HL Deb 20 July 1984 vol 454 cc1787-807

Pensioners' Lump Sum Payments Order 1984

Child Benefit (Up-rating) Regulations 1984

Family Income Supplements (Computation) Regulations 1984

Supplementary Benefit Uprating and Additional Requirements Regulations 1984

Supplementary Benefit (Requirements and Resources) Amendment Regulations 1984

Housing Benefits (Increase of Needs Allowances) Regulations 1984

2.24 p.m.

Lord Glenarthur

My Lords, I beg to move that the draft Social Security Benefits Up-rating Order 1984, be approved. The order is accompanied by a report from the Government Actuary on the effects of the up-rating on the National Insurance Fund and by a statement on the uprating of mobility allowance.

With your Lordships' permission, I will at the same time deal with the remaining Motions standing in my name on the Order Paper. The report of the Social Security Advisory Committee, including the Secretary of State's reply, on the statutory instruments which were referred to them, has been printed as Cmnd. 9296 and is before the House. The effect of this package of instruments is to put into effect the up-rating of benefits which my right honourable friend the Secretary of State announced in another place on 18th June; to provide for payment of the £10 Christmas bonus; and to make certain other changes.

I should perhaps mention that the social security up-rating order takes no account of the changes which are proposed in the Health and Social Security Bill which your Lordships passed last Tuesday. When that Bill is enacted, the 15p a week child dependency additions which are paid with short-term benefits will be abolished. Also a new benefit, severe disablement allowance, will replace non-contributory invalidity pension and housewives non-contributory invalidity pension. Neither of these changes is reflected in the up-rating order, since it would not have been appropriate to anticipate the main legislation. But both changes should take place on up-rating day, 26th November, and when they come into effect they will automatically modify what appears in the up-rating order. In other words, the 15p short-term child dependency additions should cease to be paid from November 1984 and severe disablement allowance should be paid at the rate shown in the order for noncontributory invalidity pension, which is £21.50.

I do not wish to rehearse the detailed changes in individual benefits since these are set out in the tables which appear in the statutory instruments. I propose to confine myself to the main features of the up-rating, and of the more important changes. The majority of benefits will be increased by 5.1 per cent., in line with the movement in the retail prices index to May, while the supplementary benefit scale rates will he increased by 4.7 per cent., in line with the retail prices index, excluding housing costs. The housing benefit needs allowances will be increased by 4.8 per cent., reflecting changes in the supplementary benefit scale rates and the average levels of local authority rents, and rates and water and sewerage charges. The needs allowance for a dependant child will be raised by a further 50p on top of the general increase, and by a further £1 in April 1985. This will mean a total rise of 16 per cent. since November 1983, giving real help to low income families with children. As in 1983, this up-rating is based on the historic movement in prices in the 12 months to May, which is an improvement over the old haphazard forceast method. In total, this up-rating will add over £1½ billion to the social security budget in a full year, taking it to £39 billion—almost one-third of all public spending. The cost of up-rating the retirement pension alone is £780 million in a full year; that is, the extra cost on top of what we are now paying.

In November 1984 pensions will have increased by 83.6 per cent. since this Government came into office against an expected rise in prices of 76.4 per cent. At the same time, more and more people are benefiting from the build up of the earnings-related pension scheme. The maximum earnings related addition for a newly-retired person is now £15.42 per week. The last Labour Government presided over inflation of 112 per cent. between 1974–1979: inflation under this Government is currently 63 per cent. Runaway inflation is a disaster for pensioners and for anyone with savings or living on a fixed income and the continuing improvement in controlling price rises is the most important achievement of this Government in relation to pensioners.

As well as the benefits which we are pledged to protect, we will this year maintain the value of all the main benefits, including family income supplement and mobility allowance, and the supplementary benefit scale rates. Child benefit will maintain its highest ever level in real terms. The retirement pension earnings rule will again incease by more than inflation—from £65 to £70 a week. Following last year's incease of 14 per cent. this is an earnest of our intention to abolish the limit when resources permit.

The up-rating this year will take effect on 26th November, which is 53 weeks after the last up-rating. We must have an interval of 53 weeks every few years or the up-rating would slip forward gradually until it moved right out of November into October; in 50 years' time we would be up-rating in mid-summer. We have always intended to up-rate in the last full week in November and that is what we shall be doing this year.

As your Lordships will know, a strike by a number of computer staff at the department's central office at Newcastle is currently disrupting payment of retirement pension, widow's benefit and child benefit. I deplore this action which is causing concern and anxiety to pensioners and other beneficiaries. We remain ready to resume negotiations, which the unions broke off to take strike action, and I therefore welcome a recent initiative by the Advisory Conciliation and Arbitration Service to bring both sides together, which the Government gladly accept. I hope that this initiative will also be welcomed by the unions involved and that a speedy settlement can be achieved. Given an early return to normal working, I am confident that the up-rating will be completed broadly on time. I can however assure your Lordships that whatever happens no pensioner will lose any of the increase as a result of the dispute, and that every effort will be made to pay the increases with as little delay and inconvenience as possible.

Two of the statutory instruments which we are debating go further than simply up-rating the benefits and I should like to mention these in a little more detail. First, the Supplementary Benefits (Requirements and Resources) Regulations make a number of technical changes to the scheme of which I need only refer to one; that is that people on supplementary benefit will in future be able to claim reimbursement of fares to visit relatives in residential homes and hostels. Until now, fares have only been payable for visits to close relatives in hospital, and this extension represents a further step in the Government's commitment to community care, by ensuring that a person discharged from hospital to a residential home or hostel can continue to receive visits.

