HL Deb 06 April 1982 vol 429 cc121-55
Lord Elton

My Lords, I beg to move that this Bill be now read a second time. The Bill which I bring before your Lordships today is rather more than the routine document which social security measures are apt to be. It contains two important and beneficial social reforms. The first affects payments to people who fall sick, and whose sickness prevents them from working. The second affects the way in which we give help to those people who need it in order to meet the cost of their housing.

The Bill may be different from other social security legislation by reason of the effects which it has upon practices to which we have long been accustomed. In another important respect, however, it resembles other social security legislation rather closely. In parts, it is, unavoidably, rather a complex document. I am therefore arranging for notes on clauses to be available to your Lordships in the Printed Paper Office and for those to include a note describing the way in which it is intended that the power to make regulations shall be used in respect of both the statutory sick pay and the housing benefit schemes. I am also arranging for a note on the financial effects of statutory sick pay to be made available in the same way at the same time. I hope that these will be of use to your Lordships.

The principal change which we propose to the delivery to the recipient of payments during sickness has a history going right back to 1948. It was the intention, even under the Beveridge scheme, that sickness benefits should rank for taxation. It was rapidly discovered, however, that the administrative difficulties of doing so were insuperably complex and it was taken out of taxation. However, the idea was not dropped. It was not merely that to have one sort of income taxed and another untaxed was an untidy anomaly; it was also a matter of the effects which this anomaly had in individual cases and particularly where employers had (as increasingly they have) their own schemes of sick pay running alongside that provided by the state.

One important effect of this was that the gap between the value of income received while sick and that which was earned at work was reduced. In some cases, it was reduced to a point where the incentive to return to work became marginal. In an increasing number of cases where the employer gives full pay to employees who go sick, or full pay less national insurance benefit, employees actually get more when sick than when they are working. As early as 1974, this applied to no fewer than 66 per cent. of all full-time employees, so that we have what I might call an ailment trap built into the system. The attraction of living on an income that is both unearned and untaxed is, to say the least of it, considerable.

The extent to which employers provide their own sick pay schemes alongside those of the state is now very considerable. Almost 90 per cent. of all full-time employees are covered by such schemes. The disadvantage of this does not consist only of the obvious anomaly that for a lot of people it is more profitable to be off work sick than to be at work earning. At present when any one of those people falls sick two quite separate bureaucracies spring into simultaneous and parallel action: the employer and the state both have to record the fact of his sickness. Both have to assess his eligibility for sickness payments. Both have to calculate the amount due. Both have to make payments. Both have to record his return to work.

The virtue of the change proposed in this Bill is that for the first eight weeks of sickness it disposes simultaneously of both the ailment trap and the duplicated clerical work. Statutory sick pay will be paid by the employer through the normal PAYE system, thus both bringing it into tax and cutting the workload of the Civil Service, enabling us to reduce its size by around 3,000. This reduction will be an important contribution to the overall reduction of our national bureaucracy to a level appropriate to our needs. There will also be a net financial gain to public funds of up to £90 million.

The idea of statutory sick pay is not something which has been sprung upon the public without warning nor is it something which has been adopted by the Government without consultation. We published a Green Paper in 1980: Income During Initial Sickness: A New Strategy. In June 1981 we published a second consultative document called Compensating Employers for Statutory Sick Pay. As a result of this consultation we made a number of changes to our original proposals and, as your Lordships will know full well, a number more were made as the Bill now before the House made its way through another place. In this lengthy process we have taken on board the views of both employers' and employees' representatives, and the Bill we now have before us contains the wisdom distilled from two years of careful consultation, reflection and debate.

For those of your Lordships opposite who may, none the less, have a few lingering doubts or suspicions about the measure, I have one final word of comfort. It was a Labour Government which argued the case for statutory sick pay in its White Paper on social insurance of 1969 and concluded that, the Government will later explore the possibility of introducing a statutory scheme which would provide a minimum of sick pay for all employees". We shall, of course, be dealing with the technicalities of what is proposed in some detail during the Committee stage and I think your Lordships will therefore wish me to deal with the provisions of individual clauses only briefly. They are as follows: The first four clauses—together with Schedule 1—explain when an employee is entitled to receive statutory sick pay and when an employer is liable to pay it. I shall here deal with only one point which I know has caused some concern, namely, the linking rule for statutory sick pay.

Under the existing national insurance scheme, the linking period is eight weeks, and we have no intention of changing that. In essence, the rule means that two spells of sickness separated by eight weeks or less are treated as one. This means, in turn, that the individual does not need to serve waiting days on the second spell. The purpose of this rule is to protect the position of someone who has a relapse, perhaps because he returned to work too soon, and is in effect suffering from no more than an extension of his original indisposition. That is how it works with sickness benefit under the national insurance scheme and there is no intention to change that. Under the statutory sick pay scheme there will also be a linking period, but it will be shorter.

The linking period between two spells will be two weeks. There are two reasons for that. First, it will make administration much simpler for employers. Secondly, statutory sick pay is designed principally to make payments during short illnesses. The long-term sick, for whom a longer linking period is desirable, will be the state's responsibility. Statutory sick pay will, in general, cover minor ailments—colds, 'flu, strains et cetera—for which a two week linking period seems more appropriate. We accept, however, that the linking period is a matter of judgment and we shall be keeping a close watch on its effect when the scheme is introduced. My honourable friend the Parliamentary Secretary for Health and Social Security has undertaken that we will be monitoring the effect.

Clauses 7 and 8 deal with the rates of statutory sick pay and various other provisions relating to payment. Clause 7 establishes the three rates at which statutory sick pay is to be paid. The rate to be paid depends upon the amount of the employee's normal weekly earnings. The top rate is set, initially, at £37. That is for those normally earning at least £60 a week. The bottom rate is to be £25 per week. That is for those normally earning less than £45. The middle rate was introduced as an amendment in another place. It covers those earning from £45 to £60 per week and amounts to £31. That change, made in another place, will give some 1 million employees an extra £6 per week in statutory sick pay. The result is, I think, a reasonable rate at each level, though it can of course be varied by order in the years to come. Your Lordships will know that the method by which employers were to recover their expenditure on statutory sick pay was a matter of considerable concern and some initial controversy. The Government have, however, taken great care to get the views of those concerned and to meet them. It became quite clear that the overwhelming preference of employers, both large and small, was for recovery by deduction from their monthly national insurance contributions. This is what the Bill provides.

Clauses 11 to 18 set out the administrative provisions and the rights of employees and employers. Essentially, they provide that where there is doubt about title to statutory sick pay, the national insurance adjudicating authorities can determine the question. I should also mention Clause 23 which, your Lordships will know, caused some controversy when the Bill was discussed in another place. It creates a liability for national insurance contributions to be paid on statutory sick pay. There have been objections that this is placing a financial burden on those businesses with no existing sick pay provision, which will be slightly out of pocket because of this provision. I have some sympathy with the argument but we can see no easy way round the problem. The solution put forward in another place—that employers (but not employees) should be exempted from paying contributions on statutory sick pay—would have been an administrative nightmare for both employers and the state. That I am glad to say was recognised by industry.

The effect of Clause 23 is mainly on small businesses, and your Lordships will know that this Government have done a great deal to help small businesses—not least the measures announced by the Chancellor in the Budget. These measures are selective, whereas the solutions put forward to get round the Clause 23 problem would have been indiscriminate. They would in fact have given most help to large firms, most of whom are already gaining under the compensation provisions.

Before leaving the sick pay scheme, I should like to say something about the position of disabled people. The present Minister for Social Security and his predecessor both took a close interest in the effect of the scheme on disabled people. Both sought to ensure there would be no adverse effect on the employment prospects of disabled people. A 100 per cent. self-deduction will go a long way to ensure this. As I have already mentioned, most employees are already in occupational sick schemes and most of these schemes pay more than the statutory minimum. We have found no evidence that this has led to a squeeze on disabled people's job prospects. Finally, the message of recent campaigns is beginning to get through: many disabled people do not have worse sickness absence records than their colleagues. Indeed, many of them are away from work less often than their non-handicapped, able bodied colleagues.

The position of the long-term sick has also been protected. Under our proposals someone who is sick for more than eight weeks in any tax year becomes the state's liability and he will stay with the state for as long as his illness lasts. I should stress that the national insurance 8-week linking rule applies to these cases. Furthermore, people transferred to the state will need only to receive a further 120 days of sickness benefit before they qualify for invalidity benefit. This concession will safeguard the position of the chronically sick. I turn now to Part II of the Bill. This is difficult ground over which my noble friend Lord Bellwin will lead your Lordships, with his usual assured and competent manner, in Committee; and it is particularly fitting that he should reply to this debate this evening.

Part II is concerned with the second major innovation to which I referred in my opening sentences, and once again we are looking at a problem that has been with us for a considerable time. It has been the subject of many comments—particularly from the former Supplementary Benefit Commission—drawing attention to waste and duplication in the present system.

At present a person not in full-time work and in need of assistance with his or her housing costs can turn in either of two directions. He can turn either to the Department of Health and Social Security and seek supplementary benefit or he can turn to the local authority for rebates or allowances against rent and rates. Even if a person's circumstances were not liable to change it is really far from easy to determine which of these mutually exclusive schemes would benefit him most. But circumstances do change for all of us, and very often the choice which proves right in the first instance may prove entirely wrong later on.

A further drawback to the system is that here once again we have two competing bureaucratic systems. By unifying the two systems the Government will obtain a further contribution towards their campaign to reduce the Civil Service to a reasonable size. There will be a saving, in this instance, of 2,000 posts. That will represent a net cash saving of up to £10 million. But this will not be applied to reducing the public sector borrowing requirement. It will be applied in extra benefit payments. Economic circumstances made it necessary to make this a "nil cost" change and that seemed a proper way of achieving it. The new scheme will be based on the local authority rebate and allowance schemes, simplified where possible, and supplementary benefit claimants will be entitled to full rebates of rent and rates without further income assessment. Local authorities can provide housing assistance to supplementary benefit claimants more efficiently than the Department of Health and Social Security.

Baroness Jeger

My Lords, can the noble Minister clarify one point? He refers to the number of civil servants who are to be reduced and he has just told us that the town halls will have to deal with more of these cases, so does it not mean that while he reduces Civil Service staff he has to increase local government staff?

