Social Security Benefits Up-rating Order 1982

HL Deb 29 July 1982 vol 434 cc413-30

7.2 p.m.

Lord Trefgarne

My Lords, I beg to move that the Social Security Benefits Up-rating Order 1982 be approved. I hope it will be for the convenience of your Lordships if I speak at the same time to the subsequent six Motions standing in my name on the Order Paper and then move those Motions formally when we come to them.

My Lords, this is the first of a set of instruments which, collectively, provide for the November 1982 uprating of social security benefits, for the payment of the 1982 Christmas bonus, and for various minor adjustments to the supplemenatry benefit scheme and in short-term benefits for seasonal workers. To assist your Lordships' consideration of the instruments there are available a number of explanatory documents and reports, including the statutory report by the Government Actuary on the Social Security Benefits Up-rating Order, which covers national insurance and certain other benefits; the separate statement on the up-rating of mobility allowance, laid before the House on 8th June; and the report by the Social Security Advisory Committee on the Supplementary Benefit (Requirements and Resources) Amendment Regulations.

Although the instruments taken together do not make light bedside reading, the provisions they make will be welcome in millions of homes throughout the country, and give effect principally to the proposals which were contained in the Statement in another place by my right honourable friend the Secretary of State for Social Services, which was reported to your Lordships on 10th March. The main effect is to increase all weekly social security benefits by around 11 per cent. in the week commencing 22nd November. This year's up-rating enables me to say that the Government are maintaining the value of pensions and other related long-term benefits in line with prices and thus honouring their pledge to do so. The increase of 11 per cent. reflects the Government's expectation that the full retail price index will rise by 9 per cent. in the 12 months to November 1982. To this has been added a further 2 per cent. which makes good, for all benefits and not merely those covered by the pledge, the unintended shortfall at the 1981 up-rating.

Although the forecast in the movement of the retail price index has been used as the basis for the calculation of most increases, the Government have decided to change the basis of calculating the increases in the supplementary benefit scale rates. People on supplementary benefit have their housing costs met separately, and normally in full, by the housing addition. Since the housing addition increases in line with the actual rise in rents or other housing costs, there is double provision if the up-rating of scale rates also takes account of the movement of housing costs within the retail price index. So we have adjusted the forecast of price movements for supplementary benefit scale rate purposes so as to exclude housing costs. The increases in the scale rates have, therefore, been increased by 10½ per cent. rather than 11 per cent., but when the amounts allowed separately for housing costs are taken into account those receiving supplementary benefit will continue to receive price protection.

Your Lordships will have noted that the year on year movement of prices since my right honourable friend made his forecast in March has continued to fall, as he predicted. By June the annual figure had fallen to 9.2 per cent. This compares with an annual inflation rate of 12 per cent. at the time of the last up-rating in November 1981, and shows the success of the Government's measures in bringing down the rate of inflation. We are well on the way, but if we should fall short—and this now seems most unlikely—we shall stand by our pledge of full price protection for pensioners. In the unlikely event of a shortfall in 1982 it will be made good in 1983. This would not require fresh legislation.

When the November increases come into effect this government will have increased the rates of retirement pensions by 68.5 per cent. since November 1978— slightly ahead of the expected movement of prices (about 65 per cent.) over the same period. The Government have also been able to ease the earnings rule this year by raising the earnings rule limit from £52 to £57.

Turning to benefits for disabled people, your Lordships will note that by November mobility allowance will have increased by 83 per cent. since the Government took office—an increase which is well ahead of the expected inflation rate over the same period. This is on top of the Chancellor's action in removing the allowance from liability to tax from April this year.

The increases in the prescribed levels of family income supplement are more than the standard 11 per cent, and weighted in favour of larger families. Over this Government's period in office the prescribed amount for a family with one child will have risen by more than 79 per cent. and by nearly 89 per cent. for a family with four children. These increases are, of course, additional to the separate improvements in child benefit and one parent benefit provides for in the Child Benefit (Uprating) Regulations. I acknowledge the concern which some of your Lordships have expressed about child benefit on other occasions this year. But, as I have said before, this is a very expensive benefit. I think that it is a considerable achievement, in the circumstances, that we have protected its value in 1981 and will do so again in 1982.

Turning, now, to the provisions relating to supplementary benefit, your Lordships will note that, in addition to the scale rate improvements to which I have referred, provision is made for the limit on the amount of capital which a recipient may hold without affecting his entitlement, to rise from £2,000 to £2,500—fully restoring its real value in 1980—and that the amount by way of a gift—for example, at Christmas or a birthday—which may be disregarded has been raised to five times its former level from £20 to £100.

The heating additions, payable to more than 2 million recipients of supplementary benefit, are to be increased by about 15 per cent.—in line with the forecast rise of heating costs between November 1981 and November 1982. The corresponding increase last year turned out to be rather higher than the actual increase in costs up to November 1981 and this gain has been preserved in the 1982 increase, so as further to improve the value of the additions beyond the very substantial real improvements that were made in 1980. The latest increases bring overall expenditure on special fuel help for those on supplementary benefit above £300 million a year.

Your Lordships will have noted that the group of instruments before us also includes the draft Supplementary Benefit (Requirements and Resources) Regulations 1982. These regulations have been considered by the Social Security Advisory Committee who reported on them to the Secretary of State on 28th June this year. The report (which also covered an instrument which we are not considering today) was published as Command Paper 8598. That report well illustrates the value of the committee itself and the consultative process that it sponsors.

