Lords Sitting of 16 June 1980

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chester.
The Lord Bishop of Chester—Took the Oath.

DIEGO GARCIA: USA MILITARY CAPABILITY
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the State Department of the USA informed the Foreign and Commonwealth Office, as required by the Anglo-American agreements of 1966, of its intention to send a task force of seven naval ships, carrying tanks, troop-carriers and other military equipment, to the base at Diego Garcia.
The SECRETARY of STATE for FOREIGN and COMMONWEALTH AFFAIRS (Lord Carrington): My Lords, the United States has a long-term programme for strengthening its military capability in the Indian Ocean area. This programme includes the pre-positioning of equipment to be available for use by forces deployed rapidly to the region in an emergency. At Diego Garcia such equipment will be held in converted merchant ships which will periodically be rotated within the Indian Ocean area. They do not constitute a naval task force. Her Majesty's Government were fully consulted over the proposal to send these ships to Diego Garcia in accordance with the provisions of the 1976 exchange of notes.
Lord BROCKWAY: My Lords, may I ask the Minister whether it is not the case that the 1966 agreement required that this Government should agree to other than modest routine military movements? Was this not much greater than that? If the
820
British Government had previous consultation, did they agree to an action which was not in conformity with the policy both of this Government and of our European allies against military threats and intervention?
Lord CARRINGTON: My Lords, the noble Lord is quite right. The 1976 agreement provides for consultation between the two Governments over use of facility in other than normal circumstances.
Lord SHINWELL: My Lords, may I ask the Foreign Secretary whether the decision referred to in the Question was taken by NATO? Does this mean that NATO has now changed direction, not confining itself to the situation in Europe but taking a rather global view of the situation?
Lord CARRINGTON: No, my Lords; this is a decision taken by the United States.
Lord SHINWELL: My Lords, does that mean that it has not been supported by NATO?
Lord CARRINGTON: My Lords, the decision was taken by the United States. I hope that the NATO allies will support it.
Lord BROCKWAY: My Lords, the Minister has not answered my question. I asked whether there was previous consultation and agreement before the American movement. Was this action not in contravention both of the United Kingdom policy and European policy against military threats and intervention?
Lord CARRINGTON: No, my Lords. This was done with the agreement of the British Government.

SMALL BUSINESSES: PAYMENT OF BILLS
2.39 p.m.
Lord BRUCE of DONINGTON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they propose to take to

821
redress the growing injustice experienced by thousands of small businesses who now have to wait, on average, some 70–80 days to be paid for business debts owing by large companies and corporations, local authorities, state industries and Government departments; and who are now forced to pay high interest rates for loans to preserve their cash flows, and who are increasingly threatened by bankruptcy.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard): My Lords, the Government have every sympathy for small businesses when payment for their goods and services is unreasonably delayed. For the Government, I can repeat what my noble friend the Minister of State for Defence said in the House on 24th March: Government departments are under standing instructions to settle all bills as promptly as possible. As regards state industries, sponsoring departments are reminding those industries of the need to settle bills promptly.
In the private sector the CBI are pursuing a similar campaign with their larger members and we strongly endorse their action. Indeed, I would take this opportunity to impress again on all large organisations, be they public or private, the need to have special regard for the position of small firms when making payment for goods and services.
Lord BRUCE of DONINGTON: My Lords, is the noble Lord aware that his Answer will bring little satisfaction to small businesses in the country which are suffering from this trouble at the present time? Will he draw to the attention of his right honourable friend the Minister of Transport the situation regarding contractors and sub-contractors working on the M.11 whose bills in many cases have been delayed for over three years? Will he consider as a possibility the step of drawing to the attention of his honourable friend in another place the code of fair trade in regard to practices of this kind? Will he finally bear in mind that, owing to the attitude of the Government, the situation is rapidly being created whereby large firms, although they apparently cannot afford to pay their bills to small businesses, nevertheless make offers for their acquisition?
Viscount TRENCHARD: My Lords, I do not think that I can add to what I have said in my first Answer. If the noble Lord will give me details of his allegations in relation to the M.11, I will make sure they are considered by my right honourable friend the Minister of Transport. Fair trading provisions exist in law and in codes of practice. The Institute of Purchasing and Supplies has, I believe, recently also issued one. The CBI, as I have mentioned, is working on it. As to whether this practice is as widespread as noble Lords believe, I find this a little perplexing from my industrial background. It is well known in business circles that long credit is not the biggest advantage of small firms and therefore it is in the interests of all larger buyers to pay as promptly as possible and certainly within the terms laid down.
Lord DERWENT: My Lords, would my noble friend say what is the normal practice of Government departments when they find that one of their contractors or sub-contractors is not paying as punctually as it might?
Viscount TRENCHARD: My Lords, I think it must depend on the circumstances. If noble Lords will provide those circumstances, certainly sponsoring departments will be ready to discuss the matter with the parties concerned.
Baroness SHARPLES: My Lords, is my noble friend aware that I have received a considerable amount of correspondence—well over 100 letters—from small businesses? A great number of these employ perhaps only 35 people each and they have a black list. The very large companies who do not pay within the recognised time—perhaps 90 days is in the contract and sometimes they do not pay for as long as 120 days—remain on the black list until they pay their bills within the time prescribed.
Viscount TRENCHARD: My Lords, again, if my noble friend would like to give me details it will certainly help us when we come to consider the recommendation of the Law Commission on the possibility of automatic interest after a certain date. If she will give me the

823
details she has spoken of, it will help the Government to consider that report.
Lord LEE of NEWTON: My Lords, is the noble Lord aware that a Select Committee of this House has received evidence that Government departments are delaying payment of their debts to small firms? Is this because of the high interest rates that they can gain out of them?
Viscount TRENCHARD: No, my Lords, it is not in relation to high interest rates, and if there is evidence of the wilful delaying of payments, then I should very much like to hear it. Like many other large organisations today, I am aware that some Government departments, because of difficulties concerning either computers or staff, have got behind on payments at certain times; but there is no policy of wilful delay on the official terms. We did actually defer the payment of regional grants, which went through Parliament, by four months.
Lord KILMARNOCK: My Lords, may I ask the noble Lord whether he is aware that in the public evidence given by one of the joint stock banks to your Lordships' Select Committee on Unemployment this problem was particularly stressed by a main high street bank in relation to small business? In view of that, will not the Government perhaps consider taking special powers as regards this malpractice?
Viscount TRENCHARD: My Lords, not other than in the context I have mentioned, when we come to consider the Law Commission's Report.
Lord BRUCE of DONINGTON: My Lords, is the noble Lord aware that the replies he has so far given in this House are thoroughly unsatisfactory and do not indicate any real interest in, or desire to alleviate, the plight in which small firms find themselves? Will he take note and investigate further a practice, to which reference has already been made in the Financial Weekly, of large firms placing on deposit at the current high rates of interest monies they would otherwise have to pay to their small contractors or
824
sub-contractors who themselves have to pay extortionate rates of interest under Her Majesty's present Administration in order to keep their working capital intact?
Viscount TRENCHARD: My Lords, I think that when the noble Lord comes to read the report in Hansard he will not be able to substantiate the accusation he has made. We are certainly extremely concerned about this subject, as my reply made very clear. We are seeking to ascertain how widespread the matter is, which was the substance of all my supplementary answers, and the noble Lord will no doubt take note of the degree to which Government can indeed control transactions between suppliers and the degree to which individual suppliers—even small suppliers, with good products to offer to large organisations—are not already in a position, if this happens to them once unnecessarily, to prevent it from happening again. But there is the one area in which we have positively undertaken to look at the recommendation of the Law Commission.

FUEL BILLS: ASSISTANCE TO PRIVATE PERSONS
2.48 p.m.
The Earl of LAUDERDALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what was their total expenditure in money of the day on help to private individuals in meeting their fuel bills in each year since 1974.
Lord CULLEN of ASHBOURNE: My Lords, rather than read out a table of figures, I will, with permission, place them in the Official Report. The estimated annual equivalent of the heating additions to supplementary benefit paid in November 1974 was £20 million. From November this year the Government will be spending over £200 million a year on help to poor consumers with their fuel bills.
Following are the figures referred to:

Estimated annual equivalent of heating additions to supplementary benefit in payment in November-December; and, from November 1979, of the fuel enhancement to family income supplement

Benefit expenditure on the Electricity Discount Scheme for the Winters 1976–77, 1977–78, 1978–79

£ million

£ million

1974

20

—

1975

35

—

1976

61

11·1

1977

83

21·6

1978

93

34

1979

111*

—

1980(projected)

200

—

*The 1979 figure is known to be a low estimate of annual expenditure because, when the statistics were collected in November implementation of the age-related heating additions introduced in the autumn package of help with fuel bills had only just begun.

The Earl of LAUDERDALE: My Lords, in thanking my noble friend, may I ask whether he would not agree that this tenfold increase, achieved within a year of the new Administration taking office, is greatly to the Government's credit?
Lord CULLEN of ASHBOURNE: My Lords, I am grateful for the supportive remarks of my noble friend.
Lord STRABOLGI: My Lords, will the noble Lord confirm that the agreed code of practice over disconnections will be sympathetically adhered to, as people with lower incomes are finding it increasingly difficult to pay their fuel bills with the escalating costs since the present Government came into Office?
Lord CULLEN of ASHBOURNE: I have no doubt about it, my Lords.
Lord KILMANY: My Lords, arising from that reply, may I ask my noble friend what further help is being considered in this direction?
Lord CULLEN of ASHBOURNE: My Lords, a study is in progress on the scope for further initiatives to help the elderly and disabled to save fuel by
826
insulating and draught-proofing their homes and by making more efficient use of heating appliances.
Lord GRIDLEY: My Lords, with regard to his last answer, may I ask my noble friend about help for the disabled? Can he tell your Lordships specifically whether that help will apply to those who have suffered disability in war, or as a result of war, and whether it will apply to a different category of disabled people who have suffered during peace?
Lord CULLEN of ASHBOURNE: Yes, my Lords. It would certainly apply to all people who were disabled in wartime. The fuel package directs particular help to the disabled. The merging of the middle and upper rates of supplementary benefit heating addition, at the considerably enhanced new, higher rate of £3·40, will benefit many disabled people who previously qualified for the middle rate, to the tune of an extra £78 per year each. Also, under a fail-safe arrangement which was announced on 27th March, supplementary benefit claimants or their dependants who are in receipt of attendance allowance, constant attendance allowance or mobility allowance, will automatically be entitled to the new higher rate heating addition.
Lord AVEBURY: My Lords, will the noble Lord agree that if higher standards of insulation were to be prescribed for new dwellings, and more resources were to be made available to local authorities and individuals to improve the standards of insulation in existing dwellings, a considerable fraction of the £200 million, which he mentioned as going to the poorer consumers, could be saved? Also, what cost benefit analyses have been undertaken by the Government, so as to reach the conclusion that the present levels of insulation prescribed, and the present levels of grants to local authorities and individuals, are the optimum?
Lord CULLEN of ASHBOURNE: My Lords, I regret that I cannot answer those detailed questions, but a study is in progress on this matter.
The Earl of LAUDERDALE: My Lords, is the noble Lord aware that his answers will give great satisfaction, and will provide information about a dark

827
corner which is open to propaganda by the other side? Is he aware that this surely shows that we are spending not only more, but more wisely than our predecessors?
Baroness PHILLIPS: My Lords, would the noble Lord not agree—
Several noble Lords: Order!
Lord CULLEN of ASHBOURNE: My Lords, I really was not going to say anything very much, except to thank my noble friend.
Baroness PHILLIPS: My Lords, I should not like to be in any way ungracious enough to spoil those thanks. I merely want to say that, surely, the increased money being paid out is because the cost of the gas and the electricity has gone up. So, in fact, no extra money has been paid out.
Lord CULLEN of ASHBOURNE: My Lords, the noble Baroness will realise that the scheme that we are carrying out now will operate for all forms of fuel and not purely for electricity, as did the last Administration's scheme.

THE OLYMPIC GAMES: AEROFLOT LONDON AIRPORT SERVICES
2.53 p.m.
The Earl of KIMBERLEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will stop Aeroflot operating into and out of London Airport till after the finish of the Olympic Games in Moscow.
Lord TREFGARNE: No, my Lords. We have an air services agreement with the Soviet Union which has the status of a treaty. Under that agreement, Aeroflot is entitled to operate services between the Soviet Union and the United Kingdom, as is British Airways. Her Majesty's Government are not seeking to intervene in trade with the Soviet Union where this can be justified on commercial grounds, and we take the same approach to air services.
The Earl of KIMBERLEY: My Lords, I thank my noble friend for that Answer. Am I right in thinking that the air services agreement does not apply to charter flights which Aeroflot might apply for; and, if so, could he give details?
Lord TREFGARNE: My Lords, it is true that charter services are not covered by the air services agreement. They would need specific approval, and it has been made clear that if such applications are made they will be considered at the highest level.

BUSINESS
Lord DENHAM: My Lords, with the leave of the House, at a convenient moment after 3.30 this afternoon, my noble friend the Foreign Secretary will repeat a Statement on the Venice meeting which is being made in another place.
It may also be for the convenience of your Lordships if I announce that dinner will be available this evening at the usual time. The Committee stage of the Social Security (No. 2) Bill will be adjourned at approximately 7 o'clock for about an hour, and the Second Reading of the Gas Bill will be taken during this adjournment.

THE NEW HEBRIDES: STATE OF EMERGENCY
2.55 p.m.
Lord CARRINGTON: My Lords, with your Lordships' permission, I shall make a Statement on the New Hebrides. On 11th June, following the shooting of a prominent Opposition Deputy during a demonstration on the island of Tanna, the New Hebrides Government asked the two Resident Commissioners to recommend to their Governments the despatch of British and French forces to the New Hebrides. This request was made during the course of a Cabinet meeting, and both Resident Commissioners agreed to make such a recommendation to their respective Governments.
The Chief Minister's understanding of their agreement was later confirmed in writing. It was in response to this joint recommendation that the French decided

829
to send some gendarmes from New Caledonia. They informed us of this decision. It was also in response to the joint recommendation and to match French action that we decided to send a contingent of the Royal Marines, in order that we might be in a position to act jointly, should the need arise, with the French gendarmes. We informed the French of this decision.
On 12th June, the French Government decided to withdraw their gendarmes from the New Hebrides, and did so that day. On 15th June, the French Resident Commissioner made a formal protest to the British Resident Commissioner about the despatch of the Royal Marines. In deploying our troops in Vila, we are not only demonstrating our willingness to live up to our obligations, but we are satisfied that we are acting in accordance with the 1914 Protocol which governs the joint administration in the Condominium.
My honourable friend the Minister of State for Foreign and Commonwealth Affairs is seeking an early meeting with M. Dijoud, the responsible French Minister, in order that we may clarify our joint approach to the problems in the New Hebrides. Meanwhile, it remains the intention of Her Majesty's Government to do all in our power to promote a peaceful solution to the problem, to support the democratically elected Government and to safeguard the integrity of the New Hebrides.
2.57 p.m.
Lord GORONWY-ROBERTS: My Lords, the House will be grateful to the noble Lord for making that Statement and, I think, generally in support of the attitude that the Statement projects. I myself must confess—and I am not the only one—to a certain sense of astonishment as to the French reaction, particularly in the last two or three days. Here we have two friends and allies of long standing, who have been co-operating with considerable success in a difficult situation in the condominial control and government of a dependency, and, after nearly three years of progressive consultation, in which I myself was very glad to take part at one time, reaching a constitutional position of agreement with all the represent-
830
ative bodies in the New Hebrides—that is, representative in the democratically elected sense—both francophone and anglophone, as to the timetable for an orderly and constitutional move into independence.
That was done to the great credit of both Governments, French and British, with the full agreement of Ministers on both sides. Unfortunately, certain elements attempted to disturb the integrity of the new state and, clearly, under the 1914 Protocol, and most certainly under the recent agreement of 3rd June last, which the two Ministers signed, such a situation obliged both condominial partners to take whatever steps were necessary: first, by seeking a peaceful solution; and, secondly, by putting into effect police action, if that was necessary. Indeed, it was the French Government that took the initiative. They were in a better position, territorially, to send some 55 gendarmes into the New Hebrides. They began it, by agreement with us. We followed suit, playing our part. At that point, it seems that our other partner withdrew their own contribution and have formally protested to us because we played our part.
There is a sense of mystification and of acute concern on two points: first, that there should be this sudden lack of agreement between the two partners after coming to the point of agreeing to the constitutional move forward to independence and the dates agreed for it—that is a serious matter indeed; secondly, that the situation should, because of that lack of co-operation at this late stage, not only exacerbate the dangers in the New Hebrides themselves, but, as I said earlier, perhaps encourage other movements, although we hope not, in the many other island states in the Pacific. And the Pacific is full of them. The best efforts of the British Government, whatever Government have been in power, have been exerted in order to hand over such archipelagic territories to independence with their territorial integrity assured, and we have succeeded very well indeed. It would be a very great pity if the New Hebrides not only itself underwent a process of breaking apart but also, by so doing, perhaps set on foot other equally disastrous movements in other parts of the Pacific.
Knowing a little about this matter, I can only say that I share the mystification of

831
the Government. I am sure that we on this side of the House will wish to support the noble Lord in every effort he makes now to restructure—I think that is the appropriate word—Anglo-French co-operation so that the New Hebrides can speedily return to course; namely, the movement, on a constitutional and democratic basis, to full independence on the due agreed date.
Lord BANKS: My Lords, I should like to join in thanking the noble Lord the Foreign Secretary for making this Statement this afternoon. When a Statement on this matter was repeated in the House on Friday of last week I asked for an assurance that the British and the French were in agreement on how to deal with the situation. The noble Lord, Lord Trefgarne, was reassuring. He said that the British and the French were in the closest touch, and in answer to the noble Lord, Lord Leatherland, he said that that meant in the closest agreement. Yet events over the weekend, as the Statement has made clear, have shown that the concern expressed in this House on Friday was justified. It became clear that the French did not agree with the dispatch of the Royal Marine Commandos and that the withdrawal of the 55 gendarmes was not purely coincidental.
On behalf of those of us on these Benches, I should like to assure the noble Lord that we fully support the Government in upholding the democratically elected Government of the territory in urgently seeking agreement with the French Government—whose policies, as the noble Lord, Lord Goronwy-Roberts, has said, are not easy to understand—and in seeking to secure a peaceful settlement. There is one question which I should like to ask the noble Lord: will the Royal Marine Commandos have any special, immediate, and visible role, such as guarding public buildings, or will they merely be held in reserve?
Lord CARRINGTON: My Lords, condominium is a very odd form of government. Any of your Lordships who have been to the New Hebrides, as I have been, will realise what difficulties it imposes and places upon those who live in the New Hebrides and those who are trying to govern. There have inevitably been difficulties over the past years because
832
of that form of government. However, as the noble Lord, Lord Goronwy-Roberts, has said, as a result of an agreement between the British and the French Governments there is agreement on a constitution, and an election took place recently which was supervised by the United Nations and which was declared by them to be free and fair. I am glad to say that the French Government recognise that. M. Dijoud told me when I saw him in London last week that the French Government did accept that these elections were free and fair—and the outcome of them. The French Government have also accepted that independence should take place on 30th July.
I think that after that agreement it would be a great pity if we did not proceed along the lines that we had always said we would. It will not be the fault of Her Majesty's Government if we cannot get agreement on this, because we intend to work with our French partners to get acceptance of the outcome of the election and to get independence on the date that we have already announced.
With regard to the question asked by the noble Lord, Lord Banks, the purpose of sending the Royal Marines was obviously to create stability in the islands and to provide reassurance. The job that they will do will be decided jointly between the Government of the New Hebrides and the French and the British Resident Commissioners.
Lord ALPORT: My Lords, the House was informed last week that this particular matter was under discussion between the Prime Minister and the President of France at the Venice meeting. Was there any indication during that discussion that the reaction of the French would take this extraordinary form?
Lord CARRINGTON: My Lords, my right honourable friend the Prime Minister did discuss this matter briefly with the French President and they agreed that they would remain in the closest touch over the handling of the problem.
Lord BROCKWAY: My Lords, in view of the very serious situation, may I ask the Minister whether he will immediately negotiate with the Foreign Secretary in France in order to reach a solution to this problem?
Lord CARRINGTON: My Lords, there is a problem about that: it is that my French opposite number is not responsible for this problem. M. Dijoud is the Minister concerned. As I understand it, he works in the home department, so my opposite number is not concerned with the problem. Therefore, I do not think that there is much point in my meeting him. And I do not, frankly, think that there would be much point in my right honourable friend the Home Secretary meeting his opposite number in the home department in France! For the time being, at any rate, I think it would be better if Mr. Maker and M. Dijoud continued to meet.
Lord LEE of NEWTON: My Lords, as one who has tried to negotiate with the French both in Europe and in the New Hebrides, is the noble Lord aware that he has my sympathy? Will he ensure that they are not permitted to use the arrangement which brought the condominium into existence to allow their colonists in the New Hebrides to get away with activities which are utterly unlawful and which could not stand the test of the democratic approach—because, quite obviously, they are now trying to undermine the authority of a democratically elected Government?
Lord CARRINGTON: My Lords, as I said earlier in response to a question, I think from the noble Lord, Lord Goronwy-Roberts, M. Dijoud, when I saw him in London last week, specifically said that the French Government accepted the outcome of the elections.
Lord GORONWY-ROBERTS: My Lords, the French were joint signatories with us, and others, of the constitution which fully guarantees the interests—linguistic, commercial and others—of the francophone minority in the islands. May I add to my noble friend's question this one: is the noble Lord aware that we entirely agree that the negotiations, which I gather have now been resumed between our own Minister of State and the Minister for Foreign Territories—I believe the term is territoires étrangers—constitute the right forum in this case and feel that if an attempt is agreed between them to solve the difficulties on Espiritu Santo and on Tanna by peaceful
834
means, through negotiation, all well and good? But would the noble Lord accept under advisement the need to say to our partners that, if such a final attempt at a peacefully negotiated solution fails, then we do expect that our partners will once more join with us in taking the steps necessary to sustain the authority of the properly elected Government of the New Hebrides and to make certain that that territory moves into independence on the due date in a constitutional and ordered manner?
Lord CARRINGTON: My Lords, although I confess that I have been rather puzzled by some of the things that have happened in these last two or three days, I have no reason to suppose that the French Government would not agree entirely with what the noble Lord opposite has said.
Lord HATCH of LUSBY: My Lords, I wonder whether the noble Lord the Foreign Secretary can clarify one aspect of his Statement. On Friday in his absence his noble friend Lord Trefgarne, in answer to a question from me, assured the House that the marines who were being sent were to give full support to the democratically elected Government and its chief Ministers. This presumably would include the suppression of any rebellion against that democratically elected Government, and yet it is reported that the French have a veto on the movement of those marines once they arrive in the New Hebrides. Can the noble Lord clear this up?
Lord CARRINGTON: My Lords, I think that the legal position because of this condominium is a little obscure. But I myself can conceive of no circumstances in which there was need to maintain order or to safeguard the welfare of the population in which the French should not agree to the use of our troops.
Lord ELWYN-JONES: My Lords, are not the developments of the last two days so damaging to more than Anglo-French relations that some attempt ought to be made at direct communication with President Giscard d'Estaing about this scandalous state of affairs?
Lord CARRINGTON: My Lords, there appear to have been some misunderstand-

835
ings. I know that my right honourable friend the Prime Minister and the President of France had a meeting about this on Friday, and I hope very much that these misunderstandings will now be cleared up.

