SOCIAL SECURITY BILL

HL Deb 15 April 1980 vol 408 cc134-269

3.26 p.m.

The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Baroness Young)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, that the House do now resolve itself into Committee.—(Baroness Young.)

On Question, Motion agreed to.

House in Committee accordingly.

[The Lord Aberdare in the Chair].

Clause 1 [Amendments relating to up-rating]:

The CHAIRMAN of COMMITTEES (Lord Aberdare): Amendment No. 1. I must point out that if Amendment No. 1 is agreed to, I cannot call Amendment No. 2.

Lord WELLS-PESTELL moved Amendment No. 1: Page 1, line 6, leave out subsections (1) and (2).

The noble Lord said: I beg to move Amendment No. 1. I should like to crave the indulgence of the Committee at the very beginning and ask the noble Baroness the Minister one simple question. I am grateful to her for suggesting that certain of the amendments can be grouped. I personally suggested that perhaps we could take Amendments Nos. 1, 2, 3 and 4 together, and I understand that that is acceptable to the Government. I see no difficulty about the other groupings. However, I wanted to be clear in my own mind as to whether the noble Baroness the Minister was thinking in terms of speaking to all four amendments in one go rather than taking them separately. I had hoped that in the grouping we would still speak to each amendment. We would speak to Amendment No. 1 and then decide what to do on it; then we would deal with Amendment No. 2, then No. 3 and then No. 4 and decide what we are going to do at each stage rather than speaking to all four in one go.

Baroness YOUNG

I am perfectly agreeable to the suggestion that the noble Lord has made and we shall certainly take the amendments in the way that he wishes.

Lord WELLS-PESTELL

I am most grateful to the noble Baroness, because otherwise it would have meant my speaking for an almost interminable time on the first four amendments and that would not be good for me, nor, I am sure, for your Lordships.

Clause 1 is perhaps the most important part of the Bill with the exception of that section of the Bill which deals with the abolition of the Supplementary Benefits Commission. I think that because Clause 1 is so important it is important to ask your Lordships to consider what the Government are in fact asking. Certainly the first two amendments deal with the up-rating formula for pensions and other long-term benefits.

The Government argue that the present formula, introduced by the Labour Government in 1975, produced an illogical ratchet effect. In theory I am bound to admit that that is true. Pensions go up each year in line with prices or average earnings, whichever is rising faster in the particular year. As a result, over a period of years in which prices have risen faster in some years and earnings in others, pensions will have risen faster than either prices or earnings. I accept that that is the situation. Amendment No. 1 would preserve the existing formula if your Lordships decided that it was desirable to do so. If Amendment No. 1 is agreed, the present system of raising pensions, either in keeping with prices or earnings, would be preserved. We think that that has worked well in the past.

In practice, since 1975 the ratchet effect has not resulted in pensioners getting an unfair advantage over wage-earners. But if pensions do rise faster than earnings, is that really a bad thing? I think that it is generally agreed by everybody that the basic pension is much too low. If my memory is accurate, the Minister for Social Security, the right honourable friend of the noble Baroness, himself said quite recently that the basic pension is much too low. That is why the previous Government introduced a new earnings-related pension scheme. But that scheme will help future pensioners, not those who retired before 1979.

If the ratchet effect gives some extra help to existing pensioners, I think that most people would regard that as being absolutely desirable. Let us face it, pensioners are not a pampered section of the community. Of about 8.5 million people over pension age, over 2 million were on supplementary benefit in November 1978, and supplementary benefit is not a princely amount. Another 750,000 are entitled to supplementary benefit, but they do not claim it. Many more are near the poverty line, which shows that about 3 million people had incomes of up to 40 per cent. above supplementary benefit level in 1979. That does not mean that they had enough to meet their needs week by week.

Ministers have stressed that the Government still intend that pensioners should continue to share in rising living standards. But good intentions are no substitute for legislation. 1f the Government are obliged by law to increase pensions only in line with prices, anything more will have to come out of the contingency reserve. That means that it will have to be fought for year by year in competition with other spending priorities. There can be no guarantee that the pensioners will always win, and the Government's refusal to make good the shortfall in last year's up-rating is not, if I may say so, an encouraging precedent.

Amendment No. 2 offers a reasonable compromise. It accepts that the ratchet effect could become a problem and offers a way of guaranteeing pensioners their full share of rising living standards without the ratchet effect. In normal times pensions would rise in line with average earnings. In years such as 1980, when prices are rising more than earnings, pensions would rise in line with prices—that is, more than earnings—but pensions would then continue to rise only in line with prices until the original relationship between pensions and earnings was restored.

If the Government seriously intend pensioners to share in rising prosperity, when there is any in which to share, they cannot logically oppose this formula; with very great respect, nor can noble Lords opposite reasonably object to it. Indeed, Ministers have quoted with approval articles that have recently been written; one in particular by Mr. Tony Lynes, who is recognised as being quite an authority on this matter, in which this formula was suggested.

The reason for taking November 1980 as the starting date for the new formula in Amendment No. 2 is because we already know that this year prices are expected to rise faster than earnings. So the question of giving pensioners a share in rising standards will not arise until 1981 at the earliest. I ask your Lordships to ponder on this. This House has always shown a very great concern for those less fortunately placed than many of us here. Regardless of party, we have always recognised that pensions for retired people are often not enough for them to have a reasonable standard of living. They are men and women who have worked to the ages of 65 and 60 respectively, and in many cases some have worked to the age of 70. They have helped to produce what wealth this country is in a position to produce, of which some of us, who are not producers, have enjoyed the benefits. Therefore, I ask your Lordships to accept the first amendment which will ensure that in future the present situation continues, of pensions being increased according to earnings or prices, whichever is the greater, because we believe that it is right that the community should do this for the aged. I beg to move.

3.37 p.m.

Lord BANKS

I should like to support this amendment which has just been moved by the noble Lord, Lord Wells-Pestell. I do not think that the case has really been made out for abandoning the present formula. If there is no link with earnings, as is now proposed, and if there is an increase in the standard of living through earnings rising faster than prices, pensioners and others on long-term benefits will be left behind; they will become relatively poorer. That must happen unless the present position is maintained, in which case there would be no point in the Government taking the measure which they propose in Clause 1 of the Bill. Of course, the Government say that they want to ensure that pensioners share in such an increase in the standard of living. But we cannot be sure that they will share to the full. If they continually share to the full, there would be no point at all in the new measure. Therefore, I think that it is safe to assume that they will be left behind and become relatively poorer.

The noble Lord, Lord Wells-Pestell, has explained the ratchet effect, and in theory the case appears sound, that in course of time the percentage of average national earnings which the pension represents will increase if the present formula is maintained. But if we look at what has happened over the past five years, during which time this formula has been in operation, we do not find any suggestion that the pension is shooting up in terms of the percentage of average national earnings. There is very little change to be observed at all.

As Mr. Prentice, the Minister for Social Security, has himself said that pensions are too low as a percentage of average earnings, and as the ratchet effect is scarcely detectable at the present time, surely there is no need at this moment to worry about it. The thing to do would be to allow the ratchet effect to have such effect as it has and gradually—and it would be slow—bring pensions to the target level, whatever it is, that Mr. Prentice may have in mind as being a satisfactory level, since he regards the present level as being too low. When that point is reached then I think it would be sensible for the Tony Lynes formula outlined by the noble Lord, Lord WellsPestell, to be applied.

The question I should like to ask is this: Based on the experience of the past five years, what increase in the percentage contribution made by the employer, the employee, and the Revenue do the Government think would be necessary during the next five years to contend with the ratchet effect during that period? I think it would be small, if anything at all. The most recent small increase that we have had was largely to meet the increasing cost of unemployment benefit, and the Government Actuary's reports have singled out that particular possibility for further increase and have not to my knowledge laid any stress on the ratchet effect.

3.41 p.m.

Baroness PHILLIPS

I believe that these are the clause and the subsection which, according to the notes issued for guidance, provide, for the Secretary of State to continue to have regard to earnings in reviewing the retirement pensioners' earnings rule". I still regard, and always will regard, the earnings rule as totally iniquitous. This is now the only section of the population who have to pay back in total if they commit the terrible crime of continuing to earn after they have reached pensionable age. I have attacked each Government on this and shall continue to do so.

The question I am concerned with now is if this is now to be linked to prices and not to earnings, it seems to me even as an ex-teacher of mathematics that we have a highly complicated and bureaucratic way of arriving at a simple equation. Are we to assume that the level of what people can earn before their pension is taken away will now be concerned with the kind of prices they will have to pay, assuming you know the kind of things that those people will be buying with their money?

The Bill is already complicated enough, but these clauses are going to make it impossible for pensioners to sit down and work out what they are entitled to. This is serious: we read the other day of the case of the unfortunate old man who was sent to prison simply because he had not declared that he had some savings in a building society and had taken supplementary benefit. It is vital that the pensioners themselves should understand the high complications which this Act is going to impose on them.

3.43 p.m.

Baroness YOUNG

The noble Lord, Lord Wells-Pestell, in speaking to both Amendments Nos. 1 and 2, has made it quite clear that the intention of Amendment No. 1 is to preserve the existing formula on retirement pensions. In effect it would be a wrecking amendment to this Bill—to a major provision of this Bill. Subsection (1) gives effect to the Government's declared intention to change the statutory provisions relating to the up-rating of basic retirement pensions and other long-term benefits. At present they have to be increased at least in line with the movement of earnings or prices, whichever is the greater. This subsection provides that, in future, they shall be increased at least in line with the movement of prices alone.

The present requirement means that, when the movement of earnings exceeds that of prices, pensioners have real increases similar to those for earners; but when the movement of prices exceeds that of earnings, pensioners have the value of their benefits protected while earners suffer a decrease in real income. In the long term, the inevitable result of this ratchet effect is that pensions grow faster than both prices and earnings. The expenditure implications are very considerable, and we have made it clear that we cannot allow this to continue without regard to the ability of the economy to bear the cost.

I may say at this point that we should all like to do more for pensioners. Everybody who talks about it would like to do more. When we come to look at this matter to see why we do not accept the noble Lord's amendment and continue with the situation as it has existed since the last Labour Administration put in this provision, we see that during the time of the last Labour Administration they broke the earnings link in two of their last three up-ratings and were in fact set to break it again in 1979.

In 1976 pensions were increased by 15 per cent., which was less than either the increase in earnings or the increase in prices, and this was explained. The noble Lord will be as well aware of the facts as I am, and I shall not go into them all now. In November 1978 pensions were increased by only 11.4 per cent., while average earnings rose by 13.3 per cent. Again, Labour proposed in November 1979 that pensions should he increased by 12.8 per cent., and this was reaffirmed in their manifesto. However, earnings were running at almost 15 per cent. last May, so that the up-rating would almost certainly have failed again to match the increase in earnings.

This merely indicates the great difficulty of making this kind of calculation. We feel we must give a cast-iron guarantee to pensioners. We have said that we shall keep the pensions in line with prices so that retirement pensioners will not in fact be adversely affected by the effect of inflation and increased prices because their pensions will be protected, and we think that that is a guarantee that we can keep to. Of course we see that there is a very real point that pensioners should share in rising prosperity, but the truth of the matter is that prosperity is unlikely to rise in this corning year. We are going to have a difficult time. Pensioners will therefore be protected so far as prices are concerned.

We hope that as a result of our policies the economy will pick up again and we shall become more prosperous. It is interesting to note that, during our last period in Government from 1970 to 1974, whereas prices rose by 40 per cent., earnings rose by 55 per cent. and pensions rose by 55 per cent., although there was no obligation whatever to keep pensions in line with earnings. So in effect pensioners benefited from the prosperity that accrued during those four years. It is worth recognising what the last Conservative Government did, and that, when my right honourable friend the Secretary of State for Social Services has indicated that we will look after this matter, our record speaks for it.

I hope that this, in a very real sense, answers the point raised by the noble Lord, Lord Banks, about pensions and earnings, because I think he was making a very similar sort of point. He will know, with his vast personal experience, of the complexities of getting the calculations right on either pensions or earnings, and of the difficulty that we ran into before. We therefore believe that it is right to guarantee pensioners against the increase in prices and to leave it at that point.

Amendment No. 2, to which the noble Lord, Lord Wells-Pestell, also spoke is of course a means of solving the ratchet problem. I recognise that the method of solving this problem in the present legislation by providing that pensions maintain a fixed relationship to earnings has been canvassed before in this article to which the noble Lord referred in New Society last May by Mr. Tony Lynes, and during the consideration of this Bill in another place.

We believe that the amendment does not achieve this objective since it leaves unchanged the proposed amendment to Section 125(1) of the Social Security Act 1975 as set out in Clause 1(1). However, I cannot accept the intention of the amendment, because I do not think that one should argue on really a technical point alone. I recognise that in the long term this would avoid the ratchet problem, but that is not the only purpose of Clause 1(1). The subsection is also intended to give the Government flexibility to determine when the economy is able to afford real improvements in pensions over and above the minimum that is laid down in this clause.

Lord BANKS

In the light of what the Minister said, I wish to add a comment to what I said earlier. She said the last Government broke the link with earnings, as if that were some argument against having a link in the future. It is just as easy to break a link with prices as it is to break a link with earnings, and we have no guarantee, so far as that is concerned, that the present Government might not find some way to break the link with prices. Governments may not stick to what they are supposed to do, but we are trying to decide this afternoon what they are supposed to do.

What are the difficulties over the link with earnings? It has not been explained to the Committee what the difficulties are. We have had the theoretical point about the ratchet effect, but I have suggested, and it has not been denied, that there is no detectable difference in the percentage of national average earnings which the pension represents now compared with five years ago. So what is this terrible ratchet effect that has made it so necessary to break this link? How much has the ratchet effect added to contributions? I have asked that question three times, or at least I have asked what it will add to contributions in the future. I ask, in addition, what it has added to contributions in the past.

The Minister finally said the Government wanted flexibility so that they need not always increase in line with earnings. If, however, they do not always increase in line with earnings, then it is inevitable, as I said at the outset of my remarks earlier, that pensioners and people on long-term benefits will fall behind gradually and will gradually become poorer, and I do not think that point has been answered either.

LORD WELLS-PESTELL

I realise that the noble Baroness, Lady Young, did not use the expression "wrecking amendment" in an emotive way, but this is a sincere attempt on our part to try to persuade the Government to maintain the formula as it has been in recent years. I do not think the Minister will deny that if the last Government had pursued the policy which this Government are bent on pursuing, the pensions of old people, when the present Government took over, would have been something like £5 a week less. It was only because the previous Government decided to increase pensions according to prices or earnings, whichever was the higher, that over the period of office of the last Government pensioners received about £5 a week more than they would have done if it had been confined to prices.

That means they enjoyed a higher standard of living, meaning that millions of them did not have to go cap in hand, as some of them think they have to, to the Supplementary Benefits Commission. As the noble Lord, Lord Banks, asked, how much will it cost? We cannot get an answer to that question. And if it is going to cost a lot of money, I should have thought somebody would have worked it out and we could be told. I accept that the Government would not like to accept Amendment No. 1, but the Minister said some kind and generous things about Amendment No. 2, so why not let your Lordships' House show the way, as it did on the Education Bill and has done in other ways over the years, by accepting that amendment and asking the Government, as a result, to look afresh at the matter?

LORD DRUMALBYN

I find difficulty in following the argument because it seems to be highly theoretical. The essence of the question we have to decide is whether we should be tied, so to speak, to two points, which does not give very great flexibility, or whether the reference point should be only one point. The fact of the matter is quite clear and, if I may say so, I do not think noble Lords opposite have taken this point: namely, that the 1975 Act is perfectly clear in that the obligation on the Government—the obligation which my noble friend said had not always been carried out—is, at the time of an up-rating order, to increase the sums: at least to such extent as he thinks necessary to restore the balance". In other words, pensioners will not be any worse off—the sums they receive will be brought in line with prices—but beyond that the Government can increase them to a greater extent or to a much greater extent in accordance with the degree of prosperity and the prospects of the country in the following year to which their increase relates.

I should have thought that argument would commend itself to everybody and I do not think there is any great merit in seeking to retain the earnings test as well, given that the earnings test, I imagine, at a given point in time is very much more difficult to calculate effectively than the prices test. Goodness knows, we had enough trouble in the past in arriving at what the prices test should be, at what average prices were, and what they should and should not include. This is a matter which can always be considered from time to time. The essential point here is that We have a commitment to retain the purchasing power in terms of prices; in other words, the pensioner will not be any worse off, and to go further when circumstances are appropriate, though no more than that.

Lord WELLS-PESTELL

May I ask the noble Lord, Lord Drurnalbyn, if he is saying that if the amount of the retirement pension is decided by either prices or earnings, whichever is the greater, the pensioner is no better off than if the pension is decided according just to prices?

Lord DRUMALBYN

I do not think I said that.

Lord WELLS-PESTELL

I am asking whether he would say so. I understood him to say it does not matter what the yardstick is and that the pension is protected. We are saying it is protected at a lower level than it would be if the present formula were maintained. I am sure the noble Lord will not deny that.

Lord DRUMALBYN

I certainly do deny it. There may be years in which prices increase faster than earnings, in which case it would be more advantageous to relate to prices. Where earnings have gone up but at a particular time in the year, and prices are more likely to have a much more even trend throughout the year, I should have thought that that was a point which can best be taken into account by the Government in line with prospects for the following year. That is my argument. I am not saying that we are settling on whatever is the lower of the two when we choose prices alone, and that is certainly not likely to be the case. It may be the case in one year but, as I said, in any case there is latitude to the Government to raise the level of pensions to a higher amount irrespective of the fact that they are committed to raising them only to the level of prices.

Baroness PHILLIPS

Without wishing to press the Minister, I should like a reply, perhaps in writing, as to how this formula of earnings will be worked out. I am left completely confused. If a pensioner has an increased pension, in the past the amount that can be earned has also increased. Is this still to be tied to earnings, or is it to be tied to prices? If it is to he tied to prices, then I do not understand how the formula is to be worked out.

Baroness YOUNG

I did not answer that point, which is an important one, because I thought it was a rather separate one which we shall come to when we debate a later amendment. I thought I would deal with it then because other matters will arise on it.

Baroness PHILLIPS

I am obliged to the noble Baroness.

Baroness FISHER of REDNAL

Surely it would he far easier for the Government to index according to wage levels. We constantly read in the media about average weekly earnings, and those figures obviously are collated monthly. I believe that we require some assurance from the Minister because, if at some stage the Government think of changing the cost of living index, the resulting scheme should have some bearing on the spending powers of pensioners. Some pensioners may worry that the system may go against them if the cost of living index is the only part of the ratchet that is considered and there is no fall-back in relation to the earnings provisions.

Baroness WOOTTON of ABINGER

This is clearly a gamble. If the Government succeed in reducing the rate of inflation as they hope, let us suppose that they succeed in reducing it considerably so that prices become almost stable—which older Members of the House will remember as a possibility. If prices become stable, pensions will remain the same in money terms. Pensioners tend to think in terms of money, although they realise that their money is being eroded by the rising cost of living. If pensions are fixed only in relation to prices and the Government succeed in their policies a great deal better than we on the Opposition Benches expect, pensioners will he receiving lower increases. If on the other hand the Government face complete disaster in their anti-inflation policies, prices will roar ahead and pensioners possibly will believe that they have got more real income. They will find more money in their pockets and probably will prefer that than to have a figure of pension that is stabilised because prices themselves are stabilised.

I believe that the earnings factor provides a hedge against this gamble because it gives something which is real. Pensioners will see that their pensions are bound to rise to some extent because we can be quite confident that either earnings or prices will rise in money terms. It is a question of which rises the faster; that is the gamble. One will hedge both ways if one adopts this alternative formula. That is its great merit. However, a great deal depends on whether the Government succeed, as we believe they will not succeed, in keeping inflation down. If they do not keep inflation down, there is something to be said for the prices formula. If they succeed in keeping inflation down, they will not succeed in keeping earnings down and that will give us an alternative road.

Baroness YOUNG

I wish to thank my noble friend Lord Drumalbyn for his most helpful intervention in explaining what we are attempting to do in these provisions. At the risk of repetition, and also by way of answering the noble Baroness, Lady Wootton of Abinger, and the noble Baroness, Lady Fisher, perhaps I may indicate how we see these provisions working. It is our intention that the retirement pension should keep up with prices, and that this would be a minimum requirement, as we believe it must be. As my noble friend indicated, it is one fixed point. Nobody is saying that it is a maximum requirement. If, as I would like to believe, and as I confidently hope, contrary to the view of Lady Wootton, our economic policies succeed, and if we reach a stage at which inflation is reduced to, say, 2 per cent. or even nil—I find it difficult to believe that this could happen in the next three or four years but if we may adopt the analogy used by Lady Wootton—let us assume that the economy will improve. If that happens, I am certain that the pensioners will do better because we will all do better as a country.

Our record shows that when we have done better pensioners have done better under a Conservative Government because they have been looked after. It is essential for pensioners to know that when there are great increases in prices their pensions will keep up, so that when they go to the shops week by week they are able to keep up with the prices for the things which they require to buy. That must be right, and that is why we have taken this view. There is considerable evidence to show that it is difficult, having made these promises, to keep up either with earnings or prices, whichever is the greater. One reason is that it is much more difficult to make the calculation on earnings. We believe that it will be better to make the calculation on prices.

In terms of the ratchet effect, if one has one or the other one inevitably commits oneself to an increase in expenditure. The fact is—and we could argue about this for a very long time—that it must be part of the Government's economic policy to try to get the country to live within its means. We believe that we cannot go on as we are, and we are examining every area of Government policy and Government expenditure. The most important thing for retirement pensioners is that their pensions should keep up with prices.

The noble Lord, Lord Banks, asked about the cost of the ratchet effect. It is difficult to say what the relative movements in earnings and prices will be over the next five years. Therefore, we do not know what the ratchet effect will be. In the Financial Memorandum to the Bill we estimate that the ratchet will cost £130 million a year for each I per cent. by which earnings movement exceeds movement in prices. That is an estimate and is a difficult calculation, but we believe that it is too great a burden for public expenditure, for which we cannot plan ahead. That is why we have said that if our economic policies succeed and if we do better, we shall try to make sure that pensioners get a real increase in the value of their pensions commensurate with the real increase in the standard of living and real wages and the real improvement to be obtained from an improved economy.

Lord BANKS

Does the Minister agree that if the link with pensions is not maintained in practice fully, pensioners must be worse off than under the present formula?

Baroness YOUNG

If the present formula were always to be kept because of the ratchet effect, it is true that pensioners would always be protected against prices and would get an automatic increase when earnings were greater than prices. However, if ultimately we as a country do not get our economy on a sound footing, then in comparable terms with other countries our average standard of living will decline and pensioners will do worse. It is in the interests of retirement pensioners, as of everybody else, that we should get the economy right. It would be very unfair to pretend to one group of people that somehow they can indefinitely receive a rise, as it were (as one can with other people), which is unrelated to the basic increase in productivity in the country as a whole. In a sense it is a short-term delusion, it does not last very long, and we believe that it does not put right the basic difficulties in the country as a whole.

I was reminding myself of the point that the noble Lord, Lord Wells-Pestell, made at Second Reading when he used this argument. He said: If the system which the Government are now proposing to adopt had been in operation in recent years, it would have resulted in the weekly retirement pension being £5 less than it was when the present Administration came into office."—[Official Report, 1/4/80; col. 1272.] That assumes that the Government of the day had paid sums of money up to average earnings on each occasion. The amount could have been even more if they had done that, but they did not. We are arguing imponderables as to what people might have done under certain circumstances, but in fact did not do. In the Bill we are trying to give one fixed point, which is a minimum, from which we could make additions as the economy improves.

Lord WELLS-PESTELL

I did not assume anything of the sort. Retirement pensions were in fact £5 more than they would have been had there been only one point at which the calculation was made. However, I do not want to go over all that ground again. I want to congratulate the noble Baroness upon her honesty, because if I understood correctly, what she implied a few minutes ago was that it is not so much the position of the pensioners which is the first consideration, but rather the fact that the Government cannot afford to do what is suggested because they must save money. I might be inclined to accept that.

4.12 p.m.

Baroness YOUNG

I hope that I am honest with the Committee, because I consider this a very serious matter. I take the view that it is the Government's job to look after retirement pensioners as well as all vulnerable groups within the population. As we have made perfectly clear, our first priority as a Government is that somehow we must try to live within our means and get ourselves out of the economic difficulties in which we currently find ourselves. It does not help retirement pensioners or anyone else to pretend that as a country we have unlimited sums of money to spend on all sorts of things. What we must do is look after these groups within the population, and that we are doing in this proposal. They are intelligent people, perfectly capable of knowing what is going on, and we cannot pretend to them that we can do a great many things and improve the standard of living of all kinds of people, when, as we all know, productivity is not rising and we are not in a situation in which the country is as rich as we should like it to be. What we must ensure is that these people do not fall behind; that is very important.

When previously in Government we improved the economy, things became better, and we were able to do much more for retirement pensioners, and as earnest of our good faith I gave the figures. I might say that the £10 Christmas bonus was a Conservative policy, as was pensions for the over-80s. Those were two real improvements that we were able to make—and we made them gladly—when we were last in government because we felt that things were better, and we were able to share out that prosperity.

We are being honest with everybody about this situation. We are providing a minimum below which we do not expect people to fall. We are keeping the Christmas bonus. We are of course keeping the pensions for the over-80s, and in the budget proposals we have been able to do a certain amount for war widows and other vulnerable sections. However, I should not wish to mislead the Committee, nor to pretend to people that we can undertake commitments which we do not really feel we can make at this time. When the country is in a better position, pensioners will join in the prosperity.

Baroness MACLEOD of BORVE

Is my noble friend the Minister aware that it is my knowledge—perhaps it is not of very great value—that when our country is not in a state of great prosperity the pensioners would not wish to be cushioned against its problems any more than any other section of the population?

Lord DRUMALBYN

Before my noble friend replies, may I ask whether she agrees that what the noble Lord, Lord Wells-Pestell, has said is not infallible? He has said that pensions would have been £5 less than they actually were under the Labour Government had there been only the one test of prices, but that assumes that the Labour Government would have given only that amount of increase and would not have given more, although they were entitled to do so even without the addition of earnings. This is the whole point. As the Bill now stands, the Government of the day must up-rate by at least as much as the figure of price rises, and the same applied previously. So this trotting out (if I may use the expression) of the £5 less that would have been paid to the pensioners over the period of years mentioned is wholly fallacious. It assumes that only the minimum increase would have been given; and that is not the intention. I remember very well that during my period in administration every time there was an increase it was not based only on the increase in prices. The increase looked forward to the prospective increase in prices, and went a little farther than that as well.

Lord WELLS-PESTELL

I very much dislike joining issue with the noble Lord, Lord Drumalbyn, because when I was a junior Minister I was on more than one occasion very grateful to him for coming to my rescue, with his vast knowledge of this field, but let us get the position quite clear. What the noble Lord has said, quite correctly, is that the present Government have decided on a point at which they are going to raise pensions. He then said, again quite rightly, that they are giving an undertaking that if the position is such that they can improve upon that, they will do so; but this must be a judgment, and I do not altogether trust judgments of Governments, whoever those Governments may be.

I want to see more than just a judgment. I want to see something which is laid down, and so far as I am aware, no one in your Lordships' Committee can say that there is a better formula than that of increasing pensions according to either prices or earnings, whichever is the higher. It comes down to that. We have had a good debate. I do not think that we shall get much farther on this matter, and I am prepared to say no more.

