§ Consideration of amendments on Report resumed.
§ Baroness Faithfull moved Amendment No. 33:
Page 26, line 21, at end insert—
("( ) In urgent cases income support shall be payable in accordance with this Act as modified by regulations, and regulations shall prescribe the cases which are urgent cases for the purpose of this subsection.")
§ The noble Baroness said: My Lords, this amendment concerns urgent cases of income support. When a claimant applies for income support quite rightly his circumstances are looked into and his case is considered. I have to say that such a process very necessarily and understandably sometimes takes some time. However, there are times when urgent cases need to be helped immediately; for example, when a child is taken ill very suddenly and has to go into hospital and the doctors and nurses advise either the mother or the father, or both, that they must visit the hospital frequently or that they must stay. Very often those men and women—the parents—cannot do that because of lack of money.
§ There is also the example of the hospice. People are taken into hospital when they are dying and money is needed immediately for perhaps fares or special equipment. There is also the question of women who leave their husbands because they have been cruelly treated and are admitted to a women's hostel. Those cases need urgent help—either help on a one-off basis or sometimes for a week or so.
All that the amendment asks is that there should be regulations which,
prescribe the cases which are urgent cases for the purpose of this subsection".
§ It is recommended that those cases be prescribed so that the doctors, the social workers and the nurses will know what they can advise parents or claimants they can or cannot have. I beg to move.
§ Lord Ennals
My Lords, I rise briefly to support the amendment which has been tabled by the noble Baroness, Lady Faithfull, and to say that I agree with the arguments which she has put forward. We are talking about something which is not expensive; in fact, it will probably not cost any more than the present measures contained in the Bill. However, it will lead to rapid decisions, which I think is what the noble Baroness has in mind.
In very special cases—and the noble Baroness has described some of them—humanity demands that assistance be given in order that those needs can be met. However, we cannot write humanity into a Bill, but we can humanely prescribe or list the type of situations which can be dealt with. Indeed, as I understand it, that is what is behind the amendment.
I very much hope that the Minister will feel that she can accept the amendment. If she were to do so, it would bring some pleasure to the House, especially bearing in mind that so many amendments have been defeated or the Minister, no doubt with wisdom as she thought, has put up arguments against them. On this occasion it seems that the arguments in favour of the amendment are overwhelming.
§ Baroness Ewart-Biggs
My Lords, I support my noble friend and the noble Baroness, Lady Faithfull. It seems that what is requested by the amendment is most extraordinarily reasonable and moderate. After all, every family has its crises and those crises, because of their very nature, always need an immediate response. The amendment seems to deal with the situation and obviously would only focus on particular cases which need immediate help. Therefore, as my noble friend Lord Ennals has said, the amendment seems to be a proposal that may melt what up to this moment has been the rather frigid heart of the noble Baroness opposite.
My Lords, I also rise to support the amendment and in doing so I should like to ask the noble Baroness whether she will bear in mind particularly the special needs of asylum-seekers and those awaiting leave to remain in this kingdom. I think that your Lordships will agree that many of those people have very special needs, some of which were mentioned in Committee, and I feel that those needs are particularly applicable to this amendment.
§ Baroness Trumpington
My Lords, the question of benefit provision in cases of urgent need is clearly an important one, and I thoroughly appreciate the reasons why my noble friend has moved the amendment and the support that she has received for it. We have already had a substantial debate on this subject in Committee, but I welcome this further opportunity to reassure your Lordships that we recognise the continuing need to provide for urgent needs after 1988.
The present urgent cases regulations cover a wide variety of circumstances—17 in all. They all have two common factors; namely, that a normal payment of supplementary benefit is not payable, and the person has no other resources available. But that is essentially all that they have in common.
In fact these payments range widely. At one end of the scale there is payment to a person who has had his wallet stolen. At the other end you can have a continuing payment to a person from abroad awaiting a decision by the Home Office on his immigration status. These are completely different types of payment. Clearly both persons have a need, and one which is outside the scope of the normal supplementary benefit scheme. While one is a one-off financial crisis, the other situation could clearly continue for weeks, if not months.
In considering the best way of helping those people after April 1988 we have come to the conclusion that there is no logical or convincing argument for continuing to provide for urgent cases in the same way as we do now under current supplementary benefit regulations. We have always made clear that we see the social fund as providing for people who are facing an immediate financial crisis. Indeed, that is how we would expect to help the man with the stolen wallet or to pay fares for the parents of a child who has been run over and is in hospial—regardless of whether they were on income support or in full-time employment.
But the second type of circumstances should be met within the weekly benefit system. I am happy to repeat my comments made in Committee that we see some 741 merit in allowing for the treatment of circumstances such as these in the income support scheme rather than the social fund. We believe that income support should deal with weekly benefit including those cases where circumstances mean that it is not possible to start normal weekly benefit. Therefore, I can reasssure my noble friend Lady Faithfull that we are in sympathy with the intention behind her amendment. However, I hope that my noble friend will recognise that, despite the fact that I still have such a chilly heart on the surface, we cannot recommend acceptance of the amendment. There is simply no need to amend the Bill in this way to achieve the results which my noble friend is seeking.
Your Lordships and, in particular, the noble Viscount, Lord Buckmaster, will recall that in Committee I indicated that we can pay asylum-seekers income support in the normal way without amendment to the Bill. In the same way we can pay income support in circumstances where a person not otherwise entitled to benefit requires help because his normal source of income has been disrupted by circumstances beyond his control. I do not believe that we should amend the Bill without good cause. I hope that what I have said will have reassured both noble Baronesses that this amendment is not necessary.
§ Lord Ennals
My Lords, before the noble Baroness sits down may I ask her a question? Obviously it is important, and she would agree, that those who have to take decisions about this sort of payment in offices up and down the country would want to have some common pattern. How will she be able to ensure that common pattern if the nature of the cases is not prescribed as suggested by her noble friend?
§ Baroness Trumpington
My Lords, as the noble Lord knows, for the social fund there will be directions for people working in local offices. There is also a lot to be said for good common sense under these circumstances. I think that the combination of the two answers the noble Lord's question.
§ Baroness Faithfull
My Lords, may I thank my noble friend the Minister for her sympathetic reply? I am a little sad from a practical point of view that, as stated in the amendment, the cases are not to be prescribed. The supplementary benefit offices are not on duty over weekends, whereas social service departments are on duty over weekends.
Many has been the time when I have had to give money out of the social services department for emergency cases. If it had been in regulations one would have known whether one could do that or not. Having said that, I am grateful to my noble friend the Minister for her sympathetic response to this amendment, and I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Baroness Trumpington moved Amendments Nos. 34 to 37:
§ Page 26, line 22, at beginning insert ("Subject to regulations under section 50(l)(a) below.").
§ Page 26, line 23, leave out ("his") and insert ("the").742
§ Page 26, line 29, after ("he") insert "or, if he is a member of a married or unmarried couple the other member of the couple,")
§ Page 27, line 19, leave out subsection (13).
