§ 2.53 p.m.
§ The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Baroness Young)
My Lords, I beg to move that this Bill be now read a second time. In introducing the Bill I believe that it is essential to set it in the context of the Government's overall economic strategy. For, although it is a Social Security Bill, its purpose is primarily financial. It is a short Bill of only eight clauses and, leaving aside Clauses 7 and 8, which are largely technical in nature, Clauses 1 to 5 are entirely concerned with reducing public expenditure and so making a modest but significant contribution to the task of putting the nation's economy right. Clause 6 implements a pledge made at the time of the general election by this Government to modify the financial treatment of strikers' families by altering the rules governing the payment of supplementary benefit in these cases. I begin, therefore, by saying something of the economic background to the Bill.
The Government believe that, as a country, we must return to a sensible level of public spending so that taxes and Government borrowing can be reduced. We inherited expenditure plans which were too high and were set to grow considerably faster than production. I believe that your Lordships understand the problem created by the gap between planned expenditure and economic growth and that you will understand that it is impossible to ignore a budget as large as that needed for social security if we are to implement our commitment to reduce public expenditure.
The problem we face is that in social security, as indeed in other services, expectations have been built up over 1110 many years. There has been a continuing expansion of the whole range of social security benefits and these expectations have been combined with the great demographic change in the population. For example, one of the fastest growing groups is those aged 75 and over, thus making for a great increase in real costs.
At the same time the economy has limped along. Growth in the economy has averaged 1 per cent. a year since 1973 and part of that has been due to North Sea oil. Manufacturing output is lower now than it was during the three-day week¤that is to say the first quarter of 1974¤and the outlook for 1980 is not encouraging. Growth is expected to fall by 2.5 per cent. compared with 1979. Increased public expenditure has come largely from increased borrowing and the resulting debts have now caught up with us. Debt interest at £ 10, 000 million a year is now the biggest single charge on the Exchequer and costs more than retirement pensions. We have undoubtedly had the benefit of many social security and other benefits, but in the course of that achievement we have piled up debts for our children and for our grandchildren.
As I have already indicated, the Bill before the House is designed to reduce expenditure, but in saying that I would like to emphasise two facts. First, the social security budget costs some £ 20 billion a year which is equal to a quarter of all public expenditure. The Bill is designed to save a relatively modest sum of about £ 270 million in 1981–82 and £ 480 million in 1982–83, that is, 1.35 per cent. rising to 2.4 per cent. of the social security budget. Exaggerated statements that it means the end of the welfare state are therefore totally misplaced. For, at the same time¤and it is important to remember this¤the Government have taken steps to ensure that the elderly will continue to have their retirement pensions protected and so will those on supplementary allowances¤that is, most of those on supplementary benefit who are under pension age. Supplementary pensioners and others getting the longterm rate of supplementary benefit get a little less than the price protection this year, because their rate is being aligned with the retirement pension¤a point your Lordships will remember from the Social Security No. 1 Bill.
1111 In addition, the Government are giving extra help to needy families with children through the family income supplement scheme and through the child benefit addition for lone parents. Mobility allowances for many disabled people will also be increased in November from £ 12 to £ 14–50 a week; attendance allowance and war and industrial disablement pensions will go up in line with prices forecasts.
So much for the background. I turn now to the specific measures in the Bill. Clause 1 amends the up-rating provisions of the Social Security Act 1975, to enable the amount of the increase in certain specified benefits to be less, by up to 5 per cent. of the current benefit, than the amount necessary to restore their value. This means an increase of 11.5 per cent. instead of 16.5 per cent. from November 1980. The benefits concerned are unemployment benefit, sickness benefit, maternity allowance, invalidity benefit; industrial injury benefit and unemployability supplement¤the industrial injuries counterparts of sickness and invalidity benefits; and the increases for adult dependants paid with these benefits. The clause applies to the 1980 up-rating and it can be extended by Affirmative Resolution order to either or both of the 1981 and 1982 up-ratings.