BRITISH OLIVETTI LIMITED BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
EAGLE & GLOBE STEEL LIMITED BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

SOCIAL SECURITY (NO. 2) BILL
3.13 p.m.
The MINISTER of STATE, DEPARTMENT OF EDUCATION and SCIENCE (Baroness Young): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, that the House do now resolve itself into Committee.—(Baroness Young.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL of LISTOWEL in the Chair.]
Clause 1 [Reduction of compulsory up-rating of certain benefits]:
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 1:
Page 1, line 7, leave out ("1979–1980") and insert ("1980–1981").
The noble Lord said: One of the main features of this Bill is Clause 1. Clause 1 seeks a reduction of compulsory up-rating of certain benefits, and in the view of all of us on this side of the Committee this is perhaps the most important clause, although we would not seek to suggest that some of the other clauses are not almost as important. If I may say so with very great respect, I think noble Lords should understand quite clearly what this clause seeks to do. It makes possible a reduction in the compulsory up-rating of certain
836
benefits in 1980 and in the two following years. In each of these years unemployment, sickness and industrial injury benefit, maternity allowance, the unemployability supplement to industrial disablement pension, invalidity pension and allowances and the adult dependant editions of these benefits may be increased by an amount which is 5 per cent. less than other benefits and 5 per cent. less to restore their value against prices.
I want noble Lords to listen, as I am sure they will because your Lordships always do, to what this really means. I want to suggest that there is not one of you who can honestly support this. Never before—well, not for 50 years—have a Government come before Parliament and introduced legislation to reduce benefits, the last time being in the 'thirties. This Government perhaps do not realise that by so doing they are creating an apartheid of the poor people of this country, people who in the normal way cannot make ends meet; hundreds of thousands who in the normal way have to apply for supplementary benefit. It really is a most serious business when a Government come along and introduce legislation of this kind. For the first time for 50 years unemployment and sick pay are being cut in real terms.
I find that many noble Lords regard the term "social security" as meaning supplementary benefit, which is a means-tested benefit. I do not want to presume too much, but perhaps I may be allowed to say there are two kinds of benefit in this country: national insurance and means-tested benefits. National insurance benefits are benefits which are given as a direct outcome of people contributing every week by way of national insurance contributions. They are obliged by law to do so. They pay the contributions on the understanding that if certain situations arise they will get certain benefits. It is their entitlement by right—not by charity, but by right—because they have paid in for it. Yet here we find, for the first time for 50 years, a Government asking its Members of both Houses to support this, to reduce unemployment and sickness benefit, maternity allowance, invalidity pensions and so on.
There are hundreds of thousands receiving invalidity benefit. I shall ask my noble friend Lord Underhill to inform

837
your Lordships as to what the real position is, because the Government do not know the number of people in receipt of invalidity benefit. In the last few months they have given four different accounts. I may be wrong, but if so my noble friend will put me right and I never mind being put right. It is quite wrong to come before either House of Parliament with a view to introducing a scheme where apparently you do not know the exact extent of the problem.
Baroness MACLEOD of BORVE: I wonder if I might intervene here. Several times the noble Lord has said that the Government are seeking to reduce benefits. I do not think that is correct. What the Government are seeking to do, as I understand it, is to reduce the increase from 15 per cent. to 10 per cent.—not reducing the benefits; reducing the increase.
Lord WELLS-PESTELL: That is a most unusual argument, to say the least of it. It is an understood thing in this country, originally laid down in the 1975 Act, that certain benefits went up annually in line with prices and others went up in line with earnings. One of the things this Government have done has been to cut out increasing benefits in line with earnings and they have decided to increase them by prices. To answer the noble Baroness, the Government estimated after the Budget that, come November of this year, 1980, the inflation rate would go up by 16½ per cent. so that people in receipt of benefits would require an increase of 16½ per cent. in order to break even. Many of us know that at the present moment inflation is running at 21·9 per cent. and no member of the Government is prepared to say that it will fall to 16½ per cent. this coming November. Pensions and other benefits are going to be increased only by 16½ per cent., and certain benefits are going to be increased by only 11 per cent. If that is not reduction, then nothing is reduction. The Government are reducing the value of those benefits by 5 per cent. I am glad the noble Baroness intervened because we must clear these things up, and I take no exception to that at all.
At Second Reading it was said, "Ah, but we must all make our contribution". I would not quarrel with that. Of course,
838
we have all got to make our contribution if the financial position of the country so demands. There are some of us who can make a contribution. But we have always had, under every Government, a very substantial number of people—millions in fact, if you include the children—who have been living below the poverty line for years; and such a number exist at the present moment. Can we honestly say that families living below the poverty line must also make their contribution? It is too ridiculous for words.
It is even more ridiculous when you and I know that in the next couple of weeks people will be paying £600 for two seats at Wimbledon, and that is not the only example of extreme expenditure of money. But if they can afford it, I would not deny their right to do so. What I am saying is that reasonable, fair-minded, large-hearted Members of your Lordships' House must understand that we cannot expect people who are already living either on or below the poverty line to make their contribution.
So I want to say what I said at Second Reading. I do not expect noble Lords opposite to vote against the Government. I am a realist. I know the affection that I have for the noble Baroness opposite, and many noble Lords, if not all, on the Government side would want to support her. But I ask your Lordships to ask yourselves whether this is an occasion when you can support the Government; whether you really want it known that you went into the Division Lobby to reduce the benefits of people who can least afford it, reduce the benefits of people who, when they get a full benefit, cannot make ends meet; that you supported a 5 per cent. reduction.
The effect of this amendment would be to postpone the 5 per cent. reduction in the real value of short-term benefits and invalidity benefits for one year to November 1981. In principle we are totally opposed to any reduction in the value of these benefits, which already in the vast majority of cases represent a substantial fall in income for the unemployed and sick. This year, however, even if Clause 1 of the Bill was not enacted, the value of these benefits would fall. The reason for this is that it is becoming increasingly clear that the estimated inflation rate of 16½ per cent. for the 54

839
weeks up to the 24th November, on which this year's up-rating of benefits is based, will prove to be too low. If the inflation rate remains at, say, 20 per cent. then the 5 per cent. becomes 8½ per cent. because that shortfall is not going to be made up, so far as I can understand what Government Ministers have said.
During the Committee stage of the Bill in another place the Secretary of State himself, when explaining the figure of 161 per cent. on 24th April, said:
"That"—
meaning the 16½ per cent.—
"is the best estimate that the Treasury could make in the few days before the Budget of the likely rate of inflation from last November's up-rating date to next November's up-rating date. To some extent I share the honourable gentleman's puzzlement on whether that will be attained. Anyone looking at this objectively must do so".
When has the Treasury ever got anything right? The Secretary of State went on to say that he could give no undertaking as to what would happen if in the event the estimate proved too low and there was a shortfall in the up-rating. I understand this. It is not easy to make judgments of this kind months ahead. And I can understand the Secretary of State saying: "I can give no undertaking". It is not that that I am concerned with. What I am concerned with is not making up the shortfall so far as this is concerned, but giving these benefits, which are national insurance benefits, the full rate of up-rating, namely, 16½ per cent.
What I have said, quoting from the Secretary of State, was said some two months ago. If the issue was then in doubt, it is in doubt no longer. Nobody now believes that the inflation rate will be down to 16½ per cent. by November, and nobody can seriously believe that the inevitable shortfall will be made good with effect from this November, whatever the Government may decide to do in 1981. Deliberately to add another 5 per cent. to the shortfall, which is going to be very considerable, would be totally unjustifiable even in the terms of the Government's misguided policy. The amendment seeks to prevent this, and I ask your Lordships to say that, however much they support the Government—and I recognise that it is their duty to support the Government—this is the one thing on which they cannot have it said
840
that they voted to give a very substantial section of the community, who are always either on or below the poverty line, a reduced benefit, bearing in mind that it is an insurance benefit to which I believe they are legally entitled. I think that the Government's action is wrong.
3.32 p.m.
Baroness WOOTTON of ABINGER: I should like to support in the strongest possible terms the amendment which my noble friend has just moved. What makes the Bill more disgraceful is not only that it takes away the real value from one of the more pecuniarily handicapped sections of the population, but that this follows on a Budget a year ago which gave very substantial sums—more than enough to cover what is involved here—to persons in the upper brackets of the income tax scale. A sum of £1,560 million was given back in income tax to persons with incomes over £10,000 a year, nearly £700 million of it to persons with incomes of over £20,000 a year. We will say for the Government that, having done that last year, they did have second thoughts this year and they have not repeated that exercise. But they have done the reverse. They have now taken to recouping their depleted exchequer at the expense of the unemployed, the sick and the disabled.
Baroness GAITSKELL: I too should like to support my noble friend on this amendment, with one sentence. This Government will go down in history as a Government who cut the taxes of the richer 10 per cent., 8 per cent.—whatever it was—people in the community and then proceeded to cut the benefits of the poor sections of the community in this country. It is an indictment to which the Government have lived up.
3.35 p.m.
Lord UNDERHILL: My noble friend did say that he would be asking me to deal with the question of the numbers and the problem involved in invalidity benefit. I think your Lordships will agree that it is important we get this matter clarified quite early on in consideration of this Bill. It will be recalled that on Second Reading I referred to there being 650,000 persons on invalidity benefit and I mentioned a communication from the Royal Association for Disability and

841
Rehabilitation—RADAR. I complained that 250,000 persons would suffer the 5 per cent. abatement, although they were not liable for payment of any tax whatever, and another 150,000 would pay less tax than the abatement. Your Lordships will note that I use the word "abatement" even though most of us would like to refer to it as a cut.
The noble Baroness, Lady Young, in replying, very kindly corrected my figures, and I quote from column 1189 of the Official Report where she said my figures were not correct:
"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".—[Official Report, 2/6/80; col. 1189.]
I am certain the noble Baroness gave those figures quite clearly as they had been supplied to her. I am not suggesting that the figures as supplied to her were in any way incorrect.
On checking to see just what had gone wrong I found that similar figures were given by the Secretary of State in another place on 29th April at column 363. These confirmed the figures which the noble Baroness had given. But I found that a fortnight after the Secretary of State gave those figures in another place it was stated in a Written Reply:
"On the assumption of a total of some 850,000 beneficiaries"—
an additional 200,000 to the figures which had been given to your Lordships—
"at any time in 1980–81, a very rough estimate of 400,000 was given in the previous Reply referred to as the possible order of magnitude of numbers of invalidity benefit recipients annual income would not exceed personal tax allowance if the benefit were brought into tax this year".
Then I found that on 21st May the Secretary of State said in another place, at column 555:
"The answer in the case of the invalidity benefit—the argument is here at its strongest and I accept it—is that of about 850,000 invalidity beneficiaries 250,000 people would not be liable to tax and about 150,000 people would be liable to pay less tax than would he yielded by the 5 per cent. abatement".—[Official Report, Commons, 21/5/80; col. 555.]
What do we find? The figures in the last quotation are the figures which I mentioned to your Lordships. So now we have a complete circle and we are back to the figures which I gave, which
842
the noble Baroness had to correct, and her correction was in line with the statement made on 29th April in another place but which was corrected some two to three weeks afterwards in another place.
If we are to consider this clause we must really know what is the measure of the problem; I am certain the Committee will agree with that. If the Government's figures are, first of all, 200,000 out in the number of beneficiaries, and then they are out by another 150,000 in the number of persons who either pay no tax or receive no tax at all, it is very difficult to understand how the Government came to these figures. The general question of invalidity can be dealt with on another amendment, but I think it is rather important that we should get a clear statement from the noble Baroness as to whether the figures given in another place on 12th May are the actual figures or whether the figures which the noble Baroness gave to your Lordships, based on an earlier statement in another place, are the correct ones. We need to know in order to measure exactly what is the problem and how the Government worked out the amount of money involved.
Baroness YOUNG: I wonder whether it would be for the convenience of your Lordships at this moment to have the Statement from my noble friend the Foreign Secretary. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

EUROPEAN COUNCIL: VENICE MEETING
3.39 p.m.
Lord CARRINGTON: With your Lordships' permission, I shall make a Statement on the European Council.
My right honourable friend the Prime Minister and I attended the meeting of the European Council held in Venice on 12th and 13th June. The Summary of the proceedings issued by the Italian Presidency has been placed in the Library of the House. The Venice meeting was a series of general discussions between the Nine Heads of Government about the

843
fundamental problems we all face within the European Community and outside. They had in mind the need to prepare a common European view for the Economic Summit which is to be held next Sunday and Monday.
All the nations of the European Community have similar problems of inflation and unemployment and a number now have an adverse balance of payments. The Heads of Government were agreed that the major short-term objective must be to contain inflation by means of appropriate monetary and fiscal policies. They were concerned that the 100 per cent. increase in the price of oil over the last year would lead to a recession in world trade. They were therefore disturbed by the pressure for further oil price increases at the recent Algiers meeting of OPEC. Such an increase can only make worse the economic problems of the industrialised countries and give rise to intolerable burdens for the developing countries. The European Community remains willing to enter into a dialogue with the oil producers.
Having noted the budgetary settlement reached by the Council of Ministers at the end of May, the Heads of Government had a useful but necessarily preliminary discussion of the need to put in hand and carry through urgently a review of the Community's financial position. The nine Heads of Government also took the opportunity to have a first, informal, discussion about the choice of the next President of the Commission.
The European Council issued three declarations, on the Lebanon, on Afghanistan, and on the Middle East. With permission, all three texts will be circulated in the Official Report. Those on the Lebanon and on Afghanistan reaffirmed the concern felt by the Heads of Government about the position in the two countries. The declaration on the Middle East restates the two principles which have for many years been the basis of the European position: the right of all states in the region, including Israel, to existence and security: and justice for all peoples, which implies the recognition of the legitimate rights of the Palestinian people. A comprehensive settlement requires that all the parties concerned should be bound by these principles.
844
Beyond that, the European Council decided to make contact with all the parties in order to ascertain their position—and I quote—
"with respect to the principles set out in this declaration, and in the light of the result of this consultation process to determine the form which an initiative on their part (that is on the part of the Nine) might take".
The diplomatic activity which the Nine will undertake over the next few months is intended to be complementary to the Camp David process on which the United States, Egypt and Israel are still engaged. We hope and believe that in this way the Nine can contribute to the work which will have to be done to prepare for a peace settlement in the Middle East.
Following are the texts referred to:
EUROPEAN COUNCIL DECLARATION ON THE LEBANON
The Nine affirm once again their full and complete solidarity with the friendly country of the Lebanon whose stability remains dangerously threatened by confrontations in the region, and renew their urgent appeal to all the countries or parties concerned to put an end to all acts liable to damage the independence, sovereignty and territorial integrity of Lebanon or the authority of its Government. The Nine will support any action or initiative which could ensure the return of peace and stability of the Lebanon, which constitutes an essential stabilising factor in the region.
The Nine stress the important role which UNIFIL must play in the southern part of Lebanon. The Nine recall their Declaration of 22 April 1980 at Luxembourg and stress that it is essential that all the parties concerned permit UNIFIL to carry out the tasks with which it has been charged, including the control of the territory up to the international frontier.
EUROPEAN COUNCIL DECLARATION ON AFGHANISTAN
The European Council has noted with deep concern the intensification of the military operations conducted by the Soviet troops in Afghanistan.
These dramatic developments increase still further the sufferings of the Afghan people. They emphasise the genuinely national nature of the resistance offered by an entire people. They threaten to jeopardize the climate of international relations for a long time to come.
In these circumstances, the European Council wishes to reaffirm its conviction that it is necessary to find without delay the means of reaching a solution which, in keeping with the Resolution of the United Nations General Assembly, would ensure the withdrawal of Soviet troops and the free exercise by the Afghan people of the right to determine their own future. It reiterated its view that a solution could be found in an arrangement which allowed Afghanistan to remain outside the competition among the powers and to return to its traditional position as a neutral and non-aligned state.
It recalls that it proposed in Luxembourg, on 28 April, that the great powers and the neighbouring states should undertake the necessary commitments to this end: in particular, they should agree to respect the sovereignty and integrity of Afghanistan, to refrain from any interference in its internal affairs and renounce any stationing of troops on its soil or any form of military association with it.
The European Council shares the concern expressed and the conclusion drawn by the 11th Conference of Foreign Ministers of Islamic States on the continued Soviet military presence in Afghanistan and has noted with great interest the creation by this Conference of a Committee to seek ways and means for a comprehensive solution of the grave crisis in respect to Afghanistan.
The Council repeated its readiness to support any meaningful initiative designed to promote a solution of the Afghan crisis.
EUROPEAN COUNCIL DECLARATION ON THE MIDDLE EAST
1. The Heads of State and Government and the Ministers of Foreign Affairs held a comprehensive exchange of views on all aspects of the present situation in the Middle East, including the state of negotiations resulting from the agreements signed between Egypt and Israel in March 1979. They agreed that growing tensions affecting this region constitute a serious danger and render a comprehensive solution to the Israeli-Arab conflict more necessary and pressing than ever.
2. The Nine Member States of the European Community consider that the traditional ties and common interests which link Europe to the Middle East oblige them to play a special role and now require them to work in a more concrete way towards peace.
3. In the regard, the Nine countries of the Community base themselves on Security Council Resolutions 242 and 338 and the positions which they have expressed on several occasions, notably in their Declarations of 29 June 1977, 19 September 1978, 26 March and 18 June 1979, as well as in the speech made on their behalf on 25 September 1979 by the Irish Minister of Foreign Affairs at the 34th United Nations General Assembly.
4. On the bases thus set out, the time has come to promote the recognition and implementation of the two principles universally accepted by the international community: the right to existence and to security of all the states in the region, including Israel, and justice for all the peoples, which implies the recognition of the legitimate rights of the Palestinian people.
5. All of the countries in the area are entitled to live in peace within secure, recognised and guaranteed borders. The necessary guarantees for a peace settlement should be provided by the UN by a decision of the Security Council and, if necessary, on the basis of other mutually agreed procedures. The Nine declare that they are prepared to participate within the framework of a comprehensive settlement in a system of concrete and binding international guarantees, including on the ground.
6. A just solution must finally be found to the Palestinian problem, which is not simply one of refugees. The Palestinian people, which is
846
conscious of existing as such, must be placed in a position, by an appropriate process defined within the framework of the comprehensive peace settlement, to exercise fully its right to self-determination.
7. The achievement of these objectives requires the involvement and support of all the parties concerned in the peace settlement which the Nine are endeavouring to promote in keeping with the principles formulated in the Declaration referred to above. These principles are binding on all the parties concerned, and thus the Palestinian people, and on the PLO, which will have to be associated with the negotiations.
8. The Nine recognise the special importance of the role played by the question of Jerusalem for all the parties concerned. The Nine stress that they will not accept any unilateral initiative designed to change the status of Jerusalem and that any agreement on the city's status should guarantee freedom of access for everyone to the Holy places.
9. The Nine stress the need for Israel to put an end to the territorial occupation which it has maintained since the conflict of 1967, as it has clone for part of Sinai. They are deeply convinced that the Israeli settlements constitute a serious obstacle to the peace process in the Middle East. The Nine consider that these settlements, as well as modifications in population and property in the occupied Arab territories, are illegal under international law.
10. Concerned as they are to put an end to violence, the Nine consider that only the renunciation of force or the threatened use of force by all the parties can create a climate of confidence in the area, and constitute a basic element for a comprehensive settlement of the conflict in the Middle East.
11. The Nine have decided to make the necessary contacts with all the parties concerned. The objective of these contacts would be to ascertain the position of the various parties with respect to the principles set out in this Declaration and in the light of the results of this consultation process to determine the form which an initiative on their part could take.
3.44 p.m.
Lord GORONWY-ROBERTS: My Lords, I should like to thank the noble Lord for making that Statement, although I would personally have wished to have had a little more definition here and there. However, it is good to think that there will be a European view put forward at the Economic Summit at the end of this week, and we look forward to seeing what that common view proves to be.
On the question of oil, one does, of course, welcome the emphasis on the serious impact on the world economy made by the recurrent and somewhat abrupt and substantial increases in oil prices—an impact which is perhaps particularly deeply felt in developing countries as well as developed countries.

847
One finds a certain lack of clarity and urgency in the single sentence in which future action is described. It says:
"The European Community remains willing to enter into a dialogue with the oil producers".
Personally, I should have wished to have detected a stronger note of urgency about the need to get to the bottom of this problem which is affecting the whole world. As I have said, it is affecting not only the developed, but the developing countries as well.
On the budgetary settlement, the Statement speaks of,
"the need to put in hand and carry through urgently a review of the Community's financial position".
One welcomes the word "urgently", in that context. Herr Schmidt, the Chancellor of the Federal Republic of Germany, is reported as saying that the review should be ready by the middle of next year. That was a statement made after the meetings, but it has been quoted and perhaps the noble Lord can confirm that it was, in fact, said.
I should like to ask whether Her Majesty's Government take the same view as the German Chancellor. It would seem to many of us—to most of us, I think—that this review should, in fact, be ready as a precursor of actual action by at least the middle of next year so that a more durable and equitable structure can be assured for the budget from 1982 onwards. Our own position is reasonably taken care of up to and including 1982, but the review is necessary for a continuation of the better thoughts that have come into the negotiations of the Nine in the last few months on the question of the budget.
Will the review also include a radical reappraisal of the Common Agricultural Policy? I expect that it will do so. I should think that it would be impossible to restructure the budget without, in fact, reappraising, in a very radical way, the CAP.
The second important section of the Statement refers to the Middle East. May I say in passing that we all welcome the repetition of our attitude as a Community on the serious situations in Afghanistan and in the Lebanon.
Lord SHINWELL: My Lords, what does my noble friend mean by, "we all"?
Lord GORONWY-ROBERTS: My Lords, I would hope that we all agree that it is necessary to repeat the attitude of this country and of the Nine towards what has happened and is happening in Afghanistan and in the Lebanon—
Lord SHINWELL: My Lords, that is different.
Lord GORONWY-ROBERTS: I would hope so. On the Middle East, I should like to ask whether the reference to the declaration being,
"intended to be complementary to the Camp David process on which the United States, Egypt and Israel are still engaged",
means that there will be effective and close consultation with the United States with a view to correlating whatever initiatives the Nine take in regard to the Middle East and certainly with the view to avoiding any dicotomy as between American, Egyptian and Israeli policy on the one hand, and European efforts on the other.
We would welcome the emphasis in the declaration on the United Nations' Resolutions 242 and 338. They still remain the fundamental basis for a comprehensive solution in the Middle East and one welcomes the reference to them in the declaration and also to the prospective role of the United Nations in the effective implementation of any comprehensive settlement that may be attained in the Middle East. I think that that part of the declaration is sound.
This is not the time for us to canvass the nature of any meetings and the constituents of any meetings that may prove feasible or necessary in the future. Suffice it to say that the main need at the moment is a concerted European attitude to the Middle East aiming at a comprehensive settlement, but one which is truly complementary to the efforts or the American President, the Egyptian President and the Israeli Prime Minister.
Lord BYERS: My Lords, I too should like to thank the noble Lord for making this Statement. I propose to comment on only one aspect of it. Is the noble Lord aware that, to many of us, the proposal that the PLO should be a party to negotia-

849
tions with Israel is totally incomprehensible? I should like to ask him whether the Nine, when they drew up their communiqué, were aware of the statement which had been issued before the Venice Meeting by the PLO from Damascus, to the effect that it was their aim to liquidate Israel politically, economically, culturally, ideologically and in every other way; and whether, if they knew that that statement had been made, it did not at least have some influence upon their decision to incorporate the recognition of the PLO as a party to Israeli negotiations? How can anyone expect Israel to negotiate with a group that is bent on her total destruction? I believe that there is now a real danger that proposals such as these will undermine not only Camp David, but the efforts of the United States.
3.50 p.m.
Lord CARRINGTON: My Lords, I very much agree with what the noble Lord, Lord Goronwy-Roberts, said about the problem of oil. There is no doubt that the continual increase in the price of oil leads to almost impossible problems for the developing countries of the world. It is open to question whether the right forum in which to solve these problems is a meeting between the European countries and OPEC. I do not think that there is any point in having a meeting just for the sake of a meeting. When one has a meeting one wants to be sure that it will lead to some kind of useful end. But nobody in any sense disputes the importance which the noble Lord attaches to that particular aspect.
On his question about the budgetary settlement, I also agree with him that there is a very considerable urgency that the restructuring of the budget—which must, of course, take account of a revision of the CAP—should be carried out as quickly as possible. There is a great urgency for it to be carried out, but whether it can be done by the middle of next year, I do not know. However, the sooner it can be done the better. It will not only have to take account of the Common Agricultural Policy, but it will also have to take account of the enlargement of the Community; consequently, the quicker it is done, the better. I do not think that any of us ought to be under any mis-apprehension about the difficulties that
850
such a radical restructuring will bring, and we must only hope that reality will make it possible for us to do this quicker than happened last time, when the original financing of the Community was achieved.
The noble Lord, Lord Goronwy-Roberts, also asked me about the Middle East initiative; he asked to be reassured that it was complementary and would not cut across the American autonomy talks and the Camp David talks. I give the noble Lord that reassurance. That is why the initiative was phrased in that language. I think that it is vital that it should not cut across the American process. Of course, we shall be talking not only to the Americans, but to the Israelis, the Jordanians and the Palestinians about all this. I hope that we shall go hand-in-hand in anything that we do. I believe that Europe has a particular role to play here in that, in political terms, there are certain obvious difficulties facing the United States over the next months, and in the meantime, perhaps Europe can do something to help matters along.
I turn to the question which the noble Lord, Lord Byers, asked about the PLO. He will see that in the Communique it is said that the PLO must be associated with the talks. There is no baulking the fact that the PLO is an important ingredient in the Middle East, and to shut your eyes to it is to deceive yourself into thinking that it is possible to reach a solution without taking the PLO into account. Naturally, the PLO will have to accept the principles which the Nine have enunciated in their Statement, which include recognition of the State of Israel, as, indeed, Israel will have to take account of the principles in the recognition of the rights of the Palestinian people. This is, and seeks to be, an even-handed situation. Nobody disapproves more than the Government of the language used by Al Fatah—it was not used by the PLO—in Damascus. With respect to the noble Lord, Lord Byers, it is a different wing of the PLO.
Lord BYERS: My Lords, no.
Lord CARRINGTON: My Lords, nobody deplores that language more than I. and it is totally unacceptable when it refers to the destruction of Israel. However, the principles of the declaration of the Nine make that abundantly plain.
Lord JANNER: My Lords, I should like to endorse the points which have been made by the noble Lord, Lord Byers. The statement was made by the Al Fatah, the head of which is Arafat who is the leader of the PLO. The statement, which was referred to in terms by the noble Lord, also says:
"The armed conflict must be escalated across all borders of confrontation with the Zionist enemy"—
which, of course, means Israel—
"The strategic alliance with the socialist countries, led by the Soviet Union, must be strengthened".
Are we not blind to the fact that by encouraging the PLO we are creating a further enemy in the Middle East?—that the PLO is in constant contact with the USSR? What on earth are we talking about when we talk about defence—against whom? Another state in the Middle East which would be controlled by the allies of the USSR and Libya? What on earth is the matter with us? Do we not remember what happened to Czechosolovakia in 1938, and what happened at the time of the Munich Agreement? Cannot we take those experiences into consideration? Does the European set-up really expect Israel—that small state—to depend upon promises of contracts made with the PLO?
Lord CARRINGTON: My Lords, I have already said that if the PLO is to be associated with any talks on a settlement, it will have to acccept the principles that the Nine set out—I hope that the noble Lord will read the Statement. I have said that what Al Fatah has said is totally unacceptable as regards the destruction of Israel. If the noble Lord really imagines that just because one does not like something, one can ignore it, then he is not living in the real world.
Lord BYERS: My Lords, can the noble Lord clarify one point in his answer to me? Can he say whether the Nine will insist, before the PLO is associated with negotiations, on the acceptance by the PLO of the right of Israel to exist? This is a very important point.
Lord CARRINGTON: My Lords, no negotiations are taking place at the moment.
Lord BYERS: My Lords—
Lord CARRINGTON: My Lords, if the noble Lord will allow me to finish before he interrupts me, he might be the wiser. I was saying that no negotiations are taking place at the moment. The Nine are proposing that there should be contact—soundings, if you like—between all the parties concerned, to see whether we can get any further forward. Those soundings will take place on the basis of the principles which have been enunciated in the Communiqué.
Lord NUGENT of GUILDFORD: My Lords, is my noble friend aware that his attitude and that of his colleagues in Venice, in recognising that the PLO are a factor, must be taken into account in achieving peace in the Middle East? Is he also aware that the anxieties of the Israelis—which are well understood—should cause the Israelis to remember what has been achieved in their relationship with Egypt? Is he aware that it was not so very many years ago that the Egyptians were swearing that their one objective was to exterminate every Israeli from Israel? It is possible to change your mind if you bring people into the general comity of nations. Is my noble friend aware, therefore, that the attitude which he and his colleagues have taken seems, at any rate to many people, to be a very constructive one?
Lord CARRINGTON: My Lords, I must say it seems so to me too, and I am most grateful to my noble friend. Before the noble Lord, Lord Shinwell, jumps up, in passing I would only say that I have spent a good deal of the last 16 months sitting down with either terrorists or past terrorists.
Lord SHINWELL: My Lords, is the Foreign Secretary aware that when he talks about the European desire to promote peace in the Middle East, what they have done by intervening in the Middle East affair is much more likely to provoke another war, much sooner than many people anticipate? Is the noble Lord aware that I have been associated with the subject of defence ever since I came to your Lordships' House, and that my purpose has been to create an organisation in order to deter and prevent war? But if the British Government change their sense of direction over the Middle East situation so far as defence is concerned,

853
you can "include me out", as the great Samuel Goldwyn said upon another matter. I will have no association with it at all.
When they were discussing the Middle East affair, were they discussing the motives of each of the nine countries in coming to the decision that the PLO has to be recognised? Were they aware that even King Hussein, on behalf of Jordan, refuses to recognise them, and is also definitely opposed to a Palestinian state being situated on the West Bank? I do not want to raise a debate at this time, and certainly not with the noble Lord, Lord Nugent, who I must say dismayed me by what he said. I can hardly believe that a person of his moral attitude on general matters could consider speaking as he has done about the situation there.
May I ask a final question? Is the Foreign Secretary aware that, apart from the declaration that was made unequivocally by the Palestinians immediately before the meeting that he attended, and about which there can be no doubt, their attitude was clear? A document has been published on behalf of the Palestinians by an Arabian Professor—I do not know whether the noble Lord has seen the document—which makes it clear beyond any possibility of doubt that the intention of the Palestinians, no matter what the Europeans or what the noble Lord or Lord Nugent or anybody else may say, is to destroy the state of Israel. So far as I am concerned, I am going to have no part in it, and let the British Government understand that.
Lord CARRINGTON: My Lords, I am afraid that I disagree with the noble Lord, Lord Shinwell, in almost every respect, particularly when he says that he thinks that the European initiative will make things worse and lead to war. I wonder whether the noble Lord, Lord Shinwell, has any idea what is happening on the West Bank at this particular moment, and whether or not he has any understanding of how the Palestinians on the West Bank are feeling at the moment in circumstances which are not due to the PLO but due to the Israeli Government in the settlements they have created there. The situation there is extremely grave. I wonder whether the noble Lord, Lord Shinwell, has any idea about what the
854
ordinary, moderate Arab feels about the situation with regard to the Palestinian refugees and the Palestinians?
What the Government and the Nine have sought to do is to introduce an evenhanded resolution, one side of which says that the state of Israel must be recognised and must live within secure boundaries, and for the other part to say that there should be a recognition by the State of Israel of the rights of the Palestinians, and then to go on to say that in the light of these principles they are going to approach all parties and contact them. If the noble Lord thinks that that kind of resolution is more likely to lead to war than anything else, I think he had better have a look and read it.
Lord BOOTHBY: My Lords, may I ask the noble Lord whether he realises that his Statement today will bring great relief and great satisfaction to those of us who believe that the Israelis alone can give freedom to the Palestinians, and the Palestinians alone can give security to the State of Israel, and that until they both do just that there will he no hope of peace in the Middle East?
Lord CARRINGTON: My Lords, that is precisely what the Nine were saying, and I am grateful to my noble friend.
Lord HATCH of LUSBY: My Lords, may I draw the noble Lord the Foreign Secretary away from the Middle East for a moment? I understand that it was reported in certain sections of the German press before the Venice meeting that Herr Schmidt intended to raise the issues arising out of the Brandt Commission Report. Could he tell us whether this was discussed at Venice and, if so, what line the British Government took there?
Lord CARRINGTON: My Lords, it was discussed, not at great length but at some length. It will of course be discussed at greater length at the Venice summit this weekend. In the meantime the British Government's view is being set out clearly today by my right honourable friend the Lord Privy Seal and my right honourable friend the Minister for Overseas Development in two major speeches in another place, and I wonder whether the noble Lord would be content to read them tomorrow morning.
Lord BRUCE of DONINGTON: My Lords, may I press the noble Lord on one point of detail in regard to his Statement about the budget of the Community? As I understand the position following the Brussels conference, some £300 million to £320 million was to be repaid to the United Kingdom via the financial mechanism under Title 4 of the Commission's budget. However, the remainder of the £400 million to £420 million was to be subject to some specific regulations under Article 235. Can the noble Lord give any indication as to whether the regulations proposed under Article 235 were given any discussion at the Venice meeting and, if so, with what result?
Lord CARRINGTON: My Lords, not specifically, but the agreement reached in Brussels on 29th and 30th May was accepted by the Heads of Government, and the noble Lord is perfectly right in explaining the methods by which the repayment to this country will be made.