Lord BANKS

May I make one quick point before we finish our debate on this particular matter. What I have to say is in reply to something that the noble Baroness said. When answering the point that I raised about the cost of the ratchet effect, she quoted part of the Explanatory and Financial Memorandum to the Bill, which states that if the Secretary of State's— estimate of the movement of prices were one percentage point below his estimate of the movement of earnings, the cost of that up-rating would be lower than it would have been under the existing statutory provision by £130 million in a full year at current benefit levels". We know that the new formula is less costly than the old one. Indeed, it is the basis of our objection that less will he spent on pensioners; that the pension that the pensioners receive under the new formula will be less. But the figure of £130 million that is set out in the Explanatory and Financial Memorandum in those circumstances is not the cost of the ratchet effect. The ratchet effect is the cost of increasing the percentage of average national earnings which the pension represents; it is not increasing the pension to keep in line with earnings. So the cost of the ratchet is not £130 million. If over the five years there has not been an increase in the percentage of average national earnings which the pension represents, then in fact the ratchet will not have cost anything.

Baroness YOUNG

Certainly I do not intend to pick an argument with the noble Lord, Lord Banks, on this point; to do so would be most unwise. I shall read very carefully in tomorrow's Hansard what he has said, but I shall accept what he has said as being true. I think we have had a long discussion on this, but I will not accept now that, by saying this, we are committing everybody to lower pensions. We are giving a minimum which we may be able to raise; and I suspect that by altering it, to go back to either prices or earnings, whichever is the greater, although we could write that into the Bill, it would not necessarily give anybody something which was a higher pension in real terms. It would depend on the prosperity of the country.

4.20 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 89; Not-Contents, 116.

CONTENTS
Airedale, L.	Goronwy-Roberts, L.	Northfield, L.
Amulree, L.	Gosford, E.	Oram, L.
Aylestone, L.	Hale, L.	Paget of Northampton, L.
Bacon, B.	Hampton, L.	Peart, L.
Balogh, L.	Hatch of Lusby, L.	Phillips, B.
Banks, L.	Henderson, L.	Plant, L.
Beaumont of Whitley, L.	Hooson, L.	Ponsonby of Shulbrede, L. [Teller.]
Birk, B.	Houghton of Sowerby, L.
Blease, L.	Howie of Troon, L.	Rhodes, L.
Blyton, L.	Hutchinson of Lullington, L.	Rochester, L.
Boston of Faversham, L.	Jacques, L.	Ross of Marnock, L.
Brockway, L.	Janner, L.	Sainsbury, L.
Brooks of Tremorfa, L.	Jeger, B.	Segal, L.
Bruce of Donington, L.	Kaldor, L.	Shinwell, L.
Byers, L.	Kilbracken, L.	Stedman, B.
Chitnis, L.	Leatherland, L.	Stewart of Alvechurch, B.
Cledwyn of Penrhos, L.	Lee of Newton, L.	Stewart of Fulham, L.
Clifford of Chudleigh, L.	Listowel, E.	Stone, L.
Collison, L.	Llewelyn-Davies of Hastoe, B.	Strabolgi, L.
Cooper of Stockton Heath, L.	Lloyd of Kilgerran, L.	Taylor of Gryfe, L.
David, B.	Longford, E.	Taylor of Mansfield, L.
Davies of Leek, L.	McCarthy, L.	Wallace of Coslany, L. [Teller.]
Donaldson of Kingsbridge, L.	MacLeod of Fuinary, L.
Elwyn-Jones, L.	McNair, L.	Walston, L.
Evans of Claughton, L.	Maelor, L.	Wedderburn of Charlton, L.
Evans of Hungershall, L.	Maybray-King, L.	Wells-Pestell, L.
Fisher of Rednal, B.	Melchett, L.	Whaddon, L.
Gaitskell, B.	Milford, L.	Winstanley, L.
Galpern, L.	Milverton, L.	Wootton of Abinger, B.
Gardiner, L.	Mishcon, L.	Wynne-Jones, L.
Gladwyn, L.

NOT-CONTENTS
Airey of Abingdon, B.	Ferrers, E.	Mowbray and Stourton, L.
Alexander of Tunis, E.	Fraser of Kilmorack, L.	Murton of Lindisfarne, L.
Allerton, L.	Gage, V.	Northchurch, B.
Alport, L.	Gainford, L.	Nugent of Guildford, L.
Amory, V.	Galloway, E.	O'Neill of the Maine, L.
Auckland, L.	Gibson-Watt, L.	Onslow, E.
Balfour of Inchrye, L.	Gisborough, L.	Orkney, E.
Barnby, L.	Glasgow, E.	Orr-Ewing, L.
Belstead, L.	Greenway, L.	Porritt, L.
Berkeley, B.	Gridley, L.	Redmayne, L.
Birdwood, L.	Grimston of Westhury, L.	Reigate, L.
Boyd of Merton, V.	Halsbury, E.	Renton, L.
Bradford, E.	Hankey, L.	Robbins, L.
Brentford, V.	Henley, L.	Roberthall, L.
Campbell of Croy, L.	Hertford, M.	Rochdale, V.
Cathcart, E.	Hill of Luton, L.	St. Aldwyn, E.
Chesham, L.	Home of the Hirsel, L.	St. Davids, V.
Clancarty, E.	Ilchester, E.	St. Just, L.
Clitheroe, L.	Kimberley, E.	Saint Oswald, L.
Cork and Orrery, E.	Kinross, L.	Sandford, L.
Cottesloe, L.	Kintore, E.	Sandys, L. [Teller.]
Craigavon, V.	Lauderdale, E.	Sempill, Ly.
Cranbrook, E.	Lindsey and Abingdon, E.	Somers, L.
Crawford and Balcarres, E.	Long, V.	Spens, L.
Cromartie, E.	Lonsdale, E.	Stamp, L.
Cullen of Ashbourne, L.	Lothian, M.	Strathcarron, L.
De Freyne, L.	Loudoun, C.	Strathclyde, L.
Denham, L. [Teller.]	Lucas of Chilworth, L.	Strathspey, L.
Drumalbyn, L.	Luke, L.	Tenby, V.
Dulverton, L.	Lyell, L.	Teviot, L.
Ebbisham, L.	McFadzean, L.	Tranmire, L.
Eccles, V.	Macleod of Borve, B.	Trefgarne, L.
Effingham, E.	Malmesbury, E.	Trenchard, V.
Ellenborough, L.	Mancroft, L.	Vaux of Harrowden, L.
Elliot of Harwood, B.	Mansfield, E.	Vickers, B.
Elton, L.	Massereene and Ferrard, V.	Vivian, L.
Emmet of Amberley, B.	Merrivale, L.	Westhury, L.
Faithfull, B.	Mills, V.	Young, B.
Falkland, V.	Morris, L.
Resolved in the negative, and amendment disagreed to accordingly.

4.29 p.m.

Lord WELLS-PESTELL moved Amendment No. 2: Page 1, line 13, after ("prices") insert ("and to the increase in the general level of earnings over the whole period commencing on 24th November 1980").

The noble Lord said: I move this amendment formally because I have in fact spoken to it, but I would just remind your Lordships (although there are not many of us to be reminded) that the amendment offers a reasonable compromise. It accepts that the ratchet effect could become a problem and attempts to suggest a formula by which the effect of it will not be the same as it is at the present moment. I do not think there is any need for me to say anything more: I beg to move.

Baroness YOUNG

I will speak only briefly on this point because we discussed it earlier. I recognise that, in the longterm, the proposal which the noble Lord is setting out would avoid the ratchet problem, but that really is not the only purpose of subsection (I) of Clause 1. The subsection is also intended to give the Government flexibility to determine when the economy is able to afford real improvements in pensions over and above the minimum laid down in this clause. Therefore, I am afraid I am unable to accept this amendment.

4.31 p.m.

On Question, Whether the said Amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents 76; Not-Contents, 113.

CONTENTS
Airedale, L.	Goronwy-Roberts, L.	Northfield, L.
Amulree, L.	Gosford, E.	Gram, L.
Aylestone, L.	Hale, L.	Peart, L.
Bacon, B.	Hampton, L.	Phillips, B.
Balogh, L.	Hatch of Lusby, L.	Ponsonby of Shulbrede, L. [Teller.]
Banks, L.	Henderson, L.
Beaumont of Whitley, L.	Hooson, L.	Rhodes, L.
Bernstein, L.	Houghton of Sowerby, L.	Ross of Marnock, L.
Birk, B.	Howie of Troon, L.	Sainsbury, L.
Blease, L.	Hutchinson of Lullington, L.	Segal, L.
Blyton, L.	Jacques, L.	Shinwell, L.
Boston of Faverhsam, L.	Janner, L.	Stedman, B.
Brockway, L.	Jeger, B.	Stewart of Alvechurch, B.
Bruce of Donington, L.	Kaldor, L.	Stewart of Fulham, L.
Byers, L.	Kilbracken, L.	Stone, L.
Chitnis, L.	Leatherland, L.	Strabolgi, L. [Teller.]
Collison, L.	Lee of Newton, L.	Taylor of Gryfe, L.
Cooper of Stockton Heath, L.	Listowel, E.	Taylor of Mansfield, L.
David, B.	Lloyd of Kilgerran, L.	Underhill, L.
Davies of Leek, L.	Longford, E.	Wallace of Coslany, L.
Donaldson of Kingsbridge, L.	MacLeod of Fuinary, L.	Walston, L.
Elwyn-Jones, L.	Maelor, L.	Wells-Pestell, L.
Fisher of Rednal, B.	Maybray-King, L.	Winstanley, L.
Gaitskell, B.	Melchett, L.	Wootton of Abinger, B.
Gardiner, L.	Milverton, L.	Wynne-Jones, L.
Gladwyn, L.	Mishcon, L.
NOT-CONTENTS
Airey of Abingdon, B.	Cathcart, E.	Ebbisham, L.
Alexander of Tunis, E.	Chesham, L.	Eccles, V.
Allerton, L.	Clancarty, E.	Ellenborough, L.
Alport, L.	Clifford of Chudleigh, L.	Elliot of Harwood, B.
Amory, V.	Clitheroe, L.	Elton, L.
Auckland, L.	Cork and Orrery, E.	Emmet of Amberley, B.
Balfour of Inchrye, L.	Cottesloe, L.	Faithfull, B.
Barnby, L.	Craigavon, V.	Falkland, V.
Belstead, L.	Crawford and Balcarres, E.	Ferrers, E.
Berkeley, B.	Cullen of Ashbourne, L.	Fraser of Kilmorack, L.
Boyd of Merton, V.	De Fryene, L.	Gainford, L.
Bradford, E.	Denham, L. [Teller.]	Galloway, E.
Brentford, V.	Digby, L.	Gibson-Watt, L.
Caccia, L.	Drumalbyn, L.	Gisborough, L.
Campbell of Croy, L.	Dulverton, L.	Glasgow, E.
Greenway, L.	Macleod of Borve, B.	St. Aldwyn, E.
Gridley, L.	Malmesbury, E.	St. Davids, V.
Grimston of Westbury, L.	Mancroft, L.	St. Just, L.
Halsbury, E.	Mansfield, E.	Saint Oswald, L.
Hankey, L.	Massereene and Ferrard, V.	Sandford, L.
Henley, L.	Merrivale, L.	Sandys, L. [Teller.]
Hill of Luton, L.	Morris, L.	Sempill, Ly.
Home of the Hirsel, L.	Mowbray and Stourton, L.	Somers, L.
Hornsby-Smith, B.	Murton of Lindisfarne, L.	Stamp, L.
Hylton-Foster, B.	Northchurch, B.	Strathcarron, L.
Ilchester, E.	Nugent of Guildford, L.	Strathclyde, L.
Kimblerley, E.	O'Neill of the Maine, L.	Strathspey, L.
Kinross, L.	Onslow, E.	Tenby, V.
Kintore, E.	Orkney, E.	Teviot, L.
Lauderdale, E.	Orr-Ewing, L.	Tranmire, L.
Lindsey and Abingdon, E.	Pender, L.	Trefgarne, L.
Long, V.	Porritt, L.	Trenchard, V.
Lonsdale, E.	Redmayne, L.	Vaux of Harrowden, L.
Lothian, M.	Reigate, L.	Vickers, B.
Loudoun, C.	Renton, L.	Vivian, L.
Lucas of Chilworth, L.	Robbins, L.	Westbury, L.
Lyell, L.	Roberthall, L.	Young, B.
McFadzean, L.	Rochdale, V.

Resolved in the negative, and amendment disagreed to accordingly.

4.39 p.m.

Lord WELLS-PESTELL moved Amendment No. 3: Page 2, line 19, leave out ("last") and insert ("21st").

The noble Lord said: This amendment concerns the date of the up-rating of pensions. As your Lordships know, the present position is that each up-rating must take place within 12 months of the last one. In practice, this means within 52 weeks because the up-rating day has to be a Monday. As a result, the up-rating happens a day earlier each year and this means two days earlier in the Leap Year. Since the annual up-rating rule started in 1975, the up-rating date has crept forward from 17th November in 1975 to 12th November in 1979.

If the Government had done nothing about it, the 1980 up-rating date would have been 10th November—a full week earlier than in 1975—and by 1986 it would have been two weeks earlier. It would be quite reasonable for the Government to seek power to prevent this kind of thing happening and we have no quarrel with that; all that would be needed is to provide that when the up-rating date has crept forward to 10th November it should automatically go to the 17th so that the up-rating would always take place between the 11th and the 17th. Clause 1(3), however, goes farther than this, allowing the up-rating to take place at any time before the end of November.

During the Commons debate on similar amendments, Ministers refused to say whether the Government intended to make use of this power to postpone this year's up-rating to 24th November, thus cheating—and I use the word advisedly—pensioners and other beneficiaries of a week's increase.

The noble Baroness's right honourable friend the Minister, Mr. Prentice, said during the Report stage on 18th March (at col. 373 of Hansard of the other place): the Budget announcement will contain the details of this year's up-rating, the amount and the date".

He was wrong. As I understand the situation, the Budget speech gave the amounts but not the date. That was left to the Secretary of State to announce the following day, when the postponement of the up-rating until 24th November was overshadowed by the large number of other cuts which were announced simultaneously. This amendment therefore does not deal with a hypothetical situation, as the Commons amendment did, but with a situation in which the Government have announced that they intend to cheat this November. Only the power of your Lordships' House to amend the Bill can in fact prevent them from doing so.

The reason for specifying 21st November rather than 17th November as the latest date for the up-rating is that different benefits are up-rated on different days of the week. The intention of the amendment is that the up-rating should commence not later than 17th November and should be completed by 21st November. Thus the amount saved by making the up-rating date the 24th rather than 17th November means that something like £60 million is involved. We feel strongly that it should be the 21st and not the 24th. It appears that the only reason for making it the 24th is that it will save something like £60 million at the expense of the pensioners. I beg to move.

Lord BANKS

I support the principle in this amendment. Unless there is some technical objection to it which has not occurred to me as yet, I shall be inclined to support it completely. The noble Lord, Lord Wells-Pestell, has explained that the date gets earlier each year at the present time, and that the Government are proposing to overcome that by allowing the date to go back as far as the end of the 12th month which could mean a very considerable loss to people who had to wait for their increase for something like a fortnight. This amendment, as I understand it, would prevent that and would also overcome the objection to the way things are working at the present time.

4.45 p.m.

Baroness YOUNG

The noble Lord, Lord Wells-Pestell, has explained very clearly the problems about the fact that the date for up-rating has moved forward progressively each year, normally by one day only and two days in a leap year. This gradual creeping forward has both procedural and financial implications. The amendment which he has proposed and which has been supported by the noble Lord, Lord Banks, would mean that the up-rating had to take place by the 21st day of the month in which the first anniversary of the previous up-rating falls instead of the last day of that month as the subsection provides. The choice of the 21st of the month, I assume, was made to take account of the fact that different benefits are uprated from different days of the week in which the up-rating takes place to take account of the spread. The final date referred to in an amendment of this sort has to he later than the Monday of the week in which the up- rating takes place. The aim of the amendment is to keep the up-rating week in the middle of the month.

The subsection that we are debating here does not change the principle of having an annual up-rating. It allows the Government some flexibility in settling the date by providing that the up-rating must take place by the end of the month in which the anniversary of the previous up-rating occurs. We believe that we must have a provision to prevent the up-rating date creeping forward, and that is the principle of the subsection. We need some flexibility in the arrangements. This would be prevented if one had a fixed date—as in this case—which would have to be reviewed annually, otherwise we should be in the difficulties which the noble Lord described because it clearly has financial implications as the date creeps forward each year. The noble Lord, Lord Banks, made this point. There is this difficulty as a matter of principle. Further, as we believe there must be flexibility to fix the date, we have drafted the Bill as it is. There are both financial considerations and a consideration of flexibility. That is why we are doing it. We remain committed to the annual up-rating of the pensions as I have already indicated.

BARONESS PHILLIPS

ft seems strange that one has to have flexibility when paying out pensions to people. There is no flexibility in the tax laws: we have to submit our tax by a certain date, or else! So far as I can recall, there is certainly no flexibility in the payment of wages or earnings. One's contract of employment always relates to certain days in the month. Here we are dealing with people who have very small sums of money to handle, so that if one is receiving something like only £19 a week, the odd pound which would not be noticed by a higher wage-earner becomes very important. I cannot see why the Government needs flexibility when paying out, whereas they certainly give no flexibility when receiving money from the citizen.

LORD WELLS-PESTELL

May I ask the Minister what is there to prevent it being up-rated on 21st of the month other than the fact that it will save something like £60 million? If it can be done and still not upset the normal procedures, why cannot this be done? I know a little about the procedures involved and what it means in the way of pension books and so on. If this can be done on the 24th, why cannot it be done on the 21st? Surely, it gives more time. Let us come down to the issue: is it not really a means of saving money at the expense of the retired?

BARONESS YOUNG

I have been asked two questions: why we cannot fix the date of the 21st, and the point that the noble Baroness, Lady Phillips, made. I am not by any means a tax expert but she said that income tax all had to be paid on a certain date. One pays one's income tax if on PAYE automatically through one's salary or wages. It is an automatic deduction so that it is not in quite the same sense as that. The reason why we are involved is that, as the noble Lord, Lord Wells-Pestell, has explained, quite rightly, the date has crept forward each year and so one would get to the stage, when there were a leap year, when the date would have crept forward about two weeks.

Therefore, the Government would automatically have been committed to a very large increase of expenditure if the same date were fixed and it went on creeping forward in that way. So there needs to be a general rule about it. If we wrote into the Bill that it should be the 21st November, as the amendment suggests, then once again we are on a fixed date and, for the reasons which have been mentioned—these are reasons with whose details I am sure the noble Lord is more familiar than I am—we have the difficulty about not having it on a Monday, which for administrative reasons it has to be, and therefore we would get ourselves into difficulties. That is another reasons for not having it on the 21st. Those are two reasons why we wish to leave the Bill as drafted. I agree that it would be an extra increase in expense if it were to be left at the 10th November, that being the date it would have come to had we gone on without any amendment at all. But that is not the only reason for it and it is not the only reason why the noble Lord's amendment cannot be accepted.

Lord ROSS of MARNOCK

But there is a very considerable sense of grievance among pensioners about what is happening, because effectively it is a loss of two weeks. Had the law not been changed it would have come two weeks earlier, and I would have thought myself that it is just a bit much to expect pensioners to thank the Government for having deceived them in respect of the increase which they would normally have expected at a particular time, under the present law. By the change of law and this pleading (a) for flexibility and (b) the plea that it could not be a Monday and thus resisting this particular amendment, you take away that second week that might have been saved for the pensioners.

I do not think that the Government are on a good thing at all here. I do not think it is justifiable to go so far on the grounds of flexibility as to deny pensioners a fortnight's increase to which they would normally be entitled and to which they are presently entitled until such time as this Bill becomes law. I hope the Government will think again. We have taken a half-way house here in suggesting the date of the 21st.

Baroness PHILLIPS

I do not think that one wants to press the noble Baroness, because obviously, as regards some of the sins that we are accusing this Government of, I must say that other Governments have been equally guilty. I recall that we created a situation where the pension was announced in May, I believe, and increased in November; and when certain people asked why it had to be for such a long period, the answer was that all pension books had to be amended and it was a very complicated administrative job. At that time, I pointed out that when British Rail raise their fares they do not have any of these qualms: they simply overstamp the price of the fare, and they do it the next day. I repeat that it is only when money is paid out that we get "administrative problems". It is not when money is paid in: that will always be smoothed over; things will be done quickly. I feel that once again we are having the administrative argument used as well as the economic one. This concerns a group of people who, as has just been said, feel a sense of grievance because they are already on low static incomes. The noble Baroness the Minister referred earlier to productivity; hut if the poor dears actually go and earn some money the first thing that happens is that their pension is taken away and they are taxed, so they cannot really indulge in much productivity. I feel that we are dealing here with a group with a small sum of money and that they need to get it as early as possible and they need to get the maximum that we can give them

Baroness GAITSKELL

I only want to add one sentence to this. I find it rather hard to follow. I simply do not understand why the Government are fighting this amendment. Therefore, when I read an article headed, "Are the Government blundering around in the dark? I fully agree that the Government are blundering around in the dark.

Lord BANKS

Am I not right in thinking that what the Government are saying in the Bill is that the date must be not later than the last day of the month—and we normally think in terms of November—and that this amendment would make it not later than the 21st? Would that not still leave the necessary flexibility to deal with Mondays?

Baroness YOUNG

There is a great deal I could say on this amendment, but I will restrain myself in the interests of getting on. I am afraid I cannot accept the strictures of the noble Baroness, Lady Gaitskell, that the Government are blundering around. We have had to make a lot of very difficult and painful decisions which I do not like very much. I could, if I so wished, remind her of all the painful decisions which her Government took under the strictures of the IMF and, as I indicated in the course of some of our discussions on the Education Bill, the consequences were very fortunate for the last Labour Administration because we, as an Opposition, did not go round telling everybody at every possible opportunity how terrible everything was and that the whole of society was going to fall apart as a consequence of all those decisions. I could quote to your Lordships all the figures to show in fact that the last Labour Government cut far more under the IMF than we are proposing to do in two or three years.

However, I do not think this will advance our cause very much, nor do I think it is going to help very much in a discussion of very serious problems about pensioners. I have given the reasons and I have made it quite clear that there are two of them. We believe that the drafting now in the Bill is a more flexible arrangement which avoids the "creeping back" of the one day a week for the payment of the retirement pension. Secondly—and I accept this point—it will mean a saving of expenditure by having the Bill as it is. The retirement pension itself, of course, will not fall, but the increase will not start on the date it would have started on without the amendment in the Bill, and therefore there would be a saving of money. We have not pretended at any stage that the decisions we are taking over a number of issues are easy either to make or to contemplate; but, if we are successful, all these measures will have been well worth while.

Lord WELLS-PESTELL

May I just say, in the nicest possible way, that I want to warn the noble Baroness the Minister that if she is really tempted, during the discussions we are going to have for several hours to come, to raise a number of sins of omission or commission on the part of Labour Governments, we might be strongly tempted to remind her that this country would not be in the mess that it is now had it not given £3,500 million by way of reduced taxation to people who did not need it. I only mention that, but I will trot out a few more if I am forced to do so. But let us say that, as regards sins of commission and omission, perhaps we could agree that we are fairly equal now. May I ask the noble Baroness whether she would feel able to take this back and discuss it with her right honourable friends? I realise that it is not her department, but, on the other hand, I feel sure they will listen to her. It may well be that she will come back at Report stage and say, "Nothing doing"; but this is a sticking point with us. It may seem very little—only a matter of three days—but, as my noble friend Lord Ross has said, it means depriving a number of people of a few pounds and they can ill afford to be deprived of that amount. I wonder whether she could meet us in that way; I ask for no commitment.

Baroness YOUNG

The noble Lord, Lord Wells-Pestell, is, of course, always very persuasive on these matters when he raises them in these terms, but I think that I must be quite honest with the Committee. I do not think that this is a matter on which the Government can give way. I therefore think it would be misleading to say that I will take it back and reconsider, if I really cannot offer any hope of reconsideration. If I said that I would reconsider it, I would mean precisely that. As I feel that this is not an issue on which I can give any assurance, I should not like to do it on this occasion.

Lord ROSS of MARNOCK

That being so, could we have a promise from the Government that they will no longer tell us that, in the cuts that are being made, they are going out of their way to make sure that the pensioners do not suffer? Everything that the noble Baroness said from that Box earlier was to the effect that what mattered was money. Every-

CONTENTS
Airedale, L.	Hale, L.	Oram, L.
Amulree, L.	Hampton, L.	Peart, L.
Aylestone, L.	Hatch of Lusby, L.	Phillips, B.
Bacon, B.	Henderson, L.	Ponsonby of Shulbrede, L. [Teller.]
Balogh, L.	Hooson, L.
Banks, L.	Houghton of Sowerby, L.	Rhodes, L.
Beaumont of Whitley, L.	Howie of Troon, L.	Rochester, L.
Bernstein, L.	Hutchinson of Lullington, L.	Ross of Marnock, L.
Birk, B.	Jacques, L.	Sainsbury, L.
Blease, L.	Janner, L.	Segal, L.
Blyton, L.	Jeger, B.	Shinwell, L.
Boston of Faversham, L.	Kaldor, L.	Stedman, B.
Brockway, L.	Kilbracken, L.	Stewart of Alvechurch, B.
Brooks of Tremorfa, L.	Leatherland, L.	Stewart of Fulham, L.
Bruce of Donington, L.	Lee of Newton, L.	Stone, L.
Byers, L.	Listowel, E.	Strabolgi, L.
Cledwyn of Penrhos, L.	Llewelyn-Davies of Hastoe, B.	Taylor of Gryfe, L.
Collison, L.	Lloyd of Kilgerran, L.	Taylor of Mansfield, L.
Cooper of Stockton Heath, L.	Longford, E.	Underhill, L.
David, B. [Teller.]	McCarthy, L.	Wallace of Coslany, L.
Davies of Leek, L.	McNair, L.	Walston, L.
Donaldson of Kingsbridge, L.	Maelor, L.	Wedderburn of Charlton, L.
Elwyn-Jones, L.	Maybray-King, L.	Wells-Pestell, L.
Evans of Claughton, L.	Melchett, L.	Whaddon, L.
Fisher of Rednal, B.	Meston, L.	Winstanley, L.
Gaitskell, B.	Milford, L.	Winterbottom, L.
Gardiner, L.	Milverton, L.	Wootton of Abinger, B.
Goronwy-Roberts, L.	Northfield, L.	Wynne-Jones, L.
Gosford, E.	Northfield, L.

