who are prepared to risk taking on a job that they realise may be insecure. Such people will feel less confident, because they will know that, if things do not work out, their housing benefit will be reduced sooner than it would have been otherwise.
The policy, then, discriminates against not only disabled people but the unemployed. It will be impoverishing, because people will lose not only their jobs but their homes. The ethos is that, the poorer people are, the less they should get.
The freezing of lone-parent benefits is a triumph of harsh moralism over humanity, and of dogma over realism. The Government's assertion that the social security system favours one-parent families does not stand up, and the common sense that tells us all that that is not so is supported by scrupulous research carried out by the Policy Studies Institute—the research of Berthoud and Ford, published in their paper "Relative Needs". In 1992, 78 per cent. of children in lone-parent families were living on or below income support levels, compared with only 18 per cent. in two-parent families. The Government's own publication "Households Below Average Income" tells us that lone parents constitute 11 per cent. of those 979 in the bottom income decile, but only 6 per cent. of the population. There is clearly disproportionate poverty among lone parents under the existing social security system.
Reducing one-parent benefit will again reduce incentives to work. It is a non-means-tested benefit, which a lone parent is able to claim in full when in work. Far from being tilted in favour of lone-parent families, the benefits system is tilted against them in certain important respects. In the case of jobseeker's allowance and income support, the claimant's partner can work 24 hours a week, but a lone parent can work only 16 hours a week on income support. At the very least, the Secretary of State should suspend the changes until he has seen the results of further research. He has acknowledged that the research that has been done is not definitive or conclusive in all respects. Proper research should be carried out before he embarks on any reduction in benefits, or in the relative value of benefits for lone parents as opposed to couples.
That is particularly important, given all the evidence that income support is not sufficient to meet children's basic needs. The Child Poverty Action Group's publication "Cost of a Child" makes that abundantly clear. We need a strategy to assist lone parents to move into work. We need a reform of benefits, and, of course, we need the provision of affordable, good-quality child care. The Department's own research—contained in "Moving Off Income Support", by Shaw and others—shows that lack of child care is the real barrier preventing lone parents from going to work. A high proportion want to do so, properly and naturally, although some will feel that, during this phase in their lives, their first commitment should be to home and children. Many both want and need to work. Two thirds of them say that the cost of child care is the real problem that prevents them from achieving that.
Lone parents also face other problems. They are rather more liable to lack educational qualifications. Because of their situation, they are more likely to lack recent work experience, and they run into the difficulty that, as yet, all too few employers are family-friendly in their employment practices. Faced with all those difficulties, lone parents need imaginative policies to help them to get into work, to have higher incomes, to float their households off poverty, and also to increase their opportunities to participate in and to contribute to society.
The Government will say that the child care disregard in family credit is the solution to the problem, but only 25,000 lone parents benefit from it. The lowest-paid on the maximum family credit gain nothing from the disregard, as they cannot receive more than the maximum benefit. The disregard does not apply to children over 11. Often, lone parents cannot take advantage of the disregard because they are, understandably, required to use approved child care facilities, which often are not available in the hours when lone parents need them if they are looking to do shift work, or evening or weekend work. Much more thought and imagination need to go into assisting lone parents in that regard.
Lone parents who are unable to work more than 16 hours have no child care disregard at all on income support. The earnings disregard on income support has been frozen since 1988 at £15. It has been shown by the Department's research to be too low to offer any incentive for lone parents to try out work. As an early priority when resources can be found, the Government should raise that disregard to £25, bringing it into line with the disregard 980 on housing benefit—the amount that working lone parents on housing benefit can earn before their benefit is reduced.
The Government should also redress another anomaly—this time to the disadvantage of couples—that they have created between lone parents and couples. Today, one in five households of working age in Britain have no one in work, as my hon. Friend the Member for Peckham reminded the House, and I share her anger about that. The £15 disregard for long-term claimant couples under 60 has been reduced by the Government to £10. Is that all that they can offer the one in five families who are out of work—to cut the amount that people can earn before they begin to lose benefit?
The entitlement for people who previously received invalidity benefit has been frozen for two years, so they are that much poorer because of inflation in that period. New claimants are on lower benefits, and the Government aim to save £3 billion by 2000. The Government have to recognise, however, that almost everyone in receipt of incapacity benefits has passed the all-work test. The Government cannot then claim that such people are the malingerers, the lead swingers, the workshy of their mythology, about which we heard so much when the Government introduced the incapacity benefit legislation.
The Government claim—the Secretary of State said it this afternoon—that they are focusing benefit on those who are genuinely unable to work. How can that be so if they are making reduced payments to those who have passed the all-work test and are demonstrably unable to work? Instead of removing entitlement and reducing incomes, they should concentrate on encouraging and helping incapacity benefit claimants to try out work.
That could be done, for example, by relaxing the linking rules, so that people can have more confidence to try out a new job, in the knowledge that if, for good reason, it does not work out, they will still be able to return within a reasonable time to their previous level of benefit. At the moment, they have only eight weeks in which to take that risk. That is not enough, particularly for disabled people, who are bound to find it harder to explore the job market, and face greater difficulties in finding work that is appropriate for them.
The Government should also, as the hon. Member for Rochdale (Ms Lynne) argued, be more generous in the provision that they allow for people to undertake therapeutic work. At minimal cost, such reforms could be introduced, and it would quickly save benefit expenditure.
The Secretary of State said that the Government are proud of the provision that they are making in social security, yet one cannot but feel that the Conservative party is resentful of the money that is spent in this way. Claimants are certainly made to feel unworthy, and are stigmatised. The vast extension of means-tested benefits—the proportion of the social security budget that now goes on means-tested benefits has doubled—means an extension not only of stigma but of poverty traps and a multiplication of disincentives.
The hon. Member for Havant claimed that the Government's policies have been scientifically designed—he offered to give a whole range of examples—to enable people better to get into work, but if the means-tested benefits proportion of the social security budget has been doubled, it is hardly likely that incentives to work have been improved and that it has been made easier for people to work.
981 We need a constructive and generous vision of a modernised welfare state, but for that we shall have to wait for a Labour Government. I hope and trust that we shall not have to wait long.
§ Sir Norman Fowler (Sutton Coldfield)
I do not accept—neither, I am sure, do other Conservative Members—the criticism just uttered by the hon. Member for Stratford-on-Avon (Mr. Howarth), who was, after all, elected to the House as a Conservative Member of Parliament. In my view, if he wanted to have the authority to speak on behalf of his constituents, he should have called a by-election. Had he done so, of course, he would have been defeated. He has, I fear, no authority in the House.
I had not intended to catch your eye, Mr. Deputy Speaker, until I heard the fairly extraordinary speech of the hon. Member for Peckham (Ms Harman). It is a pity that she has just left the Chamber. It seemed that she exposed and set out quite a dramatic change on Labour's policy on social security in 1997 and, we assume, as far as the election.
When I last spoke on social security about a year ago, I raised the issue of the earnings uprating of pensions—a matter on which, at every election, when I was Secretary of State for Social Services, I was attacked by the Opposition. I was attacked in 1983 and 1987. I was told that the Government were being far too mean and were not showing sufficient regard to elderly people. In 1992, the same attack was deployed once more. When I suggested a year ago that the Labour party was in the process of changing its policy to the policy that the Government had pursued, I was accused of scaremongering.
Just in case the hon. Lady's words were not quite understood—she read out a formula that had no doubt been put before her by another member of the shadow Cabinet—I point out that she confirmed that the Labour party has abandoned its pledge on the earnings upratings of pensions. There is no question about that. It is one of the most massive U-turns in social policy that I can remember in the past 25 years. I now know why she has disappeared, but if another Labour Front Bencher wants to deny that I will happily give way. Labour Members know that their policy has changed. I do not understand why they do not come clean and admit it openly, so that the public know where they stand.
The debate, including the speech of the hon. Member for Peckham, has been fascinating and significant, because it has shown that the Labour party has come to our position on the uprating of the basic pension. It has also come to our way of thinking on the whole pensions area. That is what the hon. Lady's speech implied.
When I reformed pensions in 1985–86, I was fought all the way by the hon. Member for Oldham, West (Mr. Meacher)—I do not know what has happened to him—and others in the Labour party. I was told that the state earnings-related pension scheme was sacrosanct and could not be changed. We believed that the public wanted a pension that they could call their own, not just a pay-as-you-go scheme, such as the state earnings-related scheme, which is not a funded scheme. The public wanted 982 a funded scheme of their own. We wanted to retain the basic pension, but we argued for an occupational or personal pension scheme as a second tier.
At that time, various things were wrong with occupational pension schemes, so we reformed them. Early leavers were a problem, for example. We also wanted to provide other options. Occupational pension schemes covered a vast number of people, but they had not increased over the years. We wanted to give the public the further option of a personal pension. We thought that that was right and sensible. Our policy has been followed and is held up as an example in other countries.
§ Sir Norman Fowler
Let me finish this point.
The marketing of personal pensions occurred after I had left the Department, and was popular with the public. The concept of personal pensions was excellent and was widely supported.
§ Mr. Denham
Will the right hon. Gentleman take this opportunity to apologise to the House for the fact that millions of people are now having to have their pensions policies reviewed because of misselling? Was misselling part of the concept, or merely something that went disastrously wrong?
§ Sir Norman Fowler
The hon. Gentleman takes me on to the point that I was about to make. I do not defend the misselling of pensions. Companies missold those pensions: it was nothing to do with the Government. It is usually wrong to advise someone in an occupational scheme—
§ Sir Norman Fowler
Before the hon. Gentleman intervenes again, he should let me finish my reply.
It is usually wrong to advise someone in an occupational scheme to move to a personal pension, for the simple reason that the employer makes a large contribution to an occupational scheme. When that advice has been given, it has often been wrong. There have not been millions of cases, but pensions have been missold.
The difference between that misselling and the mistakes that were made in the past on state pensions is that the problem of misselling is being put right. It is perhaps being put right slowly—too slowly, some may argue—but it is being put right, unlike the mistakes to which I shall refer in a moment.
§ Mr. Denham
Does the right hon. Gentleman feel no sense of embarrassment about the Government advertisements that showed, for example, someone upside down in a straitjacket promoting personal pensions and saying, "Now you are free to leave your employer's pension scheme"? Does he feel no embarrassment about the fact that the Government created the environment in which misselling took place?
§ Sir Norman Fowler
I do not feel embarrassed about that, or about giving the option of personal pensions to millions of people. If the hon. Gentleman is saying that 983 some companies missold personal pensions, I agree with him. That is being put right. The worst scandal in pensions in the past 25 years had nothing to do with personal pensions: it was committed by a Labour Government. It was committed by Barbara Castle, and was a total fraud on pensioners and on the public at large.
When inflation was coming down, Barbara Castle changed the method of uprating: she went from the historic to the forecast. Guess what? In current money, that saved between £1 billion and £2 billion. That money has been lost to pensioners permanently. I invite the hon. Gentleman to return to the Dispatch Box and give us a pledge that when or if Labour is returned to power, he will restore that, £1.5 billion to pensioners. Is that Labour's policy? I hear no reply and I see no movement. apart from an embarrassed shuffle. He knows perfectly well that what I am saying is absolutely true.
§ Mr. Denham
Let us get the record straight. The basic state pension increased in value under the last Labour Government by 18 per cent. in real terms. That is the true record of the Labour Government.
§ Sir Norman Fowler
The hon. Gentleman has missed the point. I am well aware of the line taken in press releases issued by Transport house, Walworth road or wherever the Labour party is now. The Labour Government fiddled pensions. They made public spending savings of more than £1 billion. No one seriously disputes that—everyone knows that it is true. It is in Barbara Castle's autobiography, it is in Denis Healey's biography and it is a simple matter of common knowledge. The difference is that the difficulty over personal pensions is being put right, whereas that mistake has not been put right, and, to judge by the embarrassed silence among Opposition Front Benchers, it never will be put right.