The Supplementary Benefits Uprating and Additional Requirements Regulations provide for the increases in the scale rates, but they also increase the available scale margin. Perhaps I could explain briefly what this so-called margin is, and then indicate why we believe that some changes are now overdue. In some cases, a supplementary benefit claimant may get an extra weekly payment on account of special expenses such as special diets or heating needs. In 1966, a higher scale rate was introduced for the normal living expenses of certain long-term claimants. One reason for this higher rate was to reduce the need for those claimants to claim additions to their benefit for special expenses and so to reduce the need to ask detailed questions about special expenses. It was therefore decided at that time that the whole of the difference between the long-term and the short-term scale rates, which in 1966 was 45p, should be offset against any additional amount for special expenses of people on the long-term rate, thereby avoiding double provision for the same expense. The amount to be offset is known as the "available scale margin".

Since 1966 the difference between the long-term and the short-term rates has steadily increased. From November 1984, for example, a couple on the long-term rate will be £11.55 better off than they would be on the ordinary rate. But the amount of this extra benefit which is deducted from additional payments for special expenses—the available scale margin—has not been increased since a Labour administration put it up to 50p 16 years ago. It therefore seems reasonable, and arguably long overdue, that we should increase the margin to bring it up to the relatively modest level of £1. Nor is there any logical reason why the margin should not be offset against heating additions, as indeed it was until 1973.

At the same time as proposing changes to the available scale margin, we are also planning to extend the scope of heating additions. We propose to introduce new automatic heating additions at the higher rate of £5.20 for supplementary pensioner householders over 85: about 90,000 pensioners will gain from this. We are also extending automatic heating additions to all supplementary pensioner householders over 65; about a further 80,000 pensioners will gain as a result. I should like to remind your Lordships that it was the Conservative Administration which in 1979 introduced automatic heating additions for householder claimants with children under five and for supplementary pensioners aged 75 or more. In 1980 we reduced the qualifying age for supplementary pensioners to 70. We have therefore considerably increased the range of people entitled to heating additions.

We have also increased their real value. Between November 1978 and November 1983 we increased the basic rate by about 140 per cent. compared with a rise in fuel prices of about 100 per cent. Heating additions are therefore worth more than ever before. We expect to spend about £400 million on heating additions this year after allowing for the savings from applying the available scale margin to heating additions. This is about £140 million more in real terms than was spent in the final year of the last Labour Administration.

I have mentioned some of the more controversial changes which will take place in November but I should also like to remind your Lordships about another improvement which we will be making. I am particularly glad that we are able to direct some additional help to elderly war widows. These are mostly widows whose husbands fought in the First or Second World Wars. We propose to increase the existing age allowances by over 15 per cent. and to introduce a new rate of £12.50 a week at age 80. Some 50,000 war widows will benefit from these improvements, which will be brought into effect by an Order in Council.

In conclusion, this year's uprating package is fair both to those who receive benefits and those who must pay for them. Many of those who are in work are having to learn that pay rises must be earned by increased productivity. It is right that during a recession we should be particularly concerned about those who are most in need, but we have to strike the right balance. This up-rating will maintain the real value of all the main benefits and scale rates and concentrates some small but worthwhile improvements in areas where help is most needed. My Lords, I beg to move.

Moved, That the draft order laid before the House on 9th July be approved;

That the draft order laid before the House on 9th July be approved;

That the draft regulations laid before the House on 9th July be approved;

That the draft regulations laid before the House on 9th July be approved;

That the draft regulations laid before the House on 9th July be approved;

That the draft regulations laid before the House on 9th July be approved:

That the draft regulations laid before the House on 9th July be approved. —(Lord Glenarthur.)

2.34 p.m.

Baroness Jeger

My Lords, I should like to thank the noble Lord, Lord Glenarthur, for putting these complicated matters so clearly before the House. The fact that it is Friday afternoon and that the majority of your Lordships have found it agreeable to go to fresh fields and other pastures does not exempt those of us who are here from putting one or two points which affect hundreds of thousands of people in this country.

The first question I want to put to the Minister relates to the point that whereas the majority of benefits are to go up in line with the retail price index as it was in May—that is, they are to increase by 5.1 per cent.—supplementary benefit is to increase by only 4.7 per cent., in line with the RPI but excluding housing. In view of the recent news about an increase in the mortgage rate and the fact that many council rents and other rents are being increased, and in view also of the muddle surrounding housing benefits, I am wondering whether we are being fair to supplementary benefit applicants. I hope that the noble Lord the Minister can help us on that matter.

In respect of the Social Security Benefits Up-rating Order, we of course welcome what improvements there are. But we have to ask particularly about the death grant, in which there is no increase made. It is generally thought that the death grant is £30, but I remind your Lordships that between the ages of 18 and 55 in the case of a man, or up to 50 in the case of a woman, the death grant payable is only £15. It seems that all the promises made by the Government that they will look at this matter have not been fulfilled. I would have thought that today was a suitable moment to give some news on that point.

With regard to flat-rate retirement pensions, we welcome that change. but we do not welcome the fact that for the long-term unemployed there is no long-term benefit; there is no improvement for the long-term unemployed in relation to long-term benefits. I know that the noble Lord will have to tell us about the economy of the country and what we can and cannot afford, but I hope he can explain one matter which, in my innumeracy, I cannot understand.

I have read very carefully the reports by the Government Actuary on the draft Social Security Benefits Up-rating Order, and I find that the surplus in the national insurance fund has been increased from £518 million last year to £932 millions this year. The Government Actuary—not I, because I would not dare to say anything about figures—states that 26 per cent. of benefit is kept in the fund. This seems to me more than is necessary. In 1983–84 the amount was 23 per cent. In 1982–83 it was 21 per cent. We are increasing the balance in the National Insurance Fund at a time when we are saying that we cannot afford to do certain things which many noble Lords consider would be helpful and useful, such as assisting the long-term unemployed.

