SOCIAL SECURITY BENEFITS UP-RATING ORDER 1975

HL Deb 30 June 1975 vol 362 cc48-57

4.54 p.m.

Lord WELLS-PESTELL rose to move, That the Draft Social Security Benefits Up-rating Order 1975, laid before the House on 11th June, be approved. The noble Lord said: My Lords, it might be for the convenience of the House if we discuss with this Order the draft Supplementary Benefits (Determination of Requirements) (No. 2) Regulations 1975, which were also laid before your Lordships on 11th June. The two Instruments together provide for most of the increases in benefits announced by my right honourable friend the Secretary of State in her Statement in another place on 22nd May. I will deal first with the national insurance and industrial injuries benefits which are covered by the Order and then turn to the supplementary benefit increases provided by the Regulations.

It will be, as your Lordships will recall, the third uprating since the Government entered Office and will be implemented from the week beginning 17th November, just over seven months after the last increases. Your Lordships will be aware that this is the first occasion on which national insurance and industrial injuries benefits have been increased by means of an Order. In the past, an uprating Act has been necessary—on 14 occasions since 1948. In adopting this new method, however, we are following the previous Administration, who provided for upratings by Order in their 1973 Social Security Act—a method of which we approve. In this uprating, long-term benefits are again being increased by more than short-term benefits. This reflects the statutory obligation on the Government to increase pensions and other long-term benefits in line with the movement in the general level of earnings, unless the movement in the general level of prices would be more advantageous to those concerned. For short-term benefits, on the other hand, the criterion is the movement in the general level of prices.

I will not go into detail but, as your Lordships will recall, the interval between the April and the proposed November upratings is, as I have said, just over seven months, so that the movements of prices and earnings were measured over a seven-month period, starting from August 1974—the point where the calculation of the last uprating ended. Thus the period of measurement was the seven months up to March 1975. Later information is now available, but changes in earnings and prices after March 1975 will be reflected in the next uprating. In the relevant seven months' period, to which I have referred, earnings rose by nearly 15 per cent. and prices by just over 13 per cent. Pensions and other longterm benefits are therefore being increased according to the movement in earnings, whereas short-term benefits will go up in line with the movement in prices.

I do not propose enumerating all the various increases: a list is to be found in Appendix 1 to the Government Actuary's Report (Cmnd. 6083) which accompanies the Order. It might help your Lordships if I refer just to the standard rates of retirement pension, which will be increased from £11.60 to £13.30 for a single person and from £18.50 to £21.20 for a married couple, and to the standard rates of sickness and unemployment benefits which will go up from £9.80 to £11.10 for a single person, and from £15.90 to £18 for a married couple. Other benefits will rise by corresponding amounts. No increase is proposed on this occasion in maternity grant, death grant or age addition, which my right honourable friend the Secretary of State is not obliged to review under Section 125 of the Social Security Act 1975. If I may refer briefly to the structure of the Order, Article 1 is formal. The increased rates are provided for by Article 2, together with the schedule, and Article 3 provides for the dates from which the various increases in benefit are to take effect—generally, the appropriate day in the week beginning 17th November on which a particular benefit is normally paid.

My Lords, I will turn now to the Supplementary Benefit Regulations. These Regulations provide for increases in the main supplementary benefit scale rates laid down by the Supplementary Benefit Act 1966. The scale rates, together with an addition for rent, represent the levels to which the income of the retired and others not in full-time work can be brought up. The main supplementary benefit increases are provided for by Regulation 2. It is proposed that the long-term rates, which are payable to supplementary pensioners and to people (except the unemployed) who have received a supplementary allowance continuously for two years, shall be increased by £1.70 to £13.70 for a person living alone and by £2.70 to £21.55 for a married couple. The ordinary scale rates, which apply to the unemployed and to other people who have received a supplementary allowance for less than two years, are to be increased by £1.30 to £10.90 for a person living alone, and by £2.10 to £17.75 for a married couple.

The preferential margin for blind persons will be maintained by means of the same cash increases in their scale rates as are being made to sighted persons. Increases in the amounts allowed for attendance requirements in the supplementary benefits scheme are also provided for in Regulation 2. They apply to supplementary beneficiaries who are also in receipt of the attendance allowance under the national insurance scheme. The increases in the attendance requirements are the same as those being made in the attendance allowance itself, with the higher rate becoming £10.60 and the lower rate £7.10. A standard weekly addition for rent is given to a beneficiary who is not a householder, and it is proposed that this shall be increased by 5p to £1 a week; this reflects (to the nearest 5p) the increase in housing costs between August 1974 and March 1975. This increase, together with the increase in his scale rate, will give the non-householder an increase of £1.40 if he is on the long-term scale, or £1.10 if he is not.

