§ 3.6 p.m.
§ THE MINISTER OF STATE, DEPARTMENT OF HEALTH AND SOCIAL SECURITY (LORD ABERDARE)My Lords, I beg to move that this Bill be now read a second time. This is a comparatively small Bill, but it marks an important step forward in dealing with the problems of poverty. It is concerned with poverty among families with children where the breadwinner is in full-time work bat has a low wage. It is not easy to arrive at precise figures of the numbers involved but, while they are only a small proportion of the working population, they are still too many in real terms. This aspect of poverty has given rise to deep concern in recent years and presents particularly difficult problems.
Most poverty arises from the absence of wages—because of sickness, unemployment or old age, or because the breadwinner has died. Such situations are met by a comprehensive range of social security cash benefits under the National Insurance Act. In addition, where these benefits are not available or are insufficient, supplementary benefits can bring 786 the income of the household up to a level laid down by Parliament. But people in full-time work, however low their earnings, are not entitled to these benefits, and while the vast majority of people who are able to work full-time have incomes which are well above this level there remain among them a small proportion of households with inadequate incomes. This is the problem with which we are seeking to deal in this Bill.
There are obvious and strong objections to any proposal to bring households of people in full-time work within the scope of the Supplementary Benefits Scheme. It would mean that their incomes would be brought up to the specified level, so that any change in earnings below that level would have no effect on income. Moreover, the administration of such a system would be extremely costly: earnings might vary from week to week and entitlement would have to be adjusted accordingly.
For the last 24 years, however, we have had one social security benefit which makes some impact on the problem of family poverty. Family allowances were introduced by the war-time Coalition Government. They were twice increased by Conservative Governments, and some three years ago the Labour Government made a further increase. They had to face then, as we do now, the fact that increasing family allowances in isolation is an extremely expensive way of tackling family poverty. These allowances are paid to all families with more than one child, the great majority of whom have incomes well above the poverty line. An increase of a shilling in the weekly allowance of each eligible child involves a gross annual expenditure of f19 million. In 1968, therefore, the Labour Government introduced the arrangement known as "clawback"—a device whereby those recipients of family allowance who are also liable to pay income tax at the standard rate have their tax liabilities increased by the amount of the increase in the allowance. Thus the benefit of the increase was restricted to families with incomes below the level at which that rate became payable, and the net cost was substantially reduced.
When we took office last June we were resolved to take steps to deal with the problem of family poverty, and with the 1968 example in mind we began with the 787 thought that the immediate way to do something was to follow the same course. When we went into the matter we found that there were substantial arguments against this. In the Budgets of 1969 and 1970 changes were made to tax reliefs and tax rates which had the effect of bringing the standard rate of tax into operation at a much lower level. As an increase in family allowances accompanied by "clawback" cannot help those who are already paying tax at the standard rate, the ranges of incomes over which a measure of this sort could bring benefit were severely limited. For example, after the Budget of April, 1970, a married man with three children all under the age of 11 became liable to tax at the standard rate if his earnings amounted to £16 1s. a week or more.
It was in this situation that we recognised that there was a serious limitation on the usefulness of the family allowance plus "clawback" technique as a method of bringing early relief. Further study showed other drawbacks. First, family allowances do not help families with one child, and could not be made to do so without a very large increase in administrative costs, since there are some three million one-child families altogether, only a very small minority of whom are in poverty. But our latest information suggests that perhaps one-third of all the families living below the supplementary benefit level are one-child families, and it is clear that we cannot ignore this group if we are to make a serious attack on family poverty. Secondly, an increase of 10s. a week in family allowances combined with "clawback" would make another 170.000 families liable for tax; and, moreover, it would actually produce a situation in which the more children a man had, the lower the earnings level at which he would start to pay tax. Finally, we saw considerable objections to a course which would mean increasing public expenditure by £187 million and increasing taxation by £158 million simply, in the end, to direct some £6 million to the families we were aiming to help.
