§ 3.3 p.m.
§ The Minister of State, Department of Education and Science (Baroness Young)
My Lords, I beg to move that this Bill be now read a second time. I do not doubt that we can and will find points to discuss on other clauses, but the weight of public comment and the balance of debate in another place make it clear that this is essentially a one-clause Bill. The key clause is Clause 1, and I fear that there will be no escaping, on either side of your Lordships' House, and indeed on the Cross-Benches, repetition of many of the arguments about social security expenditure with which we have become familiar.
Clause 1 does not, in fact, make any radical innovations. The first part of the clause enshrines in law what has become the up-rating practice in recent years; namely, an announcement (by convention, at Budget time) of the up-rating date, the up-rating figure, and the relationship between the increases proposed and movement in the retail price index; followed in due course by the laying of up-rating instruments which enable the announcements to be carried through into the actual benefit changes.
There has not been an occasion when the up-rating has been changed between announcement and implementation, but the possibility has been there, especially when legislation has been required before the up-rating instruments can be made and this stage has therefore been pushed towards the end of the Session. Such a change would mean that the global picture of expenditure commitments sought at Budget time and immediately after would not be available, and that the up-rating process, which usually begins in May, would have to be unscrambled and started again. The essential fact is that, as matters stand at present, the focal point is the laying of the up-rating order (and its associated statutory instruments), and the Secretary of State has to satisfy himself then as to the likely level of inflation between up-ratings. If the rate of inflation has slowed down or speeded up between the Budget announcement and the laying of the order, all the sums might have to be done again. That is not, I think, a prospect that any Government could face with equanimity.
If I may anticipate the argument in favour of the status quo, and it is perhaps the only argument: is there not some advantage in settling the benefit rates as near as possible to the date on which they will take effect, for example, July instead of March? The answer must be, "No" when the operational timetable means that July is far too late to start work on the up-rating process, and when the power to make good any shortfall due to an underestimate of inflation is there for the next up-rating. I should add that the 1060 guarantee of price protection that the Government have given for pensions and other long-term benefits carries with it the guarantee that any shortfall in the up-rating of these benefits will be made good.
This leads me directly to the second and much more controversial part of Clause 1. As I have said, the Government are committed to price protection for long-term benefits. That includes price protection for the invalidity benefit at its present level until it is brought into tax, and price protection thereafter at its unabated level. As regards short-term benefits, there is the legislative power in last year's Social Security (No. 2) Act to give up to 5 per cent. below price protection in 1981 and 1982, as was done for 1980. That power is not to be used in 1981, and we would hope not to have to use it in 1982. Beyond that the unmodified price protection statutory requirement applies. This is the background to the second main provision of Clause 1.
That second part enables the Government at the 1981 up-rating, and only at the 1981 up-rating, to take account of the fact that the previous up-rating was higher than intended—higher because inflation was reckoned, over the relevant period, as 16.5 per cent. and in fact emerged as only 15.5 per cent. Thus, what had been intended as a prices-only up-rating for long-term benefits became prices plus 1 per cent., that is, a real improvement; while what had been intended for invalidity benefit and short-term benefits as an increase of 5 per cent. less than the inflation level was therefore 4 per cent. below that level. There has been a certain amount of entirely understandable misunderstanding about all this.
Put simply, beneficiaries will get between November 1980 and November 1981 a benefit worth 1 per cent. more than was intended. They enjoy that advantage for a year, and no one can or wants to take it away from them. At the 1981 up-rating—effective from 23rd November, precisely a year after the previous up-rating—the 10 per cent. increase to allow for the expected rate of inflation between up-ratings will be based not on the actual 1980 rates but on the rates that would have been paid had the rate of inflation for 1979–1980 been accurately predicted. In short, Clause 1 carries forward to future years what had been intended, debated and announced for November 1980, but not what actually happened.
For the single pensioner the effect is to pay from November 1981 25p less than would otherwise have been paid; for the pensioner couple the difference is 40p. The 1 per cent. is an across-the-board adjustment for all the main line annually up-ratable benefits, the Section 125 benefits. It bites also on those benefits which are up-rated in line with these benefits—that is, supplementary benefit, war pensions, and—under a separate heading—public service pensions. The new pensions scheme earnings-related additional components are dealt with in the same way, though for technical reasons the actual methodology is a little different from that which is used for the basic flat-rate benefits. The effect for the individual beneficiary is fairly small, though of course it is real and even a small change in a modest income is noticed; the public expenditure saving, overall, is about £225 million in a full year.
1061 It may be that some of the anger directed at this provision had been built up in readiness for the rather draconian measures which have been rumoured in some quarters of the press. It is quite clear that a lot of the anger is, in fact, a carry-over of opposition to last year's intended 5 per cent. abatement. This is understandable, because Clause 1 does not represent new policy or even extension of existing policy, but carries forward last year's plans to the extent that these have been overtaken by a rather more successful control of inflation than had been predicted. Seen against the background of our economic situation, which means that we are rather far down the economic league of industrialised nations all of which are suffering from a world recession; and seen against the background of a social security budget which has grown in relation to public expenditure generally and is still growing—and by no means only because of the high level of unemployment—Clause 1 should create no surprises.
Restraint in social service expenditure is never and at no point easy, and we have never pretended that it would be. But while expansion of social service provision based not on real resources but on borrowed money may be easy, the problem is that it is also unwise, and in the long term the bill has to be met, and that bill is a burden on public expenditure and helps to create an unhealthy economy, for which we shall all have to pay the price, not least those who are heavily dependent on public expenditure.
Your Lordships will be pleased to know that I can deal with the remaining clauses of the Bill rather more briefly. Clause 2 enlarges the powers of my right honourable friend the Secretary of State for Employment, and enables him to increase employers' maternity pay, paid for six weeks of absence from work due to pregnancy, to compensate for the loss during that period of the earnings-related supplement to maternity allowance. This clause has been modified since it was originally presented to Parliament, in order to make it quite clear that the intention is to increase the rate of maternity pay and not to open the way for decreasing it. The timing of the improvement is a matter for my right honourable friend, as it is whether it will be necessary to phase the improvement. I understand that his intention is to make the change as soon as resources allow, and not to phase it unless this proves essential.
Clause 3 is very different from the original version in the Bill as first presented. The clause then contained provision for increasing both custodial sentences for social security offences and the financial penalties. As the Minister for Social Security pointed out in another place, the logic of this double approach could reasonably be criticised. It must be necessary from time to time to increase financial penalties simply in order to maintain their real value. The length of the custodial sentence is not, however, affected by inflation: a three-month prison sentence remains a three-month prison sentence even in the most inflationary of times. Moreover, it is the general tendency and I think the general wish that custodial sentences should be imposed only where necessary, and should be as short as is consistent with the seriousness of the offence. The Government have therefore dropped entirely that part of the clause which lengthened custodial sentences, 1062 and what remains is the rationalisation of financial penalties for social security offences and aligns them for the most part with the normal scale of financial penalties.
The general policy of penalties for criminal offences is of course a matter for the Home Office, and that department's objective is to have all comparable offences dealt with by means of comparable financial penalties, and for the penalties so aligned to be inflation proof so that they maintain their real value over time. There have been suggestions that the increases in penalties in Clause 3 are part of the Government's attempts to deal with social security fraud and abuse, and that enhanced penalties might be used as a threat to hang over the heads of those against whom there is not adequate evidence of an offence but who might be persuaded by the threat of worse things to befall them to give up their benefit claims.