It is a pity that the hon. Member for Rochdale (Ms Lynne) is no longer present. I hope that both Opposition parties will agree that the real lesson to be learned from the misselling of pensions is that the public need far better and more extensive independent advice on pensions. If we give more options, advice should go with them. There should also be advice from the Department of Social Security. I am concerned when people come to my advice surgery having made decisions about social security and pension benefits that are obviously wrong and not in their interests. The problem of how to advise the public should be re-examined, and much more should be done in the public and private sectors.
The debate is now on new ground. I am beginning to understand Labour's policies step by step: in each debate another veil is lifted. Despite the huffing and puffing of the hon. Member for Southampton, Itchen (Mr. Denham), Labour has no intention of abolishing personal pensions. When I was reforming the pension system, I would have preferred to scrap the state earnings-related pension scheme. Such a pay-as-you-go system simply creates a debt for future generations. I wanted a system that we could afford. Every analysis of pensions in Europe points to the British system as affordable compared with virtually every other European system. We must obviously meet the obligations that we have already 984 made; there is no question of not doing so. In the future, however, I would move away from the pay-as-you-go, state earnings-related pension scheme.
§ Sir Norman Fowler
Before the hon. Gentleman asks my right hon. Friend whether he will do that, I had better ask the hon. Gentleman the same question. I had assumed that traditional Labour party policy was to defend SERPS to the death. That is what Labour Members have been saying year after year. The hon. Member for Oldham, West certainly said that, and so did his successors.
The hon. Member for Peckham, however, said—I think that I took her words down accurately—that, if there were a Labour Government, they would want to introduce "a funded second-tier scheme". SERPS is of course not a funded scheme, so either we shall have SERPS as well as a state-funded scheme or Labour is also considering abolishing SERPS. The way in which the debate has gone is extraordinary. I am not entirely clear where the Opposition stand on SERPS. I frankly doubt very much whether they are very clear.
§ Mr. Denham
It is perfectly clear from all our policy documents that we will retain SERPS as an option for those who wish to remain in it.
§ Sir Norman Fowler
Everyone will maintain SERPS for those who are already in it. No one would go back on the obligation. I am asking what future policy will be.
§ Sir Norman Fowler
I take that as an undertaking that SERPS will go on for ever more for those who wish to be in it. That can be the only interpretation of what the hon. Gentleman has said. Labour is therefore setting out not one, not two, but three state schemes: the basic pension scheme—which even Labour would not touchSERPS and a funded state scheme. Labour Members are getting into the most hopeless muddle on pensions, so I shall allow them to try to reconcile those differences.
I want to take up the point made by my hon. Friend the Member for Teignbridge (Mr. Nicholls), about which I hope there might be some agreement across the House. I say to my right hon. Friend the Secretary of State that I hope that we will take the opportunity to move forward on the second-tier scheme. I hope that we will change our policy in very much the way that I set out in the middle 1980s. I think that we have been given the green light for change and can honestly say that the teething troubles of personal pensions are over, that the system works and that the regulations are in place. I very much hope that we can therefore do the decent and sensible thing and get rid of the remnants of SERPS.
I also hope, as my hon. Friend the Member for Teignbridge said, that we can find a way of getting extra resources to people who are perhaps in their eighties or 985 even older and, through no fault of their own, since there was no occupational pension scheme for them to join, are living on the basic state pension. The system that I have set out in the past and advocate again is one of pension credit, which is very much like family credit and would add to the basic pension. It would obviously not apply to everybody. If someone has a perfectly adequate occupational pension, they will not be affected, but if they have not, they could receive extra income. It would apply to people who have not had the benefit of the occupational pension reforms that I hope are now a matter of common agreement across the Chamber. That is my specific plea to my right hon. Friend.
The general point that I want to make is more political. The Government have won the argument on pensions. I do not think that there is any doubt about that. When one listens to Opposition Members, one realises that we have won the argument. Indeed, I think that we have won the argument on social security generally. With the exception of the hon. Member for Islington. North (Mr. Corbyn)— who I think disagrees more with his own Front Benchers than he does with the Government—most people accept that family credit, for example, is a sensible, good way in which to get help to low-income families in work. It has helped substantially and, as the person who introduced it, I am delighted at the take-up.
I find the Opposition's stance on child benefit extraordinary. To withdraw child benefit from 16 to 18-year-olds is one of the most eccentric, silly and counter-productive policies that I have heard of in a very long time. If it goes ahead, I suspect that we would be the only country in the western world where no provision at all is made for that group of children and their parents either through the tax system or the social security system. I cannot imagine that that is precisely what Labour wants to propose, but it will undoubtedly be the impact and the effect of such a policy.
As child benefit took the place of a tax allowance, it would be extraordinary if it were abolished and nothing were put in its place. I do not understand the policy; I find it extraordinary. Surely it is a matter of common consent that the extra expense of children, which lies at the foundation of child benefit, does not suddenly end when children reach the age of 16. Indeed, one could argue pretty strongly that the expense of children rises radically between the ages of 16 and 18. I hope that we hear a defence of that policy. I may not have been listening closely enough to the hon. Member for Peckham, but I did not think that she did the argument justice. In fact, I am not sure that she dealt with it at all.
The Government will enter the forthcoming debates on social security in the strongest possible position. I pay tribute to my right hon. Friend the Secretary of State for creating the strongest possible position on social security. We have the strongest possible position on pensions. We have substantial achievements to our names. The Labour party will spend its time on the defensive, answering anxious questions—not least from its own supporters—on subjects ranging from pensions policy to child benefit. I have great and continuing interest in social security and 986 pensions, but I am also a politician, so I am very much looking forward to the next few weeks and the debates to come.
§ Mr. Roger Berry (Kingswood)
I agree entirely with the last comment of the right hon. Member for Sutton Coldfield (Sir N. Fowler).
The Government have not explained why, as this Conservative Administration comes to an end, spending on poverty and unemployment is much greater than it was when it came into office. There are two possible reasons. One is that the Government might have been extremely generous with benefits, increasing unemployment benefit, increasing pensions in real terms and increasing other benefits. The only other possible explanation is that poverty and unemployment are greater than when the Government came into office.
I am glad that the hon. Member for Havant (Mr. Willetts) has come back to the Chamber. He described eloquently the Government's strategy to reduce unemployment benefit relative to average earnings. There was a clear Government policy that there would be no real increase in unemployment benefit. In relation to average earnings, the income of those dependent on unemployment-related benefits is worth a lot less in relation to average earnings than 20 years ago—about 50 per cent. less.
I note in passing that the justification given by the hon. Member for Havant was that that policy would encourage people to go to work. The Government's policy for tackling unemployment was to cut benefits. I intervened on the hon. Gentleman to ask whether he could name a year—just one year—since 1979 when unemployment, according to the Government's claimant count, had been lower than the figure that they inherited. I was surprised that the hon. Gentleman, who has been referred to as Mr. Two Brains by his close friends, could not think of one. It is possible that he does not realise that the reason that he could not think of a year is that there has not been a year since 1979 in which recorded unemployment has been lower than the level inherited by the Conservatives.
The Government have fiddled the definition 30-odd times. On all but one occasion, the change has reduced the figure. However, in not one year since 1979 has unemployment been lower than the level inherited. In most years, it has been between 2 million and 3 million—two or three times the level inherited from the last Labour Government. The staggering incompetence of the early 1980s that put unemployment up to 3 million for five years and the equally staggering incompetence in the early 1990s that again got unemployment back to 3 million merely confirm my point.
§ Mr. Berry
As the Minister well knows, when the last Labour Government left office, unemployment was falling. My constituents in Kingswood would find it astonishing that Conservative Members are so complacent 987 and self-satisfied about their performance on unemployment that they think that it is a bit of a joke that in not one year since 1979 has recorded unemployment been lower than the level inherited and that, for most of that time, unemployment has been between 2 million and 3 million. To get figures like that, we have to go back to the 1920s and 1930s, when similar policies were being pursued.
§ Mr. Berry
I should like to progress, if I may.
The hon. Member for Havant has confirmed that it was Government policy to ensure that unemployment-related benefits fell way behind average earnings. The fact that that did not bring unemployment down suggests the obvious conclusion that some people are caught in the poverty trap with the highest effective marginal rate of tax in the country. If they were to take up employment and lost benefits, they would pay an effective marginal rate of tax of more than 100 per cent. Those are the high marginal rate taxpayers whom I am worried about. For most people, it is absurd and insulting to suggest, after the massive cuts in unemployment benefit in relation to average earnings, that unemployment has increased dramatically because people have had no incentive to work. They are not in jobs because the jobs have not been there.
We all know that the Government can hardly claim to have been generous on pensions. I enjoy reading books occasionally. I hope that other hon. Members are reading a book called "Sleaze". That interesting book gives an account of how much somebody spent to stay at the Paris Ritz for five days. That sum accords roughly with what pensioners living on the state pension receive in a year. State pensions are not particularly generous when compared with what some people are quite happy to spend—whoever picks up the bill—at the Paris Ritz. The Government have broken the pensions link with earnings and cut the value of the state earnings-related pension scheme.
Will the Government be leaving office spending more on poverty and unemployment because of improved benefits? Self-evidently, that is not the case. The bill is higher because poverty and unemployment are more widespread. We could spend all evening considering definitions of poverty. I have no intention of doing that. It is incontrovertible that inequality and relative poverty have increased dramatically under the Government.
Commentators commonly use the number of households living on an income after housing of less than half average income as an indicator. The proportion of the population in that position has trebled to one in four. We can quibble about whether that is a sensible definition of poverty, but there are probably not many hon. Members who live in that position. Few Conservative Members have probably ever been in that position. The fact that the number of people suffering from relative deprivation on that scale has trebled under the Conservatives should leave the Government far from complacent, as they have been this afternoon. The number of people dependent on means-tested benefits has doubled to one in six, and one pensioner in three are dependent on means-tested benefits.
My criticism of the comments of the hon. Member for Havant relate not only to issues that I have already covered. Unemployment has increased dramatically 988 despite serious cuts in unemployment-related benefits. The hon. Gentleman argued that, as unemployment benefit is only a small proportion—about 10 per cent.—of the social security budget, reducing unemployment is not a significant way of saving money. He forgot to mention that unemployed people not only receive unemployment-related benefits, but pay less tax. Because they are poorer, they pay less income tax and less indirect tax.
The Treasury has confirmed time and again that the cost to the taxpayer of each unemployed person is about £10,000. Given that unemployment has been between 2 million and 3 million for most of the time under the Tories, we are talking about an annual cost to the Exchequer of between £20 billion and £30 billion. That is not peanuts—it is a substantial economic cost.
The problem is not just that such levels of unemployment cause enormous personal hardship, enormous social divisions, ill health, crime and all the rest, but that they generate a huge burden for the Treasury. For the hon. Member for Havant to imply that part of the problem with the social security budget and paying for decent benefits is not related to unemployment is absurd. That bill of between £20 billion to £30 billion each year is the reason why Labour Members believe that bringing down unemployment is a prerequisite for tackling the high level of social security spending. Any policy that significantly reduces unemployment will also bring savings for the taxpayer.
I am, unapologetically, a strong supporter of the windfall levy on the privatised utilities, which have made excess profits because of the Government's lax price-control regime. The majority of people believe that it is desirable to use that levy to fund employment, training and education programmes for young, unemployed people. If we get 750,000 young people off the dole, we would save on social security payments and such measures are the only way to meet the twin challenge of tackling unemployment and reducing the social security budget.
Clearly, the Conservatives regard allowing privatised utilities to retain excess profits as a higher priority than giving young people the opportunity of work, training and education. We do not, and, more importantly, nor do the majority of people in this country. The reason why spending on poverty and unemployment has increased under the Tories is not because they have been more generous. They never are. It is because unemployment and poverty are higher now than when the Tories came to office, and that is a good reason to ensure that they are removed from office as quickly as possible.
