HL Deb 06 May 1980 vol 408 cc1519-31

2.56 p.m.

Report received.

Clause 1 [Amendments relating to up-rating]:

Lord WELLS-PESTELL moved Amendment No. 1: Page 1, line 22, at end insert— ("() For the purpose of any uprating order under section 125(3) of the Social Security Act 1975, in considering what increases in the sums in question are necessary to restore their value, the Secretary of State shall have regard to the increase in the general level of prices between 24th November 1980 and the date of any such increase.").

The noble Lord said: My Lords, I beg to move the amendment standing in my name on the Marshalled List. Probably this particular amendment could be taken very briefly because we did go over some of the ground in the Committee stage. I suggest that those of your Lordships who have considered this matter will regard the amendment as being a modest one, merely requiring the Secretary of State to make good any long-term shortfall in the up-rating of benefits. It does not—let me repeat, it does not—require him to make good a shortfall that occurs in one particular year, provided that over the whole period from November 1980 the real value of the benefits have been maintained. Thus, if I may take 1982 as an example, if in that year benefits are raised by no more than is needed to compensate for price increases, the overshoot could be carried forward and set against a shortfall in any subsequent year.

During the Committee stage the noble Baroness, Lady Young, said—and I will quote from Hansard dated 15th April 1980 at column 141: We feel we must give a cast-iron guarantee to pensioners. We have said that we shall keep the pensions in line with prices so that retirement pensioners will not in fact be adversely affected by the effect of inflation and increased prices because their pensions will be protected, and we think that that is a guarantee that we can keep to".

But the Bill, as it stands, does not give that guarantee, although the noble Baroness made those remarks. If the Secretary of State underestimates the rate of inflation by only a small amount each year—and he seems likely to do so this year, for a start, because I think that pensions are going up in November by 16½ per cent. and inflation will be considerably more than 16½ per cent. next November—the real value of pensions could be seriously eroded over a period of five to 10 years. But the Government's actions, in saying that they will guarantee, do not give any real assurance.

The question of making good a shortfall in relation to prices—that is to say, a fall in the real value of benefits—arose last year when the Government refused to honour an undertaking given by the Labour Government to make good the 1978 shortfall in the present up-rating of short-term benefits. Now in the No. 2 Bill, which I had hoped to avoid mentioning on this occasion, the Government are proposing deliberately to cut the next three up-ratings of short-term benefits and invalidity pensions by 5 per cent.

It is for these reasons and no other, and the fact that the noble Baroness herself gave an assurance along these lines on 15th April last, that there should be a cast-iron guarantee given legal force, and this amendment would do that. It is a simple amendment. It does not put the Government in any difficult situation. It merely puts on the statute book a guarantee of this kind which, by its very nature, is a safeguard and I hope that the noble Baroness will feel able to accept it. My Lords, I beg to move.

Lord BANKS

My Lords, may I support very briefly the amendment which has just been moved by the noble Lord, Lord Wells-Pestell. The danger of shortfalls arises from the fact that half the reference period, on which the increase is based, is in the future and an estimate has to be made. If the reference period were entirely in the past, the danger of shortfalls would not arise in the same way and we should not be faced with this problem. It seems to me that it is right and proper that shortfalls should be made good, and because the amendment achieves this I support it.

The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Baroness Young)

My Lords, as the noble Lord, Lord Wells-Pestell, has explained, the purpose of this amendment is to relate future increases of benefits to price movements since November 1980. The amendment would not affect the rates of benefit to be introduced next November, since that alone is proposed as the point of reference for the future. Nor would it change the position for the 1981 up-rating, when the Secretary of State will, in any event, be required, under current legislation as amended by this Bill, to have regard to price movements since November 1980, and it is to those that he must have reference when he comes to consider that up-rating. However from the 1982 up-rating onwards, the amendment would require the Secretary of State to have regard each year to price movements since November 1980, instead of since the previous up-rating.

As the noble Lord, Lord Wells-Pestell, has said, the intention of the amendment is to compensate for future shortfalls in benefit increases. However, the House should recognise that the amendment would not always be to the advantage of beneficiaries, since it would require the Secretary of State always to have regard as a minimum to price movements since November 1980, even if benefits had moved ahead of prices since that date, either as a result of up-ratings based on over-generous estimates, or of deliberate decisions to up-rate by more than price movements. So one needs to consider very carefully whether this amendment, if voted upon, would achieve the result which the noble Lord, Lord Wells-Pestell, wishes.