Lord Elton

My Lords, I was about to touch on that. There will be an increase in the workload for local authority staff, but not by any means commensurate with the loss of workload by the department. At present the Department of Health and Social Security can give cash to claimants for them to pay rent and rates to the local authority officials the noble Baroness asked about, and they have to deal with that. There is also a large exercise each year to revise individual rent and rates to help to take account of increases. Under housing benefit all that goes. For the large majority of supplementary benefit claimants, authorities will not have to collect rent or rates. They will simply rebate them, although cash payments will continue to be made to private tenants. We recognise that local authorities will need some extra staff to cope with the extra volume of work and the Government have promised that these extra administrative costs—this is what the noble Baroness has been waiting for—will be met in full. There will, nonetheless, be overall administrative savings of up to £10 million, and, as I have said, this will be transferred to benefit expenditure.

Your Lordships will realise that very detailed provisions will be needed in order to introduce this scheme. Moreover, experience has shown that relatively frequent and minor adjustments will be needed to keep it in tune with the evolving needs of the community. For both these reasons it is apparent that it would not be appropriate for the detail of the scheme to be embodied in primary legislation. It would be far too costly in terms of parliamentary time—not merely at the point of introduction but on the frequent occasions for adjustment. The Bill therefore provides enabling powers for the introduction of the scheme by means of regulations. If I may summarise the salient points rather briefly: the provision for the power to make regulations governing the national statutory rebate and allowance schemes lies in Clause 28. Clause 29 was inserted by the Government in another place. It places a statutory requirement upon the Secretary of State to review the value of the needs allowance each and every year. The provision for the power to make regulations governing the local authority schemes lies in Clause 30. It will allow authorities, as at present, to improve on the statutory schemes, using their own resources to do so.

Clause 31 provides for publicity and Clauses 32 to 34 for the financial arrangements. Again, these build on the arrangements in the current rebate schemes, with the important additions that the local authorities will be compensated in full for additional benefit and administrative costs of giving rebates and rent allowances to supplementary benefit claimants. Finally, Clauses 35 and 36 deal with interpretation and supplementary provisions.

This change has also been preceded by publicity and consultation. The Government's proposals for housing benefits were outlined in a consultative document, Assistance with Housing Costs, published by the Department of the Environment, the Scottish Office and the Welsh Office last year. Since then, of course, responsibility for housing benefit has been transferred to the Department of Health and Social Security, which explains the anomaly. In the process of consultation it was established that there was a wide measure of support for the need to rationalise the existing provisions along the lines the Government proposed.

But there was also concern that the need to provide a nil cost solution produced a significant number of losers. Government have tried to reduce these; but I must make clear that the resources are not available to ensure there are none. However, it is important to realise that the Government proposals, as they stand, ensure that no supplementary benefit claimant will lose weekly benefit from the change; and that over 1 million of the poorest rebate claimants will gain. We did this by improving the rebate tapers for the poorest pensioners, with income below the needs allowance, and increasing the needs allowance for all pensioners by 75p a week. This means that 850,000 pensioners below the needs allowance and 220,000 just above it will gain on average by about £1 a week. These are significant improvements for very poor claimants. We were able to protect non-pensioners below the needs allowance, but these improvements had to be balanced by reducing help to the better-off rebate claimants. Overall, about 2 million will lose by an average of 50p a week—but the size of the loss is related to the amount of income, and nearly half lose 25p or less a week. Taper losses will also generally be limited to 75p at the start of the scheme.

We have striven throughout to improve our proposals and to produce the best scheme possible that circumstances allow. I should also add, with no little gratitude, that we have been greatly helped in this by the co-operation and expertise provided by the local authority associations. They have worked very closely with officials to produce workable and sensible procedures; they also suggested some improvements while the Bill was still in the other place and my honourable friend the Minister for Social Security was happy to accept them. This augurs well, I think noble Lords will agree, for the inauguration of the scheme when we come to it.

There are, of course, other important provisions in the Bill, but I think your Lordships will wish me to deal with them rather more briefly. Clause 38 removes the requirement that an unemployed person who claims supplementary benefit must be registered for work at a Jobcentre. (There is a corresponding requirement for unemployment benefit, but this is incorporated in regulations and not in the main legislation.) By enabling Jobcentres to concentrate on those who really need their services, this change will improve the service both to employers and to unemployed people. At the same time, it will achieve substantial staff savings. There will be no loss of control, since the availability for work of those concerned will continue to be tested when they make their claims at unemployment benefit centres.

Clause 39 is the first step in restructuring the industrial injuries scheme. The clause abolishes injury benefit—the short-term incapacity benefit payable to those injured at work or suffering from an industrial disease. Instead of this, those who are industrially injured will get statutory sick pay or national insurance sickness benefit. The money saved by this measure is being used to make disablement benefit—the scheme's long-term benefit—available from a fixed date in all cases. This will be 15 weeks after the accident or the incidence of the prescribed disease. These changes will bring substantial benefit to the more seriously disabled, and that is one of the principles underlying our proposals for the reform of the industrial injuries scheme as a whole.

Clause 43 rectifies certain defects in war pensions law and validates past awards made without adequate legal backing. It also contains provision for the Secretary of State to determine the commencing date of past awards in certain special categories of case. Hitherto, pension has generally been awarded from the date on which a claim was revived, but the clause makes provision for the payment of up to six years of arrears.

An underlying object of the Bill, complex as its drafting must be, is to achieve simplicity. Both its major proposals will abolish wasteful duplication of administrative work. Both, therefore, eliminate substantial amounts of unproductive employment that can be paid for only out of tax on productive work. The change in housing benefit, moreover, will remove entirely a very difficult dilemma that at present faces, in particular, many pensioners in need of help with their housing costs. These are objectives which will be welcomed by the country as a whole, and I commend the Bill to the House. My Lords, I beg to move.

Moved, That the Bill be now read a second time.— (Lord Elton.)

3.32 p.m.

Baroness Jeger

My Lords, I regret that this side of the House cannot commend the Bill to your Lordships, for many reasons which I shall try to set out as briefly as possible, because I accept that this is a Second Reading debate and this is very much a Committee Bill, as it is very detailed and technical and we shall want to come back to many points at Committee stage. I would not want your Lordships to think that we on this side are taking an old-fashioned Luddite view of national insurance, because national insurance must be an evolving sector in our society. We can go back to the Poor Law, to Lloyd George, and also to Churchill saying—and I have every sympathy with him—that he did not want to be shut up in a soup kitchen with Beatrice Webb. We can then go on to Beveridge and can work out how society has tried to come to terms with poverty, with illness and with chronic sickness, and has attempted to deal in a community spirit with the welfare of our citizens.

So we do not say that there should be no changes in social security. On the contrary, we want to join in any progressive measures which will change these arrangements for the better. But I have to ask several questions. First, this Social Security and Housing Benefits Bill must be seen in context with the present situation. Noble Lords will remember that the Social Security (No. 2) Act was very disadvantageous to many of the poorest people in our country; that we are in a situation where the number of people on supplementary benefit is increasing; and that, whatever is happening at the moment, there seems to be no underlying improvement in the unemployment situation. Yet we are bringing in a system whereby the poorest, the out of work and the sick people in our society will be disadvantaged.

They will be disadvantaged because the national insurance contribution is to be increased, because charges for dentistry, ophthalmic services and prescriptions are to be increased, and now we have to face a situation where there is to be a change which seems very onerous to some of us. I know that the question of unemployment pay is not included in this Bill, but as a former Member of another place I seem to recall that on Second Reading it is quite proper to refer to what should have been in a Bill, as well as to what is in it. But it seems absolutely outrageous that the sick pay that is to be brought in under this Bill is to be subject to income tax, and the fact that there is no provision for unemployment pay to be exempt from income tax is grossly unfair.

It was the understanding of many Members in both Houses that when benefits were brought into taxation they would at least then be brought up to the rate of inflation. But now we have a situation where it is admitted by the Government that unemployment pay is 5 per cent. below the rate of inflation and yet that benefit is to be taxed. I think that that is grossly dishonourable on the part of the Government.

I say that, because I have with me a copy of the Finance Bill dated 15th July, 1981, together with the Official Report of the sitting of Standing Committee B of 1st May, 1980, and at column 684 the Minister said: I do not, therefore, anticipate any difficulty in meeting the obligation to restore the benefits into tax and fulfilling the pledge that I have given. When the benefits come into tax the revenue will be there". Many Members of both Houses took that as a pledge on the part of the Government, but that is a pledge which seems to have been broken. I hope that the Minister who is to reply will explain why the Government, at the same time as admitting that there is a 5 per cent. shortfall in unemployment benefit, are bringing that benefit into taxation.

This is a very difficult Bill and I have every sympathy with Ministers opposite. There really should have been two Bills. The question of sick pay should have been separated from the housing implications of this Bill. I have referred to the taxation of unemployment benefit but, of course, we now have to face the fact that, for the first time, sick pay is to be taxed. I correct myself, my Lords. It is not the first time, because the Labour Government tried to tax sick pay from July, 1948, to April, 1949. They then gave it up as a bad job, because it seemed that they were having to collect income tax from two different sources and that really was not practical.

One of the main accusations that we have against this Bill is that it is so full of regulations. I prefer legislation to regulation. I think that that is how this country wants to be governed. This is a Bill which will affect the living standards and lives of practically every family in this country. When people ask us about it, we are going to have to say, "Wait for the regulations". Any legislation which depends upon regulations is, I feel, deficient.

I want to ask the Minister several questions. Many of the points which we on this side of the House want to raise will be raised in Committee. However, I should like today to give notice to the noble Lord of some of our problems. First, what is to happen about employers who are slow to pay? I am thinking of the slightly sickly worker who is not very well. I am not talking about the registered disabled because there is a special attitude towards them. I am talking about a man or a woman who is not very well and who perhaps has more time off than his fellow workers. What is to happen if an employer refuses to make the payments? And what delay are the Government going to accept? We are speaking about people who might be very low paid and quite poor. How long can an employer hang about not giving them their money, when they have got the landlord knocking on the door for the rent?

