SOCIAL SECURITY (No. 2) BILL

HL Deb 02 June 1980 vol 409 cc1150-94

4.49 p.m.

Second Reading debate resumed.

Lord BANKS

My Lords, I should like first to thank the noble Baroness, Lady Young, for her very thorough explanation of the provisions of this Bill. As she made very clear, the purpose of the Bill is to save a little less than £500 million a year from the social security budget. Of course, the whole policy of reducing public expenditure at a time of recession is open to question. After all, the United Kingdom Government take a lower percentage of gross domestic product than any other EEC Government, and that percentage has not increased over the last five years. But this is not the occasion to debate the general economic strategy of the Government.

However, the Government have expressed alarm, and the noble Baroness this afternoon has expressed alarm, at the growth of the social security programme within the general expenditure. It has been pointed out that 10 years ago this consisted of 17 per cent. of public expenditure; now it is 27 per cent. and totals £ 20, 000 million a year. With gross domestic product increasing at about 1 per cent. per annum, we are told that social security spending cannot possibly continue to grow unchecked. I should like to make one or two comments on that argument; that is the basic argument upon which the Government present this Bill to the House.

The first thing I would say is that social security payments make no claims on resources. Building hospitals, building schools, providing welfare services¤these things do make a claim on resources; but social security payments do not; they merely redistribute income. There are various ways of redistributing income. In the 1979 Budget the present Government redistributed £ 4, 500 million, and that sum is a quarter of the total of the social security budget. They redistributed in the 1979 Budget in the form of tax reductions a sum equal to a quarter of the total of the social security budget. At that time the richest 7 per cent. got 34 per cent. of the reductions; that is to say a total of £ 1, 560 million.

Of course, the figure of £4,500 million for the reductions does not show in the public expenditure account, because it was money given away by means of tax reduction. But surely it would have been better to have made that figure £4,000 million instead of £4,500 million, rather than have this Bill, because it is £500 million we are now asked to find through this Bill, although it was possible to redistribute £4,500 million a year ago. Of course, it is true that social security payments go to people more likely to spend than to save, but since the general level of personal savings is high at the present time I do not think we need worry too much about that.

The second comment I would make on the Government's basic argument in support of this Bill is that over one half of the figure of £20,000 million consists of contributory benefits financed from the national insurance fund, to which the revenue pays only 18 per cent. of the cost. And one half of those national insurance benefits¤that is, a quarter of the £20,000 million¤consists of retirement pensions. Pensions have not been increasing as a percentage of national average earnings. It is recognised generally that they are too low as a percentage of national average earnings; indeed this was stated recently in the other place by Mr. Prentice, the Minister for Social Security. And the cost of pensions has not raised the percentage national insurance contribution; the small increase which was made in that recently was primarily due to the increase in unemployment and in consequent unemployment benefit.

Expenditure on benefits in 1978–9 was one per cent. lower than originally estimated, and for 1979–80 some 3 per cent lower. So half of the expenditure was as anticipated and contained within the national insurance fund. One wonders whether national insurance benefits should be considered together with the rest of Government expenditure. Surely only the 18 per cent. found by the revenue should be so included.

The Government White Paper on Expenditure published at the time of the Budget this year states that expenditure on social security grew by one-third in real terms between 1974–5 and 1979–80. But half of that increase was caused by the introduction of child benefit as a taxfree allowance, accompanied by the phasing out of child tax allowances. Once the former cost of child tax allowances is taken into account, the increase is reduced to one-fifth, and part of that one-fifth is due to an increase in the number of pensioners, which was foreseen, and in the number of unemployed. In other words, a considerable part of the increase is due to an increase in the number of beneficiaries rather than to improvement in benefit levels. There has been a 10 per cent. increase over that period in pensioners, and of course they account for 50 per cent. of the cost of the total social security budget.

So we have to take these factors into account. Social security payments make no claim on resources; they redistribute income. Half the current expenditure is on national insurance benefits largely paid for by earnings-related contributions and satisfactorily coped with by the national insurance fund. Half the increase in social security expenditure since 1974–75 has been caused by the introduction of child benefit replacing income tax allowances, and part of that increase has been caused by an increase in the number of beneficiaries, pensioners and unemployed. When these are all taken into account the argument that £ 500 million must be lopped off the total of £ 20, 000 million immediately wears rather thin.

Now may I have a brief look at some of the measures contained in the Bill. We have already heard that Clause 1 provides for a reduction in the real value of a number of benefits: unemployment benefit, sickness benefit, maternity allowance, invalidity pension, industrial injury benefit, unemployability supplement, the increases for adult dependants paid with these benefits, invalidity allowance and its industrial injuries counterpart. I repeat that Clause 1 provides for a cut in the value of these benefits.

They are to be brought into tax, and this, as we have been told this afternoon, is merely an interim measure. But we do not know for certain whether, when they are brought into tax, the cut in value will be restored at the same time. There is the qualified pledge to do this subject to the availability of resources as far as invalidity pension is concerned. But that phrase "subject to the availability of resources" makes the pledge at best an aspiration, and at worst an escape hatch. In the interim the beneficiaries will be affected quite arbitrarily, and the cut will be borne by those who would pay no tax.

Invalidity benefit has been treated as a long-term benefit previously, and now a gap is to be opened up between invalidity pension and retirement pension. It is important that that should be closed, as the noble Lord, Lord Wells-Pestell, said. He also pointed out that that benefit has been subject to two cuts; as a long-term benefit it was subject to the cut under the No. 1 Bill, by which it is no longer linked to earnings as well as prices but only to prices; and now it is subject to the 5 per cent. abatement.

This clause also throws more people on to supplementary benefit at a time when we should be trying to reduce the over-large numbers dependent on that benefit. The clause also requires an amendment of the No. 1 Bill which aligned supplementary benefit and short-term benefits¤this Bill now unaligns them. Finally as regards this clause, there is the question of the rate of inflation. The Government propose to increase the benefits generally by 16.5 per cent., abating that by 5 per cent. for the benefits covered by this clause. But, with a rate of inflation at 20 per cent., it could mean a very much bigger cut than the 5 per cent. actually effected in these benefits.

Clause 2 deals with the earnings rule. We know that the Government do not intend to fulfil their pledge to abolish that rule within the lifetime of the present Parliament. But this clause, by abolishing the necessity to review the amount which a person may earn without deduction from his pension in the light of inflation, makes the earnings rule more and not less severe, and therefore goes in the opposite direction to the Government's pledge.

Clause 4 abolishes the earnings-related supplement added to unemployment benefit, sickness benefit, maternity allowance and widow's allowance. My party has argued since 1963 for earnings-related short-term benefits to cushion the immediate effect of unemployment and sickness and to avoid hardship. Having been the pioneers in that regard, and having seen our objective eventually achieved, we naturally look with disfavour on this clause. This clause also throws more people on to supplementary benefit.

Today I shall refer to only one more clause, and that is Clause 6. The right to strike, to withhold one's labour, is one of the rights which we acknowledge should be upheld in a free society. We may deplore the use which on occasion is made of that right. We may wish to see that right used less frequently than it is and used only as a last resort, but most of us in this House, I imagine, uphold the right. In my view the right is given to individuals and not to unions. Individuals may choose to exercise it in combination with others through a trade union. It is recognised practice that if they exercise the right they cannot claim supplementary benefit themselves, but they can claim it for their families. However, as a result of this clause, the family of a striker is to be penalised if he is not in receipt of £12 per week strike pay from a union. The individual striker cannot determine whether or not he is paid strike pay. If it is felt that the unions have a duty to pay strike pay, it would be more logical¤I do not say that it would be more desirable¤to place an obligation to do so upon the unions. It seems thoroughly unfair to penalise a striker's family because his union has not paid out strike pay.

I think that I have said enough to make clear why we on these Benches question the need for this attempt to reduce the social security budget by £500 million per annum, and why we object to many provisions in the Bill. We do not support the Bill, but in accordance with custom we shall not oppose the Second Reading

5.4 p.m.

Lord BOYD-CARPENTER

My Lords, the noble Lord, Lord Wells-Pestell, made such an agreeable personal reference to me¤he is such an artist in doing that because it so disarms a counter-attack¤that I am glad that I can begin by expressing agreement with at any rate one thing that he said. At the beginning of his speech he said that this was not the type of Bill which called for much discussion in detail on Second Reading. I agree with him that, as the Bill contains a number of clauses important in themselves, but not necessarily directly related to each other, it is a Bill that calls for more detailed discussion in Committee and for fairly brief speeches on Second Reading.

Having said that I must then take issue with the noble Lord. While exercising his rhetorical powers to the full, he looked at the noble Baroness and said¤and I took down his words— by what right do the Government come forward with this Bill to save this money? The answer is quite simple: The Government come forward with this Bill, with its avowed intention of saving money, because that is what they were elected to do and because at the general election, only just over a year ago, the Government made it perfectly clear that it was their intention to cut public expenditure; and they made it frankly plain that cutting public expenditure is not something that can be done without difficulty and without causing pain and perhaps hardship to some people. So, in reply to the noble Lords, somewhat rhetorical observation "By what right?" I say to him that the Government have the full right in a democracy to do what they were elected to do.