NON-CONTENTS
Ailesbury, M.	Campbell of Croy, L.	Dulverton, L.
Airey of Abingdon, B.	Cathcart, E.	Dundee, E.
Alexander of Tunis, E.	Clifford of Chudleigh, L.	Ebbisham, L.
Allerton, L.	Clitheroe, L.	Eccles, V.
Alport, L.	Cockfield, L.	Ellenborough, L.
Amory, V.	Cork and Orrery, E.	Elliot of Harwood, B.
Auckland, L.	Crawford and Balcarres, E.	Elton, L.
Balfour of Inchrye, L.	Cromartie, E.	Emmet of Amberley, B.
Bellwin, L.	Cullen of Ashbourne, L.	Faithfull, B.
Belstead, L.	Daventry, V.	Falkland, V.
Berkeley, B.	de Clifford, L.	Ferrers, E.
Boyd of Merton, V.	De Freyne, L.	Fraser of Kilmorack, L.
Bradford, E.	Denham, L. [Teller.]	Gainford, L.
Brentford, V.	Digby, L.	Galloway, E.
Caccia, L.	Drumalbyn, L.	Gisborough, L.

one had to make a cut. Time and again we hear the Government saying, "Oh! the pensioners will not suffer." This is deliberately against the pensioners. The Government are prepared to deny the pensioners a week or a fortnight's claim to their additional money. So long as it is made clear that the Government are prepared to ask the pensioners to make their contribution, we will accept it. So be honest.

5.1 p.m.

On Question, Whether the said amendment (No. 3) shall he agreed to?

Their Lordships divided: Contents, 84; Non-Contents, 109.

Glasgow, E.	Lucas of Chilworth, L.	Rochdale, V.
Glendevon, L.	Lyell, L.	St. Aldwyn, E.
Gowrie, E.	McFadzean, L.	St. Davids, V.
Greenway, L.	Macleod of Borve, B.	St. Just, L.
Gridley, L.	Malmesbury, E.	Saint Oswald, L.
Grimston of Westbury, L.	Mancroft, L.	Sandford, L.
Halsbury, E.	Mansfield, E.	Sandys, L. [Teller.]
Hankey, L.	Merrivale, L.	Sempill, Ly.
Henley, L.	Mowbray and Stourton, L.	Somers, L.
Hill of Luton, L.	Murton of Lindisfarne, L.	Stamp, L.
Home of the Hirsel, L.	Northchurch, B.	Strathcarron, L.
Hornsby-Smith, B.	Nugent of Guildford, L.	Strathclyde, L.
Hylton-Foster, B.	Onslow, E.	Strathspey, L.
Ilchester, E.	Orkney, E.	Tenby, V.
Kimberley, E.	Orr-Ewing, L.	Tranmire, L.
Kinross, L.	Pender, L.	Trefgarne, L.
Kintore, E.	Porritt, L.	Trenchard, V.
Lauderdale, E.	Redmayne, L.	Vaux of Harrowden, L.
Long, V.	Reigate, L.	Vickers, B.
Lonsdale, E.	Renton, L.	Vivian, L.
Lothian, M.	Roberthall, L.	Young, B.
Loudoun, C.

5.10 p.m.

Lord WELLS-PESTELL moved Amendment No. 4:

Page 2, line 20, at end insert— ("(4) If in any year the increase in any of the sums mentioned in section 125(1) of the Social Security Act 1975 or in section 23(1) of the Social Security Pensions Act 1975, excluding any increase resulting from the provisions of this subsection, is less than would have been required to restore their value in relation to the general level of earnings or prices, whichever is appropriate, the next following draft order under section 125(3) of the Social Security Act 1975 shall provide for increases or additional increases of the amounts necessary to make good the shortfall.").

The noble Lord said: Amendment No. 4 would require the Government to make good the shortfall in the up-rating by adding an appropriate amount on to the following year's up-rating. It applies to all benefits which are subject to a statutory up-rating formula—not just pensions but unemployment and sickness benefit. It also applies indirectly to supplementary benefit which goes up each year by the same amount as the National Insurance benefit. Under the No. 2 Bill that link would be broken for the short-term supplementary benefit rates, but it is only fair to say at this stage that we are not dealing with the No. 2 Bill.

The question of making good a shortfall first arose in 1978 when the Labour Government underestimated the increase in both prices and earnings for the year to November 1978. As a result, the new pension rates were 30p a week too low for a single pensioner and 50p a week too low for a couple, while the short-term benefit rates were 15p too low for single people and 25p too low for a married couple. The Prime Minister announced on 28th March 1979 that the shortfall would be made good in November 1979, and the then Secretary of State, the right honourable David Ennals, confirmed on 3rd April 1979 that this applied not only to pensions but to short-term benefits—for example, unemployment and sickness as well.

The present Government honoured this pledge so far as pensions are concerned, but failed to make good the shortfall in the up-rating of short-term benefits. However, in November 1979 there was again a shortfall in the up-rating of pensions and other long-term benefits. The up-rating was based on a 17.5 per cent. increase in prices, but earnings unexpectedly rose faster than prices to 19.2 per cent. However, the Government have refused to make good the 1.7 per cent. shortfall, therefore withholding from pensioners, widows and the long-term sick something like £195 million per year to which they are morally entitled.

In the Commons' debate on a similar amendment the Minister, Mr. Prentice, asked: What about overshoots, where it turns out that the Government of the day has made an overestimate and introduced a larger pension increase than would have been justified?

I must ask: does the corollary follow that pensions should somehow be reduced for that reason? The answer to this question is that while it might be reasonable to make an adjustment in the next up-rating for an overshoot as well as for a shortfall, in practice shortfalls are much more likely to occur because the Treasury is bound to err on the side of optimism in predicting the rate of inflation and the size of pay settlements.

We feel that this amendment is important because it would require the Government to make good any shortfall. If the Government are accurate in their forecast then they have nothing to fear, but I would be among the first to recognise how extremely difficult it is to make an accurate assessment. Let us face the fact, though, that Governments have behind them a vast army—I do not mean that unkindly, but certainly a very substantial number of experts in the real sense of the word who can assess fairly accurately the market situation, the economic situation, and so on. This has been shown to be the case in the past. Therefore, in my view, it is not going to be a very serious amount, but it would be of sufficient size and importance to enable one to say to the Government that when there are these shortfalls one ought, out of common fairness, apart from having a moral obligation to do so, to make them good.

I hope that the Government will feel able to accept this amendment or to look at it with some care, because again we are talking about a very deprived section of the community. It is for them that I think we speak. I am sure it is for them that noble Lords also feel keenly. I beg to move.

Lord BANKS

This problem arises through having a period of reference which is half in the past and half in the future. This came about during the time of the last Government. Many of us objected to it at the time and felt that it was an unsatisfactory arrangement to have six months of record to go by and another six months to guess at when you are working out what the increase should be. It can obviously mean that the guess can be wrong, and if the guess is wrong then it is only right that it should be made good. Had the old system been maintained, that situation could not have arisen.

As the noble Lord, Lord Wells-Pestell, has pointed out, the present Government have not made good the shortfall recently; therefore it is necessary to make it mandatory to do so. If there were an overshoot in one particular year, I could not rule out that that might be set against any increase in the following year. The great thing is not to allow people to fall behind whatever the criteria, so I would support the amendment on those grounds.

Baroness YOUNG

The present statutory provision is quite clear. The courts ruled in 1978 that the Government's duty is to base an up-rating on the best estimates available at the appropriate time of likely movements between upratings—currently, movement of prices or earnings but prices only under the provisions of Clause 1—but there is no legal obligation to make up any shortfall. The fact is that the expenditure implications of making good shortfalls are very considerable. This was the main reason why we decided that we could not make good the shortfall in relation to earnings in last year's up-rating, although noble Lords will be aware that the increase in the retirement pension was more than the rise in prices. That shortfall affected retirement pensions and other long-term benefits, and the estimated cost of making it good would have been a further £195 million in a full year. This amendment would require any shortfall in all benefits to be made good.

Finding such large sums over and above the cost of the up-rating which the Government have already taken into account in their expenditure plans would be very difficult. In fact, in the present economic climate these additional resources simply cannot be found, and even in better times the Government of the day should be left free to consider their priorities in the light of the economic situation then pertaining, and to decide what could best be fitted into existing plans.

As both the noble Lord, Lord WellsPestell, and the noble Lord, Lord Banks, have said, there is an element of swings and roundabouts about this. If we are to have a statutory requirement to make good shortfalls, should we not also take account of overshoots where the estimates prove to be too high? At present, even if the estimates are too high the new rates form the baseline for the subsequent up-ratings and the overshoot is therefore built into future benefit rates.

It is the Government's view that there should not be a statutory requirement to make good shortfalls—that this should be left to the Government of the day to decide in the light of their expenditure commitments and what the country can afford. Therefore I am unable to accept the amendment.

Lord WELLS-PESTELL

May I ask the noble Baroness whether it would be right for us on this side to assume that the Government have already made up their mind that they are not going to

accept any amendments that are down on the Marshalled List, other than their own?

Baroness YOUNG

I never commit myself by predicting what will happen all through a Committee stage when we are only on the fourth amendment.

5.19 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 78; Not-Contents, 106.

Mansfield, E.	Rochdale, V.	Strathclyde, L.
Merrivale, L.	St. Aldwyn, E.	Strathspey, L.
Mowbray and Stourton, L.	St. Davids, V.	Tranmire, L.
Murton of Lindisfarne, L.	St. Just, L.	Trefgarne, L.
Northchurch, B.	Sandford, L.	Trenchard, V.
Nugent of Guildford, L.	Sandys, L. [Teller.]	Tweedstnuir, L.
Onslow, E.	Selkirk, E.	Vaux of Harrowden, L.
Penrhyn, L.	Sempill, Ly.	Vickers, B.
Porritt, L.	Sharpies, B.	Vivian, L.
Redmayne, L.	Stamp, L.	Westbury, L.
Reigate, L.	Strathcarron, L.	Young, B.
Renton, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.28 p.m.

Lord BANKS moved Amendment No. 5:

Page 2, line 20, at end insert— ("(4) Section 30 of the Social Security Act 1975 shall cease to have effect on 5th April 1984 and all references to that section in that Act or in any other enactment shall then likewise cease to have effect.").

The noble Lord said: This amendment sets a date-5th April 1984—for the final abolition of the earnings rule whereby pensioners between ages 65 and 70 for men and 60 and 65 for women find their pensions docked if they earn more than a specified amount. I move this amendment with a good deal of confidence, for three reasons: first, because all parties are agreed that the earnings rule should go and I do not need to go over the arguments in favour of that tonight. Secondly, the Government are committed to abolishing the earnings rule during the lifetime of this Parliament. Thirdly, the noble Lord, Lord Cullen of Ashbourne, when in Opposition, moved an amendment in exactly the same terms as this one on 6th March 1979, just over a year ago. The noble Lord said that it was Conservative policy to phase it out by 1984 and he added: We are convinced that the case put forward by the Conservative Party for many years … is correct".

He also said: We have concluded that there is no real cost involved in abolishing the earnings rule".[Official Report, 6/3/79, col. 15.]

I thought he was perhaps pitching it rather high when he said that, but I agreed with the general case that he was presenting at that time and supported him in the Division Lobby.

The noble Baroness, Lady Young, gave powerful support, just a year ago, immediately before the Conservative Party took office. She pointed out the general agreement in principle to which I have referred, and she made it clear that she and the noble Lord, Lord Cullen, were concentrating on the date. She said: We believe that we have the support of thousands of people in the country, and certainly it is the wish of my right honourable friend Mr. Jenkin".—[Col. 31.]

The amendment was pressed to a Division and passed by this House by 108 to 71. The Commons moved it out of the Bill, but it has been passed in this House, and of course there has been a change of Government since it was passed here. So I am happy to provide the Government with the opportunity of giving practical expression to the views which the noble Lord, Lord Cullen, and the noble Baroness, Lady Young, so forcefully expressed. I beg to move.

Baroness YOUNG

Would it be convenient to the Committee to take the other amendments on the subject at the same time, Amendments Nos. 9 and 10?

5.32 p.m.

Lord UNDERHILL

I wish to move Amendment No. 9 and also to speak to Amendment No. 10. Both these amendments are concerned with the same principle——

The DEPUTY CHAIRMAN of COMMITTEES (The Earl of Listowel)

I hesitate to interrupt the noble Lord; I hope he will forgive me. It is contrary to the rules of the House in Committee to move an amendment while another amendment which has been moved is being discussed.

Lord UNDERHILL

I will speak on Amendments Nos. 9 and 10. Amendment No. 9 provides for the amount of the permitted earnings to be increased from the existing £52 a week to £65 a week, commencing in November of this year. The new clause which is proposed in Amendment No. 10 would abolish the earnings rule entirely, not later than 9th April 1984. Your Lordships will note that there is a difference between this wording and the wording of Amendment No. 5; Amendment No. 5 would propose that it takes effect on 5th April 1984, whereas Amendment No. 10 provides that it shall not be later than April 1984. The earnings limit was increased steadily in recent years, and there is provision for this to be reviewed annually and to be up-rated in line with earnings when benefits generally are increased. The present figure is £52 a week, and the proposal in Amendment No. 9 is that it should be increased to £65 a week. This would meet the requirement to raise the limit in line with earnings and also make a small contribution towards its eventual abolition.

The noble Lord, Lord Banks, has referred to the fact that all parties are in agreement with the abolition of the earnings rule. On this I would merely say that in other debates on other subjects we have heard a lot about the necessity for the present Administration to adhere to its manifesto commitments. Here is one that we hope they will adhere to today, because their manifesto for the 1979 election stated: It is wrong to discourage people who wish to work after retirement age, and we will phase out the earnings rule during the next Parliament". That was for the 1979 election and therefore it refers to this Parliament. The manifesto of the Conservative Party is clear on this, and the other two parties are clear also.

Baroness PHILLIPS

I should like to support my noble friend. This is a subject to which I have returned so many times. I only hope I live long enough to see the rule abolished. I was interested to hear my noble friend say that all parties wanted abolition of the earnings rule. Were I not in your Lordships' House I would have said, colloquially "You could have fooled me"! No Government that I can recall for the last 15 years has made any attempt to abolish it; they have simply brought in arguments concerning how costly it would be to abolish it. I merely repeat what I have said so many times before. This is the only group in the community who have actually to pay back their pension simply because they have committed the offence of going out to earn extra money. Since they are dealt with under fiscal laws—you have to pay tax on pensions if you happen to have anything else as well—I cannot see why it is necessary to still preserve this rule. If they were lucky enough to keep this wonderful pension that we always give our citizens and they also had this magnificent wage, they would be at once subject to taxation. It seems to me that Governments have been dragging their heels very reluctantly on this for no good reason.

Underlining what my noble friend said, I was delighted when I saw the advertisement in a national paper during the election campaign, when the Conservative Party—and this is in black and white, which is more than the Labour Party had ever done on this—said they would abolish the earnings rule during the next Parliament. No doubt this Parliament will see several more Queen's Speeches, but it would be very good if this was something that could go down in history in this Bill. It is not going to affect a lot of people.

The noble Baroness referred earlier to productivity. Here is an opportunity to make some productivity, and then let them keep the money that they have over a long period earned. We are dealing with a generation who have suffered two wars, periods of unemployment and deprivation. We are not talking about people who have had it easy. It seems to me that we could certainly look for a speedy abolition of the earnings rule, and the amendment will at least go some way to help towards this end.

5.38 p.m.

Baroness YOUNG

If this was not such an extremely serious subject I should be tempted to say that the debate we are now having would make a fitting final episode for that splendid BBC series "Yes, Minister". My only regret is that the noble Lord, Lord Wells-Pestell, has not joined in the fray. I feel certain I shall be able to bring him to his feet. He could have made my speech in Opposition, I could have made his speech in office, and it would have completed the picture.

As soon as I saw this amendment in the name of the noble Lord, Lord Banks, it rang a familiar bell, and I thought: "Where have I seen this before? "It was so helpful of him to remind us that of course it stood in the name of my noble friend Lord Cullen; I think I added my name to the amendment as well. Now that the wheel has turned full circle, as I say, if this was not such a serious subject I feel it would be a fitting episode for somebody who wishes to write up parliamentary life. Of course I looked very interestedly to see what the brief said on this subject, and it was rather a relief to find that the first reason for objecting to the amendment was a technical one. That is always a good one to fall back on when all else fails, and I am pleased to be able to tell Lord Banks and Lord Underhill that the amendments are technically defective, so we could not in any case accept them. We all know what we now think personally about this matter. I looked very carefully at the other items in the brief, which I think are quite right.

It is only fair for me to say that a detailed report on the earnings rule was published in October 1978, and that report gave figures of the cost of doing away with the earnings rule. They left us with doubts, and we have been engaged in testing out and reviewing the costs and the assumptions on which they were based. A factor in the calculation of costs, of course, is that we are trying to look ahead to a situation in some years' time; and part of the background to it all is that for some time now there has been a fairly steady trend towards earlier retirement—that is to say there are fewer people who are deferring retirement beyond pension age and therefore fewer people who, with the ending of the earnings rule, become entitled to immediate pension. There is some evidence of recent years of a greater accentuation in that trend, which may continue, and this would suggest that, come the time, costs would be somewhat lower than when they last appeared—a point which I think the noble Lord, Lord Banks, made. However, our review of these costs is not yet complete.

I was extremely touched to learn that the noble Lord, Lord Underhill, had read the Conservative Party manifesto. I should like to feel that more people had read it. I am very pleased that he did so, but then he is a real professional in these matters. However, I should like to say that the Government are committed to the phasing-out of the earnings rule, as circumstances allow, but ways of achieving this aim and the costs involved are currently being studied, and the Government will announce the outcome of this consideration in due course.

Baroness GAITSKELL

I think that this subject, which we have debated over the years, is an absolute slur on rich nations like ourselves. We are not a poor nation compared with a great many other nations and countries throughout the world. Whenever I see this type of attitude towards pensioners I think to myself, "My goodness, death before retirement is what I should like!"

Lord UNDERHILL

The noble Baroness, Lady Young, referred to the fact that in her brief there was a technical reason for rejecting the amendment. Would she give the rest of the Committee the advantage of that technical information?

Baroness YOUNG

Yes, my Lords. The reason for having an earnings rule at all is that the pension is a retirement pension. It was in support of the requirement that a person has to be retired in order to get a pension that the earnings rule came into being. It is not enough, therefore, to remove the earnings rule while leaving retirement as a condition to be satisfied before pension can be awarded. To complete the job it is also necessary to reconstruct Section 27 of the Social Security Act 1975, and other related provisions.

Lord BYERS

In the light of what the noble Baroness has just said and the fact that there is, as I understand it, another inquiry taking place into the earnings rule, does it mean that the Government have gone back on their pledge in the manifesto to get rid of this earnings rule during the lifetime of this Parliament? If so, this is a very important statement of policy: it is quite a new development. Does that pledge still stand—a pledge upon which a great many people voted Conservative—or, in the light of what the noble Baroness has said now, has that pledge been abandoned?

Baroness FISHER of REDNAL

It was interesting to listen to the noble Baroness liken the situation to the television farce "Yes, Minister". It might be a matter which makes us smile in this building, but for those people outside who watch that television programme, "Yes, Minister", it is a farce, and when those people in the Public Gallery see it being acted realistically in a legislature I think that it will make them think: what is Government all about?

The Front Bench on this side were in agreement on the matter. We have heard very eloquently from the noble Lord, Lord Banks, that he also was in agreement and supported the noble Baroness when she moved an almost identical resolution. So, the political parties are agreed upon a principle. The political parties being agreed upon that principle then have to put up with technicalities. Surely if we have a farcical situation like that put over on the television, then to me it is rather worrying that people are agreed on a situation, but then find all kinds of what I would call stupid, technical reasons for not putting it into operation.

LORD WELLS-PESTELL

I should like to ask the noble Baroness the Minister a question. If it is the intention of this Government, regardless of the circumstances, to abolish the earnings rule during the lifetime of this Government—which can be, as I understand it, right up to 1984—and if that is a serious pledge on their part, then why cannot the noble Baroness the Minister come back at Report stage with an amendment of this kind, properly worded, which would meet all drafting regulations and include the date as 1984? It will then be on the statute book and the Government would then have fulfilled a promise.

BARONESS PHILLIPS

I think that there is a very interesting technical point which has not been mentioned and I am not sure that I should draw the Government's attention to it if they have not already thought about it. If one is a widow, at 60 one has the option of changing from the widow's pension to the retirement pension, which is the same amount. But, of course, the widows' pension is not subject to the earnings rule. So, any widows who have remained in work—and I have had quite a number work for me—have very carefully not gone on to the retirement pension because they could then continue to earn and receive their full pension. So there is an anomaly.

The other matter is one to which the noble Baroness herself has referred. I deal with a great many of the pre-retirement courses and she is quite right in saying that people are retiring earlier. If they retire at 58, they have no pension. Indeed, if a man retires at 60 he does not have a pension. So we have again a whole area which creates an anomaly. If a man retires at 60 and has to go to the Supplementary Benefits Commission until he is 65, then, when he does go on to the retirement pension and earns, he has it taken away from him, he begins to wonder what it is all about. I think that there are so many curious anomalies. If it is any cold comfort to the noble Baroness, I have said more than once to my own Government that they should abolish this nonsensical earnings rule. I suspect that the administrative costs involved in taking back the money are far greater than the actual money that is collected.

BARONESS YOUNG

The noble Baroness, Lady Phillips, has made a statement about costs and I can only return to the point that I made at the beginning of my remarks and say that we are still looking at this whole question because there is some evidence that because increasing numbers of people are retiring earlier—which may continue—costs would be somewhat lower than had at first been thought. That is a review that is not yet complete and so we do not in fact have the evidence before us.

As regards the noble Lord, Lord Byers, I did not wish to make a joke of this matter. However, I never feel that it is right on an important issue to argue on a technical point. It was for that reason that I did not give the technical argument at the beginning. My answer to the noble Lord is that this is not an amendment which the Government can accept. Therefore, I felt that it would not have been right to pretend to the noble Lord that if the amendment had been correctly drafted it was one that we could accept. If that had been the case, I would have said that we would have redrafted it and brought it back at Report stage, which I think would have been right.

Lord BYERS

That is exactly the point that I am making. Does what the noble Baroness has said tonight mean that the pledge given in the manifesto no longer stands? That is the point. Has it been withdrawn?

Baroness YOUNG

I cannot go beyond saying what I said originally; namely, that the Government are committed to phasing-out the earnings rule as circumstances allow. Ways of achieving this and the costs involved are currently being studied and the Government will announce the outcome of this consideration in due course. I cannot go beyond that at this stage.

Lord BYERS

May I press the noble Baroness and say that the real test here is "the lifetime of this Parliament". That was the manifesto pledge. Does that still stand'?

Lord ROSS of MARNOCK

If the noble Baroness, Lady Young, wants to reply, then she should because it is a very important point. Is the noble Baroness prepared to answer right away?

Baroness YOUNG

I am not prepared to say more than I have already indicated; that is as far as I can go this afternoon.

Lord ROSS of MARNOCK

That means that the noble Baroness is not going as far today as the Tory Party went in its election manifesto. That is a very serious breach indeed. No wonder the noble Baroness refers to some lighthearted television programme. She is turning the whole thing into a farce; she is turning politics into a farce. It was Winston who at one time said that simply because something is stuck into a manifesto, it does not mean to say that it will become law. I thought that the Tory Party had got away from that. They place great faith in manifesto commitments. We have already had two Budgets, so they have had time to think about this.

As I understand the argument of the noble Baroness, she said that there was a review that gave figures in 1978, but her pledge came after that review—it came in 1979. The Conservative Party is now in Government and they are now working it out in the light of that review. It is appal ling that a party should claim to be taken seriously when they give a commitment (after a review that gave costs) that they would do it within the lifetime of this Parliament. I do not know how the noble Lord, Lord Banks, feels, but I certainly would not accept this business of technical difficulties as not being really serious on a Committee stage. If the Government accept the principle, they will make the suitable changes, and bring it forward at a particular time. But for the Government at this stage not to be prepared to go so far as they went at election time when they were seeking votes leads to a certain measure of cynicism which can do no good to parliamentary democracy.

Lord WELLS-PESTELL

I think that the noble Baroness is in some difficulty, which I believe we all recognise. I do not want to act as either doctor or nurse, but I wonder whether I could make a suggestion. I put this forward very seriously and I do not know what my noble friend Lord Banks would feel about it. This might be an occasion when the noble Baroness could say that these two amendments—one in the name of my noble friend Lord Banks and one in the name of my colleagues and myself—are technically deficient; she could undertake to look at the matter, and—and I say this with great respect take some advice from her right honourable friend the Prime Minister. After all, if we are to have a "Big Sister" in 1984—we were threatened by Orwell with a Big Brother—it might well be that at the Report stage she could give some sort of definite undertaking which might be of assistance to everybody.

Lord LEATHERLAND

I do not think that I have any interest that I need declare. It is my good fortune that I shall be 82 years old on Friday, so I think that I am outside the boundary of those who are likely to be penalised by the earnings rule. But when I retired from work 17 years ago, the earnings rule certainly penalised me, despite the fact that I had paid my contributions for the whole of my working life. I should have thought that that was one side of a contract which ought to have been honoured by the other side. I feel very deeply that I had a very raw deal on that occasion, and I am quite sure that there are hundreds of thousands of people who are in a similar position.

After I retired from work, news got about in certain Fleet Street quarters that I was a journalist of some moderate ability, and furthermore that I had had a long experience of local government. So I was approached to write a series of 36 articles upon local government, a task which I duly performed to my own satisfaction and to that of the people who had ordered the articles. But the trouble was that I lost two of my weekly pensions for every month during which I was writing those articles. That period extended over about 12 months.

Looking at the matter from the morality point of view, surely it is good to encourage people to work rather than to sit down in their retirement and do nothing at all except contemplate the work that they used to do when they were working. I think that the acceptance of this amendment would be very worth while. It would give satisfaction to an enormous number of people and from the moral point of view it has everything to commend it.

Baroness HORNSBY-SMITH

Before my noble friend replies, may I ask her whether, when they make this review of the cost, the Government will also take into account the number of people who have reached retirement age—and a very substantial proportion of those who do now have an occupational pension as well—who will be depriving those of employment age of jobs. I do not think that this is the time to make it easy for people to continue to work many years after they have reached retirement age. I have been fascinated by some of the comments made by noble Lords opposite, because my memory goes back to when I was in the Ministry of Pensions and National Insurance. Then it was the trade unions who said "In order to help employment you must not allow people to have their pension and work as well". I should be very interested to know how many trade unions, with, unhappily, many of their members unemployed, would welcome the fact that people who not only have one pension but who have two pensions might continue to work, thus depriving others of that employment. I do not think that this is the time to do this.

Baroness PHILLIPS

I am afraid that I cannot let the noble Baroness, Lady Hornsby-Smith, get away with that. We are not talking about people on consultancy fees of £40,000 a year; we are talking about the kind of people who man the catering industries. There are certain industries in this country where no one else wants the jobs. Do not let us fool ourselves. Those industries would actually fall apart if it were not for people of retirement age. I could tell the noble Baroness of a number of people who certainly do not have two pensions; they have their retirement pension and they have to work very hard for the other small amount of money they receive. It would be interesting for the noble Baroness to see some of the people actually working in the Palace of Westminster; they are not working at gay, happy and easy jobs. Therefore, it is unreal to suggest that these people would actually take occupations from others. In the main the older worker does the kind of job that no one of a younger age wants to do.

Baroness YOUNG

I am, of course, familiar with the arguments. I only have to read Hansard to realise how familiar I am with the arguments about all this, and that we have discussed it before. My noble friend Lady Hornsby-Smith has made an important point, and it is one of the matters that needs to be considered in all this. I have listened with great care to all the points that have been made. This debate has shown that if an historian looked at it, he would say that both the parties should have done more and should have done better. Fundamentally, I think we all wish that we could do more and that we should like particularly to help retirement pensioners to stand on their own feet and be able to earn more.