Under the present provisions as amended by this Bill, the Secretary of State will be required to have regard to price movements since the preceding up-rating, whether the forecast on which that up-rating was based turned out to be over-generous or fell somewhat short of the actual movement of prices. If the increase turns out to be more than that of prices, or if there is a shortfall, the courts have confirmed that there is no statutory obligation to correct the position. In the case of shortfall, it is for the Government of the day, in the light of such considerations as the size of shortfall and the economic situation at the time, to decide what action is appropriate.

For these reasons we have decided that it is essential to leave this measure of flexibility and, as I also indicated when we debated this matter in Committee, our record in office has shown that where it has been possible we have, indeed, more than kept up with prices—certainly between 1970 and 1974. I think it would be unfortunate if, at this stage of this Bill, we confused this Bill with the Social Security (No. 2) Bill which is currently before another place, or indeed confused this amendment with anything that might be done on short-term benefits, because we are in this clause dealing with retirement pensions which are, of course, long-term benefits. For these reasons, and because I do not believe that it would be right to accept this amendment as it stands, nor indeed do I think that it would necessarily be of benefit to the very people whom it is designed to help, I hope that the House will not support it.

3.6 p.m.

Lord WELLS-PESTELL

My Lords, may I ask the noble Baroness the Minister what will be the position in 1981? In November of this year, pensions are going up by 16½ per cent. and for the greater part of this year alone inflation will be in the region of 20 per cent.; it is in that area now, in May. That means that from November 1980 to November 1981, pensioners will lose a considerable sum of money and their standard of living must, of necessity, be depressed. If we had a Labour Government today, I am sure that they would be reminded in November of this year of the fact that pensioners had been existing on a pension which was considerably lower than the rate of inflation, and if the increase was only 16½ per cent. that Labour Government would be told in very precise terms that it was not sufficient to meet the financial needs of a large number of people who had already had their standard of living depressed.

Baroness YOUNG

My Lords, by the leave of the House—we are, of course, on Report, so that this is the last time that I may speak on this matter—pensions in November 1979 not only kept up with prices, but also made up the shortfall from the preceding year, 1978–79. So retirement pensions kept up with prices and did something more. What we have said is that in November 1980 there will be a further increase of 16½ per cent. and we have as yet taken no decision about what may happen in 1981, because it is too difficult at this point to predict exactly what may happen. But I say this to indicate that our record has shown that we have managed so far to keep up the standard of living of retirement pensioners. Of course, it is our wish that, as the economy improves—because they are a large number of people in the population, whose needs we are very well aware of and who need to be looked after—we shall be able to do more. But it would be wrong at this stage to make promises which it would not be possible to fulfil.

3.9 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 74; Not-Contents, 83.

