SOCIAL SECURITY No. (2) BILL

HL Deb 01 July 1980 vol 411 cc253-306

4.13 p.m.

Consideration on Report resumed.

Lord WELLS-PESTELL moved Amendment No. 3: age 2, line 20, at end insert— (" ( ) In subsection (1) of this section "the increase required by that subsection in respect of the sum "means such increase as the Secretary of State, at the time of laying the draft uprating order before Parliament, thinks necessary to restore the value of the sum in question.").

The noble Lord said: I beg to move Amendment No. 3. The object of this amendment is to make it clear that, for the purpose of this year's up-rating of benefits, the Secretary of State must estimate the likely increase in prices at the time when he lays the up-rating order before Parliament. The estimate of 16.5 per cent. was made at the time of the Budget and the Government clearly intend, from all that we have heard from them, to stick to it however implausible it may seem by the time the up-rating order is made.

I wish to call your Lordships' attention to Section 125(3) of the Social Security Act 1975 which provides that if, on a review of the benefit rates, the Secretary of State concludes that they have not retained their value he shall: …prepare and lay before each House of Parliament the draft of an up-rating order increasing those sums at least to such extent as he thinks necessary to restore their value". However, Clause 125(1) of the Social Security Act 1975 says: The Secretary of State shall in the tax year 1975–76 and each subsequent tax year review the sums specified in"— and it then goes on to say which parts of the Act— for the purpose of determining whether those sums have retained their value in relation to the general level of earnings or prices obtaining in Great Britain".

It is not entirely clear whether that means to such extent as he thinks necessary at the time of the review, or to such extent as he thinks necessary at the time of laying the draft order. In most years it would have made, I confess, very little difference, if any. This year, however, it makes a tremendous difference because it is becoming increasingly clear that the advice that the Secretary of State received at the time of the review which was before the Budget, was wrong, and that the rate of inflation—as I have already said many times—for the 12½month period to 24th November next, will be considerably more than 16.5 per cent. It is important, therefore, that when he comes to lay the draft order he should then make a fresh estimate of the probable increase in prices up to November and that the up-rating should he based on that new estimate and not on the out-of-date estimate announced at the time of the Budget.

I am not unmindful that this is likely to cause administrative difficulties, but I suggest that if the will is there, those difficulties can be overcome even if it means paying arrears of benefits some time after the up-rating date. The alternative of leaving the up-rating percentage at 16.5 per cent. is plainly unjust, but I think that it is doubly so when the 16.5 per cent. is further reduced by 5 per cent. cuts in respect of certain benefits. I hope that the Government will feel that this amendment is reasonable. We think that it is reasonable and that it is necessary for this course of action to be taken. I beg to move.

Baroness YOUNG

My Lords, the Government believe that, in fact, this amendment is unnecessary. The noble Lord, Lord Wells-Pestell, referred to the provisions of Section 125(3) of the Social Security Act 1975 which mean that when my right honourable friend the Secretary of State for Social Services lays a draft up-rating order, following upon a review, setting out the new benefit rates for the approval of both Houses of Parliament, he has to satisfy himself that the order increases the existing rates at least to such an extent as is necessary to restore their value in relation to the general level of prices—subject, of course, to the abatement of up to 5 per cent. in the increase of certain benefits tinder the provisions of this Bill.

These provisions to which the noble Lord has drawn attention and which I have confirmed, apply to benefits generally, in all years, whereas this amendment would apply only to benefits which are to be abated under this Bill and would appy only this one year, and in any subsequent year in which the provisions of Clause 1 of the Bill were used again. It would therefore, it seems to the Government, be entirely inappropriate to add the partial provision in this amendment to the comprehensive provision that has already been made. I can understand that the noble Lord, Lord Wells-Pestell, and his colleagues wish to clarify the position and I hope that now that the position has been made clear, the noble Lord will feel able to withdraw his amendment.

The noble Lord asked specifically about the estimate of 16.5 per cent. for price increases from November 1979 to November 1980, on which are based the proposed rates of benefit from November 1980 which were announced last March. The fact is that the proposed increases in pensions and other social security benefits from November this year are based on an estimate of a likely rise in prices of 16.5 per cent. over the period between the November 1979 up-rating and November 1980. This remains our estimate. With that explanation, I hope that the noble Lord will feel able to withdraw his amendment.

Lord UNDERHILL

My Lords, the noble Baroness has given her explanation, but it still does not meet the point that there will be this shortfall. When the Government took their decisions there could be no argument that this proposal was an economic necessity—I am not talking now about the 5 per cent. abatement. Nor could it be said that it was done in order to keep down public borrowing requirements. The fact is that the words here are: to restore the value of the sum in question", and despite all the arguments which the noble Baroness has put forward, the fact is that the value of the sum in question will not be restored in November. The point of the amendment is to endeavour to put that position right.

Baroness YOUNG

My Lords, by leave of the House, I think there is confusion here on the part of the noble Lord, Lord Underhill. There are two matters at hand and this particular amendment is not concerned with the shortfall. This is concerned with the order setting out the new benefit rates, which have to be approved by both Houses of Parliament, in which the Secretary of State has to take into account the movement of prices from year to year. Whatever that figure is— and the figure that has been determined for this year is 16.5 per cent., which has to be approved—this would be abated by the 5 per cent.

The question of a shortfall is a separate issue and the answer which I gave the noble Lord, Lord Banks, makes it perfectly clear that there is not, in fact, a legal obligation on that particular aspect of it, although, of course, there is a legal obligation on the aspect of the up-rating, which is the part of it which is concerned with keeping it in line with the movement of prices: it is the aspect which is written into the 1975 Act, to which the noble Lord, Lord Wells-Pestell, referred and which I have confirmed. It is because that part is written into the Act that we believe this amendment would be unnecessary, for it would apply only to Clause 1 of this Bill and not to benefits generally. I do not think that that can be the wish of noble Lords opposite, because it would be a narrowing of the interpretation rather than the much wider one which is in present legislation.

On Question, amendment negatived.

4.23 p.m.

Lord WALLACE of COSLANY moved Amendment No. 4: age 2, line 41, leave out subsection (4).

The noble Lord said: My Lords, this amendment would prevent the Government from repeating the 5 per cent. cuts in 1981 and 1982. The same amendment was debated at Committee stage on 16th June at columns 907 to 910 of the Official Report, when the noble Baroness, Lady Young, was asked for an assurance that no further cuts would be made once the benefits had been brought into tax. She not only failed to give such an assurance, but she ignored the point entirely in her reply.

It will be recalled that my noble friend Lord Wells-Pestell withdrew his amendment at the Committee stage in order to study the reply of the noble Baroness. We are not satisfied with the statement that the whole question will be considered in the light of circumstances at the time, and to say that it is essential and imperative that the Government have powers to put through proposals for a future abatement should necessity arise, serves only to indicate that the Government have not ruled out further abatements. The noble Baroness has said that the proposed abatement of 5 per cent. on the disabled and others was rough justice, and she has repeated that today. It is downright injustice, and the purpose of this amendment is to prevent this regrettable situation from being continued.

There are rumours of further drastic measures being taken by the Government to make more severe cuts in expenditure. Whether or not that is true, in this amendment we want to ensure that no further burden is borne by those whose circumstances do not warrant even the present 5 per cent. cut; if burdens have to be carried, let those who are fit, able and financially capable take them, and not the sick and the disabled. I beg to move.

Baroness YOUNG

My Lords, I have listened with great care to what the noble Lord, Lord Wallace of Coslany, has said in moving this amendment, and I must apologise to the House if I did not answer the questions to his satisfaction on Committee. I must clearly try again this time round. As, indeed, has been explained, this same amendment was discussed in Committee. The 5 per cent. abatement in 1980 is an integral part of the Government's overall strategy to achieve savings in public expenditure. It is essential that the Government have the power to put to Parliament proposals for a future abatement should the necessity arise. But I should like to emphasise yet again that the Government have at present no intention of repeating the abatement in either 1981 or 1982.

The noble Lord, Lord Wells-Pestell, asked in the similar debate that we had during the Committee proceedings why the Government need power to abate the benefits in November 1982 when their intention, which we have repeated today, is to bring these benefits into taxation in April 1982. As noble Lords will know, the Government intend to make unemployment benefit and supplementary benefit for the unemployed taxable in April 1982. The employer's statutory sick pay scheme would bring a large proportion of payments made during sickness into taxation at about the same time. We intend to bring other benefit payments into taxation as soon as possible thereafter. However, it may not be possible to do this by November 1982. Flexibility is therefore needed so that the Government can decide, in the light of the tax position and of the economic circumstances at that time, whether the abatement should be repeated in 1982. As I have already said, it is not our intention to make further abatement once the benefits become taxable, but we must retain the power to do so should the economic circumstances demand it.

The noble Lord, Lord Wallace, may find this a very unsatisfactory reply, but I think he would accept—as, indeed, any prudent Government would accept—that when putting legislation like this on to the statute book, they have to make provisions so that, should difficult circumstances arise, they could meet them. Of course, if they do not consider these circumstances in a statute at this point, if the difficult circumstances do arise they then have to move other legislation to meet them. This happened during the Government of the noble Lord, and indeed, it has happened in other Governments. In this particular case we believe that when we are having a debate upon this Bill it is right to include in it measures which we do not expect to have to use, but which at least would be there should the circumstances demand it.

I should like to repeat one further important point about subsection (4) which I made when we were discussing an earlier amendment, but which I think is worth emphasis again. It is that any order made under the subsection would be subject to Affirmative Resolution. Thus, if the Government decide that it is necessary to repeat the abatement, noble Lords will have an opportunity to debate the decision when the order is laid. I must emphasise this point because I believe that it is a most important safeguard. Further abatements cannot be made under this Bill without the prior approval of Parliament. Therefore, the position is that we do not expect to have to use this power. If we do have to use it, it would be contained in an order which would then have to be debated.

We hope that, with those assurances, the noble Lord, Lord Wallace, will at any rate feel that I have given him an answer to his question. But it is an important point. It is one of the provisions in the Bill which we regard as a fall-back position should economic necessity make it necessary to use it. However, as I have indicated, it is not a provision which we expect to have to use at present.

Lord WELLS-PESTELL

My Lords, I hope that the noble Baroness the Minister will tomorrow read carefully what she has said. It is a pretty disgraceful statement to say that while it is not the Government's intention to make any further cuts in three years' time they must nevertheless have provision in the Social Security (No. 2) Bill to enable them to do so if they want to. Let me remind the Government what they are doing. They are cutting the benefits, as I have said time and time again, of people who can least afford such cuts. For the next two or three years they are not going to get whatever is the accepted increase in prices; they are going to get 5 per cent. a year less.

I do not think we can overstress the fact that what the Government are doing is seeking to reduce certain benefits by 15 per cent. without giving an assurance that they will make up these cuts in the future when they are able to do so. Certainly they ought to give an undertaking that they will make good these

cuts on the benefits becoming taxable. It really is deplorable that the Government should take the line they are taking. I would say myself that it is entirely contrary to Section 125(1) of the Social Security Act 1975 where it lays upon the Secretary of State the duty … of determining whether those sums have retained their value in relation to the general level of earnings or prices obtaining in Great Britain". There is that duty imposed upon the Secretary of State. It is a duty that he is not carrying out. I question whether it is legal to do what he is doing. Perhaps one of these days we may be able to test that in another place.

