HL Deb 16 June 1978 vol 393 cc765-75

3.21 p.m.

Lord WELLS-PESTELL rose to move, That the draft Social Security Benefits Up-rating Order 1978, laid before the House on 6th June, be approved. The noble Lord said: My Lords, I hope it will be for the convenience of the House if we discuss with this order the draft Child Benefit and Social Security (Fixing and Adjustment of Rates) Amendment Regulations 1978 and the Supplementary Benefits (Determination of Requirements) Regulations 1978.

I want to be as brief as I can, because I am conscious that there is further business before your Lordships' House which is likely to take some time. The Order and the Supplementary Benefits Regulations together provide for most of the increases in social security benefits announced by my right honourable friend the Secretary of State in his Statement in another place on 12th April. The Fixing and Adjustment Rates Regulations provide for further increases in child benefit rates from next November and the following April—that is, in addition to the substantial increase from last April.

I think it will be helpful to your Lordships if I take the up-rating order first and then deal with the various regulations. The order provides for increases in national insurance and industrial injuries benefits. A list of the principal benefit rates, both as they are now and as the order proposes to increase them, can be found in Appendix I to the Government Actuary's Report (Command 7232). The most significant increases in both social and financial terms are those in the rates of retirement pension. These will be raised in November from £17.50 to £19.50 for a single pensioner, and from £28 to £31.20 for a married couple. The new figures will represent increases of over 11 per cent., and it is proposed that other long-term benefits should rise by corresponding amounts.

The standard rate of sickness and unemployment benefit will rise from £14.70 to £15.75 for a single person and from £23.80 to £25.50 for a married couple. These are increases of about 7 per cent., and other short-term benefits will rise by corresponding amounts. Pensioners will again benefit from the change in the law which links the operation of the earnings rule with the general level of earnings. The amount that a person can earn before his pension is reduced will rise in November from £40 per week to £45 per week, and this will also apply to certain wives for whom a dependency increase is payable to the pensioner. This change is made in Article 6 of the order.

The welfare of the disabled is, I know, of special concern and interest to a good many of your Lordships, and your Lordships will therefore be pleased to know that there will be an increase in attendance allowance, which will rise from £14.00 a week to £l5.60 at the higher rate and, for people entitled to the lower rate of allowance, from £9.30 to £10.40. Both non-contributory invalidity pension and invalid care allowance will go up from £10.50 to £11.70. My right honourable friend the Secretary of State has already made an order increasing mobility allowance from £7 to £10 per week from 5th July next.

The graduated pensions which many people earned under the scheme which was in operation from 1961 to 1975 will be increased for the first time this coming November. The Government have undertaken that in this respect graduated pensions will be treated broadly the same as the earnings-related additional pensions introduced by the new pensions scheme in April of this year, and will be increased in line with the movement in prices at each up-rating. This year they will go up in line with the expected movement in prices between April and November—namely, by 3.6 per cent.

The up-rating order fulfils my right honourable friend's statutory duty under Section 125 of the Social Security Act 1975. It meets the undertaking which this Government have made to protect the position of pensioners and other social security beneficiaries during a period of great economic difficulty. This up-rating will be the sixth that the Government have brought forward in just over four and a half years. The new pensions will be 152 per cent. higher in cash terms than the rates we inherited on taking office. These up-ratings mean that the real value of pensions will have risen by over 20 per cent. in the last five years.

I now turn to the draft regulations which provide for increases in supplementary benefit scale rates laid down in Schedule 1 to the Supplementary Benefits Act 1976. The increases that are proposed are comparable to the national insurance increases to which I have just referred, and will come into force at the same time. We propose that the long-term scale rates, which apply to supplementary pensioners and to people, other than the unemployed, who have received supplementary allowance continuously for two years, should be increased from £17,90 to £19.90 per week for the single householder, and from £28.35 to £31.55 for a married couple. The rates where a supplementary pensioner or his wife is over 80 will continue to be 25p higher at each point. The ordinary scale rates, which apply to the unemployed and to people who have received a supplementary allowance for less than two years, will be increased to £15.55 for a single householder and £25.25 for a married couple.