I regret that I cannot accept these amendments. I have stated the reasons. I can only reiterate that we remain committed to phasing-out the earnings rule, but at present the cost is a significant factor. We are reviewing the costs and shall decide the way forward in the light of the review. In the light of everything that has been said, I shall undertake in particular to draw this debate and what has been said this afternoon to the attention of my right honourable friend Mr. Jenkin.

It is right that he should know the feelings of your Lordships' Committee, but it would be wrong of me to go further than that. However, that undertaking I shall give.

Lord BANKS

If the noble Baroness had been prepared to say that the pledge stood that the earnings rule would be abolished within the lifetime of this Parliament, then I should have felt inclined to withdraw the amendment. Even if she had responded positively to the suggestion of the noble Lord, Lord Wells-Pestell, I think I

CONTENTS
Airedale, L.	Gardiner, L.	Milford, L.
Aylestone, L.	George-Brown, L.	Ogmore, L.
Bacon, B.	Goronwy-Roberts, L.	Oram, L.
Balogh, L.	Gosford, E.	Peart, L.
Banks, L.	Gregson, L.	Phillips, B.
Beaumont of Whitley, L.	Hale, L.	Pitt of Hampstead, L.
Bernstein, L.	Hampton, L. [Teller.]	Ponsonby of Shulbrede, L.
Birk, B.	Hatch of Lusby, L.	Rhodes, L.
Blease, L.	Henderson, L.	Rochester, L. [Teller.]
Blyton, L.	Hooson, L.	Ross of Marnock, L.
Boston of Faversham, L.	Houghton of Sowerby, L.	Seear, B.
Brockway, L.	Hughes, L.	Shinwell, L.
Bruce of Donington, L.	Irving of Dartford, L.	Stedman, B.
Byers, L.	Jacques, L.	Stewart of Alvechurch, B.
Chelmsford, Bp.	Janner, L.	Stewart of Fulham, L.
Cledwyn of Penrhos, L.	Jeger, B.	Stone, L.
Collison, L.	Kaldor, L.	Taylor of Gryfe, L.
Cooper of Stockton Heath, L.	Kilbracken, L.	Taylor of Mansfield, L.
David, B.	Leatherland, L.	Underhill, L.
Davies of Leek, L.	Lee of Newton, L.	Wallace of Coslany, L.
Donaldson of Kingsbridge, L.	Listowel, E.	Wells-Pestell, L.
Elwyn-Jones, L.	Llewelyn-Davies of Hastoe, B.	Whaddon, L.
Evans of Claughton, L.	Lloyd of Kilgerran, L.	Winstanley, L.
Fisher of Rednal, B.	McCarthy, L.	Wootton of Abinger, B.
Gaitskell, B.	Mackie of Benshie, L.	Wynne-Jones, L.
Galpern, L.	MacLeod of Fuinary, L.

NON-CONTENTS
Ailesbury, M.	Digby, L.	Henley, L.
Alexander of Tunis, E.	Drumalbyn, L.	Hill of Luton, L.
Allerton, L.	Dulverton, L.	Home of the Hirsel, L.
Alport, L.	Dundee, E.	Flornshy-Smith, B.
Amory, V.	Ebbisharn, L.	Keith of Castleacre, L.
Auckland, L.	Eccles, V.	Killearn, L.
Bellwin, L.	Ellenborough, L.	Kimberley, E.
Belstead, L.	Elliot of Harwood, B.	Kinross, L.
Boyd of Merton, V.	Elton, L.	Kintore, E.
Bradford, E.	Faithfull, B.	Lauderdale, E.
Brougham and Vaux, L.	Falkland, V.	Long, V.
Campbell of Croy, L.	Ferrers, E.	Lonsdale, E.
Cathcart, E.	Fortescue, E.	Lothian, M.
Clitheroe, L.	Fraser of Kilmorack, L.	Loudoun, C.
Cork and Orrery, E.	Gainford, L.	Lucas of Chilworth, L.
Cottesloe, L.	Galloway, E.	Lyell, L.
Craigavon, V.	Gisborough, L.	McFadzean, L.
Crawford and Balcarres, F.	Glasgow, E.	Macleod of Borve, B.
Cromartie, E.	Glendevon, L.	Malmesbury, E.
Cullen of Ashbourne, L.	Gowrie, E.	Mancroft, L.
Daventry, V.	Greenway, L.	Mansfield, E.
de Clifford, L.	Gridley, L.	Massereene and Ferrard, V.
De La Warr, E.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Merrivale, L.
Denham, L.		Mills, V.
	Halsbury, E.	Mottistone, L.

should have been inclined to withdraw the amendment. But, while I realise that she has probably gone as far as she feels she can in the circumstances in which she finds herself, nevertheless I cannot say that it is satisfactory to me, and I feel obliged to press this amendment to a Division.

6.1 p.m.

On Question, Whether the said amendment (No. 5) shall be agreed to?

Their Lordships divided:

Contents, 77; Non-Contents, 103.

Mowbray and Stourton, L. [Teller.]	Rochdale, V.	Strathclyde, L.
Murton of Lindisfarne, L.	St. Aldwyn, E.	Strathspey, L.
Northchurch, B.	St. Davids, V.	Swansea, L.
Nugent of Guildford, L.	St. Just, L.	Tranmire, L.
Onslow, E.	Sandys, L. [Teller.]	Trefgarne, L.
Orkney, E.	Selkirk, E.	Trenchard, V.
Penrhyn, L.	Sempill, Ly.	Tweedsmuir, L.
Redmayne, L.	Sharples, B.	Vickers, B.
Reigate, L.	Stamp, L.	Vivian, L.
Renton, L.	Strathcarron, L.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

6.9 p.m.

Lord BANKS moved Amendment No. 6:

Page 2, line 20, at end insert— ("(4) If the Secretary of State concludes that during any year the sums mentioned in section 13 of the Social Security Act 1979 have not retained their value he shall prepare and lay before Parliament the draft of an Order increasing these sums by at least the amount necessary to restore their value. If the draft Order is approved by resolution in each House of Parliament the Secretary of State shall make an Order in the form of the draft.").

The noble Lord said: This amendment would ensure that each year when the Secretary of State looks at the National Insurance maternity grant and the National Insurance death grant to see if they have lost value, as he is bound to do under the Social Security Act 1979, he must up-rate these grants to take account of any loss of value, which he is not bound to do at the present time under that legislation. It is well known how both these grants have been eroded over the years. The death grant, for example, has not been raised since 1967 when it was raised to £30, and it would have to be at least £125 to have the same value as when the grant was first established in 1949. The maternity grant has had a similar experience.

It is quite wrong to allow a benefit to be eroded without the specific consent of Parliament in fresh legislation. Amendments Nos. 18 and 20 in the name of the noble Lord, Lord Wells-Pestell, would increase the benefits to £125 for the death grant, and £95 for the maternity grant, and I support those amendments, but this amendment does not raise the present figure. It ensures that whatever the present figure is, whether it is the figure as now of £30 in the case of the death grant or whether it is the figure as proposed in later amendments of £125, it would not lose value in the future. Its value from this point on would be maintained. This amendment is quite compatible with the later amendments, but equally it would operate effectively if the later amendments were not carried. It would make sure that whatever value we decide on for these benefits now, that would be maintained in the future, so I hope at least that this modest amendment will be accepted. I beg to move.

Lord WALLACE of COSLANY

I shall subsequently move Amendments Nos. 18 and 19 but it might be for the convenience of the Committee if I spoke to them now and formally moved them later. The first would increase the death grant to £125 and make it payable at the same rate for a child. At present the grant for an adult is £30, but the grant payable on the death of a child is as follows: under three years of age, £9; age three to five, £15; and age six to 17, £22.50. The grant was last increased in 1967 and £125 is the amount needed to compensate for price increases since then. It is well below the full cost of even a simple funeral. Both Labour and Tory Ministers have argued over the years that while they would like to increase the death grant, they could not justify doing so in terms of spending priorities. But that is not an argument for letting the value of the grant decline indefinitely. At a time when the Government have just announced proposals to save £480 millions a year on the social security budget, they can hardly say that the £50 million needed to restore the value of the death grant cannot be found.

During the Commons Report stage, advance copies of a DHSS survey entitled Families, Funerals and Finance were made available to Members of Parliament. The survey, which is likely to be published in the next week or two, is based on information collected from bereaved people in 1975 and shows that most of them had no difficulty in meeting the cost of the funeral. However, very different results might have been obtained by interviewing a sample of elderly people about funeral costs. Many old people are extremely worried about the heavy cost that will fall on their families. The insurance policies on which they paid premiums during their working lives are in many cases quite inadequate to meet the present cost of a funeral.

Regarding the older generation, for many years firms like the Prudential and many others accepted premiums from the elderly who wanted to make sure they would have a respectable funeral. One of the qualities of the older generation—incidentally, I almost qualify to be in this category—is this attitude of mind; poor but honest and hoping to be decently buried. That is how they feel about it. Moreover, they were led to believe in 1948 that the death grant would relieve them of that anxiety; the grant was originally enough to pay the undertaker's bill for a simple funeral. They contributed to the scheme on that basis and they now feel cheated.

Amendment No. 19, the second new clause, would make the death grant noncontributory by making it payable subject to a residence test. It would also get rid of the disqualification of people who were over pension age in 1948. The first new clause would make the full grant payable for a person who was within 10 years of pension age in 1948, instead of the half-rate grant payable at present. These changes would mainly benefit the relatives of men now over 87 and women over 82, many of whom are themselves pensioners. I am concentrating my remarks on the older generation, but those who have had unfortunate experiences in this sphere in recent months will know of the extraordinary increase in the cost of a funeral, and particularly a cremation. My last word—I mean it in the sense of contributing to the debate is that while we all know that the cost of living has increased, so has the cost of dying.

Lord CULLEN of ASHBOURNE

The new clause, Amendment No. 18, would increase the rate of the death grant to £125 for all recipients including those who at present receive reduced rates. It would increase expenditure on the grant by about £60 million in a full year. The intention of the new clause inserted by Amendment No. 19 is to make the death grant payable to those elderly people who are at present excluded because they were over pension age in 1948. The clause would delete the provision which specifically excludes them and would make the grant payable in respect of them, subject to residence conditions. To pay a grant of £125 in such cases would cost a further £21½ million a year.

The purpose of Amendment No. 6 is to require that the death grant and the maternity grant be up-rated each year, presumably in line with the movement in prices. To up-rate maternity grant and death grant by 16 per cent. would cost an additional £2.7 million each in a full year. There would also be a commitment to continuing increases in subsequent years. New Clause 4 is also relevant; it seeks to increase maternity grant from £25 to £95.

Your Lordships are aware of the Government's determination to reduce the burden of public expenditure. This means that we must consider very carefully the priority of proposals for increased expenditure in the social security field, as elsewhere. The Government are aware of the concern felt in some quarters about the level of the death grant, but we have to decide whether in the present economic climate it is the best way to spend these amounts. We have to conclude that it is not. I know the noble Lord, Lord Banks, has raised this subject on many occasions before and I am sorry to say that I must resist the amendment.

Lord BANKS

The question one must ask is whether it is the intention of the Government that these benefits should continue to decrease in value. Are they saying that we do not need a maternity grant and a death grant? They should come clean with the Committee, if I may use that expression, otherwise it is quite absurd in my view for them to say, "It will cost extra money in a time of inflation to keep benefits at the same real value". That we know. That must happen. But are they saying that these benefits are ones which they no longer regard as being of any importance and that they can be allowed to dwindle right away? Surely this amendment, which, as the Minister said, would cost only £5.4 million, would at least see that the present inadequate level does not fall any lower. Does the noble Lord not think that is the proper way in which to proceed?

Baroness PHILLIPS

On the question of the older person not receiving a death grant—this is something about which I spoke to my Labour Government when we were in office—I recall my mother, who died last year at the age of 97, often saying with great irony, "I am sorry I have lived so long that you cannot collect the death grant", and I think she had gone down to the nothing point, although in her case it did not matter. However, recently I was made aware of an elderly couple, both well into the late 80's, where one died and because they had been on pension for so long, that was the moment when they really did not have very much. The couple had a small insurance, and one appreciates the terrible hardship imposed on the poor woman who was trying to do the right thing. She had no children and nobody to help her. Obviously this problem will solve itself because people of this great age will get fewer and fewer. Surely this is a moment when the Government could do something about the situation. The figure would probably not even amount to £2½ million when it is actually granted. Obviously there will be fewer and fewer old people in this group. It seems a curious anomaly to think that the longer one lives, the less one appears to need money. In fact, I believe that the longer one lives, the more one needs money. I do not follow the logic behind these provisions; indeed, perhaps there is no logic behind them. They cause great hardship to a remarkable group of people in our own generation.

Baroness HORNSBY-SMITH

If my memory serves me correctly, I believe that the amount of the weekly contribution used to be broken down and analysed, certainly during the time when I served in the Ministry. We knew how much went to pensions and how much went elsewhere. I believe that out of the total contribution a minute amount, as small as an old penny, went to death grant. Contributions have been increased in relation to pensions over the years as pensions have risen, but have there been any commensurate increases in the proportion of the insurance stamp to make up the sum forming the death grant? I have great sympathy with those who think that the present amount is dramatically small, but I am not aware that any addition has ever been made to the amount of the old penny which I believe was the proportion of the contribution that ultimately went to death grant.

Baroness PHILLIPS

I am sorry to have to disagree with the noble Baroness—I rarely do—but surely the original concept of paying into a pool was not that one would automatically draw from it what one had paid in. In that event one would almost have had to ensure that one was handicapped, sick or widowed in order to get back the money one had paid in. I paid into the scheme in the hope that I would not have the need to draw upon it, but if somebody else had to draw upon it because he or she was handicapped, elderly, widowed or unemployed, one paid one's contribution to assist such people. I know that in theory there was a breakdown, but all workers assumed that they made their contributions not necessarily for them personally to draw upon. I believe that would be a dreadful argument in relation to social security. We are talking about those who are in need, not necessarily about those who pay for these things.

Baroness HORNSBY-SMITH

With great respect to the noble Baroness, Lady Phillips, I think she has missed the point. Those who made contributions as insured people were paying the contributions for different aspects of social benefit, and a particular proportion of the weekly stamp was allocated to each. It has been common practice for every Government who felt it right and proper to raise pensions, unemployment benefit or other benefits to raise the cost of the stamp. I do not query who will claim these benefits, because none of us will escape dying.

Lord DRUMALBYN

Those of us who have had to deal with these matters in Government have always found this a difficult problem. If I remember correctly, the amount remained at £20 from its inception until 1967, but it was then increased by £10. I have no doubt the view was taken that, whatever the figure was to start with, it was not possible to increase that amount to what was needed to provide a decent funeral. Obviously when we are considering all these benefits, we have to consider them in relation to one another; we must determine priorities. There must be some elasticity in the kinds of benefits and we have to judge, as things evolve, what benefits are still necessary.

The instinctive approach of the noble Lord, Lord Banks, is that we cannot do very much to bring the figure up to what is necessary but at least should not let the position get any worse. In other words, he wishes to keep the figure up to current values. That is a point of view, but surely the better point of view is to consider the real need and how it can be met. The real need arises among those who are on supplementary benefit and who have not the resources. Surely it is possible to make the contribution to a funeral much nearer to the real cost, if not the whole of it, through what is at present the Supplementary Benefits Commission, to be carried on in future by the new body. That must be the right approach.

There cannot be an insurable risk in this case because this happens to us all, but this was the kind of benefit which at the time seemed to be necessary. However, we must realise that times have changed so much. Only on one occasion in up-rating has the position been changed. I do not know why the Government of the day chose to change it, but it was done. Manifestly, the figure is inadequate, but the question is simply one of priorities. One must always be careful to ensure that where need is manifest it can be met. Perhaps my noble friend the Minister will say to what extent it is met under supplementary benefit.

Lord CULLEN of ASHBOURNE

The noble Lord, Lord Banks, asked whether the Government intend to allow the death grant and the maternity grant to continue to decrease in value. The Government are considering all aspects of the death grant, including current levels. An announcement of the Government's intentions will be made in due course, but it will be necessary to have regard to the economic situation and to priorities. The matter is being examined seriously.

We are all sympathetic on this question, and I well remember the noble Lord, Lord Wells-Pestell, having to say the same sort of things as I am now saying today when this point was raised in the House in earlier years. The noble Lord, Lord Banks, is always in the happy position of asking these questions from the Liberal Benches. They relate to items of Government expenditure, and those of us who are responsible for these matters find some difficulty when we seek to reply.

The noble Lord, Lord Banks, also asked whether the Government intend to allow the value of the grants to continue to fall. The Government are obliged to examine the level of the grant each year. If, having regard to other priorities, the Government feel that the grants should be increased there is power to do so. But we cannot commit ourselves to what the position will be next year. For this year no increase is possible.

My noble friend Lady Hornsby-Smith asked about the contribution to death grant. I understand that about one fifth of a penny of every £1 contributed goes to death grants. I am sorry that I cannot go further, but I am afraid that I cannot accept the amendment.

Lord WELLS-PESTELL

All I want to say is that in the amendment before us there is a very marked degree of realism; indeed much more realism than there is in the two amendments which we on these Benches have put down in relation to this matter. It is because there is such a marked degree of realism, involving a little more than £5 million, that I would support the noble Lord's amendment in preference to our own amendments. What we are asking for in our two amendments may well be the impossible, so far as matters are concerned today. What the noble Lord is asking for is I believe the possible.

This matter has brought home to many of us who have some connection with social work and with professional social workers the number of times that one hears—I am not saying that it is every day or every week—of a couple or an individual pinching, or scraping up, a few pence each week to put aside because of the fear of being unable to have a decent burial. Such people do not even want the responsibility to fall upon their children, who would be most willing to undertake it.

So far as turning to social security is concerned, unfortunately one must face the fact that this is still abhorrent to a large number of our elderly people. I, and the noble Lord, have both spoken about the amount of benefits that are not taken up. Governments have spent enormous sums of money advertising benefits and in trying to persuade people to take them up. The reason that they do not take up the benefits and there is very good authority for saying this—is not so much that they do not know about them, but because they still feel that the benefits are a form of charity, and you cannot tell them otherwise.

I do not think that I really realise that the amount needed to implement the amendment of the noble Lord, Lord Banks, is only £5 million. If the Government cannot see their way clear to agreeing to this, I hope that we shall take whatever steps are open to us so as to leave them in no doubt that there are some noble Lords in the Committee who really feel that this money ought to be found from one source or another; and I should have thought that it could be found.

Lord BANKS

I am grateful to the noble Lord, Lord Wells-Pestell, for what he said about the amendment. He said that it was a modest amendment, and it is a

CONTENTS
Aylestone, L.	Goronwy-Roberts, L.	Ogmore, L.
Bacon, B.	Gosford, E.	Oram, L.
Banks, L.	Hale, L.	Peart, L.
Beaumont of Whitley, L.	Hampton, L. [Teller.]	Phillips, B.
Bernstein, L.	Hatch of Lusby, L.	Pitt of Hampstead, L.
Blease, L.	Hooson, L.	Ponsonby of Shulbrede, L.
Blyton, L.	Houghton of Sowerby, L.	Rhodes, L.
Brockway, L.	Hughes, L.	Rochester, L.
Bruce of Donington, L.	Irving of Dartford, L.	Ross of Marnock, L.
Byers, L.	Jacques, L.	Seear, B. [Teller.]
Chelmsford, Bp.	Janner, L.	Stamp, L.
Cledwyn of Penrhos, L.	Jeger, B.	Stedman, B.
Collison, L.	Kaldor, L.	Stewart of Alvechurch, B.
Cooper of Stockton Heath, L.	Kilbracken, L.	Stewart of Fulham, L.
David, B.	Lee of Newton, L.	Stone, L.
Davies of Leek, L.	Llewelyn-Davies of Hastoe, B.	Strabolgi, L.
Donaldson of Kingsbridge, L.	Lloyd of Kilgerran, L.	Taylor of Mansfield, L.
Elwyn-Jones, L.	McCarthy, L.	Underhill, L.
Evans of Claughton, L.	Mackie of Benshie, L.	Wallace of Coslany, L.
Gaitskell, B.	MacLeod of Fuinary, L.	Wells-Pestell, L.
Galpern, L.	Milner of Leeds, L.	Winstanley, L.
Gardiner, L.

modest amendment. It is not asking for a great increase in the death grant or the maternity grant, although I think that there ought to be an increase in them. The amendment is saying merely that these grants have been allowed to go down too far; do not let them go down any farther.

I think that the noble Lord, Lord Drumalbyn, missed an important point. He said that it would be possible to get help from supplementary benefit to meet the cost of a funeral, but of course it is not the person who dies who has to pay, and very often old people are extremely worried by the prospect of leaving their relatives with having to face the cost of a funeral amounting to up to £300. Whether or not the relatives will qualify for supplementary benefit is not a factor that is present in the minds of the old people, who are worrying about saving now what they should be using to help them deal with the rising cost of living, but which instead they have to save to meet the rising cost of dying. Therefore, I very much hope that your Lordships will find it possible to support the amendment, which I feel we should press to a Division.

6.34 p.m.

On Question, Whether the said amendment (No. 6) shall be agreed to?

Their Lordships divided: Contents, 64; Not-Contents, 99.

NOT-CONTENTS
Alexander of Tunis, E.	Falkland, V.	Mancroft, L.
Allerton, L.	Ferrers, E.	Mansfield, E.
Alport, L.	Fortescue, E.	Massereene and Ferrard, V.
Amory, V.	Fraser of Kilmorack, L.	Mottistone, L.
Auckland, L.	Gainford, L.	Mowbray and Stourton, L.
Balerno, L.	Galloway, E.	Murton of Lindisfarne, L.
Bellwin, L.	Glasgow, E.	Northchurch, B.
Belstead, L.	Glendevon, L.	Nugent of Guildford, L.
Boyd of Merton, V.	Gowrie, E.	Onslow, E.
Bradford, E.	Greenway, L.	Orkney, E.
Campbell of Croy, L.	Gridley, L.	Penrhyn, L.
Cathcart, E.	Grimston of Westbury, L.	Redmayne, L.
Clifford of Chudleigh, L.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Reigate, L.
Clitheroe, L.		Renton, L.
Colwyn, L.	Hanworth, V.	Rochdale, V.
Cork and Orrery, E.	Henley, L.	St. Aldwyn, E.
Cottesloe, L.	Hill of Luton, L.	St. Davids, V.
Craigavon, V.	Home of the Hirsel, L.	St. Just, L.
Crawford and Balcarres, E.	Hornsby-Smith, B.	Sandys, L. [Teller.]
Cromartie, E.	Keith of Castleacre, L.	Selkirk, E.
Cullen of Ashbourne, L.	Killearn, L.	Sempill, Ly.
Daventry, V.	Kimberley, E.	Sharpies, B.
de Clifford, L.	Kinnoull, E.	Skelmersdale, L.
De La Warr, E.	Kinross, L.	Strathclyde, L.
Denham, L. [Teller.]	Kintore, E.	Strathspey, L.
Digby, L.	Long, V.	Swansea, L.
Drumalbyn, L.	Lonsdale, E.	Swinfen, L.
Dulverton, L.	Loudoun, C.	Tranmire, L.
Dundee, E.	Lucas of Chilworth, L.	Trenchard, V.
Eccles, V.	Lyell, L.	Tweedsmuir, L.
Ellenborough, L.	McFadzean, L.	Vickers, B.
Elliot of Harwood, B.	Macleod of Borve, B.	Vivian, L.
Elton, L.	Malmesbury, E.	Young, B.
Faithfull, B.

Resolved in the negative, and amendment disagreed to accordingly.

6.42 p.m.

Lord WALLACE of COSLANY moved Amendment No. 7:

Page 2, line 20, at end insert— ("(4) The sums specified in section 6(1)(a) of the Social Security Pensions Act 1975 and column (3) of paragraph 6 of Part IV of Schedule 4 to the Social Security Act 1975 shall be increased to £27.55 and £16.55 respectively with effect from 24th November 1980.").

The noble Lord said: I move Amendment No. 7 for discussion. It would put up the basic retirement pension this November to £27.55 single and £44.10 married, instead of £27.15 and £43.45 as proposed by the Government. The 1979 up-rating was based on an expected price increase of 17.5 per cent., but in the event earnings rose by 19.2 per cent. in the year to November 1979. The Government refused to make good the shortfall by an addition to this year's up-rating. Amendment No. 7 would compel them to do so, adding an extra 40p to the pension for a single person and 65p for a married couple. The arguments supporting this amendment closely relate to those made already on Amendment No. 4, and I do not wish to repeat them except to say that this amendment puts right an injustice suffered by pensioners. I beg to move.

LORD SANDYS

As the noble Lord has made clear, the purpose of this amendment is apparently to make good the shortfall in relation to earnings in the November 1979 up-rating of retirement pensions and other long-term benefits. Although it refers specifically to the standard rate of retirement pension on a person's own contributions and to an increase for a wife, other benefits, such as a wife's Category B pension and widows' pensions, are linked to those rates. The Government announced in January of this year their reason for not making good that "shortfall", and the reason was this. The November 1979 up-rating fully satisfied the present statutory requirements of the Social Security Act 1975 and fully restored the purchasing power of benefits. There is no statutory requirement to make good any shortfall; and, as we explained, our reason for not making good the 1979 shortfall—a shortfall only when compared with earnings movements—was the very high cost of doing so.

This amendment would also appear to have the effect of thwarting our intention in regard to the invalidity pension. Statutory provision for this proposal is now being discussed in another place, and it would be inappropriate to make provision for it in this Bill.

The overall cost of this amendment is therefore considerable—about £280 million in a full year—and I am afraid we cannot possibly accept it.

LORD WALLACE OF COSLANY

I think the best thing I can do is to say that I will read Hansard very carefully tomorrow to see what the noble Lord has said, think matters over very carefully and perhaps bring something up at another stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.46 p.m.

Lord WELLS-PESTELL moved Amendment No. 8:

Page 2, line 20, at end insert— ("(4) In section 125(3) of the Social Security Act 1975, at the end there shall be inserted the words" and, in the case of a draft order laid in consequence of a review in the tax year 1979–80, 1980–81 or 1981–82, further to increase the specified sums by 5 per cent.", and at the end of section 125 of that Act there shall he added the following subsection— (5A) In the preceding subsection, "the specified sums" means—

1. (a) the sums specified in paragraphs 1 and 4 of Part I, column (3) of paragraphs 1, 2 and 3 of Part IV, and paragraphs 1, 4, 5 and 11 of Part V of Schedule 4 to this Act;
2. (b) the sums specified in paragraph 3 of Part I of the said Schedule 4 except so far as they are relevant for the purpose of section 28(7) of this Act;
3. (c) the sum mentioned in section 23(1)(a) of the Social Security Pensions Act 1975 so far as the sum is relevant for the purpose of calculating under section 14(6) of this Act the rate of unemployment or sickness benefit and of calculating under section 14, 15 or 16 of the said Act of 1975 the rate of an invalidity pension.").

The noble Lord said: This amendment would add 5 per cent. to the annual up-rating of the short-term benefits—for example, sickness, unemployment, maternity allowance, industrial injury benefits and various others—and long-term invalid- ity pension in November 1980, 1981 and 1982. We put this forward in order that it would compensate for the 5 per cent. annual reduction in the value of these benefits, for which provision is made in Clause 1 of the Social Security (No. 2) Bill. I am aware that the Social Security (No. 2) Bill is not before your Lordships' House, but, if I may say so with great respect, there is nothing to prevent our asking your Lordships to put this in to provide the safeguards which we find are not in the No. 2 Bill.