For these reasons the Government reached the conclusions that, while an eventual increase in family allowances should not be ruled out, our immediate 788 action should take another form. We have therefore evolved the scheme which is set out in the present Bill. It is a measure of selectivity, but its main keynote is simplicity. The objective is to channel benefit to the people I have described—those families with children where the breadwinner is in full-time work and therefore ineligible for supplementary benefit, but where the family income falls below the supplementary benefit level. It is, of course, inherent in such a proposal that those who are eligible must claim the benefit and must provide some information on which their eligibility may be judged. This is to be achieved by a simple test of the parents' normal income. Once that has been established, the supplement will be awarded for a period, normally of 26 weeks, and will continue in payment for that period irrespective of any further changes in circumstances.
By this approach we shall achieve something much simpler than supplementary benefits. Further, to make the scheme as straightforward as possible, the level of eligibility will be set merely by the number of children in the family. No distinction will be made between one-parent and two-parent families, and no account taken of the existence of any other adults in the household. The levels we have chosen correspond broadly to the supplementary benefit scales for two-parent families of the appropriate size paying an average rent and with average working expenses. It would be quite out of keeping with the objective of simplicity to have regard to the actual rent being paid by the household. To do so would introduce considerable complications, including, for example, the need to calculate what share of the rent should be regarded as met by other people in the household.
The prescribed levels having been fixed, the next question relates to the method of calculating the amount of the benefit. There would be considerable objection to a system of benefits for those in full-time work which involved making a payment equal to the difference between actual income and the prescribed level, for there would then be no incentive whatever to increased earnings. The Bill proposes, therefore, that the supplement 789 should be one-half of the amount by which the income falls short of the prescribed level, subject to a maximum of £3 a week. The Bill includes powers under which these figures can be altered subject to an Affirmative Resolution of both Houses. My Lords, the proposals in the Bill have substantial advantages. They will help a considerable number of poor families, a good many of them families with only one child who could not be helped in any other practicable way, and they will bring very substantial help to those whose incomes are much below the supplementary benefit levels. The scheme will also be comparatively inexpensive to administer.
May I now turn to the clauses of the Bill? Clause I includes a description of what constitutes a family for family income supplement purposes. There must be a man or a single woman engaged in remunerative full-time work, and normally so engaged. In the case of a man who has a wife or a woman living with him as his wife, she is also included. There may of course he other adults present in the household, but to include them in the family would not increase the prescribed level and might, by taking account of their incomes, reduce the supplement payable. I would emphasise that this description of the family is a special concept for the purpose of assessing title to family income supplement, and differs somewhat from the ordinary meaning of the word "family".
Clause 2 provides for the prescribed amount, £15 for the family with one child and an additional £2 for each additional child. Clause 3 deals with the calculation of the supplement. As I have explained, this is one-half of the difference between the family income and the prescribed level, subject to a £3 maximum. Clause 4 deals with the calculation of income. Under regulations, applicants will be asked to state their earnings over the period of five complete weeks immediately preceding the claim. In most cases the normal earnings will be deduced from this information. Capital and income in kind will not be taken into account. Further, under regulations, £2 of any war disablement pension and the whole of any attendance allowance will be disregarded. All other normal income in cash will be taken into account.
790 Clause 5 requires claims to be made jointly where there are two parents. Clause 6 makes the Supplementary Benefits Commission the adjudicating authority, and provides that the supplement shall be payable for 26 weeks unaffected by any change of circumstances. Clause 7 deals with appeals, and Clause 8 with provisions about duplicate payments and the recovery of overpayments. Clause 9 provides that the supplement is inalienable, and Clause 10 deals with various powers under which regulations will be made. This clause ensures that any regulation made changing the prescribed amount or the proportion of one-half, and the maximum amount used in calculating the supplement, will be subject to Affirmative Resolutions. Other regulations will be subject to the Negative Resolution procedure. Clauses 11 and 12 deal with false statements and with legal proceedings.