CONTENTS
Airedale, L. Fulton, L. Pargiter, L.
Amherst, E. Gaitskell, B. Peart, L.
Amulree, L. Galpern, L. Pitt of Hampstead, L.
Ardwick, L Gardiner, L. Plant, L.
Aylestone, L. Gladwyn, L. Reilly, L.
Bacon, B. Gordon-Walker, L. Robson of Kiddington, B.
Balogh, L. Goronwy-Roberts, L. Rochester, L.
Banks, L. Gosford, E. Sainsbury, L.
Beaumont of Whitley, L. Granville of Eye, L. Seear, B.
Beswick, L. Grey, E. Shinwell, L.
Blease, L. [Teller.] Hale, L. Sligo, M.
Boston of Faversham, L. Hampton, L. Soper, L.
Brockway, L. Hanworth, V. Stewart of Alvechurch, B.
Bruce of Donington, L. Henderson, L. Stone, L.
Burton of Coventry, B. Hunt, L. Taylor of Mansfield, L.
Byers, L. Jacques, L. Underhill, L.
Collison, L. Kaldor, L. Wallace of Coslany, L. [Teller.]
Cooper of Stockton Heath, L. Kilbracken, L. Walston, L.
Crook, L. Kilmarnock, L. Wells-Pestell, L.
Crowther-Hunt, L. Kirkhill, L. White, B.
David, B. Leatherland, L. Wigg, L.
Diamond, L. Lloyd of Kilgerran, L. Wigoder, L.
Donaldson of Kingsbridge, L. Milverton, L. Wilson of Radcliffe, L.
Elwyn-Jones, L. Newcastle, Bp. Wootton of Abinger, B.
Fisher of Rednal, B. Oram, L.
NOT-CONTENTS
Alexander of Tunis, E. Ferrers, E. O'Neill of the Maine, L.
Allerton, L. Fortescue, E. Onslow, E.
Alport, L. Galloway, E. Orkney, E.
Argyll, D. Gisborough, L. Orr-Ewing, L.
Avon, E. Glenarthur, L. Porritt, L.
Belstead, L. Gridley, L. Renton, L.
Bessborough, E. Halisham of Saint Marylebone, L. (L. Chancellor.) Rochdale, V.
Bolton, L. Romney, E.
Brock, L. Harmar-Nicholls, L. St. Davids, V.
Buckinghamshire, E. Hill of Luton, L. St. Germans, E.
Caccia, L. Hill-Norton, L. Sandys, L. [Teller.]
Campbell of Croy, L. Hylton-Foster, B. Sharples, B.
Clancarty, E. Ilchester, E. Smith, L.
Clifford of Chudleigh, L. Inglewood, L. Somers, L.
Clwyd, L. Kimberley, E. Stamp, L.
Cockfield, L. Kinloss, Ly. Strathclyde, L.
Cottesloe, L. Lindsey and Abingdon, E. Strathspey, L.
Cranbrook, E. Long, V. Thorneycroft, L.
Cullen of Ashbourne, L. Loudoun, C. Trefgarne, L.
Daventry, V. Lucas of Chilworth, L. Trenchard, V.
De Freyne, L. Lyell, L. Vaux of Harrowden, L.
Denham, L. [Teller.] Macleod of Borve, B. Vickers, B.
Derwent, L. Mancroft, L. Vivian, L.
Drumalbyn, L. Marley, L. Westbury, L.
Eccles, V. Merrivale, L. Willoughby de Broke, L.
Ellenborough, L. Morris, L. Wolverton, L.
Elliot of Harwood, B. Mowbray and Stourton, L. Wrenbury, L.
Energlyn, L. Nugent of Guildford, L. Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

3.17 p.m.

Lord WELLS-PESTELL moved Amendment No. 2: Page 2, line 19, leave out ("last") and insert ("thirteenth").

The noble Lord said: My Lords, this amendment—or, it would be more correct to say, one similar to it—was moved by me at the Committee stage. This would have made 21st November the latest date for a benefit up-rating. In practice, because the up-rating is spread over a period from Monday to Thursday, this would have meant that the Monday of the up-rating week, which is normally regarded as the up-rating date, must not be later than 18th November. It would have given to the Government the power they need to prevent the up-rating from creeping forward steadily each year by enabling them to have a 53-week interval between up-ratings—as I understand the situation, every five or six years—but it would have prevented them from doing the pensioners out of an additional week of increased pension this year by postponing the up-rating to the week commencing 24th November. I make that a period of 54 weeks instead of 52.

The amendment was defeated in Committee, but it is clear from the Official Report that the noble Baroness, if I may say this, rather misunderstood what I was trying to suggest. It may well have been my own fault. In col. 160 of Hansard of 15th April, if I may quote her, the noble Baroness the Minister said: We need some flexibility in the arrangements. This would be prevented if one had a fixed date—as in this case—which would have to be reviewed annually, otherwise we should be in the difficulties which the noble Lord described because it clearly has financial implications as the date creeps forward each year".

A little later the noble Baroness said: the Government would automatically have been committed to a very large increase of expenditure if the same date were fixed and it went on creeping forward in that way".—[Official Report, 15/4/80; col. 16½.]

If I may say so, there should be a general rule about it. If we wrote into the Bill that it should be 21st November, as the amendment suggested, then once again we should be on a fixed date. I think the noble Baroness was wrong about this. The amendment did not propose a fixed date. It merely proposed that the up-rating should be completed not later than 21st November and in principle there is here no difference from the Government's proposal in the Bill that the up-rating must be completed before 30th November. The only difference is that the Government would not have been able to do the pensioners out of an extra week's increase this year, as I suggest is their present intention.

