Social Security and Housing Benefits Bill

HL Deb 27 April 1982 vol 429 cc822-60

5.57 p.m.

House again in Committee.

[Amendments Nos. 13 and 14 not moved.]

Lord Banks moved Amendment No. 15: Page 5, line 41, leave out ("may") and insert ("shall").

The noble Lord said: I beg to move Amendment No. 15 and, with the leave of the Committee, I should like to speak at the same time to Amendments Nos. 16, 17 and 18 which are related. If the first three of these amendments are carried, then subsection (5) at the bottom of page 5 will read: Following any such review the Secretary of State shall, in the tax year in which the review is carried out, prepare and lay before Parliament the draft of an order increasing the sums by such amount as is necessary to retain their value". The object of these amendments is to place a duty on the Secretary of State to increase the rates of statutory sick pay as may be necessary to retain the real value of the benefits.

We are strongly of the opinion that the value of benefits which Parliament has thought fit to provide should be maintained until such time as by primary legislation Parliament determines that circumstances are such that these benefits should be discontinued or modified. The Bill makes it possible for the Secretary of State to raise the rates to restore their value if he thinks fit to do so. He is not obliged to do so although if he does not do so he must report his reasons to Parliament.

Amendments Nos. 15, 16 and 17 oblige the Secretary of State to raise the level of the rates to restore the value. This being so, the provision requiring him to report to Parliament his reasons for not doing so is no longer required and Amendment No. 18 would eliminate it. If the first three amendments were not carried, then we would not wish to proceed with the fourth since in those circumstances we would strongly support the retention of subsection (7). I beg to move.

Lord Cullen of Ashbourne

I am afraid that I shall have to disappoint the noble Lord, Lord Banks, by saying straight away that the Government cannot accept these amendments. As drafted, the Bill requires the Secretary of State to look each year at the rates of statutory sick pay to see whether they have kept their value. In practice, this review will take place each autumn and the measure of inflation used will be the latest retail price index figures. It is the intention to raise the rates of statutory sick pay broadly by the increase in the rate of inflation. I say "broadly" in line with inflation since, in order to keep employers' administration of the scheme simple, we shall have to consider rounding the rates and the earnings thresholds to a convenient figure.

There are, however, other considerations which the Secretary of State shall have to take into consideration. One of the most important of these is the relationship between the rates of statutory sick pay and of national insurance sickness benefit. Noble Lords will appreciate that the standard rate of statutory sick pay, £37, broadly equates with the rate of sickness benefit payable to a married couple (currently £36.40). Since statutory sick pay replaces sickness benefit during the early weeks of illness or injury, it is sensible that there should be a consistent relationship.

There are also practical considerations. For example, if statutory sick pay was to fall substantially behind in relation to the level of supplementary benefit, the net effect would be an increase in the number of supplementary benefit claims during the early weeks of illness. None of us would welcome that.

There will be other factors to which the Secretary of State should pay heed when assessing the new rates of statutory sick pay. For example, in setting the level of the earnings thresholds or the rates themselves he may well wish to look at the movement in earnings. If earnings were rising much more slowly than prices, without the flexibility given by this clause the odd situation could arise whereby people earning quite substantial wages could be considered low earners and be entitled only to one of the lower rates of statutory sick pay.

Finally, it may be necessary for the Secretary of State to have regard to the state of the economy. In the final analysis, what the country pars to people who are sick, whether by sick pay or by sickness benefits, depends on what the country can afford. Relating the rates strictly to the level of inflation could be a recipe for disaster.

We must be realistic about the rates of statutory sick pay. The Secretary of State must have the flexibility to raise the rates, having taken all the relevant factors into account. As it stands before your Lordships, the clause provides that flexibility. But the clause also makes it quite clear that our intention is to increase these rates each year in line with inflation. If the Secretary of State decides not to do that, he has to prepare a report to Parliament explaining why. But it would not be sensible to tie the Government to a statutory requirement, as this amendment would do. The Government of the day must be allowed the freedom to set the rates flexibly and realistically.

Lord Banks

I must confess that that is rather a disappointing answer. The noble Lord says that we must have a consistent relationship between statutory sick pay and sickness benefit and offers that as one of the reasons why it would not be possible to put a duty upon the Secretary of State to raise the benefits in line with prices. But he is given the discretionary powers to do that under the Bill. One would imagine that the same consideration will apply to a discretionary power. If in one year he decided he wanted to do it, although he had not done it the previous year, he would still have to be concerned about a consistent relationship. So that makes no difference whether you have it obligatory for the Secretary of State to make the increase or if it is left to his discretion.

The noble Lord said that the Secretary of State may wish to look at earnings. There is nothing to prevent him looking at earnings and making such other adjustments as are necessary in the rates. But at any rate they would be linked to prices. The third argument was the familiar one about the state of the economy and the shortage of cash; but, of course, pensions which are far and away the largest part of the expenditure on social security are linked to prices. If it can be done for pensions, why should it not be done for statutory sick pay?

Regarding not allowing benefits to be whittled away which we have seen happen to a number of benefits with an awkward situation arising as a result, such as the death grant, if we are not going to have that kind of situation arising, we have to make it clear that benefits—unless Parliament by primary legislation decide otherwise—must be increased in line with prices. For that reason, I should like to press this amendment.

6.4 p.m.

On Question, Whether the said amendment (No. 15) shall be agreed to?

Their Lordships divided: Contents, 77; Not-Contents, 106.

DIVISION NO. 3
CONTENTS
Airedale, L.	Davies of Leek, L.
Ardwick, L.	Ewart-Biggs, B.
Aylestone, L.	Gaitskell, B.
Bacon, B.	George-Brown, L.
Balogh, L.	Glenamara, L.
Banks, L.	Gosford, E.
Barrington, V.	Gregson, L.
Bernstein, L.	Hampton, L.—[Teller.]
Bishopston, L.	Harris of Greenwich, L.
Blease, L.	Howie of Troon, L.
Blyton, L.	Jacques, L.
Boston of Faversham, L.	Jeger, B.
Briginshaw, L.	Jenkins of Putney, L.
Brockway, L.	John-Mackie, L.
Bruce of Donington, L.	Kaldor, L.
Chitnis, L.	Kennet, L.
Cledwyn of Penrhos, L.	Kilmarnock, L.
Collison, L.	Lee of Asheridge, B.
Cooper of Stockton Heath, L.	Lee of Newton, L.
	Llewelyn-Davies of Hastoe, B.
David, B.

Lloyd of Hampstead, L.	Shinwell, L.
Longford, E.	Stedman, B.—[Teller.]
McGregor of Durris, L.	Stewart of Alvechurch, B.
Mais, L.	Stewart of Fulham, L.
Mayhew, L.	Stone, L.
Melchett, L.	Strabolgi, L.
Molloy, L.	Strauss, L.
Oram, L.	Tordoff, L.
Peart, L.	Underhill, L.
Phillips, B.	Vernon, L.
Pitt of Hampstead, L.	Wade, L.
Ponsonby of Shulbrede, L.	Wallace of Coslany, L.
Raglan, L.	Wells-Pestell, L.
Rathcreedan, L.	Whaddon, L.
Rhodes, L.	Wigoder, L.
Rochester, L.	Wilson of Langside, L.
Ross of Marnock, L.	Winstanley, L.
Seear, B.	Wootton of Abinger, B.
Shepherd, L.

NOT-CONTENTS
Abercorn, D.	Lauderdale, E.
Airey of Abingdon, B.	Linlithgow, M.
Allerton, L.	Long, V.—[Teller.]
Alport, L.	Loudoun, C.
Avon, E.	Lyell, L.
Balfour, E.	McAlpine of Moffat, L.
Bellwin, L.	McFadzean, L.
Beloff, L.	Mackay of Clashfern, L.
Bethell, L.	Macleod of Borve, B.
Blake, L.	Mansfield, E.
Boardman, L.	Margadale, L.
Brookes, L.	Marley, L.
Brougham and Vaux, L.	Mersey, V.
Caccia, L.	Montgomery of Alamein, V.
Caithness, E.	Mottistone, L.
Campbell of Alloway, L.	Newall, L.
Campbell of Croy, L.	Northchurch, B.
Cawley, L.	O'Hagan, L.
Chelwood, L.	Onslow, E.
Clinton, L.	Orkney, E.
Coleraine, L.	Pender, L.
Colville of Culross, V.	Portland, D.
Colwyn, L.	Rankeillour, L.
Cork and Orrery, E.	Rawlinson of Ewell, L.
Craigavon, V.	Renton, L.
Crathorne, L.	Rochdale, V.
Cullen of Ashbourne, L.	Rugby, L.
Daventry, V.	St. Aldwyn, E.
De La Warr, E.	St. Davids, V.
Denham, L.	St. Just, L.
Ellenborough, L.	Sandford, L.
Elles, B.	Sandys, L.—[Teller.]
Elliot of Harwood, B.	Shannon, E.
Faithfull, B.	Sharples, B.
Ferrers, E.	Skelmersdale, L.
Fortescue, E.	Stodart of Leaston, L.
Fraser of Kilmorack, L.	Stradbroke, E.
Gainford, L.	Strathclyde, L.
Gisborough, L.	Strathspey, L.
Glasgow, E.	Sudeley, L.
Gormanston, V.	Swinfen, L.
Greenway, L.	Tenby, V.
Gridley, L.	Teviot, L.
Grimston of Westbury, L.	Thorneycroft, L.
Haig, E.	Trefgarne, L.
Hailsham of Saint Marylebone, L.	Trumpington, B.
	Ullswater, V.
Hayter, L.	Vaizey, L.
Henley, L.	Vaux of Harrowden, L.
Kemsley, V.	Wakefield of Kendal, L.
Kimberley, E.	Willoughby de Broke, L.
Kinross, L.	Wise, L.
Kintore, E.	Young, B.
Lane-Fox, B.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendments Nos. 16, 17 and 18 not moved.]

6.12 p.m.

Lord Banks moved Amendment No. 19: Page 6, line 27, at end insert— ("( ) The Secretary of State shall in preparing any required increase in statutory sick pay in November 1982 include in it such sum as is necessary to make good the effect of section 1(1) and (2)(a) of the Social Security Act 1980 upon sickness benefit.").

The noble Lord said: I beg to move Amendment No. 19. As we heard earlier in the course of our discussions, the top rate of statutory sickness pay had been calculated with reference to the current sickness benefit rate. This rate, together with that of other short-term benefits, suffered a reduction of 4 per cent. in 1980 as a result of the abatement applied under the Social Security (No. 2) Act of that year. It should be the Social Security (No. 2) Act, because there were two that year. The effect of that abatement is of course cumulative. This 5 per cent. abatement was introduced as an interim measure pending the making of short-term benefits taxable. With the exception of invalidity benefit, no guarantee has been given that, when the short-term benefits are brought into tax, the 5 per cent. abatement will be made good, although it has been suffered by taxpayers and non-taxpayers alike.

Since statutory sick pay has been calculated with reference to sickness benefit and since sickness benefit has been subject to the 5 per cent. abatement, we are anxious that statutory sick pay as well as sickness benefit and other short-term benefits, should be increased to offset the effect of that abatement. This amendment deals with the effect of the abatement on statutory sick pay. A later amendment deals with the effect of the abatement on sickness and unemployment. I beg to move.