Turning to housing, I refer to col. 649 of Hansard of another place of 23rd November 1981, when the Minister said that these changes would take place "without any increase of expenditure on housing assistance". This means that no extra assistance will be going into the housing accounts of this country at a time when many of us feel that there needs to be additional help with housing costs for everybody in the country. Can the Government ensure that under the Bill nobody loses? The Minister said in another place at col. 650 on 23rd November 1981 that nobody would lose more than 75p a week. I am old-fashioned enough to think of 75p as the good old 17s. 6d., and 17s. 6d. is not a sum to be—have I got it wrong?

Lord Elton

My Lords, the noble Baroness is apparently not fully metricated; 75p is in fact 15s.

Baroness Jeger

I thank the noble Lord. That is why I put it in an interrogative form. I cannot add up; I am totally innumerate. Nevertheless, I do not think that fifteen "bob" is to be entirely disregarded. The point I raised when I interrupted, I hope not discourteously, the noble Lord the Minister is that the reduction in the number of civil servants might well be balanced by the increase in local authority staff. If you say to people that they cannot ask for housing help from the DHSS and that they must go to the town hall, the town hall will have to provide for their reception. At least, I hope the town halls will. However, we certainly know from experience (having been chairman of a housing committee in Camden, I certainly know from experience) how patchy the provision is which town halls make for dealing with these problems.

I want to ask the Minister whether the Government have thought through the abolition of short-term industrial injury benefits. For many years there has been an agreement between the Government and the trade unions that people who suffer as a result of injury at work should receive special consideration.

My next question is this: how are the Government going to work out the needs basis? Some time ago it was said (I remember the debates on the Social Security (No. 2) Bill in which I took part) that the Government were interested in having a tax-related index which would be separate from the RPI. My research shows, (though I am open to correction, as ever) that the tax-related index shows an inflation rate of 14.9 per cent., which is more than the RPI index shows. This is relevant. If the Bill is connected with the levels of assistance and how we are to work out the amount of assistance, then we must reach some agreement about how we do the arithmetic.

It has often been said that the RPI does not do justice to the poorest people in our society. The poorest people obviously pay a higher percentage of their income on housing, fuel, food. Many items which come into the RPI are not relevant to them. They do not buy diamonds, cars, fur coats. They do not buy many of the things which are included in the RPI. When the Government agreed to bring in this new tax-related index we thought that it would have some relevance to benefits, but I have to say to your Lordships that we have not heard much about this lately; and the uprating of benefits certainly does not reflect the uprating of costs in the tax-related index.

I have to say to your Lordships that the very fact that in the Bill there is supposed to be a topping-up arrangement means, in our view, that the Bill is a failure. We all want (I hope I am not speaking at the moment in a partisan way) to get this question straight. However, when a Bill is introduced and the Government have to say that it will be a bit rough on a lot of people so there will have to be a topping-up, it means that the Bill is wrong. Topping-up means more bureaucratic work. It means that more and more people will not know about their right to benefit. The small take-up at the moment of many of these benefits indicates this.

When the Government say, "Never mind; we'll top-up anyone who is having a rough deal", I have to say to them that this is not good enough. Who are these people who are having a rough deal? They might be the illiterate; they might be people who do not speak English very well; they might be people who do not stand up for themselves very well. The Government are putting the responsibility on the poorest people and saying, "You will have to come along and ask for a topping-up". Instead of that, the whole trend of our national insurance policy should be to wipe out those kinds of applications. We want people to get their benefits as of right and not to have to go, cap in hand, to the town hall and say, "Can you top me up?" That is a backward step.

May I also ask the noble Lord the Minister about the levels of assistance. Will there be any built-in index-linking of benefits? I have read the Bill as carefully as I can—I admit that not only am I not very numerate but perhaps I am not very literate—and I cannot find anything there which suggests that there should be index-linking of these benefits. In fact, it seems to be a Bill which will make the poor pay for the poor. The philosophical difference between us is that while we want a redistribution of wealth, the Government want a redistribution of poverty. The fact that they have to bring in this topping-up mechanism seems to be emphasising that point.

I want to ask the Minister also about Clause 35. This removes the need for registration of the unemployed. We believe that that is a great pity, because the unemployed are mostly in a situation of isolation and depression, and the fact that they do not even have to go down to register is not, we feel, a good thing socially. It seems to reject them from society, implying that nobody wants to know about them and that they need not even tell anyone that they are unemployed. This seems to us to be emotionally and politically a very bad thing.

I apologise for asking these questions now, but my hope is that doing so will save some time at Committee stage. The Government have reduced the number of inspectors for wages councils and the number of factory inspectors and health and safety inspectors. What are the Government going to do to ensure that this Bill is properly policed? How are the Government going to ensure that employers—and I refer in particular to small employers who have many difficulties with cash flow at the present time—will send the money to the man or woman who is off work for a week`? How many inspectors is the Ministry going to appoint to deal with this work? What is going to happen to workers who have been sick for more than eight weeks? What is the Government's answer to that?

Then I have to ask the Minister about the level of benefits. I understand (although, as always, I am subject to correction) that sick pay is to be calculated by reference to 1981–82 benefit figures; a sum of £22.50 for a single person plus £13.09 for a dependant adult, and 80p for each child. From those sums national insurance was not deducted, but now national insurance is to be deducted. Not only that, but income tax is to be payable on those figures.

Lord Elton

My Lords, either I have misunderstood the noble Baroness, Lady Jeger, or she has misunderstood the Bill. She mentioned the rate at which statutory sick pay was to be calculated. Has the noble Baroness perhaps overlooked Clause 7, where the actual figures (which are different from those she has just given) are set out? If that is the case, and the noble Baroness has not noticed those figures, then there is the answer. If she has noticed those figures, then will she rephrase her question so that my noble friend can answer it properly?

Baroness Jeger

My Lords, I have noticed the figures in Clause 7 because I have been living and sleeping with this Bill for the past week or two, as I am sure the noble Lord has. I was referring to the present payments and not to the payments under the Bill. It seems to me that a couple with two children will receive about £3.87 less under the new arrangements and this will be of some disadvantage to the family. My reading of this Bill and of all the deliberations in another place indicates that anyone who is receiving between £34 and £44 a week will be worse off. Then there is a cut-off of benefit at £60 a week. In case any of your Lordships imagine that no one earns less than £60 a week nowadays, may I say that, according to figures which were given in another place, more than 750,000 people in our country earn less than £60 a week. It seems to me, and again I am being interrogative, that there is a proposed flat rate of £37 benefit for people who earn more than £60 a week but that for people who earn less than £60 a week the benefit will be £25 a week. This is something we cannot accept.

Anyone who is trying to live on £60 a week or less already has no fat to cut into, and will already be having a very difficult time. Such people do not have a lot of savings, and are likely to be living on the edge of proverty all the time. To say to these people, who probably have no savings, that because they earn only £60 a week when they are at work they will get only £25 a week when they are sick, despite the extra expenses which any sickness brings, is totally unacceptable.

Lord Hawke

My Lords, I am very interested in what the noble Baroness is saying, but who exactly are these people in whole-time work who are earning less than £60 a week?

Baroness Jeger

My Lords, I thank the noble Lord, Lord Hawke, for that intervention. I do not know who these people are but the official figures show that there is this number of low earners in our country. This may come as a surprise to the noble Lord.

Lord Hawke

My Lords, are they not all in part-time employment?

Baroness Jeger

Not necessarily, my Lords. They may be in part-time employment because they are single parent families or people who cannot otherwise work full-time. That does not mean that they should be discriminated against when they are sick.

I also wish to ask the noble Lord, what additional rate burden is involved? The Government are boasting that the change in housing benefit—and we accept that there needed to be a change in these provisions—should be transferred to town halls. At a time when the Government are trying to squeeze towns halls to reduce their expenditure, what provision are the Government making to ensure that when a person in this situation is told by the DHSS that he had better go to the town hall because his housing has now been taken out of the RPI, there will be someone to see him? Will letters be written to that person? Will there be sympathetic officials able and waiting to talk to him? This is a very important question. The Government are boasting about the reduction in civil servants, yet they will have to face up to an increase in local authority staffing. As I said before, I have found the system all over the country to be very patchy in respect of the helpfulness or unhelpfulness shown towards people who have housing difficulties.

I wish to ask another question. Is it a fact that a low wage earner with a wife and two children will get around £13 a week less than sickness benefit if he was unemployed? That is a very important point, because once the Government make it more remunerative for people to stay at home than to go to work they really are on the wrong track. I must repeat our regret at the fact that there is nothing about uprating written into the Bill and nothing about index linking either. We must again ask about self-deduction. Employers are supposed to undertake 100 per cent. self-deduction. How is that going to be enforced? What is going to happen if an employer sends one or two people home because it will be cheaper for him to send them home and claim 100 per cent. back from the Government than to pay their wages? Unless there is a very adequate and expensive system of policing, the savings which the Government boast about will not be made. We are also worried about the abolition of industrial injury benefit because this was of special concern to the Labour Government; we would like to know more about the present Government's intentions in this respect.

The next and perhaps the last question I want to ask the noble Lord is this. I apologise, but this affects so many millions of people in our country that I do do not think we ought to deal with it in a casual way. Why are the Government apparently making this flat rate sick benefit and not taking into account the family circumstances of those concerned? Are the Government saying that, for example, a 19 year-old typist who lives at home is to be rated the same as a married man with three or four children? I know the answer the noble Lord the Minister is going to give me, that child benefit will take care of that. But if child benefit is going to take care of that then child benefit has got to be much uprated; it has really got to play a major part in the budgeting of the families of this country. So far there seems to be no indication that the Government are going to use child benefit in the further way that we want to see, to eliminate family poverty in this country. There seems to be in this Bill no reference to the family circumstances of a man or woman who is on sick leave. So this again makes me repeat that it is a redistribution of poverty.

Very briefly, I hope the Minister will be able to tell us something about the housing position and the help given to private tenants and people with mortgages, because the scheme seems to be very neat and tidy so far as council tenants are concerned—they should go along to the town hall and ask for this or that—but there are millions of people in this country (certainly in my old constituency there were thousands living, not at their own wish, in what was called furnished accommodation, which was often a sort of Rachman set-up) who will not be sure of their rights under this Bill.

In column 700 of the Commons Official Report the Minister admitted that 2 million householders would be worse off as a result of this Bill. It cannot be expected that this side of your Lordships' House could give its approval to a Bill which has that effect on the poorest people in the country. Therefore, because of all the difficulties and all the disadvantage that is encompassed by this Bill we cannot give it our support.