Baroness YOUNG

My Lords, with the leave of the House, I should like to correct one point. We are not making cuts of 15 per cent. As I have indicated, but it is an important point and I should like to emphasise it again, under Clause 1 the up-rating is 5 per cent. less for those to whom Clause I applies. The abatement cannot be applied in 1981 or in 1982 without an order being laid. It is therefore not correct to say that the abatement is 15 per cent.; it is 5 per cent. That is an important matter of fact.

4.34 p.m.

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

Their Lordships divided: Contents, 84; Not-Contents, 103.

CONTENTS
Airedale, L.	Davies of Penrhys, L.	Lloyd of Hampstead, L.
Ardwick, L.	Diamond, L.	Lloyd of Kilgerran, L.
Aylestone, L.	Elwyn-Jones, L.	Lockwood, B.
Bacon, B.	Evans of Claughton, L.	Lovell-Davis, L.
Balogh, L.	Fisher of Rednal, B.	McNair, L.
Banks, L.	Gaitskell, B.	Maelor, L.
Beswick, L.	Gardiner, L.	Masham of Ilton, B.
Birk, B.	Gladwyn, L.	Milford, L.
Blease, L.[Teller.]	Glenamara, L.	Ogmore, L.
Blyton, L.	Gordon-Walker, L.	Oram, L.
Boston of Faversham, L.	Goronwy-Roberts, L.	Parry, L.
Bowden, L.	Gregson, L.	Peart, L.
Brockway, L.	Hale, L.	Phillips, B.
Bruce of Donington, L.	Henderson, L.	Pitt of Hampstead, L.
Burton of Coventry, B.	Houghton of Sowerby, L.	Ponsonby of Shulbrede, L. [Teller.]
Caradon, L.	Janner, L.
Chitnis, L.	Kaldor, L.	Porritt, L.
Cledwyn of Penrhos, L.	Kilmarnock, L.	Rhodes, L.
Collison, L.	Leatherland, L.	Ritchie-Calder, L.
Crowther-Hunt, L.	Lee of Newton, L.	Ross of Marnock, L.
Darling of Hillsborough L.	Leonard, L.	Sainsbury, L.
Davies of Leek, L.	Llewelyn-Davies of Hastoe, B.	Seear, B.
Segal, L.	Strauss, L.	Wells-Pestell, L.
Shinwell, L.	Taylor of Mansfield, L.	White, B.
Simon, V.	Underhill, L.	Willis, L.
Stamp, L.	Wallace of Coslany, L.	Wilson of Radcliffe, L.
Stedman, B.	Walston, L.	Winstanley, L.
Stone, L.	Wedderburn of Charlton, L.	Wynne-Jones, L.
Strabolgi, L.
NOT-CONTENTS
Airey of Abingdon, B.	Falkland, V.	Mowbray and Stourton, L.
Alexander of Tunis, E.	Fraser of Kilmorack, L.	Murton of Lindisfarne, L.
Alport, L.	Gage, V.	Nugent of Guildford, L.
Auckland, L.	Gainford, L.	Orkney, E.
Avon, E.	Geddes, L.	Orr-Ewing, L.
Bellwin, L.	Gisborough, L.	Redmayne, L.
Belstead, L.	Glenkinglas, L.	Reigate, L.
Berkeley, B.	Gridley, L.	Renton, L.
Bessborough, E.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Robbins, L.
Birdwood, L.		Roberthall, L.
Bridgeman, V.	Hankey, L.	Rochdale, V.
Broadbridge, L.	Hanworth, V.	Saint Oswald, L.
Campbell of Croy, L.	Hawke, L.	Salisbury, M.
Cathcart, E.	Henley, L.	Sandford, L.
Chelwood, L.	Hillingdon, L.	Sandys, L. [Teller.]
Chesham, L.	Holderness, L.	Sempill, Ly.
Clifford of Chudleigh, L.	Hood, V.	Sharpies, B.
Clitheroe, L.	Ilchester, E.	Skelmersdale, I
Cork and Orrery, E.	Ironside, L.	Soames, L.(L. President.)
Craigavon, V.	Kemsley, V.	Spens, L.
Croft, L.	Kilmany, L.	Strathcarron, L.
Cullen of Ashbourne, L.	Kinloss, Ly.	Strathclyde, L.
Davidson, V.	Lindsey and Abingdon, E.	Strathspey, L.
de Clifford, L.	Long, V.	Swansea, L.
De Freyne, L. [Teller.]	Loudoun, C.	Swinton, E.
Denham, L.	Lucas of Chilworth, L.	Teviot, L.
Derwent, L.	Luke, L.	Vaux of Harrowden, L.
Drumalbyn, L.	Lyell, L.	Vickers, B.
Dundee, E.	Mackay of Clashfern, L.	Vivian, L.
Effingham, E.	Macleod of Borve, B.	Ward of Witley, V.
Ellenborough, L.	Mancroft, L.	Westbury, L.
Elliot of Harwood, B.	Marley, L.	Yarborough, E.
Emmet of Amberley, B.	Merrivale, L.	Young, B.
Exeter, M.	Mills, V.	Young
Fairfax of Cameron, L.	Milverton, L.

Resolved in the negative, and amendment disagreed to accordingly.

4.42 p.m.

Lord BANKS moved Amendment No. 5: After Clause I, insert the following new clause: Increases in invalidity payments ( .Where in consequence of a review under section 125 of the principal Act in the tax year in which invalidity pension, invalidity allowance and unemployability supplement of disablement benefit are made taxable the Secretary of State is required by subsection (3) of the principal Act to prepare and lay before Parliament the draft of an order increasing the weekly rate of any one of these benefits, the increase provided by the draft in respect of the benefit shall be greater than the increase required by that subsection in respect of the benefit by an amount that is not less than the amount the specified benefit has been abated in consequenec of section 1 of this Act.")

The noble Lord said: My Lords, in Committee I moved an amendment de- signed to ensure that when the benefits affected by Clause 1 are brought into tax, the abatement suffered in the interim period as a result of Clause I should be restored. I pointed out that if that were not done, the abatement would be perpetuated and compounded. The noble and learned Lord, Lord Mackay of Clashfern, said that in the Government's view it would be most unwise at this stage to enter into such a general commitment so far ahead. I drew attention to the fact that if the Government could have brought these benefits into tax overnight, they would have done so, and that they would then have been committed to precisely the same commitment as the amendment sought.

It seemed to me, and still does, a nonsense to refuse to accept that commitment because of the interim period during which abatement instead of taxation will operate. However, the noble and learned Lord, Lord Mackay of Clashfern, did not want to go beyond the undertaking given by the Secretary of State that, subject to the availability of resources, the abatement in respect of invalidity pension, invalidity allowance and the unemployability supplement in respect of disablement benefit would be restored in value when brought into tax.

This amendment is more narrowly drawn, therefore, than the one the noble and learned Lord turned down in Committee and it would give effect only to the Secretary of State's assurance. The Secretary of State's assurance was subject to the availability of resources. The passage of this amendment would necessitate primary legislation if the Government felt that resources were not available. The question of the availability of resources would then be debated. The amendment would therefore ensure that what the Government have agreed as reasonable and desirable should now happen, unless the Government convinces Parliament that resources are not in fact available. I beg to move.

Lord UNDERHILL

My Lords, I support the amendment, and I wish to emphasise that we are not arguing about the taxation of benefits in relation to the amendment, nor are we arguing about the general question of abatement; we are discussing solely the position of invalidity payments and their restoration, when they come into taxation, to the position as of now. I would remind the House that this is the first time that invalidity benefits will be out of step with retirement pensions. As I said previously, on the figures, which we accept, of the 650,000 invalidity claimants, some 250,000 either will not pay tax or will be paying less tax than the abatement, and we have the assurance of the Secretary of State, which we accept, but which has the qualification, as the noble Lord, Lord Banks, emphasised, that it is subject to the availability of resources.

This is not a party political issue; it is a question of the proper treatment of those unfortunate people in our society who are on invalidity payments. I would also remind noble Lords opposite that this is not in the Conservative Party manifesto, a copy of which I have with me. It also involved bringing unemployment and short-term sickness benefit within the tax system, it said, but it referred to short-term sickness benefit, not invalidity payments. In fact, there is a separate paragraph in it dealing with the position of invalidity payments, which the Conservative Party said it hoped to improve.

The noble Lord, Lord Banks, and those who support the amendment are trying to ensure that it will be restored, and that that should not depend on the economic circumstances of the time. After all, if the nation has reached the position when these benefits come into taxation that we can solve Britain's economic problems only by continuing what I regard as the unjust treatment of those on invalidity payments, then, frankly, we shall be in a very desperate state indeed. I am certain that at that time, even if the economic circumstances are still difficult, it will not be beyond the wit of any Government so to adjust things that proper treatment is accorded to those persons who, but for the present position of abatement, would be on the same level as those on retirement pensions, but they are being brought below that situation. I therefore hope noble Lords will support the amendment.

Baroness MASHAM of ILTON

My Lords, I too support the amendment, and I will be brief because your Lordships know only too well that the disabled have been hit very badly by inflation. Everybody concerned with disabled people and the disabled themselves are extremely worried at this time. If the Government could accept the amendment, which seems sensible, they would be taking a wise course. I therefore hope that if there is a Division your Lordships will support the amendment.

4.49 p.m.

Baroness YOUNG

My Lords, as the noble Lord, Lord Banks, said, this amendment is similar to amendments proposed by the noble Lords, Lord Wells-Pestell and Lord Banks, in Committee. I accept that it differs from earlier amendments in important respects. In Committee we were discussing an amendment intended to ensure that the value of all the benefits affected by Clause 1 of the Bill would be restored when they were brought into taxation. This amendment seeks to restore the value of only the invalidity benefit and unemployability supplement, and to do so with effect from the November up-rating following the extension of tax to those benefits.

As my noble and learned friend confirmed during Committee, the Government share the view that invalidity benefit and unemployability supplement are essentially long-term benefits, even though invalidity benefit can be, and is, paid for very short spells of incapacity. It was because of this that my right honourable friend the Secretary of State was able to give the special assurance, which has been quoted several times already this afternoon, about restoring their value when they are brought into taxation. The details of this assurance have already been given to your Lordships, but I shall repeat them. The Secretary of State has given an undertaking that, subject to the availability of resources, invalidity benefit and unemployability supplement will be fully restored when they are brought into taxation; that is, they will be realigned to the basic rate of retirement pension.

The intention of the amendment is to incorporate that undertaking into the Bill, excluding of course—and this is the key point, which I am sure the noble Lord, Lord Banks, will appreciate—the phrase subject to the availability of resources". In Committee the noble Lord, Lord Banks, implied that these benefits should be restored whether or not resources were to be available. He said, But it is only if resources are available that this is to he done and … that phrase is at best an aspiration, and at worst an escape hatch" —[Official Report, 16/6/80; col. 877.] Of course we can do this only if resources are available.