I do not have to refer to the fact that the Christmas bonus is staying at £10, but I must say a word about the Child Benefit (Up-rating) Regulations. Child proverty is at the heart of family poverty in this country. We will never be able to make a real attack on family poverty until we deal more generously with child benefit. I accept that the rates are going up, but I remind the noble Lord that it was the Conservative National Women's Committee who made a statement not long ago saying: Child benefit should be increased in line with any increase in tax allowances, remembering that child benefit has replaced the former system of child tax allowances". But personal tax allowances have increased by between 13 and 14 per cent. and child benefit is being increased by only 2.7 per cent. If the same criteria applied, surely the figure for child benefit should be in the region of £7.60, and not £6.85. I must ask the Minister whether there cannot be at some time a more generous approach taken to this important problem.

On the question of the Supplementary Benefit (Requirements and Resources) Amendment Regulations, there is some problem about the definition of a boarder. I am referring particularly to people who live in hostels and bed and breakfast accommodation—which is an increasingly used way of dealing with the problem of homeless families. I very carefully read paragraph 13 of the Report of the Social Security Advisory Committee, which states: Whatever the merits of the proposed amendment in principle, it is plain from the points made above that it would cause quite disproportionate problems, for hostels, their residents and for local authorities, and would moreover have a substantial impact on community care and voluntary projects of the kind the Government have been seeking to encourage". Lower down, in paragraph 14, it states: We hope that it will prove possible to devise a simple and workable criterion to identify hostel-dwellers who could reasonably receive the householder scale rate instead of the board and lodging rate". I shall not go into greater detail on that, but I leave with the Minister the thought that the Government's own advisory committee has some hesitation about that part of the regulations, and I hope it can be looked at again.

I must ask a specific question on the Supplementary Benefit (Requirements and Resources) Amendment Regulations. I understood that there was a capital disregard of £3,000 for people applying for supplementary benefit. Recently I read in the press, as many other noble Lords must have done, about two cases where children's pocket money was taken into account. In the case of one family it was found that their nine-year-old son had £63 in his piggy bank, and in the case of another family the child had saved £33. This was reported in the Standard on 11th July. It was not, as it were, "sudden" money; it was money which the children had saved over the years from Christmas and birthday presents. It seems extraordinary that these amounts were taken into account when their parents applied for supplementary benefit.

I should like to know under what legislation the contents of children's money boxes are counted when, as I understand it, the law is that there is a disregard of £3,000 for savings. If the Government are setting their supplementary benefit officers to go round counting what children have in their money boxes, no wonder there is a strike at Newcastle; and I cannot imagine where else there will not be some trouble soon. Therefore, if the Minister cannot answer that today, I hope he will, as usual, take on the mantle of St. Paul and send me an epistle, a copy of which I shall send to the Standard and to anyone else interested, in particular the families concerned. The facts about these two families have become public but one wonders how many more examples there are which we do not know about.

As regards housing benefits, all I can say is that there is total muddle, confusion and despair. The fact that the Government themselves are having another review of the question indicates that they also know that what they are doing is not meeting the requirements of the people in greatest need, especially, as I mentioned earlier, in view of the increase in mortgage payments and all the problems which follow from that.

I am sorry to have mentioned so many points, but this is the only opportunity I have before the Summer Recess to make them. I do not apologise for doing so at a quarter to three on a Friday. When I started work in the Civil Servie many years ago we worked even on Saturday mornings, and so working on Friday afternoon is for me no great penance.

2.44 p.m.

Lord Banks

My Lords, I should like to join in thanking the noble Lord, Lord Glenarthur, for the way in which he introduced these orders this afternoon. As he made clear, the orders provide the necessary up-rating to keep benefits in line with prices. I think that it is fair to say that there is no significant improvement over and above that, except the extensions which he mentioned to the scope of the age-related heating additions and also what he said about war widows.

Of course, the long-term national insurance benefits would have increased by more but for the breaking in 1980 of the link with earnings. We have to wait and see how inflation in the period May to November 1984 compares with that in the period May to November 1982 before we can say whether there is a loss suffered as a result of the move to the historic method last year. We discussed that last year at some length, and I shall not go into it again. I have a letter from the noble Lord, Lord Trefgarne, agreeing that what I have just said is correct.

The Government always say that there is not money for any additional benefits which may be proposed, but it seems to me that that does not apply to the National Insurance Fund, which provides over 60 per cent. of the benefits. Earnings have been increasing faster than prices, which has meant that revenue has been increasing by about 7 per cent. and outgo by about 5 per cent. As the noble Baroness, Lady Jeger, pointed out, that is one of the reasons why the annual surplus is now anticipated for the year 1984–85 at £932 million, according to the Government Actuary's report. That compares with an estimated figure of £200 million last November. The total surplus is rising as a percentage of annual outgo, and that is a reversal of trend, since it was moving for a number of years in the opposite direction.

That has occurred in spite of the reduction from 18 per cent. of contributons to 11 per cent. in the Treasury supplement. I understand that that reduction is fully effective in the year 1984–85. That means that contributors are paying a higher proportion of that increased revenue—employees paying nowadays 9 per cent. as against the 6.5 per cent. when the Government took office.

The recent Department of Health and Social Security publication, Population, Pension Costs and Pensioners' Incomes, assumed an earnings rate of increase in the future of 1½ per cent. higher each year than prices. If that should prove correct, will that not mean an increasing surplus in the National Insurance Fund in the years immediately ahead? If so, will it be used to increase benefits or to reduce contributions? Can we he assured that there will be no further decrease in the Treasury supplement?

Of course we cannot ignore the long-term increase in the burden that will be placed on the National Insurance Fund to cope with the maturing earnings related pension sheme. I have suggested ways in which that could be reduced. I will not go into that in any detail now, except to say that it involved the abolition of the earnings-related pension, putting everyone on contracted-in contributions and increasing the basic pension by 25 per cent.