Perhaps the most significant of the proposals in these regulations is that which would bring into effect on 9th August new provisions for estate rate heating additions. These additions help people on supplementary benefit who live on estates where the costs of heating are both exceptionally high and beyond the control of people living there. Under the new proposals the Secretary of State will use the discretion which he already possesses under the requirement regulations to designate defined types of expensive estate heating systems so that they qualify for estate rate heating additions. The designated systems will attract additions at two flat rates according to the size of the accommodation. These are specified in the regulations before the House. My right honourable friend intends to designate estates with expensive heating systems which are oil-fired, or operate with on-peak electric central heating, or non-standard off-peak electric storage heating. There are a small number of people who now qualify under the present provisions for a higher amount than will be provided in future, but provision is made to protect them from any loss in income.

The regulations also remove an anomaly in the provisions relating to disabled person's heating addition which resulted in disabled people who have chosen a tricycle, other vehicles, or private car allowance, rather than mobility allowance, being disqualified from receiving the addition. They remove a further anomaly which resulted in the addition being payable even when the recipient's heating expenses are met in full because, for example, he is in hospital, residential care, or other board and lodgings where an inclusive accommodation charge is taken into account in the supplementary benefit assessment. Those losing benefit under this latter provision will be cushioned against the effect in that the change will coincide with the date of the November uprating.

Finally, I should mention the Social Security (Unemployment, Sickness and Invalidity Benefit) Amendment Regulations. The purpose of the regulations is to remove one of the additional conditions which govern claims to unemployment benefit made by seasonal workers during their off-season. Such workers will no longer have to have been registered for employment for two years before being able to claim benefit. The proposals are wholly beneficial to those concerned and put into effect one of several recommendations by the National Insurance Advisory Committee in 1977, which were accepted by the Government of the day but not implemented by them on grounds of cost.

The full year's cost of the proposals set out in the instruments is estimated to be very nearly £3 billion. The Government are proud of the fact that, in the present economic circumstances, this money is being directed towards people who are in the greatest need. My Lords, I beg to move.

Moved, That the draft Social Security Benefits Up-rating Order 1982, laid before the House on 28th June, be approved.—(Lord Trefgarne.)

7.18 p.m.

Baroness Jeger

My Lords, I thank the noble Lord the Minister for the lucidity with which he has put these propositions to the House. They are very complicated and it is not easy to follow them in detail. However, I must put to your Lordships that I cannot understand why these regulations are described on the Order Paper as "up-rating measures". These measures, in the context of the Government's policy, will leave many people worse off. Many people will be down-rated as a result of the measures which the Government have taken.

Let me remind your Lordships that Section 125 of the Social Security Act 1975 as amended by Section 1 of the Social Security Act 1981, requires the Secretary of State to review certain benefits in each tax year to determine whether they have retained their value in relation to the general value level of prices. The Secretary of State is obliged to lay before Parliament the increase in benefits he proposes which the Act says must at least restore their value.

I must refer not only to the measures which are before the House, but to those which are not included in tonight's up-rating. For example, there is a disregard for education maintenance. It was agreed that there should be a disregard of £7.50 for a school pupil and £9.50 for a college student. Those sums remain the same as in 1979. Now in the social security regula- tions there is a blind person's addition. In 1948 it was fixed at 15 shillings—we used to talk about shillings in 1948. Now, in 1982, it increased to £1.25. On the basis of the cost of living it should now be £8. However, that is excluded from these up-ratings.

I was very glad that the Minister referred to the capital allowance for disregard in relation to claiming supplementary benefit which has been raised from £2,000 to £2,500. That I welcome. However, I want to ask the Minister—and this is a serious and absolutely non-party question—whether the Government are paying much attention to the sums which are excluded. For example, as I understand it, the £2,500 of allowable capital will still include redundancy and severance pay. It will also include life insurance policies. This seems to me to penalise people who have tried to put a bit away in preparation for their old age, whereas the more feckless seem to gain. There is also a problem because a house owner can have his or her £2,500 in the bank and be eligible for supplementary benefit, but someone who is paying rent and who has no capital asset is not allowed to have money in the bank which would be much less than the capital value of a house which his next door neighbour might have. I wish that the Government had come forward with some sort of tapering provision on this point so that there is not a total cut-off between the man who has £2,499 in the bank, who can claim supplementary benefit, and the man who has £2,501 in the bank and who can claim nothing.

I have talked a great deal to people at the citizens' advice bureaux about this and they say that there is only one answer to this present policy. They say that they tell all their clients to go to the Caribbean and spend some money so that their capital in the bank is brought below this sum. I am not making a party point here, because none of us has settled this. I know that the Government are looking into this problem, but I should be interested if there could be some answer.