4.3 p.m.

Lord Banks

My Lords, I should like to begin by thanking the noble Lord, Lord Elton, for his very clear and thorough explanation of what he himself called a complex subject. The Bill, like Gaul, is divided into three parts: the statutory sick pay scheme, the unified housing benefit and the miscellaneous provisions. I think it will be generally agreed that the first two of those are the most important.

We on these Benches oppose the statutory sick pay scheme; we support the concept of a unified housing benefit, but we are not happy with the scheme as proposed. Our reasons for opposing the sick pay scheme are these. First, we are not in favour of fragmenting the national insurance system. We believe that the income maintenance system is best administered by the Government, and we do not agree with hiving off part of that system to employers to administer separately on behalf of the Government. We favour an integration of the tax and social security systems in a tax credit scheme, and under that there would be one benefit for inability to earn which would cover sickness, among other situations. We fear that the proposed system will be an uneven one which will have very differing standards of administration by different employers. Smaller employers cannot be expected to be uniformly efficient, and we feel there are bound to be some doubts about whether claimants are getting their proper entitlement, a point raised by the noble Baroness, Lady Jeger. We are not surprised that it is going to be necessary to appoint some 2,000 fresh inspectors to supervise the administration by employers of this inevitably complicated scheme.

As the noble Lord, Lord Elton, explained, the Government have put forward various suggestions as to how this scheme should be financed, but eventually they have come round to accept the view that employers should be recompensed 100 per cent. for what they pay out in sickness benefit over the first eight weeks. We welcome that as far as employers are concerned, but it does have certain implications, and those implications were clearly set out by the Government in their document Compensating Employers for Statutory Sick Pay, published in June of last year. This is what they then said: With 50 per cent. self-deduction employers would have a direct financial interest in controlling absenteeism and ensuring that they had properly applied the rules of the statutory scheme. One hundred per cent. self-deduction (that is what is now proposed) would not have this built-in control. Even if the number of visits to employers by DHSS inspectors were increased substantially, it is probable that some monies would be withheld from the National Insurance Fund, either erroneously, fraudulently or in respect of malingering. The inevitable consequence would be an increase in the employers' contribution rate. In effect a 100 per cent. self-deduction scheme would end up with the honest, efficient employer subsidising the dishonest, inefficient one. For these reasons the Government remain strongly opposed to this approach". In the meantime, the Government have overcome their opposition to the 100 per cent. self-deduction scheme, but I am not convinced that they have overcome their own arguments.

That it is going to be a complicated and difficult burden on employers, and particularly on small employers, was confirmed by Mr. Rossi, the Minister for Social Security, in the House of Commons during the Committee stage on 28th January 1982, when he said: We expect that an additional workload is bound to accrue during the early years of the scheme, when employers, especially small employers, who do not have the assistance of accountants and professionals to help them get their records right, will need assistance in operating the scheme and dealing with complicated matters such as waiting days and linking periods". We are worried about the burden on small firms, for while there is to be recoupment for benefit paid out there is no compensation for administrative expenses. We feel also that there is a possibility of discrimination against those with a history of sickness, just as the noble Lord, Lord Elton, said about those who are disabled. We would agree that 100 per cent. recoupment does make that less likely, but the possibility is there.

There are some details about the scheme with which we are not happy. One of those is the lower rate to which the noble Baroness, Lady Jeger, referred. If we regard £37 as being fixed as the subsistence level, it is difficult to accept the lower rates of £31 and £25 which are to apply to people earning between £45 and £60 and people earning under £45. I think this is probably the answer to the point raised by the noble Lord, Lord Hawke, who intervened earlier. At present, if full contributions are paid, then full benefit is paid.

The second point of detail on which we are unhappy is the fact that national insurance contributions will now have to be paid on sick pay, thus reducing the net amount. I point out that I am talking about national insurance contributions and not about taxation. As I understand it, a sick married man in the highest bracket will receive £34.13 a week after insurance contributions, as against £36.40 at the moment, not subject to insurance contributions. I think that in this context it is important to bear in mind that about half of all males in receipt of sickness or invalidity benefit have an adult dependent.

The third point has been referred to by the noble Baroness, Lady Jeger, and it is the fact that there are no additions for children. The Government are already reducing the present additions for children faster than they are increasing child benefit. In fact, in the present year, they are reducing child additions, although child benefit is only increased to take account of inflation in the past year. We agree with the principle of replacing child additions by child benefit, but as we reduce the child additions we must increase, in our view, the real value of child benefit to compensate; and, as we understand the position, the Government are not doing that.

If there are these drawbacks to the scheme which the Government propose, why do they want to proceed with it? One of the reasons advanced—and it was advanced by the noble Lord, Lord Elton, this afternoon —is that a very large number of employees are now covered by occupational schemes. The noble Lord mentioned the figure of nearly 90 per cent. The figure more often used in this connection is 80 per cent., although that is based on a survey eight years ago, in 1974. But I wonder whether the figure is 80 per cent. or nearly 90 per cent. when one bears in mind that many of these schemes do have a waiting period, a qualifying period, during which people would not be covered by them although it might be thought that, since they were employees of a firm which had such a scheme, they were so covered. Of course the numbers covered vary enormously from industry to industry. It is not uniformly 80 per cent., or whatever, throughout the whole of industry, and one-third of manual workers are not covered in this way at all.

It is the view that this is an easy way of bringing the sickness benefit into taxation. That, of course, is true. But I do not believe that it is the only way in which we can bring sickness benefit into taxation. I do not believe that that in itself is a sufficient reason for putting forward a scheme of this kind. I think that the Government's main reason for putting this forward was that originally it was to save £400 million a year and 5,000 Civil Service jobs. That was before they accepted 100 per cent. recoupment. The £400 million has now disappeared and, as I understand it, the administrative savings are somewhere in the region of £30 million. I think that the noble Lord, Lord Elton, mentioned the figure of £90 million earlier; the figure which I have is £30 million, but no doubt that will be sorted out during the course of our debate. However, it is a very much smaller figure than that which was originally envisaged. The number of Civil Service jobs saved has been reduced from 5,000 to 3,000 by the need to appoint some 2,000 inspectors. I do not feel that these estimated savings justify changing to a system with the drawbacks which I have outlined.

Let me turn briefly to the unified housing benefit. We certainly agree in principle that many people have to choose between rent and rate rebates and supplementary benefit, and it is estimated the 400,000 people are making the wrong choice and choosing a course of action which is less beneficial for them. As the noble Lord, Lord Elton, pointed out, this is a reform which was advocated by the Supplementary Benefit Commission in the years before their demise. But they always advocated that there should be additional resources. The noble Lord, Lord Elton, made it clear that the Government are not providing additional resources, and he made it clear that this meant that there must be losers as well as gainers, or, rather, that if there are to be gainers then there must be losers. I think that the estimate—certainly the original estimate—was that 800,000 would gain but 2 million would lose. I think that that still stands. Certainly it was the original Government estimate.

In the consultative document, the Government estimated that 74,000 current recipients of supplementary benefit would be worse off on rebates, and so provision was made for the "topping-up" payments from the DHSS to which the noble Baroness, Lady Jeger, referred. But I wonder whether this joint system will be administratively feasible for both administrators and claimants. There are many people who think that it will not be. I wonder, too, whether we can be told who will identify those entitled to topping-up payments. Can we be certain that no pensioner, whether reliant on supplementary pension or not, will lose out? I am not convinced that it is right to put this additional burden on local authorities. Will it not merely multiply the number of offices with which some claimants have to deal?

Again, I am not happy about the decision to exclude housing costs from the retail price index when adjusting supplementary benefit for inflation. There is some logic in this because there is what has been described as "double counting". But our supplementary benefit rates are not over-generous and in my view should not be reduced in real value. If there is to be a differential, then I should have thought that it should not be introduced until it is possible to increase the real value of supplementary benefit levels generally.

In accordance with convention we shall not oppose the Second Reading of this Bill this afternoon, although that was the course taken by my right honourable and honourable friends in another place. But we share their dislike of the sick pay provisions and will continue to express our misgivings about certain aspects of the unified housing benefit.

4.18 p.m.

Lord Boyd-Carpenter

My Lords, I should like to join the noble Lord, Lord Banks, in thanking my noble friend on the Front Bench for a remarkably clear exposition of what he himself rightly described as a highly complex measure. I am sure that the House, whatever views we may take on the merits of the proposals, is really indebted to my noble friend for a quite masterly display. I would agree on one point, too, with the noble Baroness, Lady Jeger, on the Bench opposite, when she said that basically this is a Committee Bill. I agree that it is a Bill on which our best discussions are likely to take place in Committee and perhaps at the Report stage.

I would venture none the less to quarrel with the noble Baroness when she diverted from a very interesting and agreeably expressed analysis of the provisions of the Bill, into one of those outbursts of what I can only describe as "party passion" to which she is so susceptible. I was so moved by this that I took down what the noble Baroness said. She said: While we want to see a redistribution of wealth, what the Government want to see is a redistribution of poverty". That is a splendid rounded phrase, which I am sure would bring echoes of applause in Camden or some such place. But it does not, of course, stand up to analysis. Nor, if she will allow me to say so, is it fair to attribute motive of this kind. In this House we very much criticise—I, for one, am certainly guilty of it—the arguments and views of those who sit opposite us, but, on the whole, I do not think that we criticise their motives. On reflection, the noble Baroness may feel that that kind of remark, though it no doubt eases her feelings to make it—and that is no doubt a good reason for doing it—does not really make for clarity in this debate.

However, I want to follow it up, because I think that she there disclosed one of the reasons why in recent years Labour Governments have been such a disastrous flop. The concept is the simple one of a large cake which a benevolent Government cut in such slices as they think appropriate for different sections of the community to have on their plate. Of course, in fact, that is basically the communist approach, except that it is to be noted that in communist countries the Government—the people on top—receive an enormous slice, disproportionately far larger than the wealthy in this country receive, and the people at the bottom of the scale receive a minute slice.