The Government's proposals for personal pensions will have an effect, too, upon the burden on the national insurance scheme. In talking about that I must declare an interest, since I am an insurance broker specialising in pensions. I should like to welcome the proposals in the Government's consultative document to provide a contracted-out pension alternative to the earnings related pension and the guaranteed minimum pension. The principle of an employee contribution to a personal pension plan has been accepted by the Government. I first put that idea forward as a means of assisting those not in occupational pension schemes in an article in the News Chronicle in October 1958. So I am encouraged to find at last that the Government are making a move in that direction. In so far as those in contracted-in occupational schemes and those not covered by occupational schemes effect contracted-out personal pensions, the future burden on the National Insurance Fund will be lessened.

I should like to ask the noble Lord if he can say what the Government intend in order to deal with the problem highlighted both by the Select Committee on the Social Services in another place and by the Social Security Advisory Committee in their second report; namely, the position of those already retired with little or no earnings-related pension. The gap between them and younger pensioners is going to open up and increase in the years ahead. Both the bodies to which I have referred have said that resources must be found to assist those people. What about the 5 per cent. abatement in invalidity benefit, maternity allowance and sickness benefit? When do the Government envisage that being restored?

The noble Baroness has referred to the death grant. I wonder whether the Government have yet made up their minds as to what they intend to do about that? It stands at £30 but should be something like £210 if its value were restored. As the noble Baroness has said, the pensioners' Christmas bonus lump sum is to be continued this year but of course it is gradually losing value. Eventually critics will say to the Government that this is a derisory amount to give to pensioners. It will become so. The Government will say in reply that it would cost too much to restore its value. This is happening too often to benefits. My view is that benefits should be maintained and up-rated every year unless Parliament decides that they are no longer required.

The noble Baroness spoke about child benefit. I notice that the Secretary of State said in another place that he would look further at this particular question. The income tax allowances, which child benefit replaces, increased by 12.5 per cent. this year, yet child benefit is to increase by 5 per cent. I think there is a very strong case for a higher increase in child benefit. The noble Baroness quoted the figures provided by the Child Poverty Action Group, which suggest that the increase in the real value of personal allowances roughly during the period the Government have been in office was much higher than the real value increase in child benefit.

Turning to family income supplement, the prescribed amount has been raised to take account of inflation. I should like to ask the noble Lord what the take-up now is on family income supplement. I am not altogether happy about the fact that it is proposed that in the future there should be no change during the year of assessment for any up-rating. It has been the practice in the past to apply an up-rating immediately, even though there were no other changes during the year. It may be possible to make a logical case for what the Government propose in these orders but I wonder whether that is wise and whether it will not just be seen by everybody as making another cut—another saving in benefit.

On supplementary benefit, I share in the regret that the long term benefit is not yet available for the unemployed. The Social Security Advisory Committee have described that as wholly unjust. Again, I wonder whether the noble Lord could say what the take-up now is for supplementary pensions for those retirement pensioners who are eligible for them? I am a little concerned about the available margin proposal to which the noble Lord referred, the increase from 50 pence to £1 in the sum deducted from the additions to the scale long-term supplementary benefits. Is it correct that that will save £86 million in a year? Again, it may be possible to make out a logical case for this; but, even more than in the previous case, will not the effect be just to make a cut in long-term supplementary benefit?

In regard to housing benefit, the order before the House merely increases the needs allowances to take account principally of inflation. The orders embodying the cuts in housing benefit are not before the House, but I should like to ask the noble Lord what is the final figure for the cut from housing benefit caused by the reductions imposed in the last year. When we consider housing benefit, as the noble Baroness said, we are considering something of very great complexity. A national survey carried out by the citizens' advice bureau has found miscalculation of housing benefit in 25 per cent. of the cases, and three-quarters of these were cases of underpayment; and this after 15 months of operation.

I am glad that the Government have in progress a review of the whole operation of this benefit. By the time we discuss the next up-rating order, next year, no doubt we shall have heard the outcome of the various social security reviews. I hope they will have devised a means of unifying, simplifying and improving the complicated, diverse, and often inadequate and contradictory social security and tax systems which we have in this country today.

2.57 p.m.

The Earl of Longford

My Lords, the noble Lord, Lord Banks, has declared an interest, because he is an insurance broker specialising in pensions. I am an old-age pensioner specialising in the receipt of insurance benefit or any other benefits that are available. I hold in one hand my rail card and in my other hand my bus card; therefore I am declaring that kind of interest.

I want to say a few words in support of my noble friend Lady Jeger, and to put this matter in a rather longer perspective. I remember that before the war, when I was a city councillor in Oxford, I asked an elderly gentleman what .he was living on. In fact, he was living on an old-age pension of 10 shillings a week. He had been a friend of Billy Morris—Lord Nuffield, as he became. Nuffield had offered him the chance of going into business along with him. But my friend stuck to what he called the horses; I mean the horse and cab. He said to Nuffield, "You'll never beat the horses". It did not work out that way, and my friend was on 10 shillings a week and Nuffield was a multimillionaire. My friend said, "I don't envy him particularly; I'm told his stomach isn't too good". I must say that I should like more than 10 shillings a week.

Since then, there have been great improvements, hut, if I may say so, they were not brought about by the party opposite; definitely not. During the war I worked with Sir William Beveridge for three years. He produced plans which were put into effect by the Labour Government after the war. Sir Winston Churchill would not meet Sir William Beveridge —they knew him of old—because he did not like the Beveridge plan. So it is no good pretending that in this respect there has been any kind of parity with the Liberals. After all, Sir William became a Liberal. I thought he was mistaken to do so, but eventually he became a Liberal. The Labour Party and the Liberals have pressed for these great improvements, which were effected in substance by the end of the first Labour Government after the war.