I listened very carefully to what the noble Baroness, Lady Masham of Ilton, said about this matter. I should like to give her an assurance. I should like not to have to move Clause 1 at all, or even the Bill, but to be able to say, "Of course, we will put everything right". But that would be an irresponsible thing to do because none of us can give a guarantee that resources will be available. Noble Lords opposite, including the noble Lord, Lord Wallace of Coslany, cannot be certain. I believe that in public life it is always wrong to make a promise, let alone write something into a Bill, if one cannot be absolutely certain about delivering it. It would mean holding out false hopes—

Lord WALLACE of COSLANY

My Lords, the noble Baroness has brought me into the picture. My argument is that we should not even be considering this amendment. The Government should not have done what they now propose. Another point I should like to make to the noble Baroness is that this section of the Community is already being hit by local government cuts involving the personal social services. They are being doubly hit, and it is grossly unfair to them. I am a pensioner who pays income tax, and I should not in the least mind paying additional tax if this particular misbegotten idea were got rid of. Many people, upon realising the facts, would feel most apprehensive, but the general public do not know the situation. What the Government are proposing should not have been done.

Baroness YOUNG

My Lords, I recognise the very strong feeling of the House on these questions. This is not an easy matter for any of us, and we have previously been over the ground in regard to the Government's reasons for introducing this legislation at all. I also take the other point of the noble Lord about difficulties that arise in local authority social services departments, but in this connection I should point out that invalidity benefit was, after all, introduced by a Conservative Government in 1971. We also introduced the attendance allowance, which was increased by nearly 20 per cent. last year, and will be raised again this year in line with the expected increase in prices. Supplementary benefits and the noncontributory invalidity pension have similarly been protected against inflation, while the mobility allowance was raised from £10 to £12 last November, and this November will go up to £14.50 a week. Fifteen thousand disabled people aged between 63 and 64 were phased into the mobility allowance last November, sooner than the Labour Government had intended, and from November 1980 the disabled will be able to claim the longer-term rate of supplementary benefit after one year instead of two years.

I make those points in order to indicate that we are considering what improvements we can make within the limitations at our disposal. We should like to do more, and I hope that the noble Baroness, Lady Masham of Ilton, will accept that this is the kind of amendment to which we should like to agree, if we could. We all agree with the principle of it; nobody would argue against that. But we must be in a position so as to be able to take account of any unforeseen developments, and Clause 1 is primarily about saving money. Anticipation of tax liability is a very important aspect of Clause 1, but it is not the primary purpose of the clause. The fact is that we must live with the implications of our present economic difficulties.

We could argue about whether or not we should write this proposal into the Bill, but I have always taken the view that in public life I would not make promises that I could not be certain of delivering. I should have thought that all of us in this country have gone through enough of the vicissitudes of international affairs —including the increased price of oil, which we cannot control and which affects our lives and the rate of inflation—to realise that it would be most imprudent to write into a Bill a provision which we might later have to repeal, thus causing great disappointment.

I hope that invalidity pensioners will accept the assurances that have been given in both Houses: that if resources allow, we shall make good the shortfalls and the deficiencies once the pension is brought into tax. Our past record on these matters is good. We introduced a number of new benefits when we had the money to do so, and I believe that once again, as the economy improves—as I confidently expect it will—we shall be able to make good the deficiencies. We have given undertakings to look at the matter. I am quite sure that my right honourable friend the Secretary of State for Social Services would not have given those undertakings if he did not intend to stand by them.

Lord WELLS-PESTELL

My Lords, I do not think that it would be a very profitable exercise for either side to engage in setting out all the benefits which various Governments have introduced. I shall not burden your Lordships by mentioning the number of benefits introduced by the party of which I am a member when we were in Government. I mention only one: the mobility allowance. To enumerate the benefits does not serve a useful purpose.

However, what is important is to look at the position before us today. We are dealing with a group of people who are deprived. I do not wish to use the word "deprived and do so only because I cannot think of a better one. These people are deprived of most of those things which normal people experience, and they therefore require special attention. Invalids, particularly those who cannot get about under their own steam, often appear to he amongst the most cheerful people whom one could ever hope to meet. Nevertheless, a cloud of limitation and misery is perpetually hanging over them, and if there is anything that we can do to help them, we ought to do it.

I accept what the noble Baroness the Minister says about it being the intention of the Government to do something when resources are available, but so often these points are included in order to provide a get-out. If the will is there—and I wonder whether it really is—there is no reason why the amendment should not be accepted.

The noble Baroness the Minister said, or at least implied, that there was nothing between the Government and the noble Lord, Lord Banks. I go so far as to say that the noble Lord has presented an amendment which will assist the Government in their intention. If the Government were to accept the amendment, there would be no doubt in people's minds about their paying lip-service to the idea. Rather it would be seen as a real determination on the Government's part to take action along the lines that we have been discussing.

Viscount SIMON

My Lords, I wonder whether the noble Baroness can help me about one thing. She spoke of her unwillingness—and I understand this—to commit the Government to expenditure when they do not know whether they will be able to afford it when the time comes. But is there not a great mass of expenditure already provided under social security on exactly those terms? They are committed to that. This is a very small addition, is it not? I cannot see that there is any real difficulty in principle in committing the Government to this small addition to expenditure to which they are already committed. If the noble Baroness is saying that no Government in present circumstances—and we know they are difficult enough—can commit themselves to anything, then we shall have to repeal a great deal of the present arrangements because in fact there are commitments for next year and the years to come in relation to the levels of pension, are there not?

5.1 p.m.

Baroness YOUNG

My Lords, with the leave of the House, perhaps I may answer that point from the noble Viscount, Lord Simon. It is perfectly true that we have already debated issues in which there are statutory obligations—for example, looking at the whole question of the movement of prices in relation to retirement pensions. These matters already appear in legislation. But, of course, the difficulties that we have got ourselves into, and one of the reasons why we have to have this Bill, is that these matters are in legislation and they are now having to be repealed, and we have written Clause I into this Bill. It surely would not he wise, therefore, to accept a situation in which we would be writing into this Bill something which was a commitment for the future which we could not fulfil.

Whatever may have been done in the past, in better times, in the expectation of fulfilment—and I have not the slightest doubt that when these undertakings were agreed to there was a categorical assurance of this—we now find ourselves, when times are difficult, having to produce a Bill such as the one which is before the House today. It therefore seems to me that it would not be wise, in this Bill, which meets an emergency situation, to introduce something which we might not be able to fulfil in the future. That is one of the lessons that I think we have learned over this matter, and one which I think we have to be careful about. It is for that reason that we cannot accept the amendment as it stands, though I agree that there is no disagreement between us at all on the principle.

Lord BANKS

My Lords, I agree very strongly with the view of the noble Lord, Lord Underhill, that this is not a party political point. I think this is a matter which concerns people in all parts of the House, because, as the noble Baroness, Lady Masham, said, they appreciate that inflation has hit the disabled particularly hard, with the extra expenses that disablement brings. The noble Baroness, Lady Young, has made a great point about the resources being available, but, although she put forward her argument extremely lucidly, I do not think really she succeeded in dealing with the point which was raised by my noble friend Lord Simon. After all, the whole Bill saves only £500 million, and the noble Baroness herself has told us that £20,000 million is what is spent altogether on social security. To suggest that it is necessary to leave out of legislation this particular commitment in order to meet an emergency situation or a potential emergency situation seems to me to be exaggerating beyond reason the point which she is making.

As my noble friend Lord Simon has said, we do in fact write into legislation specific commitments which can be reversed by Parliament if it should prove necessary. One of those at the moment is that the benefits referred to in Clause I are to be increased in line with prices. There is to be a short interim period during which there will be abatement; but that is only an interim measure because at the moment these are not taxed, and once they are taxed, as I understand the position, there is a commitment, confirmed in this Bill, to continue to increase the benefits in line with prices.

Again, in addition to that there is the point which I made earlier, and which I do not think has been answered, that this abatement is only an interim measure because the Government cannot immediately bring these benefits into taxation. If they could bring them into taxation, I am sure they would do it immediately. If they did that, they would then be committed under the legislation to increase in line with prices. So they would quite happily accept the very commitment, since this would produce exactly the same level of benefits at the time when they are, under present circumstances, going to be brought into taxation. They would be quite happy to accept the commitment in those circumstances, but not in the circumstances of the Bill, which seems to me to be a nonsense, as I said earlier.

All that the amendment seeks to do is to put into the Bill the assurance which the Secretary of State has given, knowing that if at that time there should be such a crisis that the comparatively small amount of money needed to meet this particular commitment is not available, then it will be possible to come to Parliament and seek legislative power in order

to remove the commitment at that stage. But that will be a very unlikely happening, in my view; and by accepting this amendment we shall give a degree of certainty to this assurance which will bring a great deal of relief and satisfaction to those directly involved.

5.7 p.m.

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

Their Lordships divided: Contents, 91; Not-Contents, 98.

CONTENTS
Ardwick, L.	Glenamara, L.	Peart, L.
Aylestone, L.	Gordon-Walker, L.	Phillips, B.
Bacon, B.	Goronwy-Roberts, L.	Pitt of Hampstead, L.
Balogh, L.	Granville of Eye, L.	Ponsonby of Shulbrede, L
Banks, L.	Hale, L.	Rhodes, L.
Barrington, V.	Hanworth, V.	Ritchie-Calder, L.
Bernstein, L.	Henderson, L.	Ross of Marnock, L.
Birk, B.	Houghton of Sowerby, L.	Sainsbury, L.
Blease, L.	Janner, L.	Seear, B.
Blyton, L.	Kaldor, L.	Segal, L.
Boston of Faversham, L.	Kilmarnock, L.	Shinwell, L.
Bowden, L.	Kinloss, Ly.	Simon, V. [Teller.]
Brockway, L.	Leatherland, L.	Stamp, L.
Bruce of Donington, L.	Lee of Newton, L.	Stedman, B.
Burton of Coventry, B.	Leonard, L.	Stone, L.
Caradon, L.	Llewelyn-Davies of Hastoe, B.	Strabolgi, L.
Chitnis, L.	Lloyd of Hampstead, L.	Strauss, L.
Cledwyn of Penrhos, L.	Lockwood, B.	Swinton, E.
Clifford of Chudleigh, L.	Longford, E.	Taylor of Mansfield, L.
Collison, L.	Loudoun, C.	Underhill, L.
Craigavon, V.	Lovell-Davis, L.	Wallace of Coslany, L.
Crowther-Hunt, L.	McNair, L. [Teller.]	Walston, L.
Darling of Hillsborough, L.	Maelor, L.	Wedderburn of Charlton, L.
Davies of Leek, L.	Masham of Ilton, B.	Wells-Pestell, L.
Davies of Penrhys, L.	Meston, L.	White, B.
Diamond, L.	Milverton, L.	Willis, L.
Elwyn-Jones, L.	Mishcon, L.	Wilson of Radcliffe, L.
Evans of Claughton, L.	Ogmore, L.	Winstanley, L.
Fisher of Rednal, B.	Oram, L.	Wootton of Abinger, B.
Gaitskell, B.	Parry, L.	Wynne-Jones, L.
Gardiner, L.
NOT-CONTENTS
Adeane, L.	Cork and Orrery, E.	Ferrier, L.
Ailesbury, M.	Croft, L.	Fraser of Kilmorack, L.
Airey of Abingdon, B.	Cullen of Ashbourne, L.	Gainford, L.
Alexander of Tunis, E.	Davidson, V.	Gibson-Watt, L.
Alport, L.	de Clifford, L.	Gisborough, L.
Atholl, D.	De Freyne, L.	Glenkinglas, L.
Auckland, L.	De L'Isle, V.	Greenway, L.
Avon, E.	Denham, L.	Gridley, L.
Bellwin, L.	Derwent, L.	Hailsham of Saint Marylebone, L. (L. Chancellor.)
Belstead, L.	Drumalbyn, L.
Berkeley, B.	Duncan-Sandys, L.	Hawke, L.
Bessborough, E.	Dundee, E.	Henley, L.
Bridgeman, V.	Ebbisham, L.	Hillingdon, L.
Broadbridge, L.	Ellenborough, L.	Holderness, L.
Brookeborough, V.	Elliot of Harwood, B.	Ironside, L.
Campbell of Croy, L.	Emmet of Amberley, B.	Kemsley, V.
Cathcart, E.	Exeter, M.	Kilmany, L.
Chesham, L.	Fairfax of Cameron, L.	Kimberley, E.
Clitheroe, L.	Falkland, V.	Lindsey and Abingdon, E.
Long, V.	Redmayne, L.	Strathcarron, L.
Lucas of Chilworth, L.	Reigate, L.	Strathclyde, L.
Lyell, L.	Ronton, L.	Strathspey, L.
Mackay of Clashfern, L.	Robbins, L.	Sudeley, L.
Macleod of Borve, B.	Rochdale, V.	Swansea, L.
Mancroft, L.	Saint Oswald, L.	Teviot, L.
Marley, L.	Salisbury, M.	Trefgarne, L.
Merrivale, L.	Sandford, L.	Vaux of Harrowden, L.
Mills, V.	Sandys, L. [Teller.]	Vickers, B.
Mowbray and Stourton, L. [Teller.]	Sempill, Ly.	Vivian, L.
	Sharpies, B.	Ward of Witley, V.
Murton of Lindisfarne, L.	Skelmersdale, L.	Westbury, L.
Nugent of Guildford, L.	Soames, L. (L. President.)	Yarborough, E.
Orkney, E.	Somers, L.	Young, B.
Orr-Ewing, L.