Another reason why I think it is a mockery to call these orders up-rating orders is that this Government has abolished the earnings-related supplement to which workers have contributed for many years. They have put up prescription charges, dental charges and optical charges. Can the Minister say whether these increases are taken into account in the retail price index, on which the up-rating of these amounts that we have been discussing tonight have been included? The earnings-related benefit was worth about £17.50 a week for 26 weeks to a worker on average earnings. The abolition of this benefit saved the Government £445 million a year—I quote from Hansard in another place of 17th December at column 494. So there is a very considerable fall in the income of many workers who had contributed to the earnings-related benefit and, therefore, had a right to expect that they would get it, and who are now finding themselves about £17.50 a week worse off for 26 weeks of the year, if they are on average earnings, and of course a different amount applies for those on lower earnings. So that is another reason why I am not clear why the Government claim that there is any up-rating here.

Can the noble Lord the Minister say what publicity he is giving to these changes? I do not want to talk a lot of jargon, because I think that that is very boring, but he will know what I mean when I refer to the "S" Manual which was supposed to be a publication made available to staff in offices and to claimants. We have been waiting for this manual for a very long time and I hope we shall soon have publication of it, so that people are able to assess for themselves that to which they should be entitled.

I want to ask the noble Lord the Minister about the dates of these up-ratings. I understand that retirement pensions are to go up by about 11 per cent. and that they are to come into effect on 22nd November. Then I read that disablement pensions are to come into effect on 24th November and invalidity and sickness benefit on 25th November. This may be an administrative problem, but perhaps the Minister could explain to the House why we have these different dates. Percentages do not relate realistically to the inflation of pensioners' expenses. So there is no real relationship between the increases that we are getting tonight and what people in these circumstances are having to find to maintain their standard of living. For instance, the Low Pay Unit estimates that the cost of living for the poor is nearly 1¼ per cent. above the retail price index. I have to ask the noble Lord whether, when the Government are working out these up-ratings, they are working on the pensioner price index or on the retail price index, because we know that old people need to spend money on different commodities from the generality of the population. Old people try to, or should, spend a higher proportion on heating and on food. They do not spend any money on the items that often appear in the retail price index—on gin, holidays, petrol, fur coats, and things which take a share in that index.

I turn to the question of the unemployed, and this is one of the most important orders before your Lordships tonight. We are having a debate tonight at a time when there are over three million men and women unemployed in this country. In the last month alone 120,000 have been added to the unemployment list. We must face the fact that, for the first time in the history of social insurance in this country, their unemployment benefit is now being made subject to income tax. They are also suffering from a 5 per cent. abatement which was brought in last year. I must remind your Lordships that the lowest Government majority since the last election recently occurred in the other place, when there was a majority of only eight in favour of persisting in this situation. So I am not making a party point here. I am trying to say to the noble Lord the Minister that there are people on all sides of this House and on all sides of the other place who think it is totally unacceptable to bring unemployment benefit into taxation while maintaining the 5 per cent. cut-off which has been imposed on the unemployed.

There was a general impression that abatement would be restored when taxation came in. Of course, the noble Lord and I could bandy quotations backwards and forwards across this Chamber to justify the present situation or to condemn it, but I think it is totally unfair that the unemployed should be picked on to deal with the failure of the Government's economic policy. They are being given a specially heavy burden. I have no head for figures or for economics but I must put it to your Lordships that taxation on unemployment benefit is expected to bring into the Treasury £650 million from the unemployed; £650 million is being taken out of the pockets of the un-employed. The up-rating which we owe the unemployed in order to keep their benefits level with inflation would be £60 million. I will not ask the noble Lord just to take that from me, because I know that he does not have much time for all the things I say. However, I would remind him that there was a leader in The Times on 13th July which said: It may be that benefits should be deindexed, so as not to keep pace fully with the movement of prices. However, it would be much better for this to be done openly. The need for such a policy, and both the economic and social implications, could then be examined properly. If that were to be done, it would also be much better for the unemployed not to be the only welfare beneficiaries to suffer such treatment. This is a view which is generally held in the country, and certainly is held by many supporters of the Government in another place, otherwise there would not have been that minuscule majority of eight the other night.

I have to ask about the increases in social insurance contributions, which so severely reduce the take-home pay of people at work. As a result of the Social Security and Housing Benefits Act, for the first time in the history of national insurance in this country the sick have to pay contributions while living on benefit. When the Government are working out how much this benefit should be up-rated and are dealing, as I understand it, with retail price index figures, are they including in those figures this new impost on the sick of national insurance contributions which before the passing of the Social Security and Housing Benefits Act they did not have to pay?

In that calculation, has he allowed for the fact that a man who is ill now has to pay not only income tax, if he has any money, or if his wife has any income, but he has to pay national insurance, whereas since the beginning of the national insurance scheme in this country if a man was ill, or unemployed, then his card was franked and he did not have to make a national insurance contribution. When we are looking at up-rating tonight, I wonder, as I said at the beginning of my speech, are we up-rating or is the total context of the Government's policy downgrading the income of the poorest people?

I am not going to apologise for keeping your Lordships. It may be inconvenient for noble Lords who are waiting for dinner, but we are talking about the standard of living of millions of people in this country. Under the Social Security and Housing Benefits Bill, Clause 7, a man who was getting national insurance sick pay before the passing of that Act would get £22.50, £13.90 for a dependent adult, and 80p for each child. I make that £38 a week. On that money he did not have to pay any national insurance. Now, under the Act to which I have referred, a man in this position who was getting about £38 a week is now to get £25 a week. What sort of upgrading is that?— to drop a man from £38 to £25, irrespective of the number of children he has. But that is what he will get for eight weeks if he is ill.