The Government claim that the reductions would be an interim step pending the introduction of arrangements for taxing the benefits, but, when questioned at his Press conference on the day of the up-rating announcement, which was on 27th March, the Secretary of State for Health and Social Security refused to give any undertaking that the cuts would be restored when the benefits became taxable. In fact, the last of the three cuts, in November 1982, would take place after the date on which the Government hope to start taxing the benefits; namely, in April 1982. If the case for cutting invalidity benefit is thin, the case for cutting the short-term benefits is, if I may respectfully say so, thinner still. Their value has already been allowed to fall substantially in relation to the long-term benefits as a result of the policy pursued by both parties since 1973 of increasing them only in line with prices while long-term benefits rose in line with the better of prices or average earnings; and the differences are now very substantial. Long-term benefits, if you are single, amount to £23.30 a week; the short-term benefit, if you are single, is £18.50; the long-term benefits for a married couple amount to £37.30; and short-term benefits for a married couple amount to £29.95. It really is a very marked difference.

The difference between the long-term and the short-term additions for children is even wider: £11.10 per child and £5.70, respectively, including the £4 child benefit. These differences in both the adults' and the children's rates are more than enough to counteract the effects of not taxing the short-term benefits. Indeed, as the Secretary of State himself said when announcing the 1979 up-rating—and I quote: The widening of the gap is a process that has been going on for a number of years. It is something to which attention should be paid in the future and I recognise the disquiet about the matter".

That was from Hansard of 13th June 1979, in col. 441. Yet the Government are now proposing to widen the gap further. This amendment is designed to prevent them from doing so. It is our view that there can be no real justification for dealing with the short-term benefits by way of a 5 per cent. reduction. They are short-term benefits; they are less than the long-term benefits and not only less but they are to be reduced by 5 per cent. We think this is an iniquitous thing to do. I beg to move.

Baroness YOUNG

As the noble Lord has made clear, the purpose of this amendment is to prevent the provisions of Clause 1 of the Social Security (No. 2) Bill (which is having its Second Reading in another place today and which will be considered by your Lordships in due course) from having the effect they are designed to have. Clause 1 offsets the proposed limitation in the up-rating of certain short-term benefits, such as sickness and unemployment benefit, and of invalidity benefit, provided in that Bill, by adding on in this Bill increases of 5 per cent. Of course, it is open to your Lordships to debate these provisions, but we shall have the opportunity to do so when the Social Security (No. 2) Bill comes before the House, as it will before too long. Perhaps in the meantime I should explain that the proposals in Clause 1 of the No. 2 Bill are an interim step towards the taxation of those benefits. At present, they are not taxable as are retirement pensions and other long-term benefits, although it has been common ground between the parties that they should be taxable. The Chancellor of the Exchequer has made it clear that it is intended to introduce proposals to treat these benefits as part of taxable income from 1982 or as soon as possible thereafter. We believe that this will restore a fairer balance between incomes in work and incomes out of work. Pending the introduction of these proposals, it is intended that these non-taxed benefits shall go up by 5 per cent. less than is necessary to restore their value.

To deal with the amendment as it stands and on its merits, it would, at the 1980, 1981 and 1982 up-ratings, increase these specified benefits by some 5 per cent. more than was necessary to restore their value in relation to the estimated rise in prices. The financial implications of this are considerable. An increase of 5 per cent. on those benefits which are the subject of provisions being discussed in another place would cost £130 million in a full year. We are talking about very considerable sums of money. As I have indicated, this is a matter which should be debated on the Social Security (No. 2) Bill as it is not, in effect, part of this Bill. I hope the noble Lord will withdraw his amendment because we shall have another opportunity to discuss it.

Lord BANKS

The noble Baroness has referred to the proposal in the No. 2 Bill to increase the short-term benefits by 5 per cent. less than would be necessary to restore their value; and she described it as an interim step to bringing them into taxation. But it is purely arbitrary (is it not?) and some people will be penalised who would not be liable to tax at all. I wonder if the noble Baroness can say whether it will be the intention to make up that 5 per cent. once the benefits are brought into taxation; for otherwise some people at the very bottom of the scale will be penalised unfairly.

Baroness YOUNG

I will take note of the point that the noble Lord has made and the other points that have been made. There will be an opportunity to debate this on the No. 2 Bill.

Lord WELLS-PESTELL

I am glad to get the observations from the noble Baroness the Minister with regard to the Government's attitude to this matter. I accept what she has said. I admitted at the beginning of what I said that this is really a matter for the No. 2 Bill; but I think it was important that we should get some idea of the direction of the Government's thinking in this matter. When Hansard is available, I shall read carefully the explanation which the noble Baroness has given. Meanwhile, I shall withdraw this amendment only to return to it, as the noble Baroness pointed out, on what might be a more appropriate occasion.

Amendment, by leave, withdrawn.

Lord UNDERHILL moved Amendment No. 9:

Page 2, line 20, at end insert— ("(4) Without prejudice to the provisions of section 125 of the Social Security Act 1975, the sum specified in section 30(1) (excluding paragraphs (a) and (b) of that Act shall be increased to a sum not less than £65 with effect from 24th November 1980.").

The noble Lord said: I have already spoken to this amendment and I move it formally.

On Question, amendment negatived.

Clause 1 agreed to.

[Amendment No. 10 not moved.]

Clause 2 agreed to.

Schedule 1 [Amendments of Social Security Act 1975]:

6.55 p.m.

Lord WELLS-PESTELL moved Amendment No. 11:

Page 27, line 34, at end insert—

("(2A) After subsection (1) of section 47 there shall be inserted the following sub-section— (1A) Where a person whose invalidity pension is increased under the preceding subsection becomes entitled to a Category A retirement pension, the weekly rate of the retirement pension shall be increased by the amount by which the invalidity pension would have been increased under the preceding subsection if she had not become so entitled").

The noble Lord said: This amendment would enable a married woman who has been receiving an increase in the invalidity pension for her dependent husband to go on receiving that increase after she retires. At present, a married woman who is sick can claim an increase in her sickness or invalidity benefit for her husband only if he is incapable of self-support. In future, as part of the similar-treatment provisions in Schedule 1, she will be able to claim for him if his earnings do not exceed the amount of the increase, which is £15.60 from next November, in the case of an invalidity pension. In our view, this is far from equal treatment. A male invalidity pensioner can claim an increase for his wife if her earnings do not exceed £45. The increases reduce on a sliding scale above the level of earnings. Nevertheless, it is an improvement on the present situation.

On becoming a retirement pensioner, however, normally at the age of 60 (although she can defer her retirement until she reaches the age of 65) a wife is no longer entitled to an increase of pension for her husband. In the Commons debates on similar amendments, the Minister, the right honourable Mr. Prentice admitted that this was the rough edge of the legislation but refused to put it right. We feel this is rather iniquitous; it is unfair, and I move the amendment accordingly.

Baroness YOUNG

The Bill provides (paragraph 2 of Schedule 1) that a married woman receiving unemployment or sickness benefit, or maternity allowance, will be able to claim an increase of that benefit for her husband provided that he is not earning more than the amount of the increase, which is £11.45. This is precisely the same basis on which a husband can claim art increase of one of these benefits for his wife, and it meets the requirements of the EEC Directive. Although the Directive does not require it, the Bill goes on to allow a woman who is sick for some time, and who then receives invalidity benefit, to carry on claiming for her husband provided his earnings are not more than the amount of increase of that benefit, which is £14. The noble Lord, Lord Wells-Pestell, himself said that this is an improvement on the present position—under which a wife can only claim for her husband if he is incapable of self-support—but I recognise it does not give complete equality since a male invalidity pensioner can claim a full increase of benefit for his wife provided her earnings are less than £45, and a tapered increase if they are not much above that level. When, however, the invalidity pensioner wife retires and receives her retirement pension, she can no longer receive an increase of benefit for her husband.

On this position, as I understand it, we have fulfilled our obligations under the EEC Directive, and it is quite proper that we should do so. We have gone slightly further and what we are unable to do at this stage is to go as far as the noble Lord would like. The Committee will recognise that we have done more than simply meet our requirements. The fact is that the social security legislation does not provide for the payment of a dependency increase for the husband of a retirement pensioner; and the EEC Directive does not require equal treatment in this area. This is because a married man is not entitled to claim a retirement pension on his wife's contributions, and while this situation exists it would be inappropriate for a married woman retirement pensioner to claim a dependency increase for her husband instead.

There are various consequences in cost were we to go further than we have at the moment. But I hope that the Committee will recognise that the particular situation we are in arises because we have gone further than the Directive requires and allows increases for the husbands of invalidity pensioners as well as sickness beneficiaries. We feel that it is better to have done this than it would have been to have stuck strictly to the terms of the Directive which would have made an even less satisfactory situation than we have. The numbers likely to be affected adversely are small, particularly since the Bill allows a woman invalidity pensioner who does not retire at 60 to carry on receiving an increase for her dependent husband until the age of 65, if she does not retire earlier. We cannot take steps to remove this small anomaly when the inevitable consequence would be that it would lead to pressure for a major change in the scheme which, for the reasons that I have explained, is not something that we could do at the present time. I hope, however, that I have said enough to indicate that not only have we fulfilled our obligations under the EEC Directive; we have gone on a bit further and at the present time that is as far as we can go in this matter.

Lord WELLS-PESTELL

I am most grateful to the noble Baroness. I should like to consider the implications of what she has said. I should like to look at that very carefully. Meanwhile, I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

7.3 p.m.

Lord PONSONBY of SHULBREDE moved Amendment No. 11A:

Page 29, line 19, at end insert—

(". After section 52 there shall he inserted the following section— 52A. An accident happening while an employed earner is travelling to or from his place of work shall be deemed to arise out of and in the course of his employment in a case where he was so travelling—

1. (a) incidentally to, or in fulfilment of, an obligation to his employer; or
2. (b) in preparation for the fulfilment of such an obligation.".").

The noble Lord said: Schedule 1 to the Bill contains provisions which make various amendments to the Social Security Act 1975 and this would seem to be an appropriate place for inserting a further amendment to that Act concerning industrial injury benefit. At present, for an employee to qualify for industrial injury benefit or disablement benefit, an injury suffered by him must have been caused out of and in the course of his employment. There are many decisions of the Commissioners on the subject of employees who travel direct from their homes to the first appointment of the day or to a site where they must report for work. The Commissioners tend to distinguish between those who are merely travelling to a fixed place of work and those whose duties involve travelling and visiting various places. Thus, for example, benefit has been awarded to an employee who was required to make visits and had a discretion as to how those visits should be arranged, and awards in this respect have been made in favour of employees such as agricultural advisers who were required to visit farms and relief insurance agents. On the other hand, however, a home help travelling to her first house of the day had her claim disallowed.

In the case of Regina v. National Insurance Commissioners, Ex Parte Field-house, the legal issue was defined as … whether on the particular journey the claimant was travelling in the performance of a duty or travelling incidentally to the performance of a duty, or whether on the other hand, his journey was merely preparatory to the performance of a duty".

The Royal Commission of Civil Liability and Compensation for Personal Injury (the Pearson Commission), in their report published in 1978, recommended that the industrial injuries scheme should cover injuries sustained by an employee while travelling to or from work. Despite the difficulties which would arise from breaks in a journey and other borderline cases, the Commission took the view that the advantages of such an extension would outweigh the problems and that in due course case-law would arise to determine the borderline issues.

This amendment is intended to implement this foregoing recommendation of the Pearson Commission, and the object of the amendment is to provide for its implementation. I apologise to the noble Lord who is to reply that this amendment was only put down at a fairly late time. No doubt he may well wish to consider its implications. I beg to move.

Lord SANDYS

I have listened with close attention to the amendment so ably moved by the noble Lord, Lord Ponsonby of Shulbrede. It was good of him to mention that it was put down at a late stage. Nevertheless, the Government have taken a great interest in this amendment. He rightly quoted the report of the Commission on Civil Liability and Compensation for Personal Injury. The recommendation that he refers to is of course No. 86 which was passed, I think, by a majority of one regarding injury on the way to or from work.

Following the Commissioner's report, the then Government decided that the industrial injuries scheme should be reviewed. Departmental officials therefore carried out a review of the scheme and their report was submitted to the present administration and published as a discussion document entitled, Industrial Injuries Compensation—a Discussion Document—in February of this year. The document reviews the benefits provided by the scheme and seeks a public discussion of the issues by inviting views and comments from individuals and organisations during the consultation period ending on 31st December 1980.

One of the subjects reviewed in the document is the possible extension of the industrial injuries scheme to include accidents on journeys to and from work which is in Chapter 6, paragraphs 6.32 to 6.45. The arguments for and against this change are spelt out fully in those paragraphs, and copies of the discussion document are available in the Library of your Lordships' House. The Government consider it would be quite wrong to pre-empt the discussion by taking a decision and legislating on it at the present time before the consultative process can be completed. The comments of the Members of the Committee on this issue will be taken into account when the Government come to recommend what changes should be made to the industrial injuries scheme following the current review. At the present stage that is all can say on the matter. We will look very closely at what the noble Lord, Lord Ponsonby, has said and any points that other Members of the Committee wish to make.

Lord PONSONBY of SHULBREDE

May I thank the noble Lord for his very full reply to my amendment? I am glad that he will study closely what I have said, and I will study closely what he has said.

Amendment, by leave, withdrawn.

Baroness YOUNG

This might be a convenient moment to break now for dinner. It has been agreed that we should break now for three-quarters of an hour. We will resume therefore at five minutes to eight.

[The Sitting was suspended at 7.10 p.m. and resumed at 7.55 p.m.]

Lord WELLS-PESTELL moved Amendment No. 12:

Page 31, line 19, at end insert— ("17. For sub-paragraph (a) of paragraph 3(1) of Schedule 6 there shall be substituted the following sub-paragraph— ("(a) 15 per cent. of so much of the reckon-able weekly earnings as does not exceed that year's upper earnings limit; or".").

The noble Lord said: I beg to move Amendment No. 12. This is an amendment we are very concerned about, and I should like to begin by asking the noble Baroness the Minister whether she will give the Committee some indication of the right of the Government to take the proposed action in relation to the earnings-related supplement. This amendment proposes a new formula for the earnings-related supplement to unemployment, sickness, maternity and widow's benefit. At present the earnings-related supplement is paid at 33⅓ per cent. on earnings between the lower earnings limit, now £17.50 for the relevant tax year, which is 1978–79, and £30 a week plus 15 per cent. of earnings between £30 and the upper earnings limit, which I understand is now £120. For 1981 it will be 33⅓ per cent. of earnings between £19.50 and £30 and 15 per cent. on earnings between £30 and £135.

The Government, in Clause 4 of the Social Security (No. 2) Bill, propose to reduce the 15 per cent. rate to 10 per cent. from January 1981, and to abolish the earnings-related supplement altogether in January 1982. The purpose of this amendment is to suggest that rather than abolish the earnings-related supplement, the Government ought to consider ways of making it operate more effectively. The Labour Party and the Trades Union Congress have been studying this subject, as no doubt the noble Baroness knows, for some considerable time. They have produced a number of ideas which have been adopted by the General Council as TUC policy, and accepted as a basis for wide discussion by the Labour Party's National Executive Committee.

One of these ideas, incorporated in this amendment, is to replace the present formula with a simpler and slightly more generous one: earnings-related supplement to be calculated at 15 per cent. on the whole of a person's earnings up to the upper earnings limit. The £30 dividing point between the 33⅓ per cent. and the 15 per cent. rates has become meaningless with the passage of time, because practically nobody in full-time work now earns as little as £30 a week. As the £30 figure has not been adjusted in line with the upper and lower earnings limits, it has the effect of steadily diminishing the band of earnings on which the earnings-related supplement is calculated at 33⅓ per cent. In fact, it will not be many years before the lower earnings limit of £23 for the current tax year reaches £30, and the 33⅓ per cent. rate ceases to operate at all.

Under the present formula, the amount of earnings-related supplement payable in 1981 on the first £30 of weekly earnings will be one-third of £10.50—£30 less £19.50—which is equal to £3.50. This amendment would increase that to 15 per cent. of £30; namely, £4.50. Thus most recipients of earnings-related supplement would get an extra £1 per week. More important, the new formula would get rid of the £30 dividing line, since there would be only one percentage—namely, 15 per cent.—at which earnings related supplement would be calculated on earnings up to the upper limit.

Instead of considering ideas of this kind, the Government are proposing to abolish the earnings-related supplement. The arguments that they use to defend this are that only 10 to 15 per cent. of the unemployed are in receipt of earnings-related supplement at any one time; that redundancy payments and employer's sick pay are more generous than when earnings-related supplement was introduced in 1966, and that earnings-related supplement adds to income out of work and, therefore, at the margin, does not encourage a return to work. I take those words from the Secretary of State's statement on 27th March which appeared in the DHSS Press release, but for some reason not in Hansard.

The fact that most of the unemployed at any one time are not getting earnings-related supplement is largely due to the growth of long-term unemployment. Earnings-related supplement is payable from the third to the twenty-eighth week of unemployment or sickness. If the Government were proposing to save money on earnings-related supplement and to spend it on the longer-term unemployed, it might be defensible. But they are not proposing to do that. Redundancy payments normally provide a lump sum, not a weekly income; and, anyway, the sick and many of the unemployed do not qualify for them. At present levels of unemployment, redundant workers need to put such payments aside to meet major expenses during what may be a long period out of work. They should not be expected to use them for living expenses during the first weeks of unemployment.

As for sick pay, many workers still do not get it and for those who do it is often inadequate. The compulsory sick pay which was proposed in the recent Green Paper would be only £30 a week for eight weeks. As for the incentive argument, it is clearly wrong to penalise all the sick and the unemployed in order to preserve work incentives for what many of us believe to be a very tiny minority. Moreover, the earnings-related supplement is subject to a ceiling which prevents it from raising the total benefit payable to more than 85 per cent. of the previous year's weekly earnings.

Earnings-related supplement remains, as it was in 1966, a very valuable addition to the incomes of the unemployed and the sick and, not least important, of widows and expectant mothers, during the period of adjustment to what may be a lengthy spell of living on a low income. It is also an important way of keeping large numbers of people off supplementary benefit. The Government have admitted that their current proposals will add 110,000 to the number of supplementary recipients, and the abolition of the earnings-related supplement is a major factor in producing this total.

What causes so much concern on this side of the House is that the earnings-related supplement was set out to be a very valuable component to people when they were unemployed, when they were sick, when they had need to receive a benefit of some kind or other and, in particular, when they retired. It seems that the policy of the Government at the moment is to withdraw that. I do not know what right they have to do it. I am sure I shall be told that they have every legal right. But it seems to me that this is an action which is open to very grave criticism. I beg to move.

8.5 p.m.

Lord BANKS

It certainly seems that the formula which the noble Lord, Lord Wells-Pestell, has suggested is a neater one than that at present in use, and it might well be considered as a substitute for it, for the reasons which he very clearly put forward. I, too, regret the proposed abolition of the earnings-related supplement. The philosophy of the earnings-related supplement is that National Insurance is not only a means of averting extreme poverty—though it certainly is that—but is a means of cushioning the fall in earnings which people suffer when they suddenly become unemployed or sick, and when their commitments have been entered into on the assumption that their earnings would continue and be able to take care of them. They then find that that is not so, and for a period the earnings-related supplement acts as a cushion.

We on these Benches have been advocating an earnings-related supplement, paid for by earnings-related contributions, since 1963 and we were gratified when, eventually, this was adopted. So we regret the proposed abolition now, but perhaps this is not the occasion to go into it in detail. We shall certainly want to discuss it very thoroughly when we come to deal with the relevant parts of the Social Security (No. 2) Bill.

Baroness YOUNG

As the noble Lord, Lord Wells-Pestell, has quite rightly said, earnings-related supplement is payable on top of the short-term flat-rate benefits—unemployment, sickness and injury benefits and maternity allowance. It goes to employed people whose earnings in the relevant income tax year were above a specified level. The rate of supplement paid at present will usually be based on earnings in the 1978–79 tax year, and is one-third of weekly earnings from £17.50 to £30 and 15 per cent. of earnings between £30 and £120. The lower and upper earnings limits are linked to the lower and upper earnings limits for contributions in the relevant tax year. Both these limits are increased each year, but the £30 figure has remained unchanged for a number of years. so that the one-third rate of earnings-related supplement is gradually becoming a smaller and smaller earnings band. As the noble Lord quite rightly said, the numbers are declining.

The effect of the amendment would be to abolish the dual method of calculating earnings-related supplement on earnings between a floor and ceiling, and substitute a 15 per cent. rate over all weekly earnings up to the current earnings ceiling. This would increase the amount of earnings-related supplement payable, because taking away the earnings floor would more than compensate for loss of the one-third rate on a small band of earnings. An earnings-floor has always been a feature of the earnings-related supplement scheme, because the supplement is paid on top of flat-rate benefit which, with increases for dependants, already provides a high proportion of earnings during sickness and unemployment.

As the noble Lord, Lord Banks, has said, we shall have an opportunity to discuss this again when we debate the Social Security (No. 2) Bill. Under that Bill, it is proposed to cut the present 15 per cent. rate to 10 per cent. from January 1981, and to abolish the supplement altogether from January 1982. The reason for this is that, at a time when benefit savings have to be made, it is felt that the savings should fall on benefits which are above basic levels. The value of earnings related supplement has been allowed to decline by successive Governments over the years, and with more generous redundancy payments and the development of employer's sick pay schemes there is now less need for the supplement. There is also some evidence that the earnings-related supplement has lengthened duration of unemployment and its reduction and eventual abolition will lead to some improvement in incentives. The savings from the proposed reduction will be £60 million net of supplementary benefits in the calendar year 1981 and £285 million net in 1982–83. Leaving aside the savings, the increased expenditure resulting from the present amendment would be £80 million in the 1982 calendar year.

I think it will be quite apparent to the Committee from what I have said that at a time when the Government are proposing to reduce expenditure on earnings-related supplement it would not be sensible to accept an amendment which was specifically designed to improve that benefit. I should perhaps add that if in fact the amendment were to be accepted and the 15 per cent. rate were subsequently amended to 10 per cent., as we propose in the No. 2 Bill, those concerned would be worse off than they would be under the present proposals, since the reduction from 15 to 10 per cent. would apply to all earnings below the ceiling instead of merely to those earnings between £30 and the ceiling. So it would have a rather unexpected consequence which I do not think any of us would wish to see.

This again is one of these difficult measures that we shall have another opportunity to consider when we look at the Social Security (No. 2) Bill, and I shall certainly take note of the points which have been raised, in particular the one raised by the noble Lord, Lord Banks. It is a matter to which we can return on that Bill. I hope, after what I have said, that the noble Lord will feel able to withdraw his amendment.

Lord WELLS-PESTELL

I am proposing to do so, but I do so with very great reluctance because I feel strongly about this. If there were something I could get cross about it is this. I think it is quite disgraceful that this provision should be found in any Bill, even if the excuse is, "Well, we've got to cut down expenditure". I may be quite wrong, but I look upon the earnings-related supplement as a kind of insurance that I took out and that I paid for. The noble Baroness, or somebody else, may say, "Ah, yes, but there was no specific mention of the earnings-related supplement when the National Insurance rates were increased". However, I should want a lot of convincing that when the National Insurance rates were increased the cost of the earnings-related supplement was not taken into account. Therefore, along with millions of other people, I was paying an increased amount, an increased premium, if you like, to get an earnings-related supplement.

If I had taken out insurance with a private company and found subsequently that they "ratted" on it, I should want to take some action. I think the Government are doing precisely that. It may well be that I am wrong, but I do not think I am. When the Government increased National Insurance rates they must have taken into account the cost of an earnings-related supplement when it became payable. For them now to say, "Ah, well, we have got to reduce expenditure"—which is what the noble Baroness said—"and therefore we are not going to pay it", is an action which is open to very grave criticism.

I shall withdraw the amendment so far as tonight is concerned, but we will return to it, with all the strength that we can command, when the No. 2 Bill comes before your Lordships' House.

Amendment, by leave, withdrawn.

8.14 p.m.

Lord WALLACE of COSLANY moved Amendment No. 13:

Page 31, line 19, at end insert— ("17. In section 15(3), at the end there shall be inserted the words "which shall at all times be the same as the weekly rate specified in Schedule 4, Part I, paragraph 8".").

The noble Lord said: I beg to move Amendment No. 13, which would tie invalidity pensions to the basic retirement pension rate. Since invalidity benefit was introduced in 1971, it has always been payable at the same rate as the retirement pension. This year, however, the Government propose to increase invalidity benefit, along with the short-term benefits—sickness, unemployment, et cetera—by 5 per cent. less than the rate of inflation while retirement pensions will be fully inflation-proofed. As a result, while retirement pensions will rise to £27.15 single and £43.45 for a couple, the new invalidity pension rates will be only £26 and £41.60.

The reason given for this is that invalidity benefit ought to be taxed. Since it will not be possible to tax it until April 1982 at the earliest, the Government are seeking power in the Social Security (No. 2) Bill, at the moment being debated on Second Reading in another place, to reduce the up-rating by 5 per cent. this year and in each of the two following years. This is an extremely unfair measure. Many invalidity pensioners would have incomes below the tax threshold even if the benefit were taxable, yet the 5 per cent. annual reduction will hit them just as much as the better off invalidity pensioners who may be drawing sick pay on a generous scale from their employers.

The Government's enthusiasm for taxing benefits, however, has nothing whatever to do with fairness. They simply take the view that the benefits are too generous and ought to be reduced. In particular, they are worried about the alleged disincentive effect of paying adequate benefits when people are sick or unemployed. The Chancellor of the Exchequer, in his Budget Speech, stated quite openly that this was why he wanted to tax the benefits.

Nobody denies that there are a few cases in which benefits can equal or occasionally even exceed what a person could earn, but these are a very small minority of cases. Can it really be argued that, with average earnings of over £100 a week, the present rates of invalidity benefit—£19.50 for a single person and £31.20 for a married couple, plus an invalidity allowance of up to £4.15, depending on the age at which incapacity began—are adequate, let alone excessive? If so, why did the Conservatives support the introduction of an additional earnings-related benefit which will build up over a 20-year period under the Social Security Pensions Act 1975?

This is a reasonable and fair amendment which should receive support from your Lordships, particularly if many were present to listen to the debate. I beg to move.

Lord BANKS

This opening up of a gap between the invalidity pension and the retirement pension certainly seems to be a matter to which we should give serious thought. The noble Lord, Lord Wallace of Coslany, has explained that the Government are contemplating the application of the 5 per cent. reduction to invalidity pension because it is not taxed, but what they are proposing to do will have the effect that the retirement pensioner not paying tax will get more than the invalidity pensioner not paying tax, whereas until now these rates have been the same. This seems to be a move in the wrong direction, and one would want to know precisely what are the reasons which have caused the Government to propose this course of action.

Baroness YOUNG

The amendment which the noble Lord, Lord Wallace of Coslany, has moved, as it stands, is superfluous, because Section 14 of the Pensions Act already provides that the basic invalidity pension will be at the same rate as the basic Category A retirement pension. That is the position; therefore there is no need, even if the Government were moved to accept this amendment, to write it into the Bill, because Section 14 stands until it is repealed. Once again this is a matter which will come up on the Social Security (No. 2) Bill. We shall then have an opportunity to return to the issue. It does not arise under this Bill because, as I have said, the position remains as it is.

