SOCIAL SECURITY BENEFITS UP-RATING (AMENDMENT) ORDER 1979

HL Deb 08 November 1979 vol 402 cc1071-81

7.47 p.m.

Lord CULLEN of ASHBOURNE

My Lords, I beg to move that the draft Social Security Benefits Up-rating (Amendment) Order 1979, which was laid before your Lordships' House on 23rd October, be approved. I think that it may be for the convenience of the House if we take at the same time the draft Family Income Supplements (Computation) (No. 2) Regulations 1979, the draft Social Security (Earnings-Related Addition to Widows' Allowance (Special Provisions) Regulations 1979, and the draft Social Security (Maximum Additional Component) Amendment Regulations 1979. These three Instruments were also laid before the House on 23rd October.

The purpose of the draft Social Security Benefits Up-rating (Amendment) Order 1979, is to maintain at £45 the earnings limit for the dependent wives of certain pensioners. Your Lordships may recall that the Pensioners Payments and Social Security Act 1979 removed from my right honourable friend the Secretary of State for Social Services the duty of reviewing and, where appropriate, increasing the amount of this earnings limit. As my right honourable friend said in another place on 14th June, it has become common ground between the parties that different considerations apply to the earnings limit for these wives and those which apply to the earnings limit for retirement pensioners. It has become apparent that, as a test of dependency, the wives' earnings limit is already too high. Currently, the joint rate of basic pension for a man and his dependent wife is £31.20, and it goes up to £37.30 later this month. A wife earning £45 a week after deduction of work expenses is thus already supporting her husband, rather than the other way round, and some dependency benefit is still payable at present if the wife earns £58 a week. Power was taken, through the Pensioners Payments and Social Security Act, to hold back on up-rating the earnings limit for those wives until it reaches a more realistic level.

With the Bill on its way to Royal Assent, the main up-rating order, which was laid on 4th July, made no provision for increasing the wives' earnings limit. What was not made clear at that time—indeed, it was overlooked in presenting the order—was that what the up-rating order did was to leave the options entirely open by repealing the 1978 order, which had fixed the wives' earnings limit at £45. From that point we could have moved forward to £52 had the Bill not received Royal Assent, or back to £45 when, as of course happened, it did receive Royal Assent. This Amendment order therefore concludes the matter by retaining the £45 earnings limit from the old 1978 order, so that the limit which applies at the moment will continue to apply. In accordance with the provisions of Section 124 of the Social Security Act 1975, a copy of a report by the Government Actuary was laid with the draft order.

I turn now to the family income supplements (known as "FIS") regulations. Here, I am in the unusual position of having to ask your Lordships to agree a further increase in FIS before another, already approved by Parliament, has taken effect. What we are proposing is an extra £1 a week for FIS families to help them pay their fuel bills this winter. Most families on FIS will get the extra £1 by the £2 increase in the FIS prescribed amounts. This is because the amount of FIS a family gets is half the difference between their income and the FIS prescribed amount, which depends on the number of children in the family. The increase in the prescribed amounts will not benefit families who would already be getting maximum FIS payments, and, for them, the regulations therefore provide an additional £1 in the FIS maximum payments. Raising the prescribed amounts has the effect of bringing some more families into FIS who would not be entitled to it under the rates earlier agreed by your Lordships. Families who benefit from this windfall will in most cases get less than £1 FIS a week in total. They will, however, gain from the FIS passport—the automatic entitlement to other means-tested benefits, such as relief from NHS charges, which FIS brings with it.

When the Government's intention to propose the FIS increases was announced on 22nd October, they were explained as part of a package with measures to be taken by the Supplementary Benefits Commission. Householders on supplementary benefit with a child under 5 will all be given the 95p a week standard rate of heating addition if they are not getting it already. Wider coverage of the FIS families is appropriate because, unlike supplementary benefit, the FIS scheme makes no other special provision for extra help with fuel bills. Your Lordships may like to be reminded that the Supplementary Benefits Commission will also be paying the 95p heating addition to supplementary pensioner householders who are over 75, or who have a dependant who is over 75, if they are not already getting it. Looked at as a whole, the package is a mark of the Government's determination to help poorer families and maintain work incentives. The extra £1 a week will benefit around 85,000 families on FIS, and will cost about £5 million in the year up to November, 1980. The extra £1 represents a permanent improvement in the value of FIS: it will not be withdrawn at the end of winter, or have its value whittled down in future up-ratings. I am sure your Lordships will agree that this is an improvement which it is well worth making.