There are other amounts in Clause 7 of that Bill. I do not want to detain your Lordships in going over the debate we had then, but I must remind the House that contributions have gone up from about 6½ per cent. of average wages to now about 8¾ per cent. I must ask the noble Minister, when he is talking about relating increases to the retail price index, does this include these increases in contributions? These contributions and the increase in these contributions make a big hole in the pocket of every worker. If he finds his take home pay is reduced by the percentages I have mentioned, it is difficult for him to accept that the increases the Government are proposing are realistic if they do not put onto the retail price index figures those increases and the increases which must obtain when he is on benefit, a burden which has never happened before.

I must say a word about child benefit. I should like to ask the Minister what is happening so far as his statisticians are concerned? I understand that so far as child benefit is concerned there is a real loss of about 40p a week because of increases in costs and expenses. I do not want to talk too much about child benefit tonight because that is something that has to be looked at in a wider context. Some of us want to see child benefit brought out of the social security scheme. It really has nothing to do with social security. Child benefit ought to be part of the tax benefit system for the whole of the community, and it should not apply just to people who are on social security; it should apply equally to people who are at work. Again, I am not making party points because my party did not go the way I wanted on this matter, but we want to see child benefit become part of a tax benefit system, an integrated family support policy. This might—and I hope that this will appeal to the Government—reduce, however slightly, pressure for higher wage claims. That is as far as I should go tonight because I do not want to go beyond the context of these orders.

I will say one more thing on child benefit. In this case there is no problem of failure of take-up. It is administratively not expensive. I understand that the Government reckon that at least 25 per cent. of families eligible for family income supplement do not take it up—that is a problem in all branches of social security benefits—but the child benefit does not have that problem. All know that they are entitled to it, whether they are in work or out of work, so there is not this problem of non-take-up. Therefore I very much hope that the Government will give some attention to this situation.

So far as the question of the disabled is concerned—and again I shall be brief—I understand that it was about 18 months ago that the Government received a document about maternity grant. I know they are working hard on the question of the death grant, and I should be interested to know whether the Minister can tell us anything tonight about the progress of his consultations. I ask this, not in any hostile way at all, because I appreciate only too well how difficult and complicated these two questions are. I must ask the noble Lord, and I hope again not in any hostile way, whether the Government could look again at the disregard of the earnings for disabled people. I am talking about very disabled people who are not required to register for work. Their allowance has remained at £4 a week since 1975. In real value that should be raised now to £9.30, in my amateur calculation. There is nothing in the up-rating orders before your Lordships tonight about these people.

This problem concerns many mentally handicapped and other disabled people who may be able to do a little work, perhaps at day centres, or part-time in sheltered conditions. It is grossly unfair that we should in 1982, maintain this £4 disregard which was brought in in 1975. I was looking in the orders tonight for some up-rating for these people, because I know all sides of this House have a great concern for the handicapped. I should be glad if the Minister could say something about that.

I thank the Minister for what he said about heating allowances. This is, of course, one of the most difficult problems of all. I gather from the orders before us that there are proposals to do something about "hard to heat" estates. How is the Minister defining such estates? Why do we go for estates and not for single houses which are badly built and have no effective insulation? On these estates, is the application to be made by the individual tenant who feels cold in the night, or will the local housing authority put in a blanket application for the whole estate? Is there any difference between private and council tenants in respect of applications? What about people who are already getting family income supplements and others on low incomes? Do they qualify, whether or not their local authority accepts that the council flats in which they are living are hard to heat? Will the grants go to the local authorities or the individual tenants? If an individual tenant incurs expense, for instance, by doing some insulating, will he be protected compared with the more thoughtless tenant who does not bother about insulation? These may seem detailed points but they matter very much to the individuals concerned.

We are considering these orders in a context in which the Government have made it easier for people who are better off to live well and infinitely harder for the poor to maintain any standard of living. I submit—although of course we shall not vote on this matter tonight—that these up-ratings are inadequate when they are seen in the total picture of the economic policies of the Government, and I very much regret they are not more generous and will leave many o our people poorer than they were in 1979.

7.43 p.m.

Lord Banks

My Lords, I join in thanking the noble Lord, Lord Trefgarne, for his clear and comprehensive explanation of the content of the orders. As this is the eighth consecutive year that I have had the privilege of addressing your Lordships on these up-rating orders, I am well aware of the problem we face on these occasions. The increases we discuss this evening were announced the day after the Budget, on 10th March, so there has been a great deal of time for them to be discussed, both in this House and elsewhere, not least when we were debating the Social Security and Housing Benefits Bill.

The Minister reminded us that the up-rating is based on 2 per cent. to make good the shortfall last year and 9 per cent. to take care of inflation in the current year. Since the last recorded figure is 9.2 per cent., it is not impossible, as the noble Lord suggested, that the Government's estimate might for once not be so far from the target. I noticed that he said that if there was a shortfall the Government would see that pensioners did not suffer, but he did not extend that promise to cover any benefits—short-term benefits; unemployment, insurance, sickness benefit and so on—and I hope that if there is a shortfall again those benefits will be brought up to the full level and the shortfall would be made good.