We now come to the present situation. The Conservative Party is represented, very ably and charmingly, by the noble Lord opposite. I do not hold him responsible for the whole of the party's philosophy, but, still, he is their spokesman. They stand for a reduction in public expenditure. Is that right? I do not know how they are going to bring that about except by reducing the social services. If they say that they have some other cunning way of doing it, by some mysterious economies or by a reduction in waste, then let us hear about it. But that is their policy, and it is an understandable view that this country is spending too much on the social services. And so we do not expect much from them. I am merely asking the noble Lord—and I am not going to go on any longer, because we all like him and, therefore, do not mind twisting his tail—

Lord Stone


The Earl of Longford

My noble friend says "T-A-L-E". I am asking the Minister: how does he harmonise the Conservative policy of reducing expenditure with the idea of looking after the interests of the old?

3.1 p.m.

Lord Kilmarnock

My Lords, we must be grateful to the noble Earl for introducing a less solemn and technical mood into this annual debate on the up-ratings. I am afraid I have one or two slightly more technical questions that I should like to ask the noble Lord, Lord Glenarthur. In the first place, both the noble Baroness, Lady Jeger, and my noble friend Lord Banks have referred to the management of the National Insurance Fund. Therefore, it would be superfluous for me to go into any further detail. But I think they have put their fingers on a very important point. In point of fact, the balance in the fund at the end of the current year is estimated at £4,541 million, and for the coming year at £5,473 million; so nearly a £1 billion advance in the balance of the fund is projected for the end of next year. That, of course, reads rather oddly along with the explanation which was given by the Government Actuary in Section 8 of his report, in which he says: A number of factors are responsible for this change but it is due mainly to higher contribution receipts and to lower expenditure on retirement pensions than were previously expected". Those two matter make rather a strange contrast.

There is also, of course, the point that the percentage of balance in the fund has been building up from 21 per cent. in 1982 to an estimated 26 per cent. in 1984–85. Those points have been partly covered already, but they are extremely important and I hope that the noble Lord will be able to say something about them.

Another matter which is perhaps a little nearer the bone is the shift—although it is not strictly covered in the regulations—to the payment of unemployment benefit fortnightly in arrears. This is more than administrative tidying up, because before fortnightly signing was instituted claimants signed weekly and were paid weekly in arrears. When fortnightly signing was instituted, the "one week in advance and one in arrears" policy was a careful move to ensure that claimants were not worse off as a result of the change which, in any case, saved the department considerable amounts of money.

As regards what the Government propose, although in theory a person beginning work at any point between his fortnightly signing days will he able, by contacting his local office, to obtain his arrears, in practice most people, realising that they do not owe the department anything, will simply fail to sign on their next signing day. This is what happens on a large scale at the moment. But the difference is that under the new system claimants could, by so doing, be losing up to a fortnight's benefit, whereas under the old system either the claimant or the department were only "out" by a few days—and if it was the department, they could always recover it if the person signed on again.

One of the reasons advanced by the Secretary of State in another place for shifting to fortnightly in arrears appears at column 28 of the House of Commons Hansard for 18th June, when he said: Our survey shows that two-thirds of claimants had two weeks' or more wages when they finished work"— and that, presumably, is the rationale behind his wanting to shift on to this fortnightly in arrears system. I should like to ask the noble Lord from where the Secretary of State obtained those figures, and what about the other third who do not have two weeks' wages in their pockets when they become unemployed?

My noble friend Lord Banks has already referred to family income supplement. I should simply like to support him and ask what is the latest news on take-up (because the situation has always been rather disappointing in that field) and what efforts the noble Lord's department has been making.

On the matter of long-term supplementary benefit, we are certainly grateful to the noble Lord for his explanation of the available scale margin, which, as a result of his explanation, I think I now understand for the first time. However, I think that the Government have missed an opportunity (I have raised this matter before and make no apology for raising it again) to use these regulations as a vehicle for extending the long-term rate to those over the age of 55 who have been unemployed for more than three years. The noble Lord knows that I have proposed this to him before. There are 64,000 such people and he has given me a calculation of some £10 million cost. It seems to me that that is rather good value for money in relation to other savings that the Government have recently been making in the social security field.

On the question of heating additions, the noble Lord told us by how much those over the age of 80 would be better off, but my information is that only a 5p a week increase on central heating additions will be the norm for those who are not among the very elderly, which hardly seems to me to be a generous increase. Does the noble Lord not accept that some supplementary benefit recipients who have expensive heating systems are denied the state rate heating additions simply because they pay their heating bills along with their rent to their landlords? Will he look into that anomaly, which I am told gives rise to much resentment on many council estates?

Finally, because it is a Friday afternoon and because I am sure that we do not want to keep the House, I should like to raise only one more matter. I apologise for raising it, but on the other hand this is the last occasion on which I can do so before we return in the autumn. It concerns 16 to 19 year-olds during the school holidays which have already begun. In Command Paper 9296, which is referred to in the explanatory note to the Supplementary Benefit Amendment Regulations, this matter is raised. It concerns clarification of the number of hours of study allowable to 16 to 19 year-olds in non-advanced further education compatible with receiving supplementary benefit. I shall not go into any detail; I simply want to point out that at pages 50 and 51 the Social Security Advisory Committee's report says: It is … very difficult for claimants wanting to study during the initial qualifying period to be sure—unless their course lasts only a few hours a week—that they are not going to be determined as entitled only to child benefit". In the final paragraph on page 55 the committee says: we continue to feel that the various rules and conditions surrounding education for unemployed young people could be improved and rationalised to remove the existing awkwardnesses. The problem is one which goes beyond DHSS responsibilities and requires a concerted examination by the various Departments which deal with young people in the years between achieving the minimum school-leaving age and beginning independent work. We hope very much that the recently announced review of benefits for children and young people will provide the impetus to tackle this vexed area". I very much hope that the Secretary of State's review of this area will take that into account. According to the department's response to the Social Security Advisory Committee, the present situation is that it appears to be the department's aim to base amending regulations on 12 hours of supervised study, and the intention is to bring the new regulations into effect in time for the 1984–5 academic year. I may be wrong, but that would appear to me to be more restrictive than before. I should like to ask the noble Lord to bring to the attention of the appropriate review body which the Secretary of State has set up the urgency of shedding light on this grey area, which is a source of puzzlement and confusion to many young people. I simply raise this now because there will be no opportunity to raise it again until probably late in the autumn.