We come to Clause 13 which is an important one. It deals with the wage-stop which is a provision under which supplementary benefit is restricted by reference to the amount of net weekly earnings a claimant could be receiving if he were engaged in full-time work. The amount of the supplement which would be payable while the claimant was in full-time work will be added on, so that the great majority of wage-stop cases will benefit by the introduction of the scheme.
My Lords, the remaining clauses are largely formal. Clause 16 provides for the date of commencement to be appointed by Order. The present intention is to begin taking claims in May of next year and to start payments at the beginning of August. We would, naturally, have preferred to begin at an earlier date, but unfortunately it is not possible to complete the preparatory work and the necessary printing in time to begin receiving claims before May, 1971; and a reasonable time for processing claims obviously must be allowed. We estimate that 110,000 families with two parents and 54,000 families with one parent would have been eligible had the scheme come into force in August of this year, and in addition it would have helped virtually all of the 24,000 families who were at that time receiving supplementary benefit restricted by the wage-stop.
791 On estimates which, for natural reasons, cannot be precise, we believe that this Bill should bring some additional income to 180,000 families, including more than half a million children. In terms of the total population and the number of children in the community these are relatively small figures; but they are by no means negligible, and I believe that most people will welcome this proposal as one which brings help to some very poor families. We do not claim that this is the end of the road. We are studying very hard indeed how to tackle effectively the problem of family poverty. It is too early to forecast what may come out of this study, or even to say whether the family income supplement will remain a permanent feature of the scene. As an immediate measure, however, I commend it to the House as something that will ease the lot of half a million children and their parents.
§ Moved, That the Bill be now read 2a.—(Lord Aberdare.)
§ 3.23 p.m.
§ BARONESS PHILLIPSMy Lords, I should like at once to thank the Minister for his clear exposition of the Bill. Anything coming from the noble Lord, Lord Aberdare, whom we know to be a great humanitarian, must of necessity command our respect. When he says he has the cause of children particularly at heart I know from his early speeches that that is the case. But I am sure that the noble Lord will not expect me, speaking from this side of the House, to say that we like the underlying philosophy of the Bill. We believe that it reintroduces a group which used to be known as the "deserving poor". We believe, too, that it will be disincentive to increasing wages. In fact, even the Minister in another place said in reply to critics that it is a Bill which will not encourage employers to raise wages. He said:
As a general proposition, I suppose that that is true."—[OFFICIAL REPORT, Commons 10/11/70: col. 226.]He went on to qualify it, but I believe that that is a very significant statement. He also said, in reply to further questions, that it is true that this is another test; and indeed the noble Lord this afternoon used the phrase, "This is a measure of selectivity". It is against that background that I make my comments.792 Some of my noble friends who will speak during the debate will make much more eloquent speeches on this point, and I think that my best plan is to try to see how we may improve the Bill. I would say at once that I have read carefully all the debates in the other place. Therefore, if I ask the Minister a question which has been answered, it must be because I have not noticed the reply in the records of Hansard. One matter in the Bill which pleases me personally is the recognition of the single-parent family. I have worked very hard to encourage anything which will help a woman, particularly if she has been left alone, whether she has been deserted, is widowed, is an unmarried mother or is divorced. But I am not sure that the emphasis on full-time work is entirely satisfactory. My Lords, if the woman is alone, perhaps it would be better if her earnings were supplemented, even though she was doing only part-time work. If she is the only parent, her children need the affection and security which she can give, and I am not certain that it is right that she should be encouraged to undertake full-time work if part-time earnings could be supplemented.
I understand that we are not to have a Committee stage, so the Minister will forgive me if I ask questions on particular clauses. Regarding the question of the prescribed amount, I would ask whether it is wise or usual to insert a figure in a measure of this kind. I noticed that the noble Lord said that it may be a temporary figure, but in the highly inflationary situation in which we find ourselves perhaps by next August these figures will be unreal. I am wondering whether the amount should not be expressed in some other way; for example, in percentages.