The noble Baroness, Lady Jeger, raised an important point when she asked whether the 9 per cent.—if that is what it turns out to be—is really the rate of inflation for people on low incomes. She referred to the report of the Low Pay Unit, who argued that the rate of inflation for low income people is 1¼ per cent. higher, and I wonder whether we should not take that into account. I find it difficult to believe that my rate of inflation is 9 per cent., particularly as I have just had a railway season ticket increase of 53 per cent. If it is not 9 per cent. for me, then I do not know what it is for people who are on benefit.

There are certain aspects of the up-rating which we welcome. We welcome the fact that the mobility allowance has been increased more than inflation and made non-taxable. We welcome the fact that, at last, the earnings limit has been increased, from £52 to £57 per week for pensioners, but I wonder when the Government will phase out altogether the earnings limit. They were extremely keen to do that when in Opposition, and on 6th March 1979 in this House, not long before they took office, they argued that it could be done by 1984. When the noble Lord, Lord Wells-Pestell, said there was not sufficient money for it—that was his argument, one with which the noble Lord, Lord Trefgarne, is not unfamiliar—the then Conservative Opposition felt there was sufficient money and pressed the matter to a Division. I am wondering whether the 1984 target will be met by the Government.

We are glad to see that the therapeutic earnings limit has been raised to £20 a week, which I believe is an increase of 21 per cent. There has been some improvement in the rules relating to invalid care allowance, but I wonder when that benefit is to be extended to married and cohabitating women. It is available now to married and cohabitating men and it seems an unjustifiable discrimination that it should be denied to women in a similar situation.

The supplementary benefit capital level has been increased from £2,000 to £2,500. That is welcome as far as it goes, but it merely restores the value of that limit to the figure at which it was originally set and does not raise that limit, which many people have felt since its introduction is both too sharp, in that there is a complete cut-off, and too low.

Although there are things to welcome, with the qualifications I have expressed, in this up-rating, the up-rating figures have to be seen against the Government's general policy of cut-back. Mr. Patrick Jenkin said in February 1981, when Secretary of State for Social Services, that £1,500 million had been cut off the social security budget. We have many times in your Lordships' House gone over this ground of the cuts the Government have made and I will not attempt to cover that again tonight. I am sure it is as vivid in our memories as the Social Security (No. 2) Act 1980, which cut off £500 million per annum from the social security budget. It is against that background that we have to see the welcome improvements to which I have referred.

There are matters for regret, however, in the up- rating. I regret that there has been no extension of the long-term supplementary benefit to the unemployed. I regret too that child benefit is not back yet to the 1979 level; it is not back to the value it possessed in 1979. I regret that the policy of decreasing the child dependency additions without any compensating increase in child benefit is still being followed, a policy which has secured the disapproval of the Social Security Advisory Committee.

Then there is the question of the 5 per cent. abatement raised by the noble Baroness, Lady Jeger. I regret that, though unemployment benefit is now brought into taxation, nothing has yet been done to remove the abatement which affected non-taxpayers as well as taxpayers.

The pensioner's lump sum has again been fixed at £10. The first occasion on which it was paid was in 1972. It has not been paid in every year since. Nevertheless, the value in current terms of the £10 paid in 1972 would be £37.90. I dislike intensely the policy of allowing benefits to wither away, and then saying "Well, the benefit is so small and it would cost so much to put it back to what it was. Wouldn't you like to spend the money on something else? —and so we will just leave it as it is". That has happened to the death grant, and it is now happening to the pensioner's lump sum. If it is felt that these payments are no longer required, are no longer right, or that they should be fixed at a different level, Parliament should so decide. I do not like the policy of allowing them gradually to wither away.

The noble Lord will be aware that we on these Benches are unhappy about the proposal to increase the supplementary benefit by 10.5 per cent., instead of 11 per cent., to avoid the double counting, as it is called. There is some logic in that, but I consider that our level of supplementary benefit is not so high that it can stand a reduction in real value.

Turning, finally, to the Government Actuary's report on the National Insurance Fund, which is issued in connection with the orders now before the House, and which covers of course only part of the expenditure that we are talking about tonight, we see that there is an estimated deficit for 1981–82 of £1,045 million, and for 1982–83 of £350 million. The report explains that there is some imbalance between the figures, that the delayed contributions have made them so unequal, and if that is taken into account, the deficit between the two years is much nearer to being equal.

If we look to see how that has arisen, we find that there is very little difference in out-go from the estimates given by the Government Actuary in previous reports. The problem has been on the income side. Unemployment, of course, reduces contribution income, and that in turn reduces the Treasury supplement. But in addition I should have expected unemployment to increase the amount of unemployment benefit, and in this connection I am not quite clear—no doubt there is a simple explanation—why the estimated out-go on unemployment benefit for 1982–83 should be £1,674 million as against the forecast made last December for the same year of £1,996 million. In other words, the estimate has been reduced by £322 million between December and June, and I wonder whether the noble Lord is in a position to explain the reason for that.

Whatever the answer to that question, it is clear that it is unemployment, together with the Government's policy of reducing the Treasury subsidy, which is forcing up the contribution rate for personal contributors to the National Insurance Fund. With the deficits that are in view the Government may feel forced again to seek further increase for the fund, but I hope that they will seek the increase by restoring the Treasury supplement to the level of 18 per cent., and not by seeking a further increase in personal contributions.

7.54 p.m.