Lord Trefgarne

As the noble Lord has explained, this amendment is intended to require the Secretary of State to take account of the 5 per cent. abatement of sickness benefit which was introduced in November 1980 when determining the rate of statutory sick pay this autumn. I have explained in response to a previous amendment how the rates of statutory sick pay were calculated, and my noble friend Lord Cullen amplified what I said on another occasion. Essentially they relate quite closely to the rates of sickness benefit; so it could be argued that, if the rate of sickness benefit had not been abated, the rates of statutory sick pay would be higher. I accept that there is some force in that argument, but, before dealing with that point, I should like, if I may, to say a little more about the detailed financial effects of the scheme.

As I mentioned earlier, a paper which gives the figures underlying our calculations is available to your Lordships with the notes on clauses. In setting the rates of statutory sick pay, we have tried to achieve a situation where, overall, employees have the same net income as they would if existing national insurance benefits were taxed. To do this we have to take account of how much occupational sick pay is paid at the moment, of how this will be affected when statutory sick pay is introduced, and of the tax and national insurance contributions that will be paid. I will leave to one side for the moment the arrangements for married women and widows who will be entitled to statutory sick pay but who are not at present entitled to sickness benefit because they take advantage of the option to pay reduced rate contributions. Their reduced rate contributions will be increased in order to pay for their statutory sick pay.

Obviously one cannot know precisely what assumptions to make in carrying out this calculation. We do not know precisely how much occupational sick pay employers pay or, more importantly, how much they will pay after the statutory minimum is introduced under this scheme. In some cases the amounts of occupational sick pay paid at present are only small and will not have a significant effect. In other cases employers pay full pay, often allowing for existing national insurance benefits that the employee can claim, and will no doubt continue with such full pay schemes when statutory sick pay is introduced; but we have made the best estimates that we can.

Perhaps at this point I may pick up a point made by the noble Lord, Lord Banks, in his Second Reading speech. He queried then the much quoted figure of 90 per cent. of employees in occupational sick pay schemes. He quite rightly pointed out that these schemes often have conditions attached to them—for example, qualifying periods, limits of entitlement and lo on. I can, however, assure him that the best estimates we have are that approaching 90 per cent. of all full-time employees are covered by some kind of scheme, whether it be formal or informal. Around 80 per cent. of employees will be entitled to a payment from their employer at given time, and the difference between the two figures represents those covered but not entitled because they do not meet one or other of the qualifying conditions.

I am sorry to have digressed slightly but I thought it worth putting on record the best estimates that we have. The general point I want to make is that the substantial loss to the National Insurance Fund that would arise if the rate of statutory sick pay were much higher will not necessarily bring any benefit to most employees who will already be receiving more—in many cases much more—than the statutory minimum.

We have set the rates of statutory sick pay at what I consider to be reasonable levels, given that they are simply the minimum level of sick pay that this Bill will require employers to pay. In that sense they are rather different from national insurance sickness benefit rates. There is nothing to stop employers paying more than this level and indeed, many already do and will doubtless continue to do so. If we had calculated the rates of statutory sick pay on the basis of what the rates of sickness benefit would have been had they not been abated, we should have come up with a different figure. This could have meant a loss of about a further £25 million from the National Insurance Fund, and that is obviously something that we could not accept.

It has been argued, of course, that it is unfair to have abatement and taxation at the same time and that this is effectively what we are doing. I accept that the two issues are linked in many people's minds, but that does not alter the fact that the main reason for the 5 per cent. abatement in November 1980 was to save money. I make no bones about that, but I shall go no further into the question of abatement now since there is a new clause specifically relating to this issue later on the Marshalled List, and I hope that your Lordships will agree that it would be appropriate for me to deploy the argument further at that time. But in anticipation of that amendment I hope that the noble Lord will see fit to withdraw his first amendment.

Baroness Jeger

May I ask the noble Lord just one question. When he refers to 90 per cent. of workers being in schemes already, can he confirm whether or not that is 90 per cent. of full-time male employees, which was the figure I found out in my researches? If women are included, the percentage is very much lower than 90 per cent.

Lord Trefgarne

I think that it is 90 per cent. of employees, both male and female, in full-time employment. I have a feeling that it does not include part-time employees, many of whom are women.

Baroness Phillips

May I trouble the Minister again? He replied originally that the widow could receive another benefit as well as a pension. First he said one could not and then corrected himself and said that one could. Listening carefully to the Minister's speech, I thought I heard him say in the early part of his speech that the widow would receive sick pay but not sickness benefit.

Lord Trefgarne

What I said earlier was that a widow in receipt of a widow's pension could also receive statutory sick pay.

Baroness Phillips

But not sickness benefit.

Lord Trefgarne

Sickness benefit? I must confess I am not quite certain whether sickness benefit is also available with a widow's pension. Perhaps I could let the noble Baroness know later—Ah! manna from Heaven. As I said earlier, statutory sick pay and widow's pension are payable together, but sickness benefit is not payable with widow's pension.

Baroness Phillips

In other words, the Minister's first answer was correct, and the information sent to him, which he corrected himself, he should have corrected in the first place.

Lord Banks

This question of the abatement is one which has created quite a lot of heat and it did so when it was debated in another place. The strong feeling there was that, when once the short-term benefits were taken into taxation, the abatement, which was an interim measure, should be made good was to be found in all parts of the other place, and I have no doubt that it would be so here if all parts of this place were fully occupied at the present time. I think that the noble Lord, Lord Trefgarne, in his opening remarks put the case for this amendment very well when he said that since sickness benefit had been abated, and since the statutory sick pay had been based on sickness benefit, it could be argued—and, indeed, I would say should be argued—that if it were not for that abatement the statutory sick pay would be fixed at a higher level, and I would point out that we have an amendment coming later which would take care of sickness benefit.

The noble Lord raised again the argument on the fact that many people would be receiving more under occupational schemes, which is an argument against any increase in statutory sick pay. I think this is a new argument in favour of statutory sick pay which is being developed tonight. Previously, the numbers of people involved in occupational schemes have been brought forward on administrative grounds, on the grounds that it would make things administratively easier and because employers are already providing schemes of this kind it would be possible to graft on to it the state provision for the first eight weeks. But many employers, of course, are providing sickness benefit which goes on far beyond eight weeks and it is not suggested, so far as I am aware, that sickness benefit itself which people would be on after eight weeks should be reduced because of that, or that no increase should be contemplated because of that. It is being produced only in relation to statutory sick pay and I think the argument is not one which we should accept.

The noble Lord suggested that we might wait until the later amendment to hear the argument which he is then going to deploy before we came to a final decision on this matter. But I think we are obliged to deal with this matter of the abatement as it affects statutory sick pay now as that is the only time it appears on the Order Paper. So for those reasons I should like to press this amendment.

Baroness Jeger

May I say briefly that we support the noble Lord, Lord Banks, in his amendment. It seems to us unfair that the initiation of this new scheme should not be accompanied by an updating of sickness benefit to restore its real value. There are many people in the country who expected this to happen. I know that there are many alibis about the state of the economy. In view of the fact that my noble friend Lord Underhill referred earlier to the extra sums which the Government are going to collect by charging national insurance contributions on sickness benefit, which is a new windfall to the Treasury, we would have thought that that could have helped the Government to make the uprating in sickness benefit which would have made this Bill slightly more acceptable, if I may put it this way.

6.27 p.m.

On Question, Whether the said amendment (No. 19) shall be agreed to?

Their Lordships divided: Contents, 76; Not-Contents, 94.

DIVISION NO. 4
CONTENTS
Airedale, L.	Bruce of Donington, L.
Ardwick, L.	Chitnis, L.
Aylestone, L.	Cledwyn of Penrhos, L.
Bacon, B.	Collison, L.
Banks, L.	David, B.
Barrington, V.	Davies of Leek, L.
Bernstein, L.	Elwyn-Jones, L.
Birk, B.	Ewart-Biggs, B.
Bishopston, L.	George-Brown, L.
Blease, L.	Gladwyn, L.
Boston of Faversham, L.	Glenamara, L.
Brockway, L.	Gregson, L.

Hampton, L.—[Teller.]	Pitt of Hampstead, L.
Harris of Greenwich, L.	Ponsonby of Shulbrede, L.
Houghton of Sowerby, L.	Raglan, L.
Howie of Troon, L.	Rathcreedan, L.
Jacques, L.	Rochester, L.
Jeger, B.	Seear, B.
Jenkins of Putney, L.	Shinwell, L.
John-Mackie, L.	Stedman, B.—[Teller.]
Kaldor, L.	Stewart of Alvechurch, B.
Kennet, L.	Stewart of Fulham, L.
Kilmarnock, L.	Stone, L.
Lee of Asheridge, B.	Strabolgi, L.
Lee of Newton, L.	Strauss, L.
Llewelyn-Davies of Hastoe, B.	Taylor of Mansfield, L.
	Tordoff, L.
Lloyd of Kilgerran, L.	Underhill, L.
Longford, E.	Vernon, L.
McGregor of Durris, L.	Wade, L.
MacLeod of Fuinary, L.	Wallace of Coslany, L.
Mais, L.	Wedderburn of Charlton, L.
Melchett, L.	Wells-Pestell, L.
Milner of Leeds, L.	Whaddon, L.
Molloy, L.	Wigoder, L.
Napier and Ettrick, L.	Wilson of Radcliffe, L.
Oram, L.	Winstanley, L.
Peart, L.	Wootton of Abinger, B.
Phillips, B.

NOT-CONTENTS
Abercorn, D.	Kinnoull, E.
Airey of Abingdon, B.	Kinross, L.
Allerton, L.	Lane-Fox, B.
Alport, L.	Lauderdale, E.
Avon, E.	Linlithgow, M.
Balfour, E.	Long, V.—[Teller.]
Bellwin, L.	Loudoun, C.
Beloff, L.	Lyell, L.
Bessborough, E.	McAlpine of Moffat, L.
Bethell, L.	McFadzean, L.
Blake, L.	Mansfield, E.
Boardman, L.	Margadale, L.
Brookes, L.	Marley, L.
Caccia, L.	Mersey, V.
Caithness, E.	Montgomery of Alamein, V.
Campbell of Alloway, L.	Mottistone, L.
Chelwood, L.	Northchurch, B.
Clinton, L.	O'Hagan, L.
Coleraine, L.	Orkney, E.
Colville of Culross, V.	Pender, L.
Colwyn, L.	Portland, D.
Cork and Orrery, E.	Rawlinson of Ewell, L.
Craigavon, V.	Rochdale, V.
Crathorne, L.	St. Aldwyn, E.
Cullen of Ashbourne, L.	St. Davids, V.
De La Warr, E.	St. Just, L.
Denham, L.	Sandford, L.
Elles, B.	Sandys, L.—[Teller.]
Elliot of Harwood, B.	Shannon, E.
Faithfull, B.	Sharples, B.
Ferrers, E.	Skelmersdale, L.
Ferrier, L.	Stodart of Leaston, L.
Fortescue, E.	Stradbroke, E.
Fraser of Kilmorack, L.	Strathclyde, L.
Gisborough, L.	Sudeley, L.
Glasgow, E.	Swinfen, L.
Gormanston, V.	Tenby, V.
Greenway, L.	Teviot, L.
Gridley, L.	Trefgarne, L.
Grimston of Westbury, L.	Trumpington, B.
Haig, E.	Ullswater, V.
Hailsham of Saint Marylebone, L.	Vaizey, L.
	Vaux of Harrowden, L.
Hayter, L.	Wakefield of Kendal, L.
Henley, L.	Willoughby de Broke, L.
Kemsley, V.	Wise, L.
Killearn, L.	Young, B.
Kimberley, E.

Resolved in the negative, and amendment disagreed to accordingly.

6.36 p.m.

On Question, Whether Clause 7 shall stand part of the Bill?