It is important to remember that the benefits affected are ones which are not taxed at present but which it is generally agreed should be brought into taxation, for these are benefits which replace earnings. My right honourable and learned friend the Chancellor of the Exchequer announced in the Budget speech that benefits for the unemployed would be brought into taxation in 1982 and that arrangements would be made for the other benefits to be made taxable as soon as possible thereafter. Administrative difficulties make it impossible to achieve taxation of these benefits earlier, but, as I have explained, savings in the social security budget need to be made immediately. However, the savings that will be achieved¤about £ 130 million net in 1981–82¤are, in fact, only about one-third of the revenue which would be obtained if the benefits were taxed. Many people would, in fact, be paying substantially more by way of tax than they 1112 lose by way of abatement¤not least because very often these benefits are paid in years when there are also substantial earnings. The effect at present of the benefits not being taxed is, of course, that an income composed of benefit and earnings is worth more than an income of the same amount composed entirely of earnings.
Particular concern was expressed in another place about the position of invalidity pensioners, and I know that similar great concern will also be expressed in your Lordships' House. As your Lordships will know, invalidity benefit is the long-term maintenance benefit which replaces sickness benefit after the latter has been paid for 28 weeks of incapacity and ¤like sickness benefit but unlike retirement pension, to which it is closely akin¤it has not yet been brought into taxation. As a long-term benefit, invalidity benefit differs, however, from most of the other benefits affected by this clause, in that the others are paid for short-term eventualities. In view of this, my right honourable friend the Secretary of State for Social Services has given an undertaking that, subject to the availability of resources, the rate of invalidity pension will be restored to the same level as retirement pension once it is brought into taxation, which will be as soon as possible after April 1982. On 21st May, in another place, he extended this assurance to cover unemployability supplement, which is the counterpart, under the Industrial Injuries Scheme, of invalidity benefit. Those are two important points which I wish to emphasise.
The Government's position on the abatement of the other, short-term benefits is that when they are brought into taxation their level will be reconsidered in the light of all the relevant factors including the economic circumstances at the time. Finally, I think it worth repeating that the up-rating of the supplementary benefit in November will not be affected by the abatement measures in Clause 1.
I come now to the second clause of the Bill. This stops the automatic annual increase in the retirement pensioners' earnings rule¤that is, the amount a pensioner can earn without his pension being abated¤at £ 52 per week in November. The then Conservative Op- 1113 position secured the rise in the earnings rule to its present level, but this Government are committed to its abolition. However, the Government felt that, in the light of present economic circumstances, at a time when other groups are having to make sacrifices, it was difficult to justify an increase in the limit this year. The savings are about £ 1 million for every 1 per cent. rise in earnings over the year. The Government hope that it will be possible to raise the limit next year, for we are well aware of the arguments on this issue, but this must, of course, depend on the circumstances at the time. We remain committed to abolishing the rule as soon as possible.
Further savings, approaching £ 20 million in a full year, are expected from the effects of Clause 3, which is intended to take place in September 1980. This clause makes two provisions. The first is to eliminate payments of benefit for very short spells of incapacity. At present benefit is not normally paid for spells of incapacity lasting three days or less, but payment may be made where these short spells link with other spells. As a result of this clause, however, spells of incapacity lasting less than four days will not link with other spells and will never attract benefit. This change will produce savings of around £ 2 million in a full year and ease the burden of local offices and general practitioners but, as there is little financial need for these short periods, it is unlikely to cause hardship. I should remind your Lordships that there is a Green Paper out for discussion at the moment which deals with the possibility of employers, who already cover the great majority of employees for sick pay, taking over full responsibility for the first eight weeks of incapacity. Employers would not be required to pay for the first three days, though many do and would continue to do so.
The second part of the clause concerns the linking of claims for benefit. Linking allows separate spells on incapacity or unemployment benefits to count as a single period if the gap between them does not exceed 13 weeks. This clause will reduce the period from 13 weeks to eight weeks. Linking has different effects, some of which are favourable and others unfavourable to the claimant. Where spells link, fresh waiting days without benefit do not have to be served. Linking 1114 also allows a claimant to qualify for the higher rate invalidity benefit without necessarily having first to receive sickness benefit for 168 days without a break.
A reduction in the linking period will mean that fewer spells will link so that for some, more waiting days will have to be served. It will also mean that people who experience short, widely-spaced spells of minor illness will be less likely to qualify for invalidity benefit than the chronic sick for whom the benefit was intended.