Scale rates for other adults and for children are also being raised. The special rates which apply to the blind will go up by the same amounts as the corresponding rates for sighted persons, so that their special preference will continue. Regulation 2 proposes that the amounts added for attendance requirements in assessing supplementary benefits for a person who receives attendance allowance should also be increased. I should also like to mention two other changes, which, though not provided for by the regulations, are an important element in the up-rating. Your Lordships will be pleased to learn that the Supplementary Benefits Commission have again decided to increase both the discretionary additions for extra heating and the standard additions for special diets. These changes will also take effect from 13th November.

I should now like to say something about the increases in child benefit. As a result of the increases last April child benefit of £2.30 is now payable for each child. Under the Child Benefit and Social Security (Fixing and Adjustment of Rates) Amendment Regulations 1978 this rate will be further increased to £3 from 13th November. The £1 premium which has been paid since last April to certain lone parents will go up to £2 per week from 13th November. The regulations also provide for a further increase in the rate of child benefit from £3 to £4 a week for each child from 2nd April 1979. I know that noble Lords on all sides of the House will welcome these further increases which demonstrate the Government's determination to continue their support for families with children.

At this point I think I should give some explanation of the effect of the child benefit increases on the rates of National Insurance dependency benefit shown in the up-rating order. The money which families receive by way of child benefit is available during unemployment or sickness or widowhood just as much as during employment. The dependency increases which are payable with the National Insurance benefit in these circumstances will therefore be modified to take account of the increases in child benefit. The present rates of child dependency increases—E2.30 in the case of short-term benefits and £6.10 in the case of long-term benefits—are arrived at by deducting from the rates shown in the 1977 uprating order an amount equivalent to the increase in child benefit last April. The draft up-rating order which we are now considering contains in its schedule the actual amounts which beneficiaries will receive by way of child dependency increases from next November. These will be £1.85 for short-term benefits and £6.35 for long-term benefits. These rates take account not only of the increase of child benefit last April but also of the further increase from November. The deductions being made at present on account of last April's rise will therefore no longer be necessary and are revoked from November by the Fixing and Adjustment of Rates Amendment Regulations.

The schedule to the up-rating order also shows the actual rates of child dependency increases from 2nd April 1979, which will be 85 pence for short-term benefits and £5.35 for long-term benefits. By showing the Apirl 1979 rates in the order we avoid the need for further regulations to make deductions from the child dependency rates next April when child benefit goes up by a further £1 per week. The Government hope that showing the actual rates in this way will also make the position easier to understand.

Let me now say a few words about the cost of these increases in benefits and the way in which they will be paid for. The combined effect of the orders which I have described will be to increase the annual rate of outgo on social security benefits in the United Kingdom by about £1,750 million from November 1978. They will in fact benefit about 18 million people. The further increase in child benefit in April 1979 will add even more to this sum. The National Insurance contribution rates which came into effect last April will be broadly adequate to meet the extra expenditure falling on the National Insurance Fund in 1978–79 and the balance between income and outgo from the Fund in 1979–80 will be reviewed around the end of this calendar year. My Lords, I am conscious of time. I hope that it is not necessary for me to say anything more. I am not unmindful of the fact that these things are always very complicated, more than they appear to be. But I hope that I have said enough and that your Lordships will accept the three Instruments now before you. I beg to move the first.

Moved, That the draft Social Security Benefits Up-rating Order 1978, laid before the House on 6th June, be approved.—(Lord Wells-Pestell.)

3.36 p.m.

Viscount LONG

My Lords, I am sure that the whole House will be grateful to the noble Lord, Lord Wells-Pestell, for the information he has given and the speed with which he has got through these complicated orders. I, too, like the noble Lord, will try to be brief; in fact I should like to raise only one or two points. The interesting part that I have noted is Part II, on page 6, which is the maternity grant; I see it is to stay the same, at £25. I wonder, in these difficult, inflationary times, whether the Government could not have another look at this figure. Knowing full well that it has already cost us £1.700 million and we are constantly lookng at public expenditure, I wonder whether it would help to look again at this maternity grant. I turn now to Section II. This, to me, is more amazing than ever. It is the death grant. Looking down the items, it is well worth reading them out.

A death grant under Section 32 where the deceased was at his death under the age of three amounts to £9; between the ages of three and six it is £15; between the ages of six and 18, £22; for someone over the age of 18, if on 5th July 1948 that person had attained the age of 55 in the case of a man or 50 in the case of a woman, the grant is £15; and, in any other case, £30.