Resolved in the negative, and amendment disagreed to accordingly.

Clause 2 [Abolition of compulsory up-rating of amount certain pensioners may earn without abating pensions]:

5.15 p.m.

Lord WALLACE of COSLANY moved Amendment No. 6: Page 3, line 21, leave out ("be omitted") and insert ("not have effect in any year in which the increase which the Secretary of State considers necessary to restore the value of the sums specified in that paragraph is less than 10 per cent. of those sums.")

The noble Lord said: My Lords, the effect of this amendment would be that from 1981 onwards the pensioner's earnings limit would have to he up-rated in any year when the expected rate of increase in earnings was 10 per cent. or more. This is a compromise proposal intended to ensure that the earnings limit is not so badly eroded by inflation that the cost of abolishing the earnings rule becomes inordinately high.

As noble Lords will remember, the earnings rule was debated in the Committee stage on amendments moved by the noble Lord, Lord Reigate, and my noble friend Lord Wells-Pestell. Both noble Lords referred to the Conservative manifesto commitment to abolish the earnings rule during the lifetime of this Parliament. In his reply to my noble friend the noble Lord, Lord Cullen, said that the present economic situation was very had and that was why the Government were having to eat their words on the manifesto commitment. We want to be extremely helpful. This amendment, as a compromise, is designed to ease and facilititate the Government's digestive processes. It is hoped that such a friendly gesture will prove acceptable to the Government.

Lord CULLEN of ASHBOURNE

My Lords, we have found it necessary to freeze the earnings limit for retirement pensioners at its present level of £52 per week, and to lift the statutory requirement to increase it in future years because of the need—which we keep having to repeat—to hold back public expenditure. We recognise that this is not a popular measure, but we believe it to be necessary in the present economic circumstances.

We very much hope that we will be in a position to increase the earnings limit next year. But we cannot at this stage say whether this will be possible. For this reason it is not desirable for a longterm limitation on our ability to freeze the limit to be written into the Bill. It makes for complication in something which needs to be simple and straight-forward: it expects to be long-lasting something which we envisage as temporary. If a long-term provision were wanted, we should not in any event want one, as in this amendment, which ignored the cumulative effect of successive increases which were less than 10 per cent. As your Lordships know, our standing aim is to do away with the earnings rule for retirement pensioners, not just to increase the weekly amount of earnings every year, and we are committed to doing this as soon as circumstances permit.

Baroness PHILLIPS

My Lords, the noble Lord is always so charming that it is difficult to have to follow him and to contradict him. He said that this was not a popular measure. He can repeat that. It goes further; it is an unjust measure. I am doubtful about the amount of money—and I have said this many times—that would be saved, because no Government can know how many retirement pensioners are going to work and therefore can be caught by this; and since if they do work and receive money it immediately becomes taxable, the state receives its just due, if that is how they put it. We feel those who earn should not be penalised in this way. I can give a classic case not a hundred miles away, within the Palace of Westminster itself, of people who have worked long hours at the request of their employers and who have thereby put their earnings into such a category as to cause them to lose their retirement pension under the earnings rule.

This cannot be fair. It cannot be just. I feel that this amendment is an opportunity for the Government to defer this action. This is not merely an unpopular action, it is an unfair action, particularly as it was in the Conservative manifesto. I believe I have said to the House before that I read the Conservative manifesto and I was delighted to read that, having petitioned several Governments, both Labour and Conservative, for several years over the earnings rule, at last this rule was going to be abolished. Now we find that possibly it is going to be abolished in the future. But this situation is imminent. Surely this is an opportunity for the Government at least to carry out this part of their promise.

Lord BANKS

My Lords, it has been pointed out that this Bill results in an increased severity so far as the earnings rule is concerned, and in that sense it moves in the opposite direction from the Government's originally stated purpose of phasing out the earnings rule during the lifetime of this Parliament. I was very interested indeed to hear the noble Lord say that the Government hoped to increase the earnings limit next year. Does the noble Lord mean that they hope next year to begin the phasing out, or does he merely mean that over the next year they will, as they are not doing this year, maintain the real value of the limit as it now stands after the effect of this Bill?

Lord CULLEN of ASH BOURNE

My Lords, with the leave of the House, I would say to the noble Baroness that we have taken the view that at a time when we are having to make economies, those who are able, fit and strong enough to work are not the most deprived people in the country: therefore we felt that this was not an unreasonable economy to make. This comes hard for the Conserva- tive Party; and from a personal point of view I have argued as strongly as I can in favour of the abolition of the earnings rule. I take the point made by the noble Lord, Lord Banks, that what we are doing now is not only not proceeding with the abolition, as I would have hoped we would have done by now, if we could, but we are actually stopping the earnings rule at its present level. There is no question about what we on this side of the House should like to be doing, and there is very considerable regret that we cannot do it.

I do not think that I should be drawn by the noble Lord, Lord Banks, as to what it is that we might he doing next year—whether we would be increasing the earnings rule or phasing it out. If it is possible for us to start phasing it out next year, we will do so. If it is not possible, we hope that we will be able to increase the earnings limit.

Lord WALLACE of COSLANY

My Lords, may I ask the noble Lord how the Government arrive at the figure of £52 which they are freezing? Do they take into account the falling purchasing power of money in this country? We all know that this year we can buy less as against last year simply because of rising prices and the drop in the purchasing value of the pound. This is a factor that ought to be taken into account. It affects these people. With increases in costs, and so on, this £52 is going to be further reduced by the time next year is reached. The noble Lord sees what I am getting at?

Lord CULLEN of ASHBOURNE

My Lords, with the leave of the House, we are simply leaving the money frozen at this point. We realise that it will be of some hardship to some people. But this is one of the unhappy economies that we are making. I doubt whether I can add anything to that.

On Question, amendment negatived.

Clause 3 [Alteration of period of interruption of employment and of periods relating to invalidity allowance and unemployability supplement]:

5.25 p.m.

Lord WELLS-PESTELL moved Amendment No. 7: Page 3, line 43, leave out ("8") and insert ("10")

The noble Lord said: My Lords, in moving Amendment No. 7 I should also like to speak to Amendment No. 8. At the Committee stage my noble friend Lord Banks moved an amendment (No. 22) which dealt with the period of incapacity for work of 13 weeks. I had hoped that the Government during the interim period would have read what was said because it seemed to me that the noble Lord put forward then an unanswerable case for doing something rather different from what the Government intend to do. Your Lordships will know that the Government's original proposal was to reduce the linking period from 13 weeks to six weeks, and that they accepted an amendment in another place to substitute eight weeks for six.

At the Committee stage, the noble and learned Lord, Lord Mackay of Clashfern, said that the extension to eight weeks should go a long way to satisfy those who would prefer a longer period. If f may say so, it goes a very short way indeed, and certainly does not satisfy the voluntary bodies concerned with the disabled who are in a position to make a judgment on this issue.

It seems to me and my friends on this side of the House that the people who really have had the experience in this area have not been consulted. In fact the noble Lord, Lord Mackay of Clashfern, also stressed that the effect of any new rule would be monitored to see whether any further changes were needed. I suggest to your Lordships that it is a very clear indication that the Government in this matter are legislating in the dark. It is hit-and-miss. They wanted six weeks; they were pressured into having eight. It is true that I am now trying to pressurise them into having 10; but the 10 weeks is based on the judgments of people who are dealing with the disabled and have had a great deal of experience with them.

There is no real evidence as to what the effects are likely to be to the chronically sick and disabled people by keeping it at eight weeks. In this situation, if the Government are determined to change the existing rule I would, with respect, suggest that it would be far better to make as small a change as possible initially, thus minimising tle risk of hardship and injustice. There will be sonic, of course; it may well he that whatever figure we choose will produce hardship and injustice.

The 13 weeks has worked extraordinarily well and I think the Government are just acting without any real knowledge as to whether this is going to be helpful or unhelpful. From the information that we have been able to obtain from disabled people we propose in this amendment that the linking period should be reduced to 10 weeks. Your Lordships will see that in Amendment No. 8 again, on page 4 at line 19, it would be necessary to leave out the figure "8" and insert "10" if Amendment No. 7 was accepted. I beg to move.

5.30 p.m.

Lord CULLEN of ASHBOURNE

My Lords, I think that on this matter Government spokesmen have been consistent—perhaps too consistent for the wishes of noble Lords opposite—in declaring and maintaining that the primary object of this Bill, in its first five clauses, is to make much needed economies in public expenditure. The need to exercise some constraint over the continuing growth in the social security budget is inescapable; and unless measures are taken the growth would outstrip the country's capacity to pay for it.

The clause was designed to save some £20 million by ceasing to pay benefit for very short periods of incapcity of three days or less, and by shortening the linking period from 13 weeks to six weeks which, as the noble Lord has just told the House, has since been amended to eight weeks. Your Lordships will know that one effect of spells linking is that waiting days do not have to be served again in the second spell. A further effect is that days of incapacity in the two spells are added together for the purpose of determining title to invalidity benefit which comes into operation when sickness benefit has been paid for 168 days. In that case, the linking is advantageous as it gives earlier title to the long-term benefit which can then he drawn without any limit in time. But aggregation of the days of unemployment in the two spells can be disadvantageous because the 312 days' maximum benefit can he exhausted earlier than would otherwise be the case. In deciding what the appropriate linking period should be, account has to he taken of these complex interacting factors.

