§ 4.22 p.m.
§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne)
My Lords, I beg to move that the Social Security and Housing Benefits Bill be now read a second time.
The purpose of this short Bill is very simple. It is to change the future basis of up-rating social security benefits each year from a forecasting method to an historic, or actual method. Social security is notorious for the creation of obscure terms of jargon, so before going into detail on the Bill's three clauses, I will, with your Lordships' permission, explain the nature of this change and why we believe it to be both necessary and worthwhile.
The Social Security Act 1975 obliges the Secretary of State to review each year the levels of certain weekly benefits to determine whether they have kept their value, having regard to movements in the general level of prices. A similar obligation, but with special provision for housing costs, arises in relation to the needs allowances of housing benefit under the Social Security and Housing Benefits Act 1982.
Under the system which Clause 1 of this Bill replaces, the review had to be carried out in the tax year preceding the November up-rating date, and the Secretary of State was obliged to take into account the expected movement of prices from the date of the last up-rating to the date of the next one. Since 1976 this has meant preparing a forecast in the early part of the year of the likely movements in the period from November to November. Usually the only certain figures available at the time of the review have been those covering the first two or three months since the 30 previous November's up-rating. The remaining months have been a forecast based on the best assumptions possible at the time. This method of determining benefit increases came to be known as the "forecast" method.
Unfortunately, this method has not worked at all well in the seven years it has been in use. The forecasts have been wrong in five years out of seven. Sometimes the difference has meant a loss to pensioners and other beneficiaries; sometimes it meant a gain. Pensioners were never quite sure where they stood with these arrangements, because once the differences became clear there was usually a period of months before they knew what was to happen. This led to unnecessary worry and uncertainty and it was a haphazard and unsatisfactory way of providing benefit increases for the 20 million or so beneficiaries concerned.
We think that the time has come to get rid of a forecasting method which has proved to be unreliable, uncertain and a source of worry, and to replace it with a method based on fact and certainty. We propose to review on the basis of actual, or historic, price movements as late in the year as we can manage, and still ensure that beneficiaries get their increases in time. We propose to have the review in June of each year, and to fix the new rates of benefit by reference to the general movement of prices in 12 months from May to May. There is no ulterior motive in the choice of a May to May reference period or of a June review date. We are simply not able to use any later period without risking late payment of the up-rating increases to millions of beneficiaries. And clearly we do not want to move to an earlier review date and thereby widen further than necessary the gap between the review date and the up-rating date. Pensioners have complained in no uncertain terms about the long interval that arose in recent years between a Budget time announcement of new rates and their implementation in November. We intend to improve on that by cutting to five months the gap between the announcement date and the up-rating.
Five months sounds a long time to carry out the administrative work of up-rating benefits. But it is not so long when one considers the size and complexity of the operation. Millions of retirement pensioners and other beneficiaries are paid by means of a book of payable orders produced by the computer and normally covering 20 weeks of payment. The issue of these books must be carefully organised to even out the flow of work, and some books covering the week of the November up-rating start to be issued in late May. We can start the process of up-rating later than this by issuing some beneficiaries with a second book topping up their other payments, but there is a limit to the number of extra books than can be issued in this way.
There is the further problem that the department's local offices must deal clerically with the complex task of reassessment and replacement of order books for some 3 million to 4 million supplementary benefit and invalidity pension cases. We have not yet succeeded in finding the means of transferring such work on to machines or the computer. So we cannot begin the process more than a matter of a few days after the end of June without large numbers of beneficiaries being forced to wait for some time after the November up-rating date for their increases. This is the problem that 31 arose when the last Government tried to up-rate in 17 weeks in 1974 and it is one we are determined to avoid. As our operational strategy develops in the coming years we shall be looking towards the possibility of further shortening the gap between the announcement and the up-rating, but we are some way off that point yet.
The main doubts that the Bill has created in the course of discussions in another place are not concerned with the principle of the change to an historic reference period, nor to the choice of the latest possible review date. That is not surprising, because the logic is unassailable. Concern has arisen only at the implications of the change for the 1983 up-rating. This is understandable, because we think the inflation rate in May is likely to be a percentage point or two lower than that in November. But no one should draw any false conclusions from that. Last November pensions and other benefits rose by 2.7 per cent. more than was needed to maintain their values. If we had retained the old method of up-rating we would, as we made clear last autumn, have adjusted to have regard to that unintended over-provision. Had full adjustment been decided upon, if the old method had continued the year's up-rating would have been 3.3 per cent. if a forecast of 6 per cent. was assumed.
But the question of adjustment is not now relevant. The Government are changing the method and for very good reasons. With the change to the historic method this year's up-rating will reflect fully the actual movement of prices from May 1982 to May 1983. We do not know what the rise in prices will be as yet, but it may be in the region of 4 per cent. In addition, pensions will retain the full 2.7 per cent. over-provision from the 1982 uprating. No question will arise of adjustments for error; there will be no shortfalls and no overshoots. We are replacing doubt with certainty and unreliability with stability.