Lord Kilmarnock

My Lords, from these Benches I, too, should like to thank the noble Lord for his lucid and very brief introduction of the seven orders. I should like to enter a mild note of complaint with regard to the explanatory note at the back of the Social Security Benefits Ups-rating Order 1982. The explanatory note alludes to the report by the Government Actuary, and refers to the Command Paper, and where the number is normally given there is a blank within brackets. So I was unable to obtain a copy of the Government Actuary's report in time for this evening's debate. The noble Lord, Lord Banks, with his great expertise, has of course covered the most important points which arise from it, but it would be helpful to your Lordships if Command Papers numbers could be given in the explanatory notes.

I should like to ask the noble Lord one or two questions. With regard to child benefit, has the noble Lord yet any information on the number of people who, where they have the choice, have opted to continue to take child benefit weekly, as opposed to monthly? Information on that could provide a good indication of whether it is right to impose monthly take-up on new mothers unless they are on supplementary benefit. I think that this matter arose when we last debated supplementary benefits, and it would certainly be interesting to have any news that there is on it.

Along with the noble Lord, Lord Banks, we, too, welcome the raising of the gift limit from £20 to £100, the rise in the disregard on pensioners' earnings, and the increase in the capital disregard from £2,000 to £2,500. However there still seems to me to be a problem here. For example, there is a problem for those who are made redundant, who will have to run down their savings after unemployment benefit runs out, in order to qualify for supplementary benefit, if they are still short of the pensionable age. There is also a problem for those who have money in transit, where they have just sold a modest possession or a dwelling, and are waiting to put the money into something else. While they have the money on deposit in the bank they cease to qualify for supplementary benefit. I thought that the noble Baroness, Lady Jeger, was on to something when she suggested a taper, and I wonder whether the Government will give consideration to some form of sliding scale, so that entitlement to supplementary benefit is not totally lost because of relatively modest sums of capital which might be only temporarily in the bank.

On family income supplement the noble Lord congratulated himself and the Government on raising it by more than 11 per cent. But my latest figures show that the take-up on family income supplement is only in the region of 50 per cent. I think that the noble Baroness, Lady Jeger, said that there was 25 per cent. shortfall on take-up. My information is that it is higher. What are the Government doing to see that entitlement to family income supplement is given greater publicity, so that more people are aware of their rights?

I want briefly to touch on one matter which the previous speakers have not mentioned, and which was the subject of a Question in your Lordships' House only the day before yesterday. It is the the question of the 21-hour rule in relation to supplementary benefit. In Cmnd. Paper 8598, which I think the noble Lord mentioned, the Social Security Advisory Committee makes a number of representations to the Secretary of State on this matter. The committee welcomes the fact that the Government have accepted that the 21 hours should not include tea breaks and home study time; and we, too, welcome that. But we cannot welcome the three-month qualifying period. We understand the point, which is to ensure that supplementary benefit is not used as a kind of concealed educational maintenance allowance. But is it really beyond the wit of man to devise a safeguard to ensure that the benefit is not being used for that purpose by people who are simply staying on at school, or going back to school and pursuing their normal education on supplementary benefit? I wonder whether the noble Lord can say a little about that.

In his reply to the Social Security Advisory Committee the Secretary of State undertook that, the Government will monitor closely the effects of the new three-month qualifying period". I should like to ask the noble Lord to give the House an assurance that the Government are serious about that, and that they really will keep it under review.

The question of the 5 per cent. abatement of short-term benefits which has not been restored has been mentioned by both the previous speakers. That, I think, is no reason for my not mentioning it. It really is a scandal. In effect, it is imposing double taxation on the unemployed. The sum which would be required to restore the abatement is, I believe, something in the region of £60 million, as opposed to something over £500 million—I think the noble Baroness said £650 million—which will accrue to the Treasury through the taxation of unemployment benefits. I really think the Government must do something about this, if the rumblings from their own Back Benches are anything to go on. They should take account of the very narrow squeak they had on that matter on the Finance Bill in another place.

Finally, the noble Lord congratulated the Government (which is quite understandable, speaking from the Bench from which he does) on their achievement in the improvement of certain benefits, and said that the Government were proud of their record. While we are on this matter, I think we must put that into context. It must be recognised that the replacement ratio in this country—that is to say, the ratio of benefits to normal earnings—was at one time relatively high, but it has dropped and is dropping steadily. For example, even if you assume that the unemployed before becoming unemployed earned only two-thirds of the national average of earnings, the percentage replacement ratio in this country is considerably lower than that in any other European country. Belgium, for example, achieved a 60 per cent, replacement ratio; Canada, 60 per cent.; France, 90 per cent.; Australia, 73 per cent.; Ireland, 60 per cent.; and New Zealand, 71 per cent. The United Kingdom comes bottom of the league at 52 per cent. for a couple and two children.

So the Government may be doing their best, or think they are doing their best, but in fact our replacement ratios for people out of work and on to benefit are definitely declining. Here, for example, there is a calculation of the replacement ratio in Britain as against a basket of 11 other countries. For a single person, the replacement ratio of normal earnings is only 29 per cent., as against 58 per cent. for the basket of 11 other countries; and for a couple with two children it is only 52 per cent. as against 69 per cent. for a basket of 11 other countries. So when the Government claim that they are improving the social security system and up-rating according to their undertakings, these claims really have to be seen in that context. I think the Government must take account of the amount of money that they have relatively taken out of the social security system before they take out any more. Just to revert to the question of the 5 per cent. abatement, may I say that if the Government really want to restore faith in their social policies they have a very simple way out by merely restoring that abatement. That was always the general understanding given to Members in both Houses, that it would be done once unemployment benefit had been brought into tax.

