HL Deb 02 June 1986 vol 475 cc594-687

6.4 p.m.

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

My Lords, I beg to move, at this late hour that the Bill be now read a second time.

When I moved the Second Reading of last year's Bill, I invited your Lordships to take a magical mystery tour with me. This year a rather different metaphor: I invite your Lordships instead to leave the antiquated world of the scenic railway, with the bits and bobs that have grown around the track over the years, in favour of a streamlined fast service that stays right on the track and—if I am allowed a mixed goods and passenger train—delivers what is needed when it is needed; for the substance of this Bill is to restore social security to the purposes for which it was intended, to redirect help where need is greatest and to remove the glaring faults which have grown up in the system over the years.

The present social security system is both horrifically complex and inadequate in many ways. It was the recognition of that which led to my right honourable friend launching the social security review and, in turn, to our putting forward proposals in the Green and White Papers. The review itself brought the need for reform most graphically before the public, and it is significant that there has been little or no disagreement with our diagnosis of what is wrong with present arrangements. The Bill addresses the three major inadequacies in the present scheme by reforming pensions, income-related benefits and the legislative and administrative rules for claiming benefits.

The first objective is to reform pensions, and the keystone of this reform is to give every employee the opportunity of having a pension of his own from his job. Successive governments have agreed on the importance of encouraging the spread of occupational pension schemes. But the plain fact is that encouragement has not up to now been very effective. For 20 years the position has been static, with half the workforce in schemes and half the workforce out. It is also a plain fact that people want to be in pension schemes or to have a pension of their own. The research which we commissioned for the social security review showed that members of schemes were on the whole very satisfied with them and that people outside would like to be in a scheme or to have a personal pension. I stress those findings because they help to refute the foolish charge that has been put about that somehow this Government are against salary-related schemes and are threatening their existence. I shall return to that charge later in this speech.

In addition to our aims to give more people an occupational or personal pension, we want to put the future financing of the state scheme on a basis which we can reasonably and confidently expect future generations to sustain. Part I of the Bill deals with both these matters. Clauses 1 to 5 and 14 give everybody for the first time the right to a personal pension. That is an individual pensions saving scheme on money purchase principles