Our pledge to pensioners was that we would fully protect their pensions against inflation over the lifetime of this Parliament. On the best estimates we have, in the five years from November 1978 to November 1983 pensions will have risen by about 75 per cent. and the retail price index by about 70 per cent. We have more than kept our promise to pensioners, despite facing a severe, world-wide economic recession, and that is no small achievement.
So much for the background to the change. I turn briefly now to the details of the Bill's three clauses, though your Lordships may also find it helpful to refer to the notes on clauses which have been made available. Clause 1 amends the present up-rating provisions of Sections 125, 126 and 126A of the Social Security Act 1975, which cover national insurance benefits, attendance allowance and invalid care allowance. The provisions also cover public service pensions. Instead of the statutory review being carried out in the tax year preceding each November up-rating, the amendments defer the review date to June each year, for the reasons that I have explained. This clause will also require future increases to be based on the actual percentage rise in prices in the twelve months to the end of May each year, rather than on a forecast of what might happen between up-rating dates.
32 Clause 2 amends Section 29 of the Social Security and Housing Benefits Act 1982, which provides for the annual review of housing benefit needs allowances. The needs allowances are the weekly amounts allowed, in calculating the amount of benefit, for the housing and other needs of housing benefit recipients not on supplementary benefit. I should add that the change will not affect supplementary' benefit claimants on housing benefit. They are automatically eligible for help with all their rent and rates, subject, in some cases, to deductions—for example, if they have non-dependants living with them. Clause 2 simply makes the amendments necessary to enable the review of needs allowances to be done on an historic basis, by reference to actual changes in prices and housing costs. The Secretary of State will still have to report to Parliament if he decides, after a review, not to restore any loss in value.
Clause 3 relates to the Short Title, commencement and extent of the Bill. It ensures that the Bill's provisions apply for the purposes of the 1983 up-rating review, and it allows Northern Ireland to continue to reflect up-rating increases provided for in Great Britain legislation without the need for special new provisions for Northern Ireland.
As I have indicated, not all social security benefits are covered by the Bill, which is limited to those for which legislation is needed to change the method of up-rating. In other cases it is already possible to up-rate by reference to the historic movement in prices. The main benefits not covered by the Bill are supplementary benefit, child benefit, one-parent benefit, family income supplement, mobility allowance and war pensions. We have, of course, already announced a substantial increase in the rates of child benefit from November, as well as a range of other social security improvements. As for other benefits, it is our intention to up-rate these in November 1983 broadly in the same way as the benefits covered by the Bill. That is, we shall have regard to the historic movement in prices over the 12 months from May 1982 to May 1983. Details of the proposed November up-rating will be announced in June.
My Lords, two final points. Your Lordships may ask why we do not restore the link that existed for five years to 1980 whereby basic retirement pension and related long-term benefits rose by movements in earnings or prices, whichever was the higher. The fact is that that system led to a "ratchet" effect whereby benefits in the long run increased faster than either earnings or prices, and this was placing a growing burden on the working population, particularly at a time of high unemployment. Each 1 per cent. real improvement in social security expenditure costs the country about £300 million more a year. That can only be paid out of higher taxes or contributions. It would be irresponsible to introduce provisions of that kind, irrespective of the country's ability to pay.
Second, it may be suggested that we could now move towards more frequent up-ratings at, say, six-monthly intervals. But that again involves a major increase in benefit expenditure and again serves to increase inflationary pressures at a time when we are working successfully to bring inflation under firm control. Each 1 per cent. of the annual up-rating 33 brought forward by six months means £150 million more benefit cost in that year. It also leads to pressure for similar concessions for wage earners, again at inceased costs; and it means that the department's staff would be continuously engaged in up-rating benefits. As one was being implemented, so the next would be announced, to the immense confusion of pensioners and the public at large.
I conclude by reminding your Lordships that we are introducing this Bill at a time when we have brought down the annual rate of inflation to its lowest level for 13 years. This in itself is of considerable help to social security beneficiaries. This Bill further helps them by restoring simplicity, certainty and stability to the process of up-rating social security benefits. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Trefgarne.)
§ 4.38 p.m.
§ Baroness Jeger
My Lords, I thank the Minister for making this obscure Bill as clear as possible. My first criticism, which relates to the cost of living, is that this Bill, consisting of three and a half blank pages and three and a half printed pages, costs £1.30. I know that this is not the responsibility of the Minister, but many people are very concerned about what seems to be the increasing cost of official documentation. I very much hope that an opportunity will be taken to look at this matter.
Although the scope of the Bill is narrow, it has wide implications. The main concern of pensioners is not with the academic argument about forecast or historic assessments, but simply with the result: under the Bill, will they be better or worse off? The very respectable organisation called Age Concern suggests that as a result of these changes the Government will save £105 million in the year 1983–84. If the Government save, somebody loses. I cannot help but contrast this with the tax give-away in 1979 off £1,590 million—15 times as much—to the best off, in the higher tax brackets.