I am glad to take this opportunity to say that this fear or suspicion is totally unfounded. The instructions to officials engaged in investigating these matters make it quite clear that the possibility of prosecution and of consequential penalties is not to be used as a threat in order to obtain withdrawal of a claim. It is entirely right that fraud and abuse should be controlled because it brings no credit on the scheme as a whole, and indeed worries genuine beneficiaries who feel that their own reputation is at risk because they share benefits with people who are clearly not entitled to them. It is also right that serious offences which come before the courts should be dealt with consistently with their seriousness and consistently with comparable offences in other areas. However, these two things are not directly related.
Looking wider than Clause 3, and therefore taking in those social security offences at the upper end of the spectrum of seriousness which are dealt with under the Theft Act, I think it worth reminding your Lordships that deliberate fraud against the social security system; and therefore against the public purse, is certainly no less serious than an offence against the individual which is dealt with under the criminal law. I detect at times in earlier discussions the feeling that somehow anyone who is claiming a social security benefit must be a person in need of financial help and therefore deserving of sympathy. The point of course is that the minority of people who deliberately try to defraud the system are by definition people who are not in need, and are certainly not deserving of sympathy. The in-between group, as I might describe them, consisting of people who have sought and obtained that to which they are not entitled but have done it through misunderstanding and confusion, and who are perhaps less able to cope with life in general than the majority of the population, are not likely to be prosecuted.
Clause 4 is another clause which has been criticised, not because of what it provides but because of association with what is believed to be the Government's attitude to strikers and their dependants. Clause 4 simply underpins the existing practice, by which supplementary benefit paid to a striker after his return to work is recoverable. A technical flaw has been discovered in the existing provisions which means that while supplementary benefit awarded during and paid for the first fifteen days after return to work can be properly recovered, supplementary benefit paid for that period 1063 but awarded afterwards (for example, on appeal) is not properly covered by existing provisions. This is purely tidying up, and makes no change in what has traditionally been understood to be the law and what has consistently been the practice.
Clause 5 has an entirely beneficial effect. It rescues from the effects of legislation last year, which changed the conditions for qualifying for sickness benefit for short periods of incapacity, haemo-dialysis patients whose treatment involves them in a regular pattern of short-term incapacity. This provision also in effect confirms existing practice, because extra statutory provision has been made since last September to ensure that haemo-dialysis patients did not suffer as a result of the change in the rules. Thus benefit will be payable for spells of two or three days of incapacity where the incapacity is due to haemo-dialysis; and the power could be used in respect of other categories where treatment produces a regular pattern of two or three days of incapacity each week if such cases are identified.
Clause 6 is yet another tidying up measure, though in this case the rules which have been underpinned are rules which go back to the beginning of the National Insurance Scheme. People's movements between one country and another in the course of their work have made it more than ever necessary for there to be reciprocal agreements between countries which enable contribution records and benefit entitlement to be built up in more than one country. Reciprocal agreements vary between country and country, according to the circumstances of local schemes and other factors, and tend in any case to be fairly substantial documents.
However, it has always been thought quite impossible to specify in each reciprocal agreement each and every effect on each and every individual case. The formula has therefore been adopted that the Social Security Act should be modified to such extent as may be required to give effect to the provisions of the reciprocal agreement. The Select Committee on Statutory Instruments has, however, just cast some doubt on the vires of this traditional provision; and Clause 6 establishes that the law is what it has hitherto been thought to be. There will be no change in the traditional practice, no increase in public expenditure, and no diminution of existing or prospective rights. The shortcoming pinpointed by the Select Committee is perhaps less an illustration of the complexities of social security than an example of what can sometimes happen where it has been thought necessary to simplify the provisions by adopting a broad formula.
Clause 7 puts into statutory form existing practice. British officers serving with the former Indian and Burmese armed forces, whose pensions are handled by the Overseas Development Administration, have had informal appeal rights hitherto. That is to say, their cases have been passed to this department where an objection has been lodged and considered by the Pensions Appeal Tribunals on a non-statutory basis. Clause 7 gives them the same statutory appeal rights that are available to those dealt with under the United Kindgom war pensions instruments. Clause 8 is largely formal.
1064 Finally, there are two schedules to the Bill. The first of these is associated with Clause 3 and sets out the old and proposed new financial penalties for social security offences. Schedule 2 is properly headed "Minor and consequential amendments". The first item in the schedule removes the requirement for automatic annual report from the Occupational Pensions Board, but leaves the Secretary of State free to ask the board for reports as and when necessary, and requires him to lay such reports before Parliament. This change has, I understand, the support of the Occupational Pensions Board. The second provision simply brings the Industrial Injuries Advisory Council divisions more into line with those of the Social Security Advisory Committee. In particular it gives the council the discretion that the committee has to decide that a particular set of regulations, for example because it does no more than tidy up provisions or confirm what has been supposed to be the law, need not be formally submitted to it. The third and last provision in the second schedule is entirely a matter of tidying up references in existing legislation. I think I have now covered all the clauses in and schedules to the Bill, and I beg to move that the Bill be now read a second time.
§ Moved, That the Bill be now read 2a.—(Baroness Young.)
§ 3.20 p.m.
§ Baroness Jeger
My Lords, I am sure noble Lords will wish to thank the noble Baroness, Lady Young, for the usual swift efficiency with which she moved the Second Reading of what purports to be quite a short Bill. The difficulty with the Bill however is that it cannot be considered in isolation; it is but another piece in the tapestry of the Government's social policies which in the view of some of us deliberately make life hardest for the poorest people in this country.
This is the third Social Security Bill we have been asked to consider in two years. The first destroyed the right for pensions to be assessed in relation either to earnings or prices, whichever was the most advantageous to the pensioner, and which otherwise ensured that pensioners shared in any rise in the standard of living of the country to which most of them had contributed during their working lives. I believe it is essential to link benefits to average earnings, rather than to prices as the present Bill does.
It is no use lecturing an unemployed man or invalid on keeping benefits in line with prices. That way, his standards never improve because if benefits are to keep pace only with prices, he is, or feels he is, standing still. It is no use telling him how well off he is compared with the cruel poverty of the 'thirties or before; a man is as poor as he feels. He has a sense of poverty if the neighbours' wages go up and he, being out of work, cannot provide for his children as other families do. That sense of discrimination, of unfair struggle, is being increased by the present Government and measures such as this. Then we had the Social Security (No. 2) Bill, which legislated for a 5 per cent. cutback on short-term benefit. Those two measures taken together set a pattern which to many of us is totally unacceptable.
1065 I do not want to weary the House with too many figures, but I find that had we kept to the previous system of relating pensions to possible earnings, instead of £27.50 a single pensioner would have been getting £28.5, and a married couple instead of getting £43.5 would have been getting £45.85, a difference of over £70 a year for a married couple. This all has to be seen against a background of a reduction in local authority services for people who need them most. Because it is relevant to the Bill, I would remind your Lordships of a recent report by the Directors of Social Services in which they stated:The policies now being promulgated hit many of the services specially aimed at alleviating the plight of the old, sick and handicapped, and those who cannot tolerate the stresses which our society generates".I submit that we cannot just look in isolation at these changes, particularly the changes proposed in Clause 1, without taking into account the whole picture of what is happening in the provision for those most in need of help.