The noble Lord went on to say that he preferred, to the savings to be effected by this Bill, the imposition of additional taxation. If he will allow me to say so, I think that that is a remark worthy of an economic Bourbon. For that is precisely the policy which the Government of which he was an ornament, pursued with unrelenting vigour for a number of years with consequences with which we are all wholly familiar¤consequences with which this country is still struggling. The concept that because there are nice things that one wants to do, good things that one wants to do, where one just goes ahead and does them and raises the necessary taxation to do them, is not a concept that, in fact, worked when the noble Lord and his colleagues were in office and sought to do it. They produced galloping inflation, unemployment and a falling off in output.

The noble Lord must face the fact that social security, like everything else, is dependent upon the growth and strength of the national economy. This is where I quarrel with the noble Lord, Lord Banks. He said¤and he obviously liked the thought, because he said it in fact three times¤that social security payments made no claim on resources. When I was Minister of Pensions and National Insurance, I used to try that on the Treasury, with singularly little effect. The difference between me and the noble Lord is that I knew that it was phoney, but I do not think that the noble Lord does. It really is not true. If it were true, how much easier it would be. How much easier Government, and particularly social security administration, would be. But it is not true.

It is all very well to talk about transfer payments, but there is first of all¤although it is the smaller point¤the administrative cost of extracting further revenue from the taxpayer, and then the administrative cost of distributing it to the beneficiary. Neither of those is negligible. However, one must think the matter through a little further. If one is to raise further taxation to avoid these economies, broadly one can do it either through increasing direct taxation or increasing indirect taxation. If one increases direct taxation, surely it is the clearest lesson of the last few years that by diminishing incentive, by driving abroad some of the most capable and higher earners, one in fact does damage to the economy. One can argue¤of course one can¤the precise point at which that begins to operate; but that it does so operate surely is only too abundantly clear from our experience over the last few years. All right, let us say that one does it by indirect taxation: but then, of course, one raises the cost of living, including raising it against the very people whom one is seeking to benefit.

I am sure that the noble Baroness on the Front Bench wishes that the noble Lord were right; but the truth of the matter is that social security payments impose a burden on the economy, and therefore it is absolutely right that they should be looked at, at a time like this, with very great care and consideration.

I have a good deal of sympathy with the noble Baroness and her right honourable friend. As I mentioned in passing a moment ago, for some six and a half years I was, as Minister of Pensions and National Insurance, responsible for our social security system. But I was responsible for it in very different circumstances from those facing my right honourable friend and the noble Baroness. I held that post mostly during the Macmillan era, which I am bound to say looks like something of a golden age when seen through the storms which have since occurred. At any rate, it was an age when every year the national product rose; when every year output rose; when inflation was minimal; when unemployment was minimal and when national wealth was expanding. Then I was able to say—and I used this expression on many occasions when I had the privilege in another place of bringing forward measures which very substantially improved our social security system—that it is right to give the least fortunate sections of our fellow countrymen a share in rising national prosperity. No one can say that today; there is no rising national prosperity of which to give anyone a share.

Therefore, it is essential that Ministers in charge of this vast spending department, which has an enormous expenditure, as we have heard repeated today, should look at it not with a view to reckless cuts and, above all, not with a view to harming anyone who is vulnerable, but with a view to sorting out the priorities. It was Aneurin Bevan who waid: The language of priorities is the language of socialism ".

Lord GORDON-WALKER

My Lords, "the religion of socialism".

Lord BOYD-CARPENTER

My Lords, it is certainly the language of government. The noble Lord Lord Gordon-Walker, who of course was closer to the late Aneurin Bevan, says "the religion of socialism". I thank him for that; it makes it rather more telling. I am infinitely obliged. I shall not confess that I cast a line over him. It is the language of government. We must sort out the priorities¤above all, in a social security department. Even in the Macmillan era the Minister then responsible had to look at priorities, concentrate on the most important and cut back on those less clamant in their demands. As I see it, that is what this Bill does.

I am bound to say that I derive a little cynical amusement from Clause 2. The noble Lord, Lord Wells-Pestell, was perfectly justified in "twitting" the noble Baroness a little on the point about the earnings rule and its relaxation. He will probably recall that about two years ago, when he sat in the noble Baroness's place, I supported him in an effort to prevent my noble friends, now sitting on the Government Bench, committing themselves too far to the abolition of the earnings rule. I had a very direct difference of opinion, both with my noble friends on that Bench and with the present Secretary of State in another place.

It is not that I am suggesting that the earnings rule—though it has survived for 32 years—is necessarily a good thing; but, as the Government now appear to accept, relaxation of it is a pretty poor candidate for priority when funds are limited. Let us apply our minds to who benefits from relaxation of the earnings rule. Only the younger group of pensioners—those within five years of retirement—and then only that section which has the good fortune to have the health and opportunity to be doing a job which brings them in, at the present figure, between £2,500 and £3,000 per year. These are admirable people; of course one would want to help them if funds were unlimited. But can any noble Lord say that in the whole of our social security system, with all our social problems, that is the case for the highest priority? Quite plainly it is not. I am delighted that my noble friend has now come forward with a proposal which at least halts the extension of the earnings rule. I shall venture the prophecy that when this Parliament ends, the earnings rule will still be there.

I return quickly to the other parts of the Bill to which I should like to refer. I am delighted to see the provision in respect of the limitation of unemployment benefit for the occupational pensioner. There is no doubt that in certain parts of the country this had the elements of scandal about it. To register for unemployment benefit for a type of work which one knows is non-existent in the area where one has decided to settle was certainly perfectly legal. But I do not think that those concerned are entitled to any very great sympathy if their unemployment benefit is moderately restricted, as is proposed by the Bill. Here again, applying if you like the hard test of priority, is payment of unemployment benefit to such people necessarily of the highest priority? Personally I do not think that it is.

On the broad and major question of the application of income tax to short-term benefits, I remain sceptical as to the administrative practicability of this. Obviously, Whitehall can do almost anything if it is allowed to employ enough staff to do it. But I am bound to say that I remain sceptical whether the extraction of a limited amount of income tax would justify the administrative cost in this respect. I think that probably the right course is what is being done in the shortterm and which will turn out to be the long-term; that is, to adjust the level of benefits as best we can to take account of the fact that they are tax-free and, therefore, should not be compared on a 100 per cent. basis with other benefits which are taxable. I would express the view again that when the Government come down to the hard tack of seeing whether these benefits can really be made taxable, they may well find that the game is not worth the candle, and that, therefore, the sensible thing is to continue the proposed temporary provision of simply a lower scale of benefit.

Finally, I come to Clause 6, the clause dealing with payment of benefits to the families of those on strike. I very much welcome the taking into full account of the income tax refunds. I could never see any logic in limiting the amount, of what might be quite a large tax refund that was taken into account in assessing benefit, to £4. There seemed no logic in it. In parenthesis, it has always surprised me how in the case of strikers the Inland Revenue seems to move with such unaccustomed celerity in making the repayments. It is my own sadder experience that whenever I have found that the Inland Revenue owes me a small sum, it has taken months, if not years, to obtain it. I have had to get down on my knees; I have had to write them long letters before the money could be extracted. But apparently if one goes on strike—and this is the lesson that I should have learned—one gets it all back in a fortnight. Be that as it may, I am sure that this is sensible.

Then I come to the limitation effected by the presumption that there is strike pay of £ 12 a week. I realise that this is a sensitive issue. I have no doubt that this lay behind what the noble Lord—I thought unjustifiably—said about the Bill being an attack on the trade union movement. I believe that one wants to think this matter through as coolly and as calmly as one can. A man who is on strike is unemployed, but he is a peculiar category of unemployed inasmuch as, to some extent—at any rate in theory—he is voluntarily unemployed. It is an open question whether the community, which may be suffering great hardship and loss from the strike action in which that man is taking part, should be compelled to take over from him his full responsibility for the maintenance of his wife and family. If a trade union with large funds, as most of the major ones have, decides for good reason or bad to call out its members to take strike action, I think there is a reasonable case for saying that it is up to that union to use some of those funds to relieve any possible hardship among the families of its members rather than to seek, as the Iron and Steel Confederation did in the recent dispute, to shrug the whole thing off on to the shoulders of the very taxpayers and ratepayers who were being injured by that strike.

Therefore, although I am perfectly certain that this proposal will be criticised, I would say to those who will criticise it with vigour that they may find that their fellow countrymen will see a certain reason in it. It is essentially a British compromise. There is undoubtedly a logical, intellectual case for complete disqualification from benefit. There is indeed perhaps an even stronger case—my noble friend may say something about this when she replies to the debate—for making such payments on a loan basis, subject to repayment after the dispute. But that there is a case for some limitation in the liability of the public to those who, in pursuit of their own increased earnings, are inflicting some injury on the community is, I think, a reasonable one. It is perhaps typical of the careful policy of the present Government in these matters—matters which this House will be discussing tomorrow and on some later days—of not applying what hard logic would say but accepting the very strong body of opinion that the situation as at present is not satisfactory and that some intermediate or compromise solution should be reached.