§ Mr. Tim Smith (Beaconsfield)
The hon. Member for Kingswood (Mr. Berry) conveniently overlooked the fact that any possible beneficial effect from extra resources for education and training from a so-called windfall tax would be outweighed by the costs that Labour would impose on employers—the minimum wage and the social chapter—which would destroy jobs. He also conveniently overlooked the fact that unemployment is now falling faster than at any time since the second world war when records began.
As a result of the Government's economic policies, unemployment is below 2 million and falling dramatically. That is having an effect on the social 989 security budget, but the main reason for the huge increase in the budget in the past 18 years has nothing to do with the level of unemployment. It is largely due to demographic changes and a huge increase in the number of pensioners. People are, thankfully, living longer, and the cost of retirement pensions, which are contributory benefits, has risen substantially. The net result is that we are today being asked to approve a social security budget of £93 billion, or some 13 per cent. of gross national product.
My hon. Friend the Member for Finchley (Mr. Booth) told us what the social security budget was in 1948, when the present arrangements were introduced, and at various dates since. Until my right hon. Friend the Secretary of State for Social Security was appointed in 1992, the figures were rising. It is difficult to stop that happening, but we must try, because we cannot expect the working population to bear that huge cost. I pay tribute to my right hon. Friend the Secretary of State because he has found ways at the margin to reduce social security spending which, by 2000, will be worth some £6 billion and, in the long term, some £15 billion. All those changes have been opposed by Labour Members.
The Leader of the Opposition said recently that he wants to spend more money on education—few hon. Members would not like more resources devoted to our schools. He said that he would release money for education by cutting the welfare budget, because the shadow Chancellor has made it clear that there would be no increase in public spending if we were unfortunate enough ever to have a Labour Government. The Leader of the Opposition did not specify what he would reduce to increase spending on education, but Labour Members today have said the reductions in the orders are not acceptable and should be resisted, even though the reductions have already been built into the budget and will be implemented after the general election. That is not good enough, and people are entitled to ask where the money will come from.
The Government's record is outstanding, especially on pensioners, as my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) mentioned. Of course there are exceptions, but most pensioners are much better off today. Nearly 90 per cent. of pensioners retiring today have some other form of income apart from the basic state pension. Many have an occupational pension or an earnings-related, pension and some have investment income. The performance of those pensions in the past 18 years has transformed the position of pensioners and we are in a far stronger position than any other member of the European Union, especially in relation to any contingent liability.
My right hon. Friend the Member for Sutton Coldfield was right to say that—although we remain committed to the basic state pension, which is important—we should ask people to provide their second pension themselves. That is the way to ensure that we do not have massive public expenditure commitments in the future.
The establishment of the Benefits Agency as an executive agency in the Department of Social Security is another reform that has been beneficial. The hon. Member for Rochdale (Ms Lynne) was critical of the Benefits Agency, but I recall the situation some 10 or 12 years ago when customer service was not a priority for staff of 990 social security offices. Today, the staff serve their customers well, they care about the recipients of benefits, and the service has improved. The performance targets for quality of service have sharpened up their approach. Of course there is always room for improvement, but the reform so far is welcome.
My right hon. Friend the Member for Sutton Coldfield mentioned the establishment of personal pensions. He was a little modest, because he introduced that reform, but I remember how controversial and radical that proposal was, and how much opposition to it came from the Labour party and others. Today, the situation is transformed and personal pensions are extremely popular, notwithstanding the misselling about which we have heard. Millions of people have pensions and they have a good idea of what their fund is worth. The funds are portable and people can work out what they will receive in the future.
We have made many radical changes and we are starting to live within our means in terms of the social security budget. I welcome the fact that more effort has been put into ensuring that benefits are paid only to those who are entitled to them. The National Audit Office recently published a report that qualified the national insurance fund account on that score. None the less, the figures are pretty good now. For example, unemployment benefit costs us £1,100 million a year and the National Audit Office found that the total level of mistakes made by the Department was less than 3 per cent. There is always room for improvement. Mistakes should be eliminated and fraud tackled. The record in that respect, too, is much better than it used to be.
The other side of the equation is contributions and the Contributions Agency. Just as it was sensible to have a Benefits Agency with the task of ensuring that benefits are paid efficiently to those entitled to them, so it is sensible to have, within the Department of Social Security, a separate agency with the job of collecting contributions. It is just as important as the collection of income tax by the Inland Revenue.
One matter that I wish to draw to the attention of my hon. Friend the Minister has concerned me for some time. It relates to schemes designed to avoid the payment of national insurance contributions. It seems astonishing that it is not possible to legislate, in the same way as we do for income tax, so that if someone is paid not in cash but in kind, he or she will still be subject to national insurance contributions. If someone is given by his or her employer as part of a remuneration package a benefit in kind, he or she is taxed on it. Nobody disputes the equity of that; it must be the sensible approach. It is all-encompassing and it is how income tax works.
However, when it comes to national insurance contributions, it is rather different. In an article in a magazine called the London Accountant dated December 1996 to January 1997, the author explains how to make a 20 per cent. tax saving through partly paying employees in supermarket vouchers. Supermarket vouchers are pretty close to cash. If somebody is given a voucher exchangeable at Tesco, Sainsbury or Asda, it resembles payment in cash. The article says:There does remain the possibility of achieving an effective 20 per cent. tax saving … by converting a proportion of an employee's cash salary entitlement into an entitlement to supermarket vouchers.991 In some areas, the Department has tightened up on that, and the author of the article refers to some of those. He says:Certain benefits, however, are liable to NIC as a result of special legislation.He lists those asvouchers … denominated in, and exchangeable for, cash (eg. premium bonds);commodities for which there is an organised market (eg. gold);andcertain financial instruments (eg. gilts and unit trusts).So if employees are paid in those, employer and employees must pay national insurance contributions.
However, according to the author of the article, if an employer decides to pay his employees in supermarket vouchers and those are not part of the remuneration—an employer can simply say that they are not—the employer can simply reduce a package of, for example, £18,000 per annum to £17,000 with the addition of £1,000 in vouchers. He says that that is how the scheme works. I do not know whether what the author says is true, but a two-page article is devoted to it—[Interruption.] I am grateful that my hon. Friend the Minister is offering to look at it.
Instead of tackling each avoidance measure as it arises, the time has come to introduce a measure whereby it will not matter what scheme is used. Given that supermarket vouchers will be taxed as income, why could not the Department of Social Security introduce a similar measure whereby, no matter what the form of so-called "remuneration" was—supermarket vouchers or any other clever idea—it would be subject to national insurance contributions? It is time to put an end to those schemes. I have raised this general matter on a number of occasions and am concerned that we still have not tackled it.
Subject to my hon. Friend looking at that problem, as I know he will, I welcome the orders before us today and the increase in benefits. I pay tribute to my right hon. Friend the Secretary of State for the work that he has been doing to control the scale of the social security budget.
§ 8.4 pm
§ Mrs. Anne Campbell (Cambridge)
I am pleased that the debate about lone parents has now moved on to more positive ground—certainly more positive than that delineated by the Secretary of State some years ago, when he made a disgraceful speech to the Conservative party conference about his "little list". He emphasised the number of single women who allegedly had babies in order to get council flats and houses. That was a disgraceful attack.
§ Mrs. Campbell
I shall not give way at this point. The hon. Gentleman can intervene later if he wishes.
Most lone parents do not want a handout; they would like a job. Since I was elected to the House, I have had a number of conversations with lone parents in my constituency, many of whom are desperate to get back into work, but feel that the system conspires against them. Many lone parents in my constituency are well qualified. I remember one in particular who had a degree in molecular biology and some years' experience of working in a 992 professional environment. Her problem was not finding work—plenty of organisations wanted to employ her—but the fact that she could not find work that paid her enough to pay her child minder and be better off than she was on benefit. Yet the state was paying out four times more to her in benefits than it would have paid to subsidise her child minding expenses, to enable her to work.
That is a crazy way to organise the benefits system. It does not benefit women and their children, and it certainly benefits neither the state nor the taxpayer. At the same time as we are paying lone mothers to stay on benefit, my constituency is experiencing job skills shortages. Many lone parents are highly skilled. Not to use those skills is a disgrace, given that we are experiencing job skills shortages.
My hon. Friend the Member for Peckham (Ms Harman) has been doing sterling work in that respect. She has emphasised the disproportionate number of parents who depend on benefit in the United Kingdom. When we look at other countries, we realise that in Denmark, 38 per cent. of single mothers depend on benefit; in France, the figure is 37 per cent.; in Belgium, it is 38 per cent.; in Norway, it is 43 per cent.; and in Sweden it is 33 per cent. In the United Kingdom, however, the figure is a staggering 70 per cent. No wonder our benefits bill is so enormous. Benefit is paid out not just to people who want it, but to people who would prefer to have a job.
The Daycare Trust has just published an interesting leaflet in A4 format, which is convenient for Members of Parliament who do not have a vast amount of reading time. It has found that there are 800,000 latchkey children—children who go home after school to an empty house because their parents work and no affordable child care is available. Only two children in 100 have out-of-school child care places. My hon. Friend the Member for Peckham has emphasised the importance of out-of-school child care places and the crucial part that they play in helping lone parents and other parents to get back into useful employment.
When I was first elected nearly five years ago, I was so concerned about the problem that I called together several organisations in my constituency, some in the public sector, some in the voluntary sector and some in the private sector, to see whether there was anything that we could do as a local initiative.
We quickly decided that the lack of cheap nursery places was not the only problem, and that there were other factors that we might be able to deal with more easily. One critical factor for lone parents who wish to return to work is the lack of co-ordinated information. They need information on child care. That is available from social services or, in Cambridgeshire, from the under-eights advisers. They need information on jobs, and possibly on training. Again, that is available from different organisations. Parents also need to find out whether they would be better off in work than on benefit. That involves a visit to yet another organisation, the Benefits Agency.
Let us try to imagine what that is like for a lone parent with two children, who probably does not have her own transport and has to drag the children across a city such as Cambridge to the jobcentre, the Benefits Agency, social services, the further education college and wherever else she needs to go. It is obvious that the logistics and mechanics of that can become impossible.
993 We decided to provide a co-ordinated information service, and that service, which is called Childcare Links, was launched on Monday by my hon. Friend the Member for Peckham. It is doing precisely the job that the Benefits Agency should have started doing years ago.
Childcare Links provides an Internet service, freely available on all Internet access points across the county. There are now 11 of those in libraries, offices and schools, and of course the service is available on home computers, too. It provides a series of interactive web pages that guide users through the different areas that must be co-ordinated by someone looking for a job.
Those pages include information on what qualifications are needed, what training may be applied for, and how to find suitable child care to fit in with any training or job that may be chosen. We have collected all the information on registered child care in Cambridgeshire, and parents will be able to search for nurseries, child minders, out-of-school clubs and much more.
In addition, the service provides signposts to other helpful agencies, such as the under-eights advisers, the benefits advice centre, the citizens advice bureau and careers guidance. We have also made available details of play, sports and leisure activities for children, so that parents can make full use of the wide range of activities on offer in Cambridgeshire.
In setting up the system, we had help from many organisations, including Cambridgeshire county council, Cambridge city council, and Greater Peterborough training and enterprise council, as well as Cambridgeshire TEC. A huge number of voluntary sector organisations also contributed. We had advice and help from the citizens advice bureau in Cambridge, Cambridge jobsearch, Cambridgeshire careers guidance, Cambridge women's resources centre, Cambridge university and many others. We also had huge support from several private organisations, most notably Andersen Consulting, which provided a superb piece of software. It is stunning, and user-friendly for people who may not be accustomed to accessing such technology.