My Lords, I turn now to the draft Social Security (Earnings-Related Addition to Widow's Allowance) (Special Provisions) Regulations 1979, the purpose of which is to correct an anomaly in relation to widow's allowance for certain women widowed on or after 6th January 1980. If a widow's husband had reckon-able earnings as an employed person in the relevant past period, she may also be able to receive an earnings-related addition on top of her widow's allowance. Under the existing statutory provisions, this addition is calculated by reference to contributions paid in the relevant period by her husband, which will have been related to his earnings. However, since April 1978 employed people over pension age have not been liable for contributions. An unforeseen effect of this change is that where the husband is over pension age, but not retired, and dies after 5th January 1980, it will no longer be possible to calculate an earnings-related addition for his widow in the normal way by reference to his contributions. From 6th January the relevant year for the calculation of earnings-related addition will he that which started in April 1978.

The draft regulations rectify the position by providing that in these cases the earnings-related addition shall be calculated by reference, not to the husband's contributions but to his actual relevant earnings. These regulations have been submitted to the National Insurance Advisory Committee, whose report, recommending that they should be made, was laid with the regulations. I feel sure that noble Lords will agree that, in future, this small group of widows should be able to receive their benefit which widows in a similar position have been able to receive up to now. I commend these draft regulations to your Lordships.

Finally, I turn to the Social Security (Maximum Additional Component) Amendment Regulations. These regulations correct a defect in the principal regulations—the Social Security (Maximum Additional Component) Regulations 1978. If left uncorrected, this would result in certain widows and widowers who deferred their retirement beyond the end of the current tax year becoming entitled to more benefit than was intended. A person cannot receive more than one retirement pension, but Section 9 of the Pensions Act enables a surviving spouse, in appropriate cases, to receive a higher retirement pension (both basic and earnings-related additional component) by combining the pensions on the contributions of himself and his spouse.

The provisions relating to basic pension cause no problems; the maximum combined pension is the standard flat-rate pension for a single person. In relation to the additional component, Section 9 of the Pensions Act, together with the principal regulations, provides that a surviving spouse can receive the additional component on his or her own contributions plus additional component on the late spouse's contributions, but only up to a prescribed maximum. It was intended that the prescribed maximum should be what one person could have earned had he paid maximum contributions in all the tax years relevant to the calculation of his additional component. The defect relates to the time when that maximum is to be calculated.

As they stand, the principal regulations would enable a surviving spouse who defers his or her retirement beyond pensionable age to achieve a maximum additional component appropriate to a date up to five years after pensionable age (or the date of death)—several pounds a week more than was intended. These amending regulations correct that defect. Regulation 2(b) of the principal regulations, which provided for the up-rating of maximum additional components, has been deleted as unnecessary. The up-rating provisions of the Pensions Act already provide for this. I am confident that your Lordships will accept the four instruments now before the House and I beg to move the first of them.

Moved, That the draft order, laid before the House on 23rd October, be approved.—(Lord Cullen of Ashbourne.)

8 p.m.

Lord WELLS-PESTELL

My Lords, we are grateful to the noble Lord, Lord Cullen, for moving these regulations and the order and particularly for being so brief and clear at this hour. I do not imagine that there will be any problem over your Lordships approving these regulations but, because of the hour, I am sorry that the noble Lord, Lord Banks, and I did not meet beforehand to arrange some kind of division of labour. I am proposing to deal with only one of them and I have a feeling that he will deal with the rest.

We must face the fact that we cannot look a gift horse in the mouth. Bearing in mind that the Government's tax cuts gave the richest 7 per cent. of the people 34 per cent. of the tax cuts and the poorest 10 per cent. of the community only 2 per cent., we should feel grateful for these further crumbs from the Government.

As I understand the position, about 85,000 people who are in receipt of family income supplement will benefit to the extent of £1 a week or less to help them with their heating bills at a cost of about £4½million in a year. As I understand it, the Government are providing something like £162 million in new money. My first question is this. Is the balance to be used to defray the cost of paying the 95 pence heating addition to supplementary benefit households who are over 75 years of age and to those who have a dependant over 75 and to those with a child under the age of five? In other words, where is the balance going? I gather that it will only be paid if they are not already getting a heating allowance.