The noble Lord, Lord Banks, has given the reason why the Government are doing what they are doing in the No. 2 Bill; that is, increasing the invalidity pension by 5 per cent. less than the retirement pension. This is because the retirement pension is subject to tax whereas the invalidity pension is not subject to tax. However, I believe that this is a matter to which it would be more sensible to return on the No. 2 Bill, where in fact it applies, and not on this Bill, and I hope very much that the noble Lord, Lord Wallace, will withdraw his amendment.

Lord WALLACE of COSLANY

Will the noble Baroness kindly give the Committee the section of the 1975 Act to which she referred, if it is possible? I should be grateful if she could do so otherwise of course we shall have to wait for another occasion.

Baroness YOUNG

Yes, certainly. It is Section 14 of that Act which provides for the basic invalidity pension to be at the same rate as the basic Category A retirement pension. If I am wrong about that I will write to the noble Lord, but that is my understanding of the position.

Lord WALLACE of COSLANY

I thank the noble Baroness for that information and we will certainly look at it. We are not too happy about this. Of course we appreciate the fact that the Social Security (No. 2) Bill is leisurely coming our way and there is a certain amount of overlap between the two Bills, which is unfortunate. Having registered our displeasure, we will leave our displeasure on the record until a later date. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 agreed to.

Clause 3—[Amendments of Social Security Pensions Act 1975]:

8.24 p.m.

Lord BYERS moved Amendment No. 14:

Page 4, line 9, at end insert— ("( ) Where a contracted-out scheme provides increases in guaranteed minimum pension after service has been terminated before attaining pensionable age by one of the method,; provided for in the Pensions Act the same method of increase shall also apply to any transfer of rights made to that scheme in accordance with this section.").

The noble Lord said: This amendment is, unfortunately, a very technical one, and with your Lordships' permission I should like to begin by explaining some of the general principles involved in it. Between 1961 and 1975 it was possible to contract out of the graduated part of the State pension scheme, and to do that it was necessary to belong to an occupational pension scheme where the unit of pension provided each year did not fall below a minimum amount. At one time the amount in question was £3 9s 7d per year of membership. Unfortunately, those "bricks" of £3 9s 7d rapidly started to lose their real value because of the terrible rates of inflation which we have experienced in recent years.

When the last Government were devising their new State pension scheme, which began in 1978, and when they were considering the terms for contracting out, they very reasonably wanted to learn from the mistakes which had been made over the graduated scheme and its contracting out terms. They decided that it would only be possible to contract out of their new State scheme provided the units of pension built up year by year were calculated in one of two ways. The more usual method was to require the pension to be at least a certain fraction of final earnings at, or just before, retirement. The alternative method required the units of pension built up year by year to be revalued in line with national average earnings. Whichever method is employed solves the problem for those members of an occupational pension scheme who continue in active membership of the same scheme right through to retirement. But a problem arises with the members who, whether from their own free choice or through being made redundant or for some other reason, leave their job before retirement. These are the people who are known in the pensions world as "early leavers".

The last Government originally intended that an early leaver should continue to have part of his pension increased from the time he left until the time he retired and the part to be increased was the part that was used for contracting out. That of course was reasonable. What was not reasonable was that the Government stipulated that the rate of increase each year should be the rate of increase in national average earnings. This was clearly unacceptable to an employer, for several reasons. The main reason was that the employer may be able to control what he pays his own employees, but he cannot control national average earnings; and any employer who accepted that responsibility would therefore be taking on a totally open-ended liability in respect of people who were no longer contributing towards his business.

Secondly, the requirement was unreasonable because the very nature of an average requires that the many people whose earnings rise more slowly than the average would balance the many people whose earnings rise more rapidly. Requiring the pensions of early leavers, therefore, to be increased in line with national average earnings could mean that an early leaver did better and absorbed a greater share of the employer's resources than another employee who stayed with that same employer right the way through to retirement.

At the time when the 1975 Social Security Pensions Bill was being considered in this House I brought forward an amendment which would have given employers an additional option in increasing the contracted-out pensions of their early leavers. My amendment would have allowed employers the option of increasing the pension from the time the member left his contracted-out pension scheme to the time of his retirement by the same fixed rate as the Government Actuary had assumed for other purposes in his calculations in connection with the new State pension scheme and contracting out. On that occasion your Lordships were good enough to support my amendment, and although it was later deleted in another place the Government did bring forward changes of their own to achieve the same objective. The fixed rate of increase adopted at the start of the scheme in April 1978 has remained unchanged to this day and is still 8½ per cent.

There is in fact a third option and that represents a sort of compromise between the other two methods. It requires early leavers to have their contracted-out pensions increased at the fixed rate of 5 per cent. and in addition the employer must pay a lump sum known as a "premium" to the State scheme in order to purchase whatever increases are necessary over and above the 5 per cent. If the rate of increase in national average earnings falls below 5 per cent. other considerations arise, but I do not think we need concern ourselves with those for the foreseeable future.

I hope that all I have said so far serves to explain why an increase in the pensions of early leavers is essential to the system, and why it is important that the method of providing those increases should not place unreasonable burdens on the employer. There is no quarrel with the requirement in principle that the pensions of early leavers should be increased. A problem does arise over the way in which increases should be provided when a transfer of pension rights takes place from one scheme to another, and that is where I now come, from that background, to the present amendment. It is designed to improve the position where a member moves from one contracted-out occupational pension scheme to another contracted-out occupational pension scheme run by his new employer.

As far as the member is concerned it is often highly desirable that he should be able to transfer his pension when he moves. Transferring it will not necessarily increase the amount of pension but it will achieve two useful objectives. First, it will relieve the old scheme of an administrative burden of looking after what could be quite a small pension for many years and trying to keep track of the future pensioner in order to pay him the pension at the retirement date. Secondly, and probably more important, it will enable the employee to have all his pension payable from the same date and subject to the same terms. By "subject to the same terms I mean that it will be subject to the same provisions regarding retirement age, widows' pensions, increases after retirement, the guarantees applying on death, frequency of payment and so forth. But unfortunately, as the law stands at present, the receiving scheme is permitted to take in a transfer of contracted-out pension only if it agrees to revalue that pension in line with changes in national average earnings.

This is clearly an extraordinarily bad bargain from the point of view of the receiving employer. He is offered a fixed transfer value—fixed, that is, in money terms; and in return he has to provide a pension of which the contracted-out part must be increased in line with national average earnings, a factor over which he has no control at all. The net effect is that the new employer will not normally agree to transfer of the contracted-out pension.

On the other hand, if a transfer does not take place and the pension is left behind as a frozen pension with the old scheme, then the old employer can choose between three methods of increasing the contracted-out pension; namely, increases in line with national average earnings, increases at the fixed rate of 8½ per cent., or the hybrid method of increases at 5 per cent., plus payment of the lump-sum premium. Any employer can use one of these three methods of increasing the contracted-out pension for those who leave his scheme. All my amendment seeks to do is to permit the employer who takes in a transfer of contracted-out pension to use the same method in respect of contracted-out pensions transferred into his scheme as he does in respect of those who leave his scheme.

I think it is appropriate to draw attention to the fact that for very good reasons it will in future be less easy for an employee who leaves a pension scheme to take his own contributions out with him. Quite reasonably in recent years, Governments of both complexions have taken the view that the purpose of a pension scheme is to provide pensions and this objective should not be frustrated by allowing a scheme to be used as a sort of piggy-bank which, if not exactly tax-free, then at least is highly tax efficient. The result is that in future an increasing number of people who leave their employer will have to choose between a frozen pension under the old scheme or a transfer of pension rights into the new scheme. If my amendment is adopted a transfer of contracted-out pension will no longer mean that the receiving employer incurs an open-ended liability.

Before concluding, may I deal with two possible objections. The first is that my amendment deals only with the relatively small part of the pension used for contracting out. We are not talking about the total pension. It is, of course, highly desirable that the total pension should be transferred, but the contracting out requirements are concerned only with the part used for contracting out. It is the rate of increase to be applied to that part which is the subject of this amendment.

Secondly, one might be tempted to think that my amendment is unsatisfactory from the employee's point of view because the law at present requires him, if his pension is transferred, to have the contracted-out part increased in line with national average earnings. If national average earnings increase at a rate faster than 8½ per cent., he might appear to receive a smaller pension if he benefits only from increases at the rate of 8½ per cent. than if he received increases in line with the full rate of national average earnings. In fact, this will not happen as the State does already make good any shortfall if the rate of increase which is needed exceeds 8½ per cent., and this arises already since the great majority of pensions are left behind in the old scheme and not transferred. Consequently, the State scheme is already prepared to make good any shortfall caused by the rate of increase in national average earnings exceeding 8½ per cent. So I do not think it can be argued that the burden on the State scheme will be increased if this amendment is adopted.

I am sorry to have taken so long in outlining what is in the end a relatively modest amendment, but I hope the principle will appeal to the Committee. It is clearly desirable that those who transfer from one employer to another should be able to take their pension rights with them. All that I am seeking to do is to enable the receiving employer to take on board a transfer of pension rights from the previous employer on terms which do not involve the second employer in taking on open-ended liabilities. I think credit is due to the previous Government for the way in which they accepted that the contracting-out terms should not embody an open-ended liability. If your Lordships remember, a number of amendments made to the 1975 Bill as it passed through both Houses reflected this willingness to be flexible. It is unfortunate that this loophole should have been left, and I hope that the case for closing it will be accepted by the Government. I beg to move.

Lord CULLEN of ASHBOURNE

My Lords, this amendment is intended to allow guaranteed minimum pensions, when transferred from one contracted-out pension scheme to another, to be revalued at a fixed rate instead of by reference to the increase in average earnings. As the noble Lord is aware, an amendment was moved in another place to achieve the same object.

I would point out to the noble Lord at this stage that there is no need for primary legislation to achieve this object. I am advised that it could be implemented by regulations. The Government are not unsympathetic to the case put forward by the noble Lord. However, the plain fact is that the Occupational Pensions Board are presently conducting a review on the preservation and transferability of occupational pension rights. They have up till now received 700 pieces of written evidence and in addition have taken oral evidence. The board hopes to be able to report in early 1981. I would say that the speech of the noble Lord, Lord Byers, will be something that they will read with the very greatest interest. Certainly, he put the case exceptionally well and very clearly.

In this complex field, it is the Government's considered view that it would be inadvisable to act on an isolated aspect of the whole question of pension transferability and preservation in advance of the Occupational Pension Board's report. It is claimed that the present requirement for index-linked revaluation of the transferred guaranteed minimum pension is preventing transfers and therefore stopping people from changing jobs. The noble Lord will no doubt have seen the article in the February edition of the Pensions World by the chairman of the Occupational Pensions Board which indicated that the evidence the board had received on the desirability of transfers was not all one way. In any event, at the moment guaranteed minimum pensions are still only of modest amounts, built up over two years since 1978; it would, I think, be wrong to exaggerate the burden the obligation to dynamise these rights would place on receiving schemes. If the board's report recommends a change in the guaranteed minimum pension transfer arrangements this would be considered urgently by the Government, and, as I have said, could be implemented quickly by regulations. I am advised that there are some defects in the amendment which would militate against its intended purpose. Leaving that on one side, I would ask the noble Lord to withdraw his amendment in the light of my remarks.

Lord BYERS

I am grateful to the noble Lord for the sympathetic way in which he has received the principle behind this amendment. Of course, I am aware that the Occupational Pensions Board is studying this matter, and I would not dream of pressing him for a definite undertaking tonight, except to say this. It is reassuring to know that this could be done by regulations and that primary legislation is not required. As the Government appear to be fairly sympathetic to the principle, if the Occupational Pensions Board has no objection to it, I wonder whether I could ask the noble Lord if I can take it that the Government will then implement it by way of regulation.

Lord CULLEN of ASHBOURNE

I do not think I am really in a position to say that, but what I should like to do is to take this away and perhaps we could discuss it again at the next stage of the Bill.

Lord BYERS

I would be very happy to do that, and with the leave of the Committee I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

8.40 p.m.

Lord PONSONBY of SHULBREDE moved Amendment No. 14A:

Page 7, line 41, leave out from (" Act ") to (" after ") in line 43 and insert— ("(a) after the word "are" there shall be inserted the words "or at any time were"; and (b").

The noble Lord said: Clause 4 of the Bill makes a number of miscellaneous amendments to existing legislation. Subsection (I) of the clause will extend the definition of "public service pension scheme" contained respectively in Section 51(3) of the Social Security Act 1973 and Section 66(1) of the Social Security (Pensions) Act 1975. There is in fact an anomaly. The Port of London Authority Pension Scheme was established by the Port of London Authority Act 1928 and there is some concern that this scheme should clearly be seen to fall within the definition contained in the above-mentioned sections as was intended when the scheme was originally established.

However, I understand that there is some doubt as to whether the scheme falls within those sections and the object of this particular amendment is to make clear that the scheme is a public service pension scheme for the purposes of the definition. I hope that the Government will be able to agree to this amendment for the sake of clarity. I beg to move.

Lord SANDYS

We approach a difficult and technical matter of definition and I have been looking with close interest at both the Social Security Act 1973 and the Social Security (Pensions) Act 1975 with their definitions which, of course, are identical. The effect of this amendment would be to provide that, if the particulars of a pension scheme—and here of course the noble Lord referred to the Port of London Pension Scheme established quite a long time ago in 1928 established by or under an enactment or the Royal Prerogative or Royal Charter (not applicable, I imagine, in this case) had at some time been set out in an enactment, Royal Warrant or Charter, or in a legislative instrument made there under but were no longer so set out, then such a scheme would nevertheless come within the definition of a public service pension scheme for the purposes of the two Acts referred to.

I should like to say straight away that we are in some difficulty here, examining the particular scheme referred to by the noble Lord, because I have had no previous discussion with him about it. However, I think that I should continue with the details. It is important that the relaxations which apply to public service pension schemes, as defined in the two Acts referred to, should apply only to schemes whose solvency would not be in any doubt because of their association with the Exchequer. I do not wish to cast any reflection whatsoever upon the pension scheme referred to by the noble Lord, but I think I should mention that matter in passing.

If the definition were to be extended to include schemes whose particulars are now set out in trust deeds and could be changed by members' consent, then it would not be appropriate to exempt them from the stringent solvency requirements applicable to other contracted-out occupational pension schemes.

Should the noble Lord be aware of a difficulty in relation to a particular scheme, I shall do my best to assist him if he will give me the particulars. I am sure that we could arrange a discussion on these matters. Nevertheless, in view of the considerable repercussions which could result from the proposed amendment, I hope the noble Lord will agree to withdraw it.

Lord PONSONBY of SHULBREDE

I should like to thank the noble Lord for his reply and for his offer to discuss the particular problems raised by the present wording of the Bill. I should certainly like to take up his offer, and in the circumstances I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn. Clause 3 agreed to.

Clause 4 [Miscellaneous amendments]:

8.45 p.m.

Baroness YOUNG moved Amendment No. 15: Page 8, leave out lines 31 to 34 and insert ("such modifications as are prescribed by the regulations; but any modifications so made shall not apply in relation to any payment of benefit unless notice of the effect of the modifications was given to the beneficiary in accordance with the regulations before he agreed to the arrangements.

In this subsection "modifications" includes additions, omissions and amendments.").

The noble Baroness said: As I explained during our Second Reading debate, Clause 4(4) in its present form was severely criticised in another place as providing inadequate safeguards, in the arrangements for recovering overpayments, for beneficiaries paid by automated credit transfer. The Government undertook to look at the situation again, and this amendment is designed to meet those criticisms. Perhaps it would be helpful to the Committee to explain the background to the matter and what the amendment does.

A recent study by DHSS officials of the arrangements for paying social security benefits, has confirmed that there is a substantial demand among many members of the public for their benefits to be paid direct into their bank accounts by automated credit transfer. This is particularly true in the case of mothers receiving child benefit. This change in opinion is a reflection of the fact that about 50 per cent. of the adult population now use a current bank account and 75 per cent. use a current bank account or some other form of account such as a building society account. The Government are still considering the proposals in this study, which was carried out in consultation with Sir Derek Rayner and which goes much wider than payment by automated credit transfer. However, the Government share the view, expressed by the Opposition when they held office, that it is right in principle to offer the public payment of benefits by automated credit transfer if they want it—and only if they want it—provided that there are no major cost or administrative disadvantages in doing so. The Government are still considering the study, but they mean to announce their intentions on payment by automated credit transfer as soon as possible.

In the meantime, it seems only prudent to take advantage of the opportunity presented by this Bill to deal with a possible consequence of paying benefits in this way. As the Opposition will know from their own experience in Government, this system involves a greater risk of overpayments because there would be less routine contact between beneficiaries and the Department and it might lead to more beneficiaries overlooking the need to report changes in their circumstances that would affect the amount of benefit they receive. The very nature of this payment method, which transfers money by computerised systems, means that beneficiaries cannot prevent an incorrect payment as they can with an order book by simply refraining from cashing it.

None of us can be certain that there will be a significant increase in overpayments if automated credit transfer is introduced, but we believe that it would be irresponsible to put public money at risk by introducing a new payment method that the public wanted, while knowing that it carried the risk of more overpayments. At present, overpayments are not recoverable if the beneficiary shows "due care and diligence". However, if there is a significant increase in inadvertent overpayments as a result of automated credit transfer, the cost and effort required to establish whether a beneficiary has exercised "due care and diligence] would seriously jeopardise the financial viability of this method of payment. It is for this reason that, provided adequate safeguards are made available, we consider it reasonable that the "due care and diligence] test should be suspended for a person who chooses payment by automated credit transfer. Let me say here that, in providing any particular payment method for benefits, any Government would have to strike a reasonable balance between the wishes of beneficiaries for particular payment methods and the cost to the taxpayer who pays for those methods.

If automated credit transfer is made very expensive to administer because of the cost of elaborate procedures for recovering overpayments, then this will make it difficult for the Government to give the public a new payment method that they want. It must also be noted that beneficiaries who, in their own interests, choose to have their benefit credited to their account, will have voluntarily chosen a system under which they will not receive the normal reminders to report changes of circumstances or have the normal facilities for preventing further payment. And it is worth hearing in mind that members of the public will have a major safeguard in that they will have a totally free choice as to whether they want their benefits paid by automated credit transfer, and there will he nothing to stop them at any time from choosing to be paid by order books if for any reason they find that they do not like the new system.

The Government recognise that the arrangements for recovering overpayments resulting from automated credit transfer must have reasonable safeguards for beneficiaries. They have sought to amend Clause 4(4) to meet the criticisms made in another place, and the clause as amended carries a number of significant safeguards. First, it ensures the most important safeguard of all, namely, that the special arrangements for suspending the "due care and diligence] test cannot, as a matter of law, operate unless the beneficiary is given due notice of their effect before he agrees to payment by automated credit transfer. It will then be made clear to him that overpayments will be recoverable whether or not he is personally to blame. It might seem superfluous to say that it was always the department's intention that beneficiaries should be so informed, but the new wording places the matter beyond any doubt.

Secondly, the amendment widens the regulation-making powers of Clause 4(4) to enable regulations to provide for other features of the automated credit transfer system and at the same time requires the beneficiary to be given due notice of these, also, before he decides whether to opt for this method of payment. The detailed procedures are still being worked out, but it is proposed at the minimum that he will be told, when an overpayment comes to light, of the circumstances of the overpayment, the amount, and the Department's intention to recover it—if possible by reducing the future sums to be credited to his account. The beneficiary will be advised of the maximum amounts that may be compulsorily recovered by deduction from further payments. He will, in fact, be given all the information that he will need to have to decide whether to opt for payment by automated credit transfer.

Thirdly, the clause leaves intact the beneficiary's right to apply for a decision of an insurance officer, which carries normal rights of appeal to the local tribunal and thence to the Commissioner, if he disputes that there has been an over-payment or challenges the amount of it. And, fourthly, regulations made under Clause 4(4) will have to be referred either to the National Insurance Advisory Committee or the new Social Security Advisory Committee.

I have explained this in considerable detail, but there was a great deal of discussion in another place. I know that it is a matter which has very much concerned a number of Members of another place and in your Lordships' House. I felt that it would be helpful to have this on the record. I beg to move the amendment to meet the criticisms that were made, and I hope that the Committee will feel that we have fulfilled our obligation by this amendment. I beg to move.

Lord WELLS-PESTELL

I am sure that we are all grateful to the noble Baroness for going into this matter in so much detail. I am aware, as are my friends behind me, of the concern which was expressed in another place when this matter came before them. As far as I can tell, although I would want to read very carefully in Hansard what the noble Baroness has said, I feel that she has gone a long way—if not the whole way— to meet the criticisms that were made in another place.

There is only one matter which exercised my mind, and I shall not ask the noble Baroness to try to find it for me. I understood her to say that the beneficiaries will benefit if there are no administrative costs in doing so. It may well be that I have something out of context, and I am quite prepared to leave the matter until I have read for myself what the noble Baroness has said.

Baroness YOUNG

The point I was trying to make is that it would not be right to introduce a new system without a safeguard, because of the possible effect of overpayments; things would be automatically paid by a computer and there would not be the regular check that people now have of collecting something from a post office or wherever it may be—clearly it would be a different system. The idea of the new system is to provide a service for which many people have wished. Therefore, if we do have the new system we are taking the opportunity of having the safeguard against overpayments built into it. Clearly, there would he some administrative costs, but we believe that they would certainly be no greater than they are at present. One has to strike a balance between what is right—and that must be made clear to the beneficiaries who choose to do this—and the clear advantage of having something coming through one's bank account, and the dangers of the computer getting it wrong. There are a number of interests to be considered, but we are not preventing this because we think that there would be large administrative costs; on the contrary, we think that it will be administratively better, but we must close this loophole.

Lord WELLS-PESTELL

I am much obliged to the noble Baroness.

On Question, amendment agreed to.

Clause 4, as amended, agreed to.

8.55 p.m.

Lord WELLS-PESTELL moved Amendment No. 16: After Clause 4 insert the following new clause:

"Rate of child benefit

. In section 5 of the Child Benefit Act 1975 there shall he inserted the following subsection—

(7) The weekly rate of child benefit prescribed for any child with effect from 24th November 1980 shall be not less than £5.20."

The noble Lord said: I should like to speak to Amendments Nos. 16 and 17, and in due course move Amendment No. 16. Amendment No. 16 concerns the increase of child benefit to £5.20 this November, which would restore its real value to the level it reached when the last up-rating occurred in April 1979. In his Budget speech the Chancellor of the Exchequer sought to justify the proposal to increase child benefit by only 75p, to £4.75 per child, on the grounds that the percentage increase—namely, 18½ per cent. over 19 months—was roughly equivalent to the net value of the increase in personal tax allowances for a married man after deducting the extra tax due to the abolition of the 25 per cent. tax band, which amounted to about 11 per cent.

However, after last year's Budget families with children had a right to expect extra help this year, not just fair shares in what we feel is misery for a good many families. Moreover, if the Chancellor's comparison was valid, the increase in child benefit should have been limited to 11 per cent. for 12 months and not 19 months, and child benefit should have been increased from this month, as will be tax allowances.

This has caused a great deal of concern, not only to Members on this side of the Committee, but to Members on the Government side in another place. If my memory serves me correctly, I believe that some of them even voted against their own Government, and others abstained. It means that there was a great deal of feeling among a number of Conservative Members of Parliament in another place when the Chancellor increased child benefit only by 75p, when I think it is generally recognised by anyone who is concerned with levels due to inflation and so on, having worked it out, that we really need £5.20 to compensate for the child benefit increases in inflation over 19 months.

The Chancellor also argued that the 75p increase would ensure that basic rate taxpayers were better off than they would have been if child tax allowances and family allowances had continued and had been up-rated in line with prices. But the credit for that belongs entirely to the last Government. The most that this Government can claim is that they have not completely undone the good done by the previous Government. When their other attacks on the living standards of families are taken into account—and I have referred to the increased prices in school meals, the abolition of free milk for large families and a number of other matters, which I shall not go into because on more than one occasion in recent months we have made our views quite clear from this Dispatch Box—it cannot possibly be held that the 75p covers the inflation which has occurred over the past 19 months.

The benefit of £5.20 is not the right level for child benefit. To put it up to that level would merely be a holding operation to prevent its value from falling. But it is vitally important that its value should not fall because once it does it is extremely expensive to make up lost ground. The additional cost compared with the proposed £4.75 is, as I am sure we shall be told, something like £250 million in a full year; but that is a reason for doing it, in my submission, and not a reason for not doing it.

There are a large number of children involved; a large number of children are going to suffer as a result. It really is despicable that the Government should raise it by only 75p when on all showing it needed £1.20. We really ought not to be doing that to a vast army of young children whose parents need that extra money in view of the other cuts which are going to fall heavily upon the poorer families.

With your Lordships' permission, may I pass on to Amendment No. 17. This new clause provides for annual increases of child benefit in line with the increase in average earnings. Ideally one would want to see child benefit raised to an adequate level and then indexed. Under the present Government, however, child benefit is losing value in relation to both prices and earnings. Indexation is therefore needed to arrest this trend. It would also have the great advantage that the cost would automatically be provided for in the Government's expenditure plans each year. Only increases in excess of the index figure would have to be fought for in the annual battle with the Treasury.

The appropriate index for this purpose is average earnings rather than prices because child benefit is essentially a supplement to earnings. There would be a case for a price or earnings formula to ensure that if the real value of earnings fell the value of the State support for children was protected. That however might be much more controversial in view of some of the discussion we have had this evening.

The new clause is a moderate proposal which I think reasonable people of all political persuasions might be expected to support. I beg to move Amendment No. 16.

9.3 p.m.

Lord BANKS

I should like to support this Amendment. The proposed up-rating on the part of the Government, as the noble Lord, Lord Wells-Pestell, has made clear, is not really enough to take account of inflation, and the figure of £5.20 is a more accurate attempt to reflect that than the £4.75, and Amendment No. 16 would put it at that figure. Amendment No. 17 would then maintain its value in terms related to earnings thereafter.

The child benefit should have been upgraded last year, and this at the same time as increases in tax allowances because it is part of the same process to do that now that there are no child income tax allowances. As the noble Lord, Lord Wells-Pestell, said it would cost about £250 million to £270 million in order to increase the proposed increase from £4.75 to £5.20. That is a large figure, but when you think of it against the cost of the increase in personal allowances in the 1980 Budget, of £1,200 million (and this is part of the same process) it does not then seem quite so great.

The maintenance of child benefit is important because it brings help for all families, and the comparative position of people with families has been deteriorating over recent years. It helps most, of course, the poorest. It helps single-parent families, who are helped by the special addition which they get for the first child; but child benefit is for all children, so an increase in child benefit is even more helpful to them. It takes people off supplementary benefit, and that is one of the things which in a reform of the supplementary benefit system, which this Bill covers, we ought to be attempting to do. We seem at the moment to be putting more people on to supplementary benefit; but this takes people off supplementary benefit, and the Supplementary Benefit Commission themselves strongly recommended that an increase in child benefit should quickly follow. For all these reasons child benefit should, at the very least, be maintained in value.