I am pleased to report that, although the service was launched only on Monday, there are already 500 hits a day—that is, at least 500 accesses to the service every day. We have had some success already. Last week we managed to help a working mother whose children are at school in Saffron Walden, where half-term was last week. She wanted to find some child care in Cambridge, where she was working, and assumed that that would be difficult, because most of the half-term child care there would be arranged for this week, which is half-term in Cambridgeshire. I am pleased to say that she received help from the system, and quickly located a child care organisation that could help her.
Another example concerns an employee relocating from Sweden. If the service had not been available, he would almost certainly have had to wait until he arrived, to find the child care that he wanted, but by using the Internet service, he made arrangements from Sweden before he arrived, and his children are now happily settled in nursery schools in the Cambridge area.
The service is aimed primarily at lone parents. I was therefore somewhat surprised when I heard that the Benefits Agency's Parent Plus scheme would be piloted 994 in Cambridge. I have been told that under that scheme, an organiser has just been appointed to search for information on child care in Cambridgeshire and make it available. Given that our service is already up and working, and has made information about all registered child care available on the Internet, and through citizens advice bureaux, council offices and libraries throughout the county, I find that extraordinary.
What we are doing has been described as a first-stop shop or as "simple government". I should like to think of it as a re-engineering exercise. Instead of thinking about the ways in which public and private sector organisations supply information to members of the public, we are turning the system on its head. We are thinking about the needs of a specific group of customers, and are using modern technology to supply what they need in the most simple and user-friendly manner.
That not only makes information more accessible and easier to use, but gives people more power over their own lives. It enables, it motivates and it means that things that previously seemed impossible are suddenly within one's grasp. I hope that the service will take off, and that we shall be able to expand it nationwide. We need a Government with the energy and vision to help that happen—qualities sadly lacking in the present Government. Let us hope that we shall soon have a Labour Government, who will do all they can to promote it.
I shall briefly pick up the point made by the hon. Member for Rochdale (Ms Lynne), who speaks for the Liberal Democrats, about pensioners who, although entitled to income support, do not receive it. About 1 million pensioners fall into that category. In many cases, the sums that people do not claim are quite large, and the average sum unclaimed is £14 a week.
Some such pensioners already claim council tax benefit, and the form used to claim it is almost identical to that used for claiming income support. Birmingham city council has an innovative scheme that makes good use of the information on that form. The computer system that assesses people for council tax benefit also assesses them for income support.
When pensioners make a claim for council tax benefit in Birmingham, the computer assesses the claims and sends them supplementary information on a piece of paper, telling them not only whether they are eligible for income support but, if appropriate, the weekly sum to which they would be entitled if they claimed it. The form then suggests that pensioners tick a box indicating whether they would like to claim. If the box is ticked, the information is sent on to the Benefits Agency, and the claim is made as simply as that.
Of course, that system would not benefit people who, although entitled to council tax benefit and income support, do not claim either. But if it were introduced throughout the country, it would enable us to catch many pensioners who do not claim the income support to which they are entitled.
The Government talk about take-up schemes, but they did not take up our suggestion that the data matching outlined in the Social Security Administration (Fraud) Bill could be used in a positive and beneficial way, to enable the new computer systems to identify pensioners who could claim income support but do not, and calculate their entitlement. With a minor tweaking of the system, 995 we could provide such computer systems and eliminate at a stroke the pensioner poverty that the hon. Member for Rochdale described so well. The Government are not addressing the crucial matter of the rising number of pensioners who do not claim the benefits to which they are entitled. We should do all we can to eliminate pensioner poverty.
§ Mr. Matthew Banks (Southport)
The Labour party has come a long way in this Parliament: I recall that, several years ago, we would listen to the sharp wit of the right hon. Member for Glasgow, Garscadden (Mr. Dewar) or the dulcet tones of the hon. Member for Islington, South and Finsbury (Mr. Smith), and we would have one or more votes on the orders; now, the Labour party asks the usual channels for a full day's debate and can barely come up with one or two speakers. It is pathetic.
I do not do this often, but if I might presume to give my hon. Friend the Member for City of Chester (Mr. Brandreth) some advice as he sits quietly and attentively on the Front Bench, perhaps next year, when we are returned to office, when the usual channels on the Opposition side ask for a full day's debate, they might be asked a little more searchingly whether they will be able to come up with any speakers.
Almost in her opening sentence, the hon. Member for Peckham (Ms Harman) told us that we would not be having a vote tonight. In 1994, the Labour party told its Back Benchers not to vote, but about 50 or 60 of them did so. I believe that the hon. Member for Cambridge (Mrs. Campbell) was among them. The hon. Member for Kingswood (Mr. Berry) did not bother to stay on that occasion.
It is enormously sad when, in a debate such as this, on issues that are enormously important to the less well-off and the less fortunate in our society, so few Opposition Members seek to catch your eye, Madam Deputy Speaker, or stay throughout the debate.
I represent a seaside constituency that is possibly in the top 10 in the country for the proportion of elderly people, and senior citizens regularly come to me with problems such as those described by the hon. Member for Rochdale (Ms Lynne). I do not agree with everything she said, but I want to home in on her point about the importance of citizens advice bureaux. I pay tribute to Margaret Wilson, the manager of the bureau in Southport, and her colleagues, who do such a splendid job, as a result of which fewer people need to see me at my advice session than would otherwise be the case.
The hon. Members for Peckham and for Rochdale both said that we might not have a Division later, although some of us are far too cautious to rush away, but if the matters are not contentious, as the hon. Member for Rochdale suggested, why did she vote against one of the orders last year? This is not the first such debate that I have spoken in. Looking back in the Official Report over several years, I have noticed that, during a Division in 1994, I raised a point of order expressing disbelief that Opposition Members could vote against the annual uprating of social security benefits.
The hon. Member for Islington, North (Mr. Corbyn) got a little hot under the collar in suggesting that my hon. Friend the Member for Colchester, North (Mr. Jenkin) had some interest to declare. Of course my hon. Friend had, 996 as always, acted perfectly properly. If I have an interest to declare, it is that I am in receipt of a social security benefit, and perhaps in a moment I might draw on my personal experiences to underline the point made by the hon. Members for Rochdale and for Peckham about the plight of war pensioners.
War pensioners are often somewhat abused in the political arena, and we see far too many crocodile tears. If we were to target resources away from another group to pay war pensioners more, it would not necessarily mean that we were targeting them on those in greatest need. War pensioners are not necessarily 65 or older; many are considerably younger than me.
My hon. Friend the Member for Havant (Mr. Willetts), who has had such an influence on Conservative thinking over the years, touched on the importance of younger people making private provision well in advance for their retirement. My hon. Friend the Member for Teignbridge (Mr. Nicholls) said that, at the moment, three to four people were paying taxes to cover the pensions of those in retirement, that early in the 21st century it would go down to about two to one, and that in the not-too-distant future far more people would be in retirement than in work paying taxes to look after them.
All too often, we hear constituents saying that they have paid their dues. It is difficult to explain to them that their national insurance contributions do not come anywhere near paying for the pensions they receive. It is therefore important for our younger constituents to think carefully about saving and contributing to private pension schemes.
I endorse the point made by my hon. Friend the Member for Havant about over-regulation in the City. We need a sensible and appropriate form of regulation in the pensions industry, but it should not be over-restrictive. In a previous career with Barclays bank, I came across people who had money—not necessarily a great deal—sitting around in accounts, that could have been better used, but they were frightened of the regulations, or found it difficult to make choices because of the complexity of the pensions industry.
We heard earlier about the enthusiasm with which the Labour party would like to impose a windfall tax, if it ever got the chance. Such a tax would affect not the so-called fat cats but many of our constituents on the most modest means, who would have to pay higher gas, electricity or water bills. It would affect those on the benefits that the orders will uprate.
The more we hear about a windfall tax, the less the public are fooled. The public are not fools; they know that somebody will have to pay, and that those with money—at the upper echelons, as was said earlier—will manage to avoid it. People much further down the scale—those we are trying to get out of the poverty trap—would be most affected.
It is important to target resources to help those in greatest need to get back to work. All too often, constituents say, "If only we could have a little bit more help. It really isn't worth my while taking a full-time job, because I'm going to lose this benefit or that money."
I pay tribute to the Government's efforts to boost family credit whenever possible, which has been such a valuable asset in helping people back to work. I believe that the most is given where the need is greatest. I hope that my hon. Friend the Minister will be able to tell us later how much support we are giving to how many people through family credit.
997 It would be devastating if we had not just a windfall tax, but the ravages of the social chapter and the minimum wage, with all its difficulties of pay differentials. Some Opposition Members may want a minimum wage for all the best reasons, but I sometimes think from listening to them that it is merely the politics of envy. However, I will leave that to one side.
Under a minimum wage, those who received increases in their pay might not be those in work on the lowest pay rates. It is rather like arguing for council house sales receipts to be spent, but finding that those receipts are in places such as Malvern Hills district council—where there is not the greatest need to spend money on housing.
I represent a seaside resort, and I shall mention two issues to illustrate how the matters to which I have alluded would affect my constituency. As in other seaside resorts, we have slightly higher than average unemployment, and seasonal unemployment. Many people who are not originally from Southport drift in from the hinterland, and sometimes from hundreds of miles away—some people have come to my surgery from as far away as Kent. Recently, the single regeneration budget has provided an investment of £8.9 million—which has brought in a further £31 million from the private sector—to revamp the town centre, develop a sea wall, provide new housing and enable other regeneration plans to come to fruition.
On a subject close to my heart—it is one of which the Minister will be aware—the money will help us to undertake our review of local government so that we can become a county borough again. All this is intended to boost the local economy and local jobs. What would happen if we had a minimum wage and a windfall tax? They would decimate all the good work that we have achieved in this Parliament. We are trying to rebuild the tourist infrastructure in the town, but I am immensely worried that, under a Labour Government, there would be nothing for my constituents except greater unemployment.
In one of the seven wards in my constituency—those who know Southport know that that it is only seven miles long by one mile wide—there are 70 nursing homes. What would happen to low-paid workers if Labour came to power and implemented a minimum wage? It would decimate the number of jobs available. It is bad enough being ruled by the Labour party—aided and abetted by the Liberal Democrats—from Bootle, but it would be devastating if we had a Labour Government to go with it.
The hon. Member for Peckham said that people are having to sell their homes to provide care for themselves. In my local authority area, the Government have given extra money from emergency contingency reserves not just once, but twice to deal with what might be described as a unique problem of care for the elderly and bed blocking. But none of the money provided by the Government for those who have savings of £16,000 and under has been spent on the very people that the Government sought to help.
That underlines the fact that my authority—effectively run by the Labour party—has one of the worst records in the country in looking after the elderly. The hon. Lady was quite wrong to suggest that, as a result of Government policy, people have had to sell their homes.
It is important to continue to combat fraud. My hon. Friend the Member for Teignbridge referred to roads protesters, and I too believe that it is utterly disgraceful 998 that people who are frankly not available for work may well be claiming benefit. I hope that my right hon. Friend the Secretary of State and other Ministers will continue to take initiatives to crack down on bogus claimants. In my constituency—which is predominantly elderly and middle-class—most people have little in the way of savings, but have worked hard all their lives and scrimped and saved for their retirement. Every pound we save by combating fraud is a pound that we must spend on those in the greatest need.
I return to the subject of war pensions. War pensioners seem to be almost flavour of the month with some Opposition politicians. During the recent by-election in Yorkshire, the Liberal Democrats ran a campaign targeted almost solely on war pensioners, and the hon. Member for Peckham said today that the Government were not doing enough for war pensioners. I am living proof of the fact that war pensioners are not all terribly old buffers—although some may be—or senior citizens of pensionable age.
War pensions are benefits given to people who have an injury of one kind or another. Opposition Members who seek to boost the benefit in real terms—by a figure that they have not yet told us—should realise that that will not necessarily put more money into the pockets of those who need it the most. In an earlier intervention, I suggested—in a tongue-in-cheek fashion—that, if I had a pound for every war pension I had gained for my constituents during this Parliament, I would be a fairly wealthy young man. One of my hon. Friends said that I am not a young man, but I am in comparison with him.