I promised not to go into the Bill in any detail and I keep to that promise. I am quite sure that this House, with its great experience, will want to discuss the Bill fully. As I have indicated, I do not agree with every word or line of it, but I agree wholeheartedly with its basic intention that, faced with the problems which this country of ours faces, even social security¤for which I fought for some years at one time, as my noble friend Lord Thorneycroft may remember—must be examined, its priorities rigorously assessed, and it is because the Bill seeks to do just that that I support it.

Lord WELLS-PESTELL

My Lords, before the noble Lord sits down, may I ask him to answer a question? Given that the Government were elected to save money, does he really believe that if it was included in the Tory Party Manifesto that that would be done to some extent by cutting down certain social security benefits, the Conservative Party would have been elected?

Lord BOYD-CARPENTER

I would ask the noble Lord to consult the Con servative Party Manifesto, my Lords, which unhappily I do not have on me at the moment; I do not actually carry it about. I think it made it abundantly clear, as did the speeches of the Prime Minister in particular, that no area of public expenditure would be immune from examination and, if shown desirable, reduction.

5.24 p.m.

Lord SOPER

My Lords, this Bill attracts my enthusiastic opposition, not particularly because I happen to sit on these Benches but because, as I believe in the language of priorities, it is ethically ill-natured, and therefore I find the various defences that have been put up for individual articles in its premises and suggestions may or may not be vulnerable, may or may not be suitable to the particular need of the present day, but in principle I want to give a number of reasons why I believe the Bill is wrong. My noble friend Lord Wells-Pcstell deplored the absence of any episcopal presence in your Lordships' House this afternoon, although that was somewhat remedied a little later on. He did not, very properly, refer to the absence of a spiritual presence, and I think I may arrogate to myself on this occasion the ability to speak for the Church, not only the Church of England but the Methodists and others, who in general principle would support the kind of objections which I will now briefly adduce against the Bill.

First of all, the social commitments of the Church of England are at one with those of the Methodists and others in cherishing the welfare state, and I cannot but think that this is an attack on the welfare state. It is not a Bill about social security; it is a Bill about the monetarist policy of the present Government, and for that reason I object to the title.

I do not believe you can call a rake's progress a pilgrimage of grace, and I have no intention of attempting to do that. I do not doubt that there are a number of very important financial reasons for which this Government believe it right to reduce public expenditure. Many of those reasons I would find agreeable. What I find disagreeable is that this is defended at the very point at which it is most vulnerable to the ethical attack, because it is here that the attempt is being made to deprive those who are least capable of sufficient and adequate means of support of the kind of financial abilities which have been all too meagre in the past and now will afflict 1, 750, 000 more people who will be impoverished to some extent by the provisions of the Bill if it goes through.

Secondly, I was a little daunted by the noble Baroness introducing the Bill when she ventured into the realm of saying how modest it was, which prompted me to think that here is probably the old question whether you defend (shall we say?) immorality by the presentation of the child of such excess claiming it to be of modest size. This particular Bill is of modest size, but that does not in any way detract, in my judgment, from the basic wrongness of the principle which underlies it, which afflicts not those who have very largely escaped already from the rigours of the kind of situation in which we find ourselves, but those who have already suffered very much more than the general reality of the community as we in this House are tempted to regard it.

I will not presume to draw too closely on many years of social service or social activity, but I am sure I speak for my friends in all the Churches in the recognition that we are still in the kind of society in which we have not properly assessed the sort of sufferings that belong to those who are impoverished, those who have the fear of poverty, as well as those who suffer from its actual conditions. This is a Bill which will fall unevenly and improperly on those who already are heavily burdened with problems which, if I may say so without offence, do not normally oppress those of your Lordships' House and the vast majority of those who read the Daily Express. Venturing a further comment in this regard, I am sure that behind the Bill is the assumption, quite improperly set forth, that there is a great deal of scrounging that goes on and that it is necessary to tighten up the kind of social security principles which are now being very largely exceeded in many ways which are deplorable. I say with all the fervour and, I hope, with all the experience at my command that I have never been impressed by the argument that there are very many people in conditions of social privation who belong to the category of scroungers. In fact, it is only very rarely that those who are in health and physical wellbeing can be brought under that general condemnation. I reject with contempt those who believe it is necessary for us to protect society from the scrounging activities of the vast number of people who are poor and prefer their poverty being very largely supported by the state rather than that they should activate their own abilities to look after themselves. That belief is wrong; it is not true; and the evidence of the social activities of the Churches in no way supports that kind of assertion, which in my judgment is quite vindictive.

I turn for a few moments to the question of the striker. I consider that the proposals in this regard are probably the most mean and contemptible of all the provisions in the Bill. Not for one moment do I support every striker in all that he does; of course I do not. But here is the only weapon which he possesses in a capitalist society. He has been, and still is, at least under the conviction that he is subservient to principles which he cannot control and to activities over which he has no control. His weapon is the weapon of withdrawing his labour, and to try to punish his children and his wife for his attempt to secure some kind of social justice is to me a piece of impermissible depravity, politically, economically, and in every other way.

Let me conclude this very brief intervention by saying how much I regard certain elements of the Bill as requiring consideration in greater detail. I agree that there is a measure of abuse in the linking period. I agree that—as the noble Lord who has just resumed his seat pointed out—something must be done about the unemployment of pensioners. I am quite sure that we are in a position of economic difficulty, but in the long run it proves far more expensive to impoverish those who are already poverty-stricken and costs much more to recuperate them than is saved by the kind of reductions in emoluments and benefactions to which the Bill is committed.

Therefore I very much hope that, whatever happens on Second Reading, we shall regard the Bill as no satisfactory means—even in our present economic troubles—towards meeting genuine needs. Indeed, I hope that we recover our sense of priorities and the language and substance of those priorities, and that we see the danger in creating, as we are now creating, a deeper division than ever between the two communities in which we live: those who have, and those who have not, or who fear they have not. It seems to me that the only hope of the kind of recovery to which our friends on the other side of the House, and indeed the whole community, would be agreeable, lies in a community in which we share the burdens and do not unfairly impose on one section burdens which we are not ourselves prepared to accept. We are living still in a class society. This Bill does nothing to remedy it. For that reason I hope that we shall treat it very severely when it comes to Committee.

5.33 p.m.

Baroness VICKERS

My Lords, I am quite certain that the noble Lord, Lord Soper, spoke with great sincerity, and I have always admired him very much, but I do not accept his allegation that on this side of the House we are always accusing people of striving to get money in the way that he described; in other words, scrounging. I used to hold a "surgery"—and I suppose that the noble Lord has done so, too—every week when constituents came to see me. One could point out to them various means that they could accept if they wished to do so. I found most of those people extremely honest, and the only time that I ever worried about the situation was when there were instances of social security people going into houses to examine things after cases had been reported by neighbours, which I felt was a most unfriendly way of going about the matter.

With regard to the question of strikers, may I point out that at present we are in (he EEC, and that unions in every country except Ireland help with strike pay for families. So on this side of the House we are not taking an exceptional course in putting forward this proposal.

Surely one of the reasons for the need for the Bill arises from the fact that productivity is so low. It we had only 5 per cent. more productivity per man hour we should not need the Bill at all; and even then we should be working fewer hours than is the case in Germany. Therefore, if people in this country do not want this type of Bill, it is up to them to take appropriate action.

Perhaps it would be wise to consider for a few moments what has been done in one year. When we get to the Committee stage we shall be able to go into the details of some of the clauses; personally I am not in favour of all of them. However, I consider that in the past year a lot has been done. Pensions have increased since last November by 20 per cent. and they will be going up again by 16½ per cent. Thirty-thousand pre-1950 war widows now receive a pension, and all war widows are exempt from income tax. The Government have promised to protect the pensioners against price rises.

Attendance allowances, which are so important, have gone up by nearly 20 per cent. and are to be raised again. The mobility allowance has been raised from £ 10 to £ 12, and will be increased to £ 14.50 in November. Fifteen thousand disabled people aged between 63 and 64 have been phased into mobility allowance. So one cannot really say that this Government are not a caring Government when one considers these figures.

Child benefits are going up and payment is to be made in respect of the first child of one-parent families, the figure rising from £2 to £2.50, and in November it will go up to £3. The first £6 of weekly earnings by a single-parent family are to be disregarded for the purposes of supplementary benefit. A higher or long-term rate of supplementary benefit will be paid to single parents after one year, instead of two years as at present.

In 1948 unemployment and sickness benefits were taxed. Mr. Orme (whom I believe I can quote because he was a Minister at the time) stated in 1976 that unemployment and sickness benefits should be taxed. He said in relation to unemployment benefit, sickness benefit, and invalidity pensions: There is little doubt that in principle all benefits should be taxed ". The noble Lord, Lord Banks, mentioned the question relating to pensioners earning £52, so I shall not speak about that today. However, we should remember that many of the unions have enormous funds. During a recent strike the ISTC and the blast furnacemen had assets of £11 million. So it seems rather unfortunate that the general public should have to subscribe in such cases, particu- larly bearing in mind what I have said about what is done in all the other countries in Europe.

Mr. Sheldon said in a debate in the other House on 23rd June 1977: Not only do I agree with the taxation of short-term benefits, but I think everyone who has been concerned with these problems has agreed with it". So there are people in the party opposite who have considered this problem and have come out with statements such as that.