The Government's view is that a linking period of 13 weeks is unnecessarily long and the clause provides for it to be reduced to eight weeks. The Government's original view was that a period of six weeks should generally be adequate to ensure continuity of benefit if a person falls sick again after a short period back at work. Where a person goes back to work too soon after a long illness he will usually be aware of it very quickly. In fact, of the 32 per cent. of spells which link with earlier incapacity, most have a gap of less than six weeks. However, for most periods of incapacity—actually 64 per cent.—there is no link at all with any previous spell. The remaining 4 per cent. link with spells of unemployment.

For incapacity benefits, a linking period that was too long would not accord with the concept of a special benefit for the long-term sick. The longer the linking period, the greater the extent to which invalidity benefit is made available to people whose pattern of incapacities does not match up to the invalidity concept for which the benefit was originally designed.

It is nevertheless accepted that there will be a minority of beneficiaries for whom the length of the linking period will he particularly important. Those who have recovered from a long illness sufficiently to try work again would feel safer if they could he assured of a fairly long trial period. And there will be those whose disease allows them to do some work during short periods of remission; they would like to be sure of regaining title to invalidity benefit when the time came for them to reclaim benefit. The Government have much sympathy for the groups concerned and have accepted that, on balance, a linking period of eight weeks will be preferable to one of six weeks: but to move further than this would reduce the total savings by several million pounds. I cannot be more precise regarding that figure.

1 am afraid that in view of the amendment already made the Government cannot accept any further lengthening of the linking period at this stage; to do so would he to frustrate the whole intention of the clause.

Lord BANKS

My Lords, I should like briefly to support the amendment. The noble Lord, Lord Wells-Pestell, referred to the fact that at the Committee stage I put the case against the 8-week period being substituted for the 13-week period of interruption and referred to the disincentive for people to go back to work, those who had been seriously ill, and quoted a considerable amount of medical evidence to that effect—the greater difficulty of qualifying for invalidity pension, the greater liklihood of losing invalidity pension and the considerable income lost that would be involved if that should happen.

The only argument, it seems to me, in favour of the eight weeks as against the 10 weeks is this question again of saving money; but we are talking here about national insurance benefits, and there is no indcation that the National Insurance Fund is in any difficulties and is not able to meet its obligations. The Revenue provides only 18 per cent. of the cost and the rest is provided by contributions; and the contribution income, except in so far as the increase in unemployment has had some effect, has not required to be increased to meet national insurance benefits.

Therefore I am not inclined to believe that it is essential for the health of the economy that we should have to stick to the 8-week period, and I ask the Government to think very carefully about the possibility of accepting this amendment, which after all does not go as far as we should have liked to raise this matter in Committee, but would mean some concession, which I do not think would destroy the economy, on the part of the Government.

Lord BOYD-CARPENTER

My Lords, I should like to protest against the suggestion made by the noble Lord who has just resumed his seat that because expenditure falls on the National Insurance Fund rather than, apart from 18 per cent. of it, directly on the Exchequer, it is not for practical purposes public expenditure. With great respect, that is a fallacious argument; and expenditure from the National Insurance Fund has always been treated as a matter of financial policy, under all Governments, as public expenditure, particularly from the point of view of its economic effects.

I should like to ask the noble Lord, if he would, to consider further where his argument leads him. If his argument has any validity in the comparatively restricted scope of this amendment, then it is presumably valid right across the field. You could argue—and perhaps the noble Lord would—that national insurance benefits could be increased very substantially indeed all round without having any effect on the national economy. With enormous deference to the noble Lord, that is nonsense and it is, if I may say so, rather dangerous nonsense, because it could have an appeal to people who naturally feel, as the noble Lord does, a desire to help the beneficiaries of our national insurance system within the limits of financial responsibility. It is really because of the noble Lord putting forward this insidious, attractive but really rather dangerous doctrine that I thought I should enter a protest, particularly because, as I think the noble Lord will know, for some 6½ years I was the custodian of the National Insurance Fund.

Could I, while on my feet, also ask my noble friend how much money is involved in the change effected by this clause? He told us a few moments ago that the difference between six and eight weeks was several millions. But what is, in fact, the total saving which the Government expect to make for the National Insurance Fund by the reduction from 13 weeks?

5.40 p.m.

Lord CULLEN of ASHBOURNE

My Lords, I should first like to thank my noble friend for his support on the rather complicated point made by the noble Lord, Lord Banks. The saving under this clause, reducing the linking from 13 to eight weeks, would be £20 million. Unfortunately, what I cannot tell the House is what would be the difference if it were 10 weeks rather than eight. But I understand that it would be several million pounds.

The question of whether we should have 10 weeks rather than eight has now been raised by both the noble Lord, Lord Wells-Pestell, and the noble Lord, Lord Banks, and I appreciate that there are some people, who know what they are talking about, who would favour a longer period than eight weeks. The noble Lord did not quote specific support from any particular area for 10 weeks rather than some other figure, but I think it is a fact that no period has a firm scientific basis or a firm basis in experience.

Our judgment is that eight weeks will strike a sensible balance between conflicting considerations, although I confess that we would not have made this change had it not been for the need for economies. I realise that there is some considerable doubt as to whether eight weeks will prove the most sensible figure. It is for that reason that we have agreed to monitor what happens, and will then make changes later on, if required. But at this stage, I am afraid that I must advise the House not to accept the amendment.

Lord WELLS-PESTELL

My Lords, I am glad that the Minister is back in her seat. We really have reached an extraordinary situation. I think that on every amendment put up at Committee stage, and on every amendment put up today, we on this side of the House have been confronted with the sentence: "We cannot accept the amendment because of the economies, and so on" I hardly describe this as an intellectual exercise, but it is nothing more than an exercise—a colossal waste of parliamentary time and people's time.

We had the same situation on the first Social Security Bill. It did not matter what the argument was. It did not matter what the merit of the argument was. The amendments could not be accepted because the Government are pledged to save money. That has been the cry all through the Social Security (No. 2) Bill, and it is quite deplorable that a number of Members of your Lordships' House spend hour upon hour reading Bills, considering their implications, putting down amendments and considering the implications of those amendments when we know, having done all that, that it is a complete waste of time.

I hope that the end of this Bill will see the final situation of this kind, because I really feel that a Government ought not to say to the House—not in as many words, but by their actions—" You can go on talking, you can go on putting down amendments and we will have discussions about them, but because we are going to save money "—in one case, only £1 million—"whatever you say cannot be accepted by the Government". There may not be any substance in what I have said, but in all the years that I have been a Member of your Lordships' House I have never met this situation before, which we have had on two Bills in succession, and which I do not think does credit to Parliament.

Baroness PHILLIPS

My Lords, I should like to pick up one point. I feel that some one should reply to the noble Lord, Lord Boyd-Carpenter, who appeared to reprimand the noble Lord, Lord Banks, for daring to suggest that the National Insurance Fund should not be interfered with. I think he said that it was not sacrosanct—

Lord BOYD-CARPENTER

My Lords, would the noble Baroness allow me to intervene? I am most grateful to her. I am sure that she does not want to misrepresent me. The point of the noble Lord, Lord Banks, that I took up was his suggestion that expenditure from the National Insurance Fund was not public expenditure and did not have the economic significance of public expenditure—no more and no less.

Baroness PHILLIPS

Yes, my Lords, I take the noble Lord's point. I do not think I am misrepresenting him. I think he will find that he said that the National Insurance Fund was not sancrosant. But I think he also said that the noble Lord, Lord Banks, made an insidious suggestion. I am sure he used that phrase—

Lord BOYD-CARPENTER

Indeed.

Baroness PHILLIPS

My Lords, I would only ask, if the National Insurance Fund is not, and indeed has not been regarded for many years as, something a little different from money taken from the national Exchequer, why does every Bill contain a special reference to the fact that there is an increase or that there is money taken from it? If it is not a special fund, and is not something different, then there is no necessity at all to mention it in any Bills. It will simply be part of the general Exchequer. It will simply be part of what is taken from taxes.

I assure the noble Lord that when the insurance is paid by the workers they take a different view of it, and have the feeling that they are contributing to pensions and things of that kind. It would be most unfortunate if the idea got abroad that any Government can tamper with this fund at any time and take out whatever they feel is desirable. Therefore, I feel that the noble Lord, Lord Banks, had a point.

On Question, amendment negatived.

[Amendment No. 8 not moved.]

5.48 p.m.

Lord WALLACE of COSLANY moved Amendment No. 9: Page 4, line 23, at end insert— (" (5) Not later than 31st December 1982 the Secretary of State shall make a report to both Houses of Parliament on the effects of the provisions of this section.").

The noble Lord said: My Lords, we have had some rather stern words from my noble friend Lord Wells-Pestell and my heart bleeds for him, as it does for myself, as it is a most frustrating experience to deal with the brick wall opposite. But the Uriah Heeps on the Front Bench opposite have an opportunity to accept this amendment.

The Government have said that they intend to monitor the effects of the new linking rule. It seems right that the results of this monitoring process should be fully reported to Parliament and this amendment would provide the means of doing just that. I welcome the fact that the Government have said that they will monitor the effects of the clause, for the very simple reason that there is real concern in many quarters about the effects of the clause, particularly on the disabled. Many of us in both Houses feel that the attempt to effect the saving in benefits of just over £2 million a year may give rise to anomalies that will impose hardship. If the Government are in earnest in their monitoring effort, then the results should be made available to Parliament for examination and debate.

There is nothing whatever for the Government to fear in this. It is admittedly a matter of public interest and concern. It is admittedly a matter that should be reported to both Houses of Parliament. There is no reason whatever why it should not be done. The Government may say, "Ah, we intend to do this, anyway", which is their get-out. But we want to make sure. To be quite honest, and not being too personal, we do not quite trust them, and if they would put it in the Bill we would say, "Well, they're very good people. They have put it in the Bill and they can't get out of it". This is what I am putting to the Government. We do not distrust their principles; it is their actions which give us cause for great concern. Therefore, I hope the Government will accept this amendment. It is quite harmless, it is most acceptable— and I shall be very surprised indeed if they do accept it.

Lord UNDERHILL

My Lords, I should like to support my noble friend in moving this amendment and to draw attention to the fact that the report he has asked for is on both the provisions in this clause, that is, the change in waiting days for sickness benefit and also the reduction of the period for interruption of unemployment and sickness. The reason why I think the House should agree to this report is that these provisions—the whole of this Bill—are put forward on the grounds of economy. We are not arguing whether or not that is justified. What we need to ascertain is what will be the effects of the provisions in this clause.

If my memory serves me aright, when we had the previous discussion I emphasised that the voluntary organisations were extremely concerned about this reduction of the period from 13 weeks to eight weeks and the effect it may have on the disabled who endeavour to get to work. Those people are really seriously ill at intervals, and it may be a deterrent to their getting back to work. The obvious consequence of that would be an additional fall upon benefits that will have to be drawn. Therefore, we need to have this report in order to assess the effect on such individuals of the changes proposed in this clause. We will need to have a report on the effect on employment, from the employers' angle, of persons who have not felt it advisable for their own sake to get back to work. In addition, I think we need to have a report, a review, from the Government departments affected. We need to have a review from the medical profession, from the voluntary organisations and the trade unions, be- cause these measures have not been put forward on medical or any other evidence. They have been put forward solely on the grounds of economy, and therefore this review is vitally necessary.

One point that was made on the Committee stage was that the change in the waiting period for sickness benefit would be an administrative saving. It would save 500,000 claims a year and would also save the time of doctors in issuing statements on which persons could claim benefit. My noble friend Lord Wells-Pestell made the point quite strongly that we are not in the business merely of saving administrative time. We are in the business of looking after the sick and the unemployed. What we must ensure is that these changes do not have an adverse effect on the individual's employment and other matters, and that is why I think this report is so essential.