I understood that the autumn Budget statement provided for a saving of £180 million on social security. This causes a certain amount of confusion. In the other place—I refer to Hansard of 20th April, col. 302—it was suggested that these changes would save the Government £210 million. Is the Minister able to say what is the correct answer? Mr. Hugh Rossi said on 20th April, at col. 328:The arithmetical difference in 1983–84 between an assumption of 4 per cent. inflation and an assumption of 6 per cent. inflation is £210 million".I have to ask the Minister what sum of money we are talking about. If the Government are saving that sum of money, from whom are they taking it away?
This Bill affects about 20 million people, including dependants, which is a very large proportion of our population. Clause 1 proposes to increase the sums in question by a percentage or amount at least equal to the percentage by which the general level of prices has risen during the period under review. Is that reference to the "general level of prices" based on the retail price index? Has it any connection with the pensioner price index? Does it take into account that so far as retired 34 people are concerned only 2 per cent. of pensioners have mortgages? Mortgage rates, we know, are reflected quite considerably in the retail price index—and quite rightly. In the other place there was a great deal of discussion about the position of the retired pensioner. But this Bill concerns not only the retired but widows, unemployed, invalids, people receiving supplementary benefits and public service pensioners. I am grateful that the noble Lord made it clear that it does not refer to war pensioners and war widows, and I hope he may say in reply what proposals the Government have to help these people, who are really having a really difficult time.
I have to ask the Minister one or two other questions. If this whole scheme is based on the fact that there will be a gap between the inflation rate in May and what the inflation rate is in November, what happens to people who die in between? Surely they will never get their money back? What would happen to an unemployed man who was on this lower rate—because he was told to wait until November when he might get a bit more—in the most unlikely circumstance, under this present Government, that he found a job before November? Will he ever get his money back under this arrangement? I must ask the noble Lord the Minister: could we not with modern technology get a shorter gap? We know all about the computerisation that is supposed to be coming in in 1984–85. Can we not get something closer between the forecast and the implementation, or is everybody still sitting around with pens and pencils at the Elephant and Castle and the other places? Surely we could try to bring these things together. Perhaps I may put it to the noble Lord that we might have a six-monthly up-rating. I am not making any party point, because no party can take any pride in its record on this. But it does seem to me that a speedier up-rating is what the pensioners of this country deserve.
I want to ask the noble Lord one or two questions. Can he give an assurance that if inflation is higher in November than in May they will ensure that social security beneficiaries do not lose? What all the people concerned with this Bill want to know is whether they are going to be worse off, and many of them feel that they are going to be worse off. Obviously, if the May inflation rate is 4 per cent. and pensioners have to wait until November, when we are told that inflation might be 6 per cent., there will be a gap in their income. We really must know from the noble Lord the Minister what the position is to be. How can we help them? I would suggest that, to avoid a lot of paperwork, if there is a 2 per cent. rise in inflation between May and November, that on my illiterate, innumerate calculations would come to about one week's benefit, and it might be that, without a lot of clerical work, we could just double up the benefit for a week in November, just add one week's money. Otherwise, there could be a disguised clawback for many of these people.
I am encouraged in suggesting that there ought to be some changes by paragraph 35 of the report of the Social Services Committee of the House of Commons, which says:We recommend that in developing its operational strategy the Department bear in mind the considerable advantages that would accrue from the possibility of swifter and more frequent up-rating.35 A year is a very long time for people who are on benefit to have to wait while the Government do all the arithmetic and work out what should happen to them.
I must say a word about Clause 2 housing benefits. This is a Second Reading debate, so perhaps I may go a little wider than the actual Bill. I want to ask the Minister if he is satisfied with what is happening about the housing benefits provisions which have been brought in. How many people are receiving their entitlement? What monitoring is going on to ensure that this drastic change is being effective? I want to ask the noble Lord if housing benefits will be increased as rents or mortgage charges go up, or is the assessment to be annual? The Government promised at an earlier stage that nobody would be more than 70p a week worse off. I do not understand why anybody should be even 70p a week worse off. But I wonder whether if there are not some who are even more badly off at the present time. Have all the councils received the extra money they need, the extra staff? My information is that there is chaos as regards housing benefits. There are 6.7 million householders involved, and I am told that in Newcastle-on-Tyne, for instance, the staff went on strike because of the extra work for which no provision, no extra staff, had been provided. The computers had not been programmed. If only they would abolish computers they might get on better.
I am told that the switchboards are jammed in most of the council offices in the country, that the review boards of appeal have in many cases not been set up. I am told that about 40 local authorities have ordered a computer package from ICL, to be delivered in March, but it has not arrived. Guildford sent out 2,000 emergency handwritten cheques. That is the computer age for you! That was the only way the people in Guildford could get their money. In Salford, faults in the computer package forced the council to issue letters, old-fashioned letters, to 5,200 people advising them that their housing benefit had been wrongly assessed. In Newark all standard housing benefit cases have been wrongly assessed due to computer error. I am taking these figures from an issue of New Society of 28th April. If the Minister wishes to say that they are all wrong, then the House will be interested to hear about that.