Nor is it true that the Government would have had no flexibility in fixing the up-rating date. They would have been free to choose any Monday from between 1st and 18th November. I suggest that the present amendment gives another opportunity to look at the whole issue again without the confusion that was introduced by the view taken by the noble Baroness at Committee stage. This time the date we propose is the 13th, which means that this year's up-rating would have to take place in the week commencing 10th November; next year it would be on the 9th and so on until 1986 when it would then go back to the 10th again—unless of course the Government chose to exercise the flexibility on which the noble Baroness lays so much stress, by bringing forward the up-rating to an earlier date in the year.

If there had been no legislation, then the up-rating would have been on Monday, 10th November, and in point of fact this is really what we are asking for, but as a result of the legislation before your Lordships' House it will certainly not be on the 10th. As I understand it, it will be on the 21st and the pensioners will suffer. I ask your Lordships to agree to this amendment because I feel that in the circumstances it is a reasonable one. I beg to move.

Baroness YOUNG

My Lords, the noble Lord, Lord Wells-Pestell, said that we debated a very similar amendment to this on the Committee stage of this Bill. During the intervening period I have looked again at what was then said and have considered it in relation to the amendment that he has tabled this afternoon. I am sorry that he feels that I have misunderstood his original amendment. I recognise that his original amendment did not propose a fixed date; it proposed a date not later than 21st November, but, of course, as the noble Lord himself has explained, there are consequences which would follow from the acceptance of that original proposal which I think I made clear in my reply. But in case there is any misunderstanding about this matter, perhaps I may go through the argument again.

The problem which this particular subsection of Clause 1 is designed to resolve is the unforeseen effect of the present legislation. At present the latest date for an up-rating moves forward progressively each year, by one day normally and by two days in a leap year. Clearly this gradual creeping forward has both procedural and financial implications. As the noble Lord, Lord Wells-Pestell, has said, had it just been left to creep forward this year the up-rating would have been on 10th November and therefore the Government would have had to pay the increase in benefits for the week beginning 10th November instead of the week beginning 24th November; and the cost of that would have been about £125 million in 1980–81.

The fact is that different benefits are up-rated on different days of the week to take account of the spread, as the noble Lord has described, and the main up-rating date has to be earlier than the final date referred to in an amendment like this. This year, as I have said, the amendment would mean that the main up-rating date would have to be 10th November. In subsequent years it would never be later than 10th November, and in some future years—for example in 1985—it would have to be on 4th November. The main up-rating date has moved forward from 17th November in 1975 and the Government could not agree to an amendment which would have the effect of fixing the latest date somewhere between 4th and 10th November.

This subsection of Clause 1 does not change the most important principle; namely, the principle of having an annual up-rating. What it does is to allow the Government some flexibility in settling the exact date by providing that the up-rating must take place by the end of the month in which the anniversary of the previous up-rating occurs. Clearly, as I think the House will understand, in view of the enormous public expenditure and the procedural implications of this matter, we must have a provision to prevent the up-rating date from creeping forward. We need to have some flexibility in the arrangements, and, in the Government's view, the end of the relevant month is the most appropriate cut-off point to have in this particular case.

The implication of the noble Lord's remarks is that the Government, in these difficult financial circumstances in which we have found ourselves, are trying, as it were, to take away money from the pensioners. I think it is important to recognise in regard to this amendment, and the whole Bill, that this year, under the Budget, social security benefits will be increased by more than £3 billion in the next financial year under improvements and up-ratings. The sums of money that we are talking about must he seen in relation to that. Any changes over the system as a whole, on the other hand, will save only £270 million in 1980–81 and £480 million in 1982–83. It is against this background that we are considering our measures.

We believe we have to look very carefully at all the expenditure implications of this matter, and I hope I have said enough to indicate that the Government keep to the important principle of an annual up-rating but believe that, for the reasons I have given, there must be a degree of flexibility in the matter. For this reason I hope that the House will not support this Amendment.

Lord WELLS-PESTELL

My Lords, I am obliged to the noble Baroness for her comments and observations, but may I remind her that in her remarks a moment or two ago she said that a pension must be increased during the month in which it was previously increased. So far as I can remember, it has always been November and, as I understand the Bill now before your Lordships' House, it is going to be up-rated from the 21st. What is to prevent the Government, then, from not up-rating it until 30th November in the following year?