One should also remember that six out of every 10 people have free prescriptions. These people include pensioners, children under 16 years, pregnant women, nursing mothers, and low income groups. Seventy million pounds to £75 million is to be put forward to help low income groups with heating costs in the coming winter.

Peggy Herbison, who was very well-known in the party opposite and who was a very good Minister, wanted the full superannuation scheme. She disliked earnings-related supplements. She wanted a full superannuation scheme, but was overruled, and had to fall back on a minor scheme of earnings-related supplements. In May 1979, 176,000 unemployed people were receiving supplements, although the number registered as unemployed at that time was 1,247,000¤a rather interesting figure.

Like other Members of your Lordships' House who have spoken today, I do not like Clause 3 of the Bill, but I do not really understand it and I hope that we shall have it fully explained. I have read all that was said about this matter in the other House, but I am still not completely convinced regarding this particular clause.

In his last Budget the Chancellor of the Exchequer announced new measures to help charitable organisations in regard to covenants. The Wolfenden Report, in 1977, found that in personal social services the input of the voluntary sector, whether measured by man hours or by expenditure, was greater than that of the statutory services. So perhaps we shall now have to rely a little more on these splendid voluntary workers. That would bring about exactly what the noble Lord, Lord Soper, wanted: getting one section of the community to work with another section of the community; and I hope that it would not lead to the class distinctions that he mentioned.

I should like to end by saying that if we can get the Warnock Committee Report and a Bill on that soon, then I think this will mitigate a lot of the difficulties. Here, I would ask my noble friend to bear one thing in mind in the future. I notice that once again we have this phrase which I do not like very much, "statutory instruments". I do not like too much of the work of these committees, which should be in a Bill, put in the form of statutory instruments. I would much sooner things were put in the Bill at the beginning.

5.40 p.m.

Baroness GAITSKELL

My Lords, it is a pleasure to follow the noble Baroness, Lady Vickers, despite the fact that I do not agree with a word she has said on this occasion, though I often do agree with her. I am going to be very brief, for there is really nothing left for me to say after the marvellous speech by my noble friend Lord Wells-Pestell¤he said it all¤and the speech of my noble friend Lord Soper. There is really very little I can add to any of it; and as I have not studied the Bill well enough for my own satisfaction, I shall, as I say, be very brief. My noble friend Lord Wells-Pestell said that there was no need to have a second Social Security Bill. I agree with him, but not for the same reason, I think, as he put forward¤and I should like to underline this.

The Government have in fact forfeited the right and decency for this, because they have already had a second Social Security Bill¤for the rich! That is what they have had. This is not a Social Security Bill for everyone. The Government's Social Security Bill is one for the rich, and not for the poor. After all, when they were elected they could not be quick enough in cutting taxes for the richest 10 per cent. people in this country. This is not my idea; this is what they did. Now this Social Security (No. 2) Bill is busy continuing on exactly the same lines¤cutting the benefits for the poorer people in the country.

The Bill as drafted is remarkable for the English in which it is written. The words are as if the people who drafted it had some kind of sense of shame, because nowhere does the word "unemployed" appear in it. Nowhere is the word "unemployed" used. It speaks of the "interruption of employment". Has anyone heard that kind of language used about unemployment? After that, it speaks of the reduction or abolition of benefits: not of cuts, but of the reduction and abolition of benefits¤benefits for the less fortunate people in the country.

So we arc told that the Government intend to tax benefits, and the noble Baroness, Lady Vickers, agrees and recommends this because of Europe. My Lords, the countries of Europe are not the same as this country; nor have they to deal with the same kind of people. They have not got as many unemployed, and so on. The Government intend to tax benefits of all kinds, and many vulnerable people are going to be hurt. The basis of the Government package will be seen, or they hope it will be seen, as an attack on scroungers. Here, I agree with my noble friend Lord Soper. I always think that is the meanest kind of thing to say. No one talks of city scandals; no one talks of tax evasion; but when things go wrong they talk about the working classes as scroungers. As for strikers and strikes, however much we deplore strikes on occasion¤sometimes often¤it will be a sad day for this democratic country when people are not able to strike. Democracy will then have flown out of the window.

I should now like to give a few figures concerning the consequences of the cuts that the Government are proposing. The consequences are that unemployment benefit will be cut by £1.50 a week in real terms, and the invalidity sickness benefit will be cut by at least £1.85. If the same thing happens next year, as the Bill allows, then by 1982 unemployment benefit for a couple will have been cut by a total of £3.15 and invalidity benefit by £3.95; and injury benefit, which is paid for the first six months after an industrial injury, will fall by £1.95 per week. As for those with children, they will suffer even greater losses because of large cuts, in real value terms, in child support for those in receipt of national insurance benefit. I will not go on, but this is only the beginning. There are many more cuts just like these, and they all add up. The larger the family the bigger are the cuts in benefit. My Lords, that is all I have to say.

5.47 p.m.

Lord UNDERHILL

My Lords, I always find it a delight to listen to my noble friend Lady Gaitskell, because she brings sincerity and humanity to these matters, and that is what we are really dealing with. The noble Baroness the Minister was very honest when she made it quite clear in her opening speech that the purpose of this Bill is primarily financial. At one time it was my intention to tear up my notes and to follow my noble friend Lord Wells-Pestell in making an appeal to the consciences of noble Lords in this House, but on reflection I thought it best to deal with some of the points in this Bill in order to indicate that we have arguments, as well as a feeling of sentiment as to what it is correct to do in these matters. It has often been said that the test of a civilised society is how it looks after the children, the aged, the sick and the needy. Have we really reached such an economic state (and I will come to this question when I close my remarks) that we can survive only by hitting the needy in our society? Because that is what this Bill is doing. I am certain that the Minister cannot be very happy at having to introduce some of the proposals that are in this Bill.

May I look briefly at some of the points? First, there is the freezing of the earnings limit for retirement pensioners at £52. As has been mentioned, we could have expected that in November this figure would have gone up to £60.58. This, as has been mentioned already, is a complete reversal of the Conservative attitude on this point, which was that there should be a complete abolition of the earnings rule. I have here the quotation from the Conservative manifesto, but I will not weary your Lordships with it. But instead of raising the earnings limit as a step towards eventual abolition, this Bill is freezing the limit at the present unjustifiable figure. This is to save just a fraction over £16 million; and, as with other bodies, Age Concern has expressed its serious anxiety about what appears to them to be a reversal of policy which will hit the aged.

This is not the only measure in the Bill which will be a blow to pensioners. Your Lordships have heard outlined the claw- back of unemployment benefit paid to a person over 60 who is in receipt of an occupational pension, and have listened to what may have appeared to be very plausible arguments as to why this should be done. I should like to ask this. Apart from the principle involved, what is the philosophy which has determined the Government to decide on £35? Is it a figure just plucked from the air? Why £35? If it is not plucked from the air, what is the philosophy behind it?

I have read the debates in the other place and I have listened to the noble Baroness in her opening speech, and I cannot see yet the philosophy or why the figure of £35 has been struck. The only philosophy can be that of treating the occupational pension as if it were a payment from an employer. If so, the cut-off should have some relation to the national average earnings. We must not overlook that many of those who have retired with occupational pensions before reaching the age of 65, when they will be entitled to the full retirement pension, do so for a number of reasons¤some because it suits their way of life, others because of failing health, of declining physique and because they cannot continue until the age of 65. Others do so because they are following what have been Government pleas to retire at an earlier age. And many do so because when they assess what will be their lower occupational pension by going at 60 or 61 instead of waiting until they are 65, they estimate that, with the unemployment benefit, they can make ends meet. With the present proposals, these people will feel badly let down and deceived. I believe it is correct¤did I not see a report on it recently?¤that the National Union of Mineworkers has expressed its serious concern over the position regarding many miners who left before their normal retirement age. Despite the arguments put forward by the noble Baroness, there is the question of the contributory principle; that when contributions have been paid, benefits should be received.

We go on to the earnings-related supplements issue which takes effect from January 1981. This is going to hit many people who are out of work. I use those words and not the words of my noble friend Lady Gaitskell. Many of them will be the sick and disabled. The present effect on a person who had national average earnings in the previous year of, say, £95 a week, will be a reduction in benefit of £3.50 on their present entitlement. This is made worse by the fact that the earnings-related supplement will end in January 1982. What is the Government's justification for this? We often hear about the Conservative manifesto. I have not found that in the Conservative manifesto. We must recall that the original intention of the supplementary scheme was in order to cushion the effect of any sudden loss of earnings. Furthermore, as with the other proposals to which I have referred, this undermines the contributory principle; when you have paid in, you should get something back. Although I listened carefully to the Minister and to her explanation regarding the contributions that have been paid, I cannot see anything in the Bill to say that there is going to be a cessation of contributions. People will still be paying it and when it is finished in 1982 they will draw no earnings-related supplement. My noble friend Lord Wells-Pestell used a number of epithets. My view is that this is akin to cheating. No matter what may be the economic argument put forward, many people will believe they have been cheated over this and particularly those who have paid earnings-related contributions over quite a number of years, many of them getting older, many who are likely to go sick for longer periods; and there is also the question of the unemployment figures which are rising. They will feel they have been cheated when this is withdrawn in 1982. I should like the noble Baroness to indicate whether there have been any overtures either from the employers' organisations or from the trade unions that the earnings related supplement is no longer desired. I have no information about that. I should like to know why the Government have decided on this particular principle.