I could go on to describe other difficulties, not only from this article but difficulties about which I know from my own information, which show that this system is in chaos and there has been a breakdown in most parts of the country. The liaison between the DHSS offices and local authorities is in a shambles. Supplementary benefit claimants cannot get their money. Landlords are trying to evict people for nonpayment of rent when their non-payment is due to the fact that they have not got the money they are supposed to get.
Then the DHSS office has, among other things, something which is called a yellow form. This is supposed to go to private tenants on supplementary benefit. There appears to be a problem about the yellow forms because some local authorities are receiving hundreds of these and some are not receiving any at all. There seems to be an impossibility of matching the yellow forms to entitlement to housing benefit so that if there are no yellow forms the private 36 tenants are not being paid their housing benefit. Therefore, they cannot pay their rent to the landlord and the landlord starts to throw them out. I cannot believe that that was the intention of even this Government, and I cannot believe that is what the Minister wanted.
I hope he can answer some of these questions because, as we said on a previous debate, it seems that the extra resources are not being made available. A lot of extra resources are needed to give local authorities the staff and the abililty to deal with this switchover. That has not happened. This matter has been pushed through in a very raw and difficult state. I apologise for spending time—I and hope your Lordships will not think is too much time—on the housing benefits part of the Bill; but, as an former chairman of a housing committee, I am very concerned about what is happening.
This Bill is so complicated and difficult that I should like to know what steps the Government will take to explain the provisions to the people who ought to benefit from it? Often the people who need to benefit from such legislation are those least able to understand and to realise what their rights are. For instance, if someone is not entitled to supplementary benefit in June, will they be reminded to come back in November? By then they might be entitled to it. What are the Government doing about the take-up problem which we have often discussed in this House? I think that all sides of the House have agreed that there is a fall in take-up, about which we should all be concerned.
I have one final question which I put very seriously to the Minister. I understand that the 17th June is a vital day because then we expect to hear the May figures for inflation and that everything will depend on what is announced on that day. If, for the best of all possible reasons, the House is not sitting, can the Minister asure us that people who will be entitled to some up-rating will not be left in suspense because the House will not—as I hope it will not—be sitting on the 17th June?
§ 4.52 p.m.
§ Lord Banks
My Lords, I join in thanking the noble Lord, Lord Trefgarne, for his very clear exposition of the purpose and content of this Bill. We on these Benches agree with the linking of benefits to prices. We wish that all benefits were linked to prices, particularly the death grant. We regret that long-term benefits are no longer linked to earnings as well as prices. The noble Lord the Minister referred to that and again to the ratchet effect. I have said previously in this House that we on these Benches are not worried about the ratchet effect because we do not consider that the retirement benefit level is adequate. We accept that there has to be a measure of redistribution if it is to be made adequate, and we believe that we have provided a means of doing that in the tax credit scheme which we have recently published.
The main purpose of the Bill is to deal with the change from the forecast method of assessing inflation to the historic. I want to speak very briefly about that not because it is unimportant but because I believe that the essence of the matter can be put very shortly. I believe that the move is right in principle. I have 37 often said that the Government should make such a move and that it was unsatisfactory to have a period of reference which was half in the past and half in the future, and which involved an element of guessing.
The noble Lord the Minister said that the Government have in fact got the guess wrong five times out of seven. Of course, when that happens there are arguments about making good or clawing back. I believe that those disadvantages outweigh the disadvantage in the historic method of a period of delay, although I am glad to hear from the Minister this evening that there are plans to reduce that period as much as possible.
In advocating this move in the past I have said that it ought to be done at a time when inflation is going down. A time of rising inflation, when the Government themselves estimate that inflation will rise, is not the right time to make the change because at such a time beneficiaries lose. it has been explained by the Minister, and referred to by the noble Baroness, that the Government expect inflation will be running at an annual rate of about 4 per cent. in May and at about 6 per cent. by the time we get to next November.
Last year there was an over-estimate, as the noble Lord said, of over 2 per cent. in the forecast and there was speculation as to whether there would be a claw-back. To make the change from the forecast method to the historic method at a time when beneficiaries are likely to lose 2 per cent. must make the operation seem like a backstairs method of obtaining the claw-back, whether or not that is actually the Government's motive. It is undoubtedly true that recipients will be worse off this year and there is no guarantee that they will be fully compensated in the next year. I will not go into the arithmetic of that latter point this afternoon, but no doubt we can do so at a later stage if it seems appropriate.
I must say that some of the criticism from the Labour Front Bench on this issue is a little like the pot calling the kettle black because a Labour Government introduced the present system at a time of falling inflation, thus depriving beneficiaries of £500 million in 1976. Beneficiaries had reason to suppose that they would get an up-rating of 21 per cent. to match the historic rise in inflation but in fact they only received 15 per cent. I was one of those in this House who objected to that at the time.