The trouble is that I believe there is more to come. I must not get out of order, but I understand that the proposal to make employers pay the first eight weeks of sickness is still under consideration, although opposed by the CBI and the Engineering Employers' Federation. I am very apprehensive about that proposal because it seems to me that it will disadvantage the disabled in trying to get work which they desperately need because it is bound to encourage employers and potential employers to look very carefully at the health records of those whom they are about to employ. Then we must face the abolition of earnings-related supplements, which we are told will save the Government £360 million a year; which means it will cost those who were entitled to those benefits £360 million a year. Against that background, this mean little Bill is totally unacceptable because of the context in which it is set.
The noble Lord, Lord Cullen of Ashbourne, said on 8th April—his words appear in col. 538 of Hansard—that pensions had been and would be price protected. Let us consider what this Bill does to that assertion. The main provision in Clause 1 is to adjust the 1981 up-rating to take into account the fact that the 1980 up-rating was based on a 1 per cent. over-estimate of the increase in prices. The Explanatory and Financial Memorandum states clearly that it is the general level of prices that is being considered. It seems to me that while this is the way in which the social accountants ply their dismal trade, it is a sphere in which the Government show a total lack of warmth and imagination.
They are telling our old people and other pensioners that last year they were overpaid in relation to the general level of prices. In relation to what and compared with whom were they overpaid? Were they overpaid in relation to those who received £4,500 million in tax reductions in the first Conservative Budget, most of which went to people earning over £10,000 a year? That Budget lost millions of pounds to the Revenue. Or were they overpaid in relation to the rise in prices, as the Government are maintaining? If so, then the rise in what prices? It is usually accepted that the retail price index is not applicable to pensioner households, which is why we have other indices to follow. The last family expenditure survey showed that a single pensioner spent 69.6 per cent. of his income 1066 on food, fuel and housing compared with 43.5 per cent. for a working single person.
The retail price index includes a whole range of goods which most pensioners would never dream of buying. I submit that it is, therefore, totally irrelevant to the people about whom we are most concerned. If we consider fuel and heating alone, the family expenditure survey indicated that a single pensioner spent 13.8 per cent. of his income on fuel and heating compared with 5.6 per cent. for a single worker. And we know there are some formidable rises still to come and which completely distort any relevance of the RPI to the living costs of pensioners. We are considering commodities which are desperately needed. Heating in particular is of fundamental importance, and it is no good suggesting that we can overcome these problems by all sorts of rebates when we know, first, that means-tested rebates have a very small take-up and, secondly, that many people come just above the rebate level but are having a very difficult time.
I therefore must press the Minister on the assumption about the general level of prices to which she is connecting the position of pensioners. I do not see how it can be maintained that pensions—even with the surcharge, so to speak—are adequate in any case when one considers that out of over a million pensioners, more than 2 million are on supplementary assistance with probably another half million being entitled to further help. I often think—this is not the time to say it, perhaps—that an increase in basic pensions might save on some of the concessionary payments we make and would restore more dignity of choice, without which no real personal freedom exists.
We submit that the Government have not established any justification for the clause; they seem to have plucked the figure of 1 per cent. out of the air in a way that is not relevant to the position of people on pensions. Anybody could work out a price index which included whisky, fur coats, petrol and motor cars and which would show an enormous increase in the cost of living, but it would be equally irrelevant to the general RPI basis which seems to be the basis being used today.
The Government have yet to prove that pensioners did in fact receive 1 per cent. more than the rise in the cost of living, if it refers to their cost of living. Figures can be tedious, but to bring some life into this clause I reckon, to take the Government's assumption, that a single pensioner would have received 25p a week—and the noble Baroness confirmed that today—above the base line. What is the pensioner supposed to have done with that money? No crystal ball told him that he was being overpaid and to put that 25p in the teapot on the mantelpiece against next year's deprivations. That money has been spent. On what has that money been spent? May I remind your Lordships that a pint of milk costs 18½p? Perhaps the pensioner bought a loaf of bread, or perhaps he sent a Christmas card to somebody.
§ Baroness Jeger
Or perhaps he posted a couple of second class letters, allowing too something for the envelopes. While the Government are dedicated to 1067 correcting what appears to be over-provision to the poor they show no concern about the over-provision they make to the highest taxpayers and those with the highest disposable income. In fact, I reckon that the single pensioner will lose some £15.60 a year in real terms. The Secretary of State said in another place on 24th February:About £225 million will thus be saved by this measure—£225 million which we cannot afford to spend".—[Official Report, Commons; col. 762.]It is money that the beneficiaries cannot afford to do without. Lower social security benefits in real terms may mean that the state may save in cash on the cost of unemployment, illness or age—but that cost is borne instead by the deprivation and erosion of human dignity of the individuals concerned. This is a mean and irrelevant clause. It has nothing to do with the economic problems which are at the heart of the difficulties facing this country and the rest of the world.
As the noble Baroness the Minister has said, Clause 1 is the most important clause in the Bill and I, too, shall speak more briefly about the other clauses. We welcome the maternity arrangements, which have been the subject of much discussion, and we shall of course be looking at them in greater detail at Committee stage. We note that, for a change, there will be an additional cost of £6 million. The sooner arrangements are made to start these payments, the better, and we hope that the fullest consultation will take place.
In respect of Clause 3, which deals with the question of increased penalties, I welcome the statement made by the Minister this afternoon that there is to be no lenghthening of custodial sentences—so that we shall not inflate time as well as money. Nobody wishes to excuse fraud against the community, neither by tax dodgers nor by dishonest claimants for social security. But we share the noble Baroness's concern and must be anxious that any intensified campaign in this direction should not reduce take-up of benefits by those who are entitled to them. The Supplementary Benefits Commission estimated in 1979 that £4,000 million were unclaimed and that about 25 per cent. of eligible people—about 1 million people if one includes their families—did not take up benefits to which they were entitled. I was glad to hear what the noble Baroness said with regard to instructions to officials which will try to ensure that any action under this clause will not further inhibit people from claiming their rights. I know it is not the noble Baroness's concern, but hope that the Government will be even-handed and, while the DHSS will be increasing the number of its fraud investigators, I wonder whether there has been an increase or a decrease in the number of Inland Revenue investigators.
The question of custodial sentences is one for the courts, but I believe it is right to say that all of us must hope there will be the greatest hesitation in using imprisonment in these cases. It is generally agreed that it is important to reduce the prison population and the length of time that people spend in prison. If we are to return to economic arguments, it costs at least £120 a week to keep one prisoner; in some prisons it costs £160 a week. One must add to that expense the cost of unavoidable social security benefits paid to the prisoner's family. I hope that the utmost preventive work will be done in this direction.
1068 Clause 4 of the Bill deals with benefits paid to a person after returning to work and I agree with the noble Baroness that this is a technical amendment about the cover of benefit which amends for clarification Section 9 of the 1976 Supplementary Benefits Act. That seems to me to be acceptable as it stands. We all welcome Clause 5. This is the clause which will especially help dialysis patients because it takes away the requirement that people must be off work for four consecutive days before they can claim benefits. For such patients it is often a case of having only two or three days off before returning to work. I hope that this clause will be applied as generously and as tolerantly as possible to other disabled people, because there are many people trying to hold down a job who do require regular treatment of various sorts. I hope that the widest publicity will be given to helping such people to feel they are included under this clause.