Boosting war pensions by giving people more money depending on their percentage of disability does not necessarily target people as well as I would like. I pay tribute to the Government on this matter. It is not a case of demand exceeding supply, as the Government have provided extra resources for tribunals to look after the enormous number of people who—as a result of the publicity given to war pensions by the Department of Social Security—have made an application.
I will not comment in detail on the issue of people with hearing impediments, although my hon. Friend the Minister for Social Security and Disabled People may think it appropriate to do so in winding up. However, it has been a great success for the Government's social security policy.
I have one constructive criticism on war pensions, and I believe that it has been addressed during this Parliament. On the day of the general election in 1983, I was evacuated to a military hospital. I watched the election results on television, and it was that night that I said to myself that, if I could not stay where I was, politics was what I would try to do. Some years later, Madam Deputy Speaker, you are stuck with me.
It took a long time for me to claim, be assessed and have the advantage of a 20 per cent. disability pension, and I received between £90 and £100 per month tax-free. If one compares my take-home pay with that of one of my constituents who may have next to nothing, one sees the difference.
I deprecate those hon. Members, whichever party they are from, who use war pensions to try to gain votes. Ex-service organisations and the Royal British Legion would not want politicians to continue do so. However, I pay that genuine tribute to the Government, because 999 they have done a great deal to ensure that many people whose disability was not perhaps recognised early enough in their lives now have a war pension as a result of their injuries.
In the 1970s, under the last Labour Government, there was 27 per cent. inflation, the Government did not pay the Christmas bonus to senior citizens, and there was no new hospital for Southport because they had to cut the hospital building programme by a third—we had to wait for the election of a Conservative Government before we got our brand new district general hospital in Southport. Looking at the record, I have no doubt that the interests of my constituents will best be served by the re-election of this Conservative Government.
§ Mr. Bernard Jenkin (Colchester, North)
I am grateful to have caught your eye, Madam Deputy Speaker. I confess that I had not intended to detain the House for long. I have a few, I hope, pithy things to say, but I feel that I have a responsibility to expand on the comments that I intended to make, because there has been such a paucity of speeches from Opposition Members. I do not unduly criticise them for failing to produce a lot of crocodile-tears speeches on the social security system, but I wonder what it means. I am interested in the speculation of my hon. Friend the Member for Southport (Mr. Banks) on their silence.
Could this be the reason? The age of reality seems to have dawned on certain Opposition Front Benchers, notably the right hon. Member for Dunfermline, East (Mr. Brown)—he is the ghost at this feast, because he instructed the Opposition social security team to stick to the spending plans set by this Government, but it is my guess that not many people, particularly in the Labour party, want to support the proposals of the ghost at the feast. For years, the Labour party has established itself on the principle that increased Government expenditure is the way to solve the ills of the nation. That has been the bedrock philosophy of the Labour party. Having that foundation stolen from under their feet has left many Opposition Members drifting in the ether. I regret that we could not hear from more Opposition Members with their drifting speeches this evening.
I take great pleasure in taking part in this debate and following my hon. Friend the Member for Southport. This budget is probably the most important issue that we ever discuss in the House, not simply because it is by far the biggest, but because we do not have a political system that enfranchises the poor—there are various definitions of the poor, including the bottom 20 per cent. and those on income support—as a pressure group. When we change benefits for poorer people, there are no riots in the streets, the trade unions do not rush to the barricades and there are no particular groups in the House that can sway large numbers on those issues. The poor of this country are the responsibility of every hon. Member, because each and every one of us represents a constituency in which the recipients of this budget live, so it is up to each and every one of us to represent the interests of our constituents as best we can in respect of this budget.
I never lose the opportunity to remind whatever audience I happen to be addressing, whether the House or elsewhere, of the background that we have to live with—the three numbers that stick in my mind when considering 1000 the growth of social security. When the Conservative Government of 1974 left office, social security expenditure represented 7.4 per cent. of gross domestic product; when we regained office in 1979, it had risen to 9 per cent.; and by the time the Social Security Select Committee dealt with the growth in social security expenditure in 1994, it had reached nearly 12.5 per cent. of GDP.
The great achievement of my right hon. Friend the Secretary of State during his tenure of office has been to begin to reverse that trend of inexorable growth. Even during Mrs. Thatcher's Administration, the trend rate of economic growth may have been about 2.2 per cent., but the trend rate of growth in social security expenditure was 3.3 per cent. We are stuck with that history.
It was my right hon. Friend the Secretary of State, in his famous Mais lecture, who burst open the problem of that structural growth in social security expenditure and forced it on to the political agenda, forcing hon. Members of all parties to discuss the issue and face the consequences of not doing anything about it. Only my right hon. Friend has been able to do something about it, and that is what we need to discuss today. His great achievement has been to reduce the rate of growth in social security expenditure to something that we can conceivably afford into the future—a rate that is below the trend rate of economic growth—so that we can look forward to that expenditure becoming a reducing proportion of GDP, and so that we can, as many Opposition Members have suggested, transfer expenditure to other priority programmes and to the general competitiveness of our economy.
One of the ironies of this debate is that new Labour grudgingly admires that achievement. The Labour party, or certainly the Front-Bench team, has switched its attack. The old attack was based on the gut reaction that we should spend more and that every problem should be dealt with by more money.
§ Mr. Jenkin
The hon. Gentleman has switched his attack. He says that we are spending too much. As I explained, that may be why so few of his colleagues are here to support him, because they do not agree with that policy. His attack is that we spend too much and that the growth in social expenditure that he aided and abetted during the Thatcher years has become an evil to be attacked. The Opposition have switched their attack the other way—we have not cut expenditure enough.
Even then, there is a fundamental inconsistency. Opposition Front Benchers are playing two tunes: one tune to try to reassure the electors that the next Labour Government—whenever they will be elected—will not need extra taxpayers' resources, and the other for their trade union supporters, their Back Benchers and the constituency Labour parties, telling them that more money will be available.
The policies that Labour espouses—for example, the minimum wage—will indirectly and directly increase social security expenditure by adding unemployed people to the dole queues. Welfare to work has been properly costed at more than £800 million and may return some people to work, but the net cost would be more than £440 million.
1001 It is a failure of understanding on the part of the Labour party if it thinks that there are easy stones to turn over to find self-financing schemes to get people back to work more readily and to reduce the social security burden. That is the Midas touch that Labour promises to bring to the social security budget. If it were easy, would not every western Government with a large welfare budget leap at its proposals? Experience shows that, where such experiments have been tried, they prove to be more difficult to achieve—and more rigorous, perhaps even more authoritarian—than Labour would have us believe.
Another Labour policy is abolition of the 16-hour rule. How nice it would be to allow people to work more than 16 hours a week and not confiscate their benefits, but that promise would cost another £875 million. Labour has failed to live up to that promise. The introduction of local discretion in social security policy is a desirable aim, but if introduced in isolation—as if it could ever be a revenue-neutral policy—the most conservative estimate is that it would cost another £410 million.
Most staggering of all is the proposal for a guaranteed minimum pension. All evening, Opposition speakers have railed against the evils of means testing, yet they want to introduce the most massive increase in means-tested benefits for pensioners that can be imagined, amounting to an annual expenditure increase of £2.2 billion. That is against the background of their opposition to every revenue-saving measure proposed by my right hon. Friend the Secretary of State during this Parliament. The idea that the Opposition—I am tempted to use that uncouth phrase, "that lot over there"—could he responsible guardians of the public purse when they offer a concoction of inconsistency, economic moonshine and downright dishonesty, is extraordinary.
Perhaps the greatest irony is the saga of the windfall profits tax. Let us explore its background. It is true that, early in the life of this succession of successful Conservative Governments, my right hon. Friend Lord Howe, the former Chancellor of the Exchequer, introduced a windfall profits tax on the banks. The background to that was a quantum change in the method of calculating interest, so that, overnight, the banks had a windfall gain in their profits. It was not actual cash coming into the banks but a change in bank regulation which suddenly and dramatically improved their balance sheets. Because it was a regulatory change, a windfall profits tax was justified. There is nothing of that nature with the proposed windfall profits tax on the privatised utilities, which lies in the background of this debate. At least a bank is a bank; there is argument about what constitutes a privatised utility.
Labour's friends in the former privatised companies are trying to wriggle out from the obligations that are to be put upon them. [Interruption.] It would be invidious to mention names in this place. There is also the question of what constitutes a windfall profit.
All our 33 privatisations have been opposed by Opposition Members, who said that they would not work. The right hon. Member for Glasgow, Garscadden (Mr. Dewar) told us that British Airways would be the pantomime horse of capitalism, but that turned out to be one of our most spectacularly successful privatisations. Their opposition continued right up to our latest 1002 privatisation, that of British Rail. We privatised Railtrack, created and sold the leasing companies, and introduced rolling stock companies and the passenger rail franchise companies. We are attacked by the Opposition not because it has not worked, as they forecast, but because it is too successful.
So successful and cash-generative have our privatisations been, and such are the quantum leaps in services to the customer that have been achieved, that the Opposition think that those companies are too profitable and they want to take the money away. It is ironic that the policies that they wish to fund if, God forbid, they are ever returned to government, and that they would have us believe would be the fruits of their efforts, are actually the fruits of our policies. That underlines how unsustainable is their philosophy of public spending and Government.
When the right hon. Member for Dunfermline, East (Mr. Brown) made a speech capping the spending ambitions of his fellow Front Benchers, my right hon. Friend the Prime Minister described it as the jackdaw speech. What a brilliant image that is. New Labour is stealing Conservative policies, but it is stealing them in the manner of a dumb animal picking up bright things because they seem attractive, to salt them away, not knowing their value.
There was a similar lack of understanding in the exchanges between my right hon. Friend the Secretary of State and the hon. Member for Peckham (Ms Harman). She is beginning to mouth the thinking of the Social Security Select Committee about the future of social security. There is a problem with the growth of means-tested benefits, and the Government are fully aware that the growth of means testing, particularly for those in or near to work, discourages work and discourages future pensioners from saving. However, the language of the debate has been created not by Labour Front Benchers but by the Social Security Select Committee and, in particular, by our much-loved and revered Chairman. He created the language; he invented the term "poverty trap" when he was director of the Child Poverty Action Group. He has enlarged the language of the corrosion of positive social virtues through the process of means testing. He is having some difficulties, as we all are, in going further than that.
It is not good enough for the hon. Member for Peckham simply to rail against the growth of means testing and then propose absolutely no solutions for dealing with it. In the background is the implication that there needs to be more general expenditure on welfare and more general benefits to do away with means-tested benefits. Any efforts that Conservatives have made—with the introduction of Parent Plus and family credit—to turn means-tested benefits into positive benefits that help people back into the labour market are immediately attacked by the Opposition as subsidies on low pay. There is no understanding of the problems or their solutions.
New Labour is new; it has changed, but it is still way behind the Conservatives. I have one or two differences with my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler). After the battles that he had about, for example, uprating pensions in line with prices or wages, I can understand his amazement that the new Labour party has been converted to the uprating of state pensions by prices and to the need for funded second-tier 1003 pensions. However, it is a little late for the Labour party to be converted, because the decisions needed to be made 10 years ago, and to keep being made.
It was the Labour party that fought the provisions of the Pensions Act 1995, which further reformed state earnings-related pension schemes to contain the future liability. The Labour party is still behind us, because, by talking about the introduction of stakeholder pensions, it harks back to the sort of state corporatism that the Social Security Select Committee saw in Singapore. I see that the hon. Member for Croydon, North-West (Mr. Wicks), who joined us on that trip, is in his place. The Labour party is harking back to the sort of state corporatism that the old colonial British Government left behind in Singapore in the 1950s.