It is not surprising therefore if the public are cynical about these changes. A move from the historic to the forecast system needs a static or rising inflation rate if beneficiaries are not to lose. A move from the forecast to the historic needs a static or falling inflation rate if beneficiaries are not to lose. In fact both Governments chose the wrong moment to do it so that there was a loss on each occasion.
If the present Government, in the present situation, had acted when they were estimating a declining inflation rate they could have gone back to the more satisfactory historic method with much wider support than they now have. I regret that they have not done that.
§ 4.58 p.m.
§ Lord Kilmarnock
My Lords, it is difficult to make a well-rounded Second Reading speech on a Bill of this 38 nature. The intentions of the Bill are perfectly clear and in any case have been explained by the noble Lord with his customary clarity. They are to change the basis of indexation for all those benefits listed in Schedule 4, Parts 1, 3, 4 and 5 of the Social Security Act 1975 and of the housing benefit needs allowances introduced by the 1982 Act. The noble Lord also told us that there are certain other benefits, for which legislation is not required, which will be subjected in due course to the same method.
The present method of forecasting at the time of the Budget followed by an implementing order in the summer and implementation at the end of November is to be replaced by the so called historic method whereby uprating is carried out strictly in relation to past movements in prices and housing costs and assessed each June on the experience over the preceding 12 months up to 31st May.
Now this may seem superficially more accurate and therefore to have much to recommend it. Indeed, it is a return to the original method. It would avoid the need for clawing back when an over-estimate has been made or for restoring the shortfall when the forecast has under-estimated the rate of inflation. It would also save the Government the embarrassment of having to decide whether to claw back relatively small over-payments to pensioners and whether or not to make good shortfalls where these occur—matters which form the general substance of so many of our social security debates in your Lordships' House.
It does, however, seem rather curious that the Government have had these second thoughts on their method of assessment so soon after the passing of the 1982 Act and consider these second thoughts of sufficient importance to bring forward yet another Bill less than a year after that Act became law. It cannot be any coincidence that they have chosen their new basis precisely at the moment when inflation has hit its lowest point for years (as the noble Lord, Lord Trefgarne, himself pointed out) and when it can hardly do anything but rise.
Thus, as the noble Lord, Lord Banks, pointed out, those affected are very likely to be living off a 4 per cent. increase, while inflation is rising to 5 per cent. or 6 per cent. If the next adjustment is to, say, 6 per cent., they may well find inflation outstripping them again and rising to 8 per cent. over that period. Other than on a falling inflation rate, they will always be out of pocket.
Now the explanatory memorandum of the Bill tells us that there will be no effect on public service manpower, which seems pretty obvious. It will presumably take the same number of people to make the annual calculations and produce the benefit books by one method or another. But what the memorandum does not tell us is what calculation has been made of the effect on public expenditure. Age Concern, which has already been referred to by Lady Jeger, have estimated that the Government will save approximately £105 million on pensions alone in 1983–84 and that total savings will be in the region of £210 million. That is a figure which also emerged and was quoted in the debates on this subject in another place. I think the Government should tell us if they agree with those estimates, and, if so, how they can reconcile them with their undertaking to maintain the 39 real value of pensions, which the noble Lord claimed has been honoured so far. Even if that is so, it does not take into account what will happen on a rising inflation rate.
It seems to me that if the Government are determined to revert to the old system of up-rating, this makes the case a great deal stronger (if only in the interests of accuracy) for more frequent up-ratings of pensions. Although the Minister, Mr. Rossi, during the Committee stage in another place claimed that biannual up-ratings were so administratively complicated as to be beyond contemplation, this was shot down by my honourable friend Mr. Mike Thomas, and this is a matter we may well want to revert to at the Committee stage in your Lordships' House.
Speaking more generally, I do not wish to seem to treat public expenditure lightly. I do not. I am well aware of the high percentage of national income which is taken up by social security in one form or another. It is perfectly proper for this to be kept under review. But it is equally important that those who are struggling to keep up the most minimal standards of civilised life should not be squeezed intolerably. At a time of profound structural change in industry, with far-reaching effects on the people of this country—including widespread unemployment and earlier retirement—it is vital that the social security system, in combination with the tax system, should perform its function and be seen to perform that function, which is to ensure a fair distribution of sacrifices and rewards. I believe it is very important that the Government keep this in mind and resist the temptation to nibble away at every possible opportunity at the minimum requirements for survival in a harsh industrial climate. It is quite wrong to think you can only afford a good social security system when times are good. It is when times are hard that you need it most.