Baroness Jeger

I intervene only briefly, because we have had a very full debate on many of the details. I want just to reaffirm our objections to this clause, which lays down statutory rates of sick pay which we think are grossly inadequate, especially in view of the fact that national insurance has to be deducted from them. We are also concerned about subsection (4), which provides that for the purposes of subsection (3): the Secretary of State shall estimate the general level of prices in such manner as he thinks fit". We are not very impressed with the assurance that the Secretary of State can do as he thinks fit, because we may not be in agreement with him.

There has been a great deal of discussion, and I shall not detain your Lordships for long, about how we can relate the cost of living to social security benefits. I thought there was general agreement in the House that the retail price index was not really the ideal measurement for these purposes. I recall—it seems a very long time ago—that we were to have a tax and prices index, which was supposed to be a more sensitive index to the living standards of the majority of people. But the latest figures that I have been able to find show that the tax and prices index went up by 15 per cent., whereas the retail price index went up by 12 per cent. That makes me wonder whether the tax and prices index has been forgotten about, because it shows an increase higher than the RPI and, therefore, is not so much in favour of this Bill. But unless we have a formula laid down, other than the discretion of the Secretary of State, there is a danger that many people may be penalised.

I think it is generally accepted on all sides, by noble Lords who know anything about the cost of living for people on low incomes, that there is a different pattern of spending. For the poorest 25 per cent. of the people of this country, the latest retail price index which I was able to find rose by 14.4 per cent., compared with an average of 12 per cent. This is easily explained. It is because poor people do not buy gin, motor cars, fur coats and a lot of items which are included in the retail price index. They tend to spend a higher proportion of their money on housing, warmth and food, all of which have increased proportionately more than many other casual retail prices. So I hope that before the next stage the Government will look again at this part of the clause, and perhaps try to find a way of writing into the Bill some measurement, and not leave it entirely to the Secretary of State to estimate the general level of prices in such manner as he thinks fit". I must confess to your Lordships that I would not want to be a Secretary of State burdened with that responsibility without any indication of how this up-rating would relate to the uprating of other benefits. I understand that the Government have a separate index for pensioner households. I am wondering what kind of a muddle we are getting into. Are we going to stick to the retail price index for people on pensions? Are we going to go by the pensioners' index? Are we going to resuscitate for poorer people the tax and prices index? Or what are we going to do? I assure your Lordships that I am not saying this in a belligerent spirit. It is a gentle inquiry about how the poor Secretary of State is to decide how to work this part of Clause 7.

Lord Trefgarne

I suppose it is true to say that whatever index is selected for use, one year or another, somebody will say that it is the wrong index and that they would have been better off if yet another index had been devised or if another existing index had been used. The wording of the clause closely follows the wording which appears in the Social Security Act 1975. Therefore, I can give an assurance that the index to be used for this purpose will be the United Kingdom retail price index. That is the index which has been used for this purpose for a number of years. To use another index for this statutory sick pay figure—for example, the tax and prices index to which the noble Baroness referred—would mean that we were using a different index for statutory sick pay as compared with some of the other national insurance benefits. I hope the noble Baroness agrees that this would cause confusion and would not be desirable. As I say, therefore, it is proposed that the United Kingdom retail price index should be used for the purposes of this measure. In the light of that assurance, I hope the noble Baroness will agree that this clause should stand part of the Bill.

Clause 7 agreed to.

On Question, Whether Clause 8 shall stand part of the Bill?

Lord Mottistone

Clause 8 and, indeed, Clause 9 provide for a number of regulations which will be of immense importance to business, which now is involved in an enormous amount of administration in this complex area. I am asking my noble friends on behalf of business and industry to expedite, at least in draft, the production of these regulations so that companies can plan well ahead. I am told that the autumn is the latest possible time that will be suitable, and it would be very helpful if a draft of the regulations could be made available in advance to companies—possibly before the Summer Recess. It is no good waiting until Christmas. I hope my noble friends will take note of this.

May I also say that if it is suggested that there should be courses, industry has found in other areas that when the Government run courses they tend to be too general in their approach and rather expensive. On the whole, therefore, people prefer to organise their own courses. This is another good reason why the regulations and any guidance notes should be made available early so that courses can be devised, arrangements made, budgeting provided for and extra staff employed. The Government are going to reduce the number of civil servants, which means that industry may have to employ a few more people. Because of all these problems I hope that my noble friends will make sure that the impetus is kept going for the production of the draft regulations.

Baroness Jeger

I support what has been said by the noble Lord about the need to get ahead with the regulations as quickly as possible. I repeat that we on this side of the House are unhappy that so much of the Bill relies on regulations. However, that is water under the bridge. I share the noble Lord's anxiety about employers. I am also concerned about employees, trade unions, citizens advice bureaux, Members of Parliament—about anybody who may be asked for help. I very much hope that the regulations will be clear and that they will be published as soon as possible.

I notice that in another place the Minister gave an assurance that he would ensure that this information was given in what he called good plain English. With that we would all agree. However, may I suggest to the noble Lord the Minister that it is not sufficient for the information to be in good, plain English. That will not help an Asian woman in a textile mill in Bradford. The information, if not the regulations, should be published, on advice which I know the Minister can procure, in other languages so that the ethnic minorities in this country are not denied knowledge of the rights which they may have under the Bill.

Lord Trefgarne

One of the difficulties in handling legislation like this, as noble Lords will by now have appreciated, is that sometimes one needs to rely upon the advice of one's officials. This evening I have received a note which I think tells me that the regulations will be produced immediately after Royal Ascot, but when I look a little closer I think it says "Royal Assent". I can give an assurance that the regulations will be kept as simple as possible, that they will be produced immediately after Royal Assent and that they will be accompanied by an employer's guide. The local offices will stand ready to help employers to organise any instructional courses which may prove to be necessary. The employers' guide will appear just after the regulations in July, assuming that the Bill has received Royal Assent by then, and it will be available also to employees and to the public in general. We are looking at the possibility of publishing the regulations, or at least the employers' guide, in other languages. But that presents difficulties and I cannot give an assurance about it at present. However, we recognise its desirability and we shall see what can be done.

Clause 8 agreed to.

Clause 9 [Recovery by employers of amounts paid by way of statutory sick pay]:

Lord Banks moved Amendment No. 20: Page 7, line 36, after ("recover") insert ("105 per cent. of").

The noble Lord said: I beg to move Amendment No. 20. During the Second Reading debate, the noble Lord, Lord Elton, spoke of a £90 million saving as a result of the Bill. At that time I was not clear how this was arrived at. However, I have since seen the Department of Health and Social Security paper Financial Effects of Statutory Sick Pay to which reference has already been made this afternoon.

Table 3 of that paper shows losses of £565 million being the compensation to employers, and gains of £650 million. That figure of £650 million includes £30 million for administrative savings, £365 million for national insurance benefits saved because they are not now to be paid out, extra national insurance contributions and national insurance surcharge amounting to £l25 million, and extra tax on sick pay amounting to £130 million. That makes a total of £650 million and a net gain of £85 million. It seems to me that the Government ought not to have included £130 million from extra tax on sick pay, because, as r understood it, it was intended to bring sickness benefit into taxation in any event. So tax which is obtained in this way cannot, it seems to me, really be claimed as being the result of the introduction of statutory sick pay. If one takes out that figure, one has a loss because of the introduction of the scheme of around £45 million.

I mention the figure of £30 million for administrative savings, but what about the extra administrative costs which are going to be transferred to employers, incluing small employers who are ill-equipped to deal with them? Mr. Rossi, the Minister for Health and Social Security, said in another place during the Committee stage on 28th January: 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". The Society of Civil and Public Servants outlined the administrative difficulties which employers will face in these terms: Employers will have to deal with calculating the expiry of employers' liability and the transfer to National Insurance sickness benefit; the linking of several short-term periods of sickness; identifying categories of employees who are excluded from the scheme, e.g. married women paying reduced rate contributions, those over pensionable age, pregnant women during the period prior to and following birth, and casual workers; determining normal earnings in order to operate the two-scale system of payment; which is now a three-scale system of payment, determining the maternity allowance period for pregnant employees; deciding whether or not statutory sick pay is payable during a strike; agreeing the working week, especially where the employee works shifts or has an irregular work pattern; and recovering statutory sick pay which has been incorrectly paid. Firms will be required to keep additional complicated records of sick absence and the statutory sick pay paid. Any large employers will be involved in considerable extra expenditure in reprogramming existing computerised pay roll systems. Indeed, some will have to scrap their existing hardware and buy new computers to handle the extra work".

How should we assess these administrative expenses? It costs the Department of Health and Social Security some 4 per cent. of benefits to run the social security system. Therefore it seems to me that 5 per cent. of benefits would be a reasonable figure for employers' administrative expenses in administering statutory sick pay. That would be a figure of £28½ million. If I am right in thinking that these are the expenses involved, then we should add that figure to the loss of £45 million. This amendment would ensure that this administrative cost was recovered by employers.

As mentioned on Second Reading, the Government themselves have in their document Compensating Employers for Statutory Sick Pay pointed out the dangers in a 100 per cent. self-deduction scheme. I put that forward during the Second Reading debate as an argument against the proposal to transfer responsibility for the first eight weeks of sickness benefit to employers. But if we are to have such a scheme, expensive as I have shown it to be, then to be fair we should surely have not merely 100 per cent. self-deduction but some such figure as 105 per cent. self-deduction to cover the extra expenses which will be placed on employers. I beg to move.

Lord Cullen of Ashbourne

As the noble Lord has explained, the effect of this amendment would be to allow an employer to deduct from his monthly payments of contributions not only the amount paid out by way of statutory sick pay but also an additional 5 per cent. This amendment, as the noble Lord made clear in his speech, is aimed at helping employers with any additional costs arising from the scheme, most notably the cost of administering it. This would be achieved by giving employers an excess amount of money, over and above the actual statutory sick pay disbursed.

I do not wish to make an issue of the cost of this amendment, but I always think it helpful to know the financial consequences of what we are discussing. To give employers what is, in effect, 105 per cent. compensation would cost about £30 million; the saving in the public sector borrowing requirement which the Bill makes would be correspondingly reduced. However, more importantly, I do not think the amendment would achieve what it sets out to do. Noble Lords will remember that nearly 90 per cent. of full-time employees are already covered by occupational sick pay schemes. The employers who already pay occupational sick pay obviously have the administration to pay sick pay during an employee's absence. They receive notification of absence, consider any evidence about incapacity, assess what is due and make payments —exactly what they will have to do under the statutory scheme. It would not be right to compensate these employers for performing a function they already accept as part of their administrative procedures. The only additional burden these employers would have to bear would be deducting the amount of SSP from their contributions, and I doubt whether many of them would regard recovering money as a burden.

It may be argued that the amendment is aimed at small businesses and not at big corporations which pay sick pay. On that, I have two points to make. First, I would like to make clear that occupational sick pay is not confined solely to banks and other businesses. I know of one organisation representing small businesses which conducted a survey of its members and discovered 60 per cent. of them paid occupational sick pay of some sort. Secondly, I seriously question the logic of helping small firms by doling out largesse to industry in general. Depending on how one defines a small firm, only something like a fifth to a quarter of the £30 million cost would go to such firms. Most would be for firms with sick pay schemes—the very ones who gain from the compensation arrangements and who will have very little extra by way of administrative effort.