Clause 6 and Clause 7 are both largely technical. Clause 6 deals with reciprocity with other countries and, quite rightly, makes this aspect clear. We welcome Clause 7 although I am not sure it is relevant—but if this was one method of getting it on to the statute book then it was right to do it in this way and to settle fairly this point about officers who served in India and Burma. With those exceptions I still feel that this is a mean Bill. It seems to me that it carries further forward the Government's deliberate policy of eroding the sense of community and social responsibility which is essential in a complicated and civilised society. It is not a question of good housekeeping and of doing without things we cannot afford. In my view, the Government are guilty of by-passing because they are spending money on the wrong things. They are putting £14,000 million into the pockets of 5 per cent. of the people of this country. This Government cut taxes on the rich and cut benefits for the poor in real terms.
The question is: How should we spend what we have? We can all complain that we do not have enough money and say that when we have more we will put it to good use. But the question that faces society today is, how can we pool the social risks that confront millions of our fellow citizens and which confront an increasing number of unemployed—with the figure reaching up to 3 million which, including their families, will be a really unacceptably large part of the population? Although this may seem just a little Bill, to me it symbolises the difference in attitudes to public and private expenditure which is at the heart of our political and philosophical arguments. The Government, I repeat, are deliberately making economic arrangements which emphasise instead of healing the differences between one man and another. That is a long way from St. Francis of Assisi; and I regret this Bill, especially Clause 1.
§ 3.40 p.m.
§ Lord Banks
My Lords, I should like to join in thanking the noble Baroness, Lady Young, for her very careful explanation of the contents of this Bill. As the noble Baroness said, this Bill would be a routine and relatively non-controversial Bill but for Clause 1—the clause which includes the proposal to claw back in the November 1981 uprating the 1 per cent. overestimate in inflation allowed for in the November 1069 1980 uprating. The problem arises in the first instance through having a period of reference half in the past and half in the future. Guesswork is inevitably involved if that is so, and on a number of previous occasions in this House I have drawn attention to the undesirability of that. Indeed, I criticised the last Government when they introduced this system, creating these problems, and, incidentally, at the same time depriving recipients of the benefits of an increase that they would otherwise have received if the previous historical reference period had been adhered to.
I agree with the noble Baroness, Lady Jeger, that we must consider the decision to claw back the 1 per cent., and its cumulative effect in later years, against the background of what the present Government have already done to social security benefits. In regard to long-term benefits the link with earnings has been broken. So far as the invalidity pension is concerned the link with earnings has been broken and the benefits subjected to a 5 per cent. abatement, though the Government have promised to make good the abatement when the benefit is brought into tax. So far as short-term benefits are concerned, they have been subjected to a 5 per cent. abatement, and as yet no promise has been forthcoming that that abatement will be made good when they are brought into tax; and of course not only is the abatement effective in the year in which it is first imposed, but it has a continuing cumulative effect.
I believe that the Secretary of State has claimed total savings on the welfare budget of £1,500 million. We must, too, consider the decision to claw back the 1 per cent. against the Government's attitude to shortfalls in the past. It is true that they had given an undertaking to make good the shortfall in the Labour Government's estimate with regard to long-term benefits at November 1978; and that they did make good. But they refused to make good the shortfall of November 1978 with regard to short-term benefits, and they refused to make good the shortfall at November 1979 with regard to long-term benefits. The present Bill deals only with November 1981, but if future over-estimates are to be dealt with in the same way, then we require cast iron assurances that under-estimates will be made good. Now the Prime Minister has given a pledge that so far as pensions are concerned, that will be the case. It is not clear to me whether the pledge applies also to other long-term benefits, and it would appear that it does not apply to short-term benefits. I should be grateful if the noble Baroness, Lady Young, will clarify that point when she replies.
As the noble Baroness, Lady Jeger, has said, it is not as if social security benefits are too high. If we look, for example, at unemployment and sickness benefits, we find that a man with a wife and two children in 1970 received benefit which represented 66.5 per cent. of net average earnings. In 1979 the percentage had fallen to 59.5 of net average earnings. So far as pensions are concerned, 18 years ago my party accepted the target of 33 per cent. of national average earnings for the single person's pension and 50 per cent. of national average earnings for the married couple's pension.
What is the position today? At last November, the maximum point—the point when the percentage 1070 is at its highest because the increase has just taken place—the pension for the single person represented 23.73 per cent. of national average earnings, which was nearly 10 per cent. short of the target, and for the married couple the percentage was 37.98, some 12 per cent. short of the target. Of course, the figure would gradually fall away during the year, as inflation bit into it.
In those circumstances, we on these Benches welcome the over-estimate of 1 per cent. In view of all these factors the Government might well have regarded the 1 per cent. over-estimate as a small and fortuitous modification of the cuts already made. However, the Government say that they cannot afford that, that the economy will not permit them to allow that over-estimate to stand. But I wonder whether that is anything more than a dogmatic assertion. The Government are spending as a percentage of gross domestic product less than are many other industrialised countries, and figures published again during the last two or three weeks have indicated how far down the league table we come.
Government spending as a percentage of gross domestic product is not higher than it was five years ago. Under the present Government it has increased as a percentage, but it fell in the latter part of the last Government's term of office. But we are told—the noble Baroness repeated this this afternoon—that in 10 years the social security bill has gone up from 17 per cent. of total public expenditure to 27 per cent., and must be checked. We know the main reasons for this—for example, the rising number of retirement pensioners, which came as no surprise. That was allowed for in the retirement pension provided under the 1975 Act and introduced in 1978. The contributions introduced at that time have not shown themselves incapable of providing that benefit. Any increase that there has been in the national insurance contribution has been largely as a result of the increase in unemployment.
Then there has been the introduction of child benefit, which meant the substitution of cash payments, which count as public expenditure, for allowances against tax, which do not. There has been an increase in the real value of benefits. This, too, was provided for in the 1975 Act so far as national insurance is concerned, and there have been some new benefits, such as mobility allowance.
So Parliament decided to tip the balance towards social security. Was that wrong? I believe that we need a thorough examination of the relationship of the social security budget to the national budget and to the national economy. What is the right proportion of expenditure on social security, bearing in mind that social security payments and social security contributions, though they of course have an impact on the economy, are nevertheless a transfer of income and not a claim on physical resources; and bearing in mind, too, the needs of the population. Should benefits financed by national insurance contributions be counted at all as public expenditure, except as regards the Treasury supplement? Compulsory insurance payments for motor insurance, for example, are not so regarded. I believe that we need to have the answers to questions such as those before we can say that the Government, having already made considerable 1071 cuts in social security benefits, must for the sake of the economy go on to claw back the small, fortuitous mitigation of the cuts which social security recipients have received.
§ 3.49 p.m.
§ Lord Kilmarnock
My Lords, I am glad to be able to begin by welcoming the noble Baroness's announcement that the Government have dropped their original intention to increase the custodial sentences associated with frauds of supplementary benefits, of benefits of all kinds. It seemed to me to emerge very clearly from the debate that we had during the Committee stage of the Criminal Attempts Bill, in particular from the speeches made from this Bench by the noble Lords, Lord Donaldson of Kingsbridge, and the noble Lord, Lord Hunt, that that maximum deterrent effect lies in the very prospect of going to prison at all, and the maximum punitive effect is achieved during the first few days or weeks. What is more, such an increase would have gone directly against the Government's declared strategy to reduce the prison population. Therefore, we on this Bench are able to welcome the announcement.