Since Social Security Bills are generally used as an occasion for fairly wide-ranging debate in the social security field—and particularly as this Bill does not in itself give us a great deal to discuss—I hope that noble Lords will forgive me if I mention briefly the Supplementary Benefit (Requirements) (Long-Term Rates) Amendment Regulations 1983 which were passed by your Lordships on the nod last Thursday. I had intended to say a short word about this, but, while I was politely waiting for the Opposition Front Bench spokesman, Lady Jeger, to rise to her feet, the Question was put and the occasion passed. In fact, I had intended to welcome the measure, which in effect removes entirely the qualifying period of 52 weeks in receipt of a supplementary allowance before a man over 60 can opt for the long-term rate of the supplementary benefit until the pensionable age of 65. I believe that this is a further small step in the right direction—that is, in easing withdrawal from the labour market of those who are very unlikely to find further full-time employment.
It was one of the recommendations of your Lordships' Select Committee on Unemployment (I think at Chapter 14, paragraph 46) that the long-term unemployed over 55 should in effect be able to opt for early retirement on long-term supplementary benefit 40 rates. While congratulating the noble Lord on the Government's opening up this option unconditionally to all men over 60, I was going to ask him what the Government's intentions are towards those a little further down the age range. I hope he would agree with the Select Committee that it is one of the best, cheapest and most humane ways of bringing about a reduction in the supply of labour at the older end of the market. Of course, I shall not expect an answer from him this evening, but I wanted to get this down on the record, and perhaps I might hope for a letter in due course indicating whether the Government intend to extend this option progressively downwards to those over 55 who are unlikely to obtain further work.
Finally, as I have said, we are somewhat suspicious of the Government's motivation in bringing this Bill to Parliament at this particular time, as the noble Lord, Lord Banks, has also suggested. We would agree both with the Government and with him that the historic principle is the right one, but whether this was the moment to do it, and what the immediate effects will be on pensioners and other beneficiaries, is not entirely clear. I shall reserve our detailed criticism until the Committee stage of the Bill.
§ 5.7 p.m.
§ Baroness Phillips
My Lords, I intervene merely to assist the Minister. As someone who has been a spokesman on social security both in Government and from the Opposition Front Bench, I have maintained a great interest in it. I should merely like to repeat a comment that I have made at least twice before when the question of pensions has been raised. We have heard tonight how very complicated it is to make the calculations because of the varying types of benefit, but I would suggest that a very large number of retirement pensioners (certainly widows) receive possibly an identical amount. We are told that the length of time between the calculation and the actual starting of a given benefit has to be something like five or six months. It has always amazed me why Governments do not adopt the methods that other institutions do. It is different when people are going to take money away from you. Increased prices can be introduced the following day. British Rail have a very simple method of increasing the price on tickets. They use a rubber stamp. I suggest that they do it on millions of tickets. They are not concerned with only a few. For a long time we had a £25 marking on a cheque card. The banks told us that that could automatically be read as £50 if you wished to withdraw that amount.
On the ordinary, uncomplicated retirement pension benefit book, for £31 we could in future easily read £32. It is hardly likely to be £62 under this Government. It seems to me that anything which will shorten the period between the announcement of an increase and its actual receipt can only be for the benefit of people, who, as my noble friend Lady Jeger explained, may perhaps never live to collect any increased benefits. The length of time needed for this calculation has always been advanced as one reason for the delay. This is something that any Government should look at to shorten the period.
§ 5.9 p.m.
Lord Wallace of Coslany
My Lords, I rise first of all to thank the noble Lord, Lord Trefgarne, for his 41 extremely short but very detailed speech. Unlike another speaker, I do not rise exactly to assist the Minister. The noble Baroness, Lady Phillips, did so. With regard to the point which she made about British Rail altering fares, I would say that this is quite easy to do. A supermarket can alter its prices overnight, though unfortunately in most cases they go up, instead of down.
Today we debate yet another social security Bill. The number of social security Bills put forward during the life of this Parliament must be an absolute record. The theme of all of them has been financial saving, and this one is no exception. This is a curate's egg of a Bill, good in parts, but not so good in other parts. Indeed, quite a proportion of it seems good on the surface, but after scrutiny is found to be not so good. It is estimated that overall, as a result of the various Government measures on social security and allied benefits, savings effected so far by the Government amount to £2 billion. References have been made to estimates by Age Concern of savings of £105 million. At least two noble Lords have spoken about it. This relates to pensions alone, and is based on the theory that 4 per cent. now will be 6 per cent. in November. In another place Members have made the savings total even more, but of course they might be guessing. I should say that Age Concern is more likely to be accurate.
The cut of 5 per cent. in unemployment benefit imposed in 1980 is at last to be made good, though not until November. This is to be welcomed as far as it goes. The restoration comes 16 months after unemployment benefit became taxable. Its effect upon the incomes of the unemployed will be negligible, since for the majority of them it will be matched by an equivalent reduction in their supplementary benefit. The unemployed aged over 60 are now immediately entitled to the long-term rate of supplementary benefit. However once again the under-60s do not receive it—a situation which in 1981 the Social Security Advisory Committee described as "wholly unjust".