3.10 p.m.

Lord Glenarthur

My Lords, as the noble Baroness, Lady Jeger, said, this is the last opportunity to discuss these rather complex matters in this Session. I have to say that there was an opportunity, which was not taken up, to go through the subject when the up-rating statement was made. If I am unable to answer all the points that have been raised on the seven Motions, I shall follow them up in correspondence.

I shall begin with the noble Baroness's first question as to why the up-rating for housing cost will be the RPI less housing; that is, I should say, for the purposes of supplementary benefits. The RPI less housing costs is used to up-rate supplementary benefit scale rates because supplementary benefit claimants have their housing costs met separately. It has been used in this way since 1982, and in 1982 it resulted in a smaller increase than would have resulted from the use of the full RPI, but in 1983 it resulted in a greater increase. On this occasion it has resulted in a smaller one. The housing benefits needs allowances have been up-rated in accordance with the normal formula.

The noble Baroness mentioned mortgage interest rates and the treatment of those on supplementary benefit and housing benefit. Supplementary benefit makes full allowance in the assessment for mortgage interest. Housing benefit, which gives help with rent and rates, has been up-rated in accordance with the normal formula. It would be inappropriate to up-rate housing benefit needs allowance in line with RPI, which includes mortgage interest.

So far as tax allowances and child benefit are concerned, the argument being that tax allowances have gone up by about 105 per cent. and child benefit by only 71 per cent., in 1979 this Government inherited a child benefit rate of £4. In November the rate will go up to £6.85. This is a raise of 71.3 per cent., which is 2.8 per cent. in real terms, since 1979. It is a considerable achievement. Child benefit is an expensive benefit, as the noble Baroness will be aware, because it is universal. It is non-means tested, and it is non-taxable, as well. Each increase of 10p costs £50 million a year net. Increasing tax allowances is in any event a better way of reducing the poverty trap than is increasing child benefit.

The noble Baroness, Lady Jeger, and the noble Lord, Lord Banks, raised the question of the death grant. As they will know, a consultative document was issued in March 1982. There were three options for an increased grant, to fewer recipients, but there was no conclusive response to it. Most respondents wanted an increased grant payable to all, but even if the money were available, there are higher priorities for social security spending. I think there is general agreement that the people who really need help ought to get it. It ought to be targeted right.

But in any event, as my right honourable friend the Secretary of State said when announcing the social security reviews on 2nd April, we shall want to consider the death grant together with the whole of social security over the coming years. That matter will be taken into account and perhaps the reviews will produce a result in regard to the problem to which the noble Baroness and the noble Lord refer.

So far as long-term scale rates of supplementary benefit to the unemployed are concerned, we have discussed this once or twice, or possibly even three times, over the last few weeks. We are aware of the arguments for extending the long-term scale rate in the way suggested. The cost would be £480 million, or £220 million if the extension was limited to those with children. It would be very considerable. On those grounds alone it must be ruled out at present.

The noble Lord, Lord Kilmarnock, again asked me about the over 50s.

Lord Kilmarnock

My Lords, it is the over 55s—I think they are 64,000 in number—who have been unemployed for over three years. I understand that an extension involving them would cost nothing like the astronomical figure which the noble Lord has mentioned. I think it would be in the region of £10 million.

Lord Glenarthur

My Lords, I have a feeling that I gave the figure to the noble Lord before. It was the figure I was given. I will certainly check on it and if it was wrong or misleading I will come back to him in writing. I should say to the noble Baroness that since we came into office we have managed to increase the real value of the scale rates by some 5 per cent. Those with children have done even better, with an increase of some 27 per cent.

To turn to the Government Actuary's report on benefits, the question put to me by the noble Baroness—which I think was implied also by the noble Lord, Lord Banks—was whether rates will be increased in view of the size of the surplus in the National Insurance Fund. Benefit rates have always been set by the Government taking the view of what levels seem justified and affordable having regard to overall economic and social policies. I shall return to the general questions put to me by the noble Earl, Lord Longford, in due course; but the short term surpluses and deficits on the National Insurance Fund have never been a factor in setting benefit rates.

Lord Banks

My Lords, I will detain the Minister for only a moment. I am most grateful to him. He says that they have never been a factor. Perhaps the noble Lord would just say again that last sentence when he was referring to the factor.

Lord Glenarthur

My Lords, what I said was that the short term surpluses and deficits on the National Insurance Fund have never been a factor in setting benefit rates.

Lord Banks

My Lords, I do not think my question was about benefit rates. It was whether new benefits would be considered in some of the various proposals that are put forward from time to time, if there is a surplus increasing in the fund because earnings are continually running ahead of prices.

Lord Glenarthur

My Lords, it really turns on the general question which was asked by the noble Earl, Lord Longford, and that was, if I understood him correctly, that this Government, in the noble Earl's words, seek to reduce public expenditure. The fact remains that there are a number of benefits which are being reviewed by my right honourable friend at the moment, with a view, it is hoped to trying to make them less complex, which will probably help all of us in this House and others as well. But money does not grow on trees and the important point is to target the benefits in the right direction. They are very expensive. As I said when I moved the orders. they account now for a total bill of £39,000 million a year. That is a considerable sum of money.