Baroness YOUNG

My Lords, with the leave of the House, we are not discussing the following year. We are discussing the year 1980, and we have given an undertaking that it will be up-rated on 21st November, and that guarantee has to be seen in connection with the other guarantee that it will be up-rated annually in the same month.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 74; Not-Contents, 92.

CONTENTS
Airedale, L. Elwyn-Jones, L. Oram, L.
Amherst, E. Fisher of Rednal, B. Pargiter, L.
Amulree, L. Fulton, L. Peart, L.
Ardwick, L. Gaitskell, B. Pitt of Hampstead, L.
Avebury, L. Galpern, L. Plant, L.
Aylestone, L. Gardiner, L. Reilly, L.
Bacon, B. Gladwyn, L. Robson of Kiddington, B.
Balogh, L. Gordon-Walker, L. Rochester, L.
Banks, L. Goronwy-Roberts, L. Sainsbury, L.
Beaumont of Whitley, L. Gosford, E. Seear, B.
Beswick, L. Granville of Eye, L. Shinwell, L.
Blease, L. [Teller.] Grey, E. Sligo, M.
Blyton, L. Hale, L. Soper, L.
Boston of Faversham, L. Hampton, L. Stewart of Alvechurch, B.
Brockway, L. Henderson, L. Stone, L.
Bruce of Donington, L. Jacques, L. Strabolgi, L.
Burton of Coventry, B. Kaldor, L. Underhill, L.
Byers, L. Kilbracken, L. Wallace of Coslany, L.
Collison, L. Kilmarnock, L. Walston, L.
Cooper of Stockton Heath, L. Kirkhill, L. Wells-Pestell, L.
Crowther-Hunt, L. Leatherland, L. Wigg, L.
Cudlipp, L. Lloyd of Kilgerran, L. Wigoder, L.
David, B. [Teller.] McNair, L. Wilson of Radcliffe, L.
Diamond, L. Newcastle, Bp. Wootton of Abinger, B.
Donaldson of Kingsbridge, L. Northfield, L.
NOT-CONTENTS
Alexander of Tunis, E. Bessborough, E. Campbell of Croy, L.
Allerton, L. Birdwood, L. Clancarty, E.
Alport, L. Bolton, L. Clifford of Chudleigh, L.
Argyll, D. Brock, L. Clwyd, L.
Avon, F. Buckinghamshire, E. Cockfield, L.
Belstead, L. Caccia, L. Cottesloe, L.
Cranbrook, E. Hill of Luton, L. Redmayne, L.
Cullen of Ashbourne, L. Hood, V. Renton, L.
Daventry, V. Hunt, L. Robbins, L.
de Clifford, L. Hylton-Foster, B. Rochdale, V.
De Freyne, L. Ilchester, E. Romney, E.
Denham, L. [Teller.] Inglewood, L. St. Davids, V.
Dement, L. Jeffreys, L. St. Germans, E.
Drumalbyn, L. Kimberley, E. Sandys, L. [Teller.]
Duncan-Sandys, L. Kinloss, Ly. Seebohm, L.
Eccles, V. Lindsey and Abingdon, E. Sharples, B.
Ellenborough, L. Long, V. Smith, L.
Elliot of Harwood, B. Loudoun, C. Somers, L.
Emmet of Amberley, B. Lucas of Chilworth, L. Stamp, L.
Exeter, M. Lyell, L. Strathclyde, L.
Ferrers, E. Macleod of Borve, B. Strathspey, L.
Fortescue, E. Mancroft, L. Thorneycroft, L.
Galloway, E. Marley, L. Trenchard, V.
Gisborough, L. Merrivale, L. Vaux of Harrowden, L.
Glenarthur, L. Milverton, L. Vickers, B.
Gridley, L. Morris, L. Vivian, L.
Halisham of Saint Marylebone, L. (L. Chancellor.) Mowbray and Stourton, L. Westbury, L.
Newall, L. Willoughby de Broke, L.
Hanworth, V. Nugent of Guildford, L. Wolverton, L.
Harmar-Nicholls, L. Orkney, E. Wrenhury, L.
Henley, L. Porritt, L. Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

The LORD CHANCELLOR (Lord Hailsham of Saint Marylebone)

My Lords, I understand that my noble friend wishes to make a Statement now.