8.4 p.m.

Lord Trefgarne

My Lords, I have been confronted with a very considerable number of points raised by the two noble Lords and the noble Baroness who have spoken. I shall do my best to deal with as many as I can. It is interesting to note that much of what has been said this evening has been concerned less with the contents of the instruments before us than with other improvements which the Government might have introduced if the necessary resources had been available; or with the recounting of changes in social security provisions which have been made in earlier years, again largely to reflect the resources then available.

There are, of course, many things which the Government would like to do if the money to do them were available, but the plain facts are that in present circumstances we simply do not have the resources to do everything that we should wish. The social security programme will cost something above £32,000 million in 1982–83. It will account for about 28 per cent. of all public expenditure. Any shortfall in the last up-rating is made good in this one, which will cost some £3 billion; and we certainly need to determine the priorities in order to do the best we can with the funds available.

May I now turn to as many of the points as I can at this time? I do not want to detain your Lordships unreasonably, and I will certainly attempt to deal with any other points raised that I fail to deal with now by correspondence or conversation at a later moment. May I turn first to the speech of the noble Baroness, Lady Jeger, who referred to several aspects of the supplementary benefits scheme, such as the addition for the blind, which the Government have not increased in these regulations. I can assure the noble Baroness and, indeed, your Lordships, that we considered all these items very carefully before deciding which ones we could afford and which ones, unhappily, had to be left at least for this year.

The noble Baroness also referred, as did the noble Lord, Lord Banks, and the noble Lord, Lord Kilmarnock, to the cut-off for supplementary benefit, which, as I mentioned in my opening remarks, is being increased from £2,000 to £2,500 in November. The Government did not consider it right to distinguish between different types of capital or savings, like the surrender value of insurance policies, for example—that these should be taken into account in assessing capital, or that they should not be taken into account, as the case may be. The only exception is that we did not think it right to take into account the value of the claimant's own home, which I think was a specific point raised by the noble Baroness.

The noble Baroness also suggested—and I think the noble Lord, Lord Banks, picked this point up, too—that there should be a tapering of the effect of capital or savings held by claimants for supplementary benefit, instead of a straight cut-off, which is the present arrangement. Of course, such a tapering arrangement existed prior to 1980, but when we reviewed the supplementary benefit scheme we decided that a straight cut-off level was easier for claimants to understand and simpler to operate; and to reintroduce a taper, as has been suggested, would, I think, be a very undesirable complication. But I want to say that we do not have a closed mind on this matter, and we are certainly willing to listen to representations in the other direction from interested bodies.

The noble Baroness asked me about the particular days of the week in November when these benefit rates will be changed. Different benefits are in fact paid on different days of the week, and we thought it right that the increases should apply on the actual day of payment. The reason why payments are payable on different days of the week is to avoid the somewhat obvious difficulty of all the claimants turning up at the local post office on the same day for their different benefits, and causing what would obviously be a very undesirable level of congestion in the post offices if that were to happen.

The noble Baroness also asked me about which price index we used for this purpose. In fact, we use the retail price index and not the pensioner price index. The retail price index remains the best overall indicator of price rises and is therefore the most appropriate measure to determine the rise in the main social security benefits. The pensioner price indices are restricted in scope. They exclude housing costs, for example; and are also published only quarterly. In any event, the movement of these indices and the RPI over a period of years have diverged very little indeed. I have some tables here with the figures which I could send to the noble Baroness if she were interested, but they will show that the indices do not diverge very much.

Baroness Jeger

My Lords, before the noble Lord leaves that point, may I ask him whether the RPI includes national insurance contributions which have gone up so much and which make such a difference to people's income?

Lord Trefgarne

My Lords, that is a very fair point. I am not entirely clear about the answer. I think that they do not include them, but I will ascertain the position and write to the noble Baroness. The noble Baroness also asked about publication of the information and arrangements relating to these matters, particularly the so-called "S" manual, which is the main guide to supplementary benefit procedures for local office staff and is being revised to incorporate the guidance on the application of the law which the chief supplementary benefit officer issues to benefit officers to assist them in making decisions on claims to benefit.

This revised manual is to be published just as the chief supplementary benefit officer's memorandum for guidance had been published to date. The Government had originally hoped to publish the manual earlier this year, but as my honourable friend the Parliamentary Secretary explained when answering a Question in another place, the revision has proved a more complicated exercise than was expected. We think it very important that this manual should be clear, comprehensive and correct; and some little delay to achieve that we think is worthwhile. I would add that, with the publication of the regulations and the chief supplementary benefit officer's guidance, the rules and the way they are to be applied are no longer secret.

