Social Security Benefits Uprating (Hansard, 24 November 1982)

§ Lord Harris of High Cross
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne)
My Lords, the uprating of social security benefits which takes place this week was based on a forecast price movement of 9 per cent. made at the time of the Budget, which because of our successful strategy against inflation has turned out to be too high. My right honourable friend the Chancellor of the Exchequer made clear on 8th November in another place that the Government will make an adjustment to the 1983 uprating having regard to this; but the extent of that uprating for individual benefits will be decided, as usual, at the time of the Budget.

§ Lord Harris of High Cross
My Lords, I thank the Minister for that brief factual reply. Before we are deluged by emotions from a certain quarter, I would like to ask a simple question, if I may. Are the Government not the least bit worried about the effect on employment incentives of tilting the balance still further against net take-home pay, which has risen less, and often much less, than this 11 per cent. by which all benefits have now been increased?

§ Lord Trefgarne
My Lords, the noble Lord is, of course, quite right to say that many people have settled for wage increases considerably less than the 11 per cent. by which most benefits were uprated earlier this week; but, of course, it was not the intention to uprate benefits by this excess, whatever it may turn out to be, over and above inflation. The target is always, as it was of course in the time of the previous Administration, to match the increase with the rise in prices.

§ Lord Wells-Pestell
My Lords, may I ask the noble Lord the Minister this: if the Government are going to contemplate clawing back some of the over-expenditure, is it not disgraceful, considering that the 886 amount involved is only £180 million a year and £90 million of that will come from old-age pensioners who never enjoy a high standard of living?

§ Lord Trefgarne
My Lords, the sum of money which the noble Lord mentions is not yet properly established. The figure which my right honourable friend referred to in the other place was the amount by which he was proposing to adjust the social security budget as a whole for the part year, not a whole year, running from the uprating next year to the end of March 1984. It was never the intention of the Legislature—it was certainly never the case when noble Lords opposite and their right honourable friends were in power—that pensions should be uprated above the rate of inflation.

§ The Earl of Onslow
My Lords, is the noble Lord aware that by increasing benefits by 11 per cent. and trying to hold wages to 4 per cent. the Government have in fact radically increased the dangers of the poverty and unemployment traps? Is he aware that there is a solution, which is to raise the tax thresholds and the starting point of tax by higher than that amount? That will obviate the poverty trap and unemployment trap effects, which he has unintentionally initiated by this 11 per cent rise in benefits.

§ Lord Trefgarne
My Lords, the poverty trap and the problems which it brings in its wake are a pretty wide subject on their own, perhaps a little wide for Question Time, particularly on a day when we have a debate on these matters to follow shortly. But I take note of what my noble friend says.

§ Lord Kilmarnock
My Lords, is it not the case that 2 per cent. of the 11 per cent. referred in the Question of the noble Lord, Lord Harris of High Cross, is in fact a repayment for a previous shortfall?

§ Lord Trefgarne
Yes, my Lords, the noble Lord is quite right; we did add this year a small percentage to make up for a shortfall last year.

§ Lord Blyton
My Lords, may I ask the noble Lord whether he is aware that the Government took 5 per cent. off the unemployed three years ago, which they have now refused to refund? Is he further aware that two years ago they gave the pensioners a 53-week year, thereby depriving them of one week, to give them a Christmas box of £10? Does he not think the attitude of the Government is really nauseating?

§ Lord Trefgarne
My Lords, there are a number of improvements in social security benefits which we would like to make when the necessary funds are available. As to the 5 per cent. abatement to which the noble Lord referred, my right honourable friends in the other place have acknowledged and accepted the principle of restoring that abatement as soon as resources allow.

§ Lord Molloy
My Lords, can the noble Lord perhaps in due course inform the House, apropos the present clawback from the old-age pensioners, how much of that clawback and of other reductions over the past 887 three years will go to enhancing the tax relief of the very wealthy?

§ Lord Trefgarne
My Lords, we have not yet made any detailed anouncement in respect of the adjustment which the noble Lord asks about. It is perhaps worth noting that since we came into office, retirement pensions, for example, which are, of course, a very important, if not the most important, benefit, have increased in real terms by something approaching 4 per cent.

§ Lord Wells-Pestell
My Lords, may I ask the Minister whether he is aware, as I am sure he is, that a large number of old-age pensioners are living below the poverty line because they are not taking up the various benefits to which they are entitled? To claw back from 9 million or 10 million people an amount of £90 million in those circumstances is quite deplorable.

§ Lord Trefgarne
My Lords, no announcement has been made about the rate of any adjustment which may be made next year. That is a decision which will be taken along with all others when my right honourable and learned friend the Chancellor of the Exchequer formulates his Budget proposals next spring.

§ Lord Glenamara
My Lords, is the Minister aware that many of us believe there is a case for excluding retirement pensioners from the clawback because their spending pattern is quite different? For example, in the ordinary retail price index, mortgage repayments are a big element but retired people rarely have mortgages. Is there a case for looking at retirement pensioners separately from the rest of the community and excluding them from the clawback?

§ Lord Trefgarne
My Lords, it is of course the case that the recipients of different types of benefit will wish to advance their own case to be shielded from any adjustment. My right honourable and learned friend will take all these thoughts into account when formulating his proposals.