I also question the assumption many people make that the scheme will be so burdensome to administer. The scheme contained in the Bill is a simple one to run—much simpler than the state scheme, which involves checking of contribution records, dependency questions and so forth. Under the SSP scheme the employer has simply to decide whether or not an employee is entitled to SSP; and if he is not, because he is in one of the excluded groups listed in Schedule 1, to hand the employee a form on which the employer has simply stamped his name and address and ticked the relevant box. If the employee is entitled, in most cases the rate to be paid will be obvious. Only in a few cases will a simple calculation of earnings be needed. In only around 10 per cent. of the cases will the possibility of the employee exhausting his entitlement arise and, again, a simple form merely stating the date when entitlement is expected to run out is all that is required.

As to getting back the money disbursed as SSP, employers will simply have to complete an extra column in their monthly and annual returns to the Inland Revenue. When employers' organisations pressed on us the merits of the self-deduction method of compensation, they made light of any extra administrative burden. I can assure your Lordships that every effort is being made to ensure that the administration is kept to a minimum. I hope I have explained why I do not think this amendment is satisfactory. I do not agree that all employers need to be compensated for any extra administration which may fall on some of them. We do not compensate them for work involved in the collection of PAYE, for instance, and I think it would be a dangerous precedent to allow such compensation in respect of SSP.

The noble Lord made one point that I should like to deal with. The tax is only collected because the scheme is being introduced. It is logical, therefore, to count the tax gain as part of the advantage of the scheme. I hope I have satisfied the noble Lord and that he will feel able to withdraw the amendment.

Lord Mottistone

Your Lordships know that I endeavour to speak with the interests of industry in mind against other attitudes which are adopted in your Lordships' House. But in this particular case I think the noble Lord, Lord Banks, has been quite extraordinarily generous; 5 per cent. is, as my noble friend said, very much more than it could possibly cost as an additional charge on industry. I should have thought that the arguments of my noble friend were pretty conclusive, because it would be a precedent against the other types of work that industry has to do for the Government. I do not think it likes doing it but it does it, and I think this is another area altogether. So I should have thought that this particular amendment suffered from the error of being excessively generous. If the noble Lord had put in something like ½ per cent. or 1 per cent., I think it would have been more attractive for us to go along with, because one does respect the principle. It is a great pity it is so generous.

Lord Banks

I think the noble Lord, Lord Cullen of Ashbourne, is a little too optimistic about the way in which the scheme is going to be operated without additional burdens, with very little extra. I did read out a long list of things which employers will have to do. The present administrative cost is only part of what they will have to do.

With regard to the question about tax, the noble Lord said the tax is being collected only because the scheme is being introduced and therefore it is logical to include it as one of the benefits which derive from the scheme. If we have already decided, as I believe we had already decided, that sickness benefit was in one way or another to be brought into taxation, then I cannot see that we are right it allowing this particular sum as a credit in the balance sheet which is struck with regard to this particular Bill.

The noble Lord, Lord Mottistone, said that this was too generous. Well, I was comparing it with the requests which were made, and some of which I had received, for excluding the national insurance contribution of the employer, which of course would be a larger figure than this; it would be more than twice this amount. I was cutting it down to this figure and keeping it entirely separate from the whole question of national insurance payments. This was raised in another place, where it was said that it would be administratively extremely difficult to have a recoupment of that kind, to recoup people for national insurance payments. I thought that by doing it this way we should do it more simply and at a figure which was less than half what was being asked. But it may well still have been too generous. I should not want to say that that is necessarily the right figure.

I should like to consider what has been said about this amendment, but I remain convinced that there is a considerable administrative burden being put on employers, that it will fall particularly harshly on small employers, and that we should be right to return to the subject again. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

• Clause 9 agreed to.
• Clause 10 agreed to.
• Schedule 2 agreed to.
• Clauses 11 to 15 agreed to.
• Schedule 3 agreed to.
• Clauses 16 to 19 agreed to.

Lord Denham

I think that this is probably a convenient moment to adjourn the Committee, and I would suggest that we start again at eight o'clock.

(The Sitting was suspended from 7.7 until 8 p.m.)

Clause 20 [Offences and penalties]:

Lord Cullen of Ashbourne moved Amendment No. 21: Page 16, line 11, after ("8(2),") insert ("9(3)(a),").

The noble Lord said: This amendment is technical. It ensures that there are offence and penalty provisions for employers who fail to provide documents and information to the Secretary of State which may be required under the powers contained in Clause 9(3)(a). I am sure noble Lords will appreciate the sense of this amendment. It makes failure to comply with regulations made under Clause 9(3)(a) an offence which will attract the penalties laid out in Clause 20. Thus failure to produce information in respect of compensation is being treated in the same way as failure to carry out duties set out in other regulations. Clearly we cannot allow anyone to escape with impunity from any obligation which regulations lay on them.

I can assure noble Lords that we are making every effort to ensure that any requirement under Clause 9(3)(a) will not be unduly burdensome. It will be the minimum necessary to allow the Secretary of State to ensure that compensation procedures are being administered properly by employers. Noble Lords will have noticed that the different offence of someone producing false documents and information is treated separately by Clause 9(8) and 9(9). This again bears out the logic of having a deterrent for the employer who simply refuses to produce the information. I beg to move.

On Question, amendment agreed to.

Clause 20, as amended, agreed to.

Clauses 21 and 22 agreed to.

Clause 23 [Statutory sick pay to count as remuneration for principal Act]:

Baroness Jeger moved Amendment No. 22: Page 18, line 26, at end insert ("but such payments shall not be liable to national insurance contributions from either employers or employees").

The noble Baroness said: I shall speak briefly to this amendment. Looking at the Notes on Clauses it is made quite clear that the clause provides that any payment in satisfaction of a person's entitlement is to be treated as earnings for the purposes of Section 3 of the principal Act. It is under this clause, as I read it, that statutory sickness benefit attracts Class I national insurance contributions. We had an earlier debate about this matter and I must make it clear that we on this side of the Committee are opposed to this innovation. We think that it is totally unfair.

If Clause 23 is treating as earnings any entitlement under the Act, I must remind your Lordships of references which were made in another place to this problem. It seems to us that payment of national insurance would be liable if this money were, in fact, to be regarded as earnings. But the Minister in another place on 21st January, at column 235, said of the SSP: It is a hybrid between sickness benefit and earnings. It is neither one nor the other, but it has attributes of both". If that was not a sentence to confuse all legislators, let alone recipients and employers, I cannot think of anything more difficult. If it is income, then I can see that the Government can make out a case for putting national insurance on to it. But if, as the Minister said, it is a hybrid between sickness benefit and earnings, it is very difficult to understand how the Government can sustain the imposition of national insurance contributions on this amount of sickness benefit.

It was stated at column 237 on 21st January that: Statutory sick pay is a continuation of earnings". If it is a continuation of earnings then again the imposition of national insurance must, however unwillingly, be accepted. On the other hand, if it is a hybrid benefit, as the Minister said at column 235, how can we know, and how can people outside Parliament know, what this is all about?

I must say that if the Government are going to stand by the principle that the statutory sickness benefit is a continuation of earnings, then surely it must have some relationship to other earnings and it should not be, therefore, fixed at the flat rates which we were discussing in Clause 7 and which I am sure I would be out of order if I were to raise again. However, these are the points that worry us about Clause 23.

We think that it would be much fairer if neither the employer—and I am sure that I would have some sympathetic support from the other side if there was anybody there to bother—nor the employee should have to pay national insurance contributions. It has been built into our national insurance system that when one is ill or unemployed the card is franked and one does not have to contribute this £3.23 out of the £37 or even less which one will get under this Bill. So this is a new departure and I think it right to ask your Lordships to consider for a moment whether this new departure is right.

We do not, apparently, ask people to pay national insurance contributions on national insurance sickness benefits. So it is only for the first eight weeks that we are asking people to contribute £3.23. If they can manage to stay ill for longer than eight weeks they will then get sickness benefit exempted from national insurance. I hope that the noble Minister will correct me if I am wrong, but that is how I read the Bill. This seems to be grotesquely unfair. Surely if a man or a woman is unemployed or sick, there is no real reason for taking away the agreed right, agreed over many years, that their card is franked and they do not have to make a contribution.

If we proceed with the Bill as it stands and insist on this national insurance payment from people who are sick, we not only reduce the amount of money which they can spend on their family upkeep, but I am worried that we are creating a precedent. I am wondering whether the Government will come along very soon and suggest that all people in receipt of benefit—national insurance sickness benefit and unemployment benefit—are going to be asked to pay a national insurance contribution. That would be a very serious diversion from what many of us understood was to be the purpose of national insurance.

I have tried to put this case as fairly as possible. I want to emphasise that we want the exemption from national insurance contributions to apply both to employers and to employees. I have in mind a small employer, and I know that the party opposite has often professed great kindness for the small employer.

Let us suppose that such a small employer has a worker who goes off sick and that employer has, temporarily, to take on another worker in the place of that person. I put this interrogatively because I am very hesitant about these complicated things and I have every sympathy with Ministers who have to deal with them. Is it the case that that employer has to pay national insurance contributions for the employee who has gone off sick? When he takes on a temporary replacement does he not then have to pay national insurance on the temporary replacement? Is this small employer not then confronted with having to pay two national insurance benefits?—which is certainly not the case at the present time.

In tabling this amendment we are trying to help—and this may surprise noble Lords opposite—both the employer and the employee by suggesting that statutory sick pay is not, as the Minister said in another place, either sickness benefit or earnings; that it is neither the one nor the other; that it is a hybrid. I do not know what one does in this Committee about hybridity, if there is such a word. I would suggest that we leave matters as they are. If there are to be changes, the case for changes must be overwhelming and should not be partial or half-hearted. I say that it is partial because it seems that this new element is not to apply to the national insurance sick benefit which comes up after the eight weeks, and it is not to apply to unemployment benefit. Therefore, it seems not only a hybrid, to use the words of the Minister in another place, but a really rather ugly hybrid. I hope that the Minister will accept this amendment, which is meant to be helpful to both employers and employees. I beg to move.

8.12 p.m.

Lord Trefgarne

My honourable friend the Minister of State, whose words have been quoted at considerable length this evening, indeed, dealt with this matter when it was considered in the other place. Of course, statutory sick pay, as provided for in this Bill, is earnings for tax and contribution purposes. As I have already said in connection with a number of amendments this evening it will perhaps form only part of the sick pay entitlement of employees under their occupational schemes. But if it was earnings for supplementary benefit purposes, it would, of course, exclude people from supplementary benefit as such, and that was the point that my honourable friend Mr. Rossi was making when he spoke in the other place on 21st January.

The noble Baroness, Lady Jeger, is right, of course, that after eight weeks someone getting sickness benefit would not pay contributions on it; I think that they are given credits instead. The reason for making national insurance costs payable on statutory sick pay is, of course, the incentive argument, which I shall come to in more detail in a moment.

The effect of this amendment would be to exempt payments of statutory sick pay from national insurance contributions liability. Thus neither employers nor employees would pay contributions on SSP. I must say that this is, in fact, the most expensive of the amendments tabled by the noble Baroness and her noble friends opposite in connection with this Bill, certainly in connection with this part of it. If it was accepted, the loss to the National Insurance Fund would be something of the order of £100 million, and your Lordships will not need reminding that a loss of that size would have somehow to be made up. However it was done, the money would have to come from the pockets of the employees and the employers and that, of course, would mean higher contributions from one or the other, if not both.

Cost is, therefore, a very important reason why the Government think it necessary to resist this amendment. But there is also a principle at stake. If employees are not required to pay contributions on statutory sick pay, then a sizeable proportion of them will end up receiving more when off sick than when they are at work. This is because over half the workforce will, after the introduction of the scheme, be receiving full wages. This is because of the widespread practice in industry—to which I have already referred—of continuing full wages during illness, sometimes with—where appropriate—an adjustment for any national insurance benefit received.