Your Lordships will know of the reduction of £12 from a striker's family entitlement to supplementary benefit. The noble Baroness was honest. It is not to save public expenditure. It could not be so because in 1979, I understand, the saving would have been only about £1 million and over the last 10 years something like £21 million has been paid. The purpose is clear. The Government seem to have made it clear. They hope the strikers will be forced to return to work because of the possible suffering of their families. That is the only purpose behind it. It ends a long-held principle in this country that a person in need should be helped by supplementary benefit. There is talk of substantial reserves held by the unions. I can tell you of unions who do not have these substantial reserves. When we come to discuss the Employment Bill in Committee, perhaps noble Lords will keep in mind the necessity to have maximum union membership so that the unions will have the funds to meet this proposal if it is endorsed by Parliament. One Member of Parliament in the other place, Mrs. Peggy Fenner, said: In my book, a man's first responsibility is to his family. I do not believe that his first responsibility is to his trade union ". Those words, fatuous words, roll easily off the tongue. They show very little understanding of the workers' history and of the years of struggle in the trade union movement and the fact that men, with the support of their families over the years, have made sacrifices for their fellows in order to get the standard of living that we enjoy today and which we must hold on to. People have risked a lot for the things that they believe in. People do not make sacrifices for the fun of it. In my view, this particular measure is a blatant and unashamed attack on the position of the trade unions.

I should like to mention one thing that I do not believe has been mentioned in this debate. Do the Government really believe that this measure is going to assist good industrial relations¤which is what all of us want to achieve¤or a better understanding between the unions, the country and the Government? This is the last thing to help in that direction. I come to the last point of Clause 1 which is the fact that those on what are now called short benefits will have only 5 per cent. of any increase in prices in the annual review. Despite all the arguments, this is a blow to the unemployed, a blow to the sick, to the disabled, to those on maternity allowances. I will not go into the details which have been mentioned by my noble friend Lady Gaitskell. The figures may not seem a lot when we are talking of £1.15 or £1.20; we toss these sums of money over the bar for a couple of drinks.

But to somebody on unemployment benefit or sickness benefit this is a lot. That is the aspect that we should look at.

The intention of the Government is that taxation of these benefits should commence in 1982–83 or "as soon as possible thereafter". In the meantine there will be the 5 per cent. reduction carried through into 1981–82 at least. Many of the people involved in this will be below the tax limit. They will not have come into the taxation limit unless something drastic happens to our tax laws by 1981. These people will have a reduction of 5 per cent. starting in November1980. I am not a great mathematician, but, if inflation continues at its present rate, they will be 5 per cent. down this November, 5 per cent. down next November and 5 per cent. down the following November, so that by the time the taxation comes in they will have lost 15 per cent.; and if the figures are to be compounded it will be more than 15 per cent. I should like to see how the Government can justify that.

The Conservative Manifesto said that all too often many poor people are little better off or no better off at work than they are on social security; and then it talks about restoring the incentive to work as if the incentive to work is linked to whether unemployment benefit is too high or whether it will drive people to work. If my interpretation is wrong, what other interpretation can be placed on this? I should like to ask how cuts in unemployment benefit will provide more jobs. Incentive to work must depend on there being jobs available. There are something like 650, 000 people on invalidity benefit. Most of these are under pensionable age and have always been regarded as longterm benefit claimants. These benefits have always up to now been in line for retirement pensions. Now they are to be regarded as short term and have the 5 per cent. cut. I like reading the Conservative Manifesto. On page 28 it says: Much has been done in recent years to help the disabled but there is still a long way to go. Our aim is to provide an inherent system of cash benefits to meet the costs of disability so that more disabled people can support themselves and live normal lives ". So in this Bill we now bring disablement claimants from long term to short term. That is how we carry out the Conservative Manifesto.

On 21st May in another place the Minister for Social Security, Mr. Prentice, stated in col. 529 of Hansard that only two hours earlier he had been addressing a conference of RADAR¤The Royal Association for Disability and Rehabilitation—where he set out the reasons for cuts. He said that is it was well received and very well applauded. I do not know whether other noble Lords have received the same communication as I have had from RADAR. They say¤and I will not quote it all, but just a few extracts¤that unfortunately some 250,000 invalidity pensioners would not be liable for tax anyway, and a further 150,000 would pay less tax than they will loose through abatement. These are the long-term sick for whom an invalidity pension is their sole income. They constitute about two-thirds of the recipients of the pension. It goes on to say that if the abatement is generally intended as a rough and ready substitute for taxation and not a permanent cut, there could be no excuse not to revalue the benefits when they become taxed. The noble Baroness the Minister referred to this. So far the Government have given only a qualified pledge to revalue the invalidity pension. It says that it is hoped that the House of Lords will write compulsory revaluation into the Bill. If the assurances we have been told about are correct, I hope that in the Committee stage we may write this into the Bill as a compulsory revaluation.

Now, if I may conclude, reference has been made to the equality of sacrifice. I want to use temporate language. I can remember 1931, the year after I came into politics, when we talked of the equality of sacrifice. "Everybody must go down 10 per cent." The poor unemployed went down 10 per cent. and there was a ladder going into the water and they went under the water. It is nonsense to talk about equality of sacrifice. If we have really come to the economic situation that it requires equality of sacrifice, that it means even the unemployed and the sick must share in the sacrifice, then I hope that the Government will take a look at its various measures. I will not weary your Lordships again with the £4½ million tax cuts, which have been belaboured by this side of the House time and time again.

When one reads in the paper of extravagances, that two big concerns are likely to be in trouble because they are going to lose £20 million from casino gambling profits in the West End, of the £13,000 spent for a 188 year-old bottle of champagne, people say, "Where the devil are equal sacrifices?". I say that if we have got to that stage then let us carry out equal sacrifices. I do not believe that we have reached that stage and therefore I hope, as my noble friend Lord Wells-Pestell said, that members opposite will look at their consciences, that they will realise that in whatever arguments that we use we are striking a blow at people who can least afford to be dealt with in this way. Unless we are really indulging in party politics, we ought to make many amendments at the Committee stage of this Bill.

6.4 p.m.

Baroness MACLEOD of BORVE

My Lords, so much has been said this evening¤and the noble Lord, Lord Underhill, certainly waived right across the whole gamut of this Bill¤that I intend to be very brief. I know that there is a lot to be done during this evening's business. First, I should like to thank the noble Baroness for explaining this Bill to the House. I think I might be right in thinking that neither she nor any member of the Government really want this Bill. It is only forced upon us and the members of our country by the very serious economic situation with which we have been faced since we came into power. Nobody can say that we were not warned about this before the last general election. I remember my right honourable friend the Prime Minister warned this country before the genera! election that she could see that we were going to have a very hard time of it indeed. I am certain that it would be right to think that it should not be just one section of the population that should have the very hard time. I think that we all expected this. The severity of this Bill is something which is going to hit us all, but maybe that is correct.

When somebody this evening said that the Conservative Party was out as a Government to "do" everybody, I am sure that they were absolutely wrong. The Conservative Party throughout their history have had a reputation which is second to none for helping those classes to whom reference has been made this evening: the disabled, the out of work, the old-age pensioners and all the people that normally get our sympathy. But at this time, when the country is in trouble, they are going to be asked to pull their weight as perhaps never before.

I want to touch briefly on only two clauses. First, on Clause 6. The noble Lord, Lord Underhill, said that the strikers will be forced to return to work because they might well be short of money. There is nobody in this Chamber who does not know that any man or woman in this country does not have a right to strike. They have a right to withdraw their labour. I do not think that everybody in this country thinks that all should pay for that right. It is this and the reasons for it that is being dealt with by Clause 6. When one realises¤and presumably it is true¤that the card-carrying members attending the Labour Party Conference are representing thousands and thousands of union members, all of whom presumably are paid-up members of the various unions in the country, the wealth of the unions must be enormous. Where that wealth goes to, I for one do not know, except that, first of all, one presumes it goes to the Labour Party and then to paying the officials of the Labour Party. Surely it must be right that when somebody wants to strike and withdraw their labour the unions which have been the recipients of some of the wages that have been withdrawn should pay some of that money to the members. Surely the members are entitled to have some of that money. That seems to me to be absolutely logical and fair. Although some members obviously will not like it, I think that the majority of the country do. If the members have consistently paid in, and there are very few who do not have the privilege of paying in, then they should receive something other than guidance when they are in need.

The other clause that I want to refer to is Clause 4. As president of the National Association of Widows, I have been asked whether I would say something about the problems that will certainly be faced by widows as a result of Clause 4. Before I do that, I want to say how grateful a section of widows are to the Minister for Social Security on his announcement last weekend that their tax-free pension is going up from £30 to £35 a week. Those are the service widows. No other widows are allowed a pension, tax free. We are all delighted by this, but women become widows at all ages and their husbands, regrettably, die for many reasons.

