HL Deb 24 February 1986 vol 471 cc855-61

5.17 p.m.

The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington)

My Lords, with the leave of the House, I should like to repeat a Statement which has been made in another place by my right honourable friend the Secretary of State for Social Services. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement about the uprating of social security benefits. As the House knows, benefits were increased only three months ago, at the end of November. We have made it clear that we intend to move to April upratings from 1987 in order to bring tax and social security closer together and to ensure that benefit changes coincide with changes in rents and rates. The uprating that I am announcing today enables the transition to be made and is the second of three upratings in the 16-month period from November 1985 to April 1987.

"These further increases will be paid in the week beginning 28th July and will be based on the change in prices between May 1985 and January 1986 when the Retail Price Index rose by 1.1 per cent. The overall cost of the new increases will be an extra £410 million in a full year and they follow the 7 per cent. increases in benefits which were paid from last November.

"As a result, the retirement pension for a married couple will rise from £61.30 to £61.95 a week and for a single person from £38.30 to £38.70. Public service pensions will be increased by the same percentage, as will benefits for disabled people and war pensioners. Mobility allowance will go up to £21.65 a week although transport costs have in fact fallen over the period.

"The basic rate of unemployment benefit will also be increased by 1.1 per cent. from £30.45 to £30.80 for a single person and from £49.25 to £49.80 for a married couple. Other main contributory and non-contributory benefits will be similarly increased.

"I made it clear last year that the Government believe it right to continue child benefit for all children irrespective of the income of their parents. But I also said that we have to consider its level both in relation to overall priorities within social security and also with the aim of doing more for families with children on low incomes. I have considered the uprating of child benefit on that basis. My conclusion is that child benefit should be increased by 10p a week to £7.10—rather more than the rate of inflation. The older children's rates for supplementary benefit and the age related amounts for family income supplement will also go up by slightly more than 1.1 per cent.

"Mr. Speaker, three upratings in 16 months places inevitable administrative burdens and costs on local authorities and local offices of the DHSS. To sensibly contain this extra work I propose to increase the long term rate of supplementary benefit and the housing benefit needs allowance by the same cash amount as will apply to retirement pension, which means putting supplementary benefit up by 1.1 per cent. although the increase in prices after excluding housing costs is 1.2 per cent.

"For similar reasons I do not propose to make any general changes in the additional amounts paid with supplementary benefit. In some cases no increase would be due in any event and in the others only small amounts. However, I have thought it right to increase the higher rate of heating addition which goes to the very elderly, the severely disabled and to people with homes which are specially difficult to heat. This addition will increase from £5.45 to £5.55 a week.

"One other change will be made from this July which is consistent with bringing the current supplementary benefit scheme into line with the new proposed income support arrangements. From the date of the uprating no new awards of the non-householder housing addition will be made between the ages of 21 and 24. Equally, no deductions will be made from the householder's housing benefit or supplementary benefit in respect of such non-dependants in this age group. This means that the poorest households will remain fully protected. There will be no increase in the amount of non-dependant deductions generally nor will there be any increase in the deduction from benefit which applies during industrial disputes.

"Mr. Speaker, there are two other matters I should mention. First, over the last few years there has been a steep rise in supplementary benefit single payments. Since 1981 the number of these payments has risen from under 1 million a year to over 4 million and the real cost has increased by over five times to more than £300 million a year. My honourable friend the Minister of State for Social Security has reviewed the position and as a result I am today referring draft regulations to the Social Security Advisory Committee for consultation in the normal way.

"Second, concern has been expressed over future policy on the payment of benefits at post offices. In a report by the Public Accounts Committee last summer the possibility was discussed that cash incentives should be offered to beneficiaries to encourage payment directly into bank accounts. I am aware that this has led to anxiety that the existence of many sub-post offices might be threatened if inducements were paid which reduced significantly the volume of benefit business which they transact. To remove that anxiety I want to make it clear that the Government do not intend to offer cash incentives. We recognise that very many people wish to retain the option of being paid in cash at post offices, and it is clear that post offices will retain an important role in the payment of benefits in the future. In order to ensure that the service to the public is as effective as possible, a joint study is being carried out by the post offices and my department to see what improvements can be made.

"Mr. Speaker, I am laying before the House a full schedule detailing all benefit rates payable from next July. This uprating will mean that in 1986–87 spending on social security will be almost £43 billion—that is 31 per cent. of all public spending.

"The last time that an uprating statement was made less than a year after the previous one was in 1975 but the circumstances today are very different. In 1975 inflation was out of control and the value of savings was being sharply eroded. Today inflation is low, which is to the benefit of the whole nation—but perhaps most of all to millions of pensioners. This interim increase keeps pensions ahead of the rise in prices since this Government came into office and I will be making a further uprating statement in the autumn."

My Lords, that concludes the Statement.

Baroness Jeger

My Lords, I sincerely thank the noble Baroness the Minister for reading that long and complicated Statement. It is very difficult for the House to take on board the full significance of every single word and figure in the Statement. Personally I shall try to absent myself from loquacity, but there are certain points which are very important to millions of people in our country and I must ask the Minister whether she can answer one or two questions.