§ The noble Baroness said: My Lords, I beg to move Amendments Nos. 34 to 37, and speak at the same time to Amendments 39, 44, 65, 66, 76 and 77. These amendments give effect to the announcement I made at Committee stage that the Government had decided that when family credit is introduced in 1988 it will be paid direct to recipients by the Secretary of State rather than by employers, with wages, as originally proposed. The amendments also make the necessary provision in the entitlement clauses to allow entitlement to rest with the mother in two-parent family cases.
§ As your Lordships will see, we are removing all the material in the Bill relating to payment through employers, and all the bits and pieces arising there from concerning recovery from national insurance contributions and so on. There is no need for us to make specific provision on the face of the Bill for payment to be made by the Secretary of State. As with other benefits, this is covered by the common provisions powers in Clause 50.
§ I should point out some further consequentials of no longer paying family credit through employers. We have removed the provision for family credit to be terminated on the recipient becoming unemployed or changing his job. We now intend that once family credit is awarded it will run its full term without regard to changes in circumstances; just as in FIS at present, except of course that family credit will last for only six months instead of 12. Secondly by deleting Clause 28 in its entirety we have removed the provision for family credit to be suspended when the recipient is on strike or otherwise temporarily off work.
§ The detailed arrangements for claims and payments will be specified in regulations. However, I can tell your Lordships that we envisage that the regulations will provide that the mother will normally be the one to make the claim—though wherever possible we should want the man to countersign the claim form to endorse the information about his employment, etc., and as acknowledgment that he is aware of the claim. Similarly, regulations will provide that the woman will normally be the main payee, with the order book addressed to her, but that as in FIS the man would be shown as alternative payee.
§ Also included in this group of amendments is a minor technical amendment to the provisions regarding aggregation of resources in Clause 22(3). During our examination of the issues raised by the family credit changes, a slight doubt emerged over the precise wording used in that subsection. We have therefore brought forward a minor technical amendment designed to remove these doubts and clarify our intentions. I would remind your Lordships that the purpose of this particular subsection is to provide that income and capital of members of a family are to be added together and treated as belonging to the claimant. This of course, is not a new concept, my Lords. Rather it is a continuation of an approach accepted by successive Governments as essential for income-related benefits.
Finally, my Lords, with regard to Amendment No. 44, this must surely be unique in that the Front Bench
spokesman for Her Majesty's Opposition and the Minister on the Government Bench have joined hands with a joint amendment. All I wish to do is to quote from the old song:
Lord help the Mister who comes between me and my sister. And Lord help the sister who comes between me and my man.
§ I commend these amendments to your Lordships. I beg to move.
§ 8.15 p.m.
§ Baroness Jeger
my Lords, I can only say how happy I am that the noble Baroness and I have our joint names to Amendment No. 44. I am not sure which of us is Queen Elizabeth I and which of us is Mary Queen of Scots, or who is going to chop off whose head. But for the moment, this is a practical and acceptable amendment. I appreciate that what we are asking the Government to agree with tonight is not a defeat. The propositions that have been put forward arise out of a consensus not only of people on all sides of this House but of people outside who do a great deal of work and who know the difficulties.
Therefore, I am happy that we are able, I feel on an historic occasion, to have our joint names to the same amendment. 1 only wish to ask the noble Baroness, and I hope not in any unfriendly way, what is going to be put in instead of Clause 28. It is all very well for us to take out Clause 28, but what are we going to put in instead of Clause 28? I hope that the noble Baroness will be able to tell me that. Apart from asking that simple question, I am glad that we have this unanimity.
My Lords, I too very much welcome this implementation of the noble Baroness's promise to take out of the Bill the original provision for payment for this benefit through the employer and through wages. Apart from the social aspects, that promised a considerable burden, particularly for small employers. As your Lordships may recall, when my noble friend made the announcement it was generally welcomed, and it is nice to see it being implemented.
§ Lord Ennals
My Lords, may I also add a word? I know that at some stage in this Bill, and possibly in a previous Bill, I made a criticism of the way in which the noble Baroness said "No" to everything, however convincing the arguments seemed to those who presented them. I remember saying to her that the purpose of a Committee stage here or in another place was to get the best possible result, and therefore to give way if the case presented to the Government was a convincing one.
Having said that on a previous occasion, 1 think it is proper that I should say to the noble Baroness how grateful I too feel that the representations that came from so many different quarters have been listened to. They make a major change to the Bill not only to the women (because it will be mainly the women who benefit, and their children) but, as the noble Lord, Lord Boyd-Carpenter, said, to employers and particu-arly small employers. I think it is a very wise decision that the Government have taken. When we criticise them for taking stupid decisions it is also appropriate that we should congratulate them on taking wise decisions.
§ Lord Kilmarnock
My Lords, we on these Benches also welcome this series of amendments. This clearly was a matter which gave rise to considerable concern in that the family credit might not find its way into the right pocket or the right purse. As the noble Lord, Lord Ennals, has said, there were also considerable concerns on the part of employers, particularly small employers. Both on the one hand and on the other the Government have listened on this occasion. We welcome that, and also the evidence of good intentions in the case of the amendments we shall be moving later. We shall reach them in due course. In the meantime, we welcome this very much indeed.
§ Baroness Trumpington
My Lords, with the leave of the House, I should like to thank my noble friend Lord Boyd-Carpenter and the noble Lords, Lord Ennals and Lord Kilmarnock, for their general welcome to these amendments. I should like to point out that we are a listening Government, and that these amendments have come about through consultation with women's organisations, small businesses and other interested parties. I am sure that my right honourable friend in another place will be glad to hear the remarks that have been made this evening. To the noble Baroness, Lady Jeger, about the clause, the answer is, "Nothing".
§ Baroness Jeger
My Lords, with the leave of the House, I asked the noble Baroness a question about what would be put in instead of Clause 28.
§ Baroness Trumpington. Nothing, my Lords.
§ Clause 22 [Calculation]:
§ Lord Kilmarnock moved Amendment No. 38:
Page 29, line 29, at end insert ("and shall include an amount which shall be the whole of any mortgage interest for which a member of the family is liable on the home of the family.")
The noble Lord said: My Lords, after that note of happy consensus I am afraid that I have to return to a more contentious issue; that is, the question of docking 50 per cent. from the mortgage interest relief at presently available in full to those who become unemployed during the first six months that they are receiving benefit. This is a matter of great public interest, as was evidenced by the half-hour programme devoted to it last Thursday night on "TV Eye". The amendment provides that
an amount [shall be included] which shall be the whole of any mortgage interest for which a member of the family is liable on the home of the family".