When we asked the Labour party who set up the central provident fund system in Singapore, we were told that the Singapore Government inherited it from the colonial administration. Things have moved on since then; we do not want a paternalistic Government-controlled pensions system, whether funded or unfunded. We want a system in which individuals and families have personal control over the capital that they have invested for their future and their families.
To start suddenly talking about second-tier pensions half way through the 1990s—when half the working population has already had second-tier pensions, and been saving for them in occupational schemes for at least 100 years, in personal schemes for at least 50 years, and most particularly and more populously, for the past 10 years—after opposing opting out from SERPS for the past 10 years is extraordinary and inconsistent. I congratulate the Labour party on its progress. We should regard it as a delinquent child who is making unexpected progress, but let us not pretend that it is an adult political party capable of making adult political decisions as an adult Government. There is much more progress to be made.
The hon. Member for Peckham proffered her idea of stakeholder pensions as a second tier, but she is actually proposing a fourth tier. We already have three tiers: the first is the basic state pension, the second is the state earnings-related pension scheme, which can be commuted into a funded personal pension, and there is often a third tier in terms of voluntary savings for retirement. The Labour party now seems to be proposing a fourth tier.
I agree with my hon. Friend the Member for Havant (Mr. Willetts) that part of the origin of the misselling problem is the extraordinarily complex and excessive regulation of the private pensions market. By that, I mean not simply the regulation of salesmen's behaviour but regulation in its broadest sense: regulation creates a broad complexity of pensions products, and the tax system creates many extraordinary anomalies to encourage people to save.
If we are looking to the future, we need to join the great debate about funded and unfunded pensions and about hidden liabilities. We need to talk about the future of the welfare system in terms of a savings-based welfare system built on personal and family capital. That means jettisoning all ideas about moving over to the European social model based on collective state provision. It means turning our backs on that failed system, because a contract between generations is bound to fail as demographics change. It means moving the opposite direction to stakeholder welfare.
1004 I have one last thing to say tonight: watch the work of the Select Committee on Social Security. I hope that the framework of the debate in our report on savings for retirement, which should be produced before the end of this Parliament, will be the future and not the past, which is what the Labour party is offering us.
§ 9.4 pm
§ Mr. Robert G. Hughes (Harrow, West)
I apologise for not having been present for the entire debate. I had to speak to a lobby in the Grand Committee Room, but I was here at the beginning and I heard the speech made by the Opposition spokesman, the hon. Member for Peckham (Ms Harman), which was curious to say the least. She fell into a particular trap.
As usual, wise things have been said by the hon. Member for Birkenhead (Mr. Field), who is the Chairman of the Select Committee on Social Security. He said that anyone who says that Labour's welfare objectives can be achieved without spending more either has something wrong with them or should not be trusted. I am not sure which of those is true of the hon. Member for Peckham, but plainly one of them must be, because she seemed to think that Labour could achieve its social objectives without increasing expenditure.
At least the hon. Lady hesitated before saying that, whereas her predecessor, the hon. Member for Islington, South and Finsbury (Mr. Smith), had no compunction. When asked whether Labour could achieve its plans without spending more money by my right hon. Friend the Secretary of State in last year's debate, he responded:Yes, and if the Secretary of State will contain himself for a few weeks, he will learn how we intend to go about it."—[Official Report, 20 February 1996; Vol. 272, c. 211.]That was a year ago, yet we are still waiting.
We get bits and pieces, but no properly costed programme to carry out the objectives that Labour Members like to tell us about, not only in the Chamber but outside. They make promises and talk about how wonderful the one-off payments used to be, which leads people to believe that we will go back to one-off payments if there is a Labour Government. None of the plans is costed, nothing is clearly stated—they say one thing to one group and something else to another.
My right hon. Friend the Secretary of State was characteristically too generous to the Labour party when he spoke about its spending plans. He said that it would seek to contain expenditure across the whole range of Government spending within the current spending plans. However, over the period of the public expenditure survey round, those spending plans are predicated on about £9 billion of privatisation proceeds. The big question is, therefore, if a Labour Government are going to have to raise that money, what will they privatise?
We know—at least we think we know—that it will not be the Tote. Until the Labour party—which has opposed every single privatisation and every single agency being put out to the private sector—is able to come up with a list of things that a Labour Government would privatise, its spending plans have a huge hole in them, even at the current spending targets. Until Labour Members come clean on that, we will not know what they are talking about.
The theme of Labour Members' speeches that I have heard tonight is that the gap between rich and poor has increased more in Britain than in any other major 1005 developed country, which is a quote from the previous Labour spokesman on social security, the hon. Member for Islington, South and Finsbury. However, the facts simply do not bear out that assertion. We should look at what is really happening in Britain. That is not to say that there are no problems or that there are no people who are poor or who find life difficult, but there can be no doubt that the Conservative Government's actions have helped many poorer people to become richer.
The Government have a programme of major reforms and of targeting expenditure where it is needed, of helping those most in need—for instance, spending on vulnerable groups has increased by £1.5 billion a year since 1988—of improving the system of child benefit, of cracking down on fraud and of helping people into jobs. As my hon. Friend the Member for Colchester, North (Mr. Jenkin) has said, Labour Members have said not a word about the success of family credit. They did not mention the fact that we introduced it, and improved it in 1992, 1994 and 1995. That benefit has boosted the incomes of families with children, who are in work but who have low incomes. Almost 700,000 families now receive family credit, which is worth an average of £55 per week.
A moment ago, I asked what is really happening in Britain. I wonder whether Opposition Members would recognise the Britain that is described in the following terms. The average incomes of the poorest tenth of the population in 1991 had risen by nearly 50 per cent. in real terms by 1994. Do Opposition Members recognise that description of Britain under a Conservative Government? Do they recognise the fact that the poorest 10 per cent. of the population by income spend 14 per cent. more now than they did in 1979? Do Opposition Members deny that that is the situation in Britain today? Do they deny that less well-off people now have a higher standard of living than when Labour was in power? [Interruption.] I shall give way to the hon. Member for Tyne Bridge (Mr. Clelland) if he thinks that he knows his facts.
Of the 20 per cent. of the population with the lowest incomes, 85 per cent. now have a fridge-freezer compared with only 32 per cent. in 1979. Opposition Members may think that that is irrelevant, but it shows what changes have occurred. Some 75 per cent. of that group have central heating, compared with 40 per cent. in 1979. If the hon. Member for Tyne Bridge thinks that I am making up those figures, he should intervene and say so. They are the facts: this is what is happening in Britain today under a Conservative Government.
Most people are on low incomes for only a short period because our society is highly mobile. Opposition Members shake their heads, but they will not get to their feet and deny that that is happening in Britain today.
§ Mr. Hughes
That comment is characteristic of the hon. Gentleman. These are the facts. If he is confident that I am wrong, I challenge him to dispute my facts. We have a highly mobile society, which is also a meritocracy.
1006 Almost half of those on the lower tenth of incomes in 1991 had moved up to a higher income band by the following year. Do Opposition Members deny that fact?
§ Madam Deputy Speaker (Dame Janet Fookes)
Order. I do not think that the debate should proceed via answers to questions from sedentary positions.
§ Mr. Hughes
Although they will not come to the Dispatch Box and say so, Opposition Members deny that what I say is true. I have just quoted from the Institute for Fiscal Studies report of 1995, entitled "Poverty Dynamics in Great Britain". I think that people in this country would rather trust the IFS than Labour Front Benchers.
Less than 1 per cent. of men aged between 25 and 44 in 1978 stayed on unemployment, sickness or incapacity benefits between 1979 and 1993. About three quarters of men who leave their jobs find another job within a year. Listening to Labour Members, one would think, first, that long-term unemployment is a new phenomenon; and, secondly, that the same group of people remain unemployed year after year.
Finally, according to the 1996 Organisation for Economic Co-operation and Development study, "Employment Outlook", Britain enjoys more upward mobility among young workers than any from a sample of major western economies. Between 1986 and 1991, 62 per cent. of British under-25s moved up at least one band, as opposed to only 39 per cent. of young Swedes, whose social system new Labour would have us emulate.
That is what is going on in Britain. Our system has been improved and made affordable as a result of the heroic efforts of my right hon. Friend the Secretary of State. We have a system on which people can rely. All the Labour party can do is raise fears about its affordability, and raise people's hopes that somehow Labour would give them higher benefits. We know, as does Labour, that that is not true. Such deception by the Labour party will stop it ever having the opportunity to put its policies into practice.
§ Mr. Henry McLeish (Fife, Central)
I am not sure that the debate reached the dizzy heights of being interesting, but it has been an important debate nevertheless. The highlight came when the hon. Member for Colchester, North (Mr. Jenkin) got rather excited and suggested that the jackdaw was an animal, but at that point there were pigs flying round the Chamber as well, so what is new in the Government's approach?
Never have I seen Conservative Members so concerned to speak about the Opposition's policies. The proximity of a general election that Labour will win may loom large in their plans. I hope so. They spent a great deal of time attacking us this evening, but they refused to defend their appalling record on social security, especially in recent years under the guardianship of the right hon. Member for St. Albans (Mr. Lilley).
It is important to consider the charges that we preferred against the Government. Social security is a cradle-to-grave issue that affects virtually every individual in the nation at some point in his or her life.
1007 It is useful to reflect on some of the comments made during the debate. I have never before heard my hon. Friend the Member for Islington, North (Mr. Corbyn) referred to as a toff. It is a pity that he was not present to hear that criticism.
My hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) made an interesting point about the quality of service in the Department. I take the opportunity to praise one of the offices in my constituency. The lady—I am sure that I cannot use her name—has moved from being in charge of the benefits office in Kirkcaldy. She has been superb—courteous and effective, and the office that she managed provided efficient service. If every Department of State and every local government department were as effective as her office, less criticism would be levelled at public services throughout the nation.
I want to spend some time considering the issue that the Government do not want to talk about—poverty in modern Britain. The hon. Member for Teignbridge (Mr. Nicholls) suggested that the statistics on poverty were nonsense. I intervened at that point to suggest that one would describe the Government's statistics not as nonsense but as a worrying and sinister aspect of Britain as we approach the new millennium.
The Government put up no defence this evening. Over the past four years, an extra £15 billion has been spent on social security. The Government spend, spend, spend, but we have more poverty, more waste and more people living on the margins of society. The Government wax eloquent about the burdens facing the taxpayer, who pays more as a contribution to the social security budget.
We should put what the Government have been doing in context, and in doing so we should look at the past four years in particular. If the money involved had been not expenditure but investment, in a product that then materialised, we might have been debating that tonight; but, in a sense, all we have seen is a black hole. We can argue about the proportion of the budget that has been devoted to so-called family benefit, as against "failure benefit", "poverty benefit" or benefit for older people. [Interruption.] The Secretary of State says, from a sedentary position, "The facts are there; we are telling the truth." We can dispute the facts, but I think that it is important to look at the issue of poverty.
It was the Prime Minister who said, in an article in The Herald published on 4 March 1992,Some people are still not very well off, but poverty is measured by the Income Support level. This is the only way people measure poverty, the number of people above and below the Income Support level.That was the start of the Prime Minister's embarkation on the idea of the classless society. Moreover, it was at about that time that the current Secretary of State took over at the Department of Social Security. At the Conservative party conference, on Wednesday 9 October 1996, he said:But for us dependency isn't just a waste of money: it's a waste of lives. It not only drains the public purse, it saps the human spirit. That is why we are determined to continue our welfare revolution—developing a new approach to get people back to work—taking tough choices to curb welfare's relentless growth.The Secretary of State did not go on to explain why the social security budget was at an historically high level, and still growing, when he took over.