The Supplementary Benefits Commission have decided to increase extra heating additions from 40p, 80p and £1.20 to 55p, £1.10 and £1.65, respectively, a week. The standard additions for special diets are also to be increased, from 50p and £1.12 to 60p and £1.35, respectively. Both these sets of increases, which are not in the Regulations because they are made under the Commission's discretionary powers, will take effect from the same date as the main uprating; that is, from 17th November. Your Lordships will be aware that increases in the amounts which may be disregarded in calculating a claimant's resources were provided for in the Social Security Benefits Act 1975. These increases will come into effect at the same time as the new scale rates: and so, I should remind your Lordships, will the new non-contributory invalidity pension. I should emphasise that the increases in the main rates provided for in the Regulations are the same as the increases in the national insurance long-term and short-term benefit rates which are provided for in the up-rating Order. It is an integral part of our strategy to combat poverty that supplementary benefit claimants in particular, who are by definition among the poorest in the community, should be protected from the worst effects of inflation.

About 12 million people will benefit from the increases proposed in the draft Order and the draft Regulations and from the associated changes in war pensions which will be effected, to come into operation simultaneously, by means of Instruments under the Royal Prerogative. The annual cost of the proposals before your Lordships' House today is about £1,015 million. There will at the same time be an additional cost of £32 million for war pensions and of a figure in the region of £11 million for the increases in supplementary benefit discretionary additions. Of the total cost, £908 million a year will fall upon the National Insurance Fund. This will be taken into account in the review of contributions for 1976–77 which will be undertaken later this year. My Lords, our prime objective remains to control inflation. Meanwhile, so far as they are able, the Government are determined to protect from the effects of inflation the pensioners of this country and others who depend for their existence on social security benefits. These Instruments are a vital part of that continuing protection. I feel confident that your Lordships will accept these orders, and, my Lords, I beg to move.

Moved, That the Draft Social Security Benefits Up-rating Order 1975, laid before the House on 11th June, be approved.—( Lord Wells-Pestell.)

5.7 p.m.

Lord ABERDARE

My Lords, I am sure that your Lordships will be grateful to the noble Lord, Lord Wells-Pestell, for having introduced this Order briefly and clearly. We are in the middle of debating the Social Security Pensions Bill, to whose Committee stage we return on Thursday, so I do not wish to make more than a very few remarks about this up-rating Order. First, I note with interest that it is the first occasion on which such up-ratings have been introduced by Order rather than by legislation. As the noble Lord rightly says, provision for this was in our 1973 Social Security Act. I am sure that this is a more convenient way of doing things, especially when up-ratings have to occur at such frequent intervals. Probably those who represent specific interests and wish to see certain benefit payments increased will find it somewhat of a restriction on their freedom, because previously they were able to move Amendments to up-rating Bills and we cannot amend an Order. But I still agree with the noble Lord that this is a better way of dealing with fairly routine matters of up-grading benefits to match inflation in either earnings or prices.

I detected a slight note of satisfaction in the noble Lord's voice when he said it was the third up-rating since the Government took Office. I do not think that this is a matter for pride on either side of the House. The trouble is, as he touched on at the end of his speech, that inflation is going ahead at such a pace that we are running very hard on the treadmill of inflation to remain in the same place. In fact, one wonders whether we are, so far as the pensioner is concerned, still remaining in the same place and whether we are not going backwards. Already the annual rate of inflation is something like 35 per cent.

This Order comes into effect in November, by which time of course the value of the present pension will have been further eroded and the value or potential value of this new pension, up-graded by some l4½ per cent. for long-term benefits and just over 13 per cent. for short-term benefits, will equally have been affected by then. The figures in the order—the noble Lord mentioned the £13.30 for the single pensioner and the £21.20 for the married couple—will be worth a good deal less than that by the time they come into payment and thereafter will continue to be eroded unless something is done to bring this horrifying inflation under control.

Throughout the last few days we have been discussing in this House the ravages of inflation in one field or another. Last Wednesday we discussed the ravages of inflation in the case of charities. Earlier today we were speaking of the difficulty of investment in industry as a result of inflation, and of the financial effects on the pound we are only too well aware. It is equally important for the pensioners that this evil should be brought under control and, if possible, banished altogether. Although I agree with the noble Lord that it is absolutely necessary to protect the pensioner, the answer is not really to continue uprating, even at the six-monthly intervals that we would like to see. What must happen is that the present inflationary situation should be controlled.

This situation affects also the calculations that have been made for the order. Your Lordships will have seen the actuary's report which has to work on certain assumptions, including the assumptions that earnings are rising at 17½ per cent. per annum and that the unemployment figure is 850,000. These may be optimistic assumptions; as yet, we do not know. However, the actuary is obviously worried, because he goes on to point out that a change of 100,000 in the level of unemployment in a full year would alter the estimated deficit in his report of £368 million in 1975–76 by £115 million. That is a £115 million difference every time there is an increase in unemployment of 100,000 people. The deficit begins to become very large if unemployment rises beyond the million mark, which one fears might occur.

As those who try to run occupational pension schemes know, long-term stability is essential for proper pension planning. This upgrading is good and welcome as far as it goes, but for the pensioner as much as for everybody else, and for all those who are dependent upon social security benefits, the first priority to which the Government must give their attention is firm action to restrain our present inflation.