Lord CULLEN of ASHBOURNE

My Lords, the change being made in the linking rule by this clause is the first change since the rule was introduced in 1948, when the figure of 13 weeks was picked upon. It is apparent that there has been no occasion to examine the practical effect of this rule in any depth before now. This is the reason why the Government did not have available the range of statistics that would have been desirable. Action to obtain these statistics is already in hand and the Government intend to see that they will continue to be available for the future. These figures will enable the department to gauge the effect of the change in the linking period.

I am afraid, however, that statistics of this nature cannot be made available on demand. They have to be planned for, collected and analysed. Incapacity statistics are collected annually, in June of each year, but because the exercise has to be spread over the year for reasons of administrative economy the results do not become available until the following year. The first year for which the change in the linking rule will have been fully in effect will be 1981–82; the full statistics for that year will not become available until the middle of 1983.

It is necessary to explain these statistical arrangements in order to make it clear that it would not be practicable to provide in legislation for the Government to be bound to report formally by the end of 1982, as the amendment proposes. But the Government will, of course, be obtaining information from various sources, including, I am sure, those groups representing the disabled, who will be wanting to ensure that the matter is kept very much in view. Individual case histories produced by groups will, if problems do arise in practice, be particularly valuable. Information will also be coming in from the department's own case work experience. At the same time, Members of Parliament, noble Lords and the pressure groups will be seeking answers, and whatever can be said at interim stages will be said.

I ask the House not to attempt to bind the Government in the way proposed in the amendment. The Government will be watching very carefully what happens after the change comes into effect and will be ready to make information available as it emerges. We shall take note of the comments made today by noble Lords. I am sorry to disappoint the noble Lord, but I cannot ask the House to accept his amendment.

Lord WALLACE of COSLANY

My Lords, the noble Lord has not disappointed me. I am getting absolutely punch drunk with the repeated statements of the Government. This is the sort of thing we expect. This is a simple amendment which, if the Government showed any willingness at all, they could accept or else say, "Look, lads, why not make it 1983?". But they just blunder on. This is an important matter. I do not think we should part with it readily. I do not intend to divide the House on it because it is not a matter on which there would be division, but I think there should be consideration. We have still the Third Reading to come; we look forward to it with some apprehension.

Shall we put it this way? Will the Government think about it and see what they can do to meet the ideas behind it? In other words, what we want is not only that the Government should gather statistics. I should have thought that with the marvellous computers we are buying these days they could probably have done it a bit more quickly, but perhaps they are cutting down on them; we do not know. However, I put it to the Government that they should think about it until the Third Reading and see if they cannot bring forward some proposal. They should put it in a Bill; it is only right that it should be in a Bill. There should be a report to Parliament. We are talking about a very important matter. If the Government will do that, okay. I think it would be most acceptable. We are after the principle of reporting to Parliament and getting the effects, and I think that would be very helpful to us.

Baroness YOUNG

My Lords, I think if the noble Lord, Lord Wallace, reads very carefully what my noble friend Lord Cullen has said—I am sure he will read it tomorrow in Hansard—he will see that in fact we have gone a very long way to meeting the spirit of what he is asking for. We are obviously going to monitor the effects of this, and, as my noble friend has already indicated, we shall be consulting the groups of interested people, including of course organisations representing the disabled, to see how it goes. We intend to monitor the effects.

The noble Lord will also realise that it is not just a question of collecting information and statistics but of analysing those statistics. Inevitably, this takes some time. Having got them, it is not a simple head count and then you put in a figure; you have to indicate what the figures show, what they mean and how they should be presented. It is for that reason that it is very difficult to tie down the Government to giving a specific date as to when they might he produced.

That said, I am sure the noble Lord feels that even though we cannot accept the amendment, we have taken note of the point he is making.

On Question, amendment negatived.

Clause 4 [Reduction and abolition of earnings-related supplement and addition]:

6.1 p.m.

Lord WELLS-PESTELL moved Amendment No. 10: Page 4, line 32, leave out ("unemployment benefit").

The noble Lord said: I think I ought to begin by saying that the noble Lord, Lord Cullen of Ashbourne, has certainly proved me wrong because we have just dealt with an amendment in which no mention at all was made of money. I beg to move the amendment standing in my name. We are now dealing with the reduction and abolition of the earnings-related supplement and addition—Clause 4 on page 4 of the Bill. I want to deal with subsection (2) of Clause 4, in the sense that I wish to remove the two words "unemployment benefit" in line 32. The subsection reads: Except as provided in pursuance of Section 7(2) of this Act, no earnings-related supplement of unemployment benefit, sickness benefit or a maternity allowance and no earnings-related addition to a widow's allowance shall be payable under the principal Act in respect of any period which is after the coming into force of this subsection". I want to concern myself with the unemployment benefit and to draw your Lordships' attention to the problem of unemployment which is facing the country. Like many of your Lordships, I have been politically interested and involved for a good number of years. We all know that in the course of the week that means reading many, many newspapers and many, many periodicals. I do not remember a newspaper of quality spending five pages on dealing with the problem of the unemployed as did the Sunday Times last Sunday, from which I quote: Five pages is a great deal of space to devote to a single subject. But unemployment in Britain is now on such a scale that it demands a change in the attention to it; hundreds and hundreds of thousands of families are affected; there is the prospect of the 'eighties bequeathing a legacy as bitter and divisive as the 'thirties. That is from the Sunday Times.

I am not going to discuss the political implications, nor am I going to try at this stage to apportion blame or even to suggest who is responsible for it. But in this newspaper, right from May of last year, month by month, right up to the current month, they have set out, almost day by day, the exact number of people who have lost their employment. It is some of the worst reading that I have had. Last week we were told that there were 1,659,676 unemployed. Since last week that figure has risen by several thousand.

What I am so afraid of—and I really mean this—is that unless we are very careful we shall sec the word "unemployed" as a statistic and not in terms of flesh and blood. What we mean by an unemployed person is a person like ourselves but who has no job and probably no prospect, if he is 45 or 50, of ever working again.

It may be the good fortune of a large number of your Lordships who live in the country to see very little of the unemployed and perhaps to know very little about their lives or how they live. In fact, I would go so far as to say that it is beyond the imagination of many people, if they have not experienced it or seen it, to realise what unemployment means and the degradation, the disappointment and the psychological impact that it has not only on a man hut on his wife and family.

I can quite understand that noble Lords may well be asking themselves what all this has got to do with Amendment No. 10. The amendment deals with the abolition of the earnings-related supplement for the unemployed. In the case of sickness benefit, the Government can at least argue that there has been a considerable growth in the number of employers' sick pay schemes, though that growth has been very uneven, manual workers being much less adequately provided for by employers than white collar employees. But in the case of unemployment benefit there is not even that particular excuse.

Ministers have used the growth of redundancy agreements as a justification for abolishing the earnings-related supplement but they have been unable to produce any figures to substantiate this. While there has certainly been some growth, it is probably still true that most workers who lose their jobs today get no real redundancy payments. In the case of those who do—and they are the ones we hear of who get £3,000, £4,000, £5,000 and even more—they usually take a lump sum which, because of the prospect of a very lengthy period of unemployment, they will naturally want to put aside for major expenses in the future rather than fritter it away on current living expenses. Redundancy payments have never been regarded as a substitute for adequate unemployment benefits and I do not think they ever can.

The earnings-related supplement was originally regarded as primarily a benefit for the unemployed, providing them with some protection from the financial effects of economic circumstances, of which they are in most cases innocent victims. With the present level of unemployment in this country, I suggest that they need it more now than ever before.

I do not want to take up the time of your Lordships because we went into this very fully at the Committee stage. I contend that the earnings-related supplement is something for which men and women paid in their national insurance contributions every week, on the promise that when they retired they would get an earnings-related supplement to their basic pensions, and also on the understanding that if they were sick or unemployed or suffered some other adversity they would get an earnings-related supplement. Now here the Government are laying down that no earnings-related supplement to unemployment benefit, sickness benefit or maternity allowance and no earnings-related addition to a widow's allowance shall be payable under the principal Act".

I am concerned in this amendment with the unemployed. Do your Lordships really think that this is right? I do not just mean legally right, because I am quite certain in my own mind that it is legally wrong, but is this the sort of way that your Lordships would feel was right if you had been treated like it? Would you feel it right if you had taken up—or thought you had taken up—some kind of insurance and then your insurance company ratted on you? There may be noble Lords who will say that this is not analogous but I think it is, and what I want to do is to ask your Lordships to accept this amendment. I shall divide the House on this. I should like to feel that there are noble Lords opposite who would have the courage to say that this action which the Government are contemplating in this Bill is wrong—wrong from every angle. The unfortunate thing is that a large number—and I agree that they will sit on both sides —will vote without hearing the argument. That is regrettable but it is always part of it.

I do not think that anyone can really support this. Sickness is had enough but one hopes that it will not last long. The maternity allowance is just what it says it is; but here are hundreds of thousands of men who are going to have their earnings-related supplement stopped. The earnings-related supplement will eventually be abolished. That cannot possibly be right and I ask your Lordships when we divide, to indicate—it is not that I want to defeat the Government; of course one would like to win occasionally but I think this is a matter of principle—

Lord PEA RT

Of humanity.

Lord WELLS-PESTELL

Yes, my Lords, as my noble friend reminds me, it is a matter of humanity, which is a far better way of expressing it. It is on that basis that I ask your Lordships to support this amendment because I think it is the right thing to do. I beg to move.

Lord BOYD-CARPENTER

My Lords, I would not for a moment quarrel with the strong feelings expressed by the noble Lord, Lord Wells-Pestell, about unemployment. Indeed. I share them and I agree with him very much that the worst aspect of it is the sense of futility and frustration of the man or the woman who wakes up in the morning and finds there is no job to do, who has to hang about feeling unwanted. Unemployment is a horrible thing and I do not think there need be any difference between either side of the House about it.

Very properly and rightly on this amendment the noble Lord did not attempt to attribute blame for what we all regard to be a singularly unhappy situation. In this respect I will follow his good example and equally not attribute blame. If I were to do so, it might be in a rather different direction from that in which he would have put it.

Perhaps I may apply my mind to the question of earnings-related unemployment benefit from a rather different angle. I must confess to the House that I was never in favour of it when it was introduced. In a sense, of course, there is a contradiction in terms between "earnings-related" and "unemployment benefit" because ex hypothcsi unemployment benefit is only payable after earnings have ceased. I would not rest so strongly on that if it were not reinforced by the social argument. When someone becomes unemployed, generally speaking the man who has been on the higher earnings during his working life has more resources and reserves to meet it than the man who has been on the lowest scale of wages. That must be so.

Therefore, from a social point of view, a provision which makes better allowance for the man who has been on better earnings when he is unemployed than for the man who has been on lower earnings is a questionable one. It is one on which I have been wholly consistent during the many years in which I have been involved in the subject. I have always believed in earnings-related retirement pensions—indeed I had something to do with introducing them in the first place—but I have always felt that in respect of the short-term benefits, and in particular unemployment benefit, it was not a very sound provision.