However, with respect, it is a wrong concept, because a Government should be concerned, not about the redistribution of wealth, but about its maximisation. It is in that way, if you so manage the economy that you get an increase in wealth generally, that you improve the position of everybody. I do not speak without having facts in my mind. This is precisely what happened in what is now called the Macmillan era, when, because the national wealth, under wise policies and good administration, was growing year by year, the standards of life at every level of our community improved. What is more—and I can bear very direct witness of this—the funds available for our great system of social security were increased every year by successive Chancellors of the Exchequer.

From the diverting subject of the noble Baroness, I should now like to return to the perhaps more austere outlines of the Bill. I agree with the proposal to transfer to employers the responsibility for the payment of short-term sickness benefit, provided that it is so arranged—as the Bill now arranges it—that no additional financial burden is imposed on employers. I put that proposition not, I hope, in any selfish sense, but simply because at this moment, with the unemployment figures that so concern us all, it is folly to add anything to the cost of employing people. Indeed, it must be the object of Government to lessen the charge on an employer who gives employment.

That is why, unlike the noble Lord, Lord Banks, I welcome this 100 per cent. deduction. As I understood it, a 50 per cent. deduction would have landed employers with some additional cost. I do not want to weary the House with it, because this is perhaps more appropriate to an economic debate, but the whole problem of getting the economy going again and of tackling unemployment is so much aggravated by the existing heavy burdens that fall on employers—national insurance contributions, (even with the employer's surcharge to be reduced in August by a certain amount), rates and corporation tax. All the burdens placed on those who provide employment are one of the major handicaps to British industry and, therefore, the recovery of the British economy. If we had not had this 100 per cent. deduction, I, for my part, would have found it extremely difficult to support my noble friend on this Bill.

But now that that has been decided upon, I think that there are very considerable advantages. It is, of course, the fact—I think that my noble friend mentioned it in passing—that as many good employers continue full pay during at any rate a period of sickness. Where it has been possible on top of that to draw sickness benefit, with tax and national insurance contribution free, people have been distinctly the better off for being off sick. My noble friend coined a rather nice phrase; I think he called it the "ailment gap". But it must be wrong to have such a situation. When one adds to that the very real saving in bureaucratic manpower that can result from this, it seems to me that this proposal, which no one can accuse the Government of rushing—it has been put forward in Green Papers, White Papers, and papers tinged with white and green, and has been very widely discussed with all the organisations concerned in industry—is a progressive scheme which I think it is right to enact, and I, personally, welcome it.

There are one or two questions which I should like to ask my noble friend who is to reply to clear up. How will this apply to the very small employer—literally to the employer (and there are quite a number) who employs one person? Let us suppose that that one person is away sick. If the employer has to pay at the rates laid down in the Bill, that person's equivalent to sickness benefit, with no deductions for the future that he can make—because, ex hypothesi, that person is away—will he not be put in some difficulty? The sums involved in individual cases are small, but so are the employers concerned. What is the position? It is not uncommon, particularly in the countryside, for a person to have just one employee. Let us remember that where you have one employee and that employee is away sick, you are minus 100 per cent. of your manpower, and you are already in a very considerable difficulty. I wonder whether some alleviation for that situation is contemplated.

Secondly—and it may be that my reading of the Bill has been insufficient—what is the position in respect of employers whose employees are abroad? There are different categories. There are those who work for a British company and who are stationed abroad, perhaps in the Gulf, for four or five years. Then there is the case of the employee sent on a short mission who goes sick abroad. What is the position in respect of them?—because there are many in one category or the other, and, hopefully, as our policies of opening up overseas activity go ahead, there will be more. I am sure my noble friend will agree that it is very important not to make it more difficult for British firms to have their employees abroad.

I do not propose to comment, at any rate at any length, on the other main aspect of the Bill, the housing benefits. The subject is a complex one and I am not without some sympathy for the noble Baroness on the Benches opposite, having doubts about the efficiency of a good many local authorities' administrative systems and their ability to cope adequately with what I understand will be additional burdens put upon them. I think that this is a matter which we shall need to analyse rather carefully in Committee.

In this connection I should like to ask a question which I hope your Lordships and the Minister will not think funny, but it is a question arising on Clause 29. There, when prices rise, provision is made for the Minister either to increase the benefit figure or to lay a statement as to why he is not doing so. As I read that clause, there is no provision to deal with the situation if prices fall. It is within living memory—in the 1930s—that the index of prices fell consistently for a number of years. When one is legislating in an uncertain future, is it wise to exclude the possibility that the Government's measures may be so successful that inflation will not only be contained but reversed?

By way of warning, let me remind my noble friend, who may well be aware of it, of the error which the ex-service organisations made in the 1930s. They had pensions then linked to the index of retail prices. As that index fell as we got into the late 1920s and early 1930s those pensions were reduced. The ex service bodies formed up to the Government of the day and persuaded them to break that link. Needless to say, within another six months prices started to rise again, but that is an indication—perhaps an illustration—of the unwisdom of not catering for that situation. It may be that I have misread the Bill and there is machinery to deal with this. I should be interested when my noble friend replies to hear what he has to say.

I rather share sentimentally the noble Baroness's nostaligia over the passing of the industrial injuries payments. They are historical. I myself often wondered why there was the distinction between the person who got hurt at work and the person who became sick elsewhere. It was sometimes difficult to deal with because there were always the difficult questions about the person hurt on the way to work. I think he got industrial injuries benefit if he was in his employer's transport, but not if in his own.

One got these tiresome distinctions affecting quite appreciably the benefit obtained. It is logical to bring them together, and I suppose it is really due to history that industrial injuries took priority, going back early into this century, over the general national insurance sickness benefit. Many people have given a good deal of their lives, particularly many noble Lords on the Benches opposite and in another place, to an understanding of this scheme, and to appear before the tribunals that deal with it. One perhaps feels a little inclined to be sad at the passing of what was quite a considerable landmark.

On the other hand, I am delighted, assuming I understand it, which is by no means to be taken for granted, by the provisions in respect of war pensions in, I think, Clause 43, for loosening and making more flexible, as I understand is their purpose, the capacity of the war pensions scheme to deal with unusual cases. May I illustrate the importance of that by a reminiscence of a case which it was my duty to handle when I was Minister of Pensions and National Insurance a good many years ago.

There was, and I believe still is, an important war pension benefit called unemployability supplement. As its name suggests, it went to the war pensioner so badly disabled that he could not work. The case was that of a pilot in the RAF who lost both arms—ghastly mutilation. He of course was entitled, among other 100 per cent. disability and the rest, to unemployability supplement. A little after his accident it was brought to my attention at the Department that this man, because he had taught himself to paint pictures with a brush held in his teeth or his toes, was earning between £2,000 and £3,000 a year which, in those days, was something like two to two and a half times the average wage. It was therefore represented to me that I had no power to go on paying him the unemployability supplement.

I told my Permanent Secretary that I would not withdraw it in that case. My Permanent Secretary then told me sadly that in accordance with his duty as accounting officer he would have to submit a formal minute which would land us both in front of the Public Accounts Committee. Having cleared the air with these opening salvoes, we then got round to it and produced an entirely new regulation enabling the payments to be made, and this extremely gallant pilot himself obviously never knew what had happened behind the scenes. That is an illustration of the need in war pensions, which is essentially a benevolent, if you like almost patriarchal system, to have the utmost flexibility. If I understand Clause 43 aright, it is designed to increase the already considerable degree of flexibility that there is in that system. If that be so, I welcome it particularly.

As I said, and the noble Baroness said, this is a Committee Bill, and no doubt there will be quite a lot of discussion on it, but in general it seems a progressive move forward which I welcome and I believe a great many Members of your Lordships' House will welcome. As the noble Baroness said, national insurance and social security systems are not a beautiful object preserved for all time in the form in which they were originally evolved. They are a living and growing organism; and it is perhaps significant of the drive, vigour, and flexibility of mind of those at present in charge of the department that we get a Bill of this kind. I welcome it.

4.35 p.m.

Lord Kilmarnock

My Lords, I too should like to thank the noble Lord, Lord Elton, for his—I think Lord Boyd-Carpenter's word was—masterly introduction of this Bill. The noble Lord is always magisterial. The two principal schemes introduced by this Bill are the new provisions for statutory sick pay and those relating to housing benefits. I shall begin with the housing benefits, with which we do not disagree in principle, pass then to the sick pay arrangements on which we have very serious reservations, and then touch briefly on an important opportunity the Bill has missed.

The principle of a unified housing benefit is welcome. The present overlap of two schemes for housing assistance—one through the rent and rate rebates or allowances and the other through supplementary benefit payments—is confusing. If a tenant is eligible for both types he may choose to apply for whichever helps him most, but even professional advisers find it hard always to advise him correctly. Many people must have claimed the wrong benefit and lost out financially. I think that the noble Lord, Lord Banks, mentioned the possible figure of £400,000.

On these grounds we welcome the principle. At the same time we are concerned about who will meet the costs of administering the unified scheme. The enabling proposals transfer the responsibility for means-tested supplementary benefit support from the Supplementary Benefit Commission to a local authority rebate scheme. I understand that this change is estimated to yield a reduction in DHSS staff of some 2,300, at a saving of £25 million, but to require an increase in local authority staff of about 1,500 or 1,600. How is the increased local authority responsibility to be funded?

All local authorities today, as the Government well know, have great difficulty in budgeting their expenditure within the cash limits imposed by central Government. Are the Government going to accept 100 per cent. liability for the proposed transferral of costs which are estimated in the financial effects of the Bill at £15 million to £19 million? The noble Lord, Lord Elton, spoke about co-operation with the local authorities. My information is that some are still extremely worried on this score and fear that the increased costs, or part of them, will land on the local rate fund. Are the Government in close consultation with local authorities on this question, and can the noble Lord, Lord Bellwin, allay their outstanding fears when he winds up later this evening?

Turning to sick pay, one of the main aims of the new scheme is to tidy up the anomaly that someone whose pay is fully guaranteed by his employer when he is sick may receive more when sick than at work, because sickness benefit is not at present taxed. Sick pay, by contrast, like other short-term benefits, is to be brought into tax. Both major parties have, of course, entertained this idea from time to time, as the noble Lord, Lord Elton, pointed out; but it should not be forgotten that people's expenses also frequently rise during illness owing to such things as increased fuel bills and prescription charges. I rather wonder whether the Government have taken such additional outgoings into account in the minimum flat rates they have set.

