HL Deb 27 May 1976 vol 371 cc437-44

3.46 p.m.

Lord WELLS-PESTELL rose to move, That the draft Supplementary Benefit (Determination of Requirements) Regulations 1976. laid before the House on 13th May, be approved. The noble Lord said: My Lords, it might be for the convenience of the House if, subject to the consent of the noble Lord who will he speaking for the Opposition and of your Lordships, we discussed the draft Supplementary Benefit (Determination of Requirements) Regulations 1976 together with the Social Security Benefits Up-rating Order 1976, which also was laid before your Lordships on 13th May.

The two Instruments together provide for most of the increases in benefits announced by my right honourable friend the former Secretary of State in her Statement in another place on 7th April. 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.

I do not propose to enumerate all the various increases, because a list of the main rates is to be found in Appendix I to the Government Actuary's Report (Cmnd. 6478) which accompanies the Order. It might help your Lordships if I refer to the standard rates of retirement pension, which will be increased from £13.30 to £15.30 for a single person, and from £21.20 to £24.50 for a married couple, increases of about 15 per cent. Other long-term benefits will rise by corresponding amounts. It might also be helpful if mention the standard rate of sickness and unemployment benefit which will go up by about 16 per cent. from £11.10 to £12.90 for a single person, and from £18 to £20.90 for a married couple. Other short-term benefits will rise by corresponding amounts.

Your Lordships will realise that on this occasion the Government have departed from usual practice and have given a higher percentage increase to the short term benefits—benefits which, however, are not, for some people, all that short-term. The Government have been concerned about the widening gap between these benefits and the long-term pension rates and considered that there should be some closing of the gap.

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 in the week beginning 15th November. Articles 4 and 5 are technical: the one up-dating the Social Security Pensions Act 1975 and the other formally revoking last year's Up-rating Order.

This will be, as your Lordships will recall, the fourth uprating since this Government entered Office, and this is the second occasion on which National Insurance and industrial injuries benefits have been increased by an Order rather than by an Up-rating Bill. This method is provided for in the Social Security Act 1975 and was first used for the up-rating of benefits implemented in November 1975. It is proposed that the new rates of benefit in the present order will come into force in the week beginning 15th November, one year after the last increases. Although in the last two years up-ratings have been more frequent than once a year, the Government now feel that the falling rate of inflation means that such emergency measures are no longer necessary. It has always been our intention to return to the system of annual reviews of benefit levels, which the law obliges my right honourable friend the Secretary of State to carry out.

From April 1975 the Social Security Act placed upon the Secretary of State the duty at least to maintain the value of the pension in line with the movement of earnings or of prices, whichever is more favourable to the pensioner. In April 1975 the standard rate of retirement pension for a single person was £11.60, and £18.50 for a married couple. These rates were in fact introduced from that month by the Social Security Benefits Act 1975, and this was the last occasion on which the Secretary of State needed to use major legislation to increase pensions. By the first order made under the Social Security Act, pensions were subsequently increased to £13.30 for a single person and £21.20 for a married couple. These rates came into effect in November 1975. Between April and November 1975, prices rose by 11.7 per cent., and earnings rose by 12.1 per cent. To maintain the value of the April 1975 pension rates it would have been necessary, therefore, to increase them by the higher of these percentages to give rates of £13 for a single person and £20.80 for a married couple. Therefore the rates introduced in our last up-rating order—£13.30 and £21.20, as I have said—were more than sufficient to maintain the pension levels, and we are confident that the 15 per cent. increase proposed for November 1976 will be more than sufficient to protect and maintain pensions against prices and earnings increases between November 1975 and November 1976.

My Lords, I will turn now to the Supplementary Benefit Regulations. These regulations provide for increases in the supplementary benefit scale rates laid down by the Supplementary Benefit Act 1966. As your Lordships will know, the scale rates, together with an addition for rent, represent the levels to which the incomes of retired and other people not in full-time work can be brought up by means of supplementary benefit. It is proposed this year, as in previous up-ratings, to increase the main supplementary benefit scale rates by the same cash amounts as the corresponding National Insurance pensions and benefits.