Is it the case that the extra payments that have been announced today will not be made until 28th July 1986, and that those upratings will have to last until April 1987, whatever happens as regards changes in the retail price index or inflation? That would seem to be the effect of the last sentence of the first paragraph of the Statement, and I only hope that I am wrong.

The many points that have been raised, especially the more fundamental principles underlying the Statement, will, of course, be due for discussion when the Social Security Bill comes before your Lordships' House, but for the moment I must ask especially about child benefit. The noble Baroness said that child benefit will go up higher than the rate of inflation. That puzzled me, because I seem to recollect that last November, when there was an uprating, child benefit went up by 5 per cent. less than the rate of inflation. Though I am very bad at arithmetic, it seems to me that to make good the cut in real terms that child benefit suffered last year there would have to be an increase of 45p a week. Certainly to take any praise for the fact that this paltry increase is a little above the current rate of inflation, without confessing that there was that shortfall last year, seems rather unfair.

Moreover, when I look at what is happening to other children, I find that the child's special allowance is to stay at £8.05, with no increase at all. Perhaps the noble Baroness can advise me whether that is the case, because this departmental document which I have states that child dependency additions and the guardian's allowance are not to be increased at all. So I feel that in this situation there is minimal help for children and therefore for families. The Government make a great deal of what they are doing for families and it should be made absolutely clear that the amount of help they are giving is very limited.

Then there is the question of heating allowances. The recent cold weather has brought this matter to public attention. I know that concerning this matter there is a great deal of sympathy and understanding in all parts of the House. Can the noble Baroness make it clear that the modest heating allowances which are referred to in this document will not be paid until the end of July? That seems to be a delay which is hardly acceptable to people who are very cold at the present moment. When I look at the document I find that not everybody is to have an increase in their heating allowance, that the lower rate of £2.20 a week is to stay at £2.20, that the central heating additions are to stay at £4.40, and that the hard to heat estate rate heating additions are to stay at £8.80 and £4.40. Thousands of people in this country are to be excluded even come July from additions to their heating allowances.

It is very interesting that the Statement referred only to the increases, and that one has to look at other documents to find cases where there are no increases. I am especially concerned and have been for many years about the position of blind people. The blind addition, which is a pitiful £1.25 a week, is to stay at £1.25 a week. There is no addition to the 25p a week for the over-80s. There is to be no increase in the laundry cost deduction and other payments which mean a great deal to people who are really hard up.

I cannot welcome this Statement and I think it is only fair that we should make clear our dissatisfaction with it. I hope that there can be some improvements during the discussions on the Bill, or that in any case we may have an opportunity to debate some of these points, because I am trying to keep myself very strictly in order and not to turn what is a Statement into a debate.

Lord Banks

My Lords, I too should like to thank the noble Baroness, Lady Trumpington, for repeating the Statement made in another place. First, may I welcome the fact that the Government recognise that very many people wish to retain the option of being paid in cash at post offices. I think that is a most important point. Secondly, while we agree with the moving of the uprating date to April, previous experience both with this Government and with their predecessors has shown that when the reference period, which is used to determine the rate of inflation, is moved beneficiaries can suffer.

In this case it would appear that from July 1986 to November 1986 beneficiaries will be 1.1 per cent. better off in the main, but that from November 1986 to April 1987, if we assume an annual rate of inflation similar to that which prevails at the moment, they would be more than 4 per cent. worse off. Will that not mean a loss overall for beneficiaries? Does the noble Baroness agree that that is so? Is there any truth in the statement which at least one organisation has put out, that the Government will save £250 million by this operation? Would it not have been better to increase at this uprating by a higher percentage in order to ease the transition?

I turn now to child benefit. I think I am right in saying that that would need to have been increased to £7.40 to make good the cut in the real value which was imposed last November. It is to be raised to £7.10, which involves some small reduction in the cut but leaves it well short of the total cut imposed last November-30p a week short in fact.

In conclusion, I should like to ask the noble Baroness two questions. Can she say that there will be no further reduction in the real value of child benefit? Further, can she say whether it is the Government's intention at some time in the future to make good the cut made in child benefit last November and which remains outstanding after this uprating?

Baroness Trumpington

My Lords, I am appreciative of the brevity of the noble Baroness and the noble Lord, if not of the content of their questions. The noble Baroness, Lady Jeger, asked when the payments will be made. The uprating will cover the period from July 1986 to April 1987, when benefits will be increased again. With regard to child benefits, about which both the noble Baroness and the noble Lord asked me questions, as the House will know we are increasing the benefit by 1.4 per cent., from £7.00 to £7.10. This will more than maintain the November 1985 value of child benefit; an increase of 1.4 per cent. when the January RPI shows an increase of 1.1 per cent.

We recognise that child benefit is an important element of the policy of providing support for families. It is true that child benefit would need to go up to £7.45 to keep pace with inflation since introduction, but we have made clear our intention to focus help on poorer families, as we did in November with the introduction of higher FIS rates. For child benefit we must consider each uprating on its own merits in the light of the circumstances at the time. I think it is worth repeating from the Statement the fact that inflation has gone down very considerably, which means that all these benefits are of far more real meaning to the recipients than they would be under the galloping inflation that existed formerly.