SOCIAL SECURITY (No. 2) BILL
House again in Committee on Amendment No. 1.
4.7 p.m.
Lord NUGENT of GUILDFORD: Before my noble friend replies to the debate on Lord Wells-Pestell's Amendment No. 1—from which we seem to have gone rather a long way—I should like to answer a point powerfully put from the Benches on the other side by the two noble Baronesses in backing up the noble Lord's amendment. They particularly attacked the Government side because the reductions proposed in Clause 1, which will of course make an economy in public expenditure, are set against the background of a Budget which has reduced taxation and particularly has reduced it at the top end.
That, combined with the powerful speech made by the noble Lord, Lord Wells-Pestell, in moving his amendment, leaves noble Lords on this side of the Committee looking pretty shabby unless we have some justification for the support that certainly I am going to give to my noble friend. The noble Baronesses have opened up the debate in this way, and, although it is a bit of a Second
856
Reading point, I nevertheless think it is fair to answer it. I support my noble friend because I believe that these budgetary policies of lower taxation and reduced expenditure are going to give us the basis for increased production, and, therefore, benefits for all.
My personal belief is that lower taxation, especially at the top end where the most important wealth creators are, will bring about an increase in incentive and therefore an increase in wealth and an increase in production. Incidentally, at the top end, which was particularly criticised by the noble Baronesses, this will keep in this country some of the highest earners whom we have been tending to lose. This will lead us to reverse the unhappy decline from which our country has been suffering—an accelerated decline in the last five years—both in terms of national life and of employment; to check that, to reverse it, and to begin to create new wealth. This will on the one hand give us the opportunity to increase benefits, and on the other hand to increase jobs.
It is against that background that I see the policy of my noble friends. Therefore, unpleasant though this is—and nobody likes providing less than we might otherwise have done for those who are worst off—the only possible justification for these policies for any man or woman with blood in their veins is that we believe they will succeed—give us two or three years—in reversing the trend and thus giving us a prospect of increasing those benefits in the future. I feel therefore that my noble friend deserves the support of this side of the Committee in this severe policy, which it certainly is, that we are pursuing at the present time. We are convinced we shall succeed with it and, if we do, the strictures which the noble Baroness, Lady Gaitskell, put upon us will be reversed by history and this Government will be credited for achieving something which no other Government have been able to achieve since the war.
Baroness PHILLIPS: At a slightly different level—and this may answer the noble Lord, Lord Nugent of Guildford—if noble Lords opposite do not wish to be accused of being hard-hearted, it is salutary to recall that the Bill is described as for the purpose of reducing benefits.

857
One cannot get away from the fact that that is exactly what is happening. However, earlier a Question was tabled by the noble Earl, Lord Lauderdale, asking about the amount of money spent in payment of fuel bills. One cannot help wondering whether there is not some relationship between that earlier Question and the discussion we are now having. It is customary to have "kangaroos"—in other words, a Back Bencher tables a Question which puts the Government in a good light—and the noble Earl was thanked for putting down his Question and the Minister said that more money was being paid out. But as all bills are increased substantially, probably more money is being paid out although perhaps it is being paid to the same number of people. I must point out that with the passing of this Bill, as any Government are committed to maintaining a standard below which people may not fall, although the benefit may not be paid the supplementary benefit will certainly rise. Thus, even if we discard the policy of being hard-hearted, it seems that the Government's economic position will not he very much better in the final outcome of operating this Bill.
Lord SOPER: I support the amendment. The Bill is wrong, and I should have preferred to have its throat cut on Second Reading, and if that sounds a somewhat blood-thirsty observation for a pacifist, I feel blood-thirsty about this Bill because it is fundamentally immoral, and the various efforts that have been made to justify it fall to the ground with a very loud bang. I canvass the proposition, which was widely advertised in the press, that one of the reasons behind the Government's proposal of the Bill was that there were quite a number of people taking advantage of the amenities and that such skrimshankers should be repulsed. The noble Baroness very indignantly defended the Bill from any such observation and condemnation, and I of course accept her word. But if it is not for that reason, let us look perhaps for a second reason which would be justifiable, and that is the money which the Government need and will find from the prosecution of these measures.
I believe that fundamentally they will in the long run find it much more costly to
858
proceed with the Bill, and in any event it seems ludicrous and fantastic to imagine that the Government are so condemned by the economic stringencies of the present time that they must rely on a comparatively modest sum of money to be extracted from those who are least capable of paying it in order to keep this country on its feet. It is of course true that the Government are committed to vast expenditures in the arms race; one nuclear submarine less and every poor person in the country could be very much advantaged. Although it is not particularly germane to this argument, I believe that a Government who prefer to oppress, as by this measure they will, those who are least capable of defending themselves, and at the same time expose the rest of us to the incalcuable and tramatic effects of a world beset with arms, create a situation which is an insufferable piece of nonsense as well as being quite unacceptable in terms of ethics.
But if we on this side of the Committee cannot convince the Government of the wretchedness of their arguments, may I, without presumption, endeavour to wring their withers? I have been engaged in social work for many years and it has become increasingly obvious to me that to attempt to access the relative contributions that people make to the welfare of the society in which they live is an onerous and most complicated task. But when one thinks of those who are least capable of looking after themselves—those who are in receipt of supplementary benefit and the many who, though they are entitled to them in the kind of society in which we live, do not possess themselves of those benefits—and when one at the same time remembers the wise words of my noble friend who spoke of the enormous increase in the finanial amenities offered to those who are already prosperous, it seems to me incomprehensibly wrong to say that we are so compelled by the stringencies of our present economic system to put this increased burden on one small group in the community—and it is not such a small group.
May I, without offence, ask noble lords opposite if they have really assessed the sort of suffering that will be necessary and inevitable if the Bill goes through? It is for that reason, not for party reasons at all, that as a social worker and one who believes that the right contributions and

859
sacrifices should be made proportionately so that those who are invited to make them can in fact make them and still keep their heads above water, I think the Bill should not go much further. If we cannot cut its throat, let us dismember it with a thousand cuts, because that seems to be the only honourable course to take.
Lord DRUMALBYN: Perhaps I might comment on this subject from a rather different point of view. When one considers the state that some countries are in today and the reasons for it, it makes the problems that are presented by this part of the Bill comparatively insignificant. What we are suffering from now is inflation and anything we can do to bring inflation down is worth doing. At present, inflation is running at, say, 20 per cent. per annum, which means that progressively throughout the year people will be less well off, particularly those who are in receipt of national insurance in one form or another. Supposing inflation reached 50 per cent.—I will not go so far as to suppose it reaches 400 per cent. as it has done in some South American countries—just think what would be involved then. In the course of one year, the recipients of unemployment benefit, retirement pension and the rest would have their incomes reduced by three-quarters.
That is what we are trying to stop, because once inflation gets on the way it is much easier for it to go on increasing than for it to stop; and it is vitally important that we should stop it. There is no God-given reason why the unemployment benefit, retirement pension or anything else should be raised to the level that it was 12 months earlier; this has been a comparatively recent development in the history of the national insurance scheme.
It has always been understood—there has in fact been an underlying understanding—that the pay-as-you-go scheme is based on the position that one makes such contributions as are laid down and one receives such benefits as can be afforded by the nation. Of course, this is a matter of judgment. It is not a question about being honest about this; the noble Lord opposite asked, how could any noble Lord honestly support the clause? We on this side of the Committee
860
do honestly support the clause, because we believe that it is a necessity, though a most unwelcome one—
Lord WELLS-PESTELL: It is an absolute disgrace.
Lord DRUMALBYN: It is a most unwelcome necessity, but it is not a disgrace to do what is necessary. We believe this is the sole criterion at the present time, and it is for that reason that we support the Bill—
Baroness GAITSKELL: May I ask the noble Lord a question before he sits down? He spoke about anything that can be done to bring down inflation. Is there nothing that the Government can do in terms of making cuts involving some of the rich people in this country? Why must they turn to the poor?
Lord DRUMALBYN: We are talking about the national insurance scheme and social security benefits, and in paying out benefits we cannot go above a certain proportion of the national wealth. Obviously to go above that would be entirely self-defeating. Again this is a question of judgment at any given time. All I am saying is that it must not be accepted that at all times it can be said that in return for a certain contribution one will receive a certain benefit in terms of purchasing power; that cannot be so. We have been very fortunate over the years in being able to increase the real value of social security benefits. There was bound to come a time when there would be a change around. We hope that it will be for only a short time; and it will be for an even shorter time if we take the correct measures now.
4.22 p.m.
Lord GORDON-WALKER: I should like to say a few words on what the noble Lord, Lord Nugent of Guildford, said—he is not present at the moment—when he attempted to justify the reduction in regard to the higher levels of income tax, while at the same time cuts are being made against the poorest people in the land. He said something that cannot possibly be proved He said that if income tax at the higher levels is reduced, it leads to incentives, people make more, and so on. That is a piece of pure doc-

861
trine. It is just as likely that if income tax is reduced at the top, people will simply spend more. A great many of them may take longer holidays or increase their expenditure in various ways. In that case the reduction of high taxation is itself inflationary; and that reduces the argument we have just been listening to. What the noble Lord, Lord Nugent, said did not seem to me to reduce in the slightest degree the cogency of the points advanced by my noble friends.
Lord DONALDSON of KINGS-BRIDGE: The noble Lords, Lord Nugent of Guildford, and Lord Drumalbyn, have justified something which of course they do not want to do—I give them credit for that—on grounds which are totally unacceptable. It is not acceptable to reduce the emoluments to the poorest on the basis of an intellectual gamble; it is absolutely disgraceful. It is perfectly all right to take the gamble a certain distance. Of course people have different views, and I suppose that in the country today, of the people who are intellectually equipped to decide this question, 60 per cent. may agree with me and 40 per cent. may agree with the noble Lord—maybe. To make this kind of petty saving at the expense of the poorest in the community is an action based purely on a belief, not held by a majority of people, that the Government's plans will work. We all know this, and we say that it is absolutely unjustifiable to attack certain things, even though one considers that economies must be made.
I joined the Labour Party in the late 'twenties or early 'thirties—I cannot remember precisely when—for one reason only: because the National Government cut the dole. I have never forgiven them for that, and I have never changed sides, though I have wobbled a little in the middle. Now I am swinging away because of what this Bill is doing.
Lord WALLACE of COSLANY: It seems from the remarks just made that the consciences of a number of noble Lords have been touched. I fully appreciate the effects of inflation. The noble Lord, Lord Drumalbyn, was perfectly right in his reference to inflation. I can say that after having, this weekend, paid just under 50p for a large loaf, which means virtually a 10 shilling loaf, which is quite a consideration for the average family.
862
I want to relate the question of income tax relief to the actual cuts—and indeed they are cuts—in the Bill. Clause 1—de-indexing the invalidity pension—will save £140 million in a full year. Clause 2 —freezing of the earnings rule for retirement pensioners—will save £16·5 million. Clause 3—reducing the linking period for spells of unemployment and incapacity from 13 weeks to six weeks—will save £20 million. Clause 4—abolition of earnings-related supplement—will save £360 million. The most amazing thing, the proposal which has received the greatest publicity—reduction of £12 in supplementary benefit entitlement of strikers' families—will save £1 million.
My arithmetic leads me to the conclusion that that is a total of £562·5 million. The tax relief given in the Budget—which has been referred to—was £4,500 million, of which the richer section of the community, 7 per cent., receive £1,560 million in relief. So if the tax relief were to be reduced by only £500 million, the cuts now proposed need not be made. That is the arithmetic of the situation, and we feel so strongly about this matter because a reduction of £500 million would in fact make a tremendous difference to people who are already suffering because of their personal disabilities.
4.27 p.m.
Baroness YOUNG: There is no doubt that we have had a tough opening to the Bill, and I must say that on listening to the speeches of noble Lords opposite I did not feel that they bore very much relevance to the amendment that is before the Committee. We have had, in effect, a "Clause stand part" debate and we have ranged over almost all the issues of the first six clauses of the Bill, quite apart from the central issue of Clause 1.
First, I should like to correct a number of inaccuracies which crept in during the course of the debate. They were picked up most effectively by my noble friends Lord Nugent of Guildford and Lord Drumalbyn, and I am most grateful for their interventions. I wish to state from the Government Front Bench that of course we would not be considering the Bill, nor what it contains, if we did not believe that we were in a very serious economic position. It is quite absurd,

863
and quite wrong, for anyone to say that we are making these proposals because, quite apart from anything else, we think that it is agreeable to say to a number of people what we know they prefer not to hear.
If there had been another solution—and it would be nice to hear it from noble Lords opposite—I cannot think why the previous Government did not discover it when in office, particularly between 1974 and 1979. If we are quite honest—and my noble friend Lord Nugent was very honest on this point—neither party has been very successful, or not as successful as we would wish, at managing the economy, and that is precisely why we are in the present difficult position. We are making a great effort to try to put things right. One thing is absolutely clear. I made this point on Second Reading, and it has been repeated by my colleagues: we must cut down Government expenditure; and the total social security budget, now running at £20 million annually —a quarter of all Government expenditure—must bear a share of the cuts.
In seeking to make economies, my right honourable friend the Secretary of State, Mr. Jenkin, has looked at the whole of this budget and has tried to make adjustments where they will cause least damage. I should like to make it clear that we are not in fact making cuts against the poorest part of the community. Those on supplementary benefit are of course the poorest and they, along with retirement pensioners, have been fully price protected.
Lord DONALDSON of KINGS-BRIDGE: Would the noble Baroness forgive me for interrupting her? Did she quote a figure of £20 million?
Baroness YOUNG: It was £20,000 million—£20 billion, yes. It is so large that I find it rather difficult to imagine; and if it sounded a bit smaller, then that is perhaps because we all find it rather easier to comprehend figures which are a hit smaller. But, no—the social security budget is £20,000 million annually. I should like to thank my noble friend Lady Macleod for her intervention, because, of course, everybody is getting an increased benefit; the situation is that some are not getting an increase as big as others.
864
Now those who are affected by Clause 1 and who are not getting quite such a large increase in benefit are, of course, those who currently do not pay tax on their benefits. It is generally agreed—and I think noble Lords opposite will agree with us in this matter—that these benefits should be brought into taxation, and that, indeed, is the Government's ultimate aim. The fact is that this cannot be done before April 1982, very largely for operational reasons—particularly, I understand, to put all this on the computers and work out the necessary programmes. So we have an interim measure of a 5 per cent. abatement of these benefits. The savings achieved by the abatement amount to only about one-third of the approximately £450 million additional revenue which would accrue if the benefits were taxable.
Baroness WOOTTON of ABINGER: Would the noble Baroness give way for one moment? If you do not pay your taxes, you are charged interest: if the Government cannot get your taxes ready in time for you to pay them, they put them on a year early.
Baroness YOUNG: Perhaps I can come on to the point about numbers that was raised by the noble Lord, Lord Underhill. There is in fact no contradiction between the two lots of numbers that have been given. The figures that I gave at Second Reading—that is to say, the 650,000—are the figures of long-term invalidity pensioners, and they are the group that we have been talking about under Clause 1. Of those, it is estimated; as I said before, that approximately 250,000 either would not pay tax or would be unaffected. The 850,000 figure which was referred to is in fact the number of both the short-and the long-term beneficiaries, and some of those may be getting benefit for only as little as a week. This, of course, has produced different figures because we are using different numbers. I think it is just as well to be quite clear on that particular point.
The amendment before the Committee would have the effect of deferring the 5 per cent. abatement until the November 1981 up-rating; but, as I have explained, it is because the Government need to make savings now that they have introduced the abatement as an interim measure. If the benefits concerned were not subject to a 5 per cent. abatement at this Novem-

865
ber's up-rating, we would not achieve savings of about £130 million, and this is a substantial proportion of the total package in 1981–82.
As I indicated at the beginning, the purpose of this Bill is to make savings in Government expenditure. It is not an easy Bill to introduce into your Lordships' House, and we all recognise the strength of the feeling that exists. But right at the outset of our discussions I should like to disabuse your Lordships of this myth that, somehow, by not reducing taxes, as we have done in the two Budgets, we could have all sorts of expenditure which we have not indicated. The noble Lord, Lord Soper, made his suggestion. He said that we should cut down on defence expenditure—not, I think, something which most people, in the very uncertain world in which we live today, would agree with, but at least he is entitled to his point of view. But the noble Baroness, Lady Wootton, and the noble Baroness, Lady Gaitskell, and I think the noble Lord, Lord Gordon-Walker, and the noble Lord, Lord Donaldson, all referred to this point.
In his first Budget last year, the Chancellor cut income tax in 1979–80 by approximately £3,500 million. The bulk of that reduction in income tax actually went to those paying tax at the basic rate or below the basic rate. So in fact it went to help direcly those who are least well off. At the same time, the reductions in income tax were accompanied by a rise in VAT as part of a deliberate policy to switch taxation from direct to indirect taxation. One very largely financed the other, and it is wrong to suggest that one could have withheld the income tax reductions and still been able to secure the increased revenue from VAT. Similarly, this year, there were reductions in personal income tax but also increases in direct taxes on alcohol, tobacco and petrol, to maintain their real value. Here, too, it would have been impossible to have had the one without the other. One could not have increased the excise duties to reflect inflation while refusing to make any increase in the incomes tax allowances, which were equally affected by inflation.
Neither Budget, therefore, has provided a large net give-away of taxation which, even if it had been Government policy, could have been used to finance a higher level of public expenditure.
Baroness WOOTTON of ABINGER: Will the noble Baroness explain how she reconciles her figures with those which were given in a Written Answer in the Commons Hansard for 3rd July 1979? Will she look at the figures there, which indicate very much larger figures for the total reductions in income tax at the higher levels than she has quoted in her figures, and perhaps let me know how these are to be reconciled?
Baroness YOUNG: I shall certainly look at the point which the noble Baroness makes. I have not got the particular Question and Answer before me, but I shall certainly make a note of that and let her know the answer to the point she makes. But I can assure her that I have taken advice from the Treasury on this matter, and I have every reason to think that the principles I have outlined are Government policy and are correct. I therefore think it is just pretending to people, pretending to ourselves, to suggest that somehow there is a way to get more for people at a moment when the country is not producing more; and it is not kind to them. It is deluding ourselves when we, at least, ought to know better, and it certainly is not kind to others to pretend that we can get a lot more in these very difficult times.
I have been grateful for the support that I have had on this particular amendment. We are going to have a lot of other amendments, and a great deal more discussion on this Bill. It is one, as I have already indicated, that the Government would not have introduced if we did not believe that it was part of a package to try to set the country back on a road to recovery, so that we can achieve the level of benefits that we should like to see for everybody in this country. I might remind your Lordships, as we are dealing with a number of benefits, including the invalidity benefit, that it was of course a Conservative Government which first introduced invalidity benefit in 1971.
Lord PITT of HAMPSTEAD: Before the noble Baroness sits down, will she be kind enough to tell me how, if in fact taxes on cigarettes and alcohol were increased slightly in order to cover this expenditure, it would in fact have disturbed the Government's strategy?
Baroness YOUNG: The point I was trying to make was in answer to one from the noble friend of the noble Lord, Lord Pitt, that, had we not reduced direct taxes, there would have been a great deal more money to pay for social security benefits. As I was trying to indicate, we have reduced a number of direct taxes—part of our manifesto commitment —and most of the benefit has gone to those paying at the standard rate or below, and has taken a great many people out of direct taxation altogether. But that has been countered by indirect taxes —the increase in VAT in the first Budget and the increase in the other indirect taxes, which I have mentioned, in the second. In this way, it indicates that the overall level of tax has remained relatively in balance, and there is therefore not a great deal to give away for extra benefits.
Lord PITT of HAMPSTEAD: The noble Baroness realises that she has not answered my question, I hope.
Lord WELLS-PESTELL: I feel very distressed as a result of the debate that we have had this afternoon, and particularly distressed by the contributions made by the noble Lord, Lord Nugent of Guildford, and the noble Lord, Lord Drumalbyn, both of whom I claim, I think rightly, to know very well indeed. I have always enjoyed a good relationship with them and we shall go on enjoying the same relationship, I hope; but I think they both missed the point.
The point is that the Government should have devised a strategy whereby it was not necessary to save what is, after all, a miserly sum of money at the expense of that section of the community that cannot possibly afford it. The noble Baroness said," Ah, but we did not do that. We have not affected those on supplementary benefit". Does the noble Baroness not know that there are hundreds and hundreds of thousands of men, women and children who are not in receipt of supplementary benefit but who are either on or just below the poverty line? They are the people who are going to be affected by this.
Lord DRUMALBYN: The noble Lord has come back to the point of the poverty line. Can he say where the poverty line
868
exists, if it exists at all; who defines it and how it relates to the total amount that people can get by way of combined pension and supplementary benefit or unemployment benefit and supplementary benefit?
Lord WELLS-PESTELL: If I remember aright, it was defined by a number of bodies. One was the Supplementary Benefits Commission. Professor Donnison said something about it recently. The Child Poverty Action Group did a considerable amount of research into the matter and published a document on this matter only a few months ago. There are several, including Professor Townsend of Exeter University.
I think that the people who are concerned with this are quite satisfied that there are a very substantial number of people who are not in receipt of supplementary benefit but who are in receipt of other benefits who have not got a sufficient amount coming in to enable them to get all the necessities that they need. The point that I am making is that there are. I understand, still about 30,000 persons who are entitled to supplementary benefit and who do not claim it. I accept that that is not the fault of the Government. But they do not claim it. They are the people who are going to be affected by these cuts. If the noble Baroness asks—as she did ask—what is our suggestion about it, we say this. When the Social Security Bill was introduced by the Government in another place, there was no thought then of a Social Security (No. 2) Bill. The Social Security (No. 2) Bill saw the light of day only just before the Social Security Bill finished in the Commons. It was found that by introducing the Bill now before us a few hundred millions could be saved. What we are saying is that it was really a most disgraceful way of saving a very small sum.
The noble Baroness talked about the "give away" of the first Budget when she said there were £3,500 million given away and that a good deal of that—she did not specify how much—went to the ordinary person. That is perfectly true. But, certainly, an equal amount went to those who were already enjoying a fairly good income. We have heard the figure today of something like 7 per cent. of the people paying tax receiving £1,560 million. It was done in this way. I am trusting to

869
memory (which is not a very good thing to do) but I believe I am right in saying that the top level of 83 per cent. tax—and I accept that this is outrageously high and that I would not want to pay 83 pence in the pound tax—was brought down to something like 61 per cent., 62 per cent. or 63 per cent. There was no need to do that. As my noble friend Lord Gordon-Walker asked, "Where did the money go?" It went to increase inflation, as we all know. That is where the money went.
The Government said that people must be given an incentive; that they will then work harder. But let us be fair to those people. They work very hard as it is and many could not work harder if they wished to do so—they leave home early in the morning and come home late at night. I know a few such people, not many, but a few. The incentive was to enable them to spend more money; the incentive was not to work harder, because they could not do so in many instances. What we are saying is that the Government suddenly rushed into an action which, after a comparatively short space of time, they saw to have been a mistake. In fact, they did not do their sums properly when they decided to give away this £3,500 million. It was only after they had given it away that they realised that there was not so much money in the kitty and they had to look round to make cuts.
I am saying that we accept that the cuts are necessary but that what we do not accept, and shall never accept, is the way in which they were made—touching that section of the community that will really suffer. They are those who are going to suffer the 5 per cent. cut in the benefits.
Baroness YOUNG: May I say, before the noble Lord sits down, that so far as the Government's economic policies are concerned, it is perfectly true that on coming into office we faced a very serious situation, including a number of postdated cheques from the previous Government which we had to pick up and to meet by way of public sector pay settlements? Could I say that over the whole consideration of the abatement of the up-rating, the fact is that the benefits which are concerned in this are benefits which are not taxed at present and which we hope will be brought into taxation? It may be helpful to the Committee if I repeat the words of my right honourable friend the Secretary of State in another place on April 29th, when he said:
"When it"—
that is, the invalidity pension—
"comes into tax subject to the availability of resources, we shall put it back to what it would have been had it stayed in step with the retirement pension this November".
That is proof of our good faith in this matter. This is to meet a particularly difficult short-term situation.
Lord WELLS-PESTELL: Could we have this in good, sound, common English? Instead of talking about "abatement of up-rate", let us talk about stealing 5 per cent. from people.
4.48 pm.
On Question, Whether the said Amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents 75; Not-Contents, 92.

CONTENTS

Amherst, E.

David, B. [Teller.]

Hutchinson of Lullington, L.

Ardwick, L.

Davies of Penrhys, L.

Ilchester, E.

Aylestone, L.

Denington, B.

Jacques, L.

Bacon, B.

Donaldson of Kingsbridge, L.

Janner, L.

Balogh, L.

Elwyn-Jones, L.

Leatherland, L.

Banks, L.

Gaitskell, B.

Listowel, E.

Beswick, L.