The next main claim for the scheme is that it will cut out duplication of administrative effort. On the face of it, there may well be an argument for making employers the Government's agents for statutory sick pay up to a limit of eight weeks, and giving them the right to 100 per cent. reimbursement, though in fact it is not quite 100 per cent. as they will now have to pay national insurance contributions. This requirement was removed in the Standing Committee but has now been reinstated in the Bill at Report stage in another place. It certainly sounds a great deal cheaper administratively, and at Second Reading in another place the Government claimed a net saving over the two schemes of 4,700 public sector staff. But I am not clear whether their calculations of the financial effects of the Bill take into account this not insignificant number of redundancies. Perhaps the noble Lord will enlighten me when he comes to wind up.

There are other things here which worry me. First, there is the effect on small businesses, on which the noble Lord, Lord Boyd-Carpenter, also touched. Small businesses employ 16 per cent. of the workforce, a lesser percentage than in other European countries but still a large number of people. Will the small employer be as well equipped as the large corporation to comply with the new law?

If the method of reimbursement is to be by self-deduction by the employer from his national insurance liability, what happens if he has only a few employees and several of them go sick at the same time—for example, in a 'flu epidemic—and his liabilities under statutory sick pay exceed his liability to national insurance contribution? His cash flow may be seriously affected, particularly if he must take on temporary staff. Have the Government thought of that?

Other reservations are expressed by the Social Security Advisory Committee—which, it will be recalled, has replaced the Supplementary Benefits Commission—in their excellent first report which I have with me and which I recommend to those of your Lordships who are interested in these matters. While reserving their judgment on the desirability of SSP, the committee called for safeguards that would, to quote from their paragraph 2.52: help to ensure that employers administer SSP as efficiently, fairly and speedily as sickness benefit". That concern was also shared by Members of various political hues in another place, where worries that the expense of monitoring the scheme might make some of the savings illusory were expressed, a point mentioned by the noble Baroness, Lady Jeger, and the noble Lord, Lord Banks. Earlier in their report, at paragraph 2.51, the Social Security Advisory Committee said they were.

glad that it is intended to maintain the value of SSP in real terms subject to economic circumstances. But we would have liked to see the real value of SSP and sickness benefit fully protected by a statutory guarantee. The Bill requires the Secretary of State to review the SSP rates each year to see if they have retained their real value, but it does not require him to make the necessary increases to restore the rates to their former values". The relevant section and subsections of the Bill are Section 7(3) to (10). In subsection (4) the Secretary of State is allowed the extraordinary licence of estimating the general level of prices in such a way "as he thinks fit", though he must lay his reasons before Parliament. That is perhaps something one could accept as a sufficient safeguard if the Government's record in these matters were better, but it has not been good and therefore it is a subject to which we may want to return in Committee.

I come briefly to the general framework of social policy in which the Bill has been introduced. It follows the Social Security Act 1980, the Social Security (No. 2) Act 1980 and the Social Security Act 1981, all of which whittled away benefits in one form or another. In this measure, the Government have missed an important chance of improving their record and saving their social security policy from falling into disrepute. These are all portmanteau Bills. It would therefore not have been inappropriate to have included a clause, as was proposed and narrowly defeated at Report in another place, to make good the 5 per cent. abatement in unemployment and other short-term benefits made by the 1980 Act, on the understanding that it was in lieu of taxation and would be made good as soon as these benefits were brought into tax, which I understand will happen in June of this year. There is also the question of the 2 per cent. shortfall as a result of the under-estimate of the rate of inflation for 1981, making altogether a 7 per cent. downgrading of these benefits from the level at which they should, in equity, stand.

In another place there was a heated debate on whether the Government had given a cast-iron undertaking to restore the abatement, as claimed by the principal Opposition spokesman, or whether it was merely a conditional undertaking, as claimed by the Government. I shall not pursue the niceties of which type of announcement, and by whom, takes precedence in committing a Government. I would much rather stick to the principle and be guided, once again, by the Social Security Advisory Committee, in whose report it was estimated (in chapter 1, table 5) that the savings which would be effected in social security expenditure in 1982–83 through the various Bills to which I have referred and the measures now in prospect would be a whacking £1.856 billion. Even if we accept that the saving on SSP is not £400 million, as was originally intended, but only £90 million, we still get a whacking £1½ billion.

In a letter of 27th October to the Secretary of State —published in appendix 2 on page 69—the chairman of the committee stressed the importance of sustaining the real value of supplementary benefit, a timely reminder when one thinks of the increasing number of people becoming wholly dependant on supplementary benefit when their unemployment entitlement runs out. He went on to express special concern about the impact of the 5 per cent. abatement. The improvements sought by the committee are: equal to just a small proportion of the large savings, of nearly £2,000 million, already achieved or in prospect". Elsewhere the committee estimated the cost of restoring the abatement at £50 million. On 22nd December last, the chairman felt it necessary to write again to the Secretary of State when it was announced by the Government that the additional 2 per cent. shortfall in current short-term benefit rates might not, after all, be made good in November 1982. In their chapter on priorities and recommendations (chapter 3, paragraph 2) the committee pointed out that if those cuts were not made good, it would amount to, double taxation of a severely disadvantaged group —"double" in the sense that the diminished benefits would also be subject to income tax.

The Social Security Advisory Committee described the social security system as a vital safety net. I would go further and say it is the cement of a civilised society. It has been calculated by the Child Poverty Action Group that one in four of our whole population is living in conditions of, or bordering on, poverty. That, combined with the inactivity and purposelessness imposed by unemployment, can only lead to severe cracks in the social fabric, and we have detected some quite alarming ones already. The social security system provides the essential mortar required for the preservation and maintenance, in reasonably good order, of the whole edifice of our society.

The Social Security Advisory Committee's report is very fair to the Government, chiding where chiding is deserved, warning where warning is required and giving credit where credit is due. Having appointed an advisory body with a wider remit than the old Supplementary Benefits Commission, the Government would do well to pay close attention to its advice.

4.47 p.m.

Lord Pitt of Hampstead

My Lords, I shall not delay your Lordships for long because I wish to comment only on Part II of the Bill. My understanding is that 3½ million people will be affected by the proposals on housing benefits and that 2 million, or more than half, will be affected adversely. However strongly one wishes to support the principle of the Bill, those consequences cannot be accepted. Because the Government's insistence on there being no increase in public expenditure is responsible for the fact that 2 million of the 3½ million people affected will be adversely affected, it is up to the Government to face up to that fact and try to do justice to those people.

We must remember that in the last three years rents have increased tremendously; in fact, they have more than doubled, and I am speaking of local authority rents. Therefore, the rent rebates about which we are speaking have assumed a greater significance, simply because of the sharp increases in rents. From the information I have received, it would cost only £30 million to introduce a package in which there would be no loser. I accept that £30 million is a lot of money, but in the context of the totality of expenditure on housing and supplementary benefits, it is not a large percentage. Moreover, the Government are planning a revision of the supplementary benefit re-rating, so there will be savings there in addition to the savings to be made on manpower as a result of the changes in the payment of sickness benefit.

If we are dealing with the matter in totality, there is a saving which could enable the Government to introduce a "no loser" package, and so avoid what I gather is the only real criticism that is being made of the scheme. I seriously appeal to the Government to reconsider their stand and see in what way they can introduce a scheme in which no one will be on the losing end.

The other matter which has attracted criticism is the fact that there will be no appeal. At present people who receive housing benefits can appeal to the supplementary benefit appeals tribunal. They will lose that right of appeal through this Bill. I should have thought that we ought to extend, rather than restrict, people's right of appeal. Therefore I suggest—and again I hope that the Government will think seriously about it and act on it—that people who are dissatisfied with decisions on their applications for rent rebates should be able to appeal to the supplementary benefits appeals tribunal. That would not create much more expenditure for the Government, and I hope that despite their wish not to increase expenditure, they can see their way to taking up that suggestion.

As many other speakers have said, this is really a Bill for Committee rather than for Second Reading, and I do not intend to go further into it than the points that I have made. I have made them at this stage because I want the Government to think about them before Committee. This is a Bill that we shall have to go through very carefully in Committee and endeavour to improve. In the meantime we shall give it a Second Reading.

4.53 p.m.

Baroness Lane-Fox

My Lords, T should like to refer to Part I, Clauses 1 to 4 of the Bill. When I was engaged in remunerative employment of various kinds it was always a great surprise to find that national health insurance operated in what seemed to me a strangely inexplicable manner. Fortunately, like most disabled workers, I was off work through illness on only few occasions, but each time I was amazed to discover that while my employer continued to pay me in full, he refused to accept from me the national health payments that I received. I still believe that those payments had to belong to him, or at least to someone other than me. Accountants and establishment officers argued with me and did their best to try to convince me that this strange performance was perfectly in order, that the labyrinthian ways of insurance required this to happen.

It was puzzling to be paid almost double just because you were off sick, and it seemed a remarkable temptation to those who realised that it paid handsomely to be sick. Other workers told me that this was recognised practice, and it seemed pedantic for me to make a fuss about it. In self-defence I must remind your Lordships that that all occurred before the days when there was any mobility allowance, or attendance allowance, when as a disabled person it cost money to go out to do a job. So I was one of the many who accepted, without too much difficulty, what was clearly a wrongly directed bonus.

For years this bad practice has gone through on the nod. Unlike the noble Lord, Lord Banks, and the noble Baroness, Lady Jeger, I congratulate my noble friend the Minister on the courageous Part I, Clauses 1 to 4 of the Bill. Generally we disabled people are seen, justifiably, to be asking for more. Now perhaps by way of retaining our credibility and clarity I should like to applaud this long overdue tidying up of a wrongly directed payment. Nevertheless I welcome the questions about cash flow involving small employers posed by my noble friend Lord Boyd-Carpenter.

With due respect for a scheme that has done so much for disabled people in the past, I should like, very briefly, to turn to Part III and the clause which refers to those who are incapable of work due to industrial accident. I should have thought that it is a substantial improvement for persons to qualify for sickness benefit without having to satisfy the contribution conditions. The fact that the clause also makes the long-term industrial benefit payable after a fixed period of 15 weeks must be beneficial.

It is so important at the beginning of a period of disablement to have made known to one all available helpful advice, so that as far as possible a sensible reassessment of everyday living can be made at such a traumatic time. I wish my noble friend the Minister well with the Bill, in particular on both the counts that I have mentioned.

