DRAFT FAMILY INCOME SUPPLEMENTS (COMPUTATION) REGULATIONS 1976 (Hansard, 6 May 1976)

§ Lord WELLS-PESTELL
My Lords, I beg to move that the draft Family Income Supplements (Computation) Regulations 1976, laid before this House on 27th April, be approved. As your Lordships will know, family income supplement is a benefit for the lower-paid working family whose income falls below a level prescribed by Parliament. The supplement paid is half the difference between the family's income and the prescribed amount, subject to a maximum weekly sum.
The purpose of these regulations is to increase the prescribed income levels and the maximum weekly amounts payable. The change is to take effect from 20th July, which is a year since the last uprating. Regulation 2 increases the prescribed amount for a one-child family by £7.50 from £31.50 to £39.00 and the addition for every other child by £1.00 from £3.50 to £4.50. Regulation 3 increases the maximum weekly payment for a one-child family by £1.50, from £7 to £8.50, from 20th July next. For each additional child this amount is increased, as now, by 50p.
Your Lordships will recall that to provide help for one-parent families a new benefit, child interim benefit, was introduced in April this year. In effect, the new benefit extended the payment of family allowance in respect of the first child in one-parent families and, like family allowances, the new benefit will be treated as income for family income supplement. Under the normal family income supplement rules, the new benefit would be taken into account from the date of claim for family income supplement. But provision has been made in the 690 Family Income Supplements (Child Interim Benefit) (Consequential) Regulations 1976 for the adjustment to the family income supplement award to be made when the prescribed amount and the maxima are next increased, which is next July, so that all awards will be adjusted on the same date. In other words, one-parent families get family allowance for the first child from last April, and this is not taken into account when considering family income supplement. But it will be taken into account when any application is made for family income supplement from next July.
On previous upratings of family income supplement, the prescribed amounts have been increased broadly in line with prices. The effect of this has been to reduce the scope of the supplement and only about 60,000 families are now being helped. The proposed large uprating is expected to restore the relativity between gross average earnings and the prescribed amounts which existed when the scheme was introduced in 1971. As a result, family income supplement will be available to some 25,000 more families than last year. The increased income levels will also ensure that families now receiving the supplement who have received up to £6 pay rise during the year will continue to be entitled to the benefit. The increases in prescribed amounts and maximum payments will benefit about 85,000 needy families in the year immediately following the uprating, and the total cost during that year will be in the region of £19 million.
I am sure your Lordships are aware that we on this side of the House wish to see those who are dependent on means-tested benefits receive a larger part of their income from benefits as of right. That has always been our view. As long as family income supplement has a part to play in assisting lower-paid working families, we are determined that it should be effective; and we have never been afraid to disclose our admiration for the fact that it was introduced by the Secretary of State in the previous Government. I am sure that these regulations will be welcomed by noble Lords opposite. My Lords, I beg to move.
Moved, That the draft Family Income Supplements (Computation) Regulations 1976, laid before the House on 27th April, be approved.—(Lord Wells-Pestell.)

§ Lord SANDYS
My Lords, I should like to thank the noble Lord, Lord Wells-Pestell, for dealing with these Regulations so carefully. As he so rightly said, these are much welcomed on this side of the House not only because a larger number of needy families will be eligible for the benefit, but also because it is quite apparent that these are quite generous new sums to be added in supplement.
There are two questions which I should like to ask the noble Lord. First, how many families are likely to take up the new benefit? Secondly, have the Government anything to say in regard to the poverty trap? I think I should explain this question a little. It will be apparent that there are substantial difficulties which families—both one-parent families and others—have encountered in regard to obtaining these various benefits. From the speech of the noble Baroness, Lady Wootton of Abinger, only a week ago, it was apparent what the nuts and bolts of this problem really are. I shall not prolong my remarks. I am grateful to the noble Lord for explaining the improved benefits, and I look forward to his reply.

§ Lord WELLS-PESTELL
My Lords, I am grateful to the noble Lord for his approval and welcome of these regulations. As I understand the situation, it was estimated that after the first July uprating, which I believe was in 1972, there would be 225,000 people entitled to it. A careful estimation shows that at the present time, and certainly after the uprating that we are talking about in July this year, possibly 50 per cent. of that figure will be entitled to family income supplement, which I calculate as 112,500. I have said to your Lordships that, to our certain knowledge, 85,000 people will take it up and 27,500 may be entitled to it. We are doing our best, as we and the previous Government have always done, to make this as widely known as possible. I do not want to take up the time of the House, but we spent last year something like £100,000 on advertisement. This year we are proposing to spend approximately £175,000 on advertisement. We certainly let all people who are claiming free milk, and who are exempted from prescription and other 692 National Health Service charges, know about it. Persons returning to work after receiving supplementary benefit, those receiving family allowance and claimants for maternity benefit are also informed of it. We also have a prominent reminder bound into the order book, so that people are made aware. I could go on, but I think it is unnecessary to do so. If we can we should like to net those 27,500 people, but the onus is on them to apply.
In some respects, I am glad that the noble Lord has raised the question of the poverty trap, because many commentators on social security benefits suggest that following a rise in pay there is an automatic and immediate reduction in means-tested benefits, in addition to income tax payments on the increase and higher National Insurance contributions. But that is not the case. For taxpaying family income supplement families, every £1 of increased earnings will be subject to an immediate reduction of 40.75p in income tax and National Insurance contributions, but family income supplement will remain unaltered until the 12 months' anniversary of the last award. So that the position of the people who are receiving it will not be worsened for another 12 months. A change in family circumstances or in family income does not affect the amount of family income supplement for a period of 12 months, because, as the noble Lord, Lord Sandys, will know, even though earned income may increase, family income supplement is given for 12 months, and will remain the same.
The large family income supplement upratings in July 1975 and the one proposed for July of this year will ensure that no family loses family income supplement solely because of a pay rise within the current or anticipated limits of next year. Moreover, the uprating now proposed will ensure that families who have received the family income supplement for 1975–76 will receive it at considerably higher rates in the year 1976–77—provided, of course, that they do not have less dependent children and have not moved to a much better paid job.
It is when a person's income approache or even exceeds the prescribed amount that he is in danger—that is, on the expiry of the 12-month award—of facing a higher marginal tax rate. That is why a run on the benefit is allowed, and the 693 taper is 50 per cent. However, I am sure that noble Lords will agree that if a person's income rises above the limit set for title to a particular benefit, the benefit, of necessity, must be revised.