We were very grateful and indeed gratified that the Chancellor in his Budget awarded new widows an increased tax allowance for the year of their husband's death. This help was warmly received by widows throughout the country, principally because it was the first time that all widows had received a tax relief. But, in this clause, we are made somewhat unhappy, to say the least of it, by the abolition of the ERS. While acknowledging that it will save the state £15 million, it is each individual new widow who will suffer a reduction just at the time (within the first 26 weeks) when she needs all the help, both moral and financial, that she can get. As a result of Clause 4 she will receive a flat amount £38 for the first 26 weeks of her widowhood: that, of course, is taxable. The ERS, which varies from £2.83 up to a ceiling of £17.67, is a great help at this difficult time. If that is withdrawn and the widow has no other income, she cannot claim supplementary benefit, as the amount she receives would be just outside the limit which is imposed. Unfortunately, it also makes worthless the new tax allowance which is given to widows by the Chancellor. The abolition of ERS will also be felt by widows over 60.

I had promised to make these points because widows in this country, as I think your Lordships have heard me say before, are a disadvantaged collection of women and it is up to those of us who have perhaps been through the mill to stand up and be counted when we think something is being done that will be to their disadvantage. Otherwise, I welcome the Bill.

6.13 p.m.

Lord PITT of HAMPSTEAD

My Lords, I shall not delay your Lordships very long, but I feel the need to stand up and be counted this afternoon and to indicate my detestation of this mean Bill. I would also wish to express my sorrow that the Government have felt the need to bring in such a Bill. The Bill hits at the most unfortunate sections of our society: the sick, the old, the infirm, the unemployed and the widows¤and it is an unnecessary Bill. I was glad to hear the noble Baroness say that her noble friend the Minister probably did not like having to introduce this Bill. I suspect that that is so; but the Bill is unnecessary because it claims to save the Exchequer £270 million next year and £480 million in a full year. We can achieve that quite easily from a slight increase in the taxes on cigarettes and alcohol. I am absolutely certain that very few people in this country would complain about paying a little more for their cigarettes and drinks in order that old people, sick people and widows may be better off. Therefore, I find it difficult to understand why, under the guise of trying to save public expenditure and of trying to run a tight economy, we should go to this length. It is an unnecessary length. Despite the rhetoric and the brilliant oratory of the noble Lord, Lord Boyd-Carpenter, I insist that this is an unnecessary length to which to go.

Moreover, not only are the Government doing this: they are also¤how shall I put it?¤demeaning themselves. Having committed themselves to the abolition of the earnings rule during this Parliament, then one year after election, they come with a Bill which aims at pegging the earnings rule at a specific level. That is not the way we would expect this Government to behave. Moreover, the abolition of the supplement¤and I am glad that the noble Baroness, Lady Macleod, should tell us of some of the difficulties that may arise from this abolition¤is a breach of faith. It is a breach of faith despite everything the noble Baroness, Lady Young, has said in her attempt to argue in favour of it. It is a breach of faith because people have been paying for these supplements and then, having taken their money, suddenly they are to be told that they cannot have them. If any insurance company did that, I know quite well, and I am sure that all Members on the ministerial Front Bench know, what would happen. Therefore I think the Government should look at this again. This is a very wrong approach. On this occasion the sum is not negligible, admittedly, but it could be obtained in some easier way; therefore I should like to appeal to all Members of your Lordships' House to look at this Bill again. During the Committee stage, let us try to remedy the situation. Speaking personally, I would want to destroy it; in fact I shall want to go into the Lobby against all the clauses in this Bill.

My last point concerns the question of the attempt to force strikers to behave more responsibly by hitting at their pockets or, rather, at their families' incomes. This shows a gross misunder-standing of what happens when workers decide to take industrial action. On my way here, I came along Portland Place, down Regent Street and passed the musicians' pickets outside the BBC. I do not really believe that if they knew that when, if, their wives went to collect social security £12 would be deducted from the money the wives could get, that fact would affect them in any way: it just would not. It would have no effect at all, because when people decide to withdraw their labour they are usually doing it because of some very strongly held principle. It may be that sometimes they are wrong; but usually they feel strongly about it, and by making things financially more difficult will not stop them.

I notice from much of what the Government has said, not only now but a year ago, that they believe the opposite is the case and that financial influence could in fact restrain industrial action. My honest view is that it will have the opposite effect, because what it will do is to inflame attitudes and, because those concerned will feel that they have been hurt and that the Government have acted spitefully towards them, it will be much more difficult to get them to behave in a restrained fashion. Therefore, my own view of Clause 6 is that it is a gross error, and when the time comes I hope that we shall act against that clause.

Lord CARR of HADLEY

My Lords, I am grateful to the noble Lord for giving way. The only question that I should like to ask him is: Does he not think it would be right and proper for the Musicians' Union, in the case he has mentioned, or the appropriate unions in other cases, to be under a greater obligation to help to support their striking members? That is, surely, in the best and oldest traditions of trade unionism.

Lord PITT of HAMPSTEAD

My Lords, the noble Lord, Lord Banks, answered that question and I agreed with him. If that is the view of the Government then, in the Bill that we are debating tomorrow in Committee, they should put an obligation on the unions to pay strike pay. They would fight it, as they will fight all the clauses in the Employment Bill, but I can assure the noble Lord and other Members of your Lordships' House that that would have a better effect than what is now being proposed.

6.21 p.m.

Lord PLANT

My Lords, the noble Baroness, Lady Macleod of Borve, gave me the impression that she thinks that trade unions have a great deal of money. They have not. The noble Baroness also said that trade union funds are used to support the Labour Party. They are not. It is the political funds of trade unions, to which members may or may not subscribe, which are used.

As other noble Lords have dealt very fully with the taxation issues and benefits in this Bill, I want to confine myself to two clauses which demonstrate the Government's desire for further economies. Clause 2, which overturns a directive of the principal Act, that the earnings rule should be reviewed every tax year, is surprising from a Government which said that they would work towards abolition of the earnings rule. Then, under Clause 5 of the Bill, male occupational pensioners aged 60 and over, who are in receipt of an occupational pension of £35 a week or more, will have their entitlement to receive unemployment benefit restricted. The noble Lord, Lord Underhill, philosophised as to why the figure of £35 was selected, and I hope that the noble Baroness, Lady Young, will give us an answer to that in the winding-up speech.

Clause 5 permits the Secretary of State to take account of all the retirement benefits received by the pensioner in assessing the amount of his pension, even though the benefits may not actually provide the pensioner with an income. Attempts to introduce provisions on the lines of Clause 5 are not new. The question was first raised with the National Insurance Advisory Committee in 1966, and draft regulations were drawn up in 1968 under the National Insurance Act 1965. Although the draft regulations were modified they were not, in the end, proceeded with. A third attempt to restrict occupational pensioners' entitlement to unemployment benefit was made in 1976 by the Labour Government, but was eventually dropped. Now that the Social Security Bill is in this House, this issue seems to have gone though the other place in its stockinged feet.

The main reason given by the National Insurance Advisory Committee for restricting benefit was the "serious misuse of the national insurance scheme "and the" potential misuse of the national insurance fund". They said that there "was extensive public criticism of the present situation". This clearly took no account of the widespread public criticism of attempts to restrict the entitlement of a group of unemployed claimants, which successive Governments have made. It is clearly an abuse of the national insurance scheme to deny to a group of contributors any entitlement to benefit under the scheme.

As I understand the position under current legislation, a claimant for unemployment benefit must show that he is available for suitable employment and must sign a declaration to that effect. He must prove both that he is unemployed and, also, that he is available for employment. In the case of a claimant who has retired from his regular occupation, his advancing years might place some restrictions on his availability for employment, and for this there is provision in the existing regulations. Any restrictions on his availability must be reasonable for a claimant to be awarded benefit, and benefit can be withheld where the restrictions on his availability are such as to preclude all hope of further employment.

It may be said that in areas where there are very few vacancies which are suitable for occupational pensioners, it is difficult to test whether such claimants are, in fact, genuinely available for work. The criterion for benefit for all claimants, whether or not in receipt of an occupational pension, should remain one of genuinely seeking work. Otherwise, different treatment would apply in different parts of the country, and in areas of high unemployment, where there were very few vacancies, very few claimants would be entitled to benefit. There is no more reason to doubt the integrity of occupational pensioners in genuinely seeking work than there is of any others in the same age group who leave work for a variety of reasons and seek new employment. Where abuse is suspected, there are ample powers already existing to refuse benefit.

I feel very strongly that it is wrong to require a person to pay contributions to the national insurance scheme and then to deny him¤and I emphasise" him", because this applies only to men¤any prospect of claiming benefit, even though in all other respects he would be entitled to benefit. To pick out a group of occupational pensioners and say, "You may not expect to receive unemployment benefit, but if you do find another job you will still be required to pay full national insurance contributions" cannot be reasonable by any standards.

The national insurance scheme already discriminates between men and women in the retirement age. The provisions of Clause 5 will affect only male occupational pensioners, thus further extending the discrimination between the sexes to the disadvantage of men. Between the ages of 60 and 65, a woman who is entitled to the same occupational pension as a man¤if, for instance, they retire from the same occupation¤and who is receiving a national insurance pension in her own right, will have a total income which is greater than that of her male colleague whose occupational pension, and any residual unemployment benefit which might still be payable, will be well below the national average earnings.