Gordon-Walker, L.

Llewelyn-Davies of Hastoe, B.

Birk, B.

Goronwy-Roberts, L.

Lloyd of Kilgerran, L.

Blease, L. [Teller.]

Gosford, E.

Lovell-Davis, L.

Blyton, L.

Greenwood of Rossendale, L.

Mackie of Benshie, L.

Boston of Faversham, L.

Hale, L.

Maelor, L.

Brockway, L.

Hall, V.

Meston, L.

Bruce of Donington, L.

Hampton, L.

Mishcon, L.

Burton of Coventry, B.

Hatch of Lusby, L.

Northfield, L.

Byers, L.

Henderson, L.

Oram, L.

Cledwyn of Penrhos, L.

Houghton of Sowerby, L.

Pargiter, L.

Collison, L.

Howie of Troon, L.

Peart, L.

Phillips, B.

Soper, L.

Underhill, L.

Pitt of Hampstead, L.

Spens, L.

Wallace of Coslany, L.

Plant, L.

Stewart of Alvechurch, B.

Wells-Pestell, L.

Ritchie-Calder, L.

Stewart of Fulham, L.

Whaddon, L.

Ross of Marnock, L.

Stone, L.

Wigoder, L.

Sainsbury, L.

Strabolgi, L.

Wilson of Radcliffe, L.

Segal, L.

Strauss, L.

Wootton of Abinger, B.

Shinwell, L.

Taylor of Mansfield, L.

Wynne-Jones, L.

NOT-CONTENTS

Airey of Abingdon, B.

Gibson-Watt, L.

Massereene and Ferrard, V.

Alexander of Tunis, E.

Glenkinglas, L.

Morris, L.

Allen of Abbeydale, L.

Godber of Willington, L.

Mowbray and Stourton, L.

Alport, L.

Gormanston, V.

Murton of Lindisfarne, L.

Ampthill, L.

Gowrie, E.

Norfolk, D.

Avon, E.

Gridley, L.

Northchurch, B.

Bellwin, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Nugent of Guildford, L.

Belstead, L.

Orkney, E.

Brentford, V.

Halsbury, E.

Penrhyn, L.

Caccia, L.

Hanworth, V.

Reigate, L.

Campbell of Croy, L.

Hatherton, L.

Renton, L.

Clwyd, L.

Hawke, L.

Rochdale, V.

Cockfield, L.

Henley. L.

Romney, E.

Cottesloe, L.

Hives, L.

St. Aldwyn, E.

Craigavon, V.

Holderness, L.

Sandford, L.

Cullen of Ashbourne, L.

Home of the Hirsel, L.

Sandys, L. [Teller.]

Davidson. V.

Hood, V.

Selkirk, E.

Denham, L. [Teller.]

Hornsby-Smith, B.

Sharples, B.

Derwent, L.

Hylton-Foster, B.

Soames, L. (L. President)

Drumalbyn, L.

Ironside, L.

Stamp, L.

Dundee, E.

Kimberley, E.

Strathclyde, L.

Effingham, E.

Lauderdale, E.

Strathcona and Mount Royal, L.

Ellenborough, L.

Long, V.

Trefgarne, L.

Emmet of Amberley, B.

Lucas of Chilworth, L.

Trenchard, V.

Evans of Hungershall, L.

Luke, L.

Trumpington, B.

Exeter, M.

Lyell, L.

Vickers, B.

Ferrers, E.

Mackay of Clashfern, L.

Vivian, L.

Fortescue, E.

Macleod of Borve, B.

Wakefield, of Kendal, L.

Fraser of Kilmorack, L.

Malmesbury, E.

Ward of Witley, V.

Gainford, L.

Margadale, L.

Westbury, L.

Geoffrey-Lloyd, L.

Marley, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

4.56 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 2:
Page 1, line 12, at end insert—
("Provided that the increase is to come into force not later than 20th November 1980.")
The noble Lord said: This amendment would ensure that this year's uprating date was not later than the week commencing Monday 17th November. The Government have taken power, in the Social Security Act which recently received Royal Assent, to fix the up-rating date at any time up to the end of November. Ministers have repeatedly argued, as did the noble Baroness, the Minister, at the Report stage of that Bill on 6th May (column 1528 of Hansard) that the object of that change was to prevent the date from creeping steadily forward year
872
by year. It had already crept forward from 17th November, 1975, to 12th November last year and by this November it would have crept forward a full week to 10th November.
I have always accepted—as did the Opposition spokesmen in another place —that it would not be unreasonable for the Government to prevent this by putting the uprating date back to 17th November this year. The proposal to postpone the uprating for a further week, to 24th November, however, is simply a device —and I say this very carefully—to rob pensioners and other beneficiaries of a week's increase to which they are morally, although, it will be argued, not legally, entitled. It is a totally indiscriminate cut affecting not only national insurance beneficiaries, but those on supplementary benefit as well: the poorest in the land whom Ministers claim from time to time, as they have claimed today, to be protecting from the cuts.
Replying to a similar amendment in another place, the Under-Secretary of State, Mrs. Chalker, was quite frank about this. She said:
"It is perfectly true that by taking a further week, which has now happened, and by announcing the uprating at 24th rather than 17th November there are considerable savings to be made. I make no secret of the fact that there has been pressure on the Government and the DHSS to make those savings".
That was from the Standing Committee B, 3rd Sitting, part III, 24th April, 1980, at column 322. The amount at stake is not small; on the Government's own estimate, it is £60 million. I will not burden the Committee with reading further what took place in the Standing Committee.
The Government's attitude to this question was neatly summed up by the Financial Secretary to the Treasury in the Budget debate on 31st March. When asked to explain why the up-rating date was being moved from 10th to 24th November, he replied:
"To quibble over a couple of weeks is absurd".
Your Lordships will find that quotation in Hansard of another place, 31st March 1980, column 164. We take the view that for people living on the breadline, an arbitrary cut of £12—that is what it amounts to for a pensioner couple—is anything but a quibble. Therefore I move this amendment, which will add the words:
("Provided that the increase is to come into force not later than 20th November 1980.")
Baroness YOUNG: The intention of this amendment is to prevent the 5 per cent. abatement of the increase in short-term and invalidity benefits unless the up-rating of these benefits takes place by Thursday, 20th November 1980. In so far as it limits the abatement to 1980, it would also prevent the abatement in, future years even if the Secretary of State were to make an order under Clause 1(4). This amendment would require us to do one of two things. Either we would have
to up-rate these benefits by 20th November, when the Government are already committed to the week beginning the 24th November for the up-rating this year or we would have to forgo the 5 per cent. abatement of short-term and invalidity benefits.
We have already been over the ground as regards the latter of those proposals and I do not wish to repeat all the arguments again. The fact is—and I am sure the noble Lord, Lord Wells-Pestell, will know this as well as I do—the up-rating of social security benefits is a complex matter. It is essential that all benefits which are to be up-rated are increased in the same calendar week. For administrative reasons, the amendment would require the bringing forward of the up-rating date this year by a whole week to the week beginning Monday, 17th November.
I was very glad to hear the noble Lord recognise that there is nothing at all illegal in what we are proposing. As he has quite rightly said, the effect of what we are proposing has corrected the slippage in the date of the week in which up-ratings are made annually. He is also right in saying that the effect of it will he to produce a saving of about £65 million this year. This is something which we believe is essential, along with the other economics of which I have referred. The noble Lord may no doubt like to know that for 1981 we must, under existing legislation, up-rate by 23rd November, so there could not be another week out next year. I hope, for the reasons I have given, that your Lordships will decline to support this amendment and will feel that what the Government are proposing in this context is the right line of action.
5.4 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 79; Not-Contents, 86.

CONTENTS

Amherst, E.

Beswick.L.

Bruce of Donington, L.

Ardwick, L.

Birk, B.

Burton of Coventry, B.

Aylestone, L.

Blease, L. [Teller.]

Byers, L.

Bacon, B.

Blyton, L.

Cledwyn of Penrhos, L.

Balogh, L.

Boston of Faversham, L.

Collison, L.

Banks, L.

Brockway, L.

David, B.

Davies of Leek, L.

Kilmarnock, L.

Ross of Marnock, L.

Davies of Penrhys, L.

Leatherland, L.

Sainsbury, L.

Denington, B.

Lee of Newton, L.

Seear, B.

Donaldson of Kingsbridge, L.

Listowel, E.

Segal, L.

Elwyn-Jones, L.

Llewelyn-Davies of Hastoe, B.

Shinwell, L.

Gaitskell, B.

Lloyd of Kilgerran, L.

Stamp, L.

George-Brown, L.

Longford, E.

Stewart of Alvechurch, B.

Gordon-Walker, L.

Lovel-Davis, L.

Stewart of Fulham, L.

Goronwy-Roberts, L.

Maelor, L.

Stone, L.

Gosford, E.

Meston, L.

Strabolgi, L.

Greenwood of Rossendale, L.

Mishcon, L.

Strauss, L.

Hale, L.

Northfield, L.

Taylor of Mansfield, L.

Hall, V.

Ogmore, L.

Underhill, L.

Hampton, L.

Oram, L.

Wallace of Coslany, L. [Teller.]

Hanworth, V.

Pargiter, L.

Wells-Pestell, L.

Hatch of Lusby, L.

Peart, L.

Whaddon, L.

Henderson, L.

Phillips, B.

Wigoder, L.

Houghton of Sowerby, L.

Pitt of Hampstead, L.

Wilson of Radcliffe, L.

Howie of Troon, L.

Plant, L.

Wootton of Abinger, B.

Ilchester, E.

Ritchie-Calder, L.

Wynne-Jones, L.

Jacques, L.

NOT-CONTENTS

Airey of Abingdon, B.

Godber of Willington, L.

Mowbray and Stourton, L.

Alexander of Tunis, E.

Gormanston, V.

Murton of Lindisfarne, L.

Allen of Abbeydale, L.

Gowrie, E.

Norfolk, D.

Alport, L.

Gridley, L.

Northchurch, B.

Ampthill, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Nugent of Guildford, L.

Avon, E.

Orkney, E.

Bellwin, L.

Halsbury, E.

Orr-Ewing, L.

Belstead, L.

Hatherton, L.

Penrhyn, L.

Caccia, L.

Hawke, L.

Reigate, L.

Campbell of Croy, L.

Henley, L.

Renton, L.

Cockfield, L.

Hives, L

Rochdale, V.

Cottesloe, L.

Holderness, L.

Romney, E.

Craigavon, V.

Home of the Hirsel, L.

St. Aldwyn, E.

Cullen of Ashbourne, L.

Hood, V.

Sandys, L. [Teller.]

Davidson, V.

Hornsby-Smith, B.

Selkirk, E.

Denham, L. [Teller.]

Hylton-Foster, B.

Sharples, B.

Drumalbyn, L.

Kimberley, E.

Soames, L. (L. President.)

Dundee, E.

Lauderdale, E.

Strathclyde, L.

Ellenborough, L.

Long, V.

Strathcona and Mount Royal, L.

Emmet of Amberley, B.

Lucas of Chilworth, L.

Teviot, L.

Evans of Hungershall, L.

Luke, L.

Trefgarne, L.

Exeter, M.

Lyell, L.

Trenchard, V.

Ferrers, E.

Mackay of Clashfern, L.

Trumpington, B.

Fortescue, E.

Macleod of Borve, B.

Vickers, B.

Fraser of Kilmorack, L.

Malmesbury, E.

Vivian, L.

Gainford, L.

Margadale, L

Wakefield, of Kendal, L.

Geoffrey-Lloyd. L.

Marley L.

Ward of Witley, V.

Gibson-Watt, L.

Massereene and Ferrard, V.

Westbury, L.

Glenkinglas, L.

Morris, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

5.11 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL had given Notice of his intention to move Amendment No. 3:
Page 1, line 12, at end insert—
("Provided that from the first week of the tax year in which any of the specified sums become chargeable to income tax each of them shall be increased to at least the amount to which it would have had to be increased at the previous uprating if this section had never come into force.").
The noble Lord said: In view of the fact that Amendment No. 4, which is in the name of my noble friend Lord Banks, is very similar to my own and I prefer his to mine, I do not intend to move this amendment.
Lord BANKS Lord BANKS moved Amendment No. 4:
Page 1, line 12, at end insert—
("Provided that from the first week of the tax year in which any of the specified sums become charged to income tax each said sum shall be increased to that sum to which it would have been increased in consequence of reviews in the tax year 1979–80 and any subsequent tax year but for the provisions of this section").
The noble Lord said: I am grateful to the noble Lord, Lord Wells-Pestell, for not moving his amendment in favour of mine. They both have the same simple purpose, but before I explain it may I say that we on these Benches are as heartily opposed to the 5 per cent. abatement as anyone in this House. The national insurance fund is not in difficulties. We believe that this attempt to find £500 million a year in this way is not only undesirable, but unnecessary. If it is required to take £500 million off the public sector borrowing requirement, which is what happens if you accumulate money in the national insurance fund, we are quite sure that this is not the way in which to do it. It will affect the Exchequer only to the extent of about £90 million.
As we have already heard, the abatement applies to short-term benefits and invalidity benefit and involves a cut in real value, in that instead of these benefits being increased by 16½ per cent. they will be increased by only 16½ per cent. This is quite arbitrary and unfair, but we are told that it is an interim measure until these benefits are taken into tax. During that interim, it will affect people who do not pay tax as well as those who do pay tax, and people who do not pay tax will receive the cut. But the question arises: will the value be restored when these benefits are taken into tax? Will that cut which has been made during the interim be restored? If it is not, then everybody—those who pay tax and those who do not—will be penalised in the future. If it is not restored, the abatement will be perpetuated for all time and compounded.
The Secretary of State in another place has indicated that if resources are available it is the intention of the Government to restore the value of invalidity benefit, because the invalidity pension has, in the past, been treated as a long-term benefit and this measure will open up a gap between it and the retirement pension. But it is only if resources are available that this is to be done and, as I said in the Second Reading debate, that phrase is at best an aspiration, and at worst an escape hatch. But in our view it should be done for all the benefits when they are taken into tax. The value which they have lost through the abatement should be
878
restored to them. That is what this amendment would achieve. I beg to move.
Lord WELLS-PESTELL: I do not want to keep the Committee for any length of time. My noble friend Lord Banks has put the position very clearly and succinctly, and I do not think I can improve upon it in any way, other than to say that all he has asked for, and all we are asking for, is fairness and justice in this matter.
It is patently obvious to us that if benefits are reduced for a certain reason and for a particular period, then, if and when they are taken into tax, they should all—not just the invalidity benefit—be brought up to the level of what they would have been if they had not suffered an abatement of 5 per cent. I hope that the noble Baroness the Minister is in a position today to be a little more positive and a little more forthcoming than her right honourable friend was some time ago in another place, that she will give us a real assurance that this will be done and that we shall not be put off with the usual phrase "if circumstances permit", because we all know that circumstances will not permit something being done if a person does not want to do it. So I hope that she will be able to give us a categorical reply.
The LORD ADVOCATE (Lord Mackay of Clashfern): The Government have announced their intention of bringing benefits for the unemployed into the tax system in April 1982. And if, by 1982, the Government can achieve their aim of transferring to employers the responsibility for sick pay during initial weeks of incapacity, as proposed in the Green Paper published in April, most of the payments for short-term incapacity would also become taxable from that point. Other benefits will be brought into taxation as soon as possible thereafter. In the meantime, the 5 per cent. abatement in 1980 is an interim measure. No decision has been taken on whether there will be an abatement in either or both 1981 and 1982—and there are later amendments covering this matter—and this must be considered in the light of the circumstances at the time.
The amendment seeks to ensure that all the benefits affected by Clause 1 will be restored to their full value once they are

879
brought into taxation. It would, in our view, be most unwise at this stage to enter into such a general commitment so far ahead. The Government have undertaken that when the short-term benefits—sickness benefit, industrial injuries benefit, unemployment benefit and maternity allowance—are brought into taxation, their level will be reviewed in the light of all the relevant factors, including the economic circumstances at the time. This is as far as we think it is right to go.
There is a more positive side, however, to the argument, for, as my noble friend Lady Young said during the debate on Second Reading on 2nd June, my right honourable friend the Secretary of State for Social Services has already given an undertaking that, subject to the availability of resources, invalidity benefit will be fully restored once it is brought into taxation. He extended this assurance to cover unemployability supplement, which is the counterpart of invalidity benefit under the Industrial Injuries Scheme. These benefits differ from the other benefits affected by Clause 1 in that they are long-term maintenance benefits. Untaxed invalidity benefit is currently paid at the same rate as retirement pension which, as your Lordships know, is taxable. For many people who are chronically sick, invalidity benefit plays the same long-term role as retirement pension. Because of this, the Secretary of State was able to give the special assurance about restoring its value as well as restoring the value of its industrial injuries counterpart, when these benefits are brought into taxation. It has been suggested that this does not go far enough. In our view, the undertaking which my right honourable friend the Secretary of State has given is as clear and as firm as any responsible Minister could make in the present economic circumstances. For these reasons, I hope that your Lordships will not approve this amendment.
Baroness PHILLIPS: I should like to return to the point of economics. It is unnecessary to labour the point which so many noble Lords have rightly made about the poverty and the sheer hardship which will be imposed by various parts of the Bill. However, a few years ago I did a piece of research into the tax position of people in a lower income
880
group. It became apparent, even after quite amateur research, that in many cases it cost far more to collect the tax than the tax collected. It seems to me that this is a clear case where we shall bring people on invalidity long-term benefits into the system and take tax from them.
The noble Lord, Lord Drumalbyn, asked about the poverty line. That is not very difficult to determine. Those who are on fixed benefits have to shop in the same markets as those of us who are lucky enough to earn money which is subject to an up-rating, a cost of living bonus. If the invalidity long-term pension or benefit were to be subject eventually to tax, even the noble and learned Lord the Minister who has put forward the point of view of the Government would find it very interesting to discover whether it is worth while—if the whole object of the exercise is to save money, as we understand that it is. We presume that it is not to punish the invalidity benefit recipients, because they are unlucky enough to have to collect it.
May I therefore quite seriously suggest in relation to the amendment of the noble Lord, Lord Banks, that there is this other aspect; namely, whether it is really an economic proposition to collect tax from those you are not taxing already.
Equally, the poverty line can be very easily determined. These people will most certainly go below the poverty line and will then come on to supplementary benefit. Thus there will be no saving; it will be simply a question of handing back money and having to employ far more officers of government in order to carry out this exercise.
Lord MACKAY of CLASHFERN: I will not weary your Lordships by going again into general matters, but so far as the cost of taxation, which I think is the main new point which the noble Baroness has raised, is concerned, this is the point which the Government are making. This is the reason why it will take some time to introduce the scheme. The Government hope that their proposals will be reasonably cheap and economic to apply to the benefits in question. That is the reason why we cannot bring in the system now and why we shall have to wait until at least 1982 before it applies.
Baroness PHILLIPS: Do we understand that if it is found to be uneconomic the Government will not bring it in?
Lord MACKAY of CLASHFERN: I think that noble Lords could rely on the Government not to tax for taxation's sake. In other words, unless there is a reasonable yield, having regard to its cost, the Government would not be inclined to bring it in. It is fairly plain, as the noble Baroness said, that there is no intention of having a tax system simply for the purpose of punishing people. The tax system is designed to produce revenue for the State. It is only if these changes would produce a net revenue for the State that there would be any question of bringing them in.
Lord BANKS: I must confess that I find the reply of the noble and learned Lord very disappointing. If the Government could have brought these benefits into tax overnight, presumably they would have done so. If that had been done, then they would have become immediately subject to tax. And in two or three years' time the benefits would have been uprated in the interim in line with prices and then they would also have been liable to tax. The Government would not have been afraid to accept that commitment. We are asking them to accept precisely the same commitment in this amendment, yet they now say that because they are
going to have abatement for one or two years in the interim they cannot accept a commitment which they would have been quite happy to take in the normal course of events. That seems to me to be a nonsense. I feel that this is an important point of principle, and an important amendment, and that it should be pressed.
Lord DAVIES of LEEK: Another point—and I should like an answer to it—is this: how difficult will this be for people who, for the first time in many cases, will be taxed? They will face the difficulty of having to fill up a form. If I may give a personal instance—I happen to be able to wade through them—I wrote a letter of 10 pages and a three-year analysis of tiny bits of income. But 90 per cent. of these people are not able to shuffle forms. They will be left to drift, and some of them will be in an age group where it is difficult to get help. I believe that it will put a greater burden on the people who collect the tax than we should put upon them for the paucity of the sum which will be collected.
5.26 p.m.
On Question, Whether the said amendment (No. 4) shall be agreed to?
Their Lordships divided: Contents, 77; Not-Contents, 82.

CONTENTS

Amherst, E.

Greenwood of Rossendale, L.

Peart, L.

Ardwick, L.

Hale, L.

Phillips, B.

Aylestone, L.

Hampton, L. [Teller.]

Pitt of Hampstead, L.

Bacon, B.

Hanworth, V.

Plant, L.

Balogh, L.

Hatch of Lusby, L.

Ritchie-Calder, L.

Banks, L.

Henderson, L.

Ross of Marnock, L.

Beswick, L.

Houghton of Sowerby, L.

Sainsbury, L.

Birk, B.

Howie of Troon, L.

Seear, B.

Blease, L.

Ilchester, E.

Segal, L.

Blyton, L.

Ingleby, V.

Shinwell, L.

Brockway, L.

Jacques, L.

Stamp, L.

Burton of Coventry, B.

Kilmarnock, L.

Stewart of Alvechurch, B.

Byers, L.

Leatherland, L.

Stewart of Fulham, L.

Cledwyn of Penrhos, L.

Lee of Newton, L.

Stone, L.

Collison, L.

Listowel, E.

Taylor f Mansfield, L.

David, B.

Llewelyn-Davies of Hastoe, B.

Underhill, L.

Davies of Leek, L.

Lloyd of Kilgerran, L.

Wallace of Coslany, L.

Davies of Penrhys, L.

Longford, E.

Wells-Pestell, L.

Denington, B.

Lovell-Davis, L.

Whaddon, L.

Donaldson of Kingsbridge, L.

Mackie of Benshie, L.

Wigoder, L. [Teller.]

Elwyn-Jones, L.

Maelor, L.

Wilson of Radcliffe, L.

Gaitskell, B.

Meston, L.

Winstanley, L.

George-Brown, L.

Northfield, L.

Winterbottom, L.

Gordon-Walker, L.

Ogmore, L.

Wootton of Abinger, B.

Goronwy-Roberts, L.

Oram, L.

Wynne-Jones, L.

Gosford, E.

Pargiter, L.

NOT-CONTENTS

Ailesbury, M.

Gibson-Watt, L.

Murton of Lindisfarne, L.

Airey of Abingdon, B.

Glenkinglas, L.

Norfolk, D.

Alexander of Tunis, E.

Godber of Willington, L.

Northchurch, B.

Alport, L.

Gowrie, E.

Nugent of Guildford, L.

Ampthill, L.

Gridley, L.

Orkney, E.

Avon, E.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Orr-Ewing, L.

Bellwin, L.

Penrhyn, L.

Belstead, L.

Hatherton, L.

Reigate, L.

Bessborouth, E.

Hawke, L.

Renton, L.

Caccia, L.

Henley, L.

Rochdale, V.

Campbell of Croy, L.

Hives, L.

Romney, E.

Cockfield, L.

Holderness, L.

St. Aldwyn, E.

Cottesloe, L.

Home of the Hirsel, L.

Sandys, L. [Teller.]

Craigavon, V.

Hood, V.

Selkirk, E.

Cullen of Ashbourne, L.

Hylton-Foster, B.

Sharples, B.

Davidson, V.

Kimberley, E.

Soames, L. (L. President.)

Denham, L. [Teller.]

Lauderdale, E.

Strathclyde, L.

Drumalbyn, L.

Long, V.

Strathcona and Mount Royal, L.

Dundee, E.

Lucas of Chilworth, L.

Teviot, L.

Ellenborough, L.

Luke, L.

Trefgarne, L.

Emmet of Amberley, B.

Lyell, L.

Trenchard,V.

Exeter, M.

Mackay of Clashfern, L.

Trumpington, B.

Ferrers, E.

Macleod of Borve, B.

Vickers, B.

Forester, L.

Malmesbury, E.

Wakefield of Kendal, L.

Fortescue, E.

Margadale, L.

Ward of Witley, V.

Fraser of Kilmorack, L.

Marley, L.

Westbury, L.

Gainford, L.

Massereene and Ferrard, V.

Young, B.

Geoffrey-Lloyd, L.

Mowbray and Stourton, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.34 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 5:
Page 1, leave out lines 16 to 18.
The noble Lord said: This amendment would exempt the basic rates of unemployment benefit, sickness benefit and maternity allowance from the 5 per cent. cuts which the Government propose to make this year and the similar cuts which they are seeking power to make in each of the next two years. The Government seek to justify these cuts on the grounds that the benefits ought to be taxed. There is indeed a reasonable case for taxing these benefits if it can be done without undue administrative cost and complexity. If a Labour Government had proposed to tax them, however, they would certainly have given very serious consideration to the question whether the benefits themselves ought to be increased at the same time. They have been allowed to fall far below the long-term national insurance benefits in recent years. If they are to be taxed in the same way as the long-term benefits there is obviously a case for reducing the difference between the benefit rates. But that is not the Government's intention, as I understand it. On the contrary, they propose to reduce the benefits
payable for unemployment, short-term sickness and maternity still further by abolishing the earnings-related supplement.
However strong the arguments for taxing the benefits may be, in my view they cannot justify what the Government are doing in Clause 1. The proposed cuts are arbitrary and, I think, indiscriminate. They will fall equally on those whose incomes are above the tax thresholds and those whose incomes are below them. Families with children will be hit particularly hard because, in addition to the 5 per cent. cuts in the adult benefit rates, they will also suffer from the grossly inequitable way in which the value of the additions for children is being cut this November.
The Government—and I do not say this unkindly—should be honest and admit that what they are doing has nothing whatever to do with taxation. It is quite simply a deliberate decision to cut back the standard of living of the unemployed and the sick. One result of these cuts will be a big increase in the number of people forced to claim means-tested supplementary benefit. We are told that there will be about 110,000 more supplementary benefit claimants as a result of this. Ministers have claimed that because the supplementary benefit rates will not be subject to the 5 per cent. cuts the poorest

885
will be protected. But the estimate of 110,000 is based on the assumption that one in four of those becoming entitled to supplementary benefit will not claim it. This was the point that I tried to make on a previous amendment when I said that some 30,000—and I was quite wrong about that; I suppose it is really between 30,000 and 40,000 people and their dependants—will be affected. Perhaps 100,000 people in all will not be protected and their income will fall below the supplementary benefits safety net.
This is an argument which really stands up, and I do not think it can be refuted. Any argument can be refuted on the basis, "We have got to cut", and that seems to be the only answer that one gets today, as happened on the Social Security Bill, when the attitude was, "We are in a deuce of a state, we have to save money and it must go right across the board". As I have said two or three times already, we accept that there is a need to save money: what we are saying is that the poorest section of the community must be protected.
When the noble Baroness, Lady Young, was replying to me on the first amendment, she said, "We are doing this because the supplementary benefit rate will not be subject to the 5 per cent." As I said, one has to recognise that there will be between 35,000 and 40,000 people and their dependants—possibly 100,000 in all—who will not be protected and whose income will fall below the supplementary benefit net. I hope your Lordships will feel that this is a reasonable amendment. I think it is, and I hope that your Lordships will support it. I beg to move.
Lord DRUMALBYN: The argument that the noble Lord has put forward is in some respects a cogent one, but it is not a new one. We have all been faced—those who have had to deal with these things—with the problem that some people who are entitled to benefits do not take them up. I do not know whether my noble friend will be able to deal with that point: I hope she will. But it does not seem to me that that in itself would be a full justification for excluding the requirement to reduce the benefits for these groups, the sickness benefit, the unemployment benefit and so on, by 5 per cent.
886
One has to remember that in principle it must be right on a system of this kind —and one has to remember the changes in the system that have taken place over the years—to subject this kind of benefit to tax in the same way as any other form of income. Virtually any other form of income is subject to tax if indeed it falls within the taxable area. The noble Lord is perhaps right in drawing attention to the problem here, and I would urge the Government to take every possible step to see that those people who do fall below the supplementary benefit level are enabled, perhaps better than they are at the present time, to claim. There is nothing to prevent their claiming. The question is what can be done to help them.
Baroness YOUNG: When savings in social security expenditure have to be made, it seems right that part of those savings should fall on those benefits which ought to be taxable but which in fact are not. The benefits which it is generally agreed should be taxable are the benefits which replace earnings. Unemployment benefit, sickness benefit and maternity allowance all fall into this category, and therefore they should be included in the abatement proposals in Clause 1. The clause as a whole is designed to save around £130 million net in a full year.
I would assume that it is not intended by the noble Lord, Lord Wells-Pestell, or his noble friends who support the amendment, that the personal benefits with which the amendment specifically deals should be protected, while injury benefit—which corresponds to sickness benefit—and adult dependency increases payable with these benefits, should be abated. I will, therefore, refer in passing to these other issues.
It has been suggested that by abating maternity allowance this Government are adding to the difficulties faced by expectant mothers and the risks to the unborn child. However, we are confident that this proposal will not have the serious effect that some have predicted. There are a number of reasons for this. Maternity allowance is paid only to those women who have a recent history of employment. Many of them will receive in addition maternity pay under the provisions of the Employment Protection Act. Most will have an income above the tax threshold during the year in which maternity allowance is paid.