Clause 8 deals with the recovery of over-payments. There is no reference to the method of dealing with underpayments, and I notice that the method of recovery is, without prejudice, to be recovered
by deduction from any family income supplement or from any benefit under the National Insurance Acts … the National Insurance (Industrial Injuries) Acts … or the Family Allowances Acts …I have a feeling that this introduces a new principle and I should like an assurance from the Minister that it does 793 not. Clause 6, which is a vital clause, deals with claims for payment. The amount of the family income supplement paid to each claimant will eventually be fixed for periods of six months at a time. The noble Lord has explained this, but I am a little confused about how it will work in practice for some of our lower paid workers who often are seasonal workers.A good example is provided by workers in the hotel industry or in agricultural work. An agricultural worker doing a seasonal type of employment may make an application when his income will be at the figure specified. If the procedure is going to take so long—and at the present time, because of the load of work, it will take some time before the money is given—the worker may by then be earning a higher amount. He may be doing other work. Hotel work provides another good example.
The noble Lord has indicated that the worker will receive the amount he asks for, even though his circumstances have changed; but will it work the other way? If the worker applies when he is on a high wage, because he knows that at some time he will be getting less, is that something which may be operated within the framework of the Bill? It seems to me that some people may always be at the wrong end of the six-monthly period; though I imagine that as time goes on cases will be dealt with much more rapidly. I think there is little doubt—and even the noble Lord, Lord Aberdare, may not gainsay this—that this will throw much more work on the Supplementary Benefits Commission, which is already very overloaded. Since this measure was brought forward so rapidly I am wondering whether the Commission was consulted at the initial stages on the question of whether it is workable. It will involve a tremendous number of extra stair and I should have thought that the figure here of 600 is extraordinarily conservative, using that word with a small "c". I should also have thought that it would be far more costly to operate.
I can envisage the people who go into the supplementary benefit offices being divided into two groups: they will be sorted out according to those who are working and being supplemented and those who are not working and are being supplemented. Whichever way one looks 794 at it, this seems to me to be creating different groups within the community, and this can only lead to very unfortunate repercussions. We on this side of the House still believe that there are other ways of increasing the wages of the lower-paid workers. One very simple way would be to pay them more. I cannot see how that would be more inflationary than giving extra benefits through a Bill of this kind. Another way would have been to deal with family allowances—and when the noble Lord explained it this method appeared even more equitable than when I had thought about it before: if you have more you need less! And if it is returned in tax, this is surely a neat way of bookkeeping and of reducing the thing to the level of equality. We hope that this Bill will bring some measure of assistance to some members of the community who are at present in great need, but I am bound to say that we do not like the Bill. However, we shall not in any way obstruct its passage through this House.
§ 3.32 p.m.
§ LORD ILFORDMy Lords, the noble Baroness who has just concluded her speech said that she did not like the underlying philosophy of this Bill. I am bound to say that I find it a little difficult to understand what exactly the noble Baroness intends to imply by that observation. If ever there were a Bill with an underlying philosophy which is acceptable to everybody, this would be the Bill.
When one looks at the administration structure by which this Bill is to be carried out, the first thing that strikes one is that it contains what is virtually a new standard for the assessment of poverty. There are, I think, already at least two standards for the assessment of poverty on a national basis. There are family allowances—and I propose to say nothing about those because my noble friend has dealt fully with that matter. Then there is the formula which is followed by the Supplementary Benefits Commission. One might have thought that that formula was appropriate to this Bill and that it might have been used instead of multiplying the grounds upon which poverty can be assessed.
It certainly is rather an obvious comment to make on this Bill, but I think that on the whole the Government have been right in rejecting both family allowances 795 and the formula of the Supplementary Benefits Commission. The Commissioners' formula would necessarily involve a very elaborate investigation of means and needs; it is adjusted very closely to the actual needs of the applicant. Of course that would take time. It would involve a very large number of interviews and a very careful scrutiny of the applications for assistance. All that would take time. Obviously the Government are right to have put time as a major consideration in determining which of these two methods of assessment they were going to follow. On the whole I think that the relative importance of speed outweighs the importance of a completely accurate and complete assessment of need. That being so, the Government were right in rejecting the existing formula and in introducing a new formula.