But I must face the argument which, if he will allow me to say so, was extremely well put by the noble Lord, Lord Wells-Pestell, about the question of whether there is not some breach, as it were, of an insurance contract in altering these benefits at this stage. On the face of it. that sounds an impressive argument but of course if one thinks about it and carries it to its logical conclusion it means that no Government at any time, as I understand it, can alter the level of benefits in the whole of our complex national insurance scheme, because the argument used by the noble Lord a few moments ago about earnings-related unemployment benefit would apply equally to any other benefit. The person concerned has contributed in the expectation that he will get this particular predetermined benefit and then the Government of the day come along and deprive him of the whole or part of it.

If one were really to accept that argument—and I know that the noble Lord has practical experience in the administration of these schemes—I think it must be seen that it would make the scheme really unmanageable. If we are to manage this enormous scheme, one of the major directions of public expenditure, of really enormous importance to almost everybody in the country, the Government of the day must have the right and the facility for altering it—one hopes, as in years past, always in an upward direction but sometimes, in times of difficulty like the present, inevitably in some respects in a downward direction. Therefore, I think one must not put too much weight on the argument of a kind of insurance contract.

The argument is of course weakened when one remembers that the same man who has contributed in the hope of getting earnings-related unemployment benefit will find that with the other improvements which go on being made in the scheme he will get very substantial increases on the other benefits to which so far he has not contributed. I think one must look at it in that light. Every contributor in normal circumstances benefits directly or potentially from the regular increases in the standard benefits which are made from time to time, and if the Government of the day are to be pinned down on one particular benefit by the thought that people who have contributed to it can never have it reduced, then inevitably I think that the Government of the day would say, "Then we are not under any obligation to increase the other benefits for which people have not contributed at the new rates that we are introducing". Therefore, I think the noble Lord, with respect, has a little overdone what is on the face of it a powerful argument.

So I come to the view that earnings-related unemployment benefit is a benefit which, at a time when it is, I think, generally accepted that reductions in public expenditure are inevitable, is one that naturally and properly would attract the attention of the Government of the day. I think the principle of it—this is idiosyncratic, my personal view, but it is one that is consistently held—is at least dubious. I will not press my personal view on that on the House. But I think the social argument that such resources as are available should go to the poorest of the unemployed, who are generally those who have been on the lowest earnings, is a powerful one, and that the House would put itself in rather a curious position if it insisted on additional benefits for that section of the unemployed who have enjoyed higher wages while not seeing to it that those who have suffered from lower wages share the same benefit. I hope, therefore, that my noble friend, despite the persuasive and attractive way the amendment was moved, will resist it.

Baroness GA ITSKELL

My Lords, I should like, as strongly as I possibly can, to support my noble friend on this amendment. Unemployment is the main instrument for economic recovery that is put forward every single day by this Government, by the American Government, the wonderful Mr. Ian MacGregor who is supposed to have solved their economic difficulties. I do not know whether noble Lords heard Alistair Cooke last Sunday, when he said quite plainly that America was in recession in spite of the great Mr. Ian MacGregor's ideas. He said it quite clearly. The noble Lord who has just spoken has utterly ignored the rising numbers of unemployed. What are we going, to do with them? We shall not only get into recession, we shall become bankrupt and we shall have all these millions of people unemployed. What else does he suggest we can do except to have remedial actions like the one my noble friend has put forward in his amendment, and to support such an amendment? I would like to know what other things we can do.

Lord BOYD-CARPENTER

My Lords, the noble Baroness tempts me. If she really wants me to tell the House and the Government what I think can he done to deal with the economic situation I shall he out of order.

Lord SANDYS

My Lords, with due respect to my noble friend, I think he must seek the leave of the House before speaking a second time.

Lord BOYD-CARPENTER

With great respect to my noble friend, I sought to intervene, with the noble Baroness's agreement, in the course of her speech. That is not, on my understanding of the rules, a second speech, for which of course the leave of the House is required. Courteous ladies like the noble Baroness can give way when they have asked a question. Indeed, having asked a question, it would he a very odd position if they did not give way.

6.25 p.m.

Lord UNDERHILL

My Lords, the noble Lord, Lord Boyd-Carpenter, endeavoured to appeal to our consciences on the grounds of the comparison between the better off unemployed, f you can use such an expression, and the worse off unemployed. I would like to know how the noble Lord reacted to the appeals we made on this side on the question of the disabled. One would imagine that we are talking about people who have got fantastic salaries. I understand the situation is that, based on the previous year, a person who was getting an average wage of £95 a week, which is a marvellous figure, would be getting earnings-related supplement of about £14.50. I dare say noble Lords opposite, as well as noble Lords on this side, know people who are earning £95 a week, a man and wife and possibly three children. We know when he is out of work what commitments he has got, and we know what bank balance he has got—usually nil.

When this scheme was introduced in 1966 I understood it was done in order to cushion the effects of unemployment. Unemployment now is affecting vast sections of the community, the better off persons as well as the worse off. It sounds very good to appeal to our social conscience, but many people earning £4,000 or £5,000 a year, with their commitments, would he driven to get supplementary assistance to see themselves through because of those commitments. Also I understand that the scheme was introduced in 1966 to try to assist mobility of labour. The noble Lord yesterday spent quite a lot of time talking to us on another issue about mobility of labour. This is still an issue before us now, and in fact we are being told more than ever before of the necessity to move because of unemployment in different regions. Therefore, I believe there is a lot of sense in this amendment.

Once again I say, as I have said on other issues: Tell me where this is in the Conservative manifesto? If many of the things on the social insurance side had been put in the Conservative manifesto, if people had been told what they were going to do to the disabled, if they had been told they were going to cut out earnings-related supplements, I wonder what the reaction would have been. Noble Lords opposite on many occasions say, "This is a manifesto commitment". This was not in the manifesto; it is something that has been brought in since without any justification, except the one issue, the economic necessity. I will come back to this time and time again, that some of these issues could have been dealt with in other ways; they could have been found from the income tax cuts of £4,500 million: it may be that a little hit could have been found from defence expenditure, in order to see that social benefits are made available to people who really deserve them.

Lord BANKS

My Lords, the noble Lord, Lord Boyd-Carpenter, speaking about earnings-related supplement, suggested—and one can see a good deal in this argument—that it was helping people rather better off than those who were suffering the most from unemployment. But I think he would agree that there is a top limit; it is not an earnings-related benefit which goes right up the scale. You do not have to be earning a princely income in order to get the full amount of the earnings-related supplement. It is designed to help with the sudden reduction in income, and the continuing commitments which can place some people —not necessarily those at the bottom of the income scale—in an extremely difficult position. One wonders, if we are going to remove earnings-related benefit, or indeed any benefits, or reduce them, whether there ought not also to be reductions in contributions. That I think would frustrate the Government's intention, because, as I understand it, the intention is to accumulate funds in the National Insurance Fund.

This brings me back to what I was saying about capacity to pay. Whether it is the earnings-related supplement that we are dealing with or the question of a 10-week interruption instead of eight weeks, I was maintaining that the money is there to pay, that it is there in the National Insurance Fund, and only 18 per cent. of that comes from the Exchequer; the capacity is there. I did not say, as I think the noble Lord, Lord Boyd-Carpenter, was suggesting, that what you spend on national insurance benefits has no effect on the economy.

I fully realise—we have had some interesting discussions about it in this House—that if you maintain contributions and reduce benefits you accumulate funds in the National Insurance Fund, and this has its impact on the public sector borrowing requirement; it reduces the public sector borrowing requirement. I can understand that one might want to do that. The Government want to do that as an instrument of economic policy, and an economic policy which they believe is necessary at the present time. But I do not accept that it is beyond our capacity to pay for earnings-related supplements or for a 10 week interruption instead of eight weeks, because I believe that the money is there in the fund and no reduction in contributions is proposed.

6.30 p.m.

Lord SANDYS

My Lords, we have had a lengthy and very useful debate on this amendment introduced by the noble Lord, Lord Wells-Pestell, in terms which I think were at times moving. But the arguments brought to bear from the full height of his experience by my noble friend Lord Boyd-Carpenter were particularly significant. He has advised your Lordships that he was guardian for six-and-a-half years of the National Insurance Fund as Minister of National Insurance. He was also a Cabinet Minister with experience at the Treasury, and I think he brings to bear on this subject a very great deal of expertise in a field in which many of us—and I speak for myself—have very much less experience than he does. We are grateful to him for the information which he has brought to bear about the insurance contract argument It is a fallacious argument.

I attempted in Committee to show that this argument was fallacious and I did it somewhat lengthily with quotations going back to 1946. My noble friend did it very much more succinctly and in a few sentences. Evidently the noble Lord, Lord Wells-Pestell, was unimpressed by my arguments, but I believe that at the heart of Opposition thinking lies the problem that they believe that an insurance contract has in some way been legally abrogated, and I think that that is also at the heart of Liberal thinking.

The noble Lord, Lord Banks, said that the money was there in the fund. In one sense it is there in the fund, but again I quoted my right honourable friend the Secretary of State in Standing Committee who said that we were in a pay-as-you-go scheme. There are many problems here which we have not resolved in Committee, and perhaps I may be allowed to go into the matter a little further.

In so far as the insurance contract argument is concerned, I think that the situation may be summarised as follows. People do not receive the benefits that they have paid for as the books are balanced in a given year and most people are not both contributors and beneficiaries in a given year. In fact, contributors pay for other people's benefits during part of their lives and when they come to receive the benefits it is other people who pay. The contributions being paid in the current tax year go to pay for the earnings-related supplement being paid out in the current tax year. The supplement to be paid out in 1982 would have been paid for by contributions in the next tax year and the tax year afterwards. When my right honourable friend comes to set the level of contributions for these tax years, the abolition of the supplement is one of the factors that he will take into account.

I turn to the amendment itself. As the noble Lord, Lord Wells-Pestell, has explained to the House, under this amendment the earnings-related supplement payable with unemployment benefit would be exempt from abolition and would continue to be paid—though at the reduced rate introduced by subsection (1).

I share the concern which the noble Lord has expressed about the high level of unemployment and accept that there are arguments for the retention of the supplement for those who are unemployed. The noble Lord referred to the article which I am sure many of your Lordships, including myself, have read in the Sunday Times, and will keep and re-read because this is a subject of great importance. I did not notice a specific reference in the article—and I must give the subject further attention—to the noble Lord's amendment to the Bill. I shall certainly examine the article.

Nevertheless, it is vital to our economic strategy that public expenditure is reduced as part of the general effort to make the country more prosperous. In looking for savings we turned to the benefits which are payable above the basic level. In the case of the earnings-related supplement we also took into account the fact that the supplement has lost some of its original purpose and significance since it was first introduced in 1966. Further, we are maintaining the supplementary benefit net to ensure that the poorest are protected.

At this juncture I should like to refer to what my right honourable friend the Secretary of State for Social Services said on this subject. I have not previously quoted this particular extract from what he said in Standing Committee B on Thursday, 8th May, at column 905. He said: I shall not weary the Committee by going into the arguments about the Chancellor's economic strategy. So much has been said about the alleged motives for ending earnings-related supplement, about the 'Why work?' syndrome and about tax rebates. We had a long piece from the hon. Member for Wood Green (Mr. Race) about tax rebates. But, with the greatest respect to Labour Members, none of those is at the heart of the reason for the clause. The reason is overwhelmingly that it is necessary to reduce the burden of public expenditure to what the nation can afford". My right honourable friend went on—and I shall not quote him, because I think that I quoted him in Committee—to deal with our election pledges, our price protection of the retirement pension and also of the supplementary benefits scheme. I believe that in retaining these highly important aspects of the social security budget my right honourable friend has placed the emphasis in the right area.