Baroness FAITHFULL

I wonder whether it would be of assistance to the Committee and save time if I spoke to the two amendments moved by the noble Lord, Lord Wells-Pestell, and my Amendment No. 69A after Clause 7, which also concerns child benefits. With the leave of the Committee, may I speak to that amendment as well as to the other two in order to save time? In essence and in spirit, so to speak, I fully support the noble Lords, Lord Wells-Pestell and Lord Banks, and indeed we spoke on this matter at Second Reading. In matters of fact concerning the amendments my amendment is slightly different from Lord Wells-Pestell's amendment, in that I have set a date of 1981 to 1982 rather than 1980 to 1981, and I have related upgrading of the child benefit rate to prices rather than to earnings. To that extent what I have done is to agree with, and fully support, child benefits but, in view of the situation with regard to finance and inflation in this country, I have in effect deferred the up-rating of the child benefit scheme.

Having said that, I would say that I feel deeply and strongly about the whole position of child benefits. To start with, child benefits close the poverty trap, and there are about 90,000 families caught in the poverty trap in this country. I believe it is the most constructive benefit that can be given to families with children. Further, I believe it is an incentive to work for low-paid workers, and I ask myself whether trade union policy would not be effected if it were felt that if inflation rose, then with child benefits there would not be such a need for pressure for wage rises, and to that extent it would be good for society, at any rate for the time being. Therefore, I do not support Amendment No. 16 as drafted, I support in spirit Amendment No. 17 and, when the time comes, I shall move Amendment No. 69A.

Lord RENTON

It is with some hesitation that I rise to speak on this subject because I never made the deep study which many of your Lordships have, in spite of many years in another place, of the National Insurance Scheme and the various modifications of it which have been made over the years. I find that having been a Member of your Lordships' House for a relatively short time, I am always learning and being surprised. One of the surprises I have come across this evening is that apparently after a matter has been discussed thoroughly in another place, we are free in your Lordships' House to propose amendments which would lead to an increase of no less than £250 million in the taxpayers' commitment, and for that reason alone I should have thought we would be very chary indeed about accepting Amendment No. 16.

There are, of course, other reasons as well. Since child benefits were first introduced—I think they were called family allowances—many things have changed which would affect the value of them. First, the general wages level and the ability of the working population to support their families have improved enormously. Secondly, the whole pattern of social security benefits, supplementary benefits and so on has changed, so that child benefit is no longer to he relied upon to the extent that family allowances used to be and necessarily were relied upon. We also have the annual changing, for the better, of the personal and married persons' and children's allowances under the tax system. All those things are relevant to the amount of the child benefit, and I have no doubt but that all those factors were borne in mind when the matter was fully considered in another place.

I wish briefly to mention Amendment No. 17 and the amendment, which is somewhat like unto it, spoken to by my noble friend Lady Faithfull, No. 69A. I should have thought that the reasons I advanced—as I said, with some temerity, in regard to Amendment No. 16—apply with much greater force in relation to Amendments Nos. 17 and 69A because, if child benefits are to be raised from time to time, the general level of earnings obtaining in Great Britain should not be considered the only factor or indeed the main factor in deciding what child benefits should be in the years to come. For those reasons and without doubting the good motives and sincerity either of the noble Lord, Lord Wells-Pestell, to whom one always listens with great attention because of his expertise in these matters, or of my noble friend Lady Faithfull, I would he very surprised if my noble friends on the Front Bench felt able to accept either or any of these amendments.

9.14 p.m.

Baroness YOUNG

The whole issue of child benefit is important and I have listened with care to what has been said in this debate. The present position is that from next November child benefit will be increased by 75p—an increase of 18¾ per cent. since the last increase in April 1979. This is equal to an annual rate of increase of 11 per cent. After allowing for the withdrawal of the 25 per cent. tax rate, the personal allowance for a married couple will also go up by 11 per cent. for the year. Therefore, families with children are not falling behind other families.

My noble friend Lord Renton mentioned one important matter. The 1979–80 cost of child benefit is about £2,800 million, and the cost of the 75p increase already announced is about £160 million in 1980–81 and £420 million in a full year. If we were to increase child benefit to a figure of £5.20 as provided in Amendment No. 16, this would cost a further £90 million in 1980–81 and £250 million in a full year. It is easy to see that this would become a most expensive proposition.

The Government have recognised the importance of child benefit by proposing to raise it by 75p next November. The figure will be higher than if the old system of child tax allowances and family allowances had been continued and revalued in line with increases in the RPI from 1976—the last year of the old system—up to 1980. Furthermore, the Government have given extra help, as was recognised by the noble Lord, Lord Banks, to hard-pressed families. The one-parent family addition to child benefit is to be increased by 50p to £3. It will have gone up by 50 per cent. since the Government took office lat year. It is estimated that 300,000 single parents will gain from this increase.

We are also trying to help low earners who will benefit from a big improvement in family income supplement. The average payment will go up by one-third from £7.50 to £10 a week and will have doubled from about £5 since May 1979. This will be of particular help to lone parents who constitute about half of the families receiving family income supplement. For families on supplementary benefit there will be automatic entitlement to £1.40 a week fuel allowance where there is a child under five, and there will be more help to children as part of this Bill. Supplementary benefit rates are being fully protected against the increase in prices with a 16½ per cent. increase. Therefore, the Government propose not only an increase in child benefit but particular help to those groups of people, both in work and out of work, who are the most hard-pressed in our community.

I was asked by the noble Lords, Lord Wells-Pestell and Lord Banks, about the date of the up-rating for child benefit. The point is that child benefit is a social security benefit and should be up-rated at the same time as other social security benefits—that is, in November. The last increase was in April 1979 and the Government considered that a further increase in November 1979 was not justified. Therefore, the next appropriate date is November 1980.

Social security has been taking a steadily increasing share of public expenditure in recent years and now stands at 27 per cent. of all public expenditure. With falling output, there is less available to share out and the Government are determined to cut public borrowing. The consequence is that spending on social security cannot he exempted from all our economies. But we believe that our proposals on taxation and social security achieve a fair balance between working families, with and without children, and that we are also able to help the poorest, whether in work or out of work.

Because of the immense extra cost that would be involved in these amendments, including Amendment No. 69A, it is only right that I should tell the Committee that the Government cannot accept these proposals. I hope that with that explanation the Committee will feel that we are doing our best to help those who are most in need.

9.20 p.m.

Lord WELLS-PESTELL

I have listened with considerable interest to what the noble Baroness the Minister has said, and I do not believe that the whole matter can be clouded by a series of statistics about what we are doing here, there and somewhere else, and about it costing this and that. It always has cost a lot of money. What we are concerned with is the problem of the child and child benefit. It is as simple as that. People who work in this field, and who know how vulnerable children are, estimate that to provide the same purchasing power today it is necessary for child benefit to go up not by 75p but by £1.20.

I hope that the noble Baroness, Lady Faithfull, will not feel that I am being unkind—I am merely calling her to my aid—if I refer to what she said at Second Reading of the Bill on 1st April: I wish to touch on the subject of child benefits. I appreciate that such benefits have recently been increased from £4 to £4.75, but I believe that to compensate for inflation they should have risen to £5.20".—[".Official Report; col. 1294.] There are but a few people in your Lordships' Committee who know more about children and their needs than does the noble Baroness, Lady Faithfull. It is true that the noble Baroness the Minister has had much to do with local social services, but the noble Baroness, Lady Faith full, has been part of those services. She has had not one ear to the ground, but both ears, and she knows the situation. Many others among us have had vast experience of social work, and we know that children are more vulnerable than anyone else in the community. It is so often the children who suffer.

I take the point of the noble Lord, Lord Renton, but there are some situations for which society must make provision. Of course half a loaf is better than none, but we use the phrase so often; and what happens? What we do makes very little difference. I did not wish to make a lot of political capital out of this question. I am becoming a little tired, as I am sure are some of your Lordships, of constantly having to refer to the Government's cuts and to what the Government are doing and are not doing, but the noble Baroness the Minister has more than once this evening referred to what the Government have done. We must bear in mind that what the Government have done has increased the expenditure of a family of four—a husband, a wife and two children—by nearly £9 a week in some areas. With school meals going up considerably, with no free milk, and with other cuts that have affected children, in some areas a husband and wife with two children must find another £7, £8, or £9 a week. Yet they receive only 75p a week more in child benefit.

I know that nothing I say here tonight will make the slightest difference, but do not let us go away thinking that what we do is relatively unimportant. Of course whatever we do in the community will cost money, and I am among the first to realise that money must be saved. What I want to say to the noble Baroness—perhaps this is not the right moment to make this remark, because there is not time for me to establish it beyond all reasonable doubt, though in other circumstances I should have no difficulty in so doing—is that the Government have got their priorities wrong in more ways than one. If from the moment that they came into office they had had their priorities right, instead of dispensing thousands of millions of pounds to people who did not need it, then they would have been able to afford £5.20 a week child benefit.

Baroness FAITHFULL

Perhaps I may just say that of course I stand by what I said on Second Reading, that in an ideal world I would want the child benefit to be £5.20, as I said then. At this stage I have modified what I said, partly because of the very reasons given by the noble Lord, Lord Renton—that we are in a state of

CONTENTS
Banks, L.	Howie of Troon, L.	Ponsonby of Shulbrede, L. [Teller.]
Blease, L.	Irving of Dartford, L.
Brockway, L.	Janner, L.	Rochester, L.
Byers, L.	Jeger, B.	Ross of Marnock, L.
Cledwyn of Penrhos, L.	Kaldor, L.	Segal, L.
David, B. [Teller.]	Llewelyn-Davies of Hastoe, B.	Stewart of Alvechurch, B.
Davies of Leek, L.	McCarthy, L.	Stewart of Fulham, L.
Elwyn-Jones, L.	Mackie of Benshie, L.	Stone, L.
Galpern, L.	Maelor, L.	Underhill, L.
Goronwy-Roberts, L.	Northfield, L.	Wallace of Coslany, L.
Hampton, L.	Peart, L.	Wells-Pestell, L.
Hooson, L.	Pitt of Hampstead, L.	Wynne-Jones, L.

difficulty—and partly because, although I believe that children are the future of our nation, nevertheless it would be wrong to ask for something that was completely outside our reach and, unlike the noble Lord, Lord Wells-Pestell, I would rather have half the cake than no cake at all. That is why, in my amendment, I modified what I requested.

Baroness YOUNG

There is, I think, one point that I should like to make on all this. Of course, we should all like to do more for families with children; we should like to do more for the pensioners; we should like to do more for all the good causes that we have been discussing this evening. I have not totalled up what the actual cost would be; but I think it is worth the Committee bearing in mind that at the end of the day one of the effects of the Budget is that social security benefits will actually be increased by more than £3 billion in the next financial year, under improvements and upratings. We may think it ought to be more; but I really think we need to keep the costs of this in proportion, and to recognise the sort of costs that we are talking about. We are making an improvement. We should all, I am sure, like to do more; but as I have said on other occasions, one cannot simply be ruled by one's heart. One has to be ruled by one's head as well as by one's heart; and we are trying to help the poorest of families in the way that I have described.

9.28 p.m.

On Question, Whether the said amendment (No. 16) shall be agreed to?

Their Lordships divided: Contents, 35; Not-Contents, 70.

NOT-CONTENTS
Airey of Abingdon, B.	Fortescue, E.	Mottistone, L.
Alexander of Tunis, E.	Gainford, L.	Mowbray and Stourton, L.
Amherst of Hackney, L.	Galloway, E.	Murton of Lindisfarne, L.
Bellwin, L.	Gibson-Watt, L.	Nugent of Guildford, L.
Belstead, L.	Gisborough, L.	Orkney, E.
Bradford, E.	Glasgow, E.	Reigate, L.
Cathcart, E.	Gowrie, E.	Renton, L.
Clitheroe, L.	Greenway, L.	Rochdale, V.
Cockfield, L.	Gridley, L.	St. Just, L.
Cork and Orrery, E.	Grimston of Westbury, L.	Sandford, L.
Craigavon, V.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Sandys, L. [Teller.]
Cromartie, E.		Selkirk, E.
Cullen of Ashbourne, L.	Hanworth, V.	Sempill, Ly.
de Clifford, L.	Home of the Hirsel, L.	Sharples, B.
De La Warr, E.	Hornsby-Smith, B.	Skelmersdale, L.
Denham, L. [Teller.]	Killearn, L.	Strathclyde, L.
Drumalbyn, L.	Kimberley, E.	Swansea, L.
Dulverton, L.	Lauderdale, E.	Swinfen, L.
Eccles, V.	Long, V.	Trenchard, V.
Ellenborough, L.	Lonsdale, E.	Vaux of Harrowden, L.
Elliot of Harwood, B.	Lucas of Chilworth, L.	Vickers, B.
Elton, L.	Macleod of Borve, B.	Vivian, L.
Falkland, V.	Mansfield, E.	Young, B.
Ferrers, E.	Montgomery of Alamein, V.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

9.35 p.m.

Lord WELLS-PESTELL moved Amendment No. 17: After Clause 4 insert the following new clause:

"Review of rate of child benefit

. In section 5 of the Child Benefit Act 1975, for subsection (5) there shall be substituted the following subsection—

(5) In the tax year 1980–81, and each subsequent tax year the Secretary of State shall review the rates of child benefit for the purpose of determining whether those rates have retained their value in relation to the

CONTENTS
Banks, L.	Hooson, L.	Ponsonby of Shulbrede, L. [Teller.]
Blease, L.	Howie of Troon, L.
Boston of Faversham, L.	Irving of Dartford, L.	Rochester, L.
Brockway, L.	Janner, L.	Ross of Marnock, L.
Byers, L.	Jeger, B.	Segal, L.
Cledwyn of Penrhos, L.	Kaldor, L.	Stewart of Alvechurch, B.
David, B. [Teller.]	Llewelyn-Davies of Hastoe, B.	Stewart of Fulham, L.
Davies of Leek, L.	McCarthy, L.	Stone, L.
Elwyn-Jones, L.	Mackie of Benshie, L.	Underhill, L.
Galpern, L.	Northfield, L.	Wells-Pestell, L.
Goronwy-Roberts, L.	Peart, L.	Wynne-Jones, L.
Hampton, L.	Pitt of Hampstead, L.	Wynne-Jones, L.

NOT-CONTENTS
Airey of Abingdon, B.	Craigavon, V.	Elliot of Harwood, B.
Alexander of Tunis, E.	Cromartie, E.	Elton, L.
Amherst of Hackney, L.	Cullen of Ashbourne, L.	Falkland, V.
Bellwin, L.	de Clifford, L.	Ferrers, E.
Belstead, L.	De La Warr, E.	Fortescue, E.
Bradford, E.	Denham, L. [Teller.]	Gainford, L.
Cathcart, E.	Drumalbyn, L.	Galloway, E.
Clitheroe, L.	Dulverton, L.	Gibson-Watt, L.
Cockfield, L.	Eccles, V.	Gisborough, L.
Cork and Orrery, E.	Ellenborough, L.	Glasgow, E.

general level of earnings obtained in Great Britain and, if on any such review he concludes that any of the rates have not retained their value, he shall make regulations in conjunction with the Treasury providing for such higher rates as he thinks necessary to restore their value.").

The noble Lord said: I have already spoken to this amendment, I therefore move it formally.

On Question, Whether the said Amendment (No. 17) shall be agreed to?

Their Lordships divided: Contents, 34; Not-Contents, 68.

Gowrie, E.	Lonsdale, E.	Sandford, L.
Greenway, L.	Lucas of Chilworth, L.	Sandys, L. [Teller.]
Gridley, L.	Macleod of Borve, B.	Selkirk, E.
Grimston of Westbury, L.	Mansfield, E.	Sempill, Ly.
Hailsham of Saint Marylebone, L. (L. Chancellor.)	Montgomery of Alamein, V.	Sharples, B.
	Mottistone, L.	Skelmersdale, L.
Hanworth, V.	Mowbray and Stourton, L.	Strathclyde, L.
Home of the Hirsel, L.	Murton of Lindisfarne, L.	Swansea, L.
Hornsby-Smith, B.	Nugent of Guildford, L.	Trenchard, V.
Killearn, L.	Reigate, L.	Vaux of Harrowden, L.
Kimberley, E.	Renton, L.	Vickers, B.
Lauderdale, E.	Rochdale, V.	Vivian, L.
Long, V.	St. Just, L.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 18 and 19 not moved.]

9.44 p.m.

Baroness JEGER moved Amendment No. 20: After Clause 4 insert the following new clause:

"Substitution of sum

. For the amount specified in paragraph 1 of Part II of Schedule 4 to the principal Act there shall be substituted the sum of £95 with effect from 24th November 1980".

The noble Baroness said: I beg to move Amendment No. 20. This proposes that a new clause be introduced into the Bill, and there are two purposes in it. The first is that the maternity grant should be raised to £95, which is roughly the sum that would be needed to make the £25 existing maternity grant, which was brought in in 1969, of equivalent value today. I must say that I myself would much have preferred that we should have been able to start some index-linking of maternity benefit so that from time to time we did not have to alter the sums set put in the Bill, because then we would be able to build into the system a protection for families, and particularly for mothers, who are faced with rising prices. The second effect of this new clause would be to have the higher benefits start in November this year.

It would be ungracious for us not to welcome the changes that have been made in this Bill, in that maternity benefit is now to be non-contributory. I am sure that everyone in the Committee welcomes that. I understand this will mean that about 60,000 mothers every year, who were previously not entitled to benefit, will now be able to receive it. I should like to put one question to the Minister concerned, and to ask whether this shift to the noncontributory benefit will be linked at any stage to the question of a mother's age. I ask that question, because I know that we are all very concerned about the growing number of very young mothers, sometimes girls still at school, who find themselves expecting babies. I want to know whether they will be included as beneficiaries of this non-contributory benefit. It will be very useful to know whether it is to be paid totally regardless of age.

On the question of the date of starting the new benefit, I was rather sorry to see that the Bill does not refer at all to a date; it refers only to an appointed day. But from careful reading of the proceedings in another place, I see that November 1982 has been mentioned as a possible starting date. This is a great disappointment. It is a long time off, and to stick until 1982 at the £25, and the exclusion of these 60,000 other mothers who are at present unprotected, seems to me very seriously to devalue the whole process.

This benefit is of particular importance to the poorest and most disadvantaged mothers. We must all know people who do not much mind one way or the other about £25; but to the unsupported mother, to the very young mother, to the mother whose husband has deserted her, the maternity grant is a very important part of the budget. This deferment for another two years will mean that thousands of babies will be born in the poorest homes in this country, receiving only the £25 benefit which was brought in in 1969.

There has been a great deal of evidence—and I do not propose to weary your Lordships by quoting from the reports of a number of committees of inquiry that we have all worked through about the hazards and deprivations of the infant mortality problem in the poorest families. But there is this clear link, which has not been denied by any sociologist, between poverty and infant mortality and child handicap. All these people who are doing the job know that class 5 families, in the sociologists' jargon, have a higher incidence of handicapped children and of infant mortality. I am not saying that maternity benefit provides the answer to this complicated and very difficult situation, but I believe that anything which eases the financial situation in a hard-pressed family, at a time when there are unavoidable expenses, can do nothing but help them. The fact that this is a benefit which is paid to the mother is also of very great importance.

I hope your Lordships will forgive me if I remind the Committee that the first maternity grants in this country were paid in 1911, only to certain insured people. It was then £1.50, and it stayed at £1.50 until 1920, when it went up to £2. It was 28 years before it went up again. Then in 1948 the maternity grant was increased to £4. One of the reasons why I mentioned earlier that I wished this benefit were indexed is that I do not want the mothers of this country to have to wait another 28 years before the next upgrading. In 1953 it went up to £9. Then in 1969I am glad to say under a Labour Government—it went up to £25. But I regret to say that under succeeding Governments ever since 1969 it has stayed at £25.

I am advised that to restore the grant to the 1911 level of payment we should have to make it something slightly over £100. I am sure it would be a matter of regret to many of your Lordships to have to accept the fact that mothers in 1911 were treated more generously than we are treating the mothers of today. This, surely, is a deviation from the road towards social justice and better conditions, for hitherto there has been at least some Beveridge consensus between us. Therefore on behalf of my noble friends I move this new clause, for the reasons I have stated, all too briefly.

If I may anticipate what may be said in partial reply—that previous Governments have not made any increase since 1969—I would say that during the period of the last Government there were increases and developments in many spheres of social welfare. I am sorry that we did not get around to this one; it was in the Labour Party manifesto, and it would certainly have been at the top of my list had the election turned out differently.

The difficulty now is that we are holding down this benefit, which in fact means reducing it, at a time when, across the whole spectrum of our social services and welfare services, there is a contraction. So what is a virtual cut in this benefit is impinging at the same time on the family, particularly where there are other children. They are having to meet all these other expenses—more expensive school meals—and all the other difficulties with which the poorest families in this country are confronted at the moment.

I do not know why there should be such hesitation about making this upgrading. It seems to me that it would put help where help is most needed. It would put it right at the centre of the family. It would put it where it can most benefit the children of this country and the families that are often in the greatest difficulty. Therefore I hope that your Lordships will feel able to support the new clause. I beg to move.

Lord BANKS

In view of the fact that the Committee has turned down the more modest proposal which I put forward earlier, that the present value of the maternity grant should not be allowed to fall further, I am not too hopeful about the prospects for this amendment. Nevertheless, I should like again to express my support for it and for the increase in the maternity grant which it would provide—an increase in a benefit which, as the noble Baroness has explained, has been allowed to decline in value over the years.

9.54 p.m.

Baroness YOUNG

I have listened with great care to what the noble Baroness, Lady Jeger, has said on this amendment. I accept that the maternity grant of £25 is much less valuable today than it was when it was up-rated to that figure in 1969. The reason for this is that, despite continuing inflation, no Government—neither of the noble Baroness's party nor of my own—since 1969 has felt able to accord priority to increasing the amount of the grant.

I listened with great interest to the history of this matter which the noble Baroness gave to the Committee, It was certainly new to me; I had not seen those figures. Of course, if I noted correctly what she said, that there was no increase in the maternity grant for those who were eligible for it between 1920 and 1948, the period at any rate between 1920 and 1939 was a period during which there was no inflation at all. In fact, I think I am right in saying that prices dropped very slightly in the 1930s; so these long arguments that we have about indexing amounts to keep up with inflation were not relevant to that period, because prices were steady and they did not start to rise until we were suffering from the effects of the War. We are in fact speaking about a completely different world.

However, I am very glad that the noble Baroness recognised that what in fact we are doing is to make a modest improvement in connection with maternity grants by making them non-contributory from 1982. This will mean, we estimate, that there will be 60,000 more maternity grants paid each year, and I should like to confirm that the non-contributory grant will be payable regardless of age. I think that is extremely important. I take the point made by the noble Baroness: One of the groups of people most at risk are schoolgirls who become pregnant, who have not got husbands and who are therefore not eligible for the maternity grant. They are already vulnerable and by enabling them to claim the maternity grant it will be of some help to them, and I hope it will do something to assist in their general wellbeing, quite apart from that of the baby.

We estimate that the additional expenditure will amount to about fl million, £1.2 million when the reduction in supplementary benefit is taken into account. We only felt able to accept this charge for the additional benefit if it could be offset by other administrative economies of the same order, something which I am sure we all understand and feel to be right. Therefore, we reckon that the change to non-contributory benefit will allow the administration of the grant to be centralised. This in turn will enable economies to be achieved because it will become possible to computerise the main operations. The Government are satisfied that the expected economies will be sufficient to offset the additional benefit costs. The administrative changes involved will be possible in 1982 when computer facilities will become available at the child benefit centre in Washington.

Baroness JEGER

If the noble Baroness will allow me, is she saying that payment has to be deferred until 1982 because of administrative reasons or because of financial reasons?

Baroness YOUNG

Both. The introduction of the non-contributory grant will not come in until 1982 and for the reasons that I have given; namely, because it will cost more and because there will be more beneficiaries. Everybody who is currently entitled to it will of course continue to have it. It is those who will benefit when it becomes non-contributory who will start to benefit in 1982, and because we can make the administrative savings by putting this on the computers in the child benefit centre in Washington (and this can only be done by 1982) the savings that we shall make from this will enable us to pay the maternity grant to the estimated extra 60,000 girls and women who will qualify for it.

Turning to the specific Amendment No. 20 now before the Committee, the increase in the non-contributory grant to £95 would cost some £50 million per year extra, and, as the noble Lord, Lord Banks, has made quite clear, as we felt that we could not accept his much more modest amendment, the noble Baroness will not be surprised that we cannot accept her amendment. However, I am glad she feels that we have made a modest improvement in this particular matter of the maternity grant, and it is something which, as the economy improves, we can look at again.

Baroness JEGER

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 [Maternity grant]:

Lord WELLS-PESTELL had given Notice of his intention to move Amendment No. 21: Page 9, line 45, after ("date") insert ("not being later than 24th November 1980").

The noble Lord said: This is an amendment which would bring forward the commencement date from November 1982, as the Government propose, to November 1980. Having heard what the noble Baroness has said, I do not propose to move the amendment.

Clause 5 agreed to.

Clause 6 [Amendments of Supplementary Benefits Act 1976]:

10.3 p.m.

Lord WELLS-PESTELL moved Amendment No. 22: Page 10, line 22, leave out subsection (2).

The noble Lord said: We have reached, If I may say so, another point in the Bill which does cause us a great deal of concern. I refer to our amendment to page 10, line 22, which is to leave out subsection (2). Subsection (2) states: The Supplementary Benefits Commission is hereby abolished".

We view this with some very real concern because if the Social Security Bill abolishes the Supplementary Benefits Commission it will merely leave in its place an advisory committee which would cover the whole field of social security except industrial Injuries.

I think it is worthwhile recalling that the Supplementary Benefits Commission was set up in 1966 to replace the old National Assistance Board, and the then Minister said it was to be a powerhouse of ideas. Whatever criticisms we may have of the Supplementary Benefits Commission, it has certainly been that, and particularly so in recent years. Although its statutory responsibilities were virtually limited to deciding individual benefit claims, from the start it adopted a much wider role, taking a keen interest in the quality of the service to the public, the working conditions of staff, the need to publicise both the legal rights and payments, and the way in which the commission's discretionary powers were used. It is the discretionary powers that I shall want to deal with a little later in the Committee stage.

The publication of the Supplementary Benefits Handbook in 1970 was a major step towards removing the veil of secrecy surrounding the use of discretion. In 1975 the commission's role was extended and it was arranged that it should produce annual reports in which it would be free to comment on policy developments and priorities. The four annual reports it has issued have been universally praised both as major contributions to the discussion of current policy issues and as sources of factual information. On the policy side, the commission drew attention in its first report to the serious problems facing the Supplementary Benefits Scheme, and this led to the setting up of a review of the scheme by a team of DHSS officials. Many of the review team's suggestions were first put forward by the commission; for example, the automatic six-monthly payments for replacement of clothing and a single fuel benefit for those in and out of work.

On the information side, the commission's reports go far beyond the basic function of reporting on the operation of the Supplementary Benefits Scheme. For example, they have been the main source of information about the low take-up of means-tested benefits for the working poor. The Government's recent decision to discontinue publication of the DHSS annual reports on grounds of economy makes the Supplementary Benefits Commission's report more important than ever before. Equally important is the series of supplementary administration papers which the commission has produced on a whole range of topics—for example, exceptional needs payments; training of staff; the cohabitation rule; taking up benefits; proposals for local social security users; consultative groups and a whole host more.