The clause will introduce discrimination between those who have provided for their old age in an occupational pension scheme, and those who have made other forms of provision or none. Public servants have accepted the social need for a national insurance scheme and have faced ever-increasing levels of contributions, only to find that many of their occupational benefits are abated on account of national insurance benefits. This further curtailment of benefits, which at present can be claimed only in genuine circumstances, will be regarded by all public servants as a further attempt by the Government to make a substantial number of them bear the main burden of our current economic ills. The Inland Revenue allows an occupational pension scheme to have a rule which provides for commutation of a quarter of the pension. This is optional. The lump sum is 10 times the commuted part of the pension. It follows, therefore, that more men will commute up to an amount which will reduce the pension element to £35 per week.

The Government's determination to reduce the numbers of people employed in the public services will inevitably mean that more and more of them will be compulsorily retired at age 60. No matter how genuinely they may be in seeking another job, they will be denied unemployment benefit which they may be claiming for the first time after a lifetime of public work and a lifetime of contributing to the national insurance scheme.

In this respect, and the other provisions of this Social Security Bill, the Government seem determined to renege on the principle inherent in the national insurance scheme, which is that the payment of contributions establishes a right to benefits. This unnecessary Bill hits at a wide range of beneficiaries who are among the poorest and the weakest of our community.

6.31 p.m.

Lord WALLACE of COSLANY

My Lords, we have had quite an excellent debate, although the number of speakers is comparatively small. I have made some calculations based upon the speeches which have been made and I have come to the conclusion that this is a most unpopular Bill. There were four speeches in favour and seven against. I only hope that at the Committee stage there will be a similar reflection when it comes to some of the amendments.

Of all the Bills brought forward by the Government as economy measures and also, we must not forget, to finance the hand-some income tax relief to the better off this is the most despicable and penal Bill that has so far been introduced as an economy measure. To some extent it can even be charged to be fraudulent. The sick, the injured, the unemployed and the pregnant are all due to suffer a 5 per cent. reduction in their benefits next November, because the Bill provides for an up-rating which is 5 per cent. below the rate of inflation. Those who would have been eligible for earningsrelated supplements as well will lose that right because, in a move which would have prompted a Department of Trade inquiry if it had been tried by a City insurance company, the Government are abolishing the scheme. Some of the sick and unemployed have been contributing for 30 years or more to the scheme.

Nothing in the Conservative manifesto, or indeed in speeches during the election campaign, remotely suggested such measures. It is all very well to refer to a generalised statement of cuts in public spending, but there were no detailed statements particularly relating to these measures. The noble Baroness, Lady Young, gave some complicated explanations of the legality of the move, but I can say this to the noble Baroness and to the House as a whole; to those affected it will not be accepted or understood. Their simple statement is that they have paid their insurance dues and they expect their benefits. With that statement one cannot quarrel.

On this, the Government have no mandate. Even as an interim measure, if such it be, it is an unfair burden on the most vulnerable members of our society. Certainly the right honourable gentleman the Minister in the Commons gave an undertaking on invalidity benefits and unemployability supplements, subject to availability of resources. If there were ever a beautiful get-out, that statement is it, because we know that any Government department making a cautious statement like that would hardly ever be rushing in to provide the detailed answer that the people expect.

For a moment I want to come to the attack on strikers' wives and children. This was mentioned in the Tory manifesto. It must be recognised, and I recognise it only too well, that this attack has a popular soap-box mob appeal, particularly to those young enough or wealthy enough not to remember the bitterness, the misery or the heartache involved in the early struggles of the trade union movement for social justice and against the exploitation of workers. Starvation was the weapon then. "Starve them out" was the cry. Are we on the downward path of return to those days? This may sound like exaggeration, but behind this is the point that they are reducing the possibility of people being able to strike because of their wives and families. And the effect on wives and families is a reduction in the family's chances of a reasonable standard of living.

I ask the House to remember¤and I am sure that the noble Lord, Lord Carr of Hadley, will appreciate this point¤that even as matters stand at the moment, before the Bill becomes operative, strikers, and particularly their families, face tremendous sacrifices and hardship. Not all strikes are wildcat. Union leaders do not put their members at risk in an official dispute without realising the effect on their members and their wives and children. Remember this, my Lords: not all strikes are the fault of unions. Management also can bear responsibility for strikes. It is always the unions who are blamed, particularly by the mass media and many unthinking people in the country. This move can only increase bitterness and class division. It will not improve good industrial relations. It is a foolish move. It is an act of vicious spite, no more and no less.

To revert to the disabled and the sick, for a Government which came to power with many promises to the chronically sick and disabled the effect of being in office seems to be a concentration of cuts to the disadvantage of these people, some thing which, in the mildest of terms, can only be described as insensitive. It is not only the severe cuts imposed in the Social Security Bills, but also the threat to personal social services brought about by economy pressures forced upon local authorities by the Government. Even before economies were announced, the provision of such services as home helps and meals on wheels in a number of areas was well below the standard considered necessary by the Department of Health and Social Security. It is far better to keep people in their own homes rather than force them into institutional care¤and, indeed, it is more economical. Cuts in personal social services are false economy as well as being against the better interests of the handicapped and the aged. The effect of these cuts, allied to the provisions of the Bill, is an unfair and callous burden, bearing in mind those generous income tax cuts in the Government's first Budget.

I do not intend to develop an argument on the monetary policy of the Govern- ment, or as to whether cuts in public spending are necessary or otherwise. My simple and direct view is that if sacrifices are needed, then the last sections of our community to be affected should be the disabled, the sick, the unemployed and the aged. Let the wealthy, the healthy and the securely employed carry the burden. Here in this Bill we are penalising the sick, the injured, the unemployed and the pregnant. This is unjust and against the principles of a caring community. Despite party three-line whips, this House enshrines the right of every Member to vote as conscience dictates and not as the Chief Whip dictates, with persuasive Government guardians on the doors. This House, irrespective of party pressures, has already asserted itself on school transport. In accordance with tradition, we shall, albeit with the greatest reluctance, give this miserable Bill a Second Reading, but, when we reach the Committee and Report stages, important amendments will inevitably appear to protect the disabled, the sick and the unemployed. Is it too much to ask that noble Lords and noble Baronesses will examine and consider their consciences and vote as their hearts¤and not their parties¤dictate?

My Lords, the disabled, the sick and the unemployed await your decision¤and it must be your decision¤on this Bill which is imposing great hardship. It is no good dodging the question and putting party first. There are in this Bill things which must be removed, and I ask the House to support us in the Committee stage.

6.41 p.m.

Baroness YOUNG

My Lords, we come to the end of a most interesting debate on this Bill and I should like to begin by thanking my noble friends who have spoken in my support and particularly the noble Lord, Lord Boyd-Carpenter, the noble Baroness, Lady Vickers, and the noble Baroness, Lady Macleod of Borve, for giving such vigorous and effective support.

At the beginning of the debate the noble Lord, Lord Wells-Pestell, asked the question: What is the purpose of this Bill? Why, after the No. 1 Social Security Bill which we have just debated and passed, should we have a No. 2 Bill? The answer to that is quite straightforward.

This Bill is part of the Government's Budget strategy, as I made clear in my opening speech on it; and whatever the noble Lord, Lord Soper, may say¤and he said a great deal in the course of his remarks¤it is not a Bill which has anything to do with scroungers or the work- shy. Indeed, the Bill is not directed against scroungers, although some of the provisions are in areas where there is some scope for abuse. One was identified by the noble Lord, Lord Boyd-Carpenter, and if there is scope for abuse it is of course in regard to occupational pensioners who draw unemployment pay and who are not in fact available for work. But it is not intended to be against them. Fraud is not a matter of people at risk taking undue advantage; it is a matter of people without entitlement pretending that they are entitled. I think we must keep this whole matter in proportion, and it would be most unfortunate to think that the whole purpose of the Bill is something which it is not.

As I have said, it is part of our overall economic strategy. We may disagree about this strategy but, as my noble friend Lord Boyd-Carpenter made clear, the Government of the noble Lords opposite were not particularly successful when they were in office, when the mangement of the economy was in their hands. I believe even the noble Baroness, Lady Gaitskell, will recall that they too were obliged to make very considerable cuts in Government expenditure at the behest of the International Monetary Fund. They were obliged to do it because outsiders told the Government that they must, but what we are doing is considering very carefully all aspects of Government policy in making the decisions that we have come to. Indeed, I and my colleagues hope very much that our strategy will be successful. We hope this for many reasons, not least because if we are a richer and more prosperous country we can provide better benefits for those least able to help themselves.

In the past our record has shown that we have been successful in the management of the economy and we have provided good benefits. Why then, I have been asked, have we looked at the social security budget? We have looked at it because we believe that all aspects of Government expenditure must be con- sidered and that we could not ignore the vast amount that has been spent.