Concern has been expressed in another place and by expert voluntary bodies representing the interests of the disabled about the extent to which the reduction in the linking period originally proposed by the Government¤to six weeks¤might cause hardship to the chronically sick who were attempting to re-establish themselves in employment or who suffered recurrent breakdowns in health. At present, entitlement to invalidity benefit is retained provided the health breakdown occurs within 13 weeks of the previous long incapacity. It was thought that too steep a reduction in this period might discourage the chronically sick from attempting to get back into employment as they would be afraid of losing their entitlement to invalidity benefit if they were unable to continue to work.
The Government accept that the reduction to a six-week linking period as originally proposed might in some cases be a little too short, and they therefore decided to accept an amendment which instead reduced the linking period from 13 to eight weeks. This should be long enough to safeguard the position of the chronically sick while at the same time reducing scope for inclusion of those for whom this benefit was never intended.
For the unemployed the reduction in the linking period will help those who suffer from frequent spells of unemployment. Under the clause such a person would need only a gap of eight weeks and one day between spells of unemployment to start a new period of interruption of employment. This will lessen the likelihood of exhausting unemployment benefit, which is payable for a maximum period of 312 days in any one period.
The Government have announced that they will be closely monitoring the effects of this change on those receiving 1115 benefits for incapacity or unemployment. The clause provides for regulations to be made by Negative Resolution to increase the linking periods for unemployment or incapacity benefits, or both, should this be considered necessary.
Clause 4 of the Bill provides for the reduction and subsequent abolition of the earnings-related supplement payable with unemployment benefit, sickness benefit, maternity allowance and, in certain circumstances, injury benefit, and the earnings-related addition to widow's allowance. It is intended that the reduction should take place from January 1981, and abolition from January 1982. The savings from this measure are substantial. The gross figures from abolition are about £ 360 million in the first full financial year, offset by supplementary benefit payments of about £ 75 million at current benefit rates. These broad estimates are being refined, and savings may be rather higher than originally estimated¤around £ 385 million gross.
When savings in social security expenditure have to be made, it is better that they should fall on the provision made for higher benefits for the higher paid rather than on basic benefits. It is significant that under successive Governments the real value of the earnings-related supplement has been allowed to decline since 1971. Maximum earnings-related supplement is now worth half what it was. A further factor is that since the supplement was introduced in 1966, occupational sick-pay schemes have been extended and improved, maternity protection has been introduced and redundancy payments have been improved so that there is in many cases less need for the supplement than formerly.
My Lords, it was suggested in another place that the abolition of the earningsrelated supplement in 1982 was in some way a breach of contract. The argument that was put forward was that the supplement paid out during 1982 will be paid for by contributions which people are paying at the moment, and that they will, therefore, lose a benefit for which they have already paid. It is true that entitlement to the supplement during the benefit year 1982 will be based on earnings on which contributions have been paid in the current tax year. With an earnings-related benefit 1116 there has to be an earnings reference point, and this rather distant one has been the best we could manage without a major headache for employers. But 1980–81 contributions do not pay for 1982 benefits. To explain why this is the case, it may be helpful if I spend a moment or two explaining the basis on which the National Insurance Scheme is funded.
The original proposals put forward by Beveridge were for a strict insurance scheme. The contributions each individual would pay over his lifetime would be related to the average benefits he could expect to receive over his lifetime. An inevitable consequence of this was that it would be many years before full retirement pensions could be paid out: Beveridge suggested 20 years. The Government of the day in fact introduced full pensions from the outset; and it followed that the scheme as originally designed was not financially viable. There was no problem in the early years, as many were contributing while only a few were drawing pensions, but it was clear from the very beginning that this position would change over time and that slowly but surely the taxpayer would be called upon to make an ever-increasing supplement to the income from contributions.
In 1959, therefore, the Government changed to a radically different approach to funding. Instead of contributions being designed to meet an actuarial estimate of the benefits accruing to an individual, they were set so that the income in each year would meet the outgo from the National Insurance Fund in that year. The basis of funding had been changed from an insurance principle to what may be called "pay as you go". The change was formalised by the passing of the National Insurance Act of 1959, and the system has been run on a pay as you go basis ever since. I may stress that this has worked to the advantage of all concerned, since it has made it possible to introduce real improvements in the level of benefits which the population can enjoy immediately. Had we stuck to strict insurance funding, real improvements in benefits could only be introduced years after an increase in the real level of contributions.