If part of these full wages—that is, the element representing statutory sick pay—is exempt from national insurance contributions, the employee would be taking home more money when sick than when he was at work. For someone entitled to the standard rate of sick pay that average would be over £3 in a full week of sickness.

Lord Molloy

If the noble Lord will allow me, the banality of that argument is distressing. Is he really saying that for £3 a week the British workforce would rather go out and catch a cold, catch a disease or have an accident in order to be at home and not to go to work? The argument is that when you are home sick, when you are ill, when you have had an illness or when you have had an accident in the pit, the factory or the steelworks, by the time you have paid your prescription charge and many other things, the cost mounts up considerably. Therefore, what the noble Lord is inadvertently submitting is that the overwhelming majority of British workers are scroungers, and that is not the case. Nobody wants to be sick; nobody wants to be ill. At any time the average British worker would rather be earning his living—because he has a dignity—than having anything free under the excuse that he is ill. If it is an excuse that he is ill, his doctor has joined in that cheating by certifying that he is ill and sick.

Lord Trefgarne

The difficulty is that we have to live in the real world.

Lord Molloy

That is the real world.

Lord Trefgarne

The real world is that if there is a circumstance in which a work person—and this applies as much to management as it does to shop floor workers or any other kind of worker—is substantially or even marginally better off when he is sick, I fear that there will be an inducement for some—a few and only a few—to suggest that they are sick when they are not. This I think is a most unhappy inducement and is not the situation that we seek to create under the provisions of this Bill.

Baroness Jeger

I must interrupt the noble Lord on that point. If I heard him aright, he said that some people might pretend to be ill when they are not. Surely there are provisions in the Bill for certification. Surely it is not possible for there to be people claiming sickness benefit without deserving it.

Lord Trefgarne

It would be a brave noble Lord or noble Baroness who would suggest that there were no circumstances under which that would happen. I accept that they are rare. I imagine that the number of people who seek deliberately to mislead in order to achieve access to benefit of whatever kind is comparatively small, but they do exist. It would be folly and mistaken to suggest that they do not exist. They exist, but on a small scale.

Lord Molloy

The Minister has just said that there are a few. Will he allow this brave noble Lord to tell him that one of the fundamental principles of all British legislation is not to legislate for a tiny minority but to legislate for the broad majority?

Lord Trefgarne

We are not proposing to penalise anyone under this legislation. What we are seeking to avoid is actually rewarding them for their misdeeds, and also to avoid putting temptation in their path. We are all human, and if additional remuneration is available to us when we are genuinely sick, then on occasion we are certainly tempted to consider whether we are sick or whether we are not, and it is that temptation that we seek to remove by this provision.

Lord Tordoff

Can the noble Lord, having now narrowed it down to a very, very small minority, give us an indication of how many of that minority would be susceptible to temptation, and how many of that small minority of a small minority who are suceptible to temptation would actually fall for it? Then we could perhaps have the weight of his case.

Lord Trefgarne

That is a question for the right reverend Prelates who sit in your Lordships' House and not, I think, for me. If part of these full wages, the element representing statutory sick pay, is to be exempt from national insurance contributions, the employee would be taking home more money when sick than when at work. As I earlier said, for someone entitled to the standard rate of statutory sick pay the advantage could be more than £3 in a full week of sickness.

One of the main objectives of this scheme is to end such an anomaly. I do not think that your Lordships could agree to a change which perpetuated what my noble friend Lord Elton referred to at Second Reading as the "ailment trap". There are other reasons for rejecting the amendment. Much has been said about the costs to employers of the scheme. Of the £100 million in contributions which would be the cost if this amendment were agreed, around £60 million would go to employers. That sounds a lot of money—and, I repeat, it is in trims of the National Insurance Fund. But in respect of individual employers the sums involved are small. Average annual sickness absence has dropped to about a week. So, on average, employers would save £3 or £4 a head a year by way of contributions and surcharge.

The procedures for calculating and paying tax and contributions have been closely linked ever since graduated contributions were first introduced and collected through the PAYE system in 1961. Since then it has been the department's consistent policy to align tax and contribution liability as closely as possible. It would be confusing and complicated for employers if tax but not contributions had to be deducted from SSP. New procedures would be needed and misunderstandings and errors would be unavoidable. The position would he worse because most employers would be topping up SSP, subject to tax but not contributions, with extra amounts of occupational sick pay which is subject to both tax and contributions alike.

When we were considering the amendment of the noble Lord, Lord Banks, to Clause 9 I stressed that the effect of his proposal would be indiscriminate. The same is true of this proposed change. Most of the £60 million saved by employers would go to firms with existing sick pay arrangements—the very firms who stand to gain under the compensation arrangements.

I think this is perhaps not the occasion to repeat to your Lordships the help which the Government have already given to improving the working environment of small businesses. But I would remind your Lordships that the recent Budget statement contained a number of measures to do just that. These were sensible and direct ways of helping small businesses—unlike the exemption of employers from liability to pay national insurance contributions on statutory sick pay.

This amendment would perpetuate the anomalous situation whereby some people get more when sick than when they are at work. It also foists upon employers a cumbersome administrative burden. It costs a great deal of money, which could only be made up from the pockets of employers and employees whom the change is designed to help. For all these reasons, I hope that the noble Baroness would not wish to press her amendment.

Lord Kilmarnock

Since the noble Lord has made great play with the cost that would fall on the Government as a result of this amendment, and indeed of earlier amendments which I believe were moved earlier this afternoon, although I was unable to be here, would the noble Lord agree that the Social Security Advisory Committee in its first report has estimated that the social security measures undertaken by the Government since they came to office have saved something like £11 billion on the social security bill? We have also heard today that there has been a £2 billion shortfall in the PSBR. Therefore, I do not think that the noble Lord can really convincingly claim that some of these amendments that have been put forward which are socially right and desirable are necessarily too expensive to meet.

Lord Trefgarne

If I may say so, that has been the position of successive Administrations, and not just the one of noble Lords opposite, over the years. I was brought up to believe that if you look after the pennies the pounds will look after themselves. I fear that successive Governments have not paid attention to that worthwhile dictum, and as a result of not looking after the pennies the pounds have run away with themselves. It is necessary to have regard to some of the smaller sums in Government expenditure programmes so that the major cost overruns that have been such a feature of Government Administrations of both complexions over the years will not cause such difficulties. I would not accept the argument that just because we have indeed been able to make certain savings in other areas, or indeed in related areas of Government activity, we are therefore in a position to blow all that straight away.

8.27 p.m.

Lord Banks

The noble Lord has referred to the conduct of successive Governments, but he has not referred to the conduct of successive Oppositions. I well remember the noble Lord, Lord Cullen of Ashbourne, explaining to the House in some detail how we could afford to abolish the earnings rule, which the Government of which he and the noble Lord are members have not yet been able to achieve.

The noble Lord spoke about principle. He thought there was a principle involved in this, and the principle seemed to be that people who are sick must not get more when they are sick than when they are working. He went on and seemed to suggest that in order to prevent that from happening it was necessary to have national insurance contributions. They were there to prevent people getting more when not in work.

But of course what people get when they are on sickness benefit depends on the rate. The Government, one would imagine, would put the rate at what they thought was the right level, and we can argue about whether it should be higher or lower. We have suggested from this side that it should be higher. If the noble Lord thinks it should be lower he could argue that case, but it is rather absurd to suggest that you put it at one level and then, in order to get it to another, you are obliged to enforce national insurance contributions from employers and employees. That argument seems to me to be a particularly nonsensical one for advocating the maintenance, in this particular scheme, of national insurance contributions on statutory sick pay.

Lord Molloy

I would ask the noble Minister if he would reconsider the appeal of my noble friend Lady Jeger on the Front Bench and look at it from a much wider perspective. He talked of the real world. May I, with the greatest of respect, tell him what the real world is so far as British industry is concerned? It is the people who dig the coal; who make the coke; who make the steel; who work in the heavy industries; who transport up and down the country, the great lorry drivers. Does the noble Lord really believe that a miner will hope that there will be a fall in a pit to crush him? Or that if he had just a touch of pneumoconiosis he could be sick for a couple of weeks? Is a steel worker hoping that a Bessemer will overturn—I hope the Minister understands what I am talking about—and there will be a splash of steel which will just scald his arm and burn his leg almost off? Does the noble Lord really believe that people would do that for an extra couple of pounds in national insurance?

I am sure there are people who wangle and cheat on social security, but I urge the Committee to note the figures. People on National Insurance and all forms of social security cheat to the tune of £4 million a year. I agree that that is disgraceful. However, in the black economy, big businesses—one Member of this House was involved—cheat to the tune of £9 billion a year. That is what people like Mr. Arthur Scargill and other trade union leaders, when attending their conferences, must listen to from their members. So do not talk to us about people who fiddle £4 million a year when, in the City, the wealthy are cheating in the black economy to the tune of £9 billion.

I therefore suggest to the Minister—I think the noble Lord, Lord Bellwin, understands what I am talking about—that, if the Government could get back one-tenth of what people in the City get out of cheating in the black economy, they would not think of arguing against the amendment but instead would say, "Of course we agree. We will write it into the Bill and make it part of our legislation".

My final appeal to the Minister is to beg him and the Government to take what I and other noble Lords have said on this issue into full consideration, because this very subject is examined in every trade union branch throughout the country. They are not the docile people who went on hunger marches in the '30s. Today, they are working things out. Many of their children are at university and are also working things out. When they go home, they say, "Don't stand for that sort of thing, Dad. The racketeers on the black economy are cheating the nation out of millions a year". I will give way to any noble Lord opposite who will say that what I have said about the black economy is not 100 per cent. accurate.

I beg the Minister to look rather more broadly than simply in the context of the Bill. I cannot understand the Government's meanness and pettiness in refusing to accept the amendment, which has not been tabled for any trivial reason. If the Government ram this legislation through, they will be sowing the seeds of massive industrial irritation, annoyance and possible disruption. The TUC and CBI have examined the Bill and have appealed to the Government. I join that joint appeal and urge the Minister to suspend judgment, to take it back to his right honourable friend and to see whether this simple amendment cannot be incorporated. If he will do that, he will receive the plaudits of both sides of British industry.

Lord Mottistone

What an impressive speech we have just heard from the noble Lord, Lord Molloy, and what a pity to have wasted it just on an amendment in Committee! On Second Reading it would have been absolutely ideal. We are speaking of one subject, yet Lord Molloy invites us to look broadly and widely at all sorts of sinners, and certainly I would not deny that sinners are to be found all over, at all levels of society and in all countries. With respect, however, I would remind him that if one restricts oneself to this measure and the issue under discussion, one does not want to get on to the wider issues all the time.

One might adduce the sort of case the noble Lord made when debating the wider issue against the Bill as a whole, and I hope he did that on Second Reading, although I do not remember him doing so. I would not have thought that such a splendid oratorical sledgehammer was needed to crack such a little nut. Much as I respect the noble Lord—and I particularly respected him the other day when he did not press his Question; I am glad of this opportunity to tell him that—what he said does not represent an argument against the practical facts of life which my noble friends are seeking to balance in terms of balancing the national books. In short, I should not have thought that the amendment deserved a speech as great as that made by the noble Lord.