When were these figures last looked at? I am not an undertaker and have little to do with family funerals as I have few relations left, but are not these figures somewhat out of line? Are they not somewhat ridiculous? I believe that a gravedigger's wage is something in the vicinity of £20 for a couple of hour's work or whatever it is. I do not see how these grants can possibly help. If the noble Lord cannot say anything now, will he look at it again? I believe that certain hardship can come from this, especially for people who are saving up to be buried. Is there any possibility that the noble Lord could either answer my first question: when were these grants last raised? Or could his Department have another look at this corner of the Social Security Bill?

I turn now to the age allowance. I see that it was introduced in 1971. I do not see that it has been increased since. I think that it is in the vicinity of only 25p per week. I wonder if the noble Lord could throw any light on that item. I come to one further question to ask the noble Lord, which is on the earnings rule. I noticed that the noble Lord said that the Government had raised the earnings rule from £40 to £45. I believe that it was in this House some time ago when we passed an Amendment to permit the earnings rule to be raised to £50.

I wonder what has happened to that Amendment. If it is lost and the noble Lord cannot answer at the moment, I should be most grateful if he could let me know, by writing or otherwise, as it seemed to me that in your Lordships' House we had played a certain part to try to raise these earnings rules, and we have so far only heard that it has been raised from £40 to £45. I am happy to see that the pensions have been raised—not much, but every little helps—and the child benefit, which, being a father, I shall get myself and I shall be very grateful for it. In that case, we fully understand—or almost understand—these complicated orders and I have nothing further to say to the noble Lord, except to thank him for what he has already said.

3.41 p.m.


My Lords, I too, should like to thank the noble Lord, Lord WellsPestell, for his comprehensive, lucid and speedy explanation of the nature and purpose of these orders. Of course, the National Insurance increases, as the noble Lord pointed out, are in accordance with the 1975 Act, and, as I have said before, the Government cannot expect credit every year for fulfilling their statutory obligations. They were certainly entitled to a credit when they put this provision into the original Act, but now all they are doing—and it is right that they should—is to fulfil their statutory obligation so far as long-term benefits are concerned to increase them in line either with average earnings or with prices, according to whichever has had the highest increase.

That is a forumla which is designed to give satisfaction to both Government and Opposition because, when earnings are higher than prices, there is an increase in real value, but when prices are higher than earnings, there is an increase in the percentage of national average earnings represented by the benefits. It must be one or the other, so there is always something for the Government to claim credit and always something for the Opposition to complain about. This year earnings are higher than prices, so there has been an increase in real value as far as long-term benefits are concerned, and that is to be welcomed. But inevitably there is no increase in the percentage of average national earnings represented by the benefits.

There is a problem, too, thrown up by this experience this year; that is, that there is a widening of the gap between long-term and short-term benefits. The short-term benefits are only adjusted in line with prices. Long-term benefits increased by about 11½ per cent. and short-term by 7 per cent. I wonder whether it is right that this gap should be widened, and I wonder whether it would not be more correct to apply the same criteria for this purpose to all benefits. Is it right that the gap should be widened or narrowed on a purely arbitrary basis instead of as a deliberate act of policy?

The reference period which determines these matters is half in the past and half in the future, and that introduces into the exercise an element of guessing as to what the levels of prices and earnings will turn out to be. Last year, in the end, the Government got it about right, and I congratulate them on reducing the rate of inflation, about which I expressed some doubt at this time last year. On that occasion, the noble Lord, Lord WellsPestell, said that he thought it would work out all right, but he did not know what would happen if it did not, and the Government generally did not know what would happen if it did not, but they would do something. I imagine that they still do not know what would happen if it failed, if their prognostications were wrong, and I think we should bear in mind the fact that to have a reference period half in the past and half in the future is not satisfactory.

Turning to child benefit and what the noble Lord said about that, I welcome the increases which are to take place in November and April. As I understand it, the Government are proposing to spend £500 million on this over and above the final phasing out of the child allowance, which goes to help pay for the child benefit. I am glad that they are prepared to spend that amount of money on this purpose. I am glad, too, that the one-parent family's addition for the first child of £1 is to go up to £2 in November. But there is the problem to which attention has already been given in this House on more than one occasion in recent weeks with regard to the one-parent family and the child under five on supplementary benefit. The supplementary benefit rate is £4.40 for such a child, but the child benefit for the first child of a single parent will be £5—£3 child benefit plus £2 special allowance. The one-parent family will not enjoy that extra 60p, which will next April go up to £.1.60, because the extra amount will be taken off the parent's supplementary benefit. However, I understand that that does not happen in the case of single parents on unemployment benefit and sickness benefit, and I can only repeat the question which I put to the noble Lord on Monday when the noble Baroness, Lady Vickers, raised this question at Question Time: are the Government prepared to increase the child rates of supplementary benefits so that the lowest is at least as much as the highest rate of child benefit?