I find this rather difficult to understand. Surely, all persons receiving supplementary benefit because of the low rate of benefit will be eligible for one of the existing three heating allowances and the 95 pence is not likely to apply in very many cases. If I am right in thinking that, I would ask the noble Lord how many, if any, will be eligible for the 95 pence heating addition and what is the total number who will benefit from the Government's present scheme? I imagine that the total number will be about 400,000 people. If that is so, I would remind the noble Lord that the previous Government's scheme resulted in about 4 million people benefiting, and that nothing like that number will benefit under the present Government's scheme.

The Government in the other place claimed that the scheme was designed to help those most in need. The noble Lord will know that within the last few days the Government have released figures showing that there are something like 200,000 families living below the supplementary benefit level and, on this showing, the Government will be helping only about 85,000 of these. I want to ask: what about the remainder? The Labour Government's schemes were, I concede, a little cumbersome; but the Government did then spend something like £38 million in 1979 in helping poor families with their fuel bills.

The last point that I want to make is this. I know that the Government have said in another place that the whole purpose of this was to try to restrict it to cover the really needy people who wanted help with their heating bills. This is why they put in the above-75s. But are the Government really doing this? Are they really helping the most vulnerable? As the noble Lord will know, quite recently a very serious survey was done about hypothermia. It shows that over half of those who are vulnerable and at risk so far as hypothermia goes are under the age of 75. While I feel that the scheme is really not meeting the needs of a very large number of people, I accept that it is going to meet the needs of a fair number. I am sorry that it has not been possible for the Government to do something tangible and to spread it over a much larger number of people who are obviously just as much in need.

Lord BANKS

My Lords, I, too, am grateful to the noble Lord, Lord Cullen, for his very clear explanation of these regulations and the order. I think that if the noble Lord, Lord Wells-Pestell, and I had had a meeting before this short debate we might not have found it so easy to agree, because I wanted to say a word about the one that he picked on: the Family Income Supplements (Computation) (No 2) Regulations. Perhaps I can say a brief word about the others before I do so. The Social Security Benefits Up-rating (Amendment) Order is necessary to bring about the situation which we thought had been brought about by the previous order; and we debated the issue at that time. That order, I am sure, is acceptable to the House. It is clear too that the second order is required because a widow's late husband, over 65 and not retired at the time of death, would have no earnings factor because no contributions were payable after 65 and it would not be possible to calculate an earnings-related addition in relation to contributions. As a result, actual earnings are to be used. Again, I am sure that that is a very non-controversial proposal.

As far as The Social Security (Maximum Additional Component) Amendment Regulations are concerned, I imagine that many Members of the House will have come across the rhyme in the days of their youth: Brothers and sisters have I none, But this man's father is my father's son". They would then have spent many frustrating minutes trying to work out who is talking about whom. I had a similar experience when I first approached this order. I spent some time with a wet towel around my head trying to sort out everything that had happened on all the events of this remarkable day when the person specified in line 5 reaches pensionable age, retires and dies and that person's spouse, if he or she also retires on that day, becomes, but for the double entitlement rule, entitled to two pensions. A very full day indeed for all concerned. I came to the conclusion in the long run that it does do what the noble Lord says that it does.

But I am left with another small question. Ought not Paragraph 2(a) to begin "he or she"? And in 2(b), ought it not to read "he or she had had an earnings factor"? I ask this because "he or she" is used with reference to the surviving spouse at line 12. If the surviving spouse can be male or female, it follows that the deceased spouse can be male or female, as well. I do not think that the support of the House for that particular regulation will depend on the noble Lord's answer to that question.

I should like to say a word about the Family Income Supplements (Computation) (No. 2) Regulations. Like the noble Lord, Lord Wells-Pestell, I welcome the £1 a week increase which these regulations provide for all those on family incomes supplement. It is, as the noble Lord explained, only one-half of the Government's plan to help the poorest with their fuel costs and it must be judged in that context. The other half is the provision of the 95p heating addition to be paid automatically to those families with children under 5 and to people over 75. The two together replace the electricity discount scheme. As the noble Lord, Lord Wells-Pestell, said, that scheme was cumbersome. It was not ideal and was restricted to one fuel; but it helped 3 million people at a cost of £38 million, as the noble Lord, Lord Wells-Pestell explained. Therefore, there has been a substantial cut in financial help with fuel bills, from £38 million to £16½ million and a substantial cut in the number of people helped from 3 million to 345,000. Again, as the noble Lord, Lord Wells-Pestell, pointed out, many now eligible for supplementary benefit heating addition automatically under this new provision are already getting it, since more than half of the supplementary benefit beneficiaries are already receiving a heating addition.