I was interested in what some of your Lordships said as regards unemployment in other countries. The noble Baroness, Lady Gaitskell, referred to unemployment in America. I understand that in that country there has been a 30 per cent. increase in the three months up till May, whereas in France there has been an increase of 8 per cent. and in Germany 11 per cent. in that same short period of three months. I thought it unfair of the noble Baroness to suggest on the very first day that Mr. MacGregor, as the new chairman of the British Steel Corporation, was not perhaps the person to be placed in that office. That is irrelevant to this debate and I think that the noble Baroness may wish to withdraw the remark. The noble Baroness shakes her head.

Baroness GAISTKELL

My Lords, I am afraid I have been misunderstood. I was saying things about him which I had read only quite recently; namely, that there was a recession in America; that there was higher and higher unemployment and so on. I queried the fact that he may not be quite the right person. But he is there and we have to accept him.

Lord SANDYS

My Lords, the whole reason for the appointment was to bring employment back into a stable situation within the British Steel Corporation. The Government whole-heartedly support his appointment and we look forward to a period in which gradually the situation will both stabilise itself and improve.

We believe that the amendment being put forward by the noble Lord, Lord Wells-Pestell—which in some respects is similar to Amendment No. 26 which he brought before your Lordships in Committee—is not perhaps the best way of achieving what he intends to achieve. I believe that it is important to remember that the earnings-related supplement plays only a modest role in provision for people who are unemployed. Those with short spells of unemployment get little or no supplement and the long-term unemployed get no supplements because it stops after six months. The supplement is not insignificant, but it would be wrong as well as easy to overstate its importance.

The cost to the National Insurance Fund of preserving earnings-related supplement with unemployment benefit, allowing for the reduction, would be around £90 million in a full year, though supplementary benefit expenditure would be less. We should have to find comparable savings elsewhere and this would involve still more difficult choices. I must, therefore, ask your Lordships to resist this amendment.

Lord DAVIES of LEEK

My Lords, before the noble Lord sits down, I apologise for not having been present at the beginning of the debate on this amendment and for not having heard the noble Lord, Lord Boyd-Carpenter, who is an expert on this Ministry. Can the noble Lord, Lord Sandys, tell the House what is happening to the Industrial Injuries Fund?—which in my day was a very rich fund indeed. I believe that an intelligent use of that fund may have been a means of solving and modifying this problem. I should like an answer to that, and if one is not ready, I should like a note about it.

Baroness YOUNG

My Lords, I think that this is outside the terms of this Bill, but, if I can, I shall get an answer to the noble Lord and let him know.

Lord DAVIES of LEEK

My Lords, thank you.

Lord WELLS-PESTELL

My Lords, I do not have very much to say. I simply want to clear up one or two points. I think that the noble Lord, Lord Sandys, referred to Amendment No. 26, which, if he looks at Hansard, he will find I did not move. I did not understand the noble Lord's comment about my amendment and the article published in the Sunday Times. I thought that I made it perfectly clear that I wanted to use some things that were reported in the Sunday Times article in order to draw attention to the problem of the unemployed. My amendment had no connection with it, any more than the article in the Sunday Times had any connection with the amendment itself.

There is only one other point I want to make. It may well be true that the earnings-related supplement is very small in a large number of cases. I do not know what the noble Lord means by "very small", but if one is unemployed and one has a wife and a family, 50p can be a great deal and £l or £2 can be a great deal more.

The noble Lord said, as he was entitled to say, that the Government had every justification for doing this, and he also said that I spent some time talking about insurance. This was an analogy that I was trying to draw. The noble Lord is saying that a Government are entitled to do anything they like if they can get it through Parliament, and with that I should not disagree. I am saying that there are some things that are sacred. There are millions of people today going to work, paying national insurance contributions because they know that when they become 65 years of age, and if their wives happen to be more than 60 at the time they become 65, both will he able—if they want to—to retire on a pension. The noble Lord is saying that a Government can still go on collecting the national insurance contributions every week and then suddenly decide, "All right, you will not be paid your retirement pension until you are 70 and your wife is 65". There is nothing to stop a Government from doing that. However, I am saying that it would he wholly disgraceful and immoral.

6.44 p.m.

On Question, Whether the said amendment (No. 10) shall be agreed to?

Their Lordships divided: Contents, 61; Not-contents, 92.

CONTENTS
Ardwick, L.	Gaitskell, B.	Ponsonby of Shulbrede, L. [Teller.]
Avebury, L.	Gardiner, L.
Bacon, B.	Glenamara, L.	Rhodes, L.
Balogh, L.	Goronwy-Roberts, L.	Ritchie-Calder, L.
Banks, L.	Gregson, L.	Ross of Marnock, L.
Bernstein, L.	Hale, L.	Sainsbury, L.
Beswick, L.	Jeger, B.	Seear, B.
Blease, L.[Teller.]	Kaldor, L.	Simon, V.
Blyton, L.	Kilmarnock, L.	Stewart of Alvechurch, B.
Boston of Faversham, L.	Lee of Newton, L.	Stewart of Fulham, L.
Bowden, L.	Leonard, L.	Stone, L.
Brockway, L.	Llewelyn-Davies of Hastoe, B.	Taylor of Mansfield, L.
Burton of Coventry, B.	Lovell-Davis, L.	Thomson of Monifieth, L.
Byers, L.	McGregor of Durris, L.	Underhill, L.
Chitnis, L.	McNair, L.	Wallace of Coslany, L.
Cledwyn of Penrhos, L.	Maelor, L.	Wells-Pestell, L.
Collison, L.	Milner of Leeds, L.	White, B.
Davies of Leek, L.	Milverton, L.	Wigoder, L.
Davies of Penrhys, L.	Oram, L.	Wilson of Radcliffe, L.
Diamond, L.	Peart, L.	Wynne-Jones, L.
Evans of Claughton, L.	Phillips, B.

NOT-CONTENTS
Airey of Abingdon, B.	Ebbisham, L.	Mowbray and Stourton, L.
Alexander of Tunis, E.	Elliot of Harwood, B.	Murton of Lindisfarne, L.
Ampthill, L.	Exeter, M.	Nugent of Guildford, L.
Atholl, D.	Fairfax of Cameron, L.	Orkney, E.
Auckland, L.	Faithfull, B,	Pender, L.
Avon, E.	Ferrier, L.	Redmayne, L.
Bellwin, L.	Fortescue, E.	Reigate, L.
Belstead, L.	Fraser of Kilmorack, L.	Renton, L.
Bessborough, E.	Gisborough, L.	Rochdale, V.
Boyd-Carpenter, L.	Glendevon, L.	St. Aldwyn, E.
Bradford, E.	Glenkinglas, L.	Sandys, L.[Teller.]
Bridgeman, V.	Greenway, L.	Sempill, Ly.
Brookeborough, V.	Gridley, L.	Sharples, B.
Brougham and Vaux, L.	Hankey, L.	Soames, L. (L. President.)
Carrington, L. (A Principal Secretary of State.)	Hawke, L.	Strathclyde, L.
	Henley, L.	Strathcona and Mount Royal, L.
Cathcart, E.	Holderness, L.	Strathspey, L.
Clifford of Chudleigh. L.	Kemsley, V.	Sudeley, L.
Clitheroe, L.	Kilmany, L.	Swansea, L.
Cockfield, L.	Kimberley, E.	Swinfen, L.
Cork and Orrery, E.	Kinloss, Ly.	Swinton, E.
Craigavon, V.	Lindsey and Abingdon, E.	Trefgarne, L.
Craigmyle, L.	Long, V.	Trenchard, V.
Cranbrook, E.	Lonsdale, E.	Tryon, L.
Croft, L.	Lyell, L.	Vaux of Harrowden, L.
Cullen of Ashbourne, L.	Mackay of Clashfern, L.	Vickcrs, B.
Davidson, V.	Macleod of Borve, B.	Vivian, L.
de Clifford, L.	Mansfield, E.	Ward of Witley, V.
Denham, L.[Teller.]	Marley, L.	Westbury, L.
Drumalbyn, L.	Morris, L.	Yarborough, E.
Dundee, E.	Mottistone, L.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

Clause 6 [Supplementary benefit in cases affected by trade disputes]:

6.52 p.m.

Lord WELLS-PESTELL moved Amendment No. 11: Page 7, line 8, leave out ("pension or").

The noble Lord said: My Lords, I think we can take this quite briefly. The effect of this amendment would be that the proposed £12 deduction from a striker's supplementary benefit would not apply if the striker is over pension age. After all, pensioners are not expected to go on working, but many of them do because they have to. If they do so and, as a result, become involved in a trade dispute, we feel that it is plainly wrong that they should be penalised in the way suggested in the Bill.

The £12 deduction would normally apply only to a married pensioner. If he is a single striker, he will not be entitled, as your Lordships know, to any benefit at all. The effect will be that instead of getting the normal long-term weekly rate of benefit for a married couple, which is £43.45, he will first have this reduced to £21.70, because he would not be entitled to anything for himself as a result of his own requirements being excluded from the assessment. That figure will then be further reduced by the £12 deduction, which means that he will be left with only £9.70 per week to meet those of his own needs as well as those of his wife.

In most cases, I think she too would be over pension age. He may, or may not, get strike pay to replace all, or part, of the £12 deduction. That would depend not only on what the union can afford but on whether of course the strike is recognised or not. In view of the time, I do not think that I shall add anything more, but I should like to hear the Government's view on this.

Baroness YOUNG

My Lords, the effect of this amendment would be to exclude strikers over pensionable age—that is 65 for men or 60 for women—from the £12 reduction in supplementary benefit. The effect of it would be to put these strikers in a special privileged category and to ensure that they received £12 a week more supplementary benefit than their fellow strikers who had not yet reached the ages of 65 or of 60.

The Government believe that the decision to strike must be a personal decision for the individual worker. It would be unfair if certain workers doing identical jobs under identical conditions received a higher rate of supplementary benefit while on strike simply because they had reached a certain age. The number of people over pensionable age who are involved in a trade dispute is, of course, likely to be very small, but we see no reason for excluding them from this part of the clause.

This is a matter that we discussed at considerable length in the earlier stages of the Bill. As my noble friends and I made clear, the main purpose of Clause 6 is to carry out our manifesto pledge to make sure that trade unions pay their fair share of the cost of supporting their members who are on strike. There is no case for relieving them of this responsibility for those members over 65 for men or 60 for women and placing it back on the taxpayer. I hope that with this explanation your Lordships will recognise that we cannot accept this amendment, and that the noble Lord, Lord Wells-Pestell, will withdraw it.

Lord WELLS-PESTELL

My Lords, I am obliged to the Minister for the comments and observations. It is not entirely a surprise as to the line she has taken in this matter. It is not at all unexpected. I shall certainly look at what the noble Baroness has said, because I feel that there is a case here that merits special consideration, and I shall wait until I see Hansard tomorrow.

Amendment, by leave, withdrawn.

Baroness YOUNG

My Lords, I think that this might be a convenient moment to break for dinner. I beg to move that further consideration on Report be now adjourned until eight o'clock.

Moved accordingly, and, on Question, Motion agreed to.