§ Essentially, this is a problem arising from the extension down the income scale of home ownership by people on much lower incomes or in less than stable employment. Nearly a million houses have been sold under the right-to-buy, and many of them to very low income people. This may seem an excellent thing in itself, but since 1982 it has been accompanied by a quantum leap in the number of mortgages in arrears from 8,500 to 50,000 and in the number of 745 repossessions from 2,500 to 16,000. The housing aid centre cases have doubled in number. In one Liverpool private housing estate alone 70 per cent. of the homes are subject to repossession orders.
§ I do not know how many of your Lordships saw it, but in the "TV Eye" programme Mr. Newton, the Social Services Minister, dismissed the rise in arrears as an inevitable by-product of the success of the home ownership promotional campaign. But it seems rather disproportionate when a 17 per cent. increase in home ownership since 1979 is accompanied by a 600 per cent. rise in arrears.
§ When one considers the effect of the Government's proposals on families, it could be pretty devastating. Even if the lender will agree to reschedule the loan (that is incorporating not only the principal but the interest payments back into the loan) the householder is constantly increasing his or her debt. Here we come to a strange anomaly. If that householder is able to survive the first six months, during which period the Government are proposing to reduce assistance, he or she will then qualify for full remission under the supplementary benefit rules and the Government will find themselves paying interest on deferred interest instead of paying interest in the first place. This could have a boomerang effect.
§ Furthermore, the six-month period during which the Government are intending to penalise could prove a crucial period, particularly for deserted women or those who have obtained an exclusion order, for example, against a violent husband. A woman in this position may be aware that she will be unable to keep the house in the longer term, but it is during the first few months after marital breakdown that she needs a secure roof and a breathing space to recover her self-confidence and make plans for the future, which may involve seeking alternative rented accommodation. If relief is not forthcoming the importance of keeping a roof over the family's head may cause some mothers to use benefits intended for their children to maintain mortgage interest payments.
§ On the question of equity, I submit that the argument falls heavily in favour of continuing this support with mortgage interest during the first six months of unemployment or supplementary benefit. The state accepts responsibility for the full housing costs of tenants claiming supplementary benefit. There is no cogent reason for refusing similar assistance to those who have been encouraged to buy their own homes as an expressed aim of Government policy. It is among those who have bought their council houses under the right-to-buy and who have subsequently lost their jobs that the greatest number of mortgage casualties has arisen.
In the "TV Eye" programme to which I referred Mr. Newton suggested that it was not wholly a problem for the Government; the building societies, banks and finance houses were also involved. That may seem a fair point. Building societies and banks have undoubtedly been competing to lend 100 per cent. mortgages or even more if some of the ancillary services on offer are included. So how much blame should they take for over-easy lending and not scrutinising people in the way they used to? In the
programme the chief general manager of Nationwide claimed that his society was performing an act of social conscience in lending to buyers at the bottom of the market. That may be true of Nationwide, but it does not prevent other societies from repossessing for arrears for as little as £300. Social conscience or no, the Nationwide general manager was, to quote his words on the programme:
wholly opposed to the Government's proposal".
§ His view was shared by a number of Conservative Members of Parliament, who voted against the Government on this issue.
§ Where does all this leave us? I think it leads us on these Benches to demand that, at the very least, the Government rethink their policies on this matter. I know that there is an appetising saving to be gained from the Government's proposals which would be in the region of £30 million, as I understand it. But this has to be set against the £4 billion to £5 billion of mortgage tax relief extended to people in jobs and often on very high salaries which stretches right up the tax scale to the high rates. It also has to be seen against the 100 per cent. relief given to tenants in similar circumstances. It is not, therefore, inequitable that new home owners in difficulties should receive similar assistance.
In its last report the Social Services Advisory Commitee (this was its opinion in paragraph 3.39) said:
We do not think a scheme of this kind could be justified at all, unless the building societies and other mortgage-giving bodies were prepared to give comprehenisive assurances about the availability of rescheduling. In commercial terms many cases would presumably arise where because of previous unemployment or sickness and the claimant's likely income when employed, a building society would be extremely reluctant to reschedule the debt. These are issues which would need to be fully resolved before a decision could realistically be taken to limit mortgage payments for any sizeable length of time. However, even if such points could be settled satisfactorily, we would still doubt the wisdom of the proposal because of its inequity. Both on income support and in low-paid work, a claimant who was an owner-occupier would be treated less generously than a tenant with similar total housing costs, even after mortgage tax relief had been taken into account. This discrimination sits very oddly with the Government's expressed policy of encouraging owner-occupation as the preferred form of tenure.
§ That is the view of the Social Security Advisory Commitee. I want to be fair to the committee, and I take Mr. Newton's point that lending bodies should at least accept a measure of co-responsibility. They could improve their scrutiny and reduce their eagerness to lend at all costs. This would reduce the eventual cost to the public purse in the event of failure. The social conscience claimed by Nationwide could take the form of either better counselling initially or rescheduling the debt when a home owner falls on hard times. Presumably that is a minimal act of social conscience.
§ As I have already indicated, rescheduling can present mounting problems for home owners on low incomes, and if they fail to find work, it can also present a problem for the Government in meeting additional interest payments after the first six months. The Government have, after all, promoted the homeownership explosion. They must recognise that the number of those who fall by the wayside is likely to increase as a result of it—and, in fact, is increasing dramatically.747
§ The Social Security Advisory Committee is at present holding an inquiry for which I assume it has invited evidence from professional and consumer bodies. What I want to hear from the noble Baroness tonight is that the Government will not prejudge the results of the inquiry and that they will keep an open mind on withdrawing their proposal until they have received and studied the report. I do not think that the Government would want the impression to get about in the country that under the Tories you get the right to buy your own home but you do not get the right to keep it. I beg to move.
§ 8.30 p.m.
§ Lord Stallard
My Lords, I rise to support the amendments moved so eloquently by the noble Lord, Lord Kilmarnock, and since he has covered most of the points to which I would have liked to refer, perhaps I can be brief. The problem we are discussing is part of our own making, as the noble Lord rightly says; and it is part, certainly, of the Government's own making. It was one of the Government's main policy planks—and one may argue whether it is right or wrong—to encourage home ownership, to sell council houses and council flats to tenants at cut-down prices or reduced prices. Many people went into that because so far as they were concerned it was as cheap, or nearly as cheap, as renting. One can understand that.
Then all sorts of other factors came into being—unemployment among others. This has created difficulties for those families who were already stretched to buy their house and now find themselves over-stretched. So the problem which is outlined by the change in this clause is partly of the Government's own making. It seems churlish, to say the least, that having encouraged these people to buy and to get themselves into this situation, we then say at the same time that we are going to cut by half the amount of assistance that they would get, having got into these difficulties that were not their fault in the first place. That seems a bit hard to accept, and we know that many people in that situation are in real trouble. There has been a sharp increase in the number of people who own their own homes; it is a fact that two-thirds of the households in England and Wales are now owner-occupiers. Many new owners are people who are just about able to manage, just struggling to make the best of it. But the number of those in arrears has trebled since 1979. In 1984, according to the latest figures that are available, there were 54,754 mortgage possession cases, compared with 35,471 in 1981. Possession for mortgage arrears is now one of the more worrying causes of homelessness, and certainly more worrying than possession for rent arrears. Homelessness created by mortgage arrears is now in excess of that created by possession for rent arrears; that is something which is different and which certainly worries us all.