The position, my Lords, may thus be summarised as follows. The contribu- 1117 tions 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 next tax year and the tax year afterwards. When my right honourable friend the Secretary of State comes to set the level of contributions for those tax years, the abolition of the supplement is one of the factors he will take into account.
Clause 5 of the Bill, which deals with the entitlement of occupational pensioners to unemployment benefit, will have the effect of producing further savings of some £ 25 million in a full year. It provides for the abatement of the unemployed benefit paid to men or women aged 60 or over who receive an occupational pension in excess of a prescribed amount of at least £ 35 a week. This is a measure which has been proposed by some who now oppose it and opposed by some who now propose it. But the fact is that what in easier times may have had fairly evenly balanced arguments for and against it the Government now believe has much to commend it. Unemployment benefit is intended as compensation for loss of earnings arising from unexpected or unforeseeable contingencies. Retirement at the end of a pensionable career where the person receives compensation for loss of earnings in the form of a substantial occupational pension is not really such a contingency. In the present economic circumstances it does not make sense to pay full unemployment benefit to such persons, especially as their availability for work may be suspect.
It has been argued that rather than reduce the benefit payable to all occupational pensioners the Government should make more effective use of the "availability for work" condition. It has always been a condition for receiving unemployment benefit that a claimant must be available for work. But it is very difficult to test the availability of occupational pensioners when jobs for older people tend to be scarce, particularly in those areas with a high proportion of retired people. In a recent survey, over half of those with substantial occupational pensions who were also receiving unemployment benefit admitted that they were not looking for work.
1118 The Government's intention is that only a substantial occupational pension should be taken into account¤hence the figure of £ 35. This would mean that a married man with the standard flat rate benefit, including an increase for his wife, will receive some unemployment benefit unless his occupational pension exceeds £ 68 per week in 1981.
Finally on Clause 5, I would add that entitlement to contribution credits will not be affected by the clause. Occupational pensioners will still be able to claim credits for unemployment even though they may receive no benefit. People of 60 are often worried about maintaining their national insurance contribution record. This will still be possible, so that anyone who is unable to get unemployment benefit will still be able to claim, and be credited with, contributions to protect his retirement pension.
Unlike the other main clauses in this Bill, Clause 6 is not primarily intended to reduce expenditure; its aim is to achieve a greater sense of financial responsibility and ensure that the union (or the striker himself, if he has no union) meets part of the cost of support of strikers' families now provided by the state. The clause provides that, where someone is out of work as a result of his involvement in a trade dispute at his place of employment, the supplementary benefit paid for the requirements of his family will be reduced by £ 12 per week. In addition, the clause amends the rules governing the disregard of any tax refunds received by a striker. The striker only gets a tax refund because he is on strike and has no earnings. In most strikes it is part of his regular weekly income. For the striker who claims supplementary benefit there is no case for duplicating part of the tax refund with an extra amount of benefit. Tax refunds will, therefore, be taken fully into account.
At present, although strikers are disqualified from receiving supplementary benefit in the normal way they can get limited payments if they are in urgent need. In future, as a general rule, urgent need payments will not be available to strikers and their families. There is, however, power in the Bill for regulations to be made to deal with individual cases of hardship. The Government intend to use their powers so as to cover the rare compassionate case without opening the 1119 door to wholesale abuse and so defeating the purpose of the clause. The circumstances we intended to cover by recoverable urgent need payments are hardship through loss or damage caused by fire, flood or a similar disaster. Non-recoverable payments may be made for: first, fares to visit ill or dying relatives; secondly, essential fares for special transport to take handicapped or disabled children to school; thirdly, immediate necessities for a new-born baby born during a long strike; or, fourthly, repair or supply of essential household equipment if, for example, there is no working form of heating during the winter. If experience shows that there are other rare circumstances for which similar provision should be made Parliament will be asked to approve regulations conferring the necessary powers.