887
The £5 million savings from abatement of the increase in this allowance have to be considered, and I think can be defended against this background.
I should also like to remind your Lordships that this Government intend to introduce two significant measures which will help expectant mothers. The first is that we have agreed that the maternity grant, which is intended as a contribution to the expenses of having a baby, and is paid to the great majority of mothers, will become non-contributory from 1982, and so benefit some vulnerable women who are at present excluded, particularly the young mothers. The second is the proposal to allow employed women paid leave to attend prenatal clinics, which will give them the same opportunity to get a check-up and treatment as women who do not go out to work.
Unemployment benefit and sickness benefit are short-term benefits designed to replace earnings during breaks in employment. Most claims for these benefits last only a few weeks. The majority of beneficiaries will, therefore, have an income from earnings as well as from benefits during the tax year in which the benefit is paid. At present only the earnings are liable for tax. It is clear that the income from sickness or unemployment benefits should also be brought into taxation. I think there is no disagreement about that principle between us. For reasons which we have already explained, this cannot be done before April 1982, and these benefits are, as an interim measure, being made subject to the 5 per cent. abatement. This will yield important savings: £75 million gross in a full year for these benefits as a whole. Given that these short-term earnings replacement benefits are not yet taxable but ought to be, and taking account of the other factors that I have mentioned, I believe that the Government are justified in seeking a contribution from these benefits towards the overall savings that must be made.
I have been asked to deal with an important point; it was one that was raised by my noble friend Lord Drumalbyn about what will happen to those who will fall below the supplementary benefit line as a result of the provisions in Clause 1. Those "who would not be protected"—that is to say, people who come below the
888
supplementary benefit level—would be protected because, of course, they would become eligible for supplementary benefit. They must, of course claim supplementary benefit. I should like to put on record again that this Government, like their predecessors, are most anxious that people should claim supplementary benefit where they are entitled to. There is a range of means to encourage them to take up supplementary benefit and these would be used, as they have been in the past, to encourage people to do so. I hope that that goes some way to satisfy the point raised by my noble friend Lord Drumalbyn on that matter.
If this amendment before the Committee were carried it would be impossible to justify the abatement of industrial injuries benefit, which is the only short-term earnings replacement benefit not covered by this amendment, and which, paid at a higher rate, corresponds to sickness benefit. Nor, I think, would it be envisaged that abatement should apply to the increases for adult dependants paid with these benefits. The total savings lost would be about £85 million gross. For reasons which we have already gone into in Committee and at Second Reading, this would be unacceptable to the Government, as it represents a very large part of the savings this Bill is designed to achieve. I hope, therefore, that the Committee will not support the amendment.
Lord WELLS-PESTELL: I have said before that I do not think there is anything between us and the Government on the question of taxation of benefits. Many of us have held that view for some considerable time. But I think it raises a very real moral question, if not a legal question, as to whether a Government have the right to cut benefits which under the Act should be increased year by year according to the level of prices. This is what will happen this coming November, with the exception of certain benefits. I have pointed out to your Lordships that we are dealing with insurance benefits, benefits that people have paid for as a result of their national weekly insurance contributions. If the Government cannot see their way clear to tax benefits for another two years, then in my submission they ought not to impose cuts of the nature and in the areas in which they are doing it.

889
I think I took down correctly what the noble Baroness said: I hope she will correct me if I am wrong. She said that unemployment and sickness benefits are designed to replace earnings. They never were designed to replace earnings. Unemployment benefit and sickness benefit were never equal to a persons' earnings, or if they were it was in very few cases. So that is not the intention. The benefit is designed to help people who have the misfortune to be unemployed or sick, and merely repeat the argument of my noble friend Lord Banks when he says that if there is going to be a delay in bringing them into taxation then one ought to allow the benefits to continue at their proper level, in this case 16½ per cent. and not 11 per cent.
Baroness YOUNG: Before the noble Lord, Lord Wells-Pestell, sits down, may I clear up one point. He asked if I had said that unemployment benefit, sickness benefit and maternity allowances were all designed to replace earnings, and I said the answer was, yes. The fact is that these are short-term benefits and they come to people who for one reason or another, either because of short-term unemployment or sickness or, in the case of a woman, because she is having a baby, do not have the earnings. They may not fully replace the earnings, but they do replace earnings. They are, therefore, part of an income and it is expected in every case that the person who has these particular benefits will go back into work again and will pick up his salary or wage or whatever it may be. I think, therefore, it is perfectly correct to describe them as replacing earnings.
Baroness WOOTTON of AB1NGER: I should like to ask the noble Baroness whether there is any precedent for this procedure. The Government are proposing to impose a tax on certain people who have been exempt from tax. I do not know whether it is in one year's time or two years' time.
Baroness YOUNG: We shall be able to bring these benefits into taxation in 1982; that is to say, in two years' time.
Baroness WOOTTON of ABINGER: It is the year beginning 1982; that is about two years' time from now. In the mean-
890
time the Government say, "We will cut down the real income that we are paying you, which we previously promised to keep up at its real value, pending our ability to put the tax on you". Is there any precedent whatever for anticipating a tax in this way by causing the persons who are to be subject to it in two years' time to reduce their incomes two years ahead of time? This amplifies the point I put rather quickly to the noble Baroness in my interjection on a previous amendment.
I do not think there is any precedent at all for it and I consider it is monstrously unjust. Taxpayers who are in arrears are charged interest. It is true that with most of these benefits the people concerned will be on PAYE and this point may not arise, but the principle is if one is in arrears with one's tax one is charged interest. The Government are now imposing upon them a negative interest by charging them, so to speak, an interest on tax they will be liable to pay in two years' time. I regard it as perfectly monstrous from every moral and ethical point of view.
Baroness YOUNG: I think the noble Baroness, Lady Wootton, would agree with me that her party thinks in principle that these benefits ought to be taxed. Enough of her friends in another place have gone on record as saying that as a principle it is desirable that the benefits should be taxed, because the tax system should adjust for those who have the benefit and some other form of income and those who simply have the benefit, and so on, so that the system could be seen to be fair.
The noble Baroness asked me if there was a precedent for this. Subject to any information that I may have, so far as I know there is not a precedent for it. But the truth of the matter is that we are in an unprecedented situation in this country. We believe that we are in a very serious economic position, and if anybody thinks to the contrary they cannot really have studied the situation as thoroughly as they should have done. We are, therefore, looking at a whole range of issues. I hope I said enough in my reply on the first amendment to indicate that my right honourable friend the Secretary of State had looked at the whole of the social security budget to see where

891
economies might be made out of the £20,000 million that it costs, and made them in areas which we accept are not easy but which we believe will be less damaging than others.
In this area, where one has people who could perfectly well be poor but be retirement pensioners who are paying tax now, we feel we should try to do something, as it were, to make a fairer distribution between those who are on injury benefits or invalidity benefits in this particular case who would have had the full up-rating but would not have been taxed. Therefore, we are assuming a 5 per cent. less up-rating. There is a rough justice about it; I said so at Second Reading and my friends in another place have said so. We accept that there will be some hard cases; it is not perfect. But my right honourable friend the Secretary of State has said on invalidity benefit that when people are brought into taxation in 1982, as resources permit they will be brought up to the level of retirement pensioners and they will have this leeway made up.
Baroness WOOTTON of A BINGER: I have served for 44 years in the magistrates' court and I have heard every excuse one can think of for criminal actions. But I
never thought to hear in this Committee an action which is not criminal, but which I think is profoundly immoral, justified by the fact that the Government are in an unprecedented situation. Does an unprecedented situation relieve them from ordinary common moral obligations?
Baroness YOUNG: I am very glad the noble Baroness, Lady Wootton, prefaced her remarks by saying that she had been a magistrate for 44 years. May I make it quite clear that there is nothing illegal in this? We may disagree as to whether or not this is something we should have done. Her Government found themselves faced by very difficult issues and I am quite certain that many of her noble friends and her friends in another place thought it immoral when they had to make very substantial cuts in Government expenditure in reply to the International Monetary Fund. We did not go around saying to them at that stage that they were acting immorally. They were faced with a difficult situation which they tried to meet. We are doing the same.
5.56 p.m.
Their Lordships divided: Contents, 63; Not-Contents, 90.

CONTENTS

Amherst, E.

Goronwy-Roberts, L.

Peart, L.

Ardwick, L.

Gosford, E.

Ritchie-Calder, L.

Bacon, B.

Hale, L.

Ross of Marnock, L.

Banks, L.

Hall, V.

Shinwell, L.

Beswick, L.

Hampton, L.

Stewart of Alvechurch, B.

Birk, B.

Hanworth, V.

Stewart of Fulham, L.

Blease, L. [Teller.]

Hatch of Lusby, L.

Stone, L.

Brooks of Tremorfa, L.

Houghton of Sowerby, L.

Strabolgi, L.

Burton of Coventry, B.

Ingleby, V.

Strauss, L.

Byers, L.

Jacques, L.

Taylor of Mansfield, L.

Chitnis, L.

Kilmarnock, L.

Underhill, L.

Cledwyn of Penrhos, L.

Leatherland, L.

Wallace of Coslany, L. [Teller.]

Collison, L.

Lee of Newton, L.

Wells-Pestell, L.

David, B.

Llewelyn-Davies of Hastoe, B.

Whaddon, L.

Davies of Leek, L.

Longford, E.

White, B.

Davies of Penrhys, L.

Lovell-Davis, L.

Wigoder, L.

Denington, B.

Mackie of Benshie, L.

Wilson of Kadcliffe, L.

Donaldson of Kingsbridge, L.

Maelor, L.

Winstanley, L.

Elwyn-Jones, L.

Northfield, L.

Winterbottom, L.

Gaitskell, B.

Ogmore, L.

Wootton of Abinger, B.

George-Brown, L.

Oram, L.

Wynne-Jones, L.

NOT-CONTENTS

Ailesbury, M.

Allen of Abbeydale, L.

Avon, E.

Airey of Abingdon, B.

Alport, L.

Bellwin, L.

Alexander of Tunis, E.

Ampthill, L.

Belstead, L.

Bessborough, E.

Hatherton, L.

Orkney, E.

Caccia, L.

Hawke, L.

Orr-Ewing, L.

Cockfield, L.

Henley, L.

Penrhyn, L.

Cottesloe, L.

Hives, L.

Rawlinson of Ewell, L.

Craigavon, V.

Holderness, L.

Reigate, L.

Cullen of Ashbourne, L.

Hood, V.

Renton, L.

Davidson, V.

Hornsby-Smith, B.

Rochdale, V.

Denham, L. [Teller.]

Hylton-Foster, B.

Romney, E.

Drumalbyn, L.

Kimberley, E.

St. Aldwyn, E.

Dundee, E.

Lauderdale, E.

Sandford, L.

Ellenborough, L.

Long, V.

Sandys, L. [Teller.]

Elliot of Harwood, B.

Lucas of Chilworth, L.

Sharples, B.

Emmet of Amberley, B.

Luke, L.

Soames, L. (L. President.)

Exter, M.

Lyell, L.

Stamp, L.

Ferrers, E.

Mackay of Clashfern, L.

Strathclyde, L.

Forester, L.

Macleod of Borve, B.

Strathcona and Mount Royal, L.

Fortescue, E.

Malmesbury, E.

Sudeley, L.

Fraser of Kilmorack, L.

Mancroft, L.

Teviot, L.

Gainford, L.

Margadale, L.

Trefgarne, L.

Gibson-Watt, L.

Marley, L.

Trenchard, V.

Glenkinglas, L.

Massereene and Ferrard, V.

Trumpington, B.

Godber of Willington, L.

Monson, L.

Vivian, L.

Gowrie, E.

Mottistone, L.

Wakefield of Kendal, L.

Gridley, L.

Mowbray and Stourton, L.

Ward of Witley, V.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Murton of Lindisfarne, L.

Westbury, L.

Norfolk, D.

Young, B.

Halsbury, E.

Northchurch, B.

Harmar-Nicholls, L.

Nugent of Guildford, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.5 p.m.
The DEPUTY CHAIRMAN of COMMITTEES (Lord Jacques): The next amendment is Amendment No. 6. If this amendment is agreed to I shall not be able to call Amendments Nos. 7 or 8.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 6:
Page 1, leave out lines 19 to 22.
The noble Lord said: I beg to move Amendment No. 6. This amendment would exempt the adult dependency additions to unemployment benefit, sickness benefit, invalidity pension and maternity allowance from the proposed 5 per cent. cuts. In my view, precisely the same arguments apply to this amendment as to the amendment to leave out lines 16 to 18 which I moved a short time ago. However, there is an additional argument which has to do with the basis on which these additions would, in due course, be brought into tax.
In the vast majority of cases adult dependency additions are paid to married men in respect of their wives. Many women nowadays object to the term "dependency" and it is probably time that we found a much more acceptable term. For practical purposes, however, the test of entitlement to the addition to
894
benefit for a claimant's wife is simply whether her earnings for the particular week are more than a prescribed figure. Perhaps I may give an example. If a man falls sick and his wife is in full-time or even half-time work, he will receive sickness benefit for himself with additions for his children, but not for his wife. If, after a few weeks, she stops work, he will be able to claim an addition to his sickness benefit for her. Although that addition is payable to the man and not to his wife, it would seem logical that, if and when the benefit is taxed, the wife's addition should be treated for tax purposes in the same way as her earnings. I hope that I have made that point clear. In other words, her personal allowance should be set against it. If this were done it is likely that the addition would actually be taxed in only a small minority of cases.
To apply the 5 per cent. cuts to the adult dependency additions on the pretext that they ought to be taxed is, therefore, singularly unfair and ought to be strongly opposed by anybody concerned with the rights of married women and by anybody who feels that they should be treated for tax purposes quite separately. I believe that that is right. I beg to move.
Baroness YOUNG: The effect of these amendments would be that the adult dependency increases would go up by 5 per cent. more than the personal benefit

895
with which they are paid. The effect of that would be to leave the Secretary of State with a duty to increase the adult dependency additions paid with unemployment benefit, sickness benefit, maternity allowance and invalidity pension by the full amount needed for price protection. That would mean, of course, 16·5 per cent. as opposed to the 11·5 per cent. which we have proposed under the clause. The dependency addition payable with invalidity pension would then become £16·30 a week—that is the same as the retirement pension addition—instead of the proposed rate of £15·60 a week. For the other benefits the addition would be £13·35 a week rather than the proposed rate of £12·75 a week.
Most of these additions are being paid in respect of a dependent wife. Together with the personal benefit with which they are paid they provide, as it were, a "married" rate of benefit. One of the difficulties is that if the amendment were to be accepted, the addition would become a larger proportion of the total benefit in payment. There would, in effect, be a shift in resources in favour of a married couple as opposed to a single person. This, in fact, would disturb the relativities that have been established between a single person and a married couple in this particular area.
Under various earnings rules an adult dependency addition can still be paid even though the dependant has earnings. In the case of unemployment benefit, for example, a dependency addition may be paid unless earnings—that is earnings net of expenses—exceed the dependency increase; in the case of invalidity pension unless earnings exceed £45 a week. This amendment seems particularly inappropriate in cases like this where the dependant has earnings which are already disregarded. Claimants with adult dependants who have no earnings are, of course, protected where necessary by the availability of supplementary allowance which will remain fully price-protected.
It may be helpful to the Committee to know that although we speak of "invalidity benefit", it is, in fact, a generic term which has, as it were, five parts to it. There is the invalidity pension, where the pension will be up-rated by the 11½ per cent. and not the 16½ per cent.; the
896
invalidity allowance which, again, will be up-rated by 11½ per cent. rather than the 16½ per cent.; and the dependent allowance addition, usually for a wife, which again would be up-rated by the 11½ per cent. But, of course, the children's benefits remain unaffected in all this.
The noble Lord, Lord Wells-Pestell, asked me a quite specific point about the taxation of a wife's income. This is a matter to which I can give only a short answer at the present time. As I understand it, the benefit that is paid is regarded as the husband's money and not as the wife's money. In those circumstances, it is likely to be taxed as his benefit and his income. If there is anything further that, on reading Hansard, I should add to that, I shall, of course, write to the noble Lord, Lord Wells-Pestell. I hope that I have said enough to indicate that, once again, this is not an amendment which the Government would feel able to accept. I hope that I have explained the circumstances, that if it were to be accepted it would, in fact, affect this relationship between the benefits paid to married couples and those paid to single people.
Lord WELLS-PESTELL: I wonder whether the noble Baroness would allow me to set an example of flexibility and say that, having listened to what she has had to say, I acknowledge that she has raised one matter of which I had not thought. Therefore, I should like to read what she has said in Hansard tomorrow and discuss it with my colleagues. If it is necessary to come back to it, we have another stage which will enable me to do so. If we are satisfied with it, then, of course, we shall not pursue the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.15 p.m.
Lord BANKS Lord BANKS moved Amendment No. 7:
Page 1, line 19, leave out ("2").
The noble Lord said: I should like to move Amendment No. 7 and, with the leave of the Committee, to speak to Amendments Nos. 8, 9, 10 ,11, 12, 13, 14 and 15. All these amendments seek to prevent the abatement of the invalidity pension, the invalidity allowance and the invalidity pension's adult dependant's

897
allowance, and also to prevent similar abatements in respect of the unemployability supplement of the industrial injuries scheme.
I made it clear on an earlier amendment that we on these Benches are against the abatement generally, but, if it is to go through, we believe that there is a very strong case for exempting invalidity benefit in particular and disabled people generally. After all, invalidity benefit has always been treated as a long-term benefit. The others are short-term. Furthermore, invalidity benefit has already been subject to one cut as a result of the No. 1 Bill. Invalidity benefit in future will be increased in line with prices only, and not in line with prices or earnings, whichever is the higher.
Other long-term benefits for chronically sick and disabled people—war and industrial disablement pensions, the non-contributory invalidity pension and the housewife's non-contributory invalidity pension—are being increased by 16½ per cent., not 11½ per cent. We must, of course, remember that in practice inflation may well he much higher than 16½ per cent.
The noble Baroness has just described how invalidity benefit is composed. There are two principal parts to it. First, invalidity pension, which is paid to those who pay national insurance contributions, who are under retirement age and who are chronically sick or disabled. Hitherto this invalidity pension has been paid at the same rate as the retirement pension; that is to say, £23.30 for the single person and £27.30 for the married couple at the present time. The 5 per cent. abatement will mean a drop in real value of £1.15 per week or £60 per annum for the single person, and £1.85 per week or £96 per annum for the married couple.
Secondly, there is the invalidity allowance which is paid in addition to those who first become unable to work more than five years before pension age. If they first become unable to work under the age of 40, that allowance is £4.90; if they become unable to work between the ages of 40 and 50 it is £3.10, and between the ages of 50 and 60 for men and 50 and 55 for women it is £1.55. This benefit continues to be paid when disabled people reach retirement age and switch from the
898
invalidity pension to retirement pension. The present rates of invalidity allowance are the same whether the individual is on invalidity pension or retirement pension.
However, as a result of this Bill, the highest rate of invalidity allowance will increase by 80p. per week, which is by 16½ per cent. for a retirement pensioner, but only by 55p. per week, or 11½ per cent. for an invalidity pensioner. There will be a similar difference in the other rate of invalidity allowance. At the highest rate of invalidity allowance the claimant will lose another £13 in addition to what is lost on the invalidity pension, or £109 per annum in all. At present the invalidity pensioner receives an addition of £7.10 for each dependent child. This is to go up by only 5½ per cent.—not 16½ per cent. —owing to a new way of calculating, and the amendment which we are now discussing will not affect that. But it is a factor to be taken into account when considering the position of the invalidity pensioner.
The change in the method of calculation has meant a loss of 70p for each child—70p. that would have been obtained under the old method of calculation. In addition, the invalidity pensioner—and this is another factor which must be taken into account—is seldom eligible for supplementary benefit. The invalidity pension is lower than the long-term supplementary benefit rate, but it is higher than the short-term supplementary benefit rate, so that the invalidity pensioner cannot claim supplementary benefit—he cannot qualify for it—because he cannot qualify for the lower rate which is paid for the first two years at the moment, although for the first year only after November. We know that the invalidity pension is not taxable and that it is intended to bring it into tax. We know that this is an interim measure, and we discussed on earlier amendments whether or not this is a fair measure. In my view it is decidedly unfair.
In the Second Reading debate, the noble Baroness, Lady Young, told us that 150,000 claimants would pay no tax at all, that 100,000 claimants would pay less than the abatement, and these would all be affected; a total of 250,000. On 21st May in another place the Secretary of State gave different figures, 250,000 and 150,000, making a total of 400,000. The noble

899
Lord, Lord Underhill, has referred to this discrepancy already on an earlier amendment.
Baroness YOUNG: I am sorry to interrupt the noble Lord, Lord Banks, but I gave a reply to that. The figures I gave apply to those receiving invalidity benefit in the long-term. The figures that were given in another place apply to all those receiving invalidity benefit whether in the short or long term. Therefore, there is not a fundamental discrepancy; they are different sets of figures.
Lord BANKS: I am grateful to the noble Baroness for that explanation, and I am sorry if I missed that point when she replied to the noble Lord. At any rate it is a considerable number of people, whichever way we calculate it, who are affected and who get what the noble Baroness called "rough justice". I certainly think it is rough; I am not quite so sure about the justice. Well, I am sure that there is not really any justice in it. We know that there is a possibility that the value of the invalidity pension may be restored when it becomes liable to tax, but this is subject to the availability of resources and we cannot be certain that in fact that loss through the abatement during the interim period will ever be made good.
The amount of money saved by including the invalidity pension is £55 million a year. If we are short of £55 million a year, do we need to get it by cutting arbitrarily and unfairly the benefits of the sick and disabled in this way? I do not think that we do, and I beg to move.
6.22 p.m.
Viscount INGLEBY: I speak as a Cross-Bencher and not a member of any political party, and it seems to me that this 5 per cent. abatement is rough justice, as indeed the Minister in another place has admitted. It will hit some 400,000 severely disabled people whom it is not the Government's intention to hit, because they would not pay tax if these benefits were taxable as they will be in two years' time.
I quote from the Secretary of State in another place on 21st May 1980, at column 555, when he said:
900
"… of about 850,000 invalidity beneficiaries 250,000 people would not be liable to tax and about 150,000 people would be liable to pay less tax than would be yielded by the 5 per cent. abatement".
So there are 400,000 severely disabled people who are going to be penalised, although it is not the Government's intention to do so.
The effect on an individual severely disabled single person is that he will have between £60 and £73 less to live on in the year from November 1980, and married couples will have from £96 to £109 less to live on in that year. This is very rough justice indeed. I know that the Minister is sympathetic on these points, and I hope that she will think again on this one, because if not I shall be forced to go into the Division Lobby in support of the noble Lord, Lord Banks.
Lord WALLACE of COSLANY: I am grateful to the noble Viscount, Lord Ingleby, for his intervention because we have at least had the remarks of one person who knows what it is all about. I will not go into any great detail because the noble Lord, Lord Banks, has made his case, and I would not presume to encroach on the field of an acknowledged expert. I think that the noble Lord can be, and is, regarded in this House as an expert on this particular matter.
Let there be no misunderstanding—and I speak in a personal sense as well as a political sense in this case. These are vital amendments to those who can least afford reductions of income. We can argue about all the clauses of the Bill, but this particular subsection is vital. Those who are affected are affected three times over, because we must not forget the economies to be made by the local authorities in the social services. These economies will be applied in varying degree according to the council's intention to economise—and this is a matter of other argument—and will affect people in this category. For the long-term sick and disabled those cuts are a sufficient worry without any further cuts.
Do not forget, too, that many of these people have paid national insurance contributions for years, and now will lose the right of the earnings related supplement. Reference has already been made to the noble Baroness's winding-up remarks about "rough justice". She

