FAMILY INCOME SUPPLEMENTS (COMPUTATION) REGULATIONS 1977 (Hansard, 21 March 1977)

§ Lord WELLS-PESTELL
My Lords, I beg to move that the draft Family Income 253 Supplements (Computation) Regulations 1977, a copy of which was laid before this House on 3rd March, be approved. As your Lordships will know, family income supplement is a benefit for working families bringing up children on low incomes. The benefit is payable if the family's total gross weekly income, which at present includes family allowances and child interim benefit, is less than an amount determined by Parliament and known as the "prescribed amount".
The prescribed amount comprises a basic amount for a family with one child —and the same basic amount whether there are one or two parents—and this basic amount increases in equal steps for each additional child in larger families. At present the basic prescribed amount is £39 per week and the step is £4.50 per week per child. This means that the prescribed amount for a family with two children is £43.50; that is £39 plus £4.50, and for three children £48; namely, £39, with the two amounts of £4.50, and so it goes on according to the number of children in the family. The amount of benefit payable is half the difference between the family's total income and the prescribed amount appropriate to the size of the family. When the calculation has been made, the amount is then rounded up to the next 10p. There is a maximum payment of £8.50 per week for a family with one child, and if there is more than one child, there is added to the £8.50 the sum of 50p per week per child.
My Lords, I have spent a little time explaining the arithmetic of this for two reasons. The first is that, although the principles have been the same since family income supplement was introduced by the Conservative Government in 1971, there still seems to be doubt about them in some quarters. At this stage it would be fair to say that there are a number of well-informed (in the ordinary way) people in this field who sometimes find it difficult to understand the working of the family income supplement; and I am not pretending that it is easy to understand. The second reason is that, as I shall explain to your Lordships, some of the details have had to be altered to take account of the introduction of child benefit in two weeks' time. For example, there will be the disregard of child benefit, and 254 secondly, reducing the step in the prescribed amount from £4.50 to £3.50, which I shall touch on shortly.
One other preliminary point which I should mention is that families receiving family income supplement are automatically entitled to a range of other means-tested benefits on what we call a passport basis. These other means-tested benefits include free school meals and free milk and vitamins. So any family who are in receipt of family income supplement get a whole range of other benefits automatically. I mentioned free school meals, free milk and vitamins. There is also remission of prescription, dental and optical charges, refund of hospital fares, legal aid and advice, and receipt of family income supplement is also one of the conditions of eligibility for the electricity discount scheme. Therefore the family income supplement has to be seen against a fairly wide background of additional benefits.
At the beginning of April, child benefit begins to be paid at the rate of £1 for the first child and £1.50 for each other child. Child tax allowances will be reduced by 70p per week for the first child and 87½p per week for each other child. As you know, the new child benefit will replace family allowances. It will also replace the child interim benefit which has been paid over the past year for the first child in one-parent families; and so these one-parent families will get an extra 50p on top of their £l. It is also true that since the introduction of the child interim benefit for one-parent families, they have in fact been getting that extra 50p since April of last year. As the new terms come into force in April, so that they should not be at a disadvantage, they will get the £1.50 for the first child.
Ideally, families on means tested benefit should break even when child benefits are introduced, since we do not wish to reduce the overall level of support which these selective benefits give to the poorest families. But in reviewing family income supplement—and this applies throughout the whole complex of means tested benefits—our aim has been to ensure, so far as practicable, that the improvement in universal benefit, brought about by the introduction of child benefits, does not leave those already dependent on means-tested benefits worse off at the changeover point.
255 We fully accept—and I should like to repeat this—the principle that improvements in universal benefits should reduce dependence on means testing. I feel sure that noble Lords will acknowledge that we on this side of the House are firmly and expressly committed to that principle. Indeed, we believe that it is embodied in the very concept of the child benefit scheme. But reconciling these two aims—that is, reducing reliance on means testing, and protecting poor families from losing out—can produce practical problems which vary with the way in which means tested benefits are assessed.
I should like to give your Lordships an illustration of that. It is true that the last Government, who introduced the family income supplement, wanted the supplement to be a simple scheme, easily administered. We believe that it is a simple scheme; it is easily administered; but as with so many other things there are a number of problems. When I said a moment or two ago that it varies in the way in which the means tested benefits are assessed I had in mind, for example, that rent and rate rebates are assessed on a gross income basis, whereas free milk and vitamins are assessed on a net income basis. So there are different kinds of assessment, which in a sense complicates the problem and perhaps leads sometimes to a little difficulty.
Family income supplement is at the heart of this complex because, as I said earlier, it is a passport to so many other benefits which I mentioned a few moments ago. The solution we have adopted is to disregard child benefits completely as income for the purpose of family income supplement. This is affected by Regulation 2(1) of the Family Income Supplements (General) Amendment Regulations 1977, which were made on 1st March and laid before your Lordships' House on the 7th of this month. In isolation the complete disregard of child benefits would significantly increase the amount of family income supplement payable. But to increase reliance on means testing to that extent would be contrary to the principle I have just described. In our view the answer lies in reducing the prescribed amounts.
Regulation 2 of the computation regulations, which are now before your Lordships, provides for a reduction in 256 the step by £1, from £4.50 to £3.50. A good deal has been said, both in another place and outside both Houses of Parliament, as to the effect of some of these measures. This deals, I think, with the core of the problem. Taking the overall situation for families receiving family income supplement together with housing benefits, free school meals and free milk and vitamins, I believe we have got as near as it is possible to get to the break-even point. There are in fact only two groups who could lose, and then by only a few pence per week. I say, "only two groups". Even this is regrettable, but it is very difficult, as I say, to introduce a scheme that does not leave somebody out. There are, on the best estimate we can make, about 5,000 families receiving rent and rate rebates who could lose about 3p a week; that is all. The other group is so small that it is not possible to make a reliable estimate of their number; there are a few families receiving free school meals by direct claim. These families could lose up to 7p per week.
Your Lordships will have noticed that these regulations also provide for the basic prescribed amount to be uprated from the 19th July next. For the past three years family income supplement has been uprated in July, whereas the main social security uprating has always been in the November. It would be sensible to achieve a common uprating date for all benefits, and we propose to do just that by making the uprating for which these regulations provide an interim one, pending the main uprating in November. However, to protect families from losing family income supplement because they may have received a pay increase in line with the pay guidelines, it is necessary to increase the prescribed amount within a year of the last uprating. An essential feature of this year's proposals, therefore, is that the July uprating is designed to preserve the status quo for existing beneficiaries. The increase of £2.50 in the basic prescribed amount—that is, it will go up from £39 per week to £41.50—is therefore sufficient to protect any family from losing family income supplement if they have had a pay rise since last August. This is the effect of Regulation 4 of these computation regulations.
I think the only other point I need mention about these regulations is that, 257 under Regulation 3, the maximum payments which will apply from the 5th April remain the same as they are at present; namely, £8.50 per week for a one-child family, plus an extra 50p per week for each other child in larger families. Perhaps I have spent a longer time than is necessary on these regulations, but in view of their complexity I felt it was necessary to include a certain amount of detailed information. With that, my Lords, I beg to move.

