HL Deb 16 June 1980 vol 410 cc923-51

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 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 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.


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, 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.


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 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.


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 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 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 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.


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 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 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.


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.

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.
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 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 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 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.


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 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.


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.

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.


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.


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 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.


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.


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.


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 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 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 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.


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 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.


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, 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 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.


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 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 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.


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 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.


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 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 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.


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 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- 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.


I am grateful to the noble Lord the Minister for giving such a full explanation. As was the case 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?


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 amendments; and to save the time of the Committee I would formally ask your Lordships not to agree to the inclusion of Clause 3.


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.


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 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 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.

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