5.14 p.m.

Baroness PHILLIPS

My Lords, I shall not unnerve the Minister by suggesting that I am going to indulge today in a debate on pensions, but may I say in relation to inflation that it seems that here there is a very clear example of moving into what I can only call the politics of nonsense. One item will serve as an example. Those who are on supplementary benefit are to receive an increase for housing uprating, and one can only assume that part of the increase in what they are paying for their housing must be rates. One of the reasons why the rates are rising is because of the increase in the number of staff who are employed by local authorities to build up their extended empires. Therefore, through one State scheme we are paying money to people in order to pay that money back to the local authority for another enterprise which could have been dealt with at source.

It seems to me that the causes of inflation are not far to seek and that we perpetuate many of them by not looking for a sensible way of handling many of these finances both at local authority and central Government level. I am the last to suggest that we should not uprate pensions or, indeed, supplementary benefits, but I suggest that we should probably benefit our citizens if we got rid of some of the very laborious and complicated processes which in the end are much more expensive.

5.17 p.m.

Lord BANKS

My Lords, we must all welcome the increases in the benefits which have been so clearly explained to us by the noble Lord, Lord Wells-Pestell. In one sense it is encouraging to have two upratings in the year, but as the noble Lord, Lord Aberdare, has said, it is clear that the Government are hard pressed to keep up with inflation. In this matter they are in the same position as Alice and the Red Queen; they have to run faster and faster to stay where they are.

The noble Lord, Lord Wells-Pestell, will no doubt have seen the calculations which have been produced by the Child Poverty Action Group, who point out that, on the day when this uprating was announced, figures were made available by the Government which showed that in the previous three months the rate of inflation had been 34 per cent. It is their opinion that inflation is unlikely to be less, for reasons which they have set out, between now and November. On that basis they have made the calculation, taking April 1975 figures, that the pension for the single person—then worth £11.60—even with the increase would be worth £11.08 and that the married couple's pension of £18.50, even with the increase, would be worth £17.67. So everything depends on the rate of inflation. But even if those figures are too pessimistic, that the Government manage to keep pace with inflation and we find that the pension is worth the same after the increase in November as it was in April, there is still a period of considerable hardship, when you have inflation running at the rate at which it is running at the moment, before the uprating takes effect.

To conclude, I should like to ask a question which I do not believe is entirely irrelevant to the order which we are considering which covers, among other things, the non-contributory invalidity pension which was introduced by the Social Security Benefits Bill. When we were discussing that Bill the question was raised, whether that pension should not be at the same level as the contributory pension, and we were told that this was not right—that those who had contributed should have a higher rate of pension. Then I asked whether, in view of the fact that we understood that it was intended that the contributory invalidity pension should have an earnings-related component, this would not be a satisfactory difference. The noble Lord replied that this was speculation about future Government policy. But in point of fact, that very day—before we spoke, as it turned out—the Government had announced in another place their intention to base the contributory invalidity pension on an earnings-related basis. In view of that fact, and also that this is now incorporated in the Social Security Pensions Bill, can the noble Lord give me any indication of whether the noncontributory invalidity pension is, in consequence, likely to be raised?

Lord REDESDALE

My Lords, may I ask for one point of clarification from the noble Lord? It relates to the question of the electricity supplement, if that is the right term for it. Does this match the present increase, because I believe it varies from area to area, and how will it be affected by the proposed increase?

5.19 p.m.

Lord WELLS-PESTELL

My Lords, I am grateful to the House for giving by implication, if not explicitly, its support to this Bill. I did not intend to show a sense of satisfaction about the third uprating. I am sure that the noble Lord, Lord Aberdare, will understand that it is necessary from time to time. People forget what has been done, and it is important to point out that there have been three upratings in a comparatively short space of time.

I do not want to argue with the noble Lord on the matter of inflation. This is often a question of perspective and how these things are calculated. However, I took note of the light of battle in his eye and also in the eye of the noble Lord, Lord Banks, when the Social Security Pensions Bill was mentioned. I have seen the figures given by the Child Poverty Action Group, and, as I said, we do not accept them. I think it would be very difficult to prove that inflation is running at a level of about 34 per cent. or 35 per cent.

With regard to the heating supplement—I think that is the phrase which the noble Lord was looking for—this would depend to a large extent, if not entirely, on the needs of the individual. One has to bear in mind that some pensioners are almost housebound, some are almost bed-bound, and one has to take into account their respective needs. Bearing that in mind, the amount which a pensioner would need might vary between two people living next door to each other but in different circumstances. This seems to us to be the fairest way of dealing with the matter. I hope the noble Lord feels that he has had a satisfactory reply.

I do not know the answer to the point raised by the noble Lord, Lord Banks. I am not quite clear what the situation is, but if he would agree that I might look at it and let him know, I should be glad.

On Question, Motion agreed to.