Supplementary Benefits and Capital Assets (Hansard, 12 March 1981)

§ Lord Monson
My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.

§ The Minister of State, Department of Education and Science (Baroness Young)
My Lords, a person's home has never been taken into account and this position remains today. For other capital assets, from 24th November last, the capital rule for supplementary benefit changed. Previously, capital of £1,200 or less was disregarded and above that figure a sliding scale of assumed income was taken into account. Under the new regulations capital up to £2,000 is disregarded, but where a claimant's capital exceeds £2,000 there is no entitlement to benefit. In this context, the surrender value of a life assurance policy is and always has been regarded as part of a claimant's capital because it is a free resource which can be turned into cash. The change to a single capital cut-off was one of the measures of simplification introduced as part of the new Supplementary Benefit Scheme, and we shall be watching its operation with close attention.

§ Lord Monson
My Lords, while I thank the noble Baroness for her reply, would she accept that most people see the sharp cut-off point of £2,000 for property other than house property, which the new regulations stipulate and the old regulations did not, as not only extremely unfair to individuals but also as injurious to the nation as a whole in that savings of rather more than £2,000 invested largely in British industry, either directly or indirectly through the medium of an insurance policy, will have to be liquidated and the proceeds invested in such frivolities as a video recorder made in Japan, for example, which, of course, is not taken into account in assessing eligibility for supplementary benefit?

§ Baroness Young
My Lords, the noble Lord will appreciate that this new rule has only been in operation since last November. I would like to confirm that the 382 Supplementary Benefits Policy Inspectorate is undertaking an inquiry into the operation of the new capital cut-off rule, and its report is expected in a few months.
On the noble Lord's second point, about spending capital resources in the way he described, I should draw his attention to two of the regulations under the first Social Security Bill; the first one relates to a person depriving himself of resources to obtain supplementary benefit, and the former commission's practice was to use their power largely in relation to a person who gave away his capital. The second regulation can be invoked against a person who converted capital into personal possessions which were in the nature of an investment or were out of keeping with his usual standard of living Those are two safeguards to discourage the frivolous spending of capital.

§ Lord Drumalbyn
My Lords, are people debarred from rent allowances if their capital exceeds £2,000?

§ Baroness Young
My Lords, the question of rent allowances—which assumes, of course, that the person in question does not own the property—is a matter about which I think that I must write to the noble Lord. The point of this Question is that the ownership of a house does not count as capital for which the £2,000 is taken into account.

§ Lord Hale
My Lords, is the noble Baroness aware that under the old rules of estate duty, so far as I can find out—and I am without any legislative authority—the district valuer who valued a man's house at £50,000 or more did so with vacant possession? If the owner died then the occupants belonging to the same family were charged estate duty on the basis of the value of the house with vacant possession. Someone with a house of that value, on vacant possession, may now be called upon to pay up to £1,000 or £1,500 a year in rates in London, and up to £1,500 a year for heating the house and keeping it in good condition. The man who owns his own house under this Government is in a singularly unhappy situation.

§ Baroness Young
My Lords, I think that that is quite another question. However, I would not accept under any circumstances that the owner of a house is in an unhappy position. In fact, as my Answer to the first Question made perfectly clear, the value of the house is excluded from consideration as regards capital assets for someone who finds himself on supplementary benefit.

§ Baroness Wootton of Abinger
My Lords, would the noble Baroness make it perfectly clear—I think it was inherent in her previous answer—that someone can live in a house worth £50,000 unmortgaged and receive supplementary benefit; and secondly, if someone receives, let us say, redundancy pay of up to £10,000 he can be restrained from spending that as income?

§ Baroness Young
My Lords, the answer to the first part of the noble Baroness's question is: "Yes, that is what I said". As regards the second part of the question, I point out that redundancy payments do count as capital for supplementary benefit purposes. 383 However, my right honourable friend the Chancellor of the Exchequer said during his Budget speech that the Government were looking at the suggestion that the existing social security rules did act as a deterrent to initiative, and consideration was being given to whether they could be altered, or other arrangements made, so as to encourage people who had been declared redundant or who had been unemployed for some time to start their own new small businesses.

§ Baroness Wootton of Abinger
My Lords, would the Minister not agree that the present situation gives great incitement to people to spend their redundancy pay at one go, as it were, in order that they may qualify for supplementary benefit?

§ Baroness Young
My Lords, that, I think, is really the same question as the noble Lord, Lord Monson, asked at the beginning. We believe that how people spend their capital is largely a matter for them. However, there are, of course, two provisions of the Resources Regulation, which I described in a previous answer, and the interpretation of those two provisions would be a matter for the independent adjudicating authorities.

Lord Paget of Northampton
My Lords, is this not a rather curious example of what one might call the "building society system", whereby every encouragement is given to make capital available for expenditure, and no encouragement is provided to make it available for investment? It is, indeed, precisely the opposite to the policy which is pursued in Japan.

§ Baroness Young
My Lords, I hope that what I have just said to the noble Baroness, Lady Wootton of Abinger, indicates that we are aware of the problem. I should make it plain that the new rule was introduced only last November, and the two reasons for introducing it were that, in fact, more beneficiaries gained from the change than lost from it and the new rule had the advantage of saving 125 staff.