The noble Baroness and, I think, everybody who spoke—certainly the noble Lord, Lord Banks, although I am not quite sure whether the noble Lord, Lord Kilmarnock, did so—referred to the question of the death grant. I think that the noble Baroness referred also to the maternity grant. The present rates of death grant were fixed in 1967 and only about three-quarters of all deaths attract the full £30, the rest either not qualifying at all or attracting a modified rate on age grounds. The standard £30 represents, I am afraid, less than 10 per cent. of the cost of an average simple funeral. To raise the level to the real value of the grant when introduced in 1949, and to make it payable for all deaths, would mean a grant of about £200, and an expenditure of about £145 million altogether compared to the total expenditure of about £25 million at present. To make such a grant available to people who do not necessarily need financial assistance as well as to those who do, we think would be costly and wasteful.

The Government are proposing to concentrate a much higher grant of between £150 and £250 on those receiving specified benefit linked to low income where the deceased person leaves only a small estate. Proposals are set out in the consultative document which was issued at the end of March and would involve no increase in expenditure but a much better distribution of the available resources. Comments on the proposals are still coming in, as the consultation period does not end until the end of this month. The Government will then wish carefully to consider the reactions to the proposals, but we cannot make any commitment to change which requires the injection of substantially increased resources—and certainly not in present economic circumstances. The Government are, however, willing to consider any alternative proposals for redistributing present resources for the death grant more effectively to those who need it. On the question of maternity grant, as from 4th July the grant became non-contributory, giving entitlement to an extra 60,000 women a year at a net extra benefit cost of just over £1 million.

The noble Baroness also asked—and I slightly fudged the answer when I referred to the point just now—about the increase in contributions and their relationship to the RPI. I certainly acknowledge that the contributions have had to be increased. They are reviewed every year in the light of the latest information about income and expenditure in the National Insurance Fund, to which the noble Lord, Lord Banks, referred, and will be reviewed again this autumn. I understand that this does not affect the movement of the RPI, which is regarded as a measure of the consumer's expenditure. I suppose that it is assumed that national insurance contributions affect his income and not his expenditure: but I take the noble Baroness's point that the difference is no doubt regarded as academic to those concerned.

The noble Baroness also referred to child benefit. I certainly take on board the fact that this is a benefit with a very high take-up. I was asked for a percentage figure of what that take-up would be. I do not have the figure to hand, but I am certain that it must be very high indeed. Even Members of your Lordships' House, not excluding myself—or, at least, my wife on behalf of our children—are recipients of that benefit. For that reason, it is a very expensive benefit. Every additional 10p a week on child benefit costs no less than £55 million; so that to increase the benefit by 40p, which is the suggested present shortfall, would cost an extra £220 million a year; and I am afraid that at this moment the funds are simply not available for that purpose.

The noble Baroness referred also to statutory sick pay and to the provisions of the statutory sick pay and the Housing Benefit Bill which the noble Baroness and I considered some months ago. The scheme under that Bill will not be introduced until April 1983 and the rates provided in the Bill will be up-rated before then, as I remember discussing with the noble Baroness at the time. So the difficulties that she foresaw with the shortfall of rates may well not come to pass in the event.

The noble Baroness asked about hard-to-heat estates. This was in relation to that special heating allowance that I referred to in my opening remarks. These are defined as estates with oil central heating, on-peak electric central heating or off-peak storage heating using non-standard off-peak tariffs. Decisions on which estates will be for my right honourable friend who will consider all the relevant criteria. Applications for designation should be made in the first place to the local office. The extra heating addition will be paid to all claimants who live on the estate with this type of heating system; the point, being, of course, that residents on these estates where there is a common system throughout the estate have no choice as to the type of heating that they use, and if they find themselves unhappily lumbered with an old-fashioned type of system which is no longer particularly efficient and is now rather costly to operate, then when their estate becomes so designated, they will be entitled when they are in receipt of this benefit to this special rate in this particular regard.

Baroness Jeger

My Lords, can the Minister help me a little on this? Will it be for an individual tenant who feels that he is suffering from this expensive and inefficient heating to apply, or must the application be made through the local authority; and does the money go to the individual tenant or to the local authority? I think that this will affect many people.

Lord Trefgarne

My Lords, as I understand it, once the estate is designated as being hard to heat then all those on the estate in receipt of supplementary benefit will automatically get this adjusted heating allowance. I suppose that it will be for the first tenant who applies to have this up-rated allowance and at that point the estate will be designated or not, according to the merits of the application.

May I turn finally—and I recognise that I have by no means dealt with all the points that have been raised, but I have dealt with an enormous sheaf nonetheless—to the question of the 5 per cent. abatement which was raised by both noble Lords and the noble Baroness. I remember that this matter was discussed during the passage of the earlier Bill to which the noble Baroness referred and it was indeed referred to in the other place the other day. I shall deal with it very shortly, not to be repetitive. The 5 per cent. abatement that was made in unemployment benefit was done of course as a measure of necessary economy at that time. We are certainly anxious to restore that 5 per cent. abatement as soon as resources can be made available to do so. I am not in a position to give a precise date as to when that should be, but I certainly hope that it will be sooner rather than later.

I hope I have answered the main questions put to me during the debate. I am conscious that I have not by any means answered them all. I shall certainly cull the columns of Hansard and write to noble Lords on any significant matters that I have left untouched. May I repeat what I said in my opening speech. The provisions contained in these instruments will be welcomed in millions of homes throughout the country as £3 billion very well spent. The Government are proud to put forward these proposals and I hope that they will receive the agreement of your Lordships.

On Question, Motion agreed to.