HL Deb 16 June 1980 vol 410 cc835-42

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 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 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 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, 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 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 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 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 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.