The Social Security Bill proposes—and this is another matter which rather concerns a number of us—to make local benefit officers responsible for decisions on individual cases. There will still be a right of appeal, but neither the Supplementary Benefits Commission, which will no longer exist, nor Ministers, will be answerable for what goes on at the local office level. That is what will happen.

At present the chairman of the Supplementary Benefits Commission has either to justify the decisions made in the commissioner's name, or be prepared to revise them when challenged by MPs and others. In future the Secretary of State will have to say that he cannot interfere with a decision made by an independent benefit officer. I ask noble Lords opposite whether that is really what they want. I cannot think that it is. There will still have to be somebody at the centre to ensure—as the Supplementary Benefits Commission does now—that the law is administered with reasonable consistency. The intention is that a chief benefit officer will do this, but like the chief insurance officer he will work behind closed doors and the guidance he issues to local benefit officers is unlikely to be published, although in our view the Government should be pressed for an assurance that it will be published.

So far as discretionary payments are concerned—and there will still be many of them—each benefit officer will set his own standards. This is quite an important matter as regards social workers. I am thinking not only of local authority social workers, but social workers in a vast number of voluntary organisations—probation officers who deal with people who sometimes have nothing or who are missing out on a number of things. At present—all right—it fits where it touches, but by and large the local DHSS officers, when asked to use their discretion for discretionary payments, are very helpful and very co-operative. I think it is fair to say that social workers, whether voluntary or statutory social workers, would find it extremely difficult to do their job if they did not have that kind of relationship with somebody who can use the discretion—discretion which seems to me to be going. I know that I shall be told that there will still be discretion, but nobody will tell me, I am sure, the extent of that discretion.

I wish to make a few comments about the Social Security Advisory Committee that will replace the Supplementary Benefits Commission. The proposed new advisory committee, however independent, will not have the same influence as the commission for a whole variety of reasons. Being only an advisory body with no responsibility for the decisions made at local level, it will not have the right or the resources to monitor the work of local offices as the Supplementary Benefits Commission does. One of the Supplementary Benefits Commission's biggest assets is a body of high-powered headquarters officials whose job is both to administer the scheme and to advise and inform the commission. The Social Security Advisory Committee—the new body—may have access to the same officials, but the officials will owe allegiance to Ministers only, and not to the Social Security Advisory Committee.

The Supplementary Benefits Commission has an inspectorate which carries out a continuous programme of small-scale inquiries into the various aspects of the day-to-day running of the scheme. The Commission decides on the inspectorate's programme of work and increasingly publishes its findings. If the inspectorate remains in existence at all, it will not be under the control of the Social Security Advisory Committee, which will, therefore, lack one of the Supplementary Benefits Commission's main sources of information.

The new Social Security Advisory Committee will cover the whole social security field and will simply not have time to concern itself with detailed aspects of supplementary benefits, as does the Supplementary Benefits Commission. Its individual members will have to cover a wide range of interests, and as a body it will he less expert in the narrower field of supplementary benefit than is the Supplementary Benefits Commission. It will have only a small staff whose previous experience may not include working on the supplementary benefits side of the department.

Perhaps your Lordships have come to the conclusion that we, on this side of the Committee, want the Supplementary Benefits Commission to remain in existence, with its present staff and responsibility for deciding individual claims. It would lose some of its policy-making functions, but as well as reporting on draft regulations it would continue to issue guidance to local offices on the use of discretion. Its advisory role and its annual report should be extended to cover the whole field of central Government. This sort of thing is badly needed because there is a need for co-ordination, and we believe that it could be better done by the Supplementary Benefits Commission. It should be given the task of reporting annually on the relative living standards of those living at or around supplementary benefit level.

I hope that the Government will not take this lightly. We feel strongly about it. We have discussed this at some length. We believe that it is a matter which must be dealt with very fully. Unless the answer is extremely satisfactory—and I do not think for one moment that it can possibly be (I do not think that anyone is going to say that he or she will accept Amendment No. 22)—I shall feel it necessary to take whatever steps are open to me and my friends on this side of the Committee to try to get agreed Amendment No. 22, which says "leave out subsection (2)". I beg to move.

10.12 p.m.

Lord BANKS

I take rather a different view on this matter from that taken by the noble Lord, Lord Wells-Pestell, though I agree with him on some things. I agree very strongly with him about the value of the work that has been done over the years by the Supplementary Benefits Commission and, indeed, I said so on Second Reading. I share some of his apprehensions about how the new arrangement will work.

However, I accept that it is sensible to have National Insurance, family income supplement, child benefit, and supplementary benefit all dealt with by the one body. Therefore, I welcome the amalgamation of the Supplementary Benefits Commission and the National Insurance Advisory Committee. I believe that this new body has been welcomed by the Supplementary Benefits Commission itself. It is because I welcome the joining of these two together and the covering of the whole of the payments field by the one body, that I am not able to support this amendment.

I am never tired of telling your Lordships that we on these Benches would like to see a tax credit scheme; that is, a scheme which brings all the cash benefits into one scheme united with taxation. It seems logical to say that if we are to have that on the one side, we should have a joint body on the other side which reviews, monitors and advises on how all these benefits should inter-react. But the Supplementary Benefits Commission had both an administrative as well as an advisory role, and I regret that the new committee is not to have any administrative role. This may detract from some of its authority. No doubt I shall be told that this would be difficult if the Minister is to be responsible; that we should be going back to a divided and perhaps not all too clear authority, and that that must be avoided. Perhaps the Government may find some administrative role for the committee under the general supervision of the Minister. But it has to be an important and powerful body monitoring and reporting on the work of the whole system. In so far as it does that, of course it has to be an independent body.

I am not too happy about the situation that the noble Lord, Lord Wells-Pestell, described so far as the relationship between the Minister and the local benefit officer is concerned. I hope that on that point the noble Baroness, or whoever is to reply, will be able to give us a little more explanation and possibly reassurance.

10.17 p.m.

Lord CULLEN of ASHBOURNE

It would, I suggest, be convenient to discuss with the amendment to Clause 6 the amendments to lines 6 and 9 on page 32; that is, Amendments Nos. 23 and 24. The Supplementary Benefits Commission have three functions. The first of these is the executive one. The commission are responsible for determining individual claims to benefit and for the use of the discretion conferred by the present legal structure. This discretion is in fact exercised by local officers acting in the name of the commission on the basis of guidance issued by them. The major thrust of the reform of the supplementary benefits scheme set out in this Bill is to change that pattern: that is, replace discretionary powers with published rights which will have statutory authority; and replace officers acting as agents with officers who are, subject to clear right of appeal, independent determining authorities. Clearly, the commission will have no place in such a system of adjudication.

I might say here, for the sake of completeness, that the commission also have a number of other minor executive responsibilities, including the provision of temporary board and lodging for people without a settled way of living, and the provision of accommodation for a declining number of Polish people under the 1947 Polish Resettlement Act.

The Bill provides for the transfer of these minor functions to the Secretary of State.

The commission's second executive function also relates to discretion. I refer to their policy-making role in drawing up rules for the guidance of local officers in the use of their discretionary powers. Both here and in another place tributes have been paid to the way in which the commission have over the years done their work. I fully endorse these tributes. It is no criticism of the way the commission have exercised their policy-making role to ask whether such a body should really have had this role in the first place. The Government believe—and the commission made the point themselves in a statement to the Press in November last year—that issues of policy which affect the welfare of some 5 million people must really be decided by Ministers who are accountable to Parliament.

That leaves the commission's third function, which is to give advice. Again it is no criticism of the way the commission have done this to say we believe there will be a major advantage in having a single advisory body whose remit covers all the major benefits. I was glad that the noble Lord, Lord Banks, took the same view. Once again the commission themselves have endorsed this view. When the Bill was published they said: We see advantages also in the Commission's advisory role being taken over by the proposed Social Security Advisory Committee, which we see as an important new body. Unlike the present bodies—ourselves and the National Insurance Advisory Committee—the new committee will be able to consider all the main social security benefits and this will complete the process of integration begun in 1966". The Government believe there is an overwhelming case for the changes now to be made, and I urge the Committee to reject the amendment.

CONTENTS
Blease, L.	Janner, L.	Ross of Marnock, L.
Boston of Faversham, L.	Jeger, B.	Stewart of Alvechurch, B.
Cledwyn of Penrhos, L.	Kaldor, L.	Stewart of Fulham, L.
David, B. [Teller.]	Llewelyn-Davies of Hastoe, B. [Teller.]	Stone, L.
Davies of Leek, L.		Underhill, L.
Elwyn-Jones, L.	Peart, L.	Wells-Pestell, L.
Howie of Troon, L.	Pitt of Hampstead, L.	Wynne-Jones, L.
Irving of Dartford, L.	Ponsonby of Shulbrede, L.

Lord WELLS-PESTELL

I do not know whether the Minister is in a position to answer a question which is not important now because my mind is quite unchanged in regard to what should be done. I am concerned that nothing has been said so far—this is not a criticism as to what rights people in authority (Members of your Lordships' House, Members of the House of Commons and others) have got if they want to take up a complaint on behalf of, for example, a constituent. With the Supplementary Benefits Commission today, they can do so in no uncertain manner, but as far as I can see this will be a body so protected that one will not be able to question a decision being made in relation to an individual.

Certainly he will be able to appeal-1 accept that—but tribunals are not always right. He can take the matter higher if there is a point of law involved, but judges are not always right either. A good deal of social work is done by Members of the House of Commons, by Members of your Lordships' House and by others, and it seems to me that we will be excluded. I should like to know between now and Report, if the noble Lord will write to me, whether such activities will be prevented altogether or whether people like MPs, who have certain responsibilities to see that their constitutents are dealt with properly, will be able to ensure that.

Lord CULLEN of ASHBOURNE

The noble Lord, Lord Wells-Pestell, has made an extremely important point and I will most certainly write to him. I could give an answer now, but I am sure I will give a very much better one by letter.

10.23 p.m.

On Question, Whether the said amendment (No. 22) shall be agreed to?

Their Lordships divided: Contents, 22; Not-Contents, 67.

NOT-CONTENTS
Airey of Abingdon, B.	Faithfull, B.	Macleod of Borve, B.
Alexander of Tunis, E.	Falkland, V.	Mansfield, E.
Amherst of Hackney, L.	Ferrers, E.	Monson, L.
Banks, L.	Fortescue, E.	Montgomery of Alamein, V.
Bellwin, L.	Gainford, L.	Mottistone, L.
Belstead, L.	Galloway, E.	Mowbray and Stourton, L.
Boyd of Merton, V.	Gibson-Watt, L.	Murton of Lindisfarne, L.
Bradford, E.	Gisborough, L.	Reigate, L.
Cathcart, E.	Glasgow, E.	Renton, L.
Clitheroe, L.	Gowrie, E.	Rochdale, V.
Cockfield, L.	Greenway, L.	Rochester, L.
Cork and Orrery, E.	Grimston of Westbury, L.	St. Just, L.
Craigavon, V.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Sandys, L. [Teller.]
Cromartie, E.		Selkirk, E.
Cullen of Ashbourne, L.	Hampton, L.	Sharples, B.
de Clifford, L.	Hanworth, V.	Skelmersdale, L.
De La Warr, E.	Home of the Hirsel, L.	Swansea, L.
Denham, L. [Teller.]	Hornsby-Smith, B.	Vaux of Harrowden, L.
Drumalbyn, L.	Killearn, L.	Vickers, B.
Dulverton, L.	Kimberley, E.	Vivian, L.
Eccles, V.	Long, V.	Winstanley, L.
Elliot of Harwood, B.	Lonsdale, E.	Young, B.
Elton, L.	Mackie of Benshie, L.

Resolved in the negative, and amendment disagreed to accordingly.

10.31 p.m.

Baroness YOUNG moved Amendment No. 22A:

Page 10, line 33, at end insert— ("(4) Until the coming into force of subsection (1) of this section and Part I of Schedule 2 to this Act, section 34 of the said Act of 1976 (which provides for the interpretation of that Act) shall have effect as if after subsection (2) of that section there were inserted the following subsection— (3) In determining for the purposes of this Act whether a person (in this subsection referred to as "the provider") has to provide for, or for the requirements of, another person to or in respect of whom any payments are made otherwise than by the provider, the other person shall not by reason only of the payments or the amount of them be treated as a person who is, or whose requirements are, provided for otherwise than by the provider.".").

The noble Baroness said: I beg to move the amendment standing in my name. This amendment will secure the same result, from the date of Royal Assent to the Bill, in relation to the present paragraph 3(2) of Schedule 1 to the Supplementary Benefits Act, as the proposed paragraph substituted by the Bill will have from November when the revised scheme will be introduced. It is right to proceed in this way rather than through bringing the substituted paragraph into effect on Royal Assent, as it would not be practicable to bring that provision into force in isolation from other provisions which will come into force in November. The need for us to move now on this particular provision arises out of a recent High Court decision.

The amendment and the issues behind it, have a complicated history. As a prelude, perhaps I should remind the Committee that the starting point for the purposes of determining entitlement to supplementary benefit is that the requirements and resources of a family unit are aggregated. The effect of paragraph 3 of the present Schedule 1 to the 1976 Act is to require aggregation of the requirements and resources of the claimant, his wife, and any person under 16 who is a member of the same household and for whom the claimant, or his wife, in the language of the Act, "has to provide".

Before 1976, and a case to which I shall refer shortly, it was the policy of the Supplementary Benefits Commission to disregard any excess of a child's own resources over its requirements in the calculation of benefit payable to the family. The one exception was maintenance payments paid directly to the child, which were taken fully into account as a resource of the family unit.

Following a Court of Appeal decision in 1976 on the treatment of damages, the Supplementary Benefits Commission changed its policy and decided that, where a maintenance payment made to a child exceeded the child's requirements, the child's requirements and resources should not be aggregated with those of the parent. The net result was that the maintenance payment was not included as a resource of the family. Relatively few cases were affected to begin with, and there was no evidence of abuse.

However, since 1976 there has been a growing awareness among those advising claimants that the Supplementary Benefits Commission's policy in fact permits the parent to get more benefit—in some cases substantially more—if the court could be persuaded to make the bulk of any maintenance order payable to the child rather than the parent, either for the parent's maintenance, or that of the child. This led the Supplementary Benefits Commission (with the Government's full support) to revert in 1979 to the previous practice of aggregating the child's requirements and resources with those of the rest of the family. Now, however, there has been a High Court judgment to the effect that, under the Supplementary Benefits Act 1976—that is, as it stands at present, unamended by this Bill—where maintenance payments exceed the child's requirements, the parent no longer "has to provide] for the child who will not then be counted as part of the family for the purpose of calculating entitlement to supplementary benefit. There are other cases pending, and the purpose of the amendment is to clarify the issue beyond doubt.

The Government are convinced that the family should be treated as a single unit for the purposes of supplementary benefit, and in particular that maintenance payments to, or for, a child should be taken fully into account when assessing that family's entitlement to supplementary benefit. It is for this reason that we are seeking to validate the commission's practice in the present Bill; and it is because the High Court has cast doubt upon that practice under the present law that we seek to correct the position, by way of this amendment, to cover the period up to November.

The principle is seen as fundamental. Payment of maintenance enables the parent having custody of the child to maintain the child and discharge the duty of custody. If maintenance payments to or for a child, and by logical corollary child benefit payable in respect of that child, were to be regarded as the child's resource and the child then artificially taken out of the supplementary benefit assessment unit, the consequence would be the virtual emancipation of the father from any liability to maintain his child for the purposes of the supplementary benefit legislation. In addition, although the recent High Court judgment would make it theoretically possible for the commission, through discretionary powers, to control artificial manipulation of court orders—for example, where a maintenance order was loaded in favour of a child instead of the mother (for example, for the mother's maintenance)—it would in practice be administratively impracticable to oversee court orders in this way.

It is intended that regulations under the new Act should put it beyond doubt that a child, or a young person aged 16 to 18 still at school who will be excluded from entitlement to benefit in his own right under Section 6(2) of the Act as to be amended, will in all cases be subject to aggregation. They will in fact normally fall to be treated as a dependant, not only for the purposes of supplementary benefit but also of child benefit. It is because they are dependants that it is thought right that they should be subject to aggregation—that is, included in the assessment unit—and that maintenance payments to or for them should be taken fully into account.

Finally, there is another important reason why we should make this change sooner rather than later. That is that it makes for sensible administration of the supplementary benefit scheme if the staff operating it are enabled, by this amendment, to continue the commission's practice of taking these maintenance payments into account. If the amendment is not made, the situation would be that the staff, at a time when they were more than fully occupied with preparing for the new scheme, would have to learn a completely new set of rules, and to apply them for an interim period of a few months, only to revert to current practice when the new scheme comes into effect in November. For this and the other reasons I have advanced, I hope your Lordships will agree that the amendment should be made. I beg to move.

On Question, amendment agreed to.

Clause 6, as amended, agreed to.

Schedule 2 [Amendments of Supplementary Benefits Act 1976]:

[Amendments Nos. 23 and 24 not moved]

Lord WELLS-PESTELL

I fear that Amendment No. 25 will be a very long one.

Baroness YOUNG

My understanding is that it is really for the convenience of the Committee that we sit until roughly ten minutes to 11.

10.38 p.m.

Lord WELLS-PESTELL moved Amendment No. 25:

Page 32, line 31, at end insert— ("(d) after subsection (2) there shall be inserted the following subsection— (3) Any instruction or guidance issued to benefit officers regarding the exercise of their powers under this section in a class or classes of cases shall be published in such manner as may be appropriate."").

The noble Lord said: In moving Amendment No. 25 I should also like to speak to Amendment No. 52. The Bill proposes that decisions on entitlement to benefit should be made by benefit officers, normally the same local officers who make such decisions on behalf of the Supplementary Benefits Commission at present. For many years there has been criticism of the fact that these officers operate under the instructions issued by the SBC, the A Code or other codes, which are not published. These instructions cover not only the interpretation of the legal provisions of the Supplementary Benefits Act but also the policies adopted by the Supplementary Benefits Commission under its discretionary powers. Copies of the A Code circulate clandestinely among welfare rights groups, but they are invariably out of date. Publication of the Supplementary Benefits Handbook in 1970 made public for the first time many of the SBC's policies, but the handbook is a very slim volume compared with the massive two-volume A Code.

The White Paper published in November (Cmnd. 7773) said: The Bill lays down the basic principles for entitlement to supplementary benefit. It enables the Secretary of State to lay down the detailed rules, for example, on the calculation of requirements and resources in regulations. Thus the rules governing entitlement to supplementary benefit will be published, and published in full".

In future, therefore, most of the policy guidelines issued by the SBC, which do not have the force of law and do not confer legal rights on claimants, will be replaced by published regulations. Those regulations seem likely to be extremely complex but at least they will be open and published. It is becoming increasingly clear that the rules of the scheme will not, after all, be published in full.

In the Second Reading debate on 20th December, the right honourable Mr. Stanley Orme asked: … will the new regulations contain a new code similar to the A Code covering administrative matters and the remaining discretion? Will it be published? Will there be a chief benefits officer similar to the chief insurance officer? The chief insurance officer issues guidance to his local officers which is not published. Will there be a similar guide to the local SBC officers and will it be published?

That comes from Hansard, columns 923 and 924.

These questions were answered in a letter dated 15th January from the Secretary of State to my right honourable friend. The Secretary of State admitted that there would be a chief supplementary benefits officer, although neither the White Paper nor the Bill refers to such a person. He wrote: The CSBO's function will be to guide benefits officers. It is virtually certain that he will issue printed guidance. Such guidance would not be published …".

It is far from clear on what authority the Secretary of State can say that the CSBO guidance will not be published. The CSBO, like the local benefits officers, will have independent statutory authority. If he chooses to publish any guidance that he issues to the local officers, surely he has the right to do so. It would be quite improper for the Secretary of State to prevent him. Since the CSBO has not yet been appointed, how can the Secretary of State be so certain that he will keep his guidance secret?

Perhaps Ministers are assuming that because the chief insurance officer's guide is not published there will be no pressure to publish the CSBO guide. But there are major differences. First, even under the new arrangements, there will be far more discretion in the supplementary benefit scheme than on the National Insurance side. The Under-Secretary of State, Mrs. Chalker, has tried to give the impression that the guidance will be purely procedural; but is this so? The Secretary of State's letter of 15th January made it clear that procedural guidance to benefits officers would be given by the department through something like the present A Code. The CSBO's job will be a different one, presumably to explain the regulations to local officers and to ensure that they are exercising their powers, both statutory and discretionary, in a reasonable, considered manner. Guidance of that sort clearly ought to be made public. If it is not, how can Ministers claim that the rules of the scheme will be published in full?

There are three examples from the Secretary of State's letter on 11th February to which I should like to refer. After explaining the factors that local officers will take into account in deciding whether a claimant's rent is "reasonable", he says: Guidance from headquarters will provide for consistency of treatment between benefit officers".

Guidance from headquarters can only mean guidance from the CSBO, which, we are told, will not be published. The rules for deciding whether a rent is reasonable or not will be a closely guarded secret. I am bound to ask, why? When explaining how single payments for items of household equipment will be made, the letter says that, in addition to the items listed in the regulations, there will be, … a general provision for other items in exceptional cases".

It is quite certain that local benefit officers all over the country are not going to be left to make their own decisions about what can be paid for under this general provision without any guidance from headquarters. But who is going to provide that guidance?—certainly not the Secretary of State, as I understand the position. Not the SBC, because it will no longer be in existence. It can, in my submission, only be the CSBO, and his guidance will not be published. I think that we ought to be told why.

Thirdly, in the annex to Notes on Clauses we read that a boarder's requirements will include the charge actually paid for board and lodging, unless the benefit officer considers it unreasonably high; and … there will be regional and local limits determining what is regarded as reasonable".

When my right honourable friend Stanley Orme asked who would lay down these limits, under what powers and whether they would be published, the answer he received from the Secretary of State was, to say the least, cryptic: The details here are the subject of consultation".

Perhaps this time it is not the chief benefit officer but a regional benefit officer who will make the rules. But there will still be a need for consistency between one region and another, and only the CSBO will be in a position to ensure that. Whether the rules are national, regional or local, however, we believe that they should be published.

The extent of discretion is not the only thing that distinguishes supplementary benefit from National Insurance benefits. We are told that, as the new scheme develops, the interpretation of the Act and the regulations will be a matter for the social security commissioners, and that some at least of their decisions will be published, just as the National Insurance commissioners' decisions are published, so that in due course there will be a body of case law for benefit officers to follow. But all this is in the future. When the new supplementary benefit arrangements start next November, the benefit officers will have hardly any case law to guide them. They will have to look elsewhere for guidance. Thus, initially at least, the CSBO will have a far more important role than his counterpart on the National Insurance side. All the more important, then, that his guidance should be open and published. My concern—as is that of many of my friends—is, what is going to happen? Are these documents going to be published, and are they going to be available? I beg to move.

Lord SANDYS

I have listened with interest to what the noble Lord, Lord Wells-Pestell, has said on this amendment. I hope that my remarks will reassure him. I shall be quoting from what my honourable friend the Under-Secretary of State had to say in another place, which I hope will help me in that regard.

The new supplementary benefit scheme represents a significant departure from the current scheme, in terms of the degree of openness which will be achieved by publishing all the policies of the reformed scheme in the Act and the regulations made under it. No longer will the rules governing the scheme be shrouded in secrecy. Perhaps even more importantly, because claimants and their advisers will have access to all the rules governing entitlement, much of the confusion of the current arrangements will be eliminated. This confusion occurs at present because many of the rules of the scheme are based on the Supplementary Benefit Commission's discretionary policies, which are often promulgated in the form of secret instructions to staff. Those instructions were referred to by the noble Lord, Lord Wells-Pestell, under current arrangement. To add to the confusion, other parts of the rules are readily available in the form of the Supplementary Benefit Commission's Handbook, leaflets, and so on.

For the future, changes in policy will require amendment of the regulations and hence will not be made without the approval of Parliament. As the Supplementary Benefits Commission themselves have said, the proper forum for debate on all the rules affecting supplementary benefit claimants is Parliament". As the scheme gets under way, interpretation of the provisions of the Act and regulations will be a matter for the commissioners and, as noble Lords know, leading decisions of the commissioners are published. All the provisions which affect entitlement to supplementary benefit and are relevant to the calculation of benefit will thus be published.

Of course we recognise that claimants will seldom want to wade through the Act and regulations, and that is why we are publishing a simplified and expanded version of the Supplementary Benefits Handbook to help them. But the point is that everyone will have access to all the rules about entitlement if they so wish. We have always envisaged that there will still be a need for purely procedural guidance to help social security offices to administer the scheme. It is not the practice in Government departments, or indeed in any large organisation, to publish this sort of guidance and we do not envisage the publication of procedural guidance to local officers. As I have said, all the policies on entitlement to benefit will be in the regulations and handbook, and the procedural guidance to staff will not be relevant. This applies also with any guidance issued by the chief supplementary benefits officer. On the grounds that publication of guidance is unnecessary and would also be costly, I ask the Committee to reject the amendments.

In regard to what my honourable friend Mrs. Chalker said in another place, in rather more general terms, about the publication of details about the scheme as a whole, I think it is relevant to quote from the Official Report, Standing Committee E, 14th February 1980, column 627. My honourable friend said this: Leaflets will be available to claimants and they will not have to delve into a great tome or a supplementary benefits handbook. We shall publish a supplementary benefits handbook which will give much more detailed guidance, but the leaflet given to claimants might not be read, let alone understood, if it went into some of the detail which the right honourable gentleman suggests". Then, a little further on, in reply to the honourable Member for Birkenhead, my honourable friend the Under-Secretary of State said this—I think it is relevant here, and I hope I have the attention of the noble Lord, because it is an undertaking by the Government. Her words were these: I think the honourable Member knows full well that we shall be as helpful as we can be in those leaflets. One thing I did not want him to assume from my remarks was that every mortal detail could be put into a leaflet and handed out to every claimant. It is a question of balance". Then she went on: I give him my assurance that I shall see the draft of what is to go into those leaflets, and we shall seek to be as helpful as possible to claimants". I hope those remarks will help to reassure the noble Lord; and I ask him to consider very carefully what we have said.

Lord WELLS-PESTELL

I am grateful to the noble Lord, Lord Sandys, for what he has said. He will understand me, without being misunderstood, if I say that by merely listening to him I have not been able to absorb it in the way I should like to do. I should like to read through what he has said tomorrow.

If I understood him correctly, certain publications are going to be available, but there are to be others available for benefit officers which presumably nobody outside the office is going to see. I do not like that. I do not know whether the Secretary of State will have powers to see them. This is going to be a body which is not going to be responsible to Ministers or to the Secretary of State. I still do not know to whom it is going to be responsible. If I am told "to the new Social Security Advisory Committee", as I understand the situation, they are not going to meet very often. So, as far as I can tell—I may be quite wrong about this—they will be a group which is responsible to nobody at all. There could easily be, as there are today, documents printed and going around, giving instructions as to what they can and cannot do and what they must and must not do, which nobody at all seems to know anything about. The A Code was a case in point, until somebody got hold of a copy.

I do not want to be difficult about this, but I want to be absolutely certain that they will be responsible to somebody, and that some very responsible person will also be responsible for the instructions they issue to local benefit officers. But I should like to read the report of what the noble Lord has said, because it was in detail, and, as he knows only too well, I always have a remedy, which is to come back at Report stage. Meanwhile, I am very grateful to him. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness YOUNG

It is five to eleven, and I think it would be the wish of the Committee that the House should now resume.

House resumed.