Now I turn to the main clause and principal raison d'être of the Bill, Clause 1. This has been very fully covered from the Opposition Front Bench by the noble Baroness, Lady Jeger, and by the noble Lord, Lord Banks, with his usual thoroughness. But the matter of the claw-back is not as simple a one as it appears at first sight, and in the interests of clearing my own mind and those of my noble friends, perhaps, I am afraid I must ask the noble Baroness to answer, when she comes to reply, one or two questions. In the first place, can we have an undertaking from the Government that if there is an under-estimate this year or in any future year it will be made good—that is, that the reverse procedure will apply—and that any under-estimate will be made good to pensioners and any other long-term beneficiaries with the same speed as this supposed over-estimate is being clawed back from them?
Next, what is the position to be if an intentional rise is awarded over and above what would be justified by the price index, owing, perhaps, to an improvement in the country's economic position? On the principle now being established, could this be clawed back in a subsequent year because the economy had turned down again? It really would be intolerable if pensioners in particular were to be placed on this type of see-saw. Furthermore, these abstruse Treasury calculations cut little ice with the beneficiaries, who find them extremely hard to understand.
There is, incidentally, a further serious defect in this legislation, which is that new entrants to the pensioner category this year are being docked on account of a notional excess payment which they did not even receive. It was hardly a "big deal" for those who did, and will be of little comfort to those who did not.
I anticipate that the noble Baroness may say that this is a once-and-for-all operation; in other words, that pensioners and others are being asked to repay a 1 per cent. over-payment last year, this will put the record straight and that is that. But, my Lords, it is a precedent, and we all know how insidious they can be. 1072 Furthermore, is it really correct to say that this is a once-and-for-all operation? Is there not, in fact, as I think the noble Lord, Lord Banks, suggested, a cumulative effect here? The supposed over-payment took place on last year's lower base, surely, while the 1 per cent. claw-back is to be applied on this year's higher base. The effect, I agree, is relatively small when a single percentage point is involved, though this does not mean that it will not be bitterly resented by 9.6 million pensioners up and down the country.
But what if the Government are wrong in the future by, say, three percentage points? The cumulative effect in this case would be considerable. That is why I believe that this is a thoroughly undesirable precedent to introduce into the social security legislation of this country. I really cannnot believe that it would be right that old people in particular, whose tight budgets are particularly sensitive to marginal changes in their real income, should be subjected to this see-saw approach to their pensions. I make no apology for repeating the see-saw metaphor because I believe it is apt.
Finally, there is the whole question of which index is to be used as the basis for calculating statutory pension increases—and this was in fact touched on also by the noble Baroness, Lady Jeger. The 1975 Act said prices or earnings, whichever was the highest. Now the base is just prices, and the yardstick used is the retail price index. But, as the noble Baroness indicated, there are other indices. The TPI, the tax and price index, for example, is several percentage points above the RPI. There are very strong grounds for believing that the RPI does not truly reflect pensioners' living costs. All the available evidence shows that the rise of the cost of living, both for low-income families and for retirement pensioners, is greater than the RPI. The noble Baroness, Lady Jeger, gave some of these figures, but I think it is worth repeating them. The last family expenditure survey showed that a single pensioner living alone spends 13.8 per cent. of income on fuel, whereas a single person below retirement age spends only 5.6 per cent. If fuel, food and housing are taken together, the single pensioner spends 69.6 per cent. of his income on these three items alone while the corresponding percentage for a single householder below retirement age is only 43.5 per cent.
Another important consideration is that old people frequently lack transport to take them to supermarkets and shopping centres, and are therefore forced to do their shopping at the corner shop. I have nothing against corner shops, and long may they survive, but their prices are inevitably higher than those of the big chains and this must affect the costs of old people using them. All in all, my Lords, there would seem to be a strong case for using the family expenditure survey or some other adequately weighted measurement to assess pensioners' living costs rather than the retail price index. I understand that it was the Government's pledge at the last election to keep pensions in line with the cost of living. If this is to have any real meaning, it must surely apply to real costs. I should therefore like to ask the noble Baroness to tell us when she comes to reply whether the Government will consider revising their procedures for assessing pensioners' statutory increases. The present basis seems to be less than satisfactory.
§ 3.56 p.m.
§ Lord Boyd-Carpenter
My Lords, as social security Bills go, this is not a major measure, although it shows a sad consistency with a good deal of other recent legislation, in that it arrives in this House with two corrigenda slips attached. I should once again like to ask my noble friends on the Government Bench whether someone cannot take a grip on the supply of legislative material effected to this House, and make sure that Parliamentary Bills in particular arrive here word prefect, and not with two corrigenda slips attached, involving one in the effort, particularly if one is consulting people outside, of fitting the alterations into the text as originally issued. This used not to happen some years ago; it is not necessary that it should happen; and it indicates carelessness somewhere. Naturally I do not attribute that to my noble friend Lady Young, but I do attribute it perhaps to some of those who serve her.
As I ventured to say to your Lordships, this is not a major measure, although the noble Baroness, Lady Jeger, did her splendid best to try to make it seem so. But your Lordships will have observed that she did so only by reminding us of a good deal of the material in at least two preceding measures which have been through the parliamentary process and which are now the law of the land. As my noble friend on the Government Front Bench said, in point of substance or controversy, Clause 1 is of course the only point of any real substance.
However, I should like to address myself, if I may, to the general approach of the noble Baroness, Lady Jeger. She did not appear to appreciate, not only in her strictures on this measure but in her somewhat retrospective comments on preceding measures, that no activity of government, not even social security, can be immune from the effects of the general state of the national economy. I have on occasion reminded your Lordships of the fact that I was at one time responsible for social security. Indeed, I believe I was so responsible for a longer period than any other Minister since the National Insurance Act 1948. But I did have the good fortune, for which I thank providence, that I was in that office at a time when the national economy was expanding. This was an era when even lower levels of taxation produced ever higher levels of revenue because the national income, under the wise administration of that era, was steadily growing. I therefore have a good deal of sympathy with those who, like my noble friends on this Bench, have to look after our social security system at a time of manifest economic difficulty. The problem is a different one; and with all respect I suggest to your Lordships that this is a matter which we ought to have very much in mind in considering the various proposals brought forward.
I thought, if the noble Baroness, Lady Jeger, will allow me to say so, that, for her, her approach was a little simpliste when she compared the modest restraints involved in Clause 1 with certain reductions in direct taxation made two years ago. The approach seemed to suggest—and I hope that she will not mind my putting it in this way—that the function of Government was to take a grip of the whole wealth of the country and then hand it out, parcel it out, in a way they regarded as morally meritorious. That kind of 1074 thing has been tried and has been a disastrous failure because it ignores the basic element in the whole equation, the incentive to create wealth. If you adopt this maternalistic attitude—and I was about to say "paternalistic"—towards the whole of the national income, then, inescapably under what is still basically a free enterprise system, you discourage enterprise, damage incentive, drive the wealth producers overseas and, at the end of the day, have less wealth to distribute. So I think that we should look at this very much with the lesson of the late 1950s in mind; that the possibility of making the improvements in our social security system, which on all sides of this House and outside we want to see, depends on securing a growth in national wealth. An attitude of taking the whole wealth of the nation and bundling it out as some Government department thinks fit is really fatal to that objective of strengthening the national creation of wealth.
§ Baroness Jeger
My Lords, I am very confused as to what result the present Government policies are having in increasing the wealth of the country in view of what we have seen over the weekend and the increase in the numbers of the unemployed. Is the noble Lord saying that, however much the wealth of the country increases, redistribution has no part for a Government with any social conscience?