901
used the words twice during the Second Reading of this Bill in this House, and again today. I entirely agree with the noble Lord, Lord Banks; it is not just an element of rough justice, it is plain downright injustice.
On the Second Reading of the Bill, I appealed to the consciences of Members of your Lordships' House. Without any over-emphasis on this issue, I say that the moment of decision is now before you. I am not arguing whether economics are called for in public spending. We could argue until the cows come home which is right and which is wrong, but the issue we are dealing with now is definitely wrong. There is something brutal and wrong in placing burdens of this character on the long-term sick and disabled. If burdens have to be carried, then let the healthy, wealthy, and securely employed shoulder them. It is not a large amount to shoulder. Although I am "retired", I would be quite willing to pay a little more in tax if the Government would relent on this matter. I am sure that there is hardly a person in this House who would disagree. The sick and the disabled have enough burdens on their shoulders already due to their own disabilities, and the Government have already admitted that this is rough justice. I appeal to the Committee to let another place have another chance. There was no easement in another place when this was discussed. There were some members of the Government party who were definitely against this. Let the other place think again about this. We can do our duty. We are a free Chamber in the sense that we can reach decisions without the pressure of the party whips.
This is a case, above all, where not only conscience counts but where the question of party loyalty does not arise. We have to consider our obligations to our worse-off sections of society, most of them cheerful and willing to carry on as well as they possibly can, and they do not deserve this injustice. I appeal to the Committee. If the Minister can withdraw this paragraph I should be more than grateful. I do not want to force it to a Division, but I would support the noble Lord, Lord Banks, if he does. I hope that the Committee will realise its responsibilities tonight.
Baroness YOUNG: The noble Lord, Lord Banks, when introducing the amend-
902
ment, said he was speaking at the same time to a number of others, and I hope the Committee will feel it appropriate if I speak to the central point of Amendment No. 7, which was the one supported by my noble friend Lord Ingleby, on invalidity benefits. The noble Lord, Lord Banks, explained the position clearly about invalidity pensioners and what the effect of the Bill would be. As I attempted to explain earlier, the invalidity benefit has five components, three of which are affected by the Bill. The child allowances and additions are not affected by it, nor are the long-term new pension proposals. It is therefore right that we should get clear what we are talking about in this connection.
My noble friend Lord Ingleby mentioned that 400,000 people would be affected and, although I do not wish in any way to make a debating point out of something of a very serious nature, the fact is that the 400,000 whom he maintains would be worse off as a result of the Bill include not only those long-term beneficiaries but those receiving benefit in the short-term for what may be a matter of as little as a week. The figures I gave on Second Reading are those for long-term beneficiaries and, as I have said—and the point has also been made by my right honourable friend the Secretary of State—there are those who would not be in tax if the benefit were taxed now, and will not in the future, and those for whom it will just break even, so there would be about 250,000 who, it could be said, would be worse off as a result of these proposals.
Neither I nor my colleagues would wish to go into this and other measures if we did not feel the economic situation was sufficiently serious, and we have said that this is rough justice, a remark which I stand by because there is rough justice about a great many of these benefits. There is, regrettably enough, a lot of rough justice about life itself and, as I have tried to show, if you are poor a retirement pensioner you get the retirement pension up-rated by 16½ per cent. but you would or could be subject to tax and you may, at the margin, be suffering. If you are getting invalidity pension, you will up till now always have got the same up-rating on retirement pension as everybody else, whether or not you really needed it and whether or not you should have paid tax. Some may have been better off and it is

903
arguable—and noble Lords opposite might well argue that it is a sort of rough justice—that some have done better than they should and have done better than their equivalents who are getting a retirement pension.
I do not believe this is a debating point in the sense that I would wish to make it one and argue the case, because the case rests on the whole principle of saving Government money. But there is a measure of rough justice running through this which one must accept, and my party recognises that. Of course, as we go through, we would like to iron out all the anomalies, but unfortunately we cannot do so at this time. I wish, however, to take up a particular point made by the noble Lord, Lord Banks, about eligibility for supplementary benefit. I think I am right in saying that he said the invalidity pension fell between the short-term supplementary benefit rate and the long-term rate, and that invalidity pensioners therefore failed to qualify for supplementary benefit. They cannot in fact get the long-term rate of supplementary benefit payable after one year from this November, and there are two points I should make on that. One is that, as with housing costs and other extra needs, the invalidity pensioner may qualify for supplementary benefit. Secondly, this Government have done what their predecessor did not do; namely, they have enabled the non-contributory invalidity pensioner to get the long-term supplementary benefit rate by virtue of the time spent on the non-contributory invalidity pension. This is a small change but I believe it to be a valuable one.
As a party, we recognise the importance of invalidity pensions; after all, we introduced them in 1971. There is general agreement that they should be taxed, as with all other benefits, and I think I am right in remembering that the Labour Government after the war, in 1948, introduced taxation of all benefits. That was subsequently changed, but there is a measure of agreement about these matters. I remind the Committee once again what my right honourable friend the Secretary of State said about these benefits and repeat the assurance he has given to restore the rate of invalidity benefit when it is brought into taxation and to cover unemployability supplement as well—another point to which the noble Lord,
904
Lord Banks, referred, but in a subsidiary way to his main argument about invalidity benefit.
Our main argument is about the interval between the position now, when the benefit is not being fully up-rated, and the time when it will be fully up-rated but will be taxed, and that is the particular difficulty which arises, a difficulty I have described as rough justice. I recognise that the Committee feels very strongly on this and I particularly recognise that my noble friend Lord Ingleby and his colleagues, who know a great deal about this subject—far more than I do—feel very strongly about it. I ask my noble friend to accept that we would not have considered these matters if we did not feel that the economic situation of the country was sufficiently serious to justify looking at all parts of Government expenditure for economies. We believe that the social security budget, one-quarter of all Government expenditure, must bear a part of this reduction, and that is why we are introducing the Bill. I hope very much that, with this explanation, the Committee will not accept the amendment or the series which has been linked with it, and will accept my assurance that it is something which the Government believe must be done. That is why we have introduced the Bill and why we cannot at this stage give in to the request to accept the amendment.
Lord BANKS: I am grateful to the noble Viscount, Lord Ingleby, and the noble Lord, Lord Wallace of Coslany, for their support of the amendment. I regret that the noble Baroness, Lady Young, has not found it possible to support this series of amendments, though I did not think she would because we are not really arguing in this Committee stage, as we so often are in Committee, about the merits of the proposals contained in the legislation. The noble Baroness agrees that the measures are not desirable in themselves and she said the Government would not be pursuing them but for the fact that they think the economic situation demands it. The difference between the two sides of the Committee on this matter is not a question of which is the best way of dealing with the problem of the disabled; it is a division as to whether it really is necessary, given the economic difficulties, to save £55 million from the benefits which are given to the disabled.

905
Earlier today and at some length on Second Reading we argued about that, and a very strong case was put forward to reject the economic argument which the Government adduced. It would not be appropriate on this amendment to launch into that again, and, since there is no division between us and the noble Baroness on the question of the merits of the proposals, which neither she nor we like, the only thing we can do is test the
opinion of the Committee to see whether it is the feeling of noble Lords that we must raise this £55 million by reducing the benefits which are paid to the disabled.
6.39 p.m.
On Question, Whether the said amendment (No. 7) shall be agreed to?
Their Lordships divided: Contents, 65; Not Contents, 83.

CONTENTS

Amherst, E.[Teller.]

Gladwyn, L.

Ogmore, L.

Ardwick, L.

Goronwy-Roberts, L.

Oram, L.

Bacon, B.

Hale, L.

Peart, L.

Banks, L.

Hatch of Lusby, L.

Pitt of Hampstead, L.

Beswick, L.

Houghton of Sowerby, L.

Ritchie-Calder, L.

Birk, B.

Hylton-Foster, B.

Ross of Marnock, L.

Blease, L. [Teller.]

Ingleby, V.

Stamp, L.

Blyton, L.

Jacques, L.

Stewart of Alvechurch, B.

Boston of Faversham, L.

Kilbracken, L.

Stewart of Fulham, L.

Brooks of Tremorfa, L.

Kilmarnock, L.

Stone, L.

Burton of Coventry, B.

Lee of Newton, L.

Taylor of Mansfield, L.

Chitnis, L.

Llewelyn-Davies of Hastoe, B.

Underhill, L.

Cledwyn of Penrhys, L.

Lloyd of Kilgerran, L.

Wallace of Coslany, L.

Collison, L.

Longford, E.

Wedderburn of Charlton, L.

Craigavon, V.

Lovell-Davis, L.

Wells-Pestell, L.

Crowthcr-Hunt, L.

Mackie of Benshie, L.

Whaddon, L.

David, B.

Maelor, L.

White, B.

Davies of Leek, L.

Milner of Leeds, L.

Wilson of Radcliffe, L.

Davies of Penrhys, L.

Mishcon, L.

Winstanley, L.

Donaldson of Kingsbridge, L.

Monson, L.

Wootton of Abinger, B.

Elwyn-Jones, L.

Noel-Baker, L.

Wynne-Jones, L.

Gaitskell, B.

Northfield, L.

NOT-CONTENTS

Airey of Abingdon, B.

Godber of Willington, L.

Northchurch, B.

Alexander of Tunis, E.

Gowrie, E.

Nugent of Guildford, L.

Alport, L.

Gridley, L.

Orkney, E.

Ampthill, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Orr-Ewing, L.

Avon, E.

Penrhyn, L.

Bellwin, L.

Hatherton, L.

Rawlinson of Ewell, L.

Belstead, L.

Hawke, L.

Reigate, L.

Bessborough, E.

Henley, L.

Renton, L.

Caccia, L.

Hives, L.

Rochdale, V.

Carrington, L. (A Principal Secretary of State.)

Holderness, L.

Romney, E.

Hood, V.

St. Aldwyn, E.

Cockfleld, L.

Hornsby-Smith, B.

Sandys, L. [Teller]

Cottesloe, L.

Killearn, L.

Sharples, B.

Craigmyle, L.

Kimberley, E.

Soames, L. (L. President.)

Cullen of Ashbourne, L.

Lauderdale, E.

Spens, L.

Davidson, V.

Long, V.

Strathclyde, L.

Denham, L. [Teller.]

Luke, L.

Sudeley, L.

Drumalbyn, L.

Lyell, L.

Teviot, L.

Dudley, E.

Mackay of Clashfern, L.

Thorneycroft, L.

Dundee, E.

Macleod of Borve, B.

Trefgarne, L.

Ellenborough, L.

Malmesbury, E.

Trenchard, V.

Elliot of Harwood, B.

Mancroft, L.

Trumpington, B.

Exeter, M.

Margadale, L.

Vivian, L.

Ferrers, E.

Marley, L.

Wakefield of Kendal, L.

Forester, L.

Massereene and Ferrard, V.

Ward of Witley, V.

Fortescue, E.

Mottistone, L.

Westbury, L.

Fraser of Kilmorack, L.

Mowbray and Stourton, L.

Young, B.

Gibson-Watt, L.

Murton of Lindisfarne, L.

Glenkinglas, L.

Norfolk, D.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 8 to 15 not moved.]
The DEPUTY CHAIRMAN of COMMITTEES (Baroness Wootton of Abinger): I have to point out that if Amendment No. 16 is agreed to, I shall not be able to call Amendment No. 17.
6.48 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved amendment No. 16:
Page 2, line 41, leave out subsection (4).
The noble Lord said: In moving this amendment I wish to refer also to Amendment No. 17, and to deal with both amendments in one speech. Amendment No. 16 would prevent the Government from making the 5 per cent. cuts in November 1981—that is in consequence of a review in the tax year 1980–81—and Amendment No. 17 would prevent them from making the cuts in November 1982. In our view the unfairness of the cuts would increase with each year that they were repeated.
If the Government were proposing to make an immediate cut of nearly 15 per cent. in the basic benefit rates, it would be most unlikely that even their own Back-Benchers would support them. To make the cut in three instalments does not make it any more defensible. No doubt the Minister will argue that the Government hope not to have to make any further cuts in 1981 and 1982, but the fact remains that they are seeking the power to make such cuts. In deciding whether they should be given that power we must consider what would be the implications if it were in fact used.
The precise effects cannot be calculated in advance because of the cumulative effect of the up-ratings in the next three years. The total reduction in the real value of the benefit would for this reason be somewhat less than 15 per cent., and perhaps I may assume that it would be around 14 per cent. For a married man drawing a sickness benefit, a 14 per cent. cut in the present value of his benefit would mean a reduction of £4.20 per week. If he qualified for invalidity benefit after six months of sickness, a 14 per cent. cut in that benefit would mean a weekly reduction of up to £5.90, despite the fact that if the benefit were taxed he would probably not be liable for income tax in that year.
I have a shrewd suspicion that the Minister will argue that, for invalidity benefit at least, any unfairness will be only temporary because the Government have undertaken to make good the cuts when the benefit is brought into tax; but, as I understand it, that undertaking applies only to invalidity benefit, and it is qualified by the words "subject to the availability of resources". We do not know what improvements in the economy would be needed to convince the Treasury that those resources should be made available; and I do not know whether the noble Baroness the Minister can say what sort of convincing the Treasury would need.
If I may speak to Amendment No. 17, I can do so very briefly by saying that the case for the second of these amendments, which is to leave out paragraphs (b) and (c), is particularly strong. The Government hope to bring the benefits into tax as soon after April 1982 as possible. For some of the benefits, the intention seems to be that taxation would commence in April 1982. What justification can there be, then, for making a further 5 per cent. cut in the benefits in November 1982, after they have been brought into tax? This is how I see it.
At the very least we are entitled to, I was going to say, demand an absolute assurance that no such thing as that will in fact happen. But the proper course for the Government to take, I submit, would be for them to withdraw paragraphs (b) and (c) by accepting this amendment. If in 1982 they are still in office and wish to make further reductions in the living standards of the sick and the unemployed, there is nothing to prevent them coming forward then with new legislation; but I feel that the Government should pay regard to what I have said, not only in respect of the first amendment but particularly in respect of the second one because, as I say, my understanding is that there will be a 5 per cent. cut in the benefits in November 1982, after they have been brought into tax. Perhaps the noble Baroness the Minister can say something about that. I beg to move.
6.54 p.m.
Baroness YOUNG: Under Clause 1(4) the limited up-rating of short-term benefits, invalidity pension and their adult dependency increases may be

909
extended by Affirmative Order to either or both of the 1981 and the 1982 up-ratings. The effect of Amendment No. 16, which the noble Lord, Lord Wells-Pestell, has just moved, would be to remove the whole of this power, while the effect of Amendment No. 17 would be to allow a limited up-rating to take place in 1981, but not in 1982.
Before going into the detailed arguments about this matter, the noble Lord asked me quite specifically whether I could say anything further about the proposals when invalidity pension is brought into tax. I must tell him now that I cannot go any further than the statements that I have made, and repeated, not only at Second Reading but in other debates in the course of the afternoon. However, I should like to say at once that I understand the concern expressed by noble Lords about the effect of repeating the 5 per cent. abatement in 1981 and/or in 1982.
I should make it clear that a number of organisations representing the people affected by this Bill have written short papers on the effect of Clause 1, and I have no doubt at all that many noble Lords will have seen some or all of these papers. Some of these documents include notes on the effect that repeated abatements would indeed have on the benefits concerned, and I should therefore like to make two points about these notes which I hope will be of some reassurance to noble Lords.
First, in order to make statements about the level of benefits in 1981 or in 1982 one has to make certain assumptions, one assumption—an important one—being about the future level of inflation. Any figure given on the future value of a particular benefit can therefore be only a hypothetical figure. Secondly—and I think this is most important—all the notes assume that the Government will limit the up-ratings in 1981 and 1982. But I should like to make it quite clear that the Government have taken no decisions upon whether the abatement will be repeated in 1981 or in 1982. They will consider the whole question in the light of the circumstances at the time. Social and economic considerations are very closely linked in this area; both will be very much in the mind of the Government
910
when the decision comes to be made. I hope I have said enough to indicate that decisions of this kind were not lightly taken this year, and any decision in the future on what would in effect be a cumulative measure would have to be taken with at least as much care as this one has had over the last weeks.
The 5 per cent. abatement in 1980 is an important part of the Government's overall strategy to achieve savings in public expenditure. It is essential that the Government have the powers to put to Parliament through an Affirmative Order proposals for a future abatement, should the necessity arise. The amendments would remove that power, and I cannot advise noble Lords to accept this amendment. However, I will repeat the assurance that the points your Lordships have made will be very much in our mind, and that the seriousness of the issues, like the seriousness of our national difficulties, is not going to be minimised by Ministers when they take the decisions next year.
Lord WELLS-PESTELL: I should like to consider what the noble Baroness the Minister has said. Although she has made only a brief statement, it seemed to be to the point, and I should like to read Hansard tomorrow and reserve the right to come back, should it be necessary, at Report stage. Subject to the permission of your Lordships, I should like to withdraw Amendment No. 16.
Amendment, by leave, withdrawn.
Baroness YOUNG: I think that perhaps this would be a convenient moment to break this Committee stage for the dinner hour. I therefore beg to move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

GAS BILL
7 p.m.
The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie): My Lords, I beg to move that this Bill be now read a second time. This is a very short Bill. Its provisions, although limited, are never-

911
theless very important for the promotion and efficient use of this vital energy resource. There can be no doubt about the important part that natural gas now plays in the nation's economy. During the past 10 years, the consumption of gas in Great Britain has more than trebled and natural gas, or North Sea gas, although there are sources of natural gas in the Irish Sea, now accounts for 20 per cent. of our total primary energy consumption. Substantial developments already planned will enable gas to play an increasingly important role in our future energy scene. The British Gas Corporation are, however, faced with short-term supply difficulties; and it is to deal with these that the Government have introduced this Bill.
During the past year, as a result of the oil price increases and uncertainties over oil supplies, the corporation have been faced with a tremendous surge in the demand for gas in all the market sectors—industrial, commercial and domestic. They had, of course, already planned a programme to expand supplies over the next few years to cater for the predicted increase in consumption. However, the current unprecedented demand considerably exceeds those expansion plans and the corporation could not meet it without seriously putting at risk supplies to their existing customers during a time of peak winter demand.
I should like to stress that this is a question not of overall shortage of gas but of not having sufficient distribution and storage capacity to meet the potential demand in full during a severe winter. It would be easy enough for British Gas to take on extra customers during the summer, when demand for heating purposes is low, but what would happen during the winter when all their customers were demanding peak supplies? Failure to meet such demand could necessitate cutting off whole areas or industries at short notice. Apart from the obvious disruption for customers this would raise serious safety problems.
The British Gas Corporation have already announced plans to advance a number of capital investment projects in order to increase supplies, with particular emphasis on supplies at peak periods. They have recently acquired the partially-
912
depleted Rough gas field in the Southern Basin for use as a seasonal store and they are constructing salt cavities to provide further storage. They are advancing the construction of the fourth onshore pipeline from St. Fergus in Scotland so as to relieve bottlenecks in the supply system bringing gas from the Northern North Sea southwards. And they are also planning to obtain supplies from new sources both in the Southern Basin and their own Morecambe field in Morecambe Bay. As your Lordships will appreciate, such projects cannot be brought to fruition overnight. British Gas are therefore at present, except in the most exceptional circumstances, having to limit new connections to those premises which they have a statutory obligation to supply; that is to say, premises within 25 yards of an existing gas main, subject to the maximum statutory entitlement of 25,000 therms a year. These figures are often rather confusing; 25,000 therms would, roughly, be what would be used by a council estate of, say, 50 average-sized houses, or a medium-sized light factory working at fairly high capacity.
Although Section 13 of the Energy Act 1976 limited the entitlement of new customers to 25,000 therms a year, it provided that the corporation must continue to supply premises which were receiving more than this amount before the Act came into force with the maximum annual amount they received before that date. This obligation applies even where the premises are now in different ownership or where the premises are not currently consuming gas at all. The fact that such supplies may be taken on tariff means that the corporation are not able to control the offtake of very considerable volumes of gas. The corporation's present practice is to negotiate special agreements—that is, contracts where the price is negotiated—in cases where customers require more than 100,000 therms a year. These agreements incorporate conditions as to the rate of offtake, thus giving the corporation control over peak demand. However, because of the restriction in Section 25(6), of the Gas Act 1972, they are only able to enter into such agreements where the tariffs in force are not appropriate.
This Bill therefore relieves the British Gas Corporation of their obligation to supply anyone with more than 25,000

913
therms a year, and gives the corporation powers which will enable them to enter into special agreements for supplies above that level. Thirdly, as a consequence of those provisions, the Bill frees the corporation from certain constraints on the fixing of tariffs for supplies above the maximum statutory entitlement. If I can give a simple analogy, with the usual warning that analogies pressed too far can be misleading, your Lordships may be aware that when you take a London taxi—if you can still afford to do so—up to six miles will be on the regular clock but over six miles you may have to negotiate the price with the taxi driver himself. A roughly analogous position comes into force with this Bill. The effect of these provisions is that any customers requiring more than 25,000 therms a year will have to rely on contractual arrangements for their gas supplies rather than on a statutory entitlement. I shall have a little more to say about this in a moment.
My Lords, I should now like to turn to the detailed provisions of the Bill. The three substantive proposals, which amend and modify the application of various provisions in the Gas Act 1972, are contained in Clause 1. As I have already explained, Clause 1 (1) amends the British Gas Corporation's statutory obligation to supply, as set out in paragraph 2 of Schedule 4 to the Gas Act, so that they shall not be obliged to supply any premises with more than 25,000 therms a year. Section 13 of the Energy Act 1976 relieved the corporation of their obligation to supply more than this amount in so far as new customers were concerned, but premises which had been receiving supplies above that level prior to November 1976 were given the right to continued supplies at that higher level.
The Energy Act 1976, therefore, created, in effect, a preferred class of customer who enjoyed an indefinite right to large volumes of gas in preference to potential new customers, some of whom might have a more pressing need for supplies. It is certainly the case that there are new developing industries which need to use gas because of their special industrial processes and which would be prepared to pay a price reflecting their need. Furthermore, even though their pre-1976 supplies might have been taken under an interruptible or firm contract, such preferred customers could exercise the
914
right, if they so chose, to take their continuing supplies on tariff; such supplies, as I have mentioned, are not subject to offtake restrictions. The effect of subsection (1), together with subsection (4), is therefore to revoke the right of pre-1976 customers to gas supplies above 25,000 therms a year.
I should like to make it clear that nothing in the Bill affects the British Gas Corporation's existing contractual obligations. Customers who already receive their gas supplies under contract will continue to receive their supplies under the terms of their contract. Commercial arrangements are, of course, a matter for British Gas, but I should like to take this opportunity of repeating an assurance that was given by my right honourable friend the Secretary of State for Energy in another place. This is that the corporation do not intend to use the powers in this Bill to make reductions in the amounts of gas currently being supplied to industrial and commercial tariff customers receiving over 25,000 therms a year. It has to be recognised, however, that both those tariff customers and customers already receiving their supplies on contract should be prepared to pay the same price that potential new customers would he prepared to pay.
My Lords, perhaps I might turn next to Clause 1(3), since subsection (2) is consequential on its provisions. This is designed to deal with cases where the BGC supplies premises with more than 25,000 therms a year—that is, more than the maximum statutory entitlement under the Bill—and in particular with those customers at present receiving their supplies on tariff.
Under Section 25(6) of the Gas Act 1972 the BGC may only enter into a special agreement where the tariffs in force are not appropriate owing to special circumstances and their current practice, as I said earlier, is to set the tariff/contract dividing line at 100,000 therms a year. It is essential that the corporation should have the power to negotiate special agreements in all cases where a supply above 25,000 therms a year is required, and subsection (3) of Clause 1 enables them to do this irrespective of whether or not the tariffs in force are appropriate. The BGC intend to offer special agreements to all their customers at present receiving tariff supplies of bet-

915
ween 25,000 and 100,000 therms a year, thus bringing such supplies within the scope of contractual restrictions on offtake.
The purpose of Clause 1(2) is to allow the BGC to continue to charge for a supply of gas in excess of 25,000 therms a year at an appropriate published tariff rate during any period when a special agreement is not in force. Section 25, subsection (5) of the Gas Act prohibits the corporation from exercising undue discrimination against any persons, or class of persons, in fixing tariffs. Section 24(1), of the Act lays on the corporation a general duty to avoid undue preference in supply, although subsection (2) of that section excludes special agreements from this provision. These prohibitions will continue to apply to tariffs of up to 25,000 therms a year—that is, over the whole range of the corporation's statutory obligation to supply.
Although the intention is that all supplies over 25,000 therms a year will be governed by special agreement, there will inevitably be circumstances in which some supplies over that limit are taken when there is no special agreement in force. This might happen, for instance, while a contract is being negotiated or where a tariff customer either deliberately or inadvertently consumes more than his statutory 25,000 therms entitlement. In order to prevent the purpose of the Bill from being frustrated, the corporation must be able to set standby tariffs to deal with such cases without being restrained by comparisons with the level of other tariffs. The alternative would be to cut off supplies—a drastic step that they would of course prefer to avoid. Clause 2 make it clear that the Bill, in parallel with the Gas Act 1972, does not extend to Northern Ireland.
My Lords, I hope that I have clearly conveyed the objectives and effect of this Bill. Your Lordships will be aware of the problems facing certain sectors of industry at the present time because of the British Gas Corporation's inability to meet all the demands for gas arising out of the uncertainties over oil supplies. These proposals, by bringing a greater volume of gas supplies within contractual arrangements, will give the BGC greater control over peak demand and will thus enable them to distribute the supplies available in the most effective way pending
916
our undoubted longer-term improvement in supplies to which we can look forward. I commend the Bill to your Lordships and beg to move that it he now read a second time.
Moved, That the Bill be now read 2ª.—(The Earl of Gowrie.)
7.15 p.m.
The Earl of LAUDERDALE: My Lords, to me it is always agreeable—it does not often happen—to have the opportunity of congratulating my Government on doing the right thing. I wish that I could say things of this kind more often. We have already heard in recent months of the critical decision by the Government to move gas prices towards reality so that what is paid by the consumers goes some way towards meeting the replacement costs of a finite resource. Although this is painful to domestic and industrial consumers alike, it is none the less long overdue and welcome on that account.
Here we have a relatively little measure designed to make sure that all industrial consumers are henceforth treated equally in that the Bill puts new and expanding industries on an equal footing with those which are long-standing clients of the British Gas Corporation. This is heading in the right direction. But there is one question that one ought to raise in passing. It has been mentioned in another place, but one gathers that the industrial interests concerned were not wholly satisfied with the replies given.
This is the position of priority assured to domestic consumers under Schedule 2 to the 1972 Act and Section 13 of the 1976 Act. We know that any domestic consumer within 25 yards of a main has been entitled to a fantastic volume of up to 25,000 therms. We want to be quite certain that industry will get at least equality of treatment with that position hitherto enjoyed by the domestic consumers. The matter was raised in another place in Committee, and no doubt will be raised again here. One hopes that when raised again the reply will be satisfactory to the industry.
Looking at this little Bill, one cannot but look also at the vast scale of possibilities that arise as a result of natural gas from the United Kingdom continental