§ Lord SANDYS
My Lords, the House will be grateful to the noble Lord, Lord Wells-Pestell, for explaining so carefully, and with a profusion of detail, the reasons for bringing forward this order. I was very glad that the noble Lord brought out snags of the scheme, and the way in which the present regulations are going to cover the eventualities as foreseen. There are three questions I should like to ask the noble Lord, of which I have given him notice. First, what is the threshold on entry into the scheme? Secondly, what is the likely cost of the order to the Exchequer? Thirdly, has the noble Lord any figures of take-up, and could he compare the take-up of this scheme with the present situation?

§ Lord BANKS
My Lords, I, too, should like to thank the noble Lord, Lord Wells-Pestell, for his very thorough explanation of this exceedingly complicated matter. We on these Benches have very considerable reservations about the family income supplement scheme. We all know the relationship of means-tested benefits to the poverty trap, and we know, too, that the take-up of the benefit, to which the noble Lord, Lord Sandys, has just referred, is not as good as we should like. I do not propose now, at this point, to attempt to cover the interesting details that were set out for us by the noble Lord, Lord Wells-Pestell, but I should like to welcome the principle that the means-testing should be gradually eliminated by the development of the child benefit scheme. In fact, it is through a development from that, which is the sort of embryo of a tax credit scheme, that 258 one would hope to see means-testing over the whole field of social security ultimately very considerably reduced. I welcome the fact, as the noble Lord explained, that there is to be an uprating to cover, as he pointed out, any pay rise since August last. So, because we support that principle and welcome that increase, we support these complicated regulations.

§ Lord WELLS-PESTELL
My Lords, I am grateful to both noble Lords for what they have said with regard to this matter. I know that both noble Lords recognise that this is a very complex and difficult matter in which to arrange a series of benefits which are always going to come out (shall I say?) on the positive side; but, as I tried to explain, those who are likely to suffer are infinitesimal in number, but if you happen to be one of them it is nevertheless an extra piece of suffering.
My Lords, the threshold of entry is about £22 per week. That is for a husband, wife and one child. I have not been able to ascertain, even roughly, what the cost will be when the new scheme is introduced in April; nor have I been able to ascertain as yet the cost of the scheme when it comes in on the 19th July. This has yet to be worked out, so I cannot promise to let the noble Lord know by tomorrow; but what I will do, when the figures are available, is to write to him accordingly, and he may well feel that it would be perfectly proper for me to send a copy to the noble Lord, Lord Banks. I cannot give the noble Lord the figure of the number of people who are entitled to claim FIS. I do not know the figure; but what I do know is that at the present moment there are about 80,000 persons in receipt of family income supplement. After April this year that figure, we anticipate, will go up to 82,000; and after 19th July we expect it to go up to 84,000. What percentage that is of the total number of people who will be entitled to claim, I cannot say. If that is a figure that I can obtain then I will let both noble Lords know.

§ Viscount HANWORTH
My Lords, bearing in mind the very bad take-up of some of the benefits, which has been estimated in some cases as being as low as 259 30 per cent., does the noble Lord really feel that the complications of the new measures are justified, bearing in mind the number of civil servants required? Moreover, does he also agree that means testing is not a black-and-white affair; that our taxation, for example, is one form of means testing; that even the benefits made for married women or the provisions made for people who are married is, in another shape, a means testing? Is it wise to use this extremely emotive word? Is it wise to raise principles on a matter which is not black or white?

§ Lord WELLS-PESTELL
My Lords, there is a very simple answer to what the noble Lord has just said. In the absence of any other scheme that could be administered as simply as this, we have no alternative. I think that Members on both sides of the House would say without any qualification at all that society has a responsibility to do something for those who are less fortunately placed in the community. Very often, the difference between us is one of degree and emphasis. We see that there is a good deal of merit in the family incomes supplement. It can be done at present only by some form of means testing. We have made it clear that, on this side, we do not like means testing; there is a growing opinion against it. This is what we have to apply at the moment. In the absence of some other scheme that would be equally simple and easily administered, we shall have to carry on with the scheme until such time as we can devise a better one.