§ Lord Boyd-Carpenter
My Lords, in the first place, if the noble Baroness will exercise the divine quality of patience and allow for the fact that the present Administration inherited the results of disastrous mismanagement of our economy over a number of years and requires time (particularly during a world recession, which obviously has not facilitated their task) to produce results, she will find that the harsh and difficult measures which have had to be taken for this very purpose will in due course have their effect and we shall get back to the happy state of affairs in which the national income is increasing again and in which, among other things, the task of a Minister of Social Security again becomes a pleasant and agreeable one.
As to redistribution, it is foolish to be dogmatic. There comes a point—and it is a matter of enormous argument, I agree, where that point is—where compulsory redistribution discourages the creation of wealth. Undoubtedly, to judge from the results, there have been times in our recent past when we have gone beyond that point but, of course, again, once you have a strong and expanding economy, you can take (as the Macmillan Government took) a considerable amount in taxation and use it to improve the lot of the less fortunate.
That leads me on to the noble Lord, Lord Banks, who in previous debates has perpetrated, if he will allow me to say so, what is the same heresy. He expressed a doubt as to whether expenditure from the national insurance fund was public expenditure at all. I think that if the noble Lord thinks about that, he will realise that it must be so. Expenditure in the national insurance fund comes from two sources: the contributions of the contributors taken from them by law (in something like the way in which income tax is taken by law and, indeed, diminishes the amount of income that they have available to have income tax 1075 levied upon it) and also directly from the Exchequer by way of the Exchequer contribution. It is, in the true sense, money taken by the state to be spent for particular purposes which the state thinks right. The fact that the noble Lord and I think that on the whole these purposes are right does not, I suggest, make it the fact that this is other than public expenditure, however admirable. Therefore, I suggest to him that it must be taken into account by a Government which have (as noble Lords on both sides of the House well know) an extremely difficult economic situation to handle.
The trouble, as my noble friend Lady Young so well said, is that restraint in these matters is always painful. If you are to administer a great social security system on which a large number of our fellow countrymen are and will be for many years in large measure dependent, you cannot proceed in the handling of it just on the basis that the sky is the limit regardless of the general economic situation. Every item of it must be improved as the year passes. There come times—and this, I think, is one of them; and I say that I am happy to think that I was not myself personally involved at such a difficult time—where restraint is necessary and where things like special priority for child allowance, for example, has to take precedence; and taking precedence means that other things do not go forward as fast as one would like.
This is surely the proof about the social security administration and it is surely, therefore, right for a Government to show kindness and sensitivity, but also to have the courage and the determination to exercise that painful restraint which they have to do. It would have been easier for the Government not to have worried about the 1 per cent. last year. It has always seemed to me that the system under which the increase in pension to take effect in November is announced in April (or, as this year when the Budget was in March, in March) is an odd system, because in times of inflation it is impossible accurately to assess what the retail prices index will have done over as long a period as that. That was not a problem in the late 1950s since the index was stable and, indeed, an increase of 1 per cent. in the course of a year was apt to cause alarm. It is a problem now.
I think the Government ought to give consideration as to whether, notwithstanding the natural convenience from the Chancellor of the Exchequer's point of view, it really makes sense to announce benefit rates for November in a speech in March or early April. Until inflation has further reduced than at present, it seems to cause the Government a quite unnecessary difficulty and to involve them, as this Bill does, in having to do something which is very easy to attack. I commend the Government's courage in this. The House will remember that the pensioner, of all people, is the most vulnerable to the ravages of inflation, not so much because of his pension, which is related to prices, but because many pensioners have savings which inflation erodes. Looking at it from the point of view of the general benefit of the pensioner as of everybody else, it seems to me that the line the Government are taking is courageous and right and I hope that the House will support them in it.
1076 My Lords, I would add one point on a small matter which I was delighted to see in Clause 7 of the Bill. It is absolutely right that India and Burma officers at last should have the right to go to a pension appeals tribunal as of right. To go by arrangement, to go by concession, is not the same thing. The matters involved are generally very important for them. Although it is late in the day—some 30 years—since we left India and Burma, it is quite good of somebody in the Government to have thought of this at this stage and to have it included in the measure. I should like to thank my noble friend for doing that.
So I personally fully support the Government in this measure. I sympathise with them. All noble Lords will realise how much pleasanter it is to be able, as one day my noble friends will be able to do again, in the words of the poet: "To scatter plenty o'er a smiling land".
§ "And read their story in a nation's eyes".
§ 4.11 p.m.
§ Baroness Phillips
My Lords, I intervene in what the Minister might consider is a cheating action because I wish to refer to something which is not actually in the Bill. I call in aid the fact that all social security Bills, having had the experience of dealing with them from the Front Bench, when in Government, tend to be rag bags. In other words, various things are put in which are not in total juxtaposition, as indeed is the clause to which reference has just been made. I do not intend to follow what the noble Lord, Lord Boyd-Carpenter, said other than tell him that people do not feel that the Government give them any pensions at all. Most people feel—and rightly—that during their working life they make a contribution which were they to put it in a private insurance scheme would certainly not be subjected to every wind of change. Governments take advantage as no private scheme would attempt to do.
They would probably have put the money in a much more protected source so that it would be there to pay out. One of the points that comes out clearly about the paying in and the drawing out is in the clause which refers to the maternity pay. One should be delighted that the Government are putting it in in order to pay more; but when Governments purport to increase something I am always very nervous that at some later stage they use the same clause in order to decrease it. They have not put in the word "decrease"; I think they have put in the word "increase". I only hope that this augurs well for the maternity payments.
As your Lordships will know, under the maternity payments you can receive—though it is unlikely that many people do—three things. You can receive the maternity grant, which is the magnificent sum of £25. At the price of most children's clothing and cots, prams, et cetera, I do not think that that would purchase very much. You can receive the maternity allowance which is payable for 18 weeks, and you can receive the maternity pay provided you fit in with all the necessary qualifications.
The maternity allowance has not been mentioned in this Bill. This is the one to which I wish to refer. The allowance we are told is payable for 18 weeks. These are 18 weeks which the Government specify. 1077 In other words, 11 weeks must be taken before confinement and the rest afterwards. I said when I put down a Question about this that surely if you are allowing payment out of any fund you must have allocated on the assumption that everybody drawing would draw the 18 weeks. You cannot have assumed that a certain number would only draw the odd seven. I appeal to the Government to make this a flexible payment.
I have come up against this largely because my own secretary—who is continuing to work largely because she is needed by the employer and is really doing a favour to the employer—will ultimately lose the money for which she has paid in. As she points out, she has paid a full stamp. She says: "Since I am not going to be able to draw it, I shall make sure that I point out to other people that there is no particular advantage in paying the full stamp."
That is the disastrous effect that you can have if people feel that they are not getting the benefits that they have been told that they will receive. The noble Lord, Lord Cullen of Ashbourne, when he replied to my Question, pointed out that a review was in progress. He heartened me by saying that perhaps it might be simplified and perhaps there would be a better way which everybody could receive a higher sum of money thus cutting across the rather complicated rules which at the moment mean payment. I wonder whether we can dare ask whether, if we move an amendment to this Bill in the later stages, the Minister would receive the idea? This is on one simple matter: the 18 weeks' payment should be a flexible payment. The noble Lord, Lord Boyd-Carpenter, referred to prosperity. Prosperity is obviously earned by people who are still working. If they are going to be penalised, as indeed pensioners are if they work—we all know the iniquitous earnings rule, it is taking money away from them—there is precious little encouragement to add to the national wealth.