917
shelf. At present, as is widely known, there is a ban on the flaring of gas treated as a waste. If the gas cannot be flared of course that saves the gas meantime but causes a cut-back in oil production. This has been noticed in many quarters.
But now we are looking forward to creation of the gas gathering pipeline that has been widely canvassed so that what are now the waste gases shall be piped and put to good use. When we consider the enormous volume of gas reserves indentified in the Statfjord Field in the Norwegian sector, and further north above the 62nd Parallel also in the Norwegian sector recently discovered, we become aware of the tremendous potential for a relatively new and hitherto untapped energy source to be brought to our service.
The most obvious industrial end-use is the petrochemicals industry once the British Gas Corporation have taken off the methanes for use as domestic or industrial heating gas. There are the ethanes, propanes and butanes, commonly known as liquid petroleum gases (LPGs) which can be taken off and put to use. The availability of these enormous resources just off our coasts, or within tolerable reach of them—a few hundred miles only—means that the British petrochemical industry has a terrific opportunity coming to it in a few years' time.
The availability of cheaper feedstock to hand is something that must whet the appetite of everybody. Because of that, the widely canvassed proposal most recently studied by BGC and Mobil for a gas gathering pipeline is something the industry as whole—indeed the public at large—would like to know a good deal more about. One is aware that a study has been received—and one gathers favourably received—by the Government which was put together by BGC and Mobil proposing a T-shaped pipeline that would run about 400 or 500 miles north-south through the gas-producing zones and have a T-junction to bring it ashore to Scotland. That scheme has been widely canvassed but, on the whole, very little is known about it.
One is aware from the press, if from nowhere else, that a great tussle is going on between the producers, on the one hand, and the likely consumers, on the other, as to who, if either of them, shall
918
dominate this pipe; whether either will be allowed to dominate it; and what measures the Government will take to make sure that neither side does dominate it; how the institutional investors are to be brought in and whether they are willing to be brought in. All these questions await answer from an anxious and interested industry, if not also from the public at large. Therefore, this is an opportunity to ask Her Majesty's Government, first, whether they are going to give the go-ahead to this project and, secondly, what, in their view, is a reasonable target date for completion.
I think everyone wants to know whether and, if so, when, the BGC/Mobil study will be published. Will it be published in its entirety or, as is widely feared, will it have been thoroughly edited beforehand? Will the route proposed in that study be the final route? After all, there are at least two pipelines leading to the United Kingdom from the gas fields of the Northern North Sea, and it is certain that one of them will no longer be working to capacity after about 1985. So there may be a case for considering the incorporation of existing pipelines into the scheme when it finally goes ahead.
We are led to believe that BP have put forward proposals of a more comprehensive kind than those set out, so it is said, in the BGC/Mobil study. Will there be ample time for discussion between the Government and interested producers and users to discuss the route of the line before final decisions are taken? All these are questions that clamour for an answer. Perhaps the most important question of all is just how the Government intend to conduct consultations with some 30 or 40 interested parties, how quickly these can be speeded up and, equally, how thorough can they be? These questions are asked having regard to the British national interest that this scheme should be pushed ahead as fast as possible; speed is necessary if only to provide a structure on the bed of the North Sea to which the sources of supply in the Norwegian sector may also adhere (if that is a convenient term) should they prefer to do so rather than to take a line across the Norwegian Trench to Germany and the Continent. These are all questions crying out for an answer. Time is not necessarily on our side but, equally, the danger of a wrong

919
decision on the route is something which I trust the Government have very seriously in mind.
To return to the essence of this Bill, here is a Bill which seeks to bring more common sense into the consumption of a major national resource. It is one which has been squandered due to non-market pricing. For that reason alone, quite apart from the object of raising the questions I have raised, I give a warm welcome to my noble friend and his Bill.
7.24 p.m.
Lord WYNNE-JONES: My Lords, the noble Earl, in introducing this Bill, made it fairly clear that the Bill is the consequence of bad housekeeping. I am not blaming the present Government for this at all, because it is something for which all Governments must take the blame, and in particular I think the British Gas Corporation must take the blame, because we are told that the storage facilities and the whole method of dealing with the distribution of gas may not be adequate to cope with the demand from industry. The reason is that over the years, whatever the British Gas Corporation may say, the priority has been to take the cheap and easy way of getting rid of gas: that is, distributing it through the ordinary distribution system to the domestic consumer.
I hope I may be forgiven for saying this, because I called attention to that fact in 1967 when we had a debate in your Lordships' House on fuel and energy, which I introduced In my introduction to that debate, I called attention to the problem of natural gas because at that time we were only just beginning to benefit from natural gas and I had taken a little trouble to inquire from the chemical industry, with which I was in one way or another associated, as to what their demands would be for natural gas. They told me at the time that in their view the chemical industry could consume 860 million cubic feet of gas per day, which was more than half the total amount of gas being brought ashore from the North Sea. In my own remarks on that occasion (13th April 1967) I said this at column 1425:
"Here is a balance which must be struck between the possible use of natural gas industrially and the possible use of natural gas as a general domestic fuel".
920
Such a balance has bever been struck except by relying on the accident of the market. We are being told today—in fact the noble Earl, Lord Lauderdale, has just told us—that he was glad the Government were coming round to a rational point of view. I see nothing rational about saying that you are going to let the market decide. That is not "rational"; it may be expedient and it may be a useful way of doing things, but I submit that to call it "rational" is a misuse of terms which I am surprised to find a Scotsman indulging in.
It is important for us to realise that if we are going to have a policy in regard to energy we have to look at these matters and consider them carefully. We have no policy for energy; Europe has no policy for energy; the world has no policy for energy. Why? Because it is generally accepted that we should rely upon the market to decide. If you have the market deciding, it is obviously the same thing as saying you do not have a policy. You just leave it. You do not have to do anything; you do not need to think about it. It is no use worrying about whether the gas is better used this way or that way. That is irrelevant, because the market will decide. That mysterious, blind goddess will decide for us. That may be acceptable, but do not let us imagine that it is a policy. It is the negation of a policy. I would submit that this trivial Bill is before us because we have not had a policy and because we have not tried to understand how gas should be used.
I do not blame the Government for producing the Bill; I do not blame the British Gas Corporation for asking for it, because they are in a jam. The Bill is the result of being in an awkward position, and, being in that position, one says, "Let us out of this position by saying that we will not have to supply gas to a certain number of people." Of course, that is an immediate negation of the market on this issue, but it is no doubt regarded as a temporary move.
What I should like to ask of the Government is a very simple question. When will they cease to produce trivia, and when will they come before the country and say "We have a policy"? The answer is that they will not, but, nevertheless, I ask them when they will do this, because it is of importance to the country. It is

921
recognised by everyone who has looked at the energy situation in this country, and in the world, that the next 20 years will be crucial years. They will be years when grave decisions have to be reached.
If we say that we are going to leave everything to be decided by the market, all right. That is a method that can be adopted. But it is not a policy. It is the negation of a policy, and I predict that it will end not in disaster—things rarely do end in complete disaster—but in confusion and a lot of hardship in this country and elsewhere. Therefore, I implore the Government to begin to take seriously this problem of energy. I do not oppose this Bill. From this side, we will certainly support the Bill, because it is essential in the circumstances, but it is the product of bad housekeeping.
7.33 p.m.
The Earl of GOWRIE: My Lords, my noble friend Lord Lauderdale praised us for bringing forward this Bill and the noble Lord, Lord Wynne-Jones, did not blame us for bringing it forward. That is, I suppose, some modified comfort to me, as I am quite used in this House to being attacked on energy issues by the noble Lord opposite and by my noble friend from behind me. But this time both think that we have, perhaps, got it about right.
My noble friend asked me about the gas gathering pipeline study. My right honourable friend the Energy Secretary will be making an announcement on this very shortly, and I am sure my noble friend will understand that I cannot pre-empt that Statement. But if, as he hopes, he makes it, I will, of course—for the usual channels require me to—repeat it in this House. I understand that the British Gas Corporation and Mobil, who carried out the study, established contact with many licensees during the course of the study. I would say to my noble friend that a licensee who wishes to express views in the light of the published report will, of course, be free to speak to any organisation which may be set up to carry forward the design and construction of the pipeline. The BGC/Mobil study will be published at the time of my right honourable friend's Statement.
My noble friend asked me what a reasonable target date might be for the
922
gas gathering pipeline. Our target date is 1984–85. Anything much later will increase the risk of substantial flaring, and, like my noble friend, I am dead against continued substantial flaring, as he knows. My noble friend asked me whether domestic customers will continue to receive preferential treatment. Neither the present legislation nor the proposals in the Bill give domestic customers preferential treatment. The 25-yard limit applies to all premises, whether domestic, commercial or industrial. This may, in practice, tend to favour domestic customers, since they are more likely to be not within 25 yards of a main and to consume more than 25,000 therms. But I do not accept this as an argument, either for altering the 25-yard limit or for restricting the obligation to supply so far as domestic customers are concerned.
In any event, British Gas are planning to increase their supplies to industry by over 1 billion therms over the next five years. By removing the statutory right of pre-1976 customers of British Gas, regardless of their particular circumstances, to large volumes of gas, the Bill puts both old and potential new customers on an equal footing. This is the point of the Bill which my noble friend recognised, and I am grateful to him for that.
I am also glad that he drew attention to the exciting scale of our resources in natural gas. The more one looks at the energy potential of this country, whether in oil, coal, gas or our present or potential nuclear capacity, the more optimistic one becomes about our chances in an energy-hungry world, always assuming that we conserve wisely and do not blow our inheritance; or perhaps I should say here do not flare our inheritance. That is why our policy is to sell gas to our large industrial and commercial customers at prices broadly related to those of competing oil products.
I would just say to the noble Lord, Lord Wynne-Jones, that that is not trivial. That certainly is a policy. It is a policy of having to face market issues, rather than leaving everything to be decided by them; because if you left everything to be decided by them you would have to take the blows of whatever buffets an uncertain energy supply in the world outside this country might give you. So I cannot agree that we do not have a

923
policy there. I, of course, believe that the price mechanism is in the longer term the best overall method of achieving a balance between supply and demand, and we feel that this Bill is necessary to remove an impediment to British Gas implementing this policy.
Finally, the noble Lord, Lord Wynne-Jones, was a little hasty in blaming the British Gas Corporation. I sometimes have criticisms of the British Gas Corporation. I do not stand at this Box simply to go in to bat for it. Nevertheless, the low prices, which were not fundamentally the Gas Corporation's fault, inevitably meant an enormous surge in demand, and that surge in demand created imbalances and difficulties for it on the supply side which it could not easily correct, and which this Bill is therefore, logically, in terms of the rest of our energy pricing policy, designed to correct.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.
Lord LYELL: My Lords, I beg to move that the House do adjourn during pleasure until eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.37 till 8 p.m.]

SOCIAL SECURITY (NO. 2) BILL
House again in Committee on Clause 1.
[Amendment No. 17 not moved.]
Clause 1 agreed to.
Clause 2 [Abolition of compulsory up-rating of amount certain pensioners may earn without abating pensions]:
Lord REIGATE Lord REIGATE moved Amendment No. 18:
Page 3, line 21, at end insert ("but only until the end of the tax year 1980–81").
The noble Lord said: I beg leave to move the amendment standing in my name on the Marshalled List. It is in the nature of a probing amendment. During the Second Reading debate, in which I did not speak, I noticed that there were one or two references to the earnings
924
rule, some of them from this side of the House, which I felt did not augur too well for the future of the abolition of the earnings rule. This is a matter to which I have devoted my attention for more years than I care to remember since I first introduced a Private Member's Bill on the subject in 1955.
After the last debate which took place in your Lordships' House about a year ago, I had cherished the hope that somehow or another within my lifetime the earnings rule would be abolished. It was therefore with some dismay that I realised that the relaxation has temporarily been suspended, which does not forebode very well for the ultimate abolition of the earnings rule. In particular, I note that my noble friend Lord Boyd-Carpenter said at one stage that he thought the earnings rule would still be here at the end of this Parliament. I shall be very disappointed if that is so.
The noble Lord, Lord Wells-Pestell, knows of my interest in the matter. I have therefore put down this amendment simply and solely to have some reassurance from Her Majesty's Government that they remain as dedicated to the abolition of the earnings rule as I would wish them to be, and in the hope that the Government will give some indication as to when they hope the relaxation can be resumed and when they look forward to the total, ultimate and final abolition of the earnings rule.
Lord CULLEN of ASHBOURNE: As my noble friend has made clear, the intention of this amendment is to limit the freezing of the earnings limit for retirement pensioners to the 1980 and 1981 up-ratings. Its effect would be to freeze the earnings limit until November 1982. This is because the up-rating review is carried out at the end of a tax year and determines the increase in benefits in the November of the following tax year. This year's up-rating follows a review in the tax year 1979–80. If there were no review of the limit until after the tax year 1980–81, the next review would be in 1981–82 and the limit would not be unfrozen until November 1982.
But as to the intention of the amendment, may I begin by making it clear that we would not be introducing Clause 2, to freeze the retirement pensioners' earnings limit at its present level of £52 a week,

925
unless in our opinion it was absolutely necessary. I do not think that I need to go into the recent history of the earnings rule in any detail, but it will doubtless be remembered that it was a Conservative initiative that brought the earnings limit to its present high level. It is necessary to freeze the limit simply because of the overriding need to restrain public spending and at the same time to protect the most vulnerable. But I must emphasise that we have no wish to maintain this restriction on the earnings limit a moment longer than it is necessary to do so. I understand entirely the concern for older people to have the choice of working if they can find suitable employment, and the feeling that the earnings rule is a discrimination. But the fact is that women between 60 and 65 and men between 65 and 70 who can do a full-time job are not among the most vulnerable; and it is better that savings should be made here than that they should have to be made in respect of those who are less well placed.
We would hope, as my noble friend Lady Young said on Second Reading, that it will be possible to lift this restriction from November 1981. But we would need to be on very sure ground before we wanted to see an outer limit of 1981 or 1982 written into the Bill. What will be possible next year or the following year is something that can be decided only in the light of circumstances at the time. A lot of things have had to yield place to the need to contain public expenditure and when the time comes to entertain some relaxation in the restrictions on public spending, priorities will have to be decided. We cannot decide them now, and so we cannot commit ourselves at this stage to a timetable for raising the earnings limit. Our ultimate aim, of course, is to do away with the earnings rule for retirement pensioners altogether. We will do this just as soon as we can, but it is not possible to give a timetable at this stage.
Lord REIGATE: I suppose that I must, in all courtesy, say to my noble friend that I am most grateful for his reply, which was not unexpected. I am a little surprised that there was not a single voice from the Opposition Benches, Liberal or Labour, in view of the interest they have always displayed in this matter in the past. I accept the validity of my noble friend's arguments, although I regret that he cannot
926
give me the answer that I really was asking for; namely, confirmation that the Government will be able to abolish the earnings rule, somehow or another, within the lifetime of this Parliament.
I noticed that my noble friend, if I may use a vernacular phrase, trotted out the old argument about priorities. This is not just a question of priorities. Within the sphere of social services, obviously there are always priorities which can be advanced with a better claim than this particular matter of the relaxation of the earnings rule. However, may I ask my noble friend who is speaking for the Government to realise that this is not just a question of social need or different priorities. It is a question of the total reform of the social security of this country, which has so far been met by general relaxation.
What we really are fighting for is a replacement of the retirement pension with the old-age pension, as of right. That must be done, regardless of other priorities which may sometimes obtrude themselves. I am a little disappointed in my noble friend's reply for that reason and would ask him to re-read the debate at Second Reading and notice that the only critical voice from these Benches on the earnings rule was that of my noble friend Lord Boyd-Carpenter. And if he will go back to the debate which took place on an earlier occasion, my noble friend will notice that three Conservatives who took part in it and who voted against their Party were all former Ministers of the Ministry of Pensions and National Insurance: my noble friends Lord Boyd-Carpenter, Lord Inglewood and Lord Drumalbyn.
I apologise for mentioning my noble friends in their absence but the fact is that all of them are former Ministers in that department and are what might be described as "old boys of the John Adam Street school" who have always stood faithfully in support of the earnings rule. I do not, and many people think as I do. Therefore, I hope that in the lifetime of this Parliament, under a Conservative Government, we shall see the earnings rule totally abolished.
Lord BANKS: Since the noble Lord has referred to the absence of a voice from the Liberal Benches, may I be permitted to remind him of the fact that just a little

927
over a month ago we had a debate on this in this House on an amendment to the No. 1 Bill, which I moved in the identical terms in which it had been moved by the noble Baroness, Lady Young, and the noble Lord, Lord Cullen of Ashbourne, just about a year prior to that date. Certainly we on these Benches have not in any way relaxed our very strong and longstanding opposition to the earnings rule.
Perhaps I may make one further comment. I could have understood it a little better if the noble Lord, Lord Cullen, had said that in view of the fact that there was a serious economic situation it had been decided that it was not possible to proceed at this stage to the abolition of the earnings rule but that the limit would be up-rated, as it is at the present time, but to restrict it to the level of £52 regardless of what is happening to the index of prices is in fact going in the opposite direction to that to which the Government are pledged, as I am sure the noble Lord would agree.
On Question, Amendment negatived.
8.12 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved amendment No. 19:
Page 3, line 21, at end insert ("with effect from the tax year 1982–1983").
The noble Lord said: The effect of Clause 2(1) is to abolish the requirement to raise the earnings limit for retirement pensioners annually in line with average earnings. The amendment would postpone the operation of Clause 2(1) until November 1983; that is the up-rating based on a review in the tax year 1982–83.
I do not think it is necessary for me to remind your Lordships that in 1979 the Conservative election manifesto said:
"It is wrong to discourage people who wish to work after retirement age and we will phase out the earnings rule during the next Parliament".
In his post-Budget statement on 27th March, however, the Secretary of State said:
"At a time when other groups are having to make sacrifices we believe that it is right to hold the earnings limit at its present level of £52 a week for the time being".—[Official Report, Commons, 27/3/80; col. 1665].
Clause 2(1) would enable this to be done.
When this question was debated on an amendment to the No. 1 Bill, the noble Baroness the Minister reaffirmed the
928
Government's commitment to phasing out the earnings rule in these words:
"As circumstances allow"
but added:
"Ways of achieving this aim and the costs involved are currently being studied and the Government will announce the outcome of this consideration in due course".
It is clear that "as circumstances allow" does not mean in this Parliament, and if my memory serves me correctly—and I am really trusting to memory because I do not have a note of it—I then advised her to see her right honourable friend the Prime Minister and find out from her what the Government proposed to do. In fact, the Secretary of State said during the Committee stage of this Bill in another place:
"I am not in a position today to adhere to the commitment that we can do it all in this Parliament"—
and he hinted that the earnings limit might be frozen, not just for one year, but for two. In saying that, I am relying on the Official Report of the Standing Committee 'B' on 7th May 1980 at column 757.
That would mean that by November 1982 the amount a pensioner can earn without any loss of pension would probably be about half of what it was last November, talking in real terms. It would also mean that the cost of abolishing the earnings rule would be far more than it would be at present, thus, as I see it, making it more difficult for the Government to find the resources needed to do so. This amendment would prevent that from happening by ensuring that the earnings limit continues to rise, thus enabling the Government to fulfil their manifesto commitment. I beg to move.
Lord CULLEN of ASHBOURNE: The noble Lord, Lord Banks, referred to the fact that I had taken part in a debate on this subject a year or two ago. I am just as keen as my noble friend Lord Reigate that we should get rid of this earnings rule as quickly as we possibly can. I think the very fact that we are having to slow down in getting rid of the earnings rule and even going further in not up-rating the earnings limit at this time, must make it clear to your Lordships that we consider that the present economic situation in the country is very bad and that is why we are having to eat our words on our manifesto commitment. I feel

929
that in answering the last amendment I have given the Government's views fairly straight and I feel that we cannot accept this amendment.
On Question, amendment negatived.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved amendment No. 20:
Page 3, line 22, leave out subsection (2).
The noble Lord said: Clause (2) would enable the Government to freeze the pensioners' earnings limit this November despite the fact that the November up-rating will be based on a review carried out before the Bill becomes law and this amendment would prevent it. Under the law as it stands, with earnings rising at about 20 per cent., the earnings limit would have to be raised in November from £52 to at least £62 a week. In other words, freezing the earnings limit this year will mean a loss of up to £10 a week for pensioners who continue earning during the five years between the ages of 65 and 70.
In relation to the basic pension rate, which will be £27½15 for a single person from this November, that is a very substantial cut indeed. Relatively few pensioners will lose the full £10; only those whose net earnings are £66 a week or more. But large numbers will suffer losses amounting to more than the five per cent. cut imposed on those receiving short-term benefits and with even less justification since both the retirement pension and the pensioner's earnings are already subject to income tax. We feel that this is a perfectly reasonable amendment and that it is one that the Government should accept, bearing in mind that it will mean a considerable loss, of up to £10 a week for pensioners who continue to work between the ages of 65 and 70. I beg to move.
Lord CULLEN of ASHBOURNE: The effect of this amendment would be to delay the freezing of the retirement pensioners' earnings limit until the 1981 up-rating. The earnings limit is being frozen at its current level of £52 a week as a necessary contribution to the measures to hold back public expenditure, and the need for these measures is immediate. It is important, therefore, that the freeze should operate this year and should not be put off; otherwise the effect of its contribution is lost. If we did not feel as strongly as we do about this we should not be putting these matters forward this time.
As the financial memorandum implies, it is not possible precisely to estimate the savings. That will depend on the actual behaviour of pensioners and other people over pension age in employment and on the movement in earnings, but will be of the order of £1 million for every 1 per cent. rise in earnings. For example, if earnings rose at the predicted rate for prices over the year November to November, the savings would be around £16½million in a full year.
Savings of this order are not enormous but they are certainly significant, and they fall on a group which by definition has got substantial earnings. We cannot accept that savings of this order should be forgone, and, despite the persuasive way in which the noble Lord moved his amendment, I feel we really cannot accept it.
8.22 p.m.
On Question, Whether the said amendment (No. 20) shall be agreed to?
Their Lordships divided: Contents, 39; Not-Contents, 65.

CONTENTS

Banks, L.

Houghton of Sowerby, L.

Stewart of Fulham, L.

Beswick, L.

Janner, L.

Stone, L.

Birk, B.

Kilmarnock, L.

Taylor of Mansfield, L.

Blease, L. [Teller.]

Lee of Newton, L.

Underhill, L.

Boston of Faversham, L.

Llewelyn-Davies of Hastoe, B.

Wallace of Coslany, L.

Brooks of Tremorfa, L.

Lovell-Davis, L.

Wedderburn of Charlton, L

Cledwyn of Penrhos, L.

Maelor, L.

Wells-Pestell, L.

David, B.

Peart, L.

Whaddon, L.

Davies of Leek, L.

Ponsonby of Shulbrede, L.[Teller.]

White, B.

Elwyn-Jones, L.

Wigoder, L.

Goronwy-Roberts, L.

Ritchie-Calder, L.

Wilson of Radcliffe, L.

Gregson L.

Ross of Marnock, L.

Wynne-Jones, L.

Hale, L.

Seear, B.

Hatch of Lusby, L.

Stewart of Alvechurch, B.

NOT-CONTENTS

Airey of Abingdon, B.

Gowrie, E.

Orkney, E.

Bellwin, L.

Gridley, L.

Rawlinson of Ewell, L.

Belstead, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Renton, L.

Caithness, E.

Rochdale, V.

Cockfield, L.

Hanworth, V.

Romney, E.

Cottesloe, L.

Hatherton, L.

St. Aldwyn, E.

Craigmyle, L.

Hives, L.

Sandys, L. [Teller.]

Cullen of Ashbourne, L.

Holderness, L.

Selkirk, E.

Denham, L. [Teller.]

Hornsby-Smith, B.

Shannon, E.

Drumalbyn, L.

Hylton-Foster, B.

Sharpies, B.

Dundee, E.

Killearn, L.

Soames, L. (L. President.)

Ellenborough, L.

Kimberley, E.

Stamp, L.

Elliot of Harwood, B.

Luke, L.

Strathclyde, L.

Elton, L.

Lyell, L.

Strathcona and Mount Royal, L.

Falmouth, V.

Mackay of Clashfern, L.

Sudeley, L.

Ferrers, E.

Macleod of Borve, B.

Teviot, L.

Forester, L.

Mancrocft, L.

Thorneycroft, L.

Fortescue, E.

Margadale, L.

Trenchard, V.

Gainford, L.

Marley, L.

Trumpington, B.

Gibson-Watt, L.

Mowbray and Stourton, L.

Vivian, L.

Glenkinglas, L.

Murton of Lindisfarne, L.

Ward of Witley, V.

Godber of Willington, L.

Nugent of Guildford, L.

Young, B.

Moved accordingly and, on Question, Motion agreed to.

Clause 2 agreed to.
Clause 3 [Alteration of period of interruption of employment and of periods relating to invalidity allowance and unemployability supplement]:
8.29 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 21:
Page 3, line 36, leave out ("unemployment") and insert ("interruption of employment").
The noble Lord said; I beg to move the amendment standing in my name. Under Section 14 of the Social Security Act 1975 unemployment or sickness benefit is payable, apart from the three waiting days, for any day of unemployment or incapacity for work which forms part of a period of interruption of employment. Section 17(1) of the same Act defines a period of interruption of employment as
"any two days of interruption of employment, whether consecutive or not, within a period of six consecutive days".
Thus for both sickness and unemployment, if linked with a previous spell, it is necessary to be off work for only two days within a week, which need not be consecutive, in order to qualify for benefit.
The effect of Clause 3(1) of the Bill would be to retain the existing rule for unemployment benefit but to limit entitlement to sickness benefit to periods of four or more consecutive days of incapacity. The amendment would have the effect of
932
restoring the existing rule for sickness benefit. The proposed change would not only remove entitlement to sickness benefit for very short spells of incapacity; it would also affect, for example, a person who was off sick for two or three days, who returned to work for a day and then had to take a further period off. The first two or three days would not only not qualify for benefit; they would not even count towards the three waiting days. Thus a person could be off sick on six out of seven consecutive working days without qualifying for benefit.
This proposal is closely related to the Government's proposals to transfer responsibility for payment during the first eight weeks of sickness from the national insurance scheme to employers. The suggestion in the Green Paper published in April is that employers should not have to provide sick pay for spells of three days or less in any circumstances, not even where two spells would normally be counted as one under the linking rules. The Government are clearly anxious that national insurance sickness benefit should not operate more generously than employers' sick-pay schemes; but the right way to ensure that is to make employers bring their arrangements into line with the national insurance scheme, not to deprive contributors of their existing rights under the national insurance scheme.
During the Committee stage of the Bill in another place, the Under-Secretary of State, Mrs. Chalker, suggested that many of those claimants regarding short spells of sickness were not concerned about the

933
benefit but claimed as a matter of routine because the doctor had given them a certificate. One does not know how she came to those conclusions; one does not know on what information and fact, if any, she based them. It is true that many employees already get full pay from their employers for short spells of sickness, though this is far more common, if I may say so, among white-collar workers than among manual workers. However, for those who do not, the loss of half a week's wages can be a very serious matter, especially when we are talking, as by definition we are, about people who experience repeated spells of sickness.
We feel that what the Government want to do does militate against working people who find themselves in this kind of situation. We do not think it is fair. We do not feel that by the closest investigation or examination it could be regarded as fair, and therefore we ask the Committee to accept this amendment. I beg to move.
Lord CULLEN of ASHBOURNE: Clause 3 makes two changes. One of these changes is that short spells of incapacity lasting three days or less will no longer count for benefit purposes. Payments of benefit will not be made for these periods nor will they link with other periods of incapacity or unemployment. This change will only be made for periods of incapacity. Days of unemployment will still count for benefit purposes if there are two days of unemployment within a period of six consecutive days.
The amendment seeks to reverse this change and to ensure that the present rules continue to apply. These rules are that, for both unemployment and incapacity, two days in any six consecutive days count for benefit purposes. The Government are unable to agree that these rules should remain unchanged. The proposed change will provide benefit savings of over £2 million a year. In addition, it will produce useful administrative savings as the system will no longer have to deal with the half-million or so claims that are made each year for these short periods. The change thus helps to simplify the scheme a little and this should, I think, be welcomed. A further point is that the change will be of
934
assistance to doctors as well as to the social security system. This is because doctors will no longer have to provide statements so that people can claim benefit for brief periods of incapacity.
Most people who are sick for three days or less do not qualify for benefit under the present rules. This is because the first three days of a period of interruption of employment are what is known as waiting days, for which no benefit is payable. The change will therefore have very little adverse effect on individual claimants. Those who are affected will generally be people who have earnings for that week for the days that they do work.
It may be asked why the same change is not being made for unemployment benefit. In part, the answer lies in the different character of the contingency and in the different administrative implications. But there is also the important point that where short-term working can readily and satisfactorily be adopted as an alternative to longer-term lay-offs, and where someone who is unemployed can keep his hand in with odd days of work, it is valuable to have benefit arrangements which lend themselves to this, as the two-in-six rule does. We are satisfied that the proposal in Clause 3 is a desirable change and I therefore ask noble Lords to reject the amendment.
Lord UNDERHILL: I am surprised that the Minister said that these were desirable changes. I thought the argument had been put forward that these were undesirable changes which were necessary—not that they were desirable changes.
What concerns us is that most of the organisations which deal with the disabled are extremely worried about this clause. I am wondering whether the Government have really kept in mind what might be one of the possible effects—and this is certainly a matter about which the organisations which deal with the disabled are very concerned. I am referring to the possibility that persons who would endeavour to return to work may not do so because of this shorter period and therefore the benefits which will be paid out must be offset against any savings. At the end of the day the Government may find that they have not saved any money.