It is a little confusing when there is more than one method of assessing the same thing. When the investigation of the social services which the Government are going to carry out is completed, it may be that that will involve an investigation as to whether it is possible to have a single uniform standard of poverty—at least to be adopted for the national services if not for the local authority services. I do not know. There is much to be said for both sides. It may be that it is better that there should be different standards of poverty or different classes of service. It may be that a person who desires assistance from one form of service for which he is well able to pay, is not so well able to pay for another, more expensive service, which he needs equally badly. I do not know. It would involve considerable investigation; but certainly I think that it is a question which some day we shall have to answer.
My Lords, the conception of a uniform standard for either pensions or, indeed, wages, applicable to the whole field of the social services, is a very attractive proposal and it is rather surprising that the Labour Party have not said much about it because they have always played with the idea of a uniform national payment. As recently as in their Election Manifesto of 1964, the Labour Party promised the electorate what I think was called a uniform guarantee payment. Nothing has been seen since of the uniform guarantee. Eventually it disappeared from view, and 796 I think it was a good and wise thing that it did. That, in itself, illustrates how difficult this problem is. It may be that if one investigates it, as I have no doubt the Labour Party did, one would conclude as they did that the obstacles in the way are too great.
The first purpose of a social service payment is to relieve need. In so far as it fails to relieve the actual personal and individual need of the individual, so far it has failed in its purpose. Is it possible to adopt some uniform standard which will relieve need in all parts of the country and in all circumstances? The difficulty about needs is that they vary so immensely not only between individuals but between different parts of the country. Take, for example, rent. The average rent paid by a supplementary benefit applicant in London is 53s. a week; in Manchester, it is only 35s.; and in Scotland, it is only 32s. So there is a difference of 18s. in the payments which will be made on the uniform scale. It seems to be clear that if the scale is to be uniform it will not relieve the personal and individual needs of a very large number of persons. I think that for that reason alone the concept of a national minimum is impracticable.
My Lords, this Bill does not deal with the question of rents and therefore it appears to overlook one of the major factors in determining the amount of benefit. What is proposed is that those individuals who receive the supplement under this Bill will, if they are paying high rents or rents which seem to them to be high, make an application to the local authority for a rate or rent rebate. It is not all local authorities who give rent and rate rebates. Undoubtedly this is an obstacle that can be overcome. But what I think is more important is that some payment which represents the actual rent which a recipient is paying should be made to him in the sum to which he is entitled under this scheme. I see no reason why the arrangement made in this Bill, which ignores rent in the assessment of the supplement and leaves the question of making such an application until later, should not work well. These applications for rent and rate rebates are made very easily and freely. Last year over one million persons applied for a rebate, which shows, I think, that there is no hesitation on the part of the public in going to their local 797 authorities. I see no reason at present why this should not happen. If it does not happen, no doubt the matter can be put right under the regulatory powers which the Bill gives the Minister.
In conclusion, may I say a word about Speenhamland? Your Lordships will recall what happened at Speenhamland. Over 150 years ago, the Speenhamland justices paid out relief to agricultural labourers in full employment. It is astonishing what effect that incident had upon the administration of the Poor Law. For nearly 150 years the Poor Law was dominated by this conception, that relief was not to be paid to a man who was in full-time employment. In 1950, when I went to the old National Assistance Board, which, alas! has been swept away, there was Speenhamland in front of me, written into my Act. I am glad that we have now reversed this opinion.
I watched the situation going on year after year, and the conclusion that I gradually came to was that much greater hardship is caused by refusing these payments than injury is caused by the activities of the scroungers, layabouts and corner boys and all the other people who endeavour to abuse the system of supplementary benefit. I am glad that the Conservative Party have eventually come to the same conclusion to which I came. It would be much better to take the risk of any minor injury—and it would only be a very minor injury—which may be done by the activities of the corner boys and make these payments to these poor families. I am glad that one of the first acts of the Conservative Government has been to relieve the misfortunes of the under-paid, the widows and the deserted wives.