The main supplementary benefit increases are provided for in Article 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 £2 to £15.70 for a person living alone, and by £3.30p to £24.85p for a married couple. The rates for those aged over 80 remain 25p higher. The ordinary scale rates which apply to the unemployed and to people who have received a supplementary allowance for fewer than two years are to be increased by £1.80p to £12.70p for a single person, and by £2.90p to £20.65p for a married couple. Increases in the rates for children are in roughly the same proportion. The blind are to continue to receive their existing preferential margin on top of the improved rates.

Article 2 also provides for increases in the amounts allowed for attendance requirements in the Supplementary Benefits scheme. They apply to supplementary beneficiaries who are in receipt of the National Insurance attendance allowance. The increases in attendance requirements are the same as those being made in the attendance allowance itself, with the higher rate becoming £12.20 and the lower rate £8.15. 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 20p to £1.20 a week. This increase, together with the raising of the scale rate, will give the non-householder an increase of £1.80 if he is on the long-term scale, or £1.65 if he is not.

That concludes my account of the specific increases contained in the order and regulations before us. Your Lordships will, however, be pleased to learn that the Supplementary Benefits Commission have decided to raise their discretionary additions for extra heating from 55p, £1.10 and £1.65 a week, to 70p, £1.40 and £2.10 respectively. The standard additions for special diets are also to be increased from 60p and £1.35 to 75p and £1.75 a week respectively. These increases in discretionary additions will also take effect from November.

About l2½ million people will benefit from the increases proposed in the draft order and the draft regulations. The annual cost of the proposals before your Lordships' House today is no less than £1,340 million. It is probably not generally recognised that all our pension schemes cost £160 million per week; in other words, £23 million per day. I think my figures are correct. There will at the same time be an additional cost of £37 million for war pensions and of something in the region of £14 million for the increases in supplementary benefit discretionary additions. Of the total cost nearly £1,160 million will fall on the National Insurance Fund, the rest being provided by Exchequer grant. The new contribution rates which came into force in April will be sufficient to finance in the current year the rates of benefits which I have been able to announce. For 1977 to 1978 there will be a review of contributions later this year. With your Lordships' permission, that is all I feel 1 need say at this stage, and I hope that there will be no hesitation on the part of your Lordships in accepting these Instruments. My Lords, I beg to move.

Moved, That the Supplementary Benefit (Determination of Requirements) Regulations 1976, laid before the House on 13th May, be approved.—(Lord Wells-Pestell,)

4 p.m.

Lord SANDYS

My Lords, the House will be grateful to the noble Lord, Lord Wells-Pestell, for giving details of the schemes which we have heard. He can rest assured that we on this side of the House warmly welcome the proposals made and the terms in which they have been carried out_ There are a number of queries which must inevitably arise. Taking the datum of April 1974 as the period when the Government took Office, up to May 1976, a two-year period, I think the Government should be congratulated that this is the fourth uprating since they took Office. But one must remember that set against that there is the very unwelcome piece of news which was announced in another place on Monday, that during that same period the cost of living, variously worked out, rose by approximately 51 per cent. However, we must be pleased to hear what the noble Lord has said in regard to the fact that the arrangements made for the increases in November more than cover the rise in the cost of living.

The question which I should like to ask the noble Lord is this. I wonder whether he can give us any direct evidence of the purchasing power of the pension during these last three upratings, because that is perhaps the most significant piece of information your Lordships would wish to have. In regard to the information over the discretionary allowances for both heating and additional feeding, it must be a matter of grave concern for both statutory and voluntary organisations concerned with old people suffering from hypothermia, especially bearing in mind the expected rise in the cost of electricity. Therefore, the Government's proposals will be particularly welcome. Whether they meet the requirement is a different matter; nevertheless, in the circumstances, it is probably something which may be adjusted in due course.

I would like most warmly to welcome the additional expenditure of £37 million for war widows, which bears out the concern the noble Lord expressed in a debate a few weeks ago on this subject. So far as the regulations are concerned, the noble Lord gave us full details. I have no observations in that regard, except to welcome the terms in which he did so.

4.4 p.m.

Lord BANKS

My Lords, I also would like to thank the noble Lord, Lord Wells-Pestell, for his very thorough explanation of these two Instruments. Of course, we all in this House welcome increases in social security benefits, even while we realise that their main purpose is to keep pace with inflation. I understand there will be no improvement in the relation of benefits to net average earnings as a result of these increases.