935
I am surprised that the Government have placed so much emphasis on the administrative advantages and the advantages to doctors. Surely we must consider in the first instance the position of those who are affected—those who suffer long-term sickness and those who are disabled.
Lord CULLEN of ASHBOURNE: It is very difficult to know how many people might behave in the way in which the noble Lord has suggested; it is really almost speculation. We believe that very few people will behave like that and that the help which we are giving to the doctors and the small amount of money that will be saved will be advantageous.
Lord WELLS-PESTELL: I wonder whether we could come to some agreement that all that the Government are doing by the Bill is trying to save money by hook or by crook or by fair means or foul? I am getting a little tired because every reply that has been given so far has been, "Well, of course, we are going to save that and we are going to save something else." We are concerned about the individual who is unemployed or sick. We are not in the business of saving the doctors or saving administration. That is not what it is all about: it is about unemployment and sickness. If the doctors have to be protected in some way there are other means of doing it. If we are overburdened with administration—and there may well be a case for thinking that we are—then we shall deal with that in some other way.
I said earlier that it means that a person can be off sick for six out of seven consecutive working days without qualifying for benefit. It is quite preposterous that somebody can be away sick for six out of seven consecutive working days and does not qualify for benefit. What will happen to him? As regards the unemployed, are we afraid that if we make it too easy then those in casual work will not look for permanent work? Are we afraid that people will go down to their doctor and by some means or other cajole him into giving a certificate? It really does not seem fair. All that we are concerned about on this side of the Committee is not to encourage people to pretend that they are sick, or, if they are unemployed, to encourage them not to go to work; we are concerned that they should be treated
936
in the way in which they have been treated now for some years. It seems grossly unfair that the only real reasons that should be given for this are, first, that it will save money; secondly, that there are administrative difficulties, and thirdly, that it will be a great help to the doctors.
Lord CULLEN of ASHBOURNE: The noble Lord is quite right in saying that the overall point of the first five clauses of the Bill is to save money. One hesitates to go on reiterating that because it becomes extremely boring to noble Lords. However, that is, as he rightly said, the main point of what we are doing. The other arguments, such as helping the doctors, although obviously very useful, are subsidiary.
Lord WELLS-PESTELL: So, it really does not matter that if somebody is sick for six days out of seven he does not qualify for benefit?
Baroness YOUNG: Let us consider the circumstances. It is just possible to be ill, in these circumstances, for six days out of seven, but it is rather unlikely. Suppose someone fails to go to work on Monday and is away for three days. The point of the clause is that he would not qualify for the benefit. He then goes back for one day, which would be Thursday, and he then has to be off for the next three days. Of course, I accept that it is possible to have a job that takes one over seven days or one goes off. I suppose for the Friday, followed by the Monday and Tuesday, and then goes back for one more day and has to do it again. As I understand it, if it is a consecutive period of time, after the first three days one would get something. So it would have to be broken employment. I agree that it is possible, but I think that if the noble Lord considers the matter he will agree that it is unlikely. To advance his whole case on something which is possible, but unlikely, is not very satisfactory.
Lord WELLS-PESTELL: I have been opposite the noble Baroness the Minister many, many times. I have heard her say time and time again, "It is possible, but not likely". She cannot hope always to give that reply and get away with it.
On Question, amendment negatived.
8.45 p.m.
Lord BANKS Lord BANKS moved Amendment No. 22:
Page 3, line 43, after ("weeks") insert ("or, in the case of a period comprising any days of incapacity for work, 13 weeks").
The noble Lord said: I beg to move Amendment No. 22 and speak, with the leave of the Committee, to Amendment No. 23. Under existing legislation any two or more days when the claimant is incapacitated for work or unemployed may be connected, provided they are not separated by more than 13 weeks. The Bill proposed originally to reduce the 13 weeks to six. In another place that was amended to eight.
Amendment No. 22 seeks to retain the present position; that is, the 13 week linking rule for sickness and invalidity benefit. The proposed change in the Bill brings an advantage to the unemployed person in that if he is unemployed, again between the eighth and the fourteenth weeks he starts a new period of 312 days during which he can draw unemployment benefit. Unemployment benefit is limited to 312 days. But so far as sickness is concerned, after 168 days incapacity, the claimant qualifies for invalidity benefit. Return to work, followed by a further spell, or further spells, of incapacity does not prevent the accumulation of the 168 days necessary to qualify for invalidity benefit so long as the separation between the spells of incapacity is never more than 13 weeks.
Clause 3 reduces the 13 weeks to eight weeks, as I have already pointed out. Invalidity benefit is payable—and this is a very important point—at a higher rate than sickness benefit. A linking period of only eight weeks instead of 13 weeks could constitute a more serious disincentive to return to work after a prolonged illness or accident. The person incapacatated may feel disinclined to take the risk of returning to work if he knows that he has the much shorter period of eight weeks in which, if he has a recurrence of incapacity, he will return to the higher rate of invalidity benefit rather than be reduced to the lower rate of sickness benefit.
There is much expert opinion to back this view. Professor Acheson, Director of the Medical Research Council Environmental Epidemiology Unit at Southampton
938
General Hospital, an expert on multiple sclerosis, has said that a reduction of the linking period would be detrimental to a number of patients, particularly those with multiple sclerosis. A spokesman for Arthritis Care was certain that arthritis sufferers would be affected. He drew attention to a condition called "lupus erythematosus". This comes and goes a great deal and is quite incapacitating in the bad patches. Nine of 10 of those suffering from it are young girls, and he anticipated that a shorter linking period would deter many of them from attempting to work.
John Wilder, the Director of the Psychiatric Rehabilitation Association said:
"I can assure you that the rehabilitation of chronic psychiatric patients is difficult enough as it is without producing further obstacles such as Clause 3".
The National Schizophrenia Fellowship has written to the Secretary of State to say that:
"For those whose incapacity is initially sporadic in character, who, for example, recover sufficiently to take work for a time but then break down under the strain (as may often happen to schizophrenics), this new provision will work hardly, without, so far as can be seen, any justification in compensating benefit or equity".
Qualification for invalidity benefit becomes harder as a result of the proposed change from 13 weeks to eight weeks, and the risk of losing invalidity pension becomes greater. This can cause serious economic hardship. The difference between the two benefits is not inconsiderable. For a married man under 40 years of age when first incapacitated, with two children, on the rates to operate from November 1980, the difference will be £732 over a 28-week period. In addition, some will receive a lower rate of invalidity allowance as a result of the change, as the amount of this supplement to invalidity pension is determined by the age at which the total incapacity first commended. Some, who under the 13-week rule would have their period of incapacity linked back to an earlier age group, will not be so linked under the eight-week rule. For a person who failed to be linked back in this way to the under-40 age group the loss, if he lived for a further 25 years and at the rates to prevail from November 1980, would total £2,600.
The Government argue that under the 13-week rule some people were qualifying

939
for invalidity benefit after a succession of widely spread, but short, periods of illness. But I think that Ministers have been forced to admit that there is a lack of evidence to support that assertion. There does not seem to be any proof that this is, in fact, what is happening. Amenclment No. 22 would retain the 13-week rule for both sickness benefit and invalidity benefit. Amendment No. 23 would retain the 13-week rule for retaining invalidity benefit once the 168 days have been acquired under the eight-week rule. Naturally, I would hope that the Committee would support Amendment No. 22, but if the noble Baroness were to say that she could not support Amendment No. 22 but could support Amendment No. 23, I would seek the leave of the Committee to withdraw Amendment No. 22 to make way for Amendment No. 23. However, failing such a declaration from the noble Baroness, I hope that the Committee will support Amendment No. 22. I beg to move.
8.53 p.m.
Lord WALLACE of COSLANY: No doubt noble Lords in all parts of the Committee have received representations on Clause 3 as a whole from various people of repute, various organisations dealing with the sick, the mentally sick and the training of young people. I understand—and this may be subject to the Minister giving us some confirmation—that the Government have given an undertaking that they will monitor the effects of changing the linking rule and that, if there prove to be problems, the period can be changed again through the use of regulations. It is not very clear what form this monitoring exercise will take or how it will be possible to estimate the number of people deterred from seeking work who might otherwise have done so. Both commonsense and the experience of those concerned with rehabilitation suggest that the change will have a disincentive effect. We believe that the Government should retain the present linking period unless and until it is established that the change will have no damaging consequences.
There are a number of points that could be made, and I want to make two. First, it is not evident from the text of the Bill that those in receipt of the non-contributory invalidity pension will also be affected
940
by the change in the linking rule. If they lose entitlement to benefit, they will have to wait for 196 days before requalifying, as the noble Lord, Lord Banks, mentioned. In addition, there is an important point affecting the training of people, especially young people. The change in the linking rule may also have a deterrent effect in relation to courses at employment rehabilitation centres. Those who go on such courses are paid by the Manpower Services Commission for the duration of the course; so far as entitlement to benefits is concerned, it is equivalent to working. Figures supplied by the Manpower Services Commission show that about 45 per cent. of completed courses last between eight and 13 weeks and only 3½ per cent. for 13 weeks or more. Of those who complete courses, 51·5 per cent. have not yet entered employment or further training three months later. A certain proportion of these will be assessed as unfit for work. If their course lasted between eight and 13 weeks they would revert at present to invalidity benefit, but as a result of Clause 3 they revert to the lower sickness benefit. The fear of this happening must act as a disincentive to entry into such courses.
There are a number of examples that I could quote on this. I think that here is a very distinct case where the Government could give an undertaking to have a rethink without committing themselves to giving any definite undertaking. I suggest that that would be the right course to take, in which case we could return to the matter later at Report stage.
Lord MACKAY of CLASHFERN: I should like to deal first with Amendment No. 22. As the noble Lord, Lord Banks, has explained, the intention of the amendment seems to be to provide that spells of incapacity shall link with each other if they are not separated by more than 13 weeks. But the wording of the amendment would not achieve that objective. It would not be practicable because it fails to take account of the fact that a period of interruption of employment can extend over several years and can include both spells of incapacity and spells of unemployment. A "period" can therefore comprise days of incapacity for work even though the latest spell is a spell of unemployment.
But, even if it were possible to achieve the intended effect of the amendment,

941
the Government could not see their way to accept it. It would result in an unacceptable complication of the benefit arrangment. It would also be more costly than the existing position and would not, therefore, accord with the purpose of the Bill.
On Amendment No. 23, we certainly understand and sympathise with the intention of this amendment. As has been explained by the noble Lords who have supported it, it is concerned with the person who, after a long illness during which he has been entitled to invalidity benefit, then returns to work. The intention of the amendment, as I understand it, is that if he falls sick again within 13 weeks, the incapacity shall be regarded as a continuation of the earlier spell so that he may regain title to invalidity benefit straight away.
There are, however, several considerations which need to be mentioned. First, as has been explained at some length and with some frequency already, the purpose of the Bill and of this clause, is to make savings; the amendment would reduce the extent of those savings. Secondly, the amendment would introduce complications into the administration process, whereas the Government's concern is for simplification. That is a subsidiary point, but an important one.
Thirdly, our medical advice—and I know that a number of different cases can be figured—is that if relapse does not occur early on, it is just as likely to occur outside the 13-week period as within it. In other words, the 13-week period has no magic about it for catching this sort of thing. You could get the kind of case that has been envisaged happening outside the 13 weeks just as much as within it. Therefore, if this is an injustice, it happens just now, and to reduce the period does not appear to make much difference to that.
Fourthly, the Government have already taken into account the persuasive arguments put forward by the very energetic organisations which represent the disabled, to some of which reference has been made. Whereas the original intention of the Government was that the linking period should be reduced to six weeks, the Government have accepted an amendment in another place to make that
942
period eight weeks, which is the figure which now appears in the clause.
We must accept that no particular linking period would satisfy everybody. The Government's view is that 13 weeks is unnecessarily long and that six weeks should be adequate for the generality of cases. But the extension to eight weeks should go a long way to satisfy those who would prefer a longer period. Moreover, the Government have indicated—and this, in our view, is important—their intention to monitor the effect of the new rule so that if any adjustment is needed the regulation-making power can be invoked.
The only way to test out the sort of cases that have been mentoned is, we would submit, to put this clause into operation and then monitor the results. One cannot do it adequately unless the rule is first changed. In this connection we shall of course be paying particular attention to the kind of case to which the amendment is directed.
With regard to the particular case that the noble Lord, Lord Wallace of Coslany, mentioned, my understanding of the position is that attendance at the centre counts as part of the period of interruption of employment. That is my understanding of the particular case to which he referred. I am afraid, however, that, not-withstanding the persuasive arguments put forward in support of these amendments in the alternative, the Government cannot see their way to support them, and I ask the Committee not to accept either of these amendments.
Lord BANKS: I am grateful to the noble and learned Lord, Lord Mackay of Clashfern, for his thorough answer to this amendment. I should like to consider both this amendment and the next one in the light of what he has said. In view of that, I beg leave to withdraw Amendment No. 22.
Amendment, by leave, withdrawn.
[Amendment No. 23 not moved.]
9.2 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 23A:
Page 4, line 17, after ("disregarded)") insert ("and in section 18(2) of that Act").
The noble Lord said: I think that it will not be necessary to remind the

943
Committee that the purpose is basically the saving of money. I raise this point because there seems to be an anomaly in this part of the Bill. The effect of Clause 3 as it stands is that the linking periods for spells of unemployment will be reduced from 13 weeks to eight weeks, but the period of employment required to requalify for unemployment benefit will remain at 13 weeks, if I have understood this correctly.
This means that a man who is unemployed for 311 days and then goes back to work will be able to qualify for another 312 days' benefit after working for eight weeks and one day—again if I have understood it correctly—while a man who is unemployed for 312 days will not requalify for benefit until he has worked for 13 weeks. I find this both unfair and somewhat confusing. I am sure that those to whom this will apply will also think it confusing, but they will also think that it is grossly unfair.
If the linking period is to be reduced to eight weeks, then I suggest that both equity and simplicity demand that the requalification period should also be reduced to eight weeks, and this amendment would certainly do it. If the amendment is not right, if it is not suitable, if it does not apply, I should be grateful if the Minister would explain the matter in simple terms, because I find it confusing. I beg to move.
Lord CULLEN of ASHBOURNE: I agree with the noble Lord that this is confusing and it is complicated, and I shall do my best to explain it in simple terms. As noble Lords will be aware, unemployment benefit is paid for a maximum of one year (312 days) in any one period of interruption of employment. Once a claimant has received this one year's benefit he can requalify for a further year's benefit only after he has worked for at least 13 weeks and for at least 16 hours in each of those weeks. The intention of this amendment is to reduce this requalification period from 13 to eight weeks no doubt with a view to keeping it in line with the revised figure of eight weeks which, it is proposed, should apply for the purposes of linking periods of interruption of employment.
Although the present periods for linking purposes and re-qualification happen to
944
be the same; that is, 13 weeks, they serve entirely different purposes and there is really no connection between them. The re-qualification test was devised to provide, for the generality of claimants, a fair means of demonstrating a substantial return to the employment field, following exhaustion of unemployment benefit without which it has never been thought that further benefit should be paid. The conditions for re-qualification have in fact only recently been eased.
Prior to April 1978 a person had to have worked for at least 21 hours in each of 13 weeks. Under the Social Security (Miscellaneous Provisions) Act 1977 the number of hours to be worked in each week was reduced to 16 hours, this being the standard test applied for employment purposes under the Employment Protection (Consolidation) Act 1978. A further reduction in the conditions for re-qualification as proposed in the amendment would undermine the concept of a substantial return to the employment field, which, as I have explained, is the main purpose of the test. Moreover, the proposed change would be an additional cost of around £10 million. The noble Lord may not have been familiar with this, he may wish to think about it, but I hope that in the meantime he will withdraw his amendment.
Lord WELLS-PESTELL: I am grateful to the Minister. I confess that some of what the noble Lord said—I hope he will not misunderstand this—did not readily make sense; I still find myself confused as to the difference between the eight weeks and 13 weeks and I cannot see any justification for it. However, I should like an opportunity to read in the Official Report what the Minister said and feel free to return to it or get in touch with him before Report stage if I am not clear. Meanwhile, I ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.9 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 24:
Page 4, line 22, after ("effect") insert ("in relation to any benefit other than unemployment benefit").
The noble Lord said: Clause 3, as we know, reduces the linking period for spells

945
of sickness or unemployment from 13 weeks to eight weeks, so that in future two periods of interruption of employment will be treated as one if they are not separated by more than eight weeks. Clause 3(4) gives the Secretary of State power by regulation to increase the linking period to more than eight weeks. The amendment would prevent him from doing that for purposes of unemployment benefit. The main reason for the proposal to shorten the linking period to eight weeks is to reduce the number of people who qualify for long-term invalidity benefit by virtue of a series of short spells of sickness separated by up to 13 weeks. For the unemployed, however, shortening the linking period is advantageous because unemployment benefit is payable for only 312 days in one spell or series of linked spells. Thus, a man who has a second spell of unemployment within 13 weeks of a previous spell can draw benefit only for the remainder of the 312 days, after which he ceases to be entitled until he has qualified by 13 weeks' employment.
Reducing the linking period to eight weeks means that, provided the two spells are separated by at least eight weeks, he qualifies for another 312 days' benefit instead of for only the number of days remaining from his previous spell. The Secretary of State may decide in the light of experience that the eight week period has an unduly harsh effect on the long-term sick and ought to be extended, say, to 10 weeks or even restored to the present period of 13 weeks. If so, we would not want him to extend the linking period for unemployment benefit at the same time, thus depriving the long-term unemployed of the small advantage they will gain from Clause 3, and the amendment is designed to ensure that that would not happen.
Lord CULLEN of ASHBOURNE: Clause 3(4) gives power for the linking period to be increased by regulations to a longer period than eight weeks. The intention of the amendment is to ensure that the linking period will remain at eight weeks for unemployment benefit, even if it is changed for the incapacity benefits. The noble Lord's reason for proposing the amendment is that for the unemployed the reduction in the linking period is beneficial. I understand that the noble Lord wants to probe our thinking on this
946
point. Unemployment benefit is paid for a maximum of one year in any one period of interruption of employment. So the big difference between unemployment and incapacity where linking rules are concerned is that the more the separate spells of unemployment link, the sooner benefit is exhausted, while the more separate spells of incapacity link, the sooner preferential invalidity benefit replaces sickness benefit. But I ought to add an important footnote. After unemployment benefit has been exhausted, a claimant has to work as an employee for at least 13 weeks before he can re-qualify for benefit. This requalification rule is not affected by this clause. The linking rule change affects someone who has not yet exhausted his benefit.
Your Lordships may find it helpful if I use an example to illustrate the beneficial effect on the unemployed of the reduction in the linking period. If, under current rules, a claimant draws unemployment benefit for less than a year, gets a job, but then has to make another claim within 13 weeks, his new spell links with his old and he continues "clocking-up" days of benefit from where he left off. Thus someone who was unemployed for eight months, found work for about three months, and then claimed benefit again within 13 weeks of his previous claim, could continue to receive unemployment benefit for only a further four months before exhausting his 12 months' maximum entitlement. He gains through not having to serve waiting days (without benefit) at the beginning of the separate period of unemployment, but he is likely to lose far more because he runs out of benefit within the four months.
If, as proposed in Clause 3, the linking period is reduced from 13 weeks to eight weeks, the second spell of unemployment quoted in the example would no longer link with the first. Thus the claimant would be starting a fresh period of interruption of employment. He would have three waiting days to serve, but he could now receive unemployment benefit in the second spell for a maximum period of 12 months before having to requalify, rather than four months under the present rules. I cannot advise noble Lords to accept the amendment.
The regulation-making power is included in the Bill to provide some flexi-

947
bility, so that upward adjustments to the linking period can be made without having to resort to primary legislation. But before any adjustments are made, two points need to be established. The first is whether it would be desirable to increase the linking period for incapacity benefit. The Government view is that an eightweek period is an appropriate one for both unemployment and incapacity benefits. But there has been concern that this may be too short a period for the long-term sick who wish to re-establish themselves in employment, or for those suffering from a recurrent illness. The Government have therefore agreed to monitor the affect of the reduction in the linking period. If this should show that the reduction causes serious problems—and we do not expect this to be the case—then it may he necessary to review the period.
But, as the Notes on Clauses make clear, we would then need to establish whether it would be practicable to have different linking periods for unemployment benefit and the incapacity benefits. This is the second of the points that I referred to earlier. Different linking periods for different benefits would undoubtedly complicate the scheme both for those claiming benefit and for the staff administering the benefits. We would therefore need to consider the position very carefully.
Let me give a brief illustration. If there were an eight-week linking rule for unemployment benefit and a 13-week linking rule for incapacity benefits, and incapacity followed shortly after unemployment, the incapacity linking rule could jump back over the spell of unemployment and link with an earlier spell that the unemployment spell had not linked with. The scheme is quite complicated enough, for good reasons, without making it any more complicated.
Subsection (4) gives the Secretary of State power to make regulations to increase the linking period for either unemployment or incapacity benefits, or for both. As I have just demonstrated, it is essential to retain this flexibility, and I therefore advise noble Lords not to accept this amendment.
Lord WELLS-PESTELL: I am grateful to the noble Lord the Minister for giving such a full explanation. As was the case
948
with a previous Amendment of mine, I should like to look at this particular matter very carefully and, if it is not clear, to take advice and perhaps return to it. May I say in passing that if at any time the Government decide to advise those noble Lords supporting them to accept one of our amendments, will they give us ample notice, because otherwise I do not think we could withstand the shock. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 3 shall stand part of the Bill?
Lord WALLACE of COSLANY: In proposing to your Lordships that we do not accept Clause 3, I would make an appeal to the Front Bench on the Government side: please do not say again that the intention of this Bill is to save money, because we shall start screaming our heads off if we hear it any more. We know what the Government are up to. We do not think they are very good at doing it, but at least we know where they stand: they are going to rob the poor to give it to the rich.
I am going to summarise Clause 3 very briefly. First of all, the potential loss of benefits is a significant factor when someone has to decide whether to attempt to return to work after a long illness or severe disablement, and when his or her capacity to meet the demands of work is in doubt. Then, it is equally significant for someone who has to decide whether to keep up the struggle of working between bouts of incapacitating illness. The difference between a three-month period of grace and a six-week period is medically and psychologically important; and the change in the linking rule resulting from the passage of Clause 3 will therefore deter many chronically sick and disabled people from attempting to continue work. Then, any savings that might result from the change must be set against additional expenditure on benefits for those who are thus deterred; and, finally, the Government probably do not intend to create an additional disincentive to work, and they should think again about Clause 3.
That, I would say, is a very brief but fairly accurate summary of all the various arguments we have had on the different

949
amendments; and to save the time of the Committee I would formally ask your Lordships not to agree to the inclusion of Clause 3.
Lord CULLEN of ASH BOURNE: The noble Lord has spoken to his proposal very shortly indeed, and I propose to answer equally shortly. He has more or less vetoed my saying that the whole point of Clause 3 is to save money. The other arguments are subsidiary, as I have already explained; so I would ask your Lordships to agree that Clause 3 should stand part of the Bill.
Lord WELLS-PESTELL: I do not think the Committee should take this rather lightly. I do not think the Government realise how deep is our concern that they should ever have considered introducing a Bill of this kind. We consider it one of the worst Bills, and Clause 3 goes a long way to illustrate our reasons for concern and discontent. We accept that in Parliament there will be various views. We expect the Government to introduce legislation which will not be acceptable to us—the Education Bill, the Transport Bill, the Housing Bill, the Local Government Bill when it comes and, recently, the Employment Bill. We have no quarrel, if I may say so, with Bills of that kind, because they represent a different philosophy, and we are always prepared to fight on that ground.
But this Bill has been something very different. We regard it as being an attack on a section of the community whose members cannot really speak or fend for themselves. We realise that we have no chance of changing this Bill—not by a single word or a single letter. At Second Reading some of us were very much minded to put down an amendment to the effect that the Bill be read six months hence. We did not do so because it is not the practice to do that in your Lordships' House; but we felt so strongly about it. I myself had drafted an amendment to the Long Title; and, among other things, to increase benefits. But I do not believe in gestures; and it would have been nothing but a gesture, because, again, one would not have stood a chance.
We have chosen Clause 3 because we feel that it is a particularly pernicious clause. We do not propose to divide on
950
it. We use it as an opportunity of trying to convey, whatever noble Lords opposite may think, how strongly we feel about this Bill; and we hold our views as strongly and sincerely as noble Lords on the Government side. We do not allow them in the last analysis to come between us. My noble friends and I want to make it perfectly clear that we feel that, so far as we can remember, there has not been a Bill before your Lordships' House that has been more objectionable than this one; one that will have a devastating effect, as I said earlier, on a section of the community that cannot really speak or fend for itself. Rightly or wrongly—and noble Lords opposite have been very patient—we choose to say this on Clause 3 because we feel it ought to be said somewhere and that this is as good a clause as any to say it.
Baroness YOUNG: Before we conclude the proceedings on this—and I am not going to repeat all the arguments that we have had before, because I accept that we will disagree about this—I think it very important, while recognising the complexities and difficulties of the Bill, to see all this in proportion. As I and my colleagues made clear at Second Reading, although we are introducing these measures specifically to save money—and we shall save money by them—there is a safety net on it. It is really a complete exaggeration to suggest that the whole of the Welfare State is being disbanded.
The fact is that the safety net of the supplementary benefits will continue and, although the long-term rate of supplementary benefit gets a little less than price protection this year—and we discussed that in the Social Security Bill—and will be realigned with the retirement pension, the Government are giving extra help to families with children through the Family Incomes Supplement and other child benefit additions and to single parents. Further, the mobility allowances for the disabled will be increased from November from £12 to £14·50 a week and the attendance allowances—and I might draw the Committee's attention to the fact that this was something that was introduced by the last Conservative Government—will go up in line with prices along with industrial disablement pensions which also go up similarly.
I think that one must keep a sense of proportion. Some of these things are

951
difficult. We have been over the ground earlier in the Committee proceedings but, even on these matters, we must keep a sense of proportion over the consequences of a whole series of Government policies. I feel, as I have said before, that it would not be right to leave the social security budget without having to make any economies in this major field of Government expenditure; and I think that the ones that have been chosen by my right honourable friend the Secretary of State are the ones that we believe will be least damaging; and we have provided the safety net.
Clause 3 agreed to.
Baroness YOUNG: We have made very good progress on the Bill and I think it would be the wish of noble Lords that we should conclude the Committee proceedings for today now that we have got nearly halfway through the Bill. I beg to move that the House be now resumed.
House resumed.