The Joint Consumers Council-Social Security Committee looked at this problem and produced a research document called, Behind the Mortgage: 1985. They identified three causes for the problem: the increase in unemployment; the increase in divorce and separation; and the stretched budgets as lower-income households struggle to meet repayments. There is a real problem here. The lenders' different approaches to the arrears has been mentioned by the noble Lord, 748 Lord Kilmarnock. Many of them take different approaches. Some of them will accept interest-only repayments—but not all of them. In fact, 16 per cent. of local authorities refuse to accept interest-only repayments in any circumstances. A total suspension of interest payments is extremely rare. I think that probably the only instances of that were when some societies did so in the recent miners' dispute. But it is exceedingly rare and it is linked to the capabilities for future payments by the tenants.
Most of the people in these circumstances have nowhere to go. It is almost impossible for people on low incomes with high arrears to trade down; there is no way in which they can manage it. They cannot do it. So there is nowhere to go. If they sell before the repossession order comes in, they will be deemed to have made themselves deliberately homeless and they will not even qualify for local authority assistance or bed-and-breakfast accommodation. It can be an exceedingly worrying situation. Reposssession is growing through all these factors. Many of these unemployed and divorced families have survived, and are surviving, only because of the supplementary benefit provisions that were included prior to this clause. Now it is the intention of the Government to cut those payments by half. That means that there will be a dramatic increase in the number of people who are in severe difficulties. Amendment No. 38 seeks to rectify that, and I support it.
§ Baroness Jeger
My Lords, I support this amendment and I want to ask a specific question. I referred to this matter on 23rd June when I asked the Minister what would happen if someone was unemployed for six months, got his mortgage interest paid, got a job for a little while, but then lost it. Would he have to go back to the beginning of the six months, or would he be helped? The noble Baroness said:The noble Baroness, Lady Jeger, raised questions of linking arrangements for people who have two spells of benefit with only a short time in work. I shall consider this along with other matters". [Official Report, 23/6/86; col. 114]All that I ask tonight is, what has been the result of the Minister's consideration.
§ Baroness Trumpington
My Lords, there is little that I can add to what I have already said in Committee. However, I shall add what little I can. I have set out the Government's conviction that it is unfair to give 100 per cent. guarantee of state help on mortgage interest to people out of work when others in work on comparable incomes have a much greater burden to carry themselves.
We are also very concerned that a proper balance must be struck between the interests of borrowers, lenders and taxpayers. I have also said that we have referred draft regulations to give effect to our proposals to the Social Security Advisory Committee. The committee has not yet completed its consultations with interested organisations and the general public. We expect to receive its report some time in August, and I assure the noble Lord, Lord Kilmarnock, that only after that will we take final decisions. It would be premature to make a firm choice now, as the amendment invites us to do. Also of course there will be an opportunity for Parliament to debate any regulations which we eventually decide to bring forward.
749 I think I should also leave your Lordships absolutely clear on one point: that in rejecting this amendment no irrevocable decision on future help with mortgage interest is being taken. The regulations we shall be bringing forward under Clause 21 will specify in detail the help we intend to make available for mortgage interest, and we have made special provision in the Bill to have those regulations laid before Parliament in draft so that they can be fully debated.
In Committee the noble Lord, Lord Kilmarnock, expressed the view that people who had bought houses under the right-to-buy scheme and then become unemployed may be made homeless if this regulation comes into force. While I accept that lending organisations will need to operate sensitively—and I am confident that they will do so—I do not think the proposals in themselves will have the effect envisaged by the noble Lord. On average, arrears arising from the proposals will amount to no more than £200—not an over-significant amount if added to the average 25-year mortgage debt. Even for people with relatively larger mortgages, the arrears will total no more than the equivalent of three months' interest payments. It is unlikely that a lender will repossess for such a sum. Furthermore, building societies have indicated their preparedness to help individual borrowers over short-term difficulties. That is why we have decided to limit the state guarantee for the first six months.
The Government encourage home ownership through tax reliefs, discount sales of rented homes and the right-to-buy schemes. Taxpayers should not have to underwrite these forms of support from the very first day on benefit to the extent that they do now. Building societies should accept that to expand business as they have done carries with it some social responsibility. The capitalised arrears concession will assist societies to reschedule loans.
The noble Baroness, Lady Jeger, asked about linking arrangements, and I well recall what I said to her at an earlier stage. To protect people with short breaks in entitlement to benefit we also propose to introduce an eight-week linking rule. Anyone who goes off benefit for eight weeks or less will not have to start the six-month period again. With those assurances, and in the expectation of the report coming shortly from the Social Security Advisory Committee, I would ask your Lordships not to press this amendment.
§ Lord Pitt of Hampstead
My Lords, before the noble Baroness sits down, I notice that the Government are willing to think again on the question of the mortgage. Will they also think in terms of taking into account the cost of repairs and insurance to cover the structure? These are all things which can be difficult when somebody is out of work and needing help.
§ Baroness Trumpington
My Lords, with the leave of the House, I have said that it is premature for me to answer now. The general rule is that we do not take into account repairs to houses.
§ 8.45 p.m.
§ Lord Kilmarnock
My Lords, I am grateful to those noble Lords who have participated in this short debate 750 on this rather important matter. I was interested to hear the noble Lord, Lord Stallard, say that mortgage arrears are actually in excess of rent arrears. That is certainly an important point. Also I think he said that 16 per cent. of societies refused to accept interest-only repayments. I hope those are two considerations which the Government will bear in mind.
Obviously we welcome the announcement made by the noble Baroness in response to the noble Baroness, Lady Jeger, on the eight-week rule. I find it difficult to go along with the noble Baroness when she says it is unfair to those in work to have to support those out of work. She made no reference to the far greater unfairness of not giving homeowners the same protection as tenants. That really is the essential issue of equity in this matter, in my view.
However, at the same time I was glad to hear her say that the report is expected from the Social Security Advisory Committee in August and that no irrevoca-ble decision has been taken by the Government in recommending the rejection of this amendment. She said it would be premature to make a decision, and in fact I agree with her. I was not going to press this amendment, but I wanted to air this important matter. It represents an area of growing concern and we have now had an opportunity to discuss it.
There are other points one could take up, such as the unliklihood of repossession for a debt of a little as £200; but that is probably a minimum figure and, when added back into the debt, presents a further problem for the eventual reduction of that debt. I agree with the noble Baroness that the building societies have some social responsibility in the matter, and I imagine that this will be discussed during the consultation process with the Social Security Advisory Committee. Bearing in mind all those points I shall not press the amendment, but certainly when the Government finally come forward with regulations, if they are unsatisfactory or inequitable, we shall return to this matter. On that note I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Baroness Trumpington moved Amendment No. 39:
§ Page 29, line 35, leave out from ("shall") to end of line 36 and insert (", except in prescribed circumstances, be treated as the income and capital of that person.")