The Government believe that for too long now strikes have been used as a weapon of first rather than of last resort. We believe it right that unions should face up to their responsibility to provide strike pay when their members strike. Non-union members, too, if they go on strike, must be ready to provide towards the upkeep of their families. The changes made in the clause to the financial support available to the families of strikers are overdue and are designed to make the unions accept their responsibility.
I recognise that this will be regarded as a tough Bill, but it is one that is designed to help us in a very tough economic situation. I should like to assure the House that in making these proposals in the Bill my right honourable friend the Secretary of State for Social Services looked very carefully at the whole social security budget, and he believes¤and I agree¤that the savings that he is making are fair. However, despite the savings that the Government are proposing to make, the up-rating in social security benefits from November will cost more than £ 3 billion extra in a full year. I believe that savings made now will contribute towards the national recovery that we are all seeking, and which will in turn ensure that we will continue to be able to pay for the benefits which will be needed in the future. My Lords, I beg to move.
1120 Moved, That the Bill be now read 2a.¤(Baroness Young.)
§ 3.20 p.m.
§ Lord WELLS-PESTELL
My Lords, some 10 minutes or so ago it was my intention not to speak at any great length in this debate. One appreciates the fact that at Second Reading one can merely set out one's views. If one wants to deal in detail with the Bill and its various clauses, one can do that only at the Committee stage, and so this afternoon it is not my intention to go very deeply into each of the clauses nor to say in detail what we on this side of the House feel about them.
It is perfectly true that this is a little Bill, but if your Lordships look at it in detail I think you will agree that it would not be unfair of me to say that it is a very nasty Bill. In this regard one need look only at the Long Title of the Bill:to amend the law relating to social security for the purpose of reducing or abolishing certain benefits and of relaxing or abolishing certain duties to increase sums ".We have been told by the noble Baroness that the sole purpose of the Bill is to save money; to save £ 270 million in 1981–82, and £ 480 million in the following year, 1982–83.
During the Committee stage of the first Social Security Bill in another place there was no suggestion that the Government were considering a fundamental change in their policy in respect of social security, and I ask the noble Baroness why, after the first Social Security Bill had been before Members of another place, did it suddenly become necessary immediately afterwards to introduce a No. 2 Bill?
It is a Bill which is aimed at that section of the community least able to afford it. The noble Baroness spoke about the need to save money, and I wish to ask her what right the Government have to save this amount of money at the expense of that section of the community who can least afford it. Why do they not devise a scheme whereby those members of the community who are in a far better position than the majority help to provide the amount of money that is needed?¤about £ 700 million, I gather. It would be comparatively easy to devise a system of 1121 taxation which would not be unbearable to that section of the community who can afford it. I wonder whether it could be a conscious attempt to depress the standard of living of millions of people to such an extent as to affect their purchasing power and so assist in the bringing down of inflation; and so I again ask, why was the No. 2 Bill necessary?
As I understand it, the Bill is an attack on the so-called work-shy syndrome, whereas there is no evidence at all that they exist in any substantial numbers. It is an attack upon strikers' families, and it also arises from the Government's belief¤which some of us have heard about time and time again¤that many people are better off on social security than they are at work; and again I ask, where is the evidence of this?
I wish to ask noble Lords opposite really to study the Bill. I think that the noble Baroness would agree with me that it is a complicated Bill. It is not easy to understand what the Bill seeks to do. Although one may have listened very carefully to what the noble Baroness has said today¤I did, and I am sure that most of your Lordships did, too¤nevertheless it is very difficult to under stand the matter accurately and to grasp what the Bill stands for and what it seeks to do. It is because I regard it as a serious and a complicated Bill, which I believe will have devastating effects upon a large section of our people, that I ask noble Lords opposite to study it in detail, and not to be content merely to try to remember what the noble Baroness has said, nor even just to read Hansard tomorrow. Rather they should study the Bill, because I am quite convinced that, if they do so, they will not be able to support some of its provisions; nor will they be able to go into the Division Lobbies, as we shall all be called upon to do, when we reach the Committee stage.
I wonder what is the reason for this sudden additional Bill. Did the Government get their sums wrong? Did they not know the financial position, or did they see this as a further opportunity to launch an offensive against the working people of this country and the trade union movement as a whole? This is how some of us see the Bill, because there is no escaping the fact that it Will bear down heavily 1122 upon people who cannot afford the reductions envisaged in it.