Baroness Jeger

The Minister's reply was most disappointing. We tabled the amendment in all seriousness and, if I do not paraphrase the Minister's reply wrongly, he said this was not a time or opportunity for change. I would remind him that it is not the amendment which would make a change; the Government are making the change to which we are objecting. We are saying, "Let us not change the situation so that a man or woman in receipt of sickness benefit has to pay £3.23 in contributions out of that benefit".

I was surprised that the Minister spent so much time referring to the number of people who, if the amendment were accepted, would be better off on sick pay than they would be if they were earning. I know many people and I know how much many of them earn. I cannot think that many of them are earning less than £37 a week, minus £3.23 national insurance. I cannot think that many of them are earning £31 or £25; those are the sums of sickness benefit laid down in the Bill. To suggest that the world is full of workers who would prefer to stay at home because they would be better off receiving those amounts, minus national insurance and minus income tax, than if they went to work, is unrealistic and indicates an ignorance of the real world. I cannot use the phase "with respect" in saying that; why should I respect ignorance? Ignorance has been demonstrated throughout this debate of what life is really like on the buses, on the shop floor, in the hospital wards and in the whole working context.

Lord Stone

And in the sewers.

Baroness Jeger

Yes indeed, and in the sewers, as my noble friend reminds me. That is a very important place of work, and I hope all those who work in the sewers earn more than £37, £31 or even £25 and do not have to stay at home to make a profit.

The Minister then said that, if the amendment were accepted, so exempting employers and employees from national insurance contributions in this context, there would be a loss of £100 million. How could there be such a loss when the Government are not getting that money now? At present, people on sick pay are not paying national insurance contributions, so it cannot be said that the amendment would cause a loss. The amendment would preserve the status quo. On the other hand, if the Minister is saying, "We can get £100 million more out of these poor, sick, miserable people", then he is admitting that the Government are taxing the sick to the extent to £100 million a year. This is nothing less than a hidden tax, and it goes totally against all the promises in the Conservative election manifesto. It goes totally against all the words that they have spoken about reduction of income tax and encouragement of incentives.

They are saying in effect—and the Minister has said it tonight—"We are going to take £100 million out of the pockets of the sick". I note that the noble Lord the Minister is shaking his head, and perhaps after I sit down he will explain to me what was meant by saying that our amendment would cost £100 million. The Minister referred—and I apologise if I interrupted him rather tempestuously—to people who are skiving and who are not entitled to sickness benefit. Human nature has its failings; this problem will be with all Governments, at all times, and we have to rely very much on the medical profession and its certification processes.

Later in the Bill we shall come to the question of self-certification, and I shall want to ask the Minister what agreement has been reached with the BMA about certification and in particular about whether certificates are to be supplied to the employer, which would involve a breach of confidence which does not at present exist. At present, as I understand it, the certificate goes to the DHSS; it does not go to the employer. If the existing form, which in shorthand we call "Med 3", is to continue to be used, I would point out that it includes a section for the statement of diagnosis. If the form "Med 3" is necessary in order for a worker to apply for sickness benefit, then it would seem to me that the opportunity for cheating will be minimal. I am worried more about the breach of confidentiality than about the possibility of some people making out that they are more sick than their doctors might think they are.

Does the noble Lord want to put me right? He is sitting on the edge of his seat and I appreciate that he is longing for me to sit down, which I shall do very soon. I apologise to him for having delayed the Committee, but to the people concerned these things are desperately important. They mean the difference between a decent standard of living and living at a miserable level of poverty. The £3.23 which the Government are proposing to take off all sick people might not seem a great deal to your Lordships. After all, one cannot buy many drinks in the Peers' Guest Room for £3.23, but it might involve the cost of school dinners or some shoes for a child. It is an important sum. The Minister is shaking his head perhaps because he knows, as I know, that one cannot buy much of a pair of shoes for £3.23—but perhaps one can buy a pair of plimsolls, or something such as that. We are asking the Government to leave this amount of £3.23 with the sick person, as is the case at the moment. It is the Government who are making the change, not US.

If the Government are absolutely convinced that they must tax sick people £3.23, then why do they not face the music and impose the deduction from national insurance sick benefit? As I understand the Bill, if a person manages to survive eight weeks of statutory sick pay, and then goes to the DHSS, he can get his card franked. So the whole impetus is directed towards staying ill as long as you can. The Minister says that one of the reasons for the Bill is to prevent people feeling better off when they are sick than when they are at work, but the Bill is saying to people, "Stay off for eight weeks whatever you do, string it out, fall down on your nose, break your glasses, or anything. But if you can manage it for eight weeks, you will then go on to national insurance sickness benefit, and you will get payment for your wife and for your children, and your card will be franked".

Without making party politics out of this issue, I would say that this does not make sense. I do not know why the noble Lord the Minister is laughing. Well, he has nothing better to do than laugh; he cannot think of anything useful to say. This is had accounting. How can it be good and sensible accounting in the national insurance scheme to take £3.23 off people who are sick, for eight weeks, and then give it back to them after the eight weeks? It is inconsistent, and it is stupid.

We have been told that our amendment would cost £100 million. I am glad that we have that figure from the Minister, because it means that the Government are taxing sick people with a take-home pay of £37, £31, or £25, by this sum, or some other relevant sum—relevant according to their low earnings. I do not really think that this is the Government's intention. I think they have simply not realised that this would be the effect of what they are trying to do.

I am sorry if I am boring the noble Lord, but I have many neighbours who will not be bored by this debate. There will be many people who will want to know why for the first eight weeks they have to be taxed £3.23, whereas in weeks following they will not be subject to such a tax. It really does not make sense, and I wish that the noble Lord the Minister would offer to have another look at it. I know that he thinks that my noble friends and I are making party points about this, but I thought that I was being very actuarial, as actuarial as I could be. I very much hope that he will feel able to leave things as they are, and that he will not support the Government's proposal to introduce this taxation on sickness benefits.

Lord Trefgarne

I can well understand the feeling in the minds of noble Lords and noble Baronesses opposite that a junior Minister of a Conservative Administration, and a hereditary peer to boot, is unlikely to have much idea of the real world, but I should like to tell the Committee that before I had the privilege of joining the present Government I did indeed work and live in the real world. I can, for example, tell the noble Baroness about sick notes. She was not entirely clear about what happens to a sick note. I know, because I have had a sick note, and I can tell the Committee what I did with it. I gave it to my employer, first of all, to tell him that I was not feeling too good. He then passed it on to the DHSS in order to process the application for sickness benefit, as it was.

On the question of the £100 million, which the noble Baroness were agreed to, employees would be in a out that £60 million of that will come from employers. It is only £40 million that comes from the employees. The amendment which the noble Baroness has moved provides that the contributions from both employers and employees should be waived in connection with statutory sick pay, and thus the cost to the fund would be a total of £100 million, being made up of the two figures to which I have referred.

The fact remains that, if the amendment of the noble Baroness were agreed to, employers would be in a position to receive when they were sick more emoluments than they would receive when they were well, and we do not think that that is right and proper. I accept what the noble Lord, Lord Molloy, says, that of course nobody in his right mind would seek to injure himself or seek to suffer from influenza when he did not need to, simply for the privilege of getting £3-odd a week extra. But, of course, there are many more marginal cases, and I have to confess to your Lordships that there were occasions in my working life when I woke up in the morning and felt, "If only I did not have to go to work today! Perhaps I can go sick".

As some of your Lordships may know, I was a pilot in my commercial life, before I came to the Government, and I can tell your Lordships that that feeling is particularly strong at half-past-three or half-past four in the morning, when one is otherwise required to get up and go to work, as I was. So I am well aware of the temptations to which I referred earlier. I hope I was able to overcome those temptations on all appropriate occasions but once or twice I had to say that I was genuinely ill. Then I was quite properly required to obtain a certificate from my doctor, which I sent first to my employer in support of my contention that I was unwell, and that, as I say, was in due course processed by the DHSS.

I remain firmly of the view that it is not appropriate to provide a higher income for employees when they are sick than when they are fit. Of course, I agree that sometimes there are, particuarly in the low income cases to which the noble Baroness has referred, cases where genuine hardship may occur, and it is for that purpose, of course, that we have the supplementary benefit arrangements. But I hope your Lordships will agree that it would not be appropriate to accept this amendment, which makes them as of right entitled to this extra emolument.

On Question, amendment negatived.

Clause 23 agreed to.

Clauses 24 to 27 agreed to.

Clause 28 [The statutory schemes]:

8.53 p.m.

Lord Wallace of Coslany moved Amendment No. 23:

Page 22, line 15, at end insert— ("In the calculation of entitlement to a rent rebate or allowance no amount shall be prescribed as a deduction from the rent of tenants who are qualifying students.").

The noble Lord said: I beg to move the amendment standing in the name of my noble friend and of the noble Lords on the Liberal Benches. Of course, this may be assumed as something of a Lib-Lab pact, but the honest truth is that the National Union of Students have made representations to all parties. The noble Lord, Lord Banks, supported their view, as I did, but it so happens that our amendment was a little ahead of theirs. So there is a joint feeling about this.

The intention of the amendment is to eliminate an important area of discrimination against students in the present rent allowance scheme. In 1981–82 £10.83 per week is deducted from the term-time rent paid by students before entitlement to allowances is calculated. It is assumed that this prescribed sum covers students' costs and is paid as part of the grant. There is no rational basis for the calculation of this sum. Most students pay well above £10.85 per week in rent. In a recent survey of over a hundred college accommodation officers it was revealed that the average weekly rent in the private sector paid by students throughout the United Kingdom was £13 in 1981–82. In London the average rent is much higher—it is £18.80—and in the South-East it is £15.50.

It is apparent that the Government now set the grant without reference to students' actual cost, but in the context of wider public expenditure considerations. By 1982–83 the student grant will have fallen in real value by over one-fifth since 1962. Students, both as a matter of principle and as a matter of meeting a real financial need, should be assessed on their entire income on the same basis as any other claimant.

The existence of the prescribed sum for students further complicates the administration of what is already a complex system. Moreover, many officials misunderstand the system as it applies to students, and consequently discriminate against them. Many students are deterred from claiming because the existence of the prescribed sum makes them uncertain of their entitlement. Government and local authority publications on rent allowances take no account of the special calculations which apply to students. I would say that the situation in London is very much worse than can in fact be inferred from what I have said. I think there is a case here for consideration. I beg to move.

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

The treatment of students in housing benefit must be considered in the context of the existence of the grant system, which covers maintenance needs, including the accommodation costs of people living away from home. It is arguable how far, if at all, the state schemes of financial assistance should supplement public funds paid through the grant system.

Grants paid to students who have to live away from the parental home to pursue their courses include an amount to cover rent. Thus, it is reasonable to expect students to pay rent up to a certain level without looking for further assistance from public funds. For this reason a deduction is made from the eligible rent when assessing entitlement to housing benefit; but, of course, in fairness it must be said that the same deduction is made from the students' assessed income. Not to do this would, I believe, be wrong in principle. I do not think it is right to allow public funds to pay twice. In addition, there would be a cost involved, which would have to be met by cutting assistance given elsewhere.

The noble Lord, Lord Wallace, referred to the concern about students in London in particular. On that, I would want to say that the standard deduction is a national figure applied to all students, and reflects the level of the grant for students outside London. However, London students qualify for a higher award—currently £290 more than other students—in recognition of the extra costs of living in the capital. The present national deduction is anomalous—it gives London students preferential treatment—and we propose in housing benefit to have a higher deduction from London students. This, I think, in fairness—and we seem to have heard much of this word used earlier today—does no more than reflect the fact of a differential grant system.