§ Baroness Faithfull moved Amendment No. 40:
Page 30, line 4, at end insert—
(", provided that, in calculating or estimating income from employment, any expenses necessarily incurred in connection with that employment shall be deducted from the income ").
§ The noble Baroness said: My Lords, this amendment deals with the difficult question of volunteers' expenses. I do not wish to detain your Lordships by making a Second Reading speech, but at this point I would just say that in your Lordships' House we pay tribute to the volunteers in this country who do so much voluntary work, whether they are unemployed or in work on low pay.
§ When the Government put forward the proposals to raise the earnings disregard for unemployed people to £5 from £4 but to allow no deduction for work expenses, many of us thought it could adversely affect 751 people doing voluntary work who have their expenses reimbursed. It is easy to exempt volunteers' expenses. The problem arises where the person is receiving some small remuneration in addition to the reimbursement of expenses. For example, a volunteer driver who had £10 expenses reimbursed would suffer no loss of benefit because the £10 would be ignored; but someone doing similar work and earning £5 a week on top of the expenses would presumably not be treated as a volunteer. The earnings of £5 would be covered by the £5 disregard, but the expenses of £10 would be deducted from the benefit. Of course the regulations may say that if your earnings are only £5 net, you can be treated as a volunteer; but then what about someone who earns £10? Would my noble friend the Minister not agree that perhaps the simplest thing of all would be to say that work expenses should be deductible? I beg to move.
§ Lord Ennals
My Lords, I shall be brief in supporting the noble Baroness. I think the problem of definition between a volunteer, on the one hand, and a volunteer who gets a small honorarium for the work he or she does, on the other, is a very difficult one. As I have had the privilege of seeing, there is a very substantial growth across the country of schemes, sometimes based on a volunteer plus a driver and sometimes based on a volunteer plus a home helper (not a home help) for those who are disabled and elderly. I think it is difficult to say just what the difference is between a volunteer and a volunteer who might actually be making a very small sum of money because he or she probably lives on a low or modest income. It seems to me that the noble Baroness has hit on a very reasonable way of dealing with this particular problem. I shall be very interested to hear the Minister's answer, because clearly an answer has to be found, and if the Minister has that answer I shall leap up and say "Thank you".
§ Baroness Ewart-Biggs
My Lords, as I had my name down to the amendment when it was mooted at Committee stage, and as it now appears in a different form, perhaps I can say a few words. As many of us know from our postbags a great deal of concern has been expressed about the effect of the proposal in the Bill. The majority of people involved were unemployed and doing voluntary work, as the noble Baroness, Lady Faithfull, said, for which they were paid only expenses. At Committee stage the Minister was very sympathetic and said:I understand the concern that people should not be put off volunteering by this change. We have a great deal of sympathy and admiration for the valuable work undertaken by volunteers. Genuine expenses will continue to be disregarded. Therefore, the amendment is unnecessary".—[Official Report, 24/6/86; col. 132.]We accepted that the Minister was sympathetic and that there was little to fear. Since then we have understood there have been discussions between officials and outside advisers and that a concession limited to volunteers' expenses would create new and indefensible anomalies. These are of such complexity that I do not think that I can go into them now, but it does mean that the anxiety is still there. We are very much looking forward to a slightly different answer from the Minister this evening.
752 May I add that I have received in particular a number of letters from Northern Ireland. Northern Ireland has already been mentioned as suffering a great deal more from some of the provisions than other places. As your Lordships will know, volunteer work in Northern Ireland is really one of the great professions, and I think there are more people involved in voluntary work there than perhaps anywhere else in the United Kingdom.
I have received, as I say, many letters. One of those letters comes from the Belfast Voluntary Welfare Society, and it says:We have been finding increasingly that motivation has been weakening among the young unemployed and that the little extra expenses have been absolutely critical in ensuring that we are able to move unmotivated youngsters onto the beginning of a pattern which moves through volunteering, hopefully on to either a training scheme or an MSC type of employment scheme and then on into employment. If our reading of the new Bill is correct, the Government is going to remove a key link in our very tortuous attempts to tempt some of the young unemployed towards the employment market.My Lords, the anxiety is still there despite what the noble Baroness said at Committee stage, and the noble Baroness, Lady Faithfull, has suggested a way in which those anxieties can be diminished. I very much hope that the Minister will take that road.
§ Lord Banks
My Lords, I should like briefly to support this amendment and testify to the fact that the anxiety referred to is still very prevalent for the reasons so cogently expressed by previous speakers.
§ Baroness Trumpington
My Lords, there has undoubtedly been some confusion between two issues here, and that is why I was particularly anxious to take these amendments separately. I hope my explanations will have the noble Lord, Lord Ennals, leaping like a Lord.
First, there is the question of how we define the earnings or resources which will be included in the calculation which determines the level of benefit. The second is the extent to which these earnings will be taken into account in calculating the benefit. This latter question raises the subject of specific automatic disregards—i.e., we say a certain level will be ignored. It is on this that we have made a firm proposal in the Green and White Papers. However, the other issue, the definition of earnings, should not be confused with this kind of automatic disregard. Thus it is possible to define the resources to be taken into account in such a way as to exclude expenses such as volunteers or two-thirds of the income from child-minding. We should not confuse these two matters.
Nevertheless, I think discussion of this topic in the past has created some confusion, and I shall describe the two sides to the problem to clear this up. Your Lordships may know that at present lone parents have a complicated earnings disregard whereby they are allowed to keep £4 of earnings plus one-half of earnings between £4 and £20 before their benefit is affected. Thus, if she earns £ 12 she can keep £8 a week before the benefit begins to reduce. In deciding what level of earnings to which that complicated taper can be applied regard is taken of child-minding expenses. They are taken off the earnings.
753 The Government have proposed two things in relation to this disregard: first, there should be a flat-rate disregard of £15 (which is higher than the former maximum at present); and, secondly, individual assessment of expenses like child-minding costs should no longer take place. This second is the subject of an amendment tabled by Lady Ewart-Biggs, so I shall say no more on the merits of it. But I shall ask your Lordships to note that the Government's proposal relates only to the child-minding expenses of a person going out to work. I fear some people have felt that our proposal relates to the treatment of income from child-minding of someone who does so as a part-time occupation. This is not the case. Certainly at present when assessing the income of someone in this position, two-thirds of it is ignored. This is provided for in Regulation 10(2)(c) of the Supplementary Benefit (Resources) Regulations.