The closing of the "invalidity trap" is to be welcomed, but entitling invalidity pensioners under 60 to claim the long-term rate of supplementary benefit after one year on invalidity benefit and immediately entitling those over 60 mean that the Government are forcing people on to a means-tested supplementary benefit, rather than improving their National Insurance benefit.
I now turn to another 5 per cent. cut, which is not mentioned in the Bill. I wish to ask the Government: when will the 5 per cent. cut in invalidity benefit be restored? It has not so far been mentioned in today's debate, and it is certainly not mentioned in the Bill.
When a week yesterday there was telephoned to me news of the change of business for today, my immediate reaction was, "Ah! So it's to be a June election". That may of course be so if the headmistress makes up her mind. But as my noble friend Lady Jeger has mentioned, June plays a significant part in the Bill. It plays a significant part simply because it will be the month of decision on the amount of benefits up-rating based on price increases as at 31st May, not on a forecast of price increases in November, with inflation likely to be at 4 per cent. at the end of May and a Government forecast of an inflation rate of 6 per cent. 42 in November. That is rather interesting and very clever stuff on the part of the Government. There is no straightforward (if that is the appropriate word) clawback, but rather a devious way of securing recovery of last year's overshoot of 2.7 per cent. which was due to miscalculation in forward forecasting. This afternoon various suggestions on forecasting have been made, including the use of more computers, and other methods. But whatever method is adopted, forecasting cannot be accurate. The fairest way is to relate the issue to prices or wages, whichever is the higher, as was past practice. Furthermore, I would add that there is certainly a need for more frequent reviews, though one cannot reasonably suggest reviews more often than every six months.
It is said that this House contains many experts on many subjects. I do not pretend to be one of those, except on the matter of shopping. I make that claim advisedly because I have been well trained. On the subject of inflation I would say that many items used in Government calculations do not appear in the budget of the pensioner, the unemployed, and other types of social security beneficiary. I now come to the expert bit. Being closely involved in my household's weekly shopping, as well as being sent on my own on other occasions—having been well trained, as I have said—I am well aware that prices of food and other essential items for families or individuals on a small budget do not seem to be going down: on the contrary, they seem to be going up. It is quite usual to hear among elderly pensioners when shopping the comment, "They say inflation has gone down. I don't know where—money doesn't seem to go far these days". That is a very frequent comment. I have heard it when going around the shops, and virtually every Friday my wife says it to me, too. So make no mistake about it, my Lords: I know something about it.
Comments of that kind indicate what is nowadays a fact of life for people on social security benefits. The retail price index does not fully reflect the expenditure pattern of pensioners and others on benefits. This is borne out in a recent report—House of Commons Paper 123—of the Social Services Select Committee, which stated:There are good grounds for believing that the welcome fall in the rate of inflation over the past 12 months has not been fully reflected in the expenditure patterns of pensioners and other groups of social security beneficiaries".By way of example the committee pointed to fuel and light costs, which account for a higher proportion of the expenditure of pensioners and low income families than that of other households. Between November and December 1982 the fuel and light component of the RPI (the retail price index) rose by 2 per cent., and the RPI itself rose by only 0.5 per cent. There is no doubt whatever—it must be done somehow—that the official pensioners' price index, quite apart from the retail price index, urgently needs to be reviewed.
Of course, the cost of benefits is becoming a national financial burden, but we must not forget that a figure of well over 3 million unemployed is costly to the nation financially and represents a pitiful waste of human energy and resource. What is the annual cost of unemployment benefit and allied supplementary benefit? Whatever huge sum it might be, it represents the cost to the country of Government policy.
43 I note that Clause 3(2) of the Bill, on page 3, states:This Act shall be deemed to have come into force on 16th March 1983".In other words, although we have not yet passed the Bill and Royal Assent is still awaited, its provisions are to be backdated. Why? Has it anything to do with a June election? That brings me to a point made by my noble friend Lady Jeger, and I should like to go into perhaps a little more detail. Parliament could be prorogued in June or even late May. The retail price index comes out on 17th June which is also the starting date for changing the books of millions of beneficiaries. I wish to know whether a decision will be reached and operated without parliamentary approval.
Another point is the great inconvenience caused to those on the Labour Benches and other Benches on this side of the House. I understand that the committee stage is being pushed forward to Monday 9th May. What is the reason for what appear to be these panic measures? The whole matter is being rushed through with indecent haste.
This Bill, compared to some, appears on the surface to be a small measure with only three clauses. With one honourable exception, it is of interest only to the Front Benches of this House. But, in my view, it is a cunning and devious measure carefully calculated to deceive. It is window dressing for a possible early election. The Bill is probably the last of a long series of social security measures during the lifetime of this Parliament. If that is the case, I welcome it with a great sigh of relief.
§ 5.21 p.m.
§ Lord Trefgarne
I, too, welcome the measure, but perhaps for rather different reasons from those of the noble Lord. I am grateful to every noble Lord and noble Baroness who has contributed. I cannot say that all of them agree with every single word that appears in the Bill. I fancy, however, that the main thrust of the proposals, which, as I stated in my opening remarks, is to replace doubt with certainty and unreliability with stability, has found an echo even with noble Lords and noble Baronesses opposite.