I think I understand clearly the concern expressed by the noble Lord, Lord Wallace, and others who feel this way, but I hope that, again, if we are talking of fairness, they will take the point that in this case public funds should not pay twice. If there is argument and debate as to the extent to which students have grant in terms of the actual amount, then that is a different thing and perhaps it is for somewhere else. But in terms of the principle involved in connection with the Bill, I hope the noble Lord will feel that there is merit in the point I have made and will understand why we are unable to accept the amendment.

Lord Wallace of Coslany

At this hour I do not want to debate this further. I appreciate the points that the noble Lord, Lord Bellwin, has made. We will have a further think about this and take advice, and if necessary will come back on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

9 p.m.

Lord Wallace of Coslany moved Amendment No. 24:

Page 22, line 37, at end insert— ("( ) In making regulations under this section the Secretary of State shall ensure that any payments for furniture paid as part of the rent for the dwelling shall be included in the assessment of rent eligible for rebate purposes.").

The noble Lord said: I beg to move the amendment standing in my name and in that of my noble friend. This amendment deals with people in furnished accommodation who have to pay for the furniture as part of their weekly or monthly rent. The majority who live in furnished accommodation do so mainly because there is no alternative available. They have no alternative to that part of the rent being included in the assessment. They pay for furniture, incidentally, whether it is good or bad. The amount of money involved in the amendment is small, about £1 million, I understand. There was some promise of a degree of sympathy from the Government in another place with the usual proviso "if money can be found". While there is life there is hope; and I hope for a more positive reply tonight. I beg to move.

Lord Bellwin

As my honourable friend the Parliamentary Under-Secretary of State for the Environment made clear in another place and as the noble Lord intimated, the Government accept that there is a good case for making such charges eligible for housing benefit in line with the existing supplementary benefits scheme; so that the noble Lord is preaching to the converted on this matter. The difficulty, as always, has been cost and, as he has said, we are talking about £1 million a year. However, I am pleased to say that the Government, having gone into the matter carefully, have decided that this change should be made and, as no primary legislation is required, as the powers in Clause 28(3) will already permit payment in respect of dwellings to form part of eligible rent for housing benefit purposes, we intend to apply to the extra help both rebate and allowances schemes and not just rebates as suggested in the amendment. In any case, to follow that proposal would be unfair to private tenants. With my assurance that furniture will be eligible, I hope that that will please the noble Lord and he will feel able to withdraw the amendment.

Lord Wallace of Coslany

I am delighted to do so and beg leave to withdraw the amendment. I am overcome.

Amendment, by leave, withdrawn.

Clause 28 agreed to.

Lord Wallace of Coslany moved Amendment No. 25: After Clause 28, insert the following new clause:

("Needs allowance

. Regulations under section 28 above shall provide that the needs allowance shall not be less than the sum of—

1. (a) the supplementary benefit long term scale rate, and
2. (b) 40 per cent. of the national average Council house rent, and
3. (c) the national average domestic rate, and
4. (d) the national average domestic water and sewerage charges,

being in each case the prevailing weekly rate or charge appropriate to the size of the household for each category of needs allowance.").

The noble Lord said: I beg to move the amendment standing in my name, and with the permission of the Committee, to take with it Amendment No. 30 which is very much bound up with it. The new clause has for its purpose the clarification of the needs allowance formula to be applied under Clause 28 which itself is complicated and, in many people's view, needs clarification. The amendment includes the whole average domestic rate instead of the 40 per cent. proposed by the Government in the needs allowance. This is a serious deficiency as it fails to take account of the tapers and the way in which the increase affects the person whose income is less than the needs allowance.

Topping up payments are objectionable for two reasons. First, because it is difficult to define eligibility and therefore many who are eligible will not receive payments; and, secondly, they involve considerable administrative cost which should at this point alone persuade the Government to accept the amendment.

The needs allowance in real terms fell for married couples for the first time in 1981. This in itself strengthens the case for the new clause. Our amendment on Clause 29 to delete line 27 is tied up with the new clause as it restores the retail price index formula for prices. The Government propose to delete housing costs from that formula. The retail price index has its defects and the worst of these is that it does not reflect the actual costs of the low-paid families when they are in work. Worse, it does not reflect the cost to particular families or individuals when they are not in work. It does not reflect the extreme pressure on the low-paid or unemployed of the large element of family spending on fuel, light, food, rent and rates.

The less one has, the greater the blow of even a small increase, in costs, Council house rents have risen severely and are likely to do so in the near future. The same applies to rents of private accommodation, also. I have endeavoured to put over the point as briefly as possible but there is some need for clarification of the Government's proposal on the needs allowance section. That is why this clause has been moved. I beg to move.

Lord Bellwin

Before looking at the detail of the amendments, may I remind the Committee of our intentions regarding the needs allowances. As my honourable friend the Minister of Social Security announced in another place, we shall continue the existing structure and, under Clause 29 of the Bill, the Secretary of State will review the needs allowances each year taking into account the general levels of prices and of housing costs. Noble Lords will be aware that the needs allowance is based upon the supplementary benefit long-term scale rate, 40 per cent. of national average rates and 40 per cent. of national council house rent, together with average water and sewerage charges. The rationale behind these 40 per cent. figures is that a claimant whose income equals needs allowance is entitled to 60 per cent. of his rent in rebate or allowance and 60 per cent of rates as rebate. This is perfectly logical and nothing I have heard this evening suggests that it should be altered. What the noble Lord has argued is that, by increasing the rates element to 100 per cent. the number of topping-up cases will be reduced. It is, of course, obvious that any increase in the needs allowance will have this effect. That is one of the reasons why we intend to add 75p to the needs allowance for pensioners. So what we are discussing tonight is, in effect, the case for a general increase in the level of the needs allowance. Although earlier it was somewhat derogatorily looked upon, I would want to tell the committee that the effect of this amendment would be to increase the 1981–82 needs allowance by £2.68 a week at a cost in excess of £120 million. This is not considered to be a great amount by some, but is considered to be a very great amount by others. A rough estimate suggests that the number of topping-up cases would be reduced by 50,000.

I hesitate to remind the Committee again that current economic constraints mean that housing benefits must be introduced on the basis of nil additional cost. There is no way of finding such a large sum within the schemes except by making tapers more severe and/or by introducing a cut-off to benefit at a given income level. This would be a self-defeating process, since one would be giving with the left and taking with the right. For this reason alone, I feel that we could not accept the amendment. But I should also deal with the issues raised in its last two lines. The national averages used for rent, rates and water charges today are overall averages—that is, that for rent covers all types and sizes of council dwellings.

I also have to say that the proposal would be extremely difficult to administer. Local authorities would have to use a multiplicity of needs allowance and would immediately have the problems of deciding which allowances were appropriate. Would the widow living on in the family home have her needs allowance set without any reference to the level of rents and rates generally for her size of house? There is also the question of non-dependants. They are expected to contribute to housing costs through the non-dependent deductions, but are they part of the household size for needs allowance, if we accept this amendment? Could this lead to pensioners who have a grown-up child living with them being penalised? How could we ensure equity of treatment?

I do not think that I need go on. Like the noble Lord, Lord Wallace of Coslany, I am anxious that we should make progress. I take his point that we are also talking in effect about Amendment No. 30. Therefore, we are talking of a general principle—namely, how is the housing benefit needs allowance to be uprated? The Government's position, I respectfully submit, is grounded on solid logic. I hope that when the noble Lord has the opportunity to consider what I have said, which I appreciate he may want to do—because if we have learned anything from listening to this debate today it is that we are in very complex country—he will then know how to deal with it and I leave it to him to do so.

Baroness Birk

I have listened very carefully to what the Minister said. He raised a lot of questions himself: the needs allowance, how it would affect widows and so on. There are many other questions that could be raised. What is important if this amendment is going to be taken back and looked at is that the way it is drafted at the moment is not very equitable. The question is how it can be made more equitable, even though the Minister raised a number of points and different arguments that should be looked at. It seems to us exactly as my noble friend said in moving the amendment, that the Bill is not right as it is.

While I appreciate that it is not difficult to pick holes in an amendment that has been moved, what does the Minister intend to do about this clause and about the requirements asked for in the following clause, whether it is part of a new clause or incorporated differently in the Bill? How does he propose to proceed about that? It seems to me that he agreed that there is a problem and he pointed out the difficulties in putting it right. How is he going to try to put it right?

Lord Bellwin

I think the noble Baroness misunderstands me. The various questions that I was saying had come forth, came from the amendment, in my respectful submission, not from the proposals as they are now. It was my suggestion that, knowing how complex it all is, it might be that the noble Lord, Lord Wallace, would feel that he would want the opportunity—if I were in his place, I should—to look at what I have said, if you like as justification for what we are doing. I suspect that that is what the noble Lord will want to do.

Lord Wallace of Coslany

Lord Bellwin's suspicions are quite correct. I agree that this whole Bill is far more complex than a great number of noble Lords and noble Baronesses appreciate. I shall certainly look at what he said very carefully, and, if possible, obtain a little more expert advice and return to this matter next time. I beg leave to withdraw the amendment.

Amendment, by, leave, withdrawn.

9.13 p.m.

Lord Wallace of Coslany moved Amendment No. 26: After Clause 28, insert the following new clause:

("Tapers

. Regulations made under section 28 above shall provide that if a person's weekly income exceeds the needs allowance, the rebate or allowance payable to such person shall be reduced by the percentages shown below, being in each case a percentage of the amount by which such person's weekly income exceeds the needs allowance—

1. (a) in the case of a rent rebate or rent allowance, 19 per cent.;
2. (b) in the case of a rate rebate, 6 per cent.").

>

The noble Lord said: This is an attempt to get some improvement. The clause, in my opinion, is not a complete improvement on the scheme proposed by the Government. It does not remove all the losers. At least our amendment is intended to be constructive and proposes a change which to a degree improves the Government's scheme. It reduces the timber of losers: the losses that different categories of individuals would suffer are reduced. It also improves the administrative simplicity, and, after all, we must remember that 2 million—I think the Government's figure is 2 million —households will be losers unless this Government scheme is amended.

Lord Bellwin

This, new clause gives us an opportunity to discuss two important facets of the housing and benefit proposals—as the noble Lord rightly says, the numbers of gainers and losers and the cost of the scheme. Lord Wallace of Coslany's proposal is something that we have seen tabled in another place in Report stage. The Government are proposing that the tapers above the needs allowance should be increased to 21p and 7p so the scheme overall remains at nil cost. This, together with the other changes—again, as the noble Lord rightly said—would produce 2 million losers and 220,000 gainers among claimants with incomes above the needs allowance. As my honourable friend the Minister for Social Security explained in the other place, the proposal still produces nearly 1.2 million losers and no gainers above the needs allowance yet costs net an extra £23 million more than the Government's proposals.

It has been argued that the Government were wrong to bring in the housing benefits proposals on a nil cost basis—that is, that the scheme should cost no more than the benefit and administrative costs of the existing local authority and supplementary benefit provisions for housing assistance. But the Government have to live with economic reality. The money for improvements could only be found at the expense of other projects. In the current financial situation, when the Government's first aim must be devoted to putting the economy right, there are higher priorities than housing benefits. We must do the best with what we have got.

The benefit cost of limiting taper losses—up to £14 million a year—would be available; and indeed, the Government propose to use the money, once it is available, to finance in part a 75p a week increase in the needs allowance for pensioners. But this money will not be available until the transitional protection has been eroded. The £30 million they found from changes in the supplementary benefit uprating provisions, is not part of the housing benefits nil cost package. The nil cost scheme is, as I have said, made up of the resources in the existing local authority rebate and allowance schemes, and the supplementary benefit housing additions.