This is a simple example but it affects a large number of young working wives. It is much better for them if they work. The money is surely intended for the use of the child, not merely to keep the mother away from work. Obviously, if women were going down coalmines it would be absolutely essential that they did not work; but so many women are working in places where they are needed and wanted. I feel that it is unfortunate that this system works in this curious way. I am hopeful—casting my bread upon the waters—that perhaps if I could introduce a small amendment at the next stage of the Bill the Government will look kindly upon this. I do not think that it will involve a great deal of increase in money being paid out but it will enable the people who continue working to receive what they feel to be rightly theirs.
§ 4.17 p.m.
Lord Wallace of Coslany
My Lords, we have had a somewhat short debate which to me to some extent is disappointing because this is a very important and vital subject. I should like to thank—as indeed my colleagues have done—the noble Baroness for her outline of the Bill, which was made with great speed and with her usual smooth and reassuring performance, although unfortunately I am not reassured.
1078 The Bill that we are discussing has been described in another place by a Conservative MP as "unfair and mean". That in my view is an understatement. This MP with another actually voted against their Government on the Second Reading. As the House is aware, this Bill is the third in a series of Bills on social security. The purpose of the Government with this Bill, as with the others, is to reduce public expenditure, and the effect is to reduce the amount and purchasing power of benefits. That in a nutshell is what this Bill is about.
We are told time and time again that the economic position of the country is critical—and I do not dispute that—and that all sections of the community must make some sacrifice. Bear in mind the lavish tax handouts given in the first Tory Budget where, by the end of 1980–81, the loss of revenue through the change in the standard rate of income tax alone will amount to approximately £6,400 million. The loss each year by the adjustment in the higher rate band is about £300 million.
Taking this into account, how can the Government talk about sharing the burden to the increasing millions of unemployed, the disabled and the sick? Are not these members of our society sacrificing enough already? It is stated that the cuts are small. The fact is that the living standards of the worse-off sections of the community are being reduced by this Bill and preceding legislation.
The Secretary of State said to the Conservative Party Conference in 1980:We believe that it is the duty of the strong to help the weak. That is why we seek to help the most vulnerable in our society. Those words are not just pious platitudes: look at the record".Look at the record indeed! Without taking into account the 1 per cent. issue in this Bill due to the breaking of the link of pensions with earnings, single old-age pensioners are 90p per week worse off and married couples are £1.40 worse off. Take the long-term disabled, and bear in mind that this is the International Year of the Disabled; every single invalidity pensioner is suffering a cut of £2 per week that he would have received, and a married couple a cut of £3 per week. Look at the record indeed! All this is without taking into account Clause 1 of this Bill.
Quite honestly, I do not think the majority of those on the Benches opposite know or appreciate what life on a low income, be it wages or social security benefits, really means. Charles Dickens' character, Micawber, is not exactly typical of the people we are discussing and who are affected by this Bill, but Dickens had an appreciation of poverty:Income £1, expenditure 19s 11d: result happiness. Income £1, expenditure £1. Os 1d: result misery".When the income is low, a few pence one way or the other, be it price rise or social security benefit, makes all the difference in the world. Some of us know what it means from our own personal experience in the past.
We often hear references being made to some women being bad managers. This sort of talk usually arises when we discuss social security. It arose in a question very recently which was discussed in this very Chamber. A woman has to be a mathematical genius to cope with the financial situation of a family on low income, be it a single-parent family or a family with the breadwinner physically disabled or unemployed. It is a 1079 constant battle, often lost, to make ends meet. These are the people from whom the Government expect to effect financial savings in the present economic situation and to defeat inflation—the Clause 1 victims, in fact.
I will now make a few comments on Clause 3, with its increased financial penalties on those seeking benefits from the state to which they are not entitled. I am glad to see that the imprisonment side of that has been cut out. Those "scroungers", as sonic call them, are comparatively few in number but any case established is headlines in some sections of the press and creates an impression of widespread abuse which in fact is not the case. Some 1,000 staff are, I understand, now being employed to sniff out fraudulent claims, which operation is expected to save £50 million. What is the cost annually of this exercise? Why this concentration on social security benefits and not on tax evasion which is estimated to cost about £2 billion per annum?
What I am afraid of is that the increased severe financial penalties will scare off people who are entitled to claim supplementary benefits but do not do so. I understand it is at least 500,000, and probably more. When I was Member of Parliament for Norwich North I frequently had to try to persuade elderly or handicapped people to claim supplementary benefit. Many had not done so mainly because of lack of awareness of such benefits and very often, with the elderly, just pride. If I failed to convince such people I used to write or phone the manager of the local social security office and ask him to send round to the person concerned a tactful and experienced member of his staff—and I pay tribute to the many members of the social security offices I have met in the course of my career. As a result, many people received additional help to which they were fully entitled.
Now I put this point to the Government: You are engaging in an intensive and expensive campaign against fraudulent claims. What action are you taking to persuade the entitled to claim? I am persuaded to make this point arising from an article in the Guardian dated 28th May 1981; and I quote:Radio commercials urging the elderly and the unemployed to claim more social security benefits are about to be launched by Labour-controlled councils in Sheffield and Newcastle upon Tyne.Their decisions follow a successful publicity campaign by Strathclyde Council which resulted in extra social security payments last year of nearly £1 million.Both councils are voting ratepayers' money totalling £32,000 to launch the campaign, which will include the employment of a welfare rights worker and an education and information campaign on welfare rights. Newcastle upon Tyne is also to launch an 'advice line' for people seeking help on benefits. Sheffield is to concentrate on helping those on short time, the newly unemployed and the elderly.The authorities' move follows a letter to three Sheffield MPs from Mrs. Lynda Chalker, a junior Social Security Minister. In it Mrs. Chalker said that the Government's main purpose in its Social Security Act was to save money—about £270 million this year and up to £480 million next year. She also condemned the idea of 'an increase in general publicity' to encourage more claims".Will the Government support and encourage such councils to do their work for them or will they indulge in a similar campaign? Or will they take action to stifle such activity, on the grounds that their main purpose in their social security legislation is to save money— 1080about £270 million this year and up to £480 million next year"?This is a ruthless, tawdry and mean little Bill. By tradition we do not oppose Government legislation passed from another place on Second Reading in this House. I, for one, respect tradition but I am very strongly tempted indeed to advise my noble friends to divide the House. We shall not do so, but will closely examine the Bill in Committee and on Report. The Government Chief Whip, as is his habit these days, will no doubt put his faithful watchdogs on the doors. Even so, we look forward to receiving support from many quarters in our effort to bring a degree of humanity into what constitutes a harsh and unjust piece of projected legislation.
§ 4.28 p.m.
§ Baroness Young
My Lords, we have come to the end of a short debate on this Bill. I should like to begin by thanking my noble friend Lord Boyd-Carpenter very much for speaking in support of the Government. I am grateful to him for understanding some of the problems that we on the Front Bench face. One of the difficulties that the Government encounter is the fact that a lot of people are disinclined to recognise the reality of our situation and to face the very hard and difficult policies that we are asked to carry out. I have listened on a number of occasions to the strictures from the Opposition Front Benches, particularly in debates like this, and have been accused of a great many things. I should like to assure the Front Bench opposite that I understand what it is not to have a lot of money. I only wish that I had never had the experience of having a little money, but, alas!, that is not the case. I have also known a lot of people who have had to struggle on very little money, and I am perfectly well aware of the difficulties that people face in these circumstances.