Before I close, one word, if I may, about cost, to which the noble Lord referred. In a full year, as he said, so far as the National Insurance Fund is concerned, the expenditure will be £1,054 million. That is the extra, additional expenditure caused by these increases. The figure last year in the Government Actuaries' report was £1,234 million, and in the year before that £1,158 million. So there is a lower-than-usual cost this time, owing to a lower inflation rate and a reasonably effective incomes policy.

Again, so far as the additional expenditure is concerned on National Insurance benefits, there is no particular credit, and certainly no discredit, due to the Government because this is met, as the noble Lord said, by a buoyant revenue. Earnings-related contributions provide for earnings-related benefits. The deficit which was predicted for 1978–79 of £25 million will now be £69 million. One factor in producing that slightly greater deficit is the fact that some 10 million people are now expected to be contracting out of the Government's new pension scheme, as against the nine million previously assumed. That reduces the revenue available now, but, of course, it will reduce the outgo later on. With these few comments, I should like to support the passage through the House of these three orders.

3.49 p.m.


My Lords, I am very grateful to both noble Lords. Perhaps I may endeavour to deal with the questions raised by the noble Viscount, Lord Long. On the face of it, I would feel inclined to agree that it does appear to be rather unrealistic when perhaps the death grant is as small as it is. On reflection, I am not really very worried about the maternity grant of £25, for this reason. One has to take into account that there is a maternity allowance which goes on for something like 18 weeks, and that maternity allowance is quite substantial. Therefore, with the maternity grant and the maternity allowance, it really does not seem too bad.

The death grant, having regard to what it costs these days to bury a person, does, by comparison, look a little unrealistic. I can only say—and I say this because happen to know it to be true, because I have been present fairly recently at discussions on this matter—that this has very much exercised the mind of my right honourable friend the Secretary of State. But we were forced to come to the conclusion that at this stage we could not do anything about it because, to do something realistically, would have meant a very considerable increase.

With regard to the premium given to the over-80s, that too, on the face of it, looks a bit mean. But I think one has to look at it from the angle that in the last five years—and I am not trying to make a political point about this—pensions have been very substantially increased. Over the last five years they have increased in real value by something like 20 per cent. So the position is rather different. I know that many people will argue, as I would myself, that the aged—and it is very difficult to know whether to draw the line below or above 80, but we have to draw a line somewhere—perhaps do need some sort of extra help. But I do not think that anybody is quite clear in his own mind whether they need financial help or added services. Some months ago, my right honourable friend the Secretary of State had a very comprehensive conference dealing with the needs of the elderly. We shall be publishing fairly soon a document on the needs of the elderly and it may well be established that their needs are more for services than they are financial. We shall have to wait to see.

I do not know that I can say very much to the noble Lord, Lord Banks, because he was not, if I may say so, all that controversial. He raised the matter of the 60p only a week or so ago. I endeavoured to deal with it then. I may not have dealt with it adequately from his point of view but I do not think, quite honestly, that I can say anything more today than I said on that occasion other than that, again, I know that this is causing my right honourable friend the Minister of State for Social Security some concern. Whether or not we shall be able to deal with this as well as with, perhaps, a different formula between the long-term and the short-term benefits, I do not know, other than to say that this is exercising the minds of many of us.

I am glad that the noble Lord referred to the estimated income and out-go of the National Insurance Fund for 1978 and 1979. If he had not done so, I would have done so, because I can remember for the last two years I have come under fire from him because of the enormous amount in reserve. I think the implication on each of those occasions was that we ought to be running more into deficit than into extended credit. I was going to say that perhaps he ought to take some credit for the fact that the Government may appear to have taken some advice from him. I do not think that I can really add anything more, other than to thank both noble Lords for the welcome they have given to these orders.

On Question, Motion agreed to.