The noble Baroness was perfectly frank when dealing with Clauses 1 to 4. They affect the unemployed. They affect the sick. They affect the disabled, and, as I understand the Bill, they affect those receiving maternity allowance and widow's allowance. Under Section 125 of the Social Security Act 1977, sickness benefit, unemployment benefit and maternity allowance rise each year in line with prices, while invalidity benefit should rise in line with prices or earnings, whichever is the greater. As I understand the position, each of these groups will be affected by the Bill.
I notice that when the matter was before the other House my right honourable friend Mr. Orme quoted from the Disability Alliance, which stated:The Government has launched a deplorable assault on the welfare of sick and disabled people. The future living standards of all those who rely on social security benefits are to be cut. But one group has been singled out for a double blow—the 600, 000 long-term sick and disabled people who receive invalidity benefit ";and, as I understand the noble Baroness, that is the situation. In view of what is likely to happen to the disabled and the sick, I must say that I am surprised that we have nobody on the list of speakers today representing the disabled lobby. When we were in Government, I cannot remember a single occasion on which those who spoke for the disabled did not take every opportunity to call our attention to the needs of the disabled. Yet there is no one here on the list today, on the Government side, to speak for the disabled. I think that we on this side of t he House are entitled to say that it is a reflection upon the organisations which seek to serve the disabled that they are not calling this Bill into question.
I go further, and say this. I look to the two right reverend Prelates on the Bishops' Bench. There are 26 right reverend Prelates who are Members of this House. I cannot remember a single debate or Bill on such a matter as this during our period in office when somebody representing the Church of England Board for Social Responsibility did not make a contribution; and whether or not I, as a Minister, agreed with that contribution, it was a valuable contribution. Yet we are to hear nothing from the Bishops' 1123 Bench today. I must say that it is always dangerous to pick people out, but I shall listen with very great interest to the one person on the list of speakers who has probably had more experience in this field than anybody else¤the noble Lord, Lord Boyd-Carpenter; and perhaps I may strain the indulgence of the House by wishing him a very happy birthday today. It may well be that I shall disagree with a lot of what he is going to say¤I do not know¤but it will be worth listening to him.
My Lords, the first Social Security Bill amended the indexation of the invalidity benefit by tying it to prices, like the other benefits I have mentioned. At the next up-rating, November 1980, instead of rising by 16½ per cent., certain benefits will increase, as the noble Baroness says, by only 11½ per cent. I know that the Government feel that these benefits should be taxable, and there is perhaps nothing between us on this matter of taxation of benefits. I accept that the retirement pension is liable for taxation; but I gather from the noble Baroness that, as it seems unlikely that the Government will be able to do this before 1982 to 1983, they are reducing these benefits by 5 per cent. The Government are presumably working on the assumption that all those receiving any of these benefits will be eligible to pay tax. My Lords, this is not so; and it really is a reprehensible way of saving money.
How many people in receipt of these benefits will have to apply for supplementary benefit? In point of fact there will be a considerable number who will have to apply for supplementary benefit as a result of this situation. I understand it is estimated that an additional 110, 000 people will have to apply for supplementary benefit when the earnings-related supplement is reduced. I want to ask the Government to give an assurance that, when these benefits are brought into taxation, any cuts made under Clause 1 will be restored. Not to do so will be little short, if short at all, of a scandalous situation. The earnings rule for retirement pensioners is dealt with by annual increases in fine with earnings. At the present time, a pensioner may earn £ 52 a week before his pension is reduced, and I understand that it is being frozen at that figure.
1124 I cannot say what the rise in earnings will be by next November, but the Government's assessment for prices is 16½ per cent. If the earnings rule amount was raised by 16½ per cent., the limit would then increase to £ 60–58; and it seems to me that if we are going to have indexation, then it should be applied to the earnings rule, and the earnings rule should not be frozen. I think this is a further example of a complete change in policy. Not only did the Conservative Party¤and here I speak from memory¤secure the indexation of the earnings rule during the last Government, but in their election manifesto they promised to phase out the earnings rule entirely during the lifetime of this Parliament, which I gather they are not proposing to do.