I think it important to identify two simple aspects of poverty. First, poverty is not just about money; in Britain, it means families and individuals experiencing social 1008 exclusion, welfare dependency, economic and long-term insecurity, community dislocation, detachment from the labour market and, critically—I hope that hon. Members on both sides of the House agree about this—the undermining of the self-worth of the individual. The catalyst in the creation of a productive and civilising society is the self-worth of every one of the 56 million people who live in the United Kingdom.
I said that poverty was not just about money; it is also not just about the poor. We are all involved. The recipients, or claimants, of benefit are obviously involved, but the taxpayer is playing an enormous role. One pound in three of public expenditure are now devoted to social security, and we have seen a remorseless increase over the past three or four years.
I have tried to underline the general importance of the issue, but I specifically want to confront the Government with the central charge that they are unaware, or else unwilling or unable to face up to their own statistics, which are contained in the quarterly reports on income support. We do not want to complicate life by talking about 50 per cent. of average household income or low pay at this stage.
Excluding those important considerations, let us dwell on income support. In February 1996, 5.8 million people were claiming income support. Let us recall what the Prime Minister said about the level of income support being something that could be used as a benchmark. That means that a population larger than that of Scotland is now claiming income support—and when we take into account dependants such as children and partners, the figure increases to nearly 10 million. Again, the Government, not I, worked out the ratio.
What does it mean in modern Britain for 10 million people—I exclude other definitions of poverty and low pay—to be on the breadline? What does that mean in a modern, civilised, prosperous society? It means all the things that I mentioned earlier, but it also confronts Governments, and it certainly confronts the Opposition. If we are to have a cohesive society in which fractures are healed, surely to goodness we must take account of nearly one in five of the population. Nearly 3 million children are being brought up in families whose income is, in fact, income support.
The central thrust of our charge this evening is that, in the past four years, there has been a spectacular explosion in costs and in the number of people claiming income support. Indeed, the Government's quarterly income support figures show that, between February 1992 and February 1996, a further 865 people claimed income support or entered poverty every working day. How can that be justified? I will give Ministers an opportunity to tell me, first, whether that figure is right—it is, and they know it—and, secondly, how they can justify the extraordinary explosion in the number of people marching to benefit offices day in and day out to receive girocheques.
We have been given the impression this evening that the number of unemployed people has gone down, but, in the four years to February 1996, every working day an extra 47 unemployed people claimed income support, an extra 140 pensioner claimants joined the poverty queue, and there were an additional 675 new claimants in terms of lone parents, the sick and the disabled. Those are chilling figures, and they come from the Department. [Interruption.]
1009 The Secretary of State—making an intelligent contribution from a sedentary position—asks what we will do about it. It would be useful to have a consensus in this country on the extent of the problem. As my hon. Friend the Member for Peckham (Ms Harman) suggested, it can start very soon indeed. We need only the prospect of an election victory and we will get on with the task of rebuilding Britain, especially the task of removing people from the exclusive category into which the Government have put them.
§ Mr. Bernard Jenkin
The hon. Gentleman recited a very good question from my right hon. Friend the Secretary of State. We all share the concern about the extent of means testing in the benefit system, but what will the hon. Gentleman do about it? Let us not retreat into tiresome little jibes at each other at this time of the evening.
§ Mr. McLeish
The hon. Gentleman cannot distinguish a bird from an animal, so I am not inclined to take many more criticisms like that.
The Conservatives' cheap jibe leads me to another criticism that I wish to make. We heard tonight that in one in five non-pensionable households no one works. That is modern Britain under the Conservatives. Let me quote another statistic. One in three of all households in Britain are on means-tested benefits. When we add up the catalogue of misery, it is clear that we will inherit a legacy of Britain on benefit, Britain on the breadline. As I said earlier, give us a chance and when the election comes we will start to get on with the problem.
I have other considerations for the Minister who will reply, because we have heard—[Interruption.] The Government may not like this, but I am afraid that they are going to get some more of it.
Let us look at the labour market, which is crucial. Again we heard claims that, over the past four years, under the present premiership, things have improved. Let us look at the reality. Between February 1992 and February 1996, the number of people claiming income support increased by 403,000. At the same time, the number—doctored 30 or 33 times, but what does it really matter?—of unemployed people, as measured by the civilian work force in work, went down by 390,000. The important point is that the number of people in work went down by 96,000.
Income support shoots ahead, unemployment goes down, through a variety of manipulative means, and the number of people working also goes down. When the Minister deals with that little conundrum, I should like him to explain what type of productive society we are living in, given that unemployment has gone down, and we know why; income support has gone up, and I think we know why; but we do not know why there are fewer jobs in Britain. The Government's suggestion that this country is the enterprise capital of Europe is humbug and hypocrisy, and it is quite worrying when so many people are trying to get back to work.
There is a clear dividing line between the Labour party and the Government. The price of failure is being borne by millions of citizens. Like us, they must yearn for a change. We need to return to a society in which the 1010 individual and his self-worth are paramount, and in which we can collectively as a nation start to put employment and education at the heart of the modernisation of the welfare state. We need a work ethic and a learning ethic. The learning ethic is the sound issue for the next millennium.
When we talk about taking costs from the welfare budget and investing that money in education, our proposals are derided. This is the old-fashioned Conservative party. It is not willing to accept that, unless we invest in those crucial areas, motivated by the learning ethic, we as a nation, whether a productive economy or a civilised country, will fail in the next millennium. The Government do not appreciate the reality.
We make the fundamental point that a successful and cohesive society goes hand in hand with a prosperous and successful economy. That is elementary. We must now take stock—to use another of the Prime Minister's famous phrases—of the calamitous mess into which the Government have got the labour market. If we acknowledge the two sets of statistics that I gave on the massive increase in poverty and dependency under the Government and the massive mess that they have made of the labour market, we can start to chart a way forward and to find solutions for the future.
An amazing development has taken place that is found nowhere else in the European Union or in other parts of the developed world. We have not only one welfare state in Britain, but three. In-work welfare is the new growth area. The Conservative party extols the virtues of family credit. There is clearly nothing wrong with family credit, but Conservative Members should appreciate that housing benefit, council tax benefit and family credit prop up low pay in the workplace. When we suggest a minimum wage, the Government find that horrible. The fact that there is minimum wage protection in 14 of the 15 European Union countries and in great swathes of the American economy, does not move them one iota.
There has been a massive extension of in-work welfare. The Government will not let people leave welfare and go into work, so £3 billion a year is spent on propping up low wages in the workplace. We want to do something about the cause and the cost of that, whereas the Government ignore the consequences and are unable to do anything about it.
The second welfare state is the out-of-work welfare state that we have had since Beveridge. Out-of-work welfare has grown, and we have witnessed the calamitous way in which it has been overseen by the Secretary of State for Social Security. We have in-work welfare and out-of-work welfare, but not content with ensnaring so many people into the welfare state, the Government have created a third one: it is called workfare, and it is neither work nor welfare. They are developing workfare as an alternative to their other policies.
If there is one word that sums up what the Government are about on social security it is "waste". We sat through a Committee considering the Social Security Administration (Fraud) Bill, and we made a number of suggestions.
§ Mr. McLeish
Forgive me, Mr. Deputy Speaker, for ignoring the idle chat of Conservative Members.
1011 In Committee, we suggested ways of tackling landlord fraud, but when matters come a little close to friends of the Conservative party, Conservative Members recoil. We wanted a register; we partly got that. We wanted a landlord offence; we did not get that. We wanted to help to toughen up a Government who are high on rhetoric but soft on reality. Waste is the key issue that distinguishes the Conservative party from a modern Labour party. We think that waste is a scandal. It is an abuse and it shows contempt for taxpayers.
We were very constructive in Committee, tried again on Report and perhaps might still toughen up the legislation in another place. Waste in social security was matched earlier in this Administration by waste under the poll tax. We now have the edifying spectacle of a beef tax, which is costing the nation £3.5 billion. Waste is no stranger to the Government. At the end of the day, the election will be fought on the basis that the Government are not interested in linking welfare to work, in tackling waste or in helping the 600,000 young people aged under 24 who are the victims of failed economic policies.
I issue a final challenge to the Minister. The windfall levy has been attacked in this debate. We are seeking to invest it in Britain's future, but the Government have derided that. I hope that the Minister agrees that getting people off welfare and into work and giving 600,000 young people the opportunity to get into productive work, training and education is right. I fear that the Government will not respond to such a challenge, but in government we will.
§ The Minister for Social Security and Disabled People (Mr. Alistair Burt)
It is a pleasure to follow the hon. Member for Fife, Central (Mr. McLeish), who was known as a wily midfielder in his day and certainly showed his wiliness at the Dispatch Box, producing an effort well worthy of him that rescued to some degree the speech of the hon. Member for Peckham (Ms Harman). His speech was, however, a striking parallel with that of the hon. Lady's in that it contained no policies whatever of any decent substance. The only reference to beef was a sly one directed at the Government Benches—there was no beef in any policies that he might have proposed.
It was noticeable that, for most of his speech, the hon. Member for Fife, Central was supported solely on the Back Benches by the hon. Member for Rochdale (Ms Lynne) and his hon. Friend the Member for Stratford-on-Avon (Mr. Howarth), who was elected by thousands of Conservative votes. We find ourselves with a select audience, which is a shame because the speeches, especially those of Conservative Members, have been extremely good. It is of some disappointment that they have not been heard by a wider audience, which might have been so had the Opposition sought to challenge any of the orders and put anything to the test of a vote. However, they chose not to do so.
I shall do my best to answer the debate rather than follow the hon. Member for Fife, Central. However, I should like to thank him in passing for his comments on his Benefits Agency manager. It was kind and gracious of him. I am sure that his comments reflect the appreciation felt by the majority of us of those who work extremely 1012 hard on our behalf. I also thank my hon. Friend the Member for Southport (Mr. Banks) for expressing his appreciation of his citizens advice bureau manager.
§ Mr. McLeish
I hope that the comments will be passed through the ministerial team in the Department.
§ Mr. Burt
Yes, of course they will. I am again grateful to the hon. Gentleman.
The Opposition are supporting the measures that, from April, will increase benefit rates and therapeutic earning levels and revise national insurance rates. Opposition Members have in fact opposed all the measures that we have introduced in this Parliament to reform benefits, but the reforms have in some way contributed to allowing us the space for these upratings. I pay tribute to my right hon. Friend the Secretary of State. The number of comments made by my hon. Friends in appreciation of his handling of social security was noticeable, and I echo them.
My right hon. Friend reminded us that, in the 50 years since Beveridge, social security growth was 5 per cent. more than inflation. Thanks to our reforms, we have stabilised growth in social security to containable levels, even though there are pressures because the elderly are living longer and because of our support for the sick and disabled. That could be achieved only by the measures that we have taken in the past four Budgets. There now seems to be a consensus over the size of the budget, but it is disappointing that we had to get there on our own.
Consensus does not sit easily with some of the views that have been expressed tonight. There was a dispute across the Dispatch Box between my right hon. Friend the Secretary of State and the hon. Member for Peckham about the figures for growth in social security over the past few years. The figures are incontrovertible. I risk going over old ground, but the hon. Lady cannot make out that the majority of the increase in benefit expenditure has been caused by unemployment. The majority of the expenditure increases in the past few years have been related to the elderly and the long-term sick and disabled. Labour Members may see some form of black hole and think that there is an easy alternative way to look after our long-term sick and disabled and the elderly, but they never mention it.
The number of people in employment has increased from 24.4 million in 1979 to 25.8 million in the summer of last year. The figure is going higher still. The number of households with no one in work is a genuine issue. There has been an increase in the number of such households because of changes in the structure of society. There has been an increase in the number of single-adult households, including lone parents. Such households are less likely to include an earner than those with more adults.
The proportion of no-earner households in the United Kingdom is not radically different from that elsewhere—in Germany the figure is 15.5 per cent.; in France it is 16.5 per cent.; in Italy it is 17.2 per cent.; and in Spain it is 20.1 per cent. The growth in no-earner households is not just a United Kingdom phenomenon. The important question is what to do. Conservative Members are entitled to draw attention to the fact that the answers come from this side. All we get from the Opposition is criticism, but no decent answers to the difficult questions.