There is nothing in the current Supplementary Benefit Act which covers this detailed point. The main legislation provides the power for certain resources to be disregarded. Your Lordships will see that we have similar power in Clause 22(7)(b) to disregard capital or income, so when drawing up the regulations for the treatment of capital under income support we shall be able to carry forward the same treatment—should we want to.
I do not want to pre-empt decisions at this stage. We Ministers will have to look at the details of the regulations under the new scheme, to see what extent provisions in the current supplementary benefit scheme should be in the income support scheme when it is introduced nearly two years hence. I am sure that when doing so we shall be helped by the views that have been expressed in this House and in another place on a whole host of issues, including the subject of this amendment.
I have now to confess that the most terrible thing has happened to me. My replies to amendments have been put in the wrong way round. I have been speaking to Amendment No. 41 with immense conviction, and I am very sorry but the numbering has gone wrong. What would your Lordships like me to do? I am totally in your hands. I can either start all over again—
§ 9 p.m.
§ Baroness Faithfull
My Lords, I am very grateful to my noble friend. I was beginning to think that I had the lowest possible IQ in your Lordships' House, before she said that the numbers had gone wrong. This is a very complicated situation and it is very hard on the Minister that she should have to go through it all over again. I wonder whether she could bear it in mind for the next stage of the Bill and whether it could be clarified for us then. I still cannot understand whether, under her statement, the child minder will have a disregard of one-third of the payments received in respect of child minding. It will be extremely difficult for my noble friend the Minister and, if your Lordships agree, may I ask her whether she will clarify the whole situation for us by writing to us and then raising the matter at the next stage of the Bill?
§ Baroness Trumpington
My Lords, with the leave of the House, may I say that I could not be more 754 embarrassed and I could not be more grateful for the kindly spirit in which my noble friend has taken this great shock to my nervous system. Probably the best thing to do would be for me to undertake to speak at Third Reading of the Bill on these two matters, by which time I hope that the numbering system will have sorted itself out. This has no bearing at all on the amendment of the noble Baroness, Lady Ewart-Biggs, which is quite a different matter. But if your Lordships are willing for me to do it in that way, I shall be very grateful. I do not believe that, basically, we are at odds over this matter. It is simply a question of clearing up the confusion that exists in the minds of everybody, to which I have unwittingly added.
§ Baroness Jeger
My Lords, I should like to say on behalf of my noble friends that we appreciate the situation and look forward to the Third Reading when the Minister will speak further.
§ Baroness Faithfull
My Lords, with the assurance of my noble friend the Minister, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 41 not moved.]
§ Baroness Ewart-Biggs moved Amendment No. 42:
§ >Page 30, line 4, at end insert ("; save that for the purpose of calculating income support there shall be deducted from earnings derived from any employment expenses incurred in respect of child care.")
§ The noble Baroness said: My Lords, I hardly dare to move my amendment on account of the deep shock of the last few minutes. However, the Minister said that my Amendment No. 42 is quite separate from anything she has been saying, and therefore I shall move it. This amendment seeks to allow child care costs for parents, mainly single parents in receipt of income support, to be regarded as a work-related expense and therefore to be disregarded in the calculation of benefit, as is the case under the supplementary benefit scheme. At present, parents are able to set their work expenses, such as child care costs or fares to work, against their earnings before entitlement to supplementary benefit is calculated. This is in addition to a maximum earnings disregard for a single parent of £12.
As the National Council for One Parent Families has pointed out:
This enhanced disregard, together with deductions for work expenses, was introduced in recognition of the special needs of one-parent families to enable lone parents to take advantage of a valuable source of extra income through part-time work with provision for necessary child care costs, and to increase the labour market participation of lone parents who are dependent upon supplementary benefit".
§ During the Committee stage, the Minister put forward a rather misleading view because she cited research from the Social Policy Research Unit at York University to justify abolishing the disregard for child care costs. She said that the average fare to work for single parents in 1982 was £1.18 a week, and child care costs were 94p. But such averages do not really relate to the actual costs incurred by single parents paying for child care, the reason being that the figures quoted by the noble Baroness the Minister must have been based on the inclusion in the sample of many 755 parents who do not pay anything for child care; for example, single parents whose relatives look after their children for nothing. Indeed Professor Jonathan Bradshaw at York confirmed this and agreed that it is misleading for the Government to use the figures in this way.
§ The figures showed that 77.6 per cent, of the mothers in paid work did not pay anything for child care, but these were included in the sample. They therefore distorted the reality of the actual costs, because if you add up all the costs and divide by the mothers, a whole lot of whom do not pay anything, you get a very much lower cost than the real cost of child minding. In this sample in 1982, 14 per cent, spent over £3 on travel and 5.6 per cent. spent over £5 on child care; and today the figures would be much higher, especially in London.
A further important point is set out in the paper on earnings disregard from York University. It welcomes a flat rate disregard for single parents but also says:
It should be noted that as the proposal stands this will mean a loss in income for some lone parents because work related expenses are positively associated with earnings. Those who lose tend to be those with the highest earnings which means that this change will penalise the people who are making the greatest effort to keep in contact with the labour market".
Perhaps I may quote another paragraph:
One way round this would be to increase the level of disregard to compensate for the removal of work related expenses. Indeed we would argue that the proposed level of £15 is too low for this and for other more important reasons. The Green Paper is very brief about the aims of the disregard saying only that they are intended to help them in seeking employment and helping themselves.
As an incentive to take up employment or remain in jobs, not only is the level of disregard likely to be important but also how it relates to the number of hours worked".
§ According to the new earnings survey of 1984 the average gross hourly earnings of women in part-time manual jobs of £2.09 plus a disregard of £15 represents only about seven hours of paid work a week. Given any rise in earnings between 1984 and 1987 when the change is introduced this will still be further reduced. Indeed seven hours bears very little relation to the actual hours of paid work for female part-time employees.
§ For a lone mother on income support to take a typical part-time job of about 18 hours would therefore mean that there would be no financial gain from more than half the hours she worked. In this context the cash incentive of an additional £15, although it might be quite a substantial increase on her benefit income, may be seen as representing only a very low return from the hours worked. That really seems to give justification for our amendment. As I said in Committee it is important for lone mothers to go out and work. Not only does it help with a very low income but it is also therapeutic and helps the mother to avoid depression. Such factors are important for the child. Anything that can be done to encourage and help single mothers to go out to work should surely be encouraged. I beg to move.
§ Baroness Lockwood
My Lords, I should like briefly to support the amendment in the name of my noble friend Lady Ewart-Biggs. She has outlined the difficulties arising from the low pay of the majority of women workers and in particular the low pay of part- 756 time women workers, who constitute more than 40 per cent. of women workers generally.
There is another aspect of the problem on which I should like to focus. I refer to the use of child minders as carers of children where the mother is at work. A few years ago the whole question of child minding was one of great concern in this country. Unfortunately, we do not have a good reputation for being generous in the provision of nurseries for small children. The majority of women have to rely largely on child minders if they want their children to be cared for. It will be recalled that at that time a number of cases appeared to suggest that there could be a great deal of abuse in the child minding services.