Lord Bruce of Donington

My Lords, I am grateful to the noble Lord. Would he kindly explain to the House what he means by "a short term balance" or "a short term surplus" on the fund? From my information, the surplus seems to be quite a permanent factor over the years and has gone up by some £300 million in the current year or in the year under review. What does he mean by "a short term surplus"?

Lord Glenarthur

My Lords, perhaps I may return to that question in a moment becase it is a complex area and one in which I should like to be particularly certain that I give the noble Lord the right answer.

Reverting to the question asked about the use of children's piggy banks, which was raised by the noble Baroness, in the supplementary benefits scheme urgent need payments are made as a last resort under more stringent conditions than the normal benefit payments. All capital that can be made available in time to meet urgent need, including readily realisable childen's capital, is therefore taken into account. But the point is that this has always been the case. It is not anything new or something that has been introduced by the present Government. The fact is that the rules are different. When a claim for supplementary benefit under the normal or the urgent need provisions is made, the claimant is asked for details of any savings which he, his wife or his children have. So far as normal benefit is concerned, capital up to £3,000 is disregarded, but if the capital exceeds that figure, benefit is not payable. I should not like the noble Baroness to think that that is something new or something which is in any way unusual—

Baroness Jeger

My Lords, can the noble Lord make clear how it works? I appreciate his explanation; but if a child hides his money box under the bed, or lends it to his grannie, or something of that sort, how do the insurance officers find out? Is it only the honest parents who produce their children's money boxes who are penalised, while other children might go off and buy a stereo or, as I have said, hide their money? I am asking because I am worried about the officers concerned. How do they hope to go around finding out what has happened to childen's money boxes?

Lord Glenarthur

My Lords, I think that perhaps the noble Baroness reads rather too much into the report in the Standard. She quoted from it and I think it only fair that I come back on it. There tends to be an exaggeraton in all these things. I really cannot think that anyone imagines—and I am glad to see that the noble Lord, Lord Bruce, agrees with me—that people go around, crawling under beds, looking for piggy banks, or wondering whether or not a particular child, of whatever age, has spent on a stereo the money that he or she has saved. The fact is that it is something that has gone on for a long time and, in the general run of things, significant amounts of capital genuinely available have to be taken into account. I think that all this has been wildly exaggerated.

On the question of boarders, which I think was a point also raised by the noble Baroness, the proposal to amend the definition of "boarder" was withdrawn in the light of the comments made by the Social Security Advisory Committee. It is the Government's view that the current definition is too wide in its scope and that there is a good case for amending it. We shall be examining the possibilities further in the light of the committee's helpful comments. I hope that that is reassurance for her.

I revert to the question of the short-term surplus and why should not the contribution rates be reduced, which, I think was a point made by the noble Lord, Lord Bruce. Short-term surplus is a surplus for one year, as I understand it; short-term balance is a surplus over a number of years. Perhaps that answers that specific question that he asked. On the question of reducing the contribution rates, the aim of the Government, taking one year with another, is to maintain a balance on the fund. Surpluses or deficits are likely to occur from year to year, but we do not alter contributions in a year as a result.

The contribution rate was set last November. It will be reviewed again, for 1985–86, next November, and the surplus will be one of the factors to be taken into account at that stage. So far as what happens to the surplus is concerned, it is invested in Government stock and the interest credited to the fund. It therefore helps to finance the PSBR—

Lord Bruce of Donington

My Lords, may I come back on this? The noble Lord treats what he terms the long-term surplus with some lightness of hand. It is five and a half thousand million pounds. The short-term surplus, on his own statement, is some £932 million. Does he not think there is any scope at all for any amelioration as a result of this continually increasing surplus? I am well aware of the ordinary fiscal constraints imposed by the PSBR, which have a virtually nil correlation in relation to inflation, but I do not see why this should affect the issue at all, aside from a slavish adherence to an outworn theory concerning the nature of the PSBR.

Lord Glenarthur

My Lords, there is something to be said for being in credit rather than being in debt. The fact is, as I have said, that this is invested in Government stock. We have to maintain a balance in the fund. It is taken into account, as I said, when the rates are looked at. I agree that it is a highly technical area, and one in which the noble Lord, in his wisdom as an accountant, is much more expert than I am. The fact is that the amount of that surplus is looked at year on year when we look at the question of up-rating contributions. Having said that, I think I might leave that subject and turn to the Christmas bonus to which reference was made by the noble Lord, Lord Banks.

The payment of the Christmas bonus is now enshrined in legislation, which previously it was not, and, when it was convenient on a couple of occasions for the party opposite not to pay the Christmas bonus, then they did not pay it. In 1983 the cost was £109 million plus £1.1 million in administrative costs. A £20 bonus would cost £109 million and each £1 extra costs about £11 million. The cost is considerable but the bonus is not taxable. If we talked about increasing it in the way suggested by the noble Baroness it would mean that it would have to be taken into account when considering other benefits for perhaps more worthwhile and sensitive parts of the social security system.

The noble Lord, Lord Banks, referred to the FIS up-rating and asked why it should not be reviewed at a different time. There are expected to be about 210,000 families receiving family income supplement in November, and the assessment of their claims is staggered over a 12-month period. It is not a practical proposition to reassess all their incomes, in the way the noble Lord suggests, over the comparatively short period concentrated around the up-rating date. It would also be inconvenient and irritating for employers to receive a large number of inquiries about earnings over this period. The sensible alternative is to reinforce the general FIS rule so that awards run for 52 weeks based on income assessed at the date of claim.

Lord Banks

My Lords, is not the position at the moment that, with regard to up-ratings, this applies immediately during the year but under the orders will cease to do so? That was the point to which I was referring.

Lord Glenarthur

My Lords. if I have the noble Lord wrong. I will study his particular remarks and come back to him.