The noble Baroness referred to heating additions not being increased. Our main help with fuel costs for those in receipt of supplementary benefit is through the weekly scale rates. These are being increased in line with inflation. Extra weekly heating additions are not being increased on this occasion because the movement in the fuel price index only between May 1985 and January 1986–1.7 per cent.—would produce an increase of less than 5p. With regard to claimants paying bills, they will be receiving extra help in the form of increased scale rates which are intended to cover normal heating needs among other things. An increase in heating additions in line with the fuel price index would have only a marginal effect. I was asked whether the failure to uprate all heating additions this year will be taken into account for the April 1987 uprating. I have to tell your Lordships that no decision have yet been taken on next year's uprating.

With regard to the change in the uprating date producing savings and what the level of the uprating would be if it had still been in November this year, which I think is what the noble Lord, Lord Banks, asked me, the cost of an uprating depends on inflation over the period measured. We will not know what an uprating in November 1986 would have cost until the inflation figures for May 1986 are available. Whatever happens, pensioners will have their benefits maintained against inflation. The noble Baroness, Lady Jeger, asked about child special allowances and guardians' allowances not going up. Recipients of these allowances will get extra help through child benefit. The same practice has been applied at this uprating as in previous years. There has been no oversight here.

I hope that that deals with the main points raised by the noble Baroness and the noble Lord. If I have omitted anything I shall of course write to them.

Lord Boyd-Carpenter

My Lords, is my noble friend aware that opinion generally, I am sure, favours the stage transfer of uprating dates to April, so as to make them coincide in time with changes in taxation and rates, and that it would congratulate my noble friend and her right honourable friend on their steps towards that end?

Is she aware also that the comparatively modest cash figures contained in the Statement, despite the immensity of the cash outlay of social security as a whole, reflect the success of the Government in dealing with inflation? I was rather surprised that no reference to that at all was made from the Benches opposite.

I have questions to ask of my noble friend on two specific points. First, does her reference to the uprating of war pensions include also, as I hope it does, war widows? In Statements they are generally referred to separately from war pensioners and I hope it is only a misunderstanding that my noble friend did not mention them specifically. Secondly, is my noble friend aware that I for one wholly agree with the noble Baroness opposite that consideration ought to be given to raising the figure for the blind?

Baroness Trumpington

My Lords, I thank my noble friend Lord Boyd-Carpenter for his remarks. Perhaps I may reiterate my comments concerning inflation, which his own remarks just now added to very nicely. I am conscious of the fact that I have not answered the question of the noble Baroness opposite, concerning the blind. I will answer both the noble Baroness and my noble friend by saying that that addition has not been uprated for many years, but blind people receive help for special needs in the same way as other disabled people dependent upon supplementary benefit.

My noble friend Lord Boyd-Carpenter will be glad to hear that war widows are of course included. They were not excluded from the Statement for any reason except perhaps brevity; they are of course included.

Lord Stallard

My Lords, will the noble Baroness record that this side of the House also welcomes the change to April? As the noble Lord, Lord Boyd-Carpenter, has rightly said, it is a change for which many organisations have been campaigning for many years. Our welcome does not necessarily mean that we accept the arbitrary transitional arrangements. That is a different matter. The RPI figures that the noble Baroness announced take no account of the post-Budget increases that will inevitably occur. Pensioners will have to endure those Budget price increases from now until April 1987. If the arrangements made are not arbitrary then that situation ought to have been reflected in the transitional arrangements—but it is not. We cannot therefore accept the transitional arrangements.

I am dealing here with pensioners because I do not have time to deal with all the other aspects; and pensioners and their increase interest me. Is the noble Baroness aware that if pensioners had waited until November of this year and had then enjoyed four months, from November or December until the following March, on a 4 per cent. increase—that is, £1.60 per week—then they would have received double the extra cash that they will receive from the eight months, from August until March of next year, at the rate of 1.1 per cent?

As the noble Lord, Lord Banks, has said, and on my own rough calculations, there will be a saving to the Government of some £100 million on pensioners alone, to say nothing of the saving on the unemployed and on the other beneficiaries. This is obviously another cost-cutting exercise to build up funds for the Chancellor's Budget. Will the noble Baroness say how much money the Government expect to save in total as a result of this measure?

Baroness Trumpington

My Lords, it is unexpected that the noble Lord should sit down so quickly! I am simply not used to it. If I may endeavour to answer the noble Lord's points, pensioners will receive extra help in July, and all movements in the RPI from January 1986 to September 1986 will be taken into account in April 1987. This year's uprating is based upon the movement of prices, as the noble Lord will know. The reason why the uprating is so low is simply due to our success in controlling inflation. It is also because the uprating is based on only eight months' price rises. That success benefits pensioners and others on low incomes most of all. The noble Lord, Lord Stallard, spoke about a cuts exercise. How can this be a cuts exercise when it will add £410 million to the budget in the next year?