Since then there have been tremendous steps forward in professionalising the child minding service. Obviously if you are going to professionalise a service, the cost of that service will increase accordingly. One of the fears is that if the expenses for child care were not to be allowed, as this amendment indicates, there might be a tendency for children to be withdrawn from the better kind of child care facilities and placed into less well provided child care facilities. That would be a very retrograde step. I would have made this point on the previous amendment had the noble Baroness, Lady Faithfull, been able to move it, but it is relevant both to the case that she would have been making on Amendment No. 41 and to Amendment No. 42 of my noble friend.
§ Lord Pitt of Hampstead
My Lords, before the Minister replies, I have had my attention drawn to a striking consequence of the Government's programme. It is an example of one piece of Government legislation defeating the aim of their employment programme. A particular project has been advertising part-time jobs under the community programme. There have been several applicants who are women with children. Child minding fees of £30 and £34 per week is the borough average, and with that they can embark upon the community programme while their children are looked after. However, without those expenses being offset, that will not be feasible and access to the community programme and to other part-time opportunities and avenues of employment will be denied to them. That is an example, but I am told it is quite typical. I thought that I should throw that point into the pond at this moment. I have just been given that information but it seems to me that it illustrates the situation.
§ 9.15 p.m.
§ Baroness Trumpington
My Lords, I am still so unnerved by my recent experience that your Lordships must stop me if my reply does not sound right. This issue is one that has been discussed at length during the Bill's progress. Indeed, we debated this point in Committee three weeks ago, and I find myself in some difficulty because I do not want to test the patience of your Lordships by repeating the remarks I made then. However, as I said in my ill-starred last few moments on my feet, this amendment raises an entirely different matter from that raised by my noble friend Lady Faithfull in her amendment. It is specifically directed at the cost of child care as met by someone who goes out to work. It seeks to have those excluded from the 757 amount of earnings that will be taken into account in determining the level of benefit.
I have already pointed out that the current treatment of those expenses in the supplementary benefit scheme is at odds with the approach of housing benefit and family credit: the benefit for those out of work is more complicated and generous than the benefit for those in low-paid full-time work. Our moves to put all three income-related benefits on a common footing have been widely welcomed. I do not believe it is sensible to perpetuate inconsistencies.
I mentioned during Committee stage that the available evidence suggests that the part-time work expenses, including child minding expenses, of those on supplementary benefit are relatively low. In the nature of things, most part-time work by those on supplementary benefit is likely to be undertaken locally.
The noble Baroness, Lady Ewart-Biggs, raised the question of SPRU research. We shall of course consider her point, but the point she accepted was that the majority of people did not have costs. That is unsurprising, because much such part-time work will be local and for short periods. There has to be a balance. The point remains that for most lone parents the new system will be simpler and better.
Our proposals on earnings disregards generally offered substantial improvements over the present arrangements. I am sure your Lordships will agree that direct incentives of that kind are preferable to the complications of the current system, which would be carried forward by this amendment. We propose to increase the general earnings disregard from £4 to £5. We are proposing also enhanced disregards of £15 for certain special groups, including lone parents, who are the people most likely to incur child minding expenses. The other groups are disabled people and long-term unemployed couples. We have said we shall monitor that aspect.
So, regretfully, I cannot recommend acceptance of this amendment. The Government's proposals represent increased help to a majority of lone parents without involving them or our local office staff in a complicated assessment. I hope that the noble Baroness, Lady Ewart-Biggs, will agree with my explanation.
§ Baroness Ewart-Biggs
My Lords, I agree that the explanation of the noble Baroness was related to my amendment but I cannot say that I am very happy about it. The noble Baroness said yet again that she felt that child minding expenses were relatively low, but I thought that I had made a very definite point to show that some parents who do not have relatives to look after their children when they are working have to pay a high price. As my noble friend said, what we worry about is that these lone parents will either retire from work or put their children into the hands of carers who cost very much less.
Therefore, I believe we have brought forward a very important point and there are many people who are extremely worried about it. There is no doubt that the number of single parents is increasing and the more we can involve them in the life of the community and avoid any kind of social isolation the better it will be, 758 not only for them but particularly for their children.
I am of course very disappointed that I did not receive any further response from the Minister. However, it is a little late to do anything but heave a great sigh of sorrow and ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Banks moved Amendment No. 43:
Page 30, line 11, at end insert—
("( ) Where a person has a Purchased Life Annuity to which Section 230 of the Taxes Act 1970 applies—
§ The noble Lord said: My Lords, in assessing a person for income-related benefits, both income and capital are taken into account. A purchased life annuity is composed of both income and capital elements, and this amendment is concerned with the recognition of that fact and a proper division between the two.
§ The amount of annuity payment is determined by taking the purchase price of the annuity, which is capital, and adding an estimate of the interest to be earned on it between purchase and death. Since the date of death is not known the expectation of life of the individual is used. A deduction is made for expenses and the resulting total is divided by the number of years of the expectation of life to arrive at the annual annuity payment. There is clearly an interest and capital element in each payment.
§ For income tax purposes only the interest element is taxable. The consequence of this amendment would be that only the interest element would be assessed as income for earnings-related benefits. The capital value of the annuity would be determined by deducting from the original purchase price the sum of the capital elements paid since purchase. This would clearly be a declining figure year by year. The capital value in the early years would probably bring the annuitant over the cut-off point for capital. As time went on he would fall below it, assuming he had no other capital.
§ Where the annuitant had raised a loan to purchase the annuity—as in a home income plan effected by an elderly person—the amount of the loan would be offset against the capital value. Since it would always exceed the capital value, there would be no net capital value in those cases.
§ It is already the practice (and it is a welcome return to the former practice) to offset the mortgage interest in those cases against the annuity for assessing housing benefit. With the separation of capital and interest 759 which I envisage, the mortgage interest would be offset against the interest element in the annuity in the determination of income. Thus, the amendment would be of value to elderly home owners, supplementing low incomes by means of a home income plan by eliminating capital value and reducing income for assessment.
§ However, as I have explained, the amendment covers all purchased life annuities and not merely those which form part of the home income plan. The aim generally is not to secure special favours for annuitants but rather to put purchased life annuitants on as near as possible an equal basis—a level playing field, as it is described—with other forms of saving such as building society and bank deposits. I beg to move.
§ Baroness Turner of Camden
My Lords, I rise to support the amendment moved by the noble Lord, Lord Banks, and to highlight one particular aspect of what he had to say in his very technical but very interesting speech when moving it. This amendment affords an opportunity to highlight the small but significant anomaly that affects elderly homeowners who have a home income plan to which the noble Lord, Lord Banks, has referred. I understand that about 15,000 of them exist. In conjunction with a building society or assurance company such elderly people have mortgaged their homes and used the proceeds to buy life annuities to supplement their incomes. Through taking this action and seeking to use their own resources to provide for themselves some extra income, they have been put at a disadvantage with regard to income-related benefits.