The noble Lord mentioned the cost of the increases, which, of course, is a large sum; but he went on to say—and it is stressed in the Government Actuary's report on these instruments—that this would be met by the contribution rate which was fixed last year. The Government Actuary stresses the fact that where you have contributions related to earnings they should provide a buoyant revenue which will automatically meet the increase in benefits. Therefore, we must not be too alarmed by the size of the figures that are mentioned by the noble Lord as to the cost of these proposals.

Some credit was taken in another place when these changes were announced by the then Secretary of State, Mrs. Castle, for the fact that there had been an increase in the real value of pensions under the present Government. But if you set up a scheme under which pensions and longterm benefits generally are to rise in line with whichever is the higher—the increase in prices or the increase in earnings—then inevitably the pension will either increase in real value or become a higher percentage of national average earnings. It must do one or the other. An increase in real value then underlines the original virtue of the scheme rather. than any subsequent Government generosity.

When we discussed the last up-rating order on 30th June 1975 the noble Lord, Lord Wells-Pestell, said at column 49: … the interval between the April and the proposed November upratings is, as I have said, just over seven months, so that the movements of 1 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 for 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. But we see now that that is not going to happen. The Government have decided to jump ahead to the date of the last uprating of November 1975 and estimate a year ahead from there.

Since the rate of inflation has been reduced, it is true that this will mean, if the Government prediction is correct for the current year, that there will be no fall in the real value of benefits when next November rate is compared with last November rate. But recipients will have been denied compensation for the higher rate of inflation which took place in the period from March 1975 to November 1975, and which has been left out of the calculations. That increase has nevertheless been built into the current levels of earnings and prices. After all, earnings and prices continue to increase, even if more slowly. They are certainly not falling. So there has been no offset for the higher increase in that period. In conclusion, I should like to ask the noble Lord whether, should the rate of inflation increase again, the Government intend to move the reference period back again wholly into the past, so that one way or the other the recipient loses out?

4.8 p.m.

Lord WELLS-PESTELL

My Lords, I am grateful to the noble Lord, Lord Sandys, and also to the noble Lord, Lord Banks, for their understanding of what the Government are endeavouring to do. The noble Lord, Lord Sandys, expressed some concern about the heating. This is a matter of considerable moment so far as my Department is concerned, and I was at some pains to endeavour to find out what the situation really is. The position is that I was surprised to learn what personal attention was given to each individual person who needs some kind of heating allowance. If, of course, the cost of heating goes up, then it will be the concern of the Department to see that the real needs of people, particularly those who are in receipt already of a heating allowance, will in fact be met.

As the noble Lord, Lord Banks, said, we are at some pains to try to keep pensions in line with inflation. The only thing that the Government can do in matters of this kind is to try, using the best means possible when introducing an up-rating, to see what the situation will be when the pensions in fact come in. This is not easy but there are ways and means of assessing trends and that is what we have sought to do. I was asked how much real improvement the Government had achieved in the level of retirement pensions. The rates of £13.30 for a single person and £21.20 for a married couple introduced last November are worth about 8.1 per cent., in other words 99p, for single persons and 6.8 per cent. for married couples more than the equivalent of the October 1973 rates after allowing for price increases up to April 1976, the latest date for which figures are available.

Reference to the missing period, which Lord Banks put his finger on, as I thought he would, serves only to obscure the real issues. They are, first, whether this Government have maintained the value of the pension and, secondly, whether the present proposals will continue to do so. On the first, as I tried to say earlier, the last up-rating established levels of pensions which were worth more— on a comparison either with earnings or prices —than any previous rate. On the second, the Government are confident that the present proposals will maintain the pension value with something to spare. This must be a matter not of conjecture but of what will happen between now and November.

As noble Lords will know, Government Departments have an opportunity to assess fairly accurately what will happen even if they do not always say what will happen, and this is what has been done. Further, the pension in November will be worth substantially more than the rates introduced by the previous Government in the autumn of 1973. I do not say that in any way unkindly; I was asked to give some sort of comparison. We shall have increased it by over 97 per cent., whereas up to last month prices had increased by only 59 per cent. So this is a real step forward and shows that the amounts which we have fixed really are giving a plus and not a minus.

On Question, Motion agreed to.