My Lords, I want to come quickly to Clause 3. At present, neither unemployment benefit nor sickness benefit is paid for the first three days. The noble Baroness has set this out very clearly, and I do not propose to go into any great detail; but I understood her to say that short periods of unemployment are going to be treated differently. I want to ask her why. Is it because the Government are afraid that those in casual work will not look for permanent work¤not that it is possible to get it these days¤if they are able to claim some sort of short-term benefit?
I want to come to Clause 4, the earnings-related supplement, which I think is one of the worst features of this Bill, and to what the Government are proposing to do in this clause. What the Government are proposing to do may be quite legal, but in my view it is open to serious question. I recognise what the Government want to do in this matter, but people have paid national insurance contributions over a long period of time, and I would find it very difficult to believe that in assessing the amount of their weekly national insurance some consideration has not been given to the amount which is likely to be paid out by way of an earnings-related supplement. I cannot think that we devise an insurance scheme and fix a weekly rate without taking into account what has to be paid out. What I suggest, therefore, is that, in working out the amount that has to be paid by way of national insurance each week, account must have been taken of the 1125 earnings-related supplement. That is now to be reduced.
I find going through my mind such words as "theft", "robbery", "stealing", "larceny" and "embezzlement", but I do not know which, if any, apply. However, it seems to me to be thoroughly dishonest to take money from people for national insurance purposes and then suddenly to say, "We are going to reduce benefit from 15 per cent. to 10 per cent.". I do not intend at this stage to go fully into this matter; that will be done in Committee, when one can argue the situation in some detail. At this stage I will merely say that I should have thought that the action which the Government are taking in this matter is on the fringe of the law.
I content myself today by reminding your Lordships that under Sections 14(7), 22(4) and 24(3) of the Social Security Act 1975, and Schedule 6, people receiving unemployment benefit, sickness benefit, maternity allowance and widow's allowance are entitled to an earnings-related benefit, after two weeks on benefit, which can be paid for for a maximum period of six months. The percentage payable at present is one-third of earnings between £17–50, which is the lower earnings limit, and £30 a week, and 15 per cent. of earnings between £30 and the upper earnings limit of £120 per week. The Bill will reduce the 15 per cent. to 10 per cent., which will mean, if I have done my sums correctly, a loss of between £4 and £5 per week—and if I am wrong I am sure the Minister will put me right.
It means that the average employee who is in the scheme will pay, in national insurance contributions, £7–29 per week and the employer, £14–80, making a total of over £22 a week national insurance contributions paid by the worker and employer. As I said earlier, some of it really must go to the earnings-related supplement, and I question the Government's moral right to do what they propose in this matter, and we shall return to this matter in Committee. If the clause is accepted, the Government will take—that is the best word I can possibly find to describe it—£65 million in 1981 and £360 million in 1982 from people who have paid increased contributions in order that they should get 15 per cent. earnings-related supplement. Quite apart from causing 1126 about 110,000 people to apply for supplementary benefit, it means that a large number of people will be impoverished as a result.
I do not want to deal with Clause 5, which seeks to end the right of unemployment benefit to those who have reached the age of 60. As the noble Baroness said, there is to be a clawback by the Government of 10p for every 10p where the occupational pension exceeds £35. I hope that at some stage, though not necessarily today, the noble Lord, Lord Banks, who is perhaps the best authority in your Lordships' House on this matter, will have something to say about it, and then we can make up our minds.
Clause 6, which legislates for a £12 reduction in the striker's family entitlement to supplementary benefit and other penalties, is likely to prove the most contentious clause in the Bill, but I do not think this is the time to develop my argument on that; I shall be happy to do so in Committee. Meanwhile I give this warning to the noble Baroness: this and certain other clauses and matters in those clauses will be dealt with very fully, and we hope, although it is a forlorn hope, that the Government will be receptive to reason and argument. They were not on the Social Security No. 1 Bill, and perhaps I am hoping for too much.
I conclude where I started. I ask noble Lords opposite not just to answer the Division bell and assume that your spokesmen on the Front Bench are infallible and must be right. I ask each of you, as I have never done before, to read the Bill for yourself and ask yourself whether this is something you can really subscribe to. Maybe you will be able to subscribe to a lot of it. Maybe there are things in it which will offend you. I hope that if they do, we shall all have the courage to do what we think ought to be done.