As noble Lords have said earlier in the debates on other aspects of this Bill, there has been a drive on the part of the Government to encourage people to become homeowners. The increase in home ownership has meant that more elderly people are living in their own homes and facing the bills that go with that situation, and with reduced Government expenditure there is often less help for house maintenance. What such elderly people have been doing, as has been indicated, is to undertake home income plans. If the amendment were passed, it would mean that in future the anomaly to which the noble Lord has referred would no longer exist and the elderly people who have embarked upon such home income plans would not be put at a disadvantage. Because it seems to us to be fair and reasonable, and because after all it is a relatively small anomaly to which the noble Lord has referred we hope that the amendment commends itself to your Lordships.
My Lords, I also should like to support the amendment of the noble Lord, Lord Banks. He may remember that some time ago there was a similar amendment in front of us which was unsuccessful. I hope that this one will be successful. The noble Baroness has entirely covered the issues raised by Age Concern that I wished to express, but I also have some other points to add.
The link between these measures is that, for housing benefit purposes, the entire income from the annuity counts as income. It therefore will take the claimant off the scale, although in practice much of that income 760 is immediately "spent" as a repayment. The net income would be a fairer measure. The difficulty occurs since income arising from certain fixed term annuities and bank and building societies deposits is treated consistently both for tax and housing benefit purposes and only interest is assessed. Part of the fixed term annuity is regarded as a return of capital. Moreover, for tax purposes, since 1955 whole life annuities are similarly treated, with part of the income regarded as a return of capital. However, this has not been applied to housing benefit. Indeed, the June 1985 guidance manual specifically requires income from whole life annuities to be considered in full.
In May, the Government announced that in future a change in the guidance manual will advise that mortgage interest deductions should be disregarded. However, life annuity plan holders are still at a disadvantage. I suggest that the amendment is therefore very helpful. It affects only a very small number of people—as the noble Baroness has said, about 15,000 altogether.
The amendment has been well thought out, if I may say so, by the noble Lord, Lord Banks. It may affect only a very small group of people but it may be a very important source of income to elderly homeowners in the future.
§ Lord Kilmarnock
My Lords, I wanted to say that just because my name does not appear in this amendment, as it does in most others in tandem with that of the noble Lord, Lord Banks, that is not to say that I do not support it. It is purely an oversight that my name is not there.
I simply add my voice to those of other noble Lords who have spoken to say that those home income plans are an extremely important way of enabling elderly people with a little capital to stay in their own homes by mortgaging their homes in order to purchase an annuity. I should have thought that that procedure was absolutely straight in line with the Government's policy of helping people to stay in their own homes. So I very much hope that the Government will look favourably upon this amendment.
§ Baroness Trumpington
My Lords, this is not the first occasion that the noble Lord and I have discussed this subject in your Lordships' Chamber. He originally raised it through an Unstarred Question last November, with particular reference to housing benefit. Since then we have, as he knows, partly as a result of the arguments he advanced then, been able to offer an improvement in the way in which one form of life annuity—the home income plan—is treated in the housing benefit assessment. The noble Lord was kind enough obliquely to mention that this evening. The noble Baroness, Lady Turner, may not have been aware of it when she made her comments. As a result of that improvement, some 7,500 elderly owner-occupiers will be better off from the 28th of this month.
This leaves the wider question of how life annuities in general should be treated in future. When I spoke in the short debate last November I told the noble Lord that I was not persuaded by his arguments. I shall now eat humble pie—I am doing a lot of that this evening—and modify what I said. I am prepared to 761 keep an open mind on the issue. I fully accept that many of the noble Lord's arguments carry weight. Equally, though, he must remember that from 1988 a capital cut-off will be in operation for all three income-related benefits, with a tariff income applied to those with capital of between £3,000 and £6,000.
This means two things. First, treating life annuities as consisting partly of capital could be extremely complicated to administer. This is not simply a bureaucratic point. If it is complicated to administer, staff may get it wrong and elderly claimants may not understand it. Secondly, it would by no means be to the advantage of all those with a life annuity to treat them in this way. There would no doubt be swings and roundabouts. But, for example, someone who already had a small amount of savings in the building society could be knocked off income-related benefits completely by this method of assessment. I think this in particular merits further thought, and indeed the noble Lord might like to consider whether it is right to penalise some people with life annuities simply in order to achieve what he believes is theoretically the correct way to treat them in the assessment.
I would therefore like to invite the noble Lord to consider withdrawing his amendment on the basis of three assurances. First, as he is no doubt aware, his amendment is not necessary in order to achieve his purpose. There is already sufficient power in this clause to make the regulations which would be needed. Secondly, we shall not lose sight of this issue and will continue to consider all the possible options before we finally draw up the regulations. The Association of British Insurers has already initiated discussions with the department. Those discussions will continue, and I hope that the noble Lord will agree that it would be wrong to pre-empt them before the implications of all the options have been fully explored. And, thirdly, as I said at the outset, we shall keep an open mind on this issue. I am not ruling out the solution that the noble Lord has proposed, and we shall bear in mind everything that he has said in reaching a final decision, but I do not want to rush headlong into it. I hope that, with those assurances, the noble Lord will feel able to withdraw his amendment.
§ Lord Banks
My Lords, the noble Baroness referred, as I did, to the offset of mortgage interest in the case of home income plans. I certainly welcome that. Under a home income plan somebody may raise a mortgage on his house in order to purchase an annuity. Out of that he pays the interest on the mortgage and the balance is the additional income which helps him to meet his expenses. He never actually receives the mortgage interest. It never comes into his hands, because it is retained by the life office which is providing the plan. It seemed reasonable for the Government to offset the mortgage interest, and I am glad that they have done that.
As the noble Baroness recognised, in the amendment I was dealing with purchased life annuities as a whole, not just those which are bought in connection with a home income plan. While what I proposed would help, as I and others have shown, those who have home income plans, I was not seeking advantage for any particular section. I fully 762 understand the point that the noble Baroness made when she said that there would be swings and roundabouts. I was trying to find a basis for treating purchased life annuities by separating capital and income so that we could deal with them in the way in which capital and income are proposed to be dealt with in the Bill.
I am aware that the Association of British Insurers has submitted suggestions, and the amendment is based on one of the bases which it put forward, and there are others. I am grateful to the noble Baroness for the sympathetic way in which she received the amendment; for the fact that she said that she would keep an open mind, and because she obviously contemplates something being done eventually under regulations to meet the points which are raised in the amendment. That being so, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 28 [Payment and recovery of family credit]:
Baroness Trumpington moved Amendment No 44:
Leave out Clause 28.
§ The noble Baroness said: My Lords, I have already spoken to this amendment. I beg to move.
§ House adjourned at twenty-four minutes before ten o'clock.