1013 The hon. Member for Peckham ducked the major challenge offered by my right hon. Friend the Secretary of State on the minimum wage. He pointed out the gross inconsistency in supporting a policy that subsidises employment to get people back to work but not recognising the impact on an employer of increasing labour costs through the minimum wage. The hon. Lady cannot have it both ways. If bringing an employer's labour costs down through subsidy improves his perception of taking on a worker, putting his labour costs up through the minimum wage must also impact on his perception.
That is not even a fair balance. The numbers to be thrown out of work by Labour's minimum wage far outweigh the amount of money that would be recycled through the scheme of taxing someone else £3 billion to put others back to work in the spaces that are left because of the sackings caused by the minimum wage. The policy is barmy. My right hon. Friend offered the hon. Lady the chance to explain the inconsistency, but she did not.
The hon. Lady's speech was also instructive on another important issue. She advanced her previous argument on pensions. My right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) made an exceptional contribution on pensions—a subject that he understands very well. He referred to the progress that has been made. I thought that important progress was made when the hon. Lady was dealing with Labour's plans for early retirement.
My right hon. Friend the Secretary of State smoked out some time ago the fact that if, under Labour's proposals, someone were to retire at the earliest possible age at no extra cost to the taxpayer, they would luxuriate in a pension for life £20 a week lower than the pension that they could expect if they retired at the earliest possible time under the current system, as most people do. That led to the question whether income-related benefits would be available to supplement a low pension.
The hon. Lady skated round that issue at the time, but she advanced her argument today when she said that there would be no extra cost to the system. Therefore, a person in that situation would not be eligible for income support. That is fascinating. Would people who are approaching retirement have to sign a pledge with the hon. Lady to say that they were willing to accept £20 less a week and that, if they fell on hard times, they would not seek access to the social security system in the future? Would that be a condition of taking early retirement? Is that what the hon. Lady means? Would people have to get permission from her to claim an early pension and then avoid falling on hard times, because she would not allow them access to income support? That was the clear implication of her remarks today.
In the future, pensioners run the risk of a pension that is £20 a week lower, and they would know that, if they fell on hard times under Labour, they would have no access to support from the social security system. I am not surprised that the hon. Member for Islington, North (Mr. Corbyn) is not in his place, because he would be spinning like a top if he understood the full implications of the hon. Member for Peckham's remarks this afternoon.
1014 The hon. Member for Peckham also mentioned lone parents.
§ Mr. Burt
The hon. Lady mentioned lone parents, nine out of 10 of whom are lone mothers. I am anxious to put on record what my right hon. Friend the Secretary of State for Social Security said at our party conference in 1993. He mentioned areas of rising spending and said:The third main area of rising spending is on lone parents. But I am less concerned about the cost than the breakdown of families. 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.We all echo those remarks, and they are not remembered often enough when my right hon. Friend's remarks about single parents are quoted.
Our work on lone parents is not a new area for us. I was interested in the comments made by the hon. Member for Cambridge (Mrs. Campbell) about her local scheme, and I would be grateful if she would keep us informed. We have worked on the problem of lone parents for some time, and we appreciate the differences with other countries which have more lone parents in work. Lone parents in other countries do not have the option of not needing to find work until their children are 16—they have to find work much earlier.
We have tried a number of schemes to put lone parents back to work, and the most successful is the family credit scheme. The hon. Member for Peckham did not mention that. She said that lone parents were left on benefit with no assistance to get back to work, but the family credit scheme has been outstandingly successful in getting lone parents back to work. It is one of the main reasons why some 300,000 lone parents now claim family credit at a cost of £1 billion. Since 1992, some 200,000 lone parents have left income support for family credit, and more will do so in the future.
We have worked on schemes with the National Council for One Parent Families for the past three years—the contract has been renewed—to research the work and training that will be most suitable for women who want to get back to work. My hon. Friend the Under-Secretary has studied that area and, together with my right hon. Friend the Secretary of State, has introduced Parent Plus, which will provide structured assistance in jobseeking and training for lone parents by way of a three-year pilot project.
§ Mr. Burt
As my hon. Friend says, it will be the best scheme in the world, because it is distilled from ideas from elsewhere and ideas that we have worked on for a long time.
Not only do we share a common desire to get lone parents back into work but, as has so often been the case in social security, it is we who have had the ideas, we who are putting them into practice and we who can create budgets that can deliver, unlike the Labour party, which simply makes pious promises.
The hon. Member for Islington, North made, as always, a significant speech. If the right hon. Member for Dunfermline, East (Mr. Brown) is one of the ghosts 1015 at this feast because of his contribution to social security, the hon. Member for Islington, North, along with the hon. Member for Leyton (Mr. Cohen), are also the ghosts, because they have spoken in the past of their belief in socialism; I have no doubt that their connection with the Opposition Front Bench is tenuous, to say the least.
The hon. Member for Islington, North went through the entire range of his concerns about poverty and other such matters but his sole solution was to tax the rich. As the hon. Gentleman knows, because I have debated with him for many years, there is not much between us in our determination to deal with matters such as poverty caused through lack of employment. As sponsor Minister for Manchester and Salford with responsibility for the city challenge projects in the north of England, I have seen the Government invest serious sums of money in a variety of areas where work has been hard to come by, in order to stimulate employment and improve social conditions in hard-hit communities.
That regeneration work has been among the most successful that the Government have accomplished, and the Prime Minister and others deserve great credit for putting money into those schemes and doing the job properly. However, having recognised that money alone is not enough, they have looked for good schemes and ways to help reduce the incidence of poverty.
As my hon. Friend the Member for Southport clearly said, the hon. Member for Islington, North and, to some extent, Opposition Front-Bench Members, have failed to see that poverty in the UK is not static. There is a great deal of mobility because people get jobs, have chances to improve their position and move up the income bracket with assistance and, above all, with the availability of jobs. Again, we return to the crucial contradiction in Labour policy. I do not understand how a group of people who have shared virtually every principle that they ever stood for but who cling desperately to at least one—the determination to get people into work—can have a minimum wage policy that is so contrary to that objective.
The Conservative party's determination to get people back into work is evidenced not just by the figures that show the reality of falling unemployment and rising employment but in our determination to resist the very policies that sound marvellous on the doorstep but would do such damage to working people. We are right to resist them vigorously.
My hon. Friend the Member for Finchley (Mr. Booth) had the right approach when he talked about people's attitude to employment and opportunities. He quoted the phrase that we need a hand-up society rather than a handout society. That is nothing new. He need not defer to the Labour party in terms of that phrase; we have all had it in mind as part of our policy for a long time. The only difference between us and the Labour party is that we achieve it. Our welfare-to-work, family credit and work incentive policies have done the job.
The hon. Member for Rochdale, surrounded by so many of her colleagues during the debate—[HON. MEMBERS: "Where were they?"]—put up a lone but brave battle on a number of different issues. I must correct her analysis on war pensions. The responses from those we have consulted on the proposal to simplify war pensions have been broadly welcoming.
The measures were greeted by the Royal British Legion with the words: 1016the decision on the changes has been most welcome and reassuring".The British Limbless Ex-Service Men's Association said:we are extremely happy with the decisions reached by the Government".The approach that we are now taking to war pensions in connection with noise-induced sensorineural hearing loss is sound. All those who have commented agree that the medical advice that we are now following is right. The Royal British Legion's medical advisers confirmed in their open letter thatnoise induced hearing loss and loss due to ageing are broadly additive".We accept—
§ Mr. Burt
May I finish the point?
We accept that the evidence on which our new advice is based has been available to the experts for some time. That means that the current advice should have been applied earlier. However, we shall honour existing awards, despite their lack of foundation, and no existing war pensioner will lose money as a result of the change of approach.
§ Ms Lynne
How come that Lord Mackay of Ardbrecknish, in the other place, seemed to back-track on the idea of new medical evidence? He seemed to admit that no new medical evidence had been brought forward, yet people who had experienced hearing loss—not to the extent of an 80-year-old at present, but hearing loss that could deteriorate over the years—would not get their war pensions. Why did Lord Mackay say that?
§ Mr. Burt
The clarification offered by my right hon. and noble Friend in another place related to the medical evidence. We had originally been under the impression that the medical evidence that we were receiving was new. In fact, it had been available for some time, and we might have acted upon it sooner. My right hon. and noble Friend was clarifying the fact that we did not intend to go back on awards already made, and confirming the fact that the advice on which we are now working had been available for some time.
§ Mr. Denham
Will the Minister confirm that, according to the experts, there has been no change in the medical evidence not only for "some time", but for 30 years? Is not the truth that it was a convenient discovery of an alleged change that led to the change in policy designed to hit future war pension claims?
§ Mr. Burt
I think that the number of years is immaterial. The point is that the policy that we are following now is correct, and based on medical evidence. We have clarified the small detail that had been left open through recent arguments.
1017 My hon. Friend the Member for Havant (Mr. Willetts), in a good contribution, described in some detail the importance of work incentives. Again, we could supplement his comments in so many ways by examining our work incentive strategy since 1988. We have introduced a series of measures to ensure that people move from welfare into work—from the introduction of family credit to housing benefit earnings disregards, from national insurance contribution bonuses and contribution holidays for employers, to housing benefit run-ons. Those measures have been responsible for ensuring that people have moved from welfare into work. In the face of such evidence, it is extraordinary that Opposition Members seem so determined to go back on policies that have proved so successful.
My hon. Friend the Member for Teignbridge (Mr. Nicholls) made several points. In particular, we share with him a concern that those who claim benefits should be available for work. I assure him that the benefit claims of people who take part in protests are processed, in the same way as everyone else's, to ensure that they are indeed available for work.
I am grateful for the assistance of my hon. Friend the Member for Beaconsfield (Mr. Smith) in passing on further information about a loophole. We do much to ensure that loopholes are closed, but we are always grateful for new information about them.
My hon. Friend the Member for Colchester, North (Mr. Jenkin), in what was almost the final contribution of the debate, hit the nail on the head when he described the difference between the Government and the Opposition in terms of the two tunes that Labour like to sing. There is one tune down here, which is spread round by the right hon. Member for Dunfermline, East, and it is about Labour sticking to our spending and tax policies. There is a different tune for the poor and disadvantaged, which says that in some way the Labour party still represents some hope for them.
The truth is that the hope for those who want to see an improvement in people's conditions in this country no longer resides with the Labour party; the hope for people to improve their circumstances lies with those who are getting people back to work: the Conservative party and the Secretary of State with his policies on social security.
My right hon. Friend the Member for Sutton Coldfield said earlier that we had won the arguments both on pensions and on social security. He was so right. This is 1018 no longer a debate. We go through as an icebreaker, and Para Handy follows behind like a little tugboat trying to make something of it.
We can answer the challenges. Some years ago, the hon. Member for Islington, South and Finsbury (Mr. Smith) was sent away to think the unthinkable on social security. The truth is that, as on so many other matters, the Tories have got it right.
Question put and agreed to.
That the draft Social Security Benefits Up-rating Order 1997, which was laid before this House on 31st January, be approved.MR. DEPUTY SPEAKER then put the remaining Questions required to be put at that hour.
Resolved,That the draft Social Security (Contributions) (Re-rating and National Insurance Fund Payments) Order 1997, which was laid before this House on 31st January, be approved.That the draft Social Security (Contributions) Amendment Regulations 1997, which were laid before this House on 10th February, be approved.That the draft Guaranteed Minimum Pensions Increase Order 1997, which was laid before this House on 31st January, be approved.That the draft Social Security (Incapacity for Work) (General) Amendment Regulations 1997, which were laid before this House on 31st January, be approved.—[Mr. Coe.]