There was some considerable discussion as to the basis of this and I think I can do no better than to quote what my right honourable and learned friend the Chancellor of the Exchequer told another place in his Budget Statement on the 26th March. Referring to the social security programme he said: Its volume has grown by about 50 per cent. in the last 10 years, allowing for both inflation and the switch from family allowances and child tax allowances to child benefit. That rate of growth is more than three times the 15 per cent. increase in gross domestic product over the same period".¤[Official Report, Commons, 26/3/80; col. 1458.] If one looks at the factors which have led to this growth, one sees that they include both demographic and economic changes, that is more old people and more unemployed and real improvements in benefits. Broadly speaking, the changes can be summarised as follows. Expenditure in 1970–71 at 1979 survey prices was about £12,000 million. Between that year 1970–71 and 1979–80 were added £800 million for more people unemployed, £1,100 million for more old people, £2,500 million for real improvements in pensions, £800 million for new benefits, excluding child benefits and £1,500 million transfer of child tax allowances to child benefit and £300 million for real improvements in family support. That adds up to a total expenditure of about £19,000 million or 27 per cent. of total public expenditure. It is hardly surprising that, however difficult it may have been, the Government felt that they ought to look at this vast area of Government expenditure.

I now turn to the detailed points which have been raised on different aspects of the Bill. There has, I think, been general agreement that short-term benefits should be taxed. Concern has been expressed about the interim period between the situation now and when these benefits in fact will be taken fully into tax. I recognise in this that there is an element of rough justice about it, but I should like to correct the figures given by the noble Lord, Lord Underhill, in this regard because they were not quite right. So far as invalidity benefit tax is concerned, 100,000 would pay less tax than they would get in abatement; 150,000 would pay no tax at all. That makes a total of 250,000, not 400,000 people to which he referred. However, that 250,000 must be seen against the 650,000 beneficiaries, most of whom will not be worse off, although I accept, as I said at the beginning, that there is an element of rough justice in this.

The noble Lord, Lord Underhill, also asked about the 5 per cent. reduction carried through to the later years of 1981¤82, and I should like to make it clear right at the start of these proceedings before we go into Committee, that we have taken no decision at all on the 5 per cent. abatements in the following years, 1981 and 1982. I think it is important to make that point quite clear.

The noble Lord, Lord Boyd-Carpenter, asked whether in fact it would be less expensive or whether there would be savings once these particular groups of people were brought into taxation. I think the answer is that earlier schemes were very expensive in numbers of staff, and he made that point, but with unemployment benefit the scope for the use of computers and the fact that tax will not be deducted currently but normally after the return to work, will reduce the staff cost. So, too, does the transfer to employers of responsibility for the first eight weeks of sickness, which the Government propose in their consultative document, the Green Paper to which I have referred. So we believe that the tax scheme as envisaged will be more economical of staff than earlier versions.

Turning to Clause 2, I should like to reassure the noble Lord, Lord Wells-Pestell, who referred to this, that it is our intention to abolish the earnings rule as soon as possible. That remains our long-term commitment. But as I believe that I should be generous to my noble friend Lord Boyd-Carpenter I will accept his teasing of the Government on this particular point and I will take his strictures to heart. He had a good point to make and I do not blame him at all for making it on this particular occasion. However, I do not feel quite so generous to the noble Lord, Lord Underhill, who tried the same point, because, if I may say so, had he been here when his Government were in office he would have found himself on my side and not in fact making that argument at all.

I turn now to the points which have been raised on Clause 3 about the linking. The noble Baroness, Lady Vickers, said this was a very difficult clause, and I agree with her. If I could put it in terms which I find somewhat easier to understand than the way it is put in the Bill itself, I think the problem arises if one takes the example of a man who has had a heart attack and is therefore off work and who wishes to go back to work and rehabilitate himself. Under the present situation he has up to 13 weeks to rehabilitate himself. He may have short periods of sickness, but during that time he is able to claim invalidity benefit. We originally proposed that this period of time would be reduced to six weeks, but after a great deal of discussion in another place we have increased this to eight weeks. He will have eight weeks to rehabilitate himself; after that time he will not get invalidity benefit should he be off sick, but he would have sickness benefit. I think taking a particular illustration makes it easier to understand than it is as set out in the Bill.

Clause 4, on the earnings-related supplement, has roused a very great deal of criticism and we have been accused of a great many things, including fraud. I do not wish to ask noble Lords opposite to do a great deal of extra work before Committee stage because I am sure we are all going to be very busy indeed. But I would like to refer them to the words that I used at the beginning on this point. There was a great deal of discussion about the principle, and whether or not we were taking away a benefit for which people had already paid. It is. therefore, very important that we should set out the facts correctly. I hope those noble Lords who have raised points on this will read what I have said once again. I suspect that at the end of the day they do not want to be confused by the facts of the situation, but I really do not think that we are committing the kind of sins attributed to us.

The noble Baroness, Lady Macleod, made a very interesting and important point on this clause, about widows. I listened with very great care to her speech; I recognise her great concern and knowledge about the difficulties that widows have. Clause 4 affects earnings-related additions to widows allowance.

The flat-rate widow's allowance is higher than all other short-term benefits, and the allowance goes to younger widows who may be working before and after bereavement. I hope this statement may be some help to her. It is a matter on which I recognise she has a great deal of know ledge, and I shall certainly read very carefully what she had to say.

Turning now to Clause 5, the noble Lord, Lord Underhill, asked me an important point as to why we had chosen the figure of £35 for those with occupational pension schemes. The figure was chosen simply as a measure of a substantial pension. About 50 per cent. of occupational pensioners get less than £35 a week. With the £35 figure some unemployment benefit would be payable to a married couple with a flat rate unemployment benefit until the occupational pension exceeded £68 a week. The noble Lord, Lord Plant, also raised an important point about availability for work for those in occupational pension schemes. I referred to this in my earlier remarks. I should like to emphasise again that it is difficult to test availability for work, because employers are reluctant to take on people over 60 years of age; 56 per cent. of those likely to be affected who were interviewed in a survey admitted in the survey interview, though not of course to the benefits officer, that they were not looking for work, and this illustrates the point. So we feel that we are right to make this new arrangement. I was very pleased to have the support of my noble friend Lord Boyd-Carpenter for putting right what could be regarded as an abuse.

I turn now to Clause 6. I was grateful for the intervention of my noble friend Lord Carr on this. I recognise that Clause 6 is a very sensitive issue. I should like to make it clear that it is not in any way intended as an attack on trade unions. It is an issue on which we did fight in the general election, and we did indicate that we would be bringing forward legislation were we to be elected.

A number of points have been made and I will try to deal with them in the order in which they were made. The noble Lord, Lord Banks, raised a number of points. He advocated recovering the £12 from the striker rather than cutting the benefit. The answer to this is that recovery of benefit from all individuals would not be practicable. It would have to be done through their employers, making extra work for them, and indeed for the Department of Health and Social Security. It would also prolong ill-feeling caused by a strike, for weeks or even months after the strike was over.

Lord BANKS

My Lords, I am grateful to the noble Baroness for allowing me to intervene. I did not actually suggest that, but I fully understand the argument she has put forward against it.

Baroness YOUNG

My Lords, I am sorry if I misunderstood what the noble Lord said. I will certainly read his remarks and see if there are other matters to which I should refer when we come to this in Committee. He also said that it might be better to place the obligation on the unions to pay the £12 strike pay, because the individual cannot determine whether or not the strike pay is to be given. I think the answer to this is that the only practical way to enforce such an obligation would be to legislate for recovery of part of the supplementary benefit from the union. This would be cumbersome and administratively very costly, and would, I believe, be very bad for industrial relations. It does seem to us far better to leave it to individual trade unionists to influence unions democratically to pay a proper level of strike pay rather than to intervene in this particular way.

The noble Lord, Lord Underhill, referred to the estimate of £1 million savings on the basis of benefits paid to strikers in 1979. This figure is correct, but I think he will recognise that during the steel strike in 1980 the total benefit paid out was over £9 million. Clause 6 would have saved over £4 million on this strike alone. Incidentally, the amount paid out over the previous 10 years was very nearly £30 million, not £21 million as the noble Lord stated. For these reasons, we believe it is a fair clause. It is not intended, as I say, as an attack on trade unions, but is a recognition of their responsibility in supporting their members when they are out on strike. We hope it will be seen as something which is a fair measure.

In winding up, the noble Lord, Lord Wallace, made an impassioned appeal to the House against this Bill. I am very pleased to feel that he thinks this House has a virtue and has some point in speaking out about this Bill. We sometimes wonder¤particularly in view of some of the remarks made on Saturday at another conference¤what noble Lords actually feel about this House. However, we will accept his sincerity and his colleagues' sincerity in this matter, and we shall look forward to debating with them on the Committee stage.

I should like to conclude with the very important proviso that I made at the start of my speech on this Bill. It is true that this is a tough Bill. It is one that is designed to save money. But, nevertheless, the Government have taken steps to protect the elderly, and they will continue to do that, and those on supplementary allowances. Although it makes a saving in some directions, one must remember the fact that, at the end of the day, there will be an extra £3, 000 million being spent on benefits, regardless of what this particular Bill is doing in other respects. I therefore hope that I shall have the support of the whole House when we come to the Committee stage of the Bill.

On Question, Bill read 2^a and committed to a Committee of the Whole House.