I should also like to assure noble Lords opposite that I should much prefer, as my noble friend Lord Boyd-Carpenter has said, to be able to come to the Dispatch Box and say that all the benefits were going up. Who, in political life, does not like to be able to say what people want to hear, and to say it because it would give so much pleasure and help to a lot of people who deserve it? There is surely no difference of opinion about that. But I do not think it helps, in these circumstances—certainly, it does not help the elderly or those on both short- and long-term benefits—to give exaggerated pictures of what is happening. Therefore, I am very grateful to my noble friend for setting out the economic background to this Bill—I shall not repeat the arguments, because he has made them very carefully and clearly—and, also, for his explanation and understanding of what Clause 1 is attempting to do.
Having thanked my noble friend for his remarks, and particularly for his welcome to Clause 7, I should like to say to the noble Baroness, Lady Jeger, and, indeed, to others who have spoken, that I am glad that they at least support Clause 3 and some of the other measures in the Bill. I shall concentrate my remarks very largely on Clause 1, in order to get away from some of the exaggerations which play on the fears of the elderly, and in order to set the record straight—which is very important—in relation to this 1081 Government's and other Governments', policies on pensions.
There is one matter which I should like to clear up which is not directly concerned with the Bill, though it was referred to by the noble Baroness, Lady Jeger. It relates to the employers' sick pay arrangements and the effect that they might have on disabled people. It is very important to make it clear that this is not, as the noble Baroness suggested, directly relevant to this Bill, but it is worth saying, and saying as often as we can, that the attendance record of disabled people is, in general, very good indeed. The recent figures on employing disabled people, which have been produced by the Manpower Services Commission, emphasise the point that disabled people are good employees with good records. I should not want the suggestion to get about, in any way, that the sickness absence of disabled people is generally above average, because there is no evidence of this. It is very important to make that point quite clear.
To turn to Clause 1 of the Bill, the really contentious part of it is subsection (3). This enables us to take into account at this year's up-rating the fact that last year we increased benefits by more than was our intention. The intention last year was to increase pensions and other long-term benefits, apart from invalidity benefit, in line with prices, and to increase short-term benefit and invalidity benefit by five percentage points less than the increase in prices, under the provisions of the Social Security (No. 2) Act 1980. In the end, the estimate of price increases was 1 per cent. too high, at 16½ per cent. instead of 15½ per cent., and subsection (3) enables us to calculate this year's rates by recalculating the 1980 rates as if the prices forecast had been correct, and to increase those recalculated rates by 10 per cent., which is the expected increase in prices between November 1980 and November 1981. I have been asked—
§ Baroness Jeger
My Lords, before the noble Baroness leaves the point of prices, can she answer the point raised by more than one speaker? Of what was it 1 per cent.? Was it 1 per cent. of the general level of prices, 1 per cent. of the RPI or 1 per cent. of the pensioners' estimated budget?
§ Baroness Young
Yes, my Lords. I was just coining to that point, because it is an important one which the noble Baroness and other people raised. The basis is the retail price index. I should like to say on this point, because it has been raised by a lot of noble Lords, that the general retail price index is widely accepted as a reliable measure of price increases faced by different types of households to which the index refers. It was, of course, used by the noble Baroness's own Government when they were in office. It includes low income families and the majority of social security beneficiaries, including about half of all pensioner households; and, of course, the up-ratings affect many more people than pensioners alone.
As to the suitability of pensioner indices, which point was raised by the noble Lord, Lord Kilmarnock, I understand that these are limited in scope. In particular, they exclude housing costs and are published only quarterly. They cannot, therefore, be compared directly with the general index, and it would not be 1082 appropriate to up-rate benefits in line with an index which does not cover housing costs. It is very important that I should make that clear.
It may be helpful, if I go on to say that, in 1977, 1978 and 1979, pensioners' indices rose by less than the general index, excluding housing. It is true that over the 12 months from the fourth quarter of 1979 to the fourth quarter of 1980—this is the nearest we can get to the 54-week period between the 1979 and 1980 upratings—the general index, excluding housing, rose by 13.3 per cent. compared with 14.7 per cent. for the one-pensioner index and 14 per cent. for the two-pensioners index. It would not be easy to calculate for a 54-week period, but the difference would probably not be significantly altered. So the 1 per cent. relates to the retail price index, which is the index now used in all cases, and I think it is right that we should stand by that same index.
I should like to reaffirm—again, this is a point which was raised by the noble Baroness, Lady Jeger, and the noble Lord, Lord Kilmarnock—that the shortfall will be made good for pensioners, as for other long-term beneficiaries. The shortfall will hold for all of them. It is the intention that the provision will cover only this year's 1 per cent. overpayment and will not extend any further than that. So there is no question of this arising under this Bill at another time.
On the question of the overpayment, I think that the noble Lord, Lord Kilmarnock, has misunderstood the position. The 1 per cent. was 1 per cent. extra on the 1979 benefit rates. By recalculating the increase on the 1979 rates to give a notional rate for November 1980, the 1 per cent. is precisely recovered. It is not a direct 1 per cent. subtraction from the 16.5 per cent. The effect is to increase the 1980 rates by 9.06 per cent.—not a full 1 per cent. reduction.
The noble Baroness, Lady Phillips, raised a quite separate point about maternity pay. She has raised the question of maternity allowance before in this House, and I know that she feels very strongly about it. The estimates of maternity allowance expenditure are based on actual experience and on birthrate projections. To extend the entitlement period would mean an increase in costs, however marginal that might be. I understand that the noble Baroness hopes to put down an amendment to give flexibility of entitlement, which would undoubtedly increase the cost. She will not expect me to say that this is something which I welcome, but of course I shall look to see what the amendment is when she puts it down before giving a definitive answer on the point.
The noble Lord, Lord Wallace of Coslany, raised a number of points about the amount that we shall save by employing more people to deal with fraud and abuse. My understanding is that the net savings figure of £40 million relates to the extra resources devoted to this area, and a fuller Statement will be made to the House next week on this subject. But it is a net savings figure that we expect to get.
I hope I have covered in my remarks the answers to the main questions which have been raised. I am grateful for the support I have received for the non-contentious parts of the Bill, which I think help in a number of areas. For instance, there was the point which was made about home dialysis patients, and the point which my noble friend Lord Boyd-Carpenter 1083 made about pensioners. I think that the noble Baroness, Lady Phillips, and the noble Baroness, Lady Jeger, are pleased about the provisions concerning maternity pay which will mean that no loss is suffered once the earnings-related supplement goes. I feel this will help that small group of people.
Finally, the Government remain committed to standing by the statement which my right honourable friend the Prime Minister and others have made, and have repeated, that the Government's plan is to keep pensions and other long-term benefits up with prices. This is a guarantee that the pensioners will not fall behind others. The Government's record in this respect is good. If we look at social security benefits over a long period of time, we see that Conservative Governments have introduced a number of new measures. As my noble friend has quite rightly said, when the economy has improved, pensions have improved in real terms. I hope we may agree that we all want the economy to improve, not only because we should like the country to be more prosperous but because it is only a prosperous country which is able to help really effectively those who are the least fortunate of its citizens.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.