A number of points have been put to me. I shall deal with as many as possible and at least with the most important of them. Any that I fail properly to deal with now, I shall endeavour to respond to subsequently by correspondence. The noble Baroness, Lady Jeger, asked how much money was to be saved by these proposals. This point was echoed by the noble Lord, Lord Kilmarnock. The difference between the money that will be caused to be spent in the increases this year and the money that might have been spent had the old system still been in force or some other system devised would have depended upon the assumptions that we made when we were forecasting, as it fell to us to do, under the old system. I can go no further than my honourable friends in the other place when they mentioned various figures that had been mooted and which they broadly confirmed. For example, the basic difference between a 4 per cent. and a 6 per cent. up-rating is indeed about £210 million. That was one of the figures to which the noble 44 Baroness, I think, referred. But these figures, emphasise, are speculative. They are based on various assumptions that may or may not have proved accurate in the upshot.
What we have done, as your Lordships will appreciate, is to alter the basis of these calculations so that pensioners know precisely where they stand. To take up another point made by the noble Baroness, the shortfall, if there is one, in the June up-rating, when it comes to be announced, will, of course, be made good in the following year because the reassessment period runs from May to May.
The noble Baroness, Lady Jeger, also asked a number of points about housing benefit. The implementation of housing benefit reassessment in local offices and local authorities has generally been completed at least as fast as the reassessment of cases for rent changes in previous years under the old scheme. Progress reports have been collected from various local authorities. I understand that, as soon as they have been collected, my honourable friend the Minister for Social Security will make the results known in an appropriate way.
The noble Baroness asked me about progress in implementing the scheme of housing benefits. My honourable friend intends to make some observations about that. I cannot deny that there have been some local problems and doubtless a few individual mistakes. That is not surprising when we consider that we are introducing a new scheme involving over 5 million claimants. However, there have been no breakdowns. Ministers have received practically no correspondence from right honourable and honourable Members of another place. From my own experience, I am certain that had there been any widespread difficulty we would have received a welter of correspondence from honourable Members, and indeed from noble Lords.
Progress reports entering our headquarters show that local offices reassessed nearly 90 per cent. of supplementary benefit claimants in the main start by 18th March, which was their target date. Most of the remaining cases were completed by Easter. On the local authority side, three-quarters of the existing rebate changes were reassessed on time. Where cases had not been reassessed on time, this was due to a variety of factors, often local in origin and, in many cases, not directly associated with housing benefit. A good example of difficulties was the recent industrial action in DHSS offices at Birmingham and Oxford that had a knock-on effect on housing benefits.
The noble Baroness, Lady Jeger, asked me about publicity for what she regarded as this complex measure. I am not sure that it is a complex measure. I think, on the contrary, that we are introducing a much more certain and reliable arrangement for pensioners. The announcement, when it comes to be made in June, will be subject to affirmative parliamentary resolution, I think by both Houses, immediately after, or at an appropriate moment after, the order is laid. The noble Baroness asked me some other points about housing benefit. I can assure her that the amount of housing benefit that a person receives goes up when rents and rates rise as well as when the needs allowances are increased.
45 The noble Baroness also asked about the link with mortgage costs. The housing benefit scheme is designed to help with the cost of rent and rates. It does not give assistance specifically with mortgage costs. That being so, movements in mortgage interest do not play a part in settling the rate of the housing benefit needs allowance. Because of this, the change to a historical review has no particular relevance to the measurement of mortgage costs for the purpose of up-rating the needs allowances. The costs are therefore outside the scope of the scheme.
The noble Lord, Lord Banks, drew attention to the Liberal plans to which I believe he was a significant contributor. I referred to that scheme when the noble Lord spoke on the social security orders the other day. Perhaps I need not say more about that now. The noble Lord, Lord Kilmarnock, and the noble Lord, Lord Wallace of Coslany, asked me about extending the long-term scale rate to those below 60 years of age. I was asked for an indication of Government thinking on the proposal to extend entitlement down from the age of 60 to 55. I can tell both noble Lords that they should not have to wait too long. The proposal was one of those included in the report of Social Services Committee on the age of retirement. The Government are still considering that report and their detailed response. We hope to make our views known shortly. I cannot, of course, forecast what our decision will be on the particular matter that has been raised, but we shall touch upon it in our response.
I was also asked by the noble Lord, Lord Wallace, why abatement is still applied to invalidity pension. We have undertaken that the abatement of invalidity pension will be made good when invalidity benefit is brought into tax. A date for that has not yet been fixed. If there are any other points that I have not properly dealt with, I shall be happy to reply to them in correspondence. Meanwhile, I invite your Lordships to give the Bill a second reading. I beg to move.
On Question, Bill read a second time, and committed to a Committee of the Whole House.