However, those who are helped are helped on average more substantially, approximately £50 per year per head on average as opposed to £7.50p. In this respect, those on family income supplement are particularly helped. Under the old scheme, if one had an electricity bill of £40 and was receiving supplementary benefit at the lowest rate of heating addition, one received £54.20p per annum. If one received family income supplement, one only received £10. That will now be increased to £52 for most people on family income supplement, and that undoubtedly is good.

But what about the person on rent or rate rebate who received £5 before and now gets nothing? Those who were included before and are now left out must total about 2½ million, and they include pensioners on rent and rate rebates (because they are not on supplementary benefit) and pensioners aged between 65 and 75 who will not get any automatic payment, although of course they will be able to claim. But they are a group very vulnerable to hypothermia as the noble Lord, Lord Wells-Pestell, said. There are families with children over five on supplementary benefit. They may claim heating addition but they will not get it automatically as the people now on family income supplement in similar circumstances will. I am concerned that the range of beneficiaries is not wide enough. I am concerned that the cut in the amount of money available from £38 million to £16½ million should be so drastic. It is a cut of 56 per cent.

If the Government had tackled the problem through the benefit system but with a wider range of beneficiaries on similar lines as they have suggested but on a wider range, and with more money available—on the scale provided last year—then there would be less criticism of their proposals than there is. Though I say they should use the benefit system, I have a reservation about the use of family income supplement because of its effect on the poverty trap being means-tested benefit, and because of the take-up which is 75 per cent.

Under the tax credit scheme, which we on these Benches would like to see established, it would be possible to have either a fuel credit for a limited range of beneficiaries but wider than the Government now propose, or an element of fuel costs included in the personal credits, which would be paid to everyone. This would be to provide, in one way or another, a fuel benefit rather like child benefit; and like child benefit it would not be means-tested and since the object of a tax credit scheme is to get away from means tests and lift the great number of people off supplementary benefit who are on it at the moment, that would be an important point. Like the child benefit, it would help the poorest most.

8.15 p.m.

Lord CULLEN of ASHBOURNE

My Lords, I am grateful to both noble Lords for what they have said. There has been some criticism but, on the whole, acceptance of the regulations. The noble Lord, Lord Wells-Pestell, asked me who really gets this benefit, apart from the 85,000 families on FIS. He is quite right: the cost for those 85,000 families is about £5 million a year. We estimate that about 110,000 pensioners will receive it, also at a cost of about £5 million, and 150,000 beneficiaries with young children will benefit. That will cost about £6½ million. That is how the balance is made up.

So far as the criticism of the FIS scheme is concerned, it does take the place of the previous Government's electricity discount scheme, which as the noble Lord, Lord Banks, said, did run into a fair amount of criticism. Five pounds was given to a lot of people who in point of fact did not deserve to have it—children living at home over a certain age who did not have any fuel bills to pay, and so on. I think that everybody realises that that scheme, although costly, was spread very thinly and did not altogether go to the most needy people. Again, as the noble Lord, Lord Banks, said, the average receipt was about £7.50p. We have a different scheme which is to give about £50 to the most needy people. There are always lots of needy people, and, unfortunately, in these days, we cannot give all we should like to give to all the people who would like to have it, and who perhaps really do need it.

There is another criticism of that other scheme, and that is that it cost £4 million to administer. Our scheme, which, admittedly, only comes to £16 million or £17 million as opposed to £38 million, will only cost £400,000. That I think is undoubtedly in its favour.

The noble Lord, Lord Banks, asked perhaps a slightly jocular question about "he or she". There is probably a good deal in what the noble Lord has said. "Person" seems quite a reasonable word. It applies to "he or she", and I think that the draftsman probably found it difficult to think of a better word than "person". It may well be that "he or she" would have been better. I doubt if the noble Lord will wish——

Lord BANKS

My Lords, very briefly, it was not that I was objecting to the word "person", but the text just said "he" in the two places to which I referred. I felt it should say "he or she" because it was, as I understand it, referring to a man or a woman. Further down in the order that distinction is made.

Lord CULLEN of ASHBOURNE

My Lords, there is certainly substance in that, but I doubt if the noble Lord would wish to have it changed. My Lords, I think I have answered most of the questions that I have been asked.

On Question, Motion agreed to.