The Government were anxious to reduce the number of topping-up cases. The procedure is necessary to protect poor claimants from falling below supplementary benefit levels but it is complex for claimants and administrators. As nearly all topping-up cases will be pensioners, we had to concentrate help on pensioners. Our proposals, more generous tapers below the needs allowance and a 75p addition to the needs allowance, reduces the need for topping up and produces over 1 million poor pensioner gainers—200,000 people more than the noble Lord actually suggests. But the changes cost over £70 million and have to be funded from within the scheme. It does seem fairest to find the money from the people with relatively higher incomes. The cost of the improvements was met by increasing the rent and rate tapers for those above the needs allowance from the current 17 per cent. and 6 per cent. respectively to 21 per cent. and 7 per cent. This also ensured that losses were relative to the size of income.

This is very much a matter of argument, though the Government have sought to concentrate on helping most effectively the poorer pensioners. On the other hand, noble Lords opposite feel that the extra money should be there, and I understand the point. But there is still a question of a judgment at the end of the day, and clearly there is a difference between us. We think that the scheme is a very big improvement on what exists at the moment, but for the reasons I have given we are not able to accept the amendment, although appreciating very much as I do the motivation behind it.

Lord Wallace of Coslany

It is perfectly true that this amendment was moved in another place and, if I remember correctly, there was a Division. The noble Lord, Lord Bellwin, has probably given a clearer and wider explanation than we had elsewhere. Of course, he is well versed in local government affairs and we accept him as an expert. We are not too happy about it and I do not think the Minister will be too happy about the situation, either. It is, however, pointless to press this issue tonight, and therefore I withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Wallace of Coslany moved Amendment No. 27: After Clause 28, insert, the following new clause:

("Appeals.

. Any claimant of housing benefit shall have the right of appeal to a Supplementary Benefit Appeals Tribunal against any decision of a housing or rating authority regarding such person's entitlement to or level of housing benefits.").

The noble Lord said: I beg to move the amendment standing in my name. This is a very important amendment involving a very important principle. The clause deals with an important human right—that of an appeal against a decision by an official body. It is something that we strongly pressed on the Mental Health (Amendment) Bill and which received very strong support by your Lordships. I am glad to say that it was accepted by the Government in another place.

This Bill does not deal with legal aid whereas the Mental Health (Amendment) Bill was primarily concerned with legal aid; but the principle is there. This clause does not deal with legal aid, as I say, but it would put into the Bill something that does not exist at the moment; namely, the right of appeal. No one would deny that this is a complicated Bill which could lead to anomalies. Local authorities and rating authorities are usually very efficient, but as with other departments and businesses elsewhere the human element exists here, too, and mistakes and errors of judgment will arise. People in need should have the right of appeal against injustice, even if the injustice is accidently caused by human error. I beg to move this amendment. This is an important issue and if we cannot get very far with it tonight it is definitely one matter we shall proceed strongly with at another stage.

Lord Bellwin

I agree very much with what the noble Lord says about an important principle being involved here. I think I should say at once that I am not able to accept the amendment. I just wonder how far the noble Lord would like me tonight to go into the details of the reasons for that. I understand what he means when he says that this is something he and his noble friends will want to pursue in depth at another stage and perhaps would go all the way. For that reason, I think perhaps I should not go into the detail tonight except perhaps to say this: we believe that our proposals offer claimants a direct and speedy means of seeking and securing a review of the housing benefits claim from the body that can best help them—their local council. The alternative proposed in the amendment requires a major shift in the operation and outlook of SBATs.

I would ask: do we need to go down this path to provide a means of challenging a local authority when our proposal builds on the system that is already there in many authorities? I think that the amendment as such, does not show that this system is defective or that local councillors are not able to pursue on behalf of their constituents instances where local officers have come to a poor decision. I certainly believe in democracy, as one who has had much experience for many years, as have others in this Chamber, who have similarly taken up causes and cases on behalf of constituents at local authority level; and in my experience good councillors will pursue the thing to the death, so to speak. I believe that in this kind of case they would continue to do that no less than they do in other cases.

It is basically for that reason, without going into further details tonight, that I would explain that is the main thrust of the argument we would put forward anyhow, however much it is tied in with detail. I would hope that if the noble Lord brings back a similar amendment on another occasion before doing so he would think about that aspect of it, because that would be the major reason why we feel we cannot accept the amendment.

Lord Ross of Marnock

Yes, but I hope the Minister appreciates that it is a very different scheme from the existing local authority scheme, with which local authorities are very much more familiar. The noble Lord has already explained the complications of this, and I hope he appreciates that, as well as being complicated for people who are in local authority houses, I receive considerable correspondence from the Federation of Scottish Housing Associations, who have a great deal of trouble in even being supplied by the Scottish Office with the original paper. I am far from satisfied that the noble Lord can brush it away like this. I know that he is not really brushing it away, but he is pleading for time. We have already heard somebody say today that we cannot deal with this matter because this is the Committee stage. But if you cannot deal with a matter in Committee stage, when can you deal with it? As the noble Lord knows, it will be very much easier for the Government when we come to Report stage, because everyone is very much more limited in the time that is available.

Lord Bellwin

With respect, that is not at all fair. I am quite prepared, here and now, to go into a lengthy and detailed explanation of the case and I have said so. I hope that the noble Lord, Lord Wallace, will be with me on this. It was he who said that, if noble Lords opposite were not satisfied with the explanation, they would want at another stage to press the case, presumably to a Division. It was for that reason that I said expressly that I would not, therefore, go into detail tonight, but I felt obliged, nevertheless, at least to give the thrust of the case. I know that the noble Lord, Lord Ross, understands that. I hope he will accept what I am saying, because in no way am I trying to stall or to ask for extra time. I do not need any extra time for this. In the interests of management of the procedure, it makes sense to do as the noble Lord said, but the decision is his.

Lord Wallace of Coslany

I thank my noble friend Lord Ross for his support, because, if he is anything, he is certainly a mine of information and experience, not only on political matters but on football matters. But that is another subject. The noble Lord, Lord Bellwin, referred to local democracy and I accept what he said, because I have been a councillor myself. Of course, as he knows, there are good and bad councillors, as well as lazy and active councillors. When I was a new MP way back in 1945, these sort of things did not go to the councillor, but came to the poor old MP who was badgered to death. The noble Lord, Lord Bellwin, said that there is a case for some kind of appeal, but he did not go into detail. Certainly, it is something which we shall have to study in depth. Knowing the noble Lord, I am sure that he will have another look at the matter. He may not say so officially, but I am fairly sure that he will. In those circumstances, bearing in mind the lateness of the hour and the fact that this is not the best time to go into details on an important matter like this, I beg leave to withdraw the amendment. But the noble Lord knows full well that I shall come back on Report, I hope refreshed and, possibly, re-armed.

Amendment, by leave, withdrawn.

9.28 p.m.

Lord Wallace of Coslany moved Amendment No. 28: After Clause 28, insert the following new clause:

".Claimants living in hostel accommodation shall be treated on the same assessment basis with regard to housing benefits as all other claimants".

The noble Lord said: This is a very difficult amendment and I think that there is a degree of sympathy from the Government on it. How we shall resolve it, I do not know. The main issue is the principle that people who live in hostels should be treated on the same assessment basis, with regard to entitlement to housing benefit, as all other claimants. I understand that in another place the Minister indicated some sympathy with the position of people living in hostels, and agreed to meet outside organisations concerned with the problem. I am not yet aware whether such meetings or consultations have taken place. There are many problems in relation to this issue; for instance, over the classification of boarders. The hostel problem is growing, mainly due to the housing shortage, unemploy- ment, change of environment to seek work and many other reasons. Has a decision been finally reached to clarify residential qualification? What is the position of people who live in hostels and who, eventually, manage to find work? This, as I said, is an important amendment which I am sure has Government sympathy. I hope that the Government's reply will be satisfactory. I await it with interest. The noble Lord, Lord Bellwin, may not yet be in a position to make a statement, but if he could I should be grateful. I beg to move.

Lord Bellwin

As the noble Lord quite fairly said, the Government are very sympathetic towards what is intended. I can tell the noble Lord that officials have held a number of meetings with the local authority associations and the voluntary organisations most concerned to work out the most effective and practical way of ensuring that hostel dwellers are able to obtain help with their housing costs.

The noble Lord may be aware that many hostel dwellers experience difficulty in obtaining rent and rates assistance from their local authority under the existing schemes. This is because some authorities take the view that they are not occupying the hostel as their home and are therefore ineligible until they have served a qualifying residential period, which varies but which can be as long as six months. The Government amended the Bill in another place to provide for regulations under which a person who occupies a dwelling otherwise than as his home may be treated as if he occupied it as his home. That is Clause 28(2)(b). This gives sufficient legislative cover, we feel, for all hostel dwellers to be brought within the scope of the scheme.

However, it must be recognised that hostel dwellers pose particularly difficult administrative problems, for two reasons.

First, some are very mobile, spending only a few nights at a time at each address. They may also be in urgent need. Secondly, hostel dwellers and other boarders have their entitlement assessed in different ways from other supplementary benefit recipients. Instead of having their entitlement assessed on the basis of a scale rate, plus additional requirements, plus an amount for housing costs, they are assessed on the basis of their board and lodgings charge, plus any additional requirements, plus an amount for personal expenses. The amount included in the assessment for board and lodgings covers not only rent and rates but also board, heating charges and other service charges which would not be eligible for housing benefit purposes.

These different elements are not, however, separately assessed for supplementary benefit purposes. It would therefore not be a simple matter for the supplementary benefit officer not to award an amount for rent and rates and instead to issue a passport which entitled the claimant to housing benefit. Since it is the local authority's responsibility to assess eligible rent and rates, the supplementary benefit officer would not know by how much to reduce the board and lodging award until housing benefit had been calculated. Thus the applicant, who might well be in urgent need, would have to wait not only for his housing benefit but for his supplementary benefit as well.

We have therefore decided that the most sensible way to deal with hostel dwellers and other boarders would be to provide for all boarders in receipt of supplementary benefit to continue to receive their housing assistance via the supplementary benefit scheme. They will then be spared the delays, however short, which would arise if benefit was passported. I am sure that there must be a better word than that. No doubt noble Lords will tell me later on.

So far as those who are not in receipt of supplementary benefit are concerned, we propose to make regulations under which a hostel dweller will be eligible for benefit if he stays for a period of at least two weeks. Once he qualifies, entitlement will be backdated to the date of application in the normal way. This will be a considerable improvement on existing practices. It is probably the most which can reasonably be expected of local authorities in view of the considerable administrative problems involved in processing claims for very short periods.

I think this, too, is something about which the noble Lord will wish to say, "I will read it over very carefully". This is really a difficult problem; I remember it so well in so many other ways and, as they say, there just ain't an easy answer to this one. But all right, if we can do something to make things better as we go along, then we are improving the scene, and that is what we are trying to do.

Lord Wallace of Coslany

I thank the noble Lord for those sentiments. He included, if I am not mistaken, a bargain offer. I am always very suspicious about bargain offers—not in this House but outside, because there is always a catch somewhere. But the noble Lord has been very reasonable in his general approach and at least there is some real concession here. As discussions are still taking place—I understood from the Minister that that is the case—perhaps, if a probing amendment is put down, he will undertake to come back at Report stage to give us, if possible, the result of any further discussions. If that is the case, I will thank the noble Lord very much. I beg to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Denham

I believe this would be a convenient moment at which to finish the evening's proceedings. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.