With regard to the gap between the older and younger pensioners—a point which was raised by the noble Lord, Lord Banks—this is a matter which the inquiry of my right honourable friend into the provision for retirement will be considering, and note will be taken of what the noble Lord has said and of other representations made on that topic.

On the question of the method of FIS up-rating perhaps I may return to the point made by the noble Lord, Lord Banks, as this may answer his question. He asked: why change the up-rating method now? The answer is, because of the pressure on public expenditure, the need for savings and because the present approach is out of line with the realities of a significant proportion of the cases. Therefore it is an area in which savings can be made without undue hardship. The noble Lord. Lord Banks, also asked about take-up for FIS. The latest official estimate is that about half of those eligible do claim FIS, and that is based on the Family Expenditure Survey conducted from January 1981 to December 1982.

I turn now to the 5 per cent. abatement on invalidity benefit to which reference was made. On 10th March 1981 my right honourable and learned friend the Chancellor of the Exchequer stated that, in part because of pressures on Civil Service staff numbers, the plan to bring invalidity benefit into tax from 1982 was postponed. I have to say that no new date has been set. But my right honourable and learned friend has given an unqualified assurance that, when invalidity benefit comes into tax, the 5 per cent. abatement made at the 1980 up-rating would be restored. I do not think that I can go much beyond that.

The noble Lord asked what was the take-up for supplementary pensions. The answer is that it is estimated that the take-up in 1981 was around 70 per cent. I am sorry that these figures are rather out of date but we have to wait for more recent data before we can up-date them accurately. The noble Lord also asked whether it was correct that changes to the available scale margin will save £86 million a year. The total savings in a full year from changes to the available scale margin will be £86 million. The net savings in a full year, after taking account of the cost of new automatic heating additions for supplementary pensioners, will be £63 million a year.

The noble Lord asked about losses from housing benefit cuts in the last year. As I am sure your Lordships will appreciate, the relevant regulations concerned primarily with that are not before us today because they are subject to the negative procedure; but I can tell the noble Lord that, as a result of the April 1984 and November 1984 measures, about 2 million people will have lost an average of 91 p from the taper and minima rule charges. The average loss for pensioners is about 69p. The Government designed their proposal so that most people—about 4¾ million households, including 2¾ million pensioner households—will not be affected. Those on supplementary benefit and those with incomes below the needs allowance need not be affected by the changes.

Baroness Jeger

My Lords, would the noble Lord just make clear whether the figures he mentioned are per week? He referred to people losing 69p: is that per week?

Lord Glenarthur

Yes, my Lords, per week. The noble Lord, Lord Kilmarnock, inquired about unemployment benefit payments in arrears. The fact is that at the start of a claim most people have just finished work and they have money in their pockets. This change, with extra money at the end of the claim, will mean that fewer people need to claim supplementary benefit for deferred earnings. The only exceptions are people who are now over-paid, and they will lose the over-payments. So the only losses are the overpayments which are stopped. That is the meat of it, my Lords; at most, one week's benefit per person or about £45, and the average loss is likely to be around £15. The fact is that when a person starts his period of unemployment he is more likely to have money in his pocket than he is at the end of the period. That is why this change, which is essentially an administrative one, has been carried out.

The noble Lord, Lord Kilmarnock, also asked about the child benefit regulations and the definition of full-time education, in the comments raised by the SSAC. Supplementary benefit is not an appropriate means of support for those who are continuing full-time education. It is therefore necessary to distinguish between committed students and young people who are genuinely seeking work who want to occupy their time constructively while doing so. The proposed definition is in terms of hours of supervised study, since a number of difficulties have been caused by the inclusion of homework within the 15 hours allowed. I hope that is a source of comfort to the noble Lord.

As to estate rate heating additions for those who pay a fixed charge rent, I should like to study the noble Lord's comments and write to him. The noble Lord asked about the 90,000 pensioners over 85 who will gain from an extension of heating additions and will receive only 5p extra, I think he suggested, and especially those with central heating additions. In fact, they will gain up to £2.60. As for the central heating addition, at the higher rate this will be £4.20 from November and the new higher rate, going automatically from November to the over-85s, will be £5.20 a week.

If I may revert to a question which the noble Lord, Lord Kilmarnock, asked about FIS take-up, in support of the noble Lord, Lord Banks, perhaps I can expand on that a little. As I said, the latest figure for take-up is 50 per cent. The take-up was lowest among those potentially entitled to less than £2 a week. The Government are disappointed at this figure, but have taken steps since December 1982 to improve the position, and from April this year have introduced a free-phone service which should help to improve recognition of in-work benefits.

I am sure that there are a number of questions which I have not answered, because there have been a great many to get through, but I shall certainly study what your Lordships have said. The noble Earl, Lord Longford, asked one particular question about pensioners, and referred to the increase in pensions since 1979. The cost of 716,000 additional pensioners was approximately £1 billion in 1983–84, but despite this we spent 6.6 per cent. more per capita in real terms on retirement pensioners in 1983–84 as compared with 1978–79.

So far as concerns the noble Earl's general point about the Government's policy towards a reduction in public expenditure, I stand by what I said. The growth in social security spending is considerable. It is important that the best targets (if that is the right overall term to use) receive the benefits which are available. Within the limits which we can all afford—because they must be paid for by somebody—we strive to eliminate waste wherever it occurs. The noble Earl referred to the elderly. The elderly are affected by many things including, for example, the National Health Service, though that goes wider than the subject that we are talking about today. But, as I said, we strive for efficiency in that and to eliminate waste wherever it occurs.

But the most important thing is that at last rampant inflation is under control, maintaining the real value of benefit for the elderly and for all those who need the care which the social security system can provide. It is one of the achievements which I think we can sincerely be proud of, and I hope that this situation will continue and be maintained, for only by controlling public expenditure in all its forms will we achieve what, in the end, will be best for the elderly as well as the younger members of society.

On Question, Motion agreed to.