4.56 p.m.

Lord Wallace of Coslany

My Lords, I am afraid that I cannot follow the noble Baroness in congratulating the Minister on the Bill, or in welcoming it. I enjoyed the noble Baroness's reference to the good old days when some generous employers did not deduct one's sickness benefit; but a tremendous number did, and if one was out for more than about a fortnight, one was out on the dole queue; and that was the end of that.

There does not appear to be an overwhelming interest in the Bill, but I believe that the interest remains outside, in the country. I should like to thank the noble Lord, Lord Elton, for his detailed outlining of the Bill's provisions, given in his usual, gentle, bedside manner, which he has cultivated to great success. But although he clothed to an extent the skeleton of the Bill, clearly this is an enabling Bill, and the House will have to await a series of regulations, which will have to be seriously considered and debated.

I listened with interest to the noble Lord, Lord Boyd-Carpenter, and gained an impression about the financial advantages of being sick. I could not quite agree with him, since being sick is bad enough without being accused of taking financial advantages; and there are other problems, as other noble Lords have pointed out.

My noble friend Lady Jeger certainly went to town and asked so many questions that I am sure that the Minister will not be able to answer them all this evening. However I think I am correct in saying that we do not expect all the answers this evening, but we are giving the Government a reasonable opportunity to appreciate some of the points on which we shall base our—I shall not say attack—constructive approach in Committee.

This is yet another social security Bill, and if there is a note of weariness in my voice, it is because from this Dispatch Box I have been involved in so many such Bills. This is one of a number of similar Bills which the Government have brought forward since they took office, and, in one degree or another, all of these Bills have undermined the fabric of the welfare state. Some one has estimated that so far we have had 10 Bills with the same objective. I have lost count; it might be 10, it might be nine.

The theme of this Bill, as with all the others, is financial saving, with the side effect (in this Bill) of a further addition to the ranks of the unemployed by abolishing some Civil Service posts. There is some difficulty here as to the actual numbers. The Minister mentioned 3,000, but I think that the total number will be in the region of 6,000 civil servants. At the same time the Bill will place additional pressures and work on employers and local authorities. I accept that there will be a measure of financial assistance to employers and local authorities, but the pressures remain, and they will place a considerable burden on the small employer so far as the sick pay proposals are concerned.

I go back with a certain amount of sentimentality to during the war, when I was serving in the Royal Air Force and when the main topic of conversation apart from when we should get out of the war was the Beveridge Report. There is no argument about that; and I profoundly believe it had a significant effect on the result of the following election. It heralded to us in the forces a new dawn. Today, this Bill moves away from the comprehensive and unified welfare structure that we have had since Beveridge. One of the principles basic to that was the unification of responsibility, a single insurance fund and a single Ministry, and this Bill, among others, disrupts that principle.

No mention is made in this Bill about restoring the 5 per cent. cuts in unemployment and invalidity benefits. It is coincidental, incidentally, that the Social Security Advisory Committee issued its first report a few days before this debate. Some measure of the Government's attack on the social services is that it would cost £686 million to restore social security benefits to the level that they were when the Conservatives came to power in 1979. I hope that in due course we can debate this report.

The proposals in the Bill to put the payment of statutory sick pay on to employers is likely, in my view —and I have said this before—to cause a degree of industrial unrest. It is claimed that 90 per cent. of employees are covered by union agreements on occupational sickness schemes. I think that this seems to be a high figure, and could well be over-estimated. Even so, there are at least 10 per cent. of workers without union protection, mainly engaged in small business concerns. One or two speakers have mentioned their concern over that 10 per cent. not getting union protection, and it is welcome to hear some support for union activities.

My Lords, the Government are setting up a task force (which is a new and popular phrase at the moment) of inspectors to check on employers' actions. I must say that that is a complete change from the last Bill, when we had a large task force of inspectors to check up on so-called scroungers. So benefits are now being challenged in another direction: we are now checking on employers as well as claimants— "Ah, well! Life goes on under a Conservative Government in a way that we have never had before".

I believe that employers running small businesses get the worst possible treatment under the Bill. The big boys (and many noble Lords associated with them know this) are well able to take care of themselves, but the small employers will have to carry a very heavy burden that they are least able to bear. They will be out of pocket immediately, and will have to wait for financial refunding. Most small employers are reasonable and fair, and, as I have some contact with them, perhaps I may say that relations with the employees are, in the main, almost paternal in these smaller businesses. But the unrepresented 10 per cent. of employees mainly work in this field and severe difficulties must arise on both sides. The 10 per cent. are mainly low wage-earners, and the sick pay scales mentioned in the Bill for them are the lowest.

Now I come, not to Clause 35 but to Clause 38. I think that the Bill has been amended, and it is now Clause 38 which raises the debatable issue of registering for employment on a voluntary rather than a compulsory basis. This is indeed a very bad clause, and ought to be removed. I do not claim, as some have claimed, that it is an attempt to "cook" the employment figures. I do not think the Minister or his colleagues would countenance that for one moment. But it will mean a reduction in the usefulness of job centres in placing people in employment, and will substantially undermine the work of the Manpower Services Commission.

Turning to rents, the Government have already forced up rents to record heights. I think the rise is now some 78 per cent. and in the very near future is very likely to be about 140 per cent. Under the Government's proposals in the Bill there will be, on the Government's own admission, 2 million worst-off losers under the scheme. When we talk about 2 million worst-off losers, we are talking about 2 million households at the very least. It is not just one loser; it is a whole family, a household. The housing scheme, as has already been stated, is very complicated, to say the least; and it is absulutely vital—and here I agree with other speakers, particularly the noble Lord, Lord Pitt, who spoke a few minutes ago—that there should be a right of appeal to an independent body.

Local authorities will take over an increased burden, and, with all the good will in the world, mistakes will be made. I have worked with local authorities as a councillor, and I know that they do a good job, but the human element comes in and mistakes will be made. With all the good will in the world, you will not get perfection. It means one thing: if you do not introduce appeals, local Members of Parliament are going to be absolutely inundated. It was bad enough being a Member of Parliament in the past, because half of the cases that came up at what they call "surgeries" (I hate the word; I always use "interviews") were housing cases; now this will introduce a further factor. With all sincerity, I say to the Government, in order to give them an opportunity to think about this before we get to the Committee and Report stages, that the Government must introduce an appeals machinery in the interests of justice and of a fair deal to those worse off and affected so seriously by the Bill's proposals To revert to the sickness benefit proposals, it is the workers who are married and with dependants who suffer most. If they are on the highest rate of sickness benefit they will be worse off by about £4 a week, and if on low pay they will be penalised by £13 a week. This fact constitutes a vicious attack on the family, and it should be remedied. I underline—and other speakers have already mentioned this—that when the wage-earner is sick, extra expenses increase; it is not all financial advantage. Take prescription charges. We know how they have risen by about 400 per cent. since the Government took office. In some cases additional heating may be needed, special diets and many other things. The wife who remains at home to care for the family and does not go to work by that fact penalises the wage-earner and his family under this pernicious Bill. The situation which I have illustrated is far worse for the low wage-earners, most of whom have few extra resources, including savings, because if you are on a low wage, even with all the scrimping and saving in the world it is a very difficult job to accumulate a few pounds—and I speak with some degree of experience in that matter in my early days.

With my noble friend Lady Jeger I am all for streamlining Government administration to create efficiency in social security services, provided that it gives a fair and reasonable deal to those whose circumstances call for help and assistance. This Bill does nothing of the sort. It is a mean and vicious measure, which means that in both the social security and housing fields many vulnerable and poor people will be worse off if this Bill proceeds unchanged. Of course, we must all recognise that we are still facing a serious economic situation and a situation which will get worse due to the present international situation. But that is no reason whatever why the poorest sections of our community should suffer from having to make a sacrifice, for in their case it is already being done. If sacrifices have to he made, and they do have to be made, then let them be made by those better off and not by the poorest of the community: the sick, the disabled and the unemployed. As has been indicated—and we on these Benches are not alone in the matter—we shall strongly contest this Bill in Committee. Unfortunately—and I feel this very much at the moment—we cannot by custom and usage vote against a Bill which has received a Second Reading in another place. However, I do not commend this Bill to the House. I regret bitterly that the Government ever introduced it.

5.11 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin)

My Lords, it has become something of a tradition in this House for debates on social security Bills to be informed and interesting, and no one will suggest that this one has been less than interesting, although I am sure that noble Lords opposite, and especially the noble Lord, Lord Wallace of Coslany, would not expect me to agree with the sentiments that have been expressed and least of all those of the noble Lord in his last remarks. I endorse what everyone has said, that this is a Committee type Bill and it is there that we should be getting to the nuts and bolts. Also, clearly, in winding up I cannot and would not try to cover all the points made. Neither is it expected of me. Nevertheless, I will refer to some of them. I assure all noble Lords who have spoken that not only will we deal with their matters in Committee but in many instances we will be in communication with them before then so that we can either clarify for them points which they may find it useful to have in mind at Committee stage, or in some instances give them information that they ought properly to have.

I think I should begin by saying to the noble Lord, Lord Wallace of Coslany, because he implied that this was an attempt to reduce the welfare state, that I repudiate that absolutely. At present anyone who falls sick is entitled to sickness benefit from the state if he meets the qualifying conditions. Once the statutory sick pay scheme is introduced, anyone falling sick will be entitled to statutory sick pay if he meets the qualifying conditions. If he does not, he still may be entitled to state benefit. All that the scheme does is to substitute in respect of short illnesses one statutory right for another. People will be afforded the same protection after April 1983 as now.

It has been argued that it will be more difficult for an employee to get his statutory rights from his employer than from the state. That claim overlooks the fact that the vast majority of employees already get occupational sick pay from their employers. There is no evidence that this gives rise to problems, despite the fact that in most cases occupational sick pay is worth a lot more than the statutory minima laid down in the Bill. If an employer proves difficult, there are procedures to ensure that the employee gets his entitlement and penalties for the employer who has been acting in a dilatory and obstructive fashion.

The noble Baroness, Lady Jeger, criticised the scheme (as did others) as switching resources from the family to the single person. That is not the overall effect. What the scheme does financially is to divert money from those in good sick pay schemes to those with little or no occupational provisions. Why, we have been asked, is the statutory sick pay to be paid at a flat rate? The main reason is that SSP is a payment by employers and such payments do not take account of family circumstances. To compel employers to change long-standing practice would be wrong. It would be equally wrong to put employees in the position of having to give the employer personal information in order to get money. I take the opportunity to stress that someone who is sick and has insufficient resources will be able to claim supplementary benefit, so that the safety net for the family still exists.

The rates of SSP have been discussed. Some have criticised them in another place and elsewhere as too low. I am tempted to say that even if the Government had come forward with a proposal to pay full wages during sickness some noble Lords would have criticised that as being too little. I suspect that we shall come back to that particular matter on another occasion so I will not labour it. The noble Lord, Lord Wallace of Coslany, and others specifically said that they were concerned that the low-wage earners were being treated harshly. We thought long and hard about how to treat the low paid under the scheme and we concluded, after consultation, we should not compel employers to pay full wages to the low paid when they are sick. Many will choose to do so but they will have the discretion not to.

Therefore, we have set the middle rate and the lower rate at such a level as to provide incentives to return to work and to leave it to the employer who knows best in the circumstances to decide whether an incentive is necessary. Even after tax and contributions have been paid, someone receiving only the lower or middle rate of SSP will still get more than a single person gets by way of sickness benefit.

The noble Lord, Lord Banks, touched on the point of the hidden tax of the national insurance contribution. This Bill has been different from most other social security Bills in that the concerns expressed have not been solely about the claimants but also about the employers. It is true that employers are being asked to take on a new task. It is our objective to minimise the additional administrative burden on them. The gains to the economy through reduced bureaucracy and reduced PSBR are worth a great deal and will improve the environment in which the employers operate.

It is argued that there is a hidden tax in this, that employers have to pay national insurance contributions and the surcharge on the SSP. It has been clear since the Green Paper was published that this liability would exist. Employers cannot and I think will not complain now that they did not know of this. Taken overall, the compensation to employers under self deduction is greater than their costs by around £80 million My noble friend Lord Boyd-Carpenter stressed the importance of there not being an additional burden on the employers, least of all at this time—although some would say at any time. The point is taken and is satisfactorily covered by the proposals in the Bill. Should some of the other points he raised lead us to think that this is not so, we will look carefully at what he said. That is an overall equation.

No doubt some companies will gain from the arrangements; others will lose financially, but to a small extent. The latter group will be firms without existing sick pay schemes. They could have to find up to £5 extra for each £37 of SSP they pay out. The average sickness per employee per year is just over one week; so taking into account the waiting days, the average extra cost per employee per annum will be about £3. To excuse employers that very small sum would involve them in an administrative nightmare in calculating what they owed by way of national insurance contributions. I respectfully submit that that extra burden would more than outweigh the very small cost that they might—only that they might—have to bear. Even so, I still take the point that my noble friend made and I will deal with it as I said I would.

A point to which I would specifically like to respond which the noble Baroness, Lady Jeger, made was that unemployment benefit should not be taxed. It has been agreed on both sides of both Houses that benefits which replace income should be taxed.

Baroness Jeger

My Lords, may I make my position perfectly clear? I was not saying that the benefit should not be taxed. I was saying that benefit should not be brought into taxation while there is this 5 per cent. shortfall in the payment of unemployment benefit.

Lord Bellwin

My Lords, whether or not that point was also dealt with in another place, I am not aware. But this was discussed elsewhere and accepted in the way that I suggested. Perhaps I could move on to another point that the noble Baroness made. There is some reason to quarrel with some of the figures that the noble Baroness quoted regarding what it will cost to restore the abatement of unemployment pay; but, on reflection, that is something we had better take up on another occasion.

On housing benefits, I would remind the House that we have achieved two important policy goals. First, we have resolved the "better off" problem. The noble Baroness in her opening remarks at least acknowledged that this was a problem—and a real one— for many people. At present, many claimants are faced with the difficult decision of choosing which of the two current schemes providing help with rent and rates will give them the greater assistance. Housing benefits remove this "better off" problem. In future, claimants will receive help with rent and rates from their local authority only. Secondly, we shall be able to get the work of providing rent and rates assistance for supplementary benefit claimants done more efficiently by giving the job to the local authorities.

It always amuses me that in the many debates in which I am involved on local authorities sometimes both my noble friends and noble Lords opposite speak with such pleasure about the achievements of local government and local authorities, and sometimes they clobber them so hard that it is not to be believed. I am always faced with the dilemma on one hand of remembering that it is from there that I came, seeing some of the problems that face them, and at the same time recognising that there are shortcomings. Anyone who has their interests as much at heart as I have is the first to acknowledge that there are shortcomings. We want them to be better; we want them to be good. Everyone wants that.

Surely the noble Lord, Lord Wallace, when he expressed his dislike of the Bill in such emotive tones, must accept that if one can take £10 million of costs and translate that into the same £10 million of benefits to people, that is what I would have thought it was all about. I see on reflection that the noble Lord is nodding his approval. The DHSS will require, as has been said, 2,000 fewer staff from the change and that is a useful contribution to what the Government are seeking to do.

As the noble Baroness pointed out, although there will be the extra costs for the local authorities, and of course it will involve extra manpower, nevertheless there is a significant net gain—if I may use the term—and we have undertaken that we will fully reimburse that extra cost—and I mean fully, 100 per cent.—to local authorities. I know from conversations with the local authority associations that they have no anxieties or fears about that, as I hope that the noble Baroness does not on that point. In another place, my honourable friend the Member for Acton said—and I just quote briefly—that the additional costs which fall on local authorities as the result of the new scheme will be met in full by Exchequer funds. I hope that that covers that point well enough.

The noble Lord, Lord Pitt, and the noble Baroness, Lady Jeger, expressed concern at the number of losers under our proposals. It was suggested that this would have been avoided if we had put more resources into the scheme instead of introducing it on a nil-cost constraint. I think that the noble Lord mentioned a figure of £30 million. I cannot comment on that figure. I am sure he has it on good advice. I used to get the same advice. I suspect it comes from the same source and it was usually—but not always—good. One would want to check that out very carefully.

I must say that the Government do not have additional resources to spare for housing benefits. The Government's central aim must be to put the national economy straight, not least after several years of its being directed in very much an opposite direction. We believe, as I have said from this Dispatch Box so many times in the past three years, that we have to live within our means and decide our priorities on that basis.

Our overall priorities mean that we have no extra money for housing benefits. We can use the resources within the scheme to best effect, and we can use efficiency savings for benefit. But I am afraid that we cannot bring in resources from outside the scheme—whether it be new resources or savings in other areas such as that from taking the housing element out of the index used for uprating supplementary benefit.

The noble Lords, Lord Pitt and Lord Wallace, were concerned very much about the right of appeal to independent bodies. I ought to comment at least upon that because I recognise that that is a very reasonable concern to have. The Government totally support the need for review arrangements for claimants to challenge the decisions of local officers who have considered the case. But it is in the interests of everyone that these arrangements are as speedy and as direct as possible, especially as housing benefits will be a weekly benefit. The Government believe that our proposals are the most effective way of achieving that goal. I understand what the noble Baroness said about regulations and her reservations. I have had it on so many Bills now and I clearly understand what the point is.

Even so, so far as these proposals are concerned, we are intending to set out in regulations—and doubtless we shall come back to that later on—provisions whereby all existing housing benefits claimants would have the right to a review of their housing benefits determination by a committee of councillors. The Committee's decision, with reasons, would have to be given to the claimant in writing. Thus, for the first time all rebate and rent allowance claimants will be assured of a decent and detailed review if they are dissatisfied. There will also be the additional safeguard that Ministers will be keeping a close watch on this part of the scheme. We will be asking authorities to provide the DHSS with information about the number and kinds of reviews they undertake and the outcome.

I assure noble Lords that if we see particular problems arising, we shall be able to amend the regulations to ensure that equity prevails. There I would have thought is one instance where regulations can be advantageous rather than something which is set down firmly and finally once and for all on the face of a Bill. If we see particular problems arising, we shall be able to amend the regulations, to ensure that equity prevails.

We studied alternative proposals but found them more cumbersome or, in the case of supplementary benefit appeal tribunals, requiring significant changes in the operation and outlook of the appeal body concerned. On the other hand, our proposals offer claimants the most direct and speedy means of securing a review of their housing benefits claim from the body that can best help them—their local council. The proposals are based on ideas which have been tried and tested in some local authorities, none of which has been proved to be found wanting. They are also based on the fundamental principle, with which I hope noble Lords will agree, that councillors are best placed and must be ready and willing to intervene on behalf of their constituents to review certain decisions taken in the name of the council. The noble Lord, Lord Pitt, specifically referred to the fact that supplementary benefit claimants will lose some of their appeal rights from the introduction of housing benefits. I would argue instead that our proposals give them rights to seek a review from the most appropriate people to investigate their housing benefit entitlements; namely, the local elected members.

We shall be coming back to many of these matters before too long, but to conclude, the new scheme will involve new procedures and will require local authorities and the Department of Health and Social Security local offices to liaise more closely than hitherto. Again, discussions between the department and Local Authority Association officials have been fruitful, and the necessary procedures are being developed. I hope that I have covered at least the major points raised today, but I repeat the assurance I gave at the beginning that we will very carefully check over everything that has been said and I will have regard to the points I have not covered.

I should like to conclude by saying just a word about the merits of the measures in this Bill. As my noble friend Lord Elton said earlier, they are aimed at reducing wasted effort. The sick pay scheme will cut dramatically the overlap of work between employers and the state when someone is sick for short periods. The housing benefit scheme will not only remove a lot of confusion and unnecessary work from staff but it will also reduce the confusion for claimants by replacing two schemes for financial help with housing costs by one scheme. The overall effect of the Bill is to reduce civil servant manpower by around 6,000, and that is an important contribution to the Government's objective of reducing the size of the bureaucracy.

I conclude by saying that, despite the real concern expressed by noble Lords opposite, I hope that as we go through this they will recognise many parts of the Bill which even they will feel are an advance on present procedures. The Government think so—as your Lordships might expect. I believe myself that this is a fine measure and a good Bill. It will take us much further along the road towards doing things in these areas better than we do them today.

On Question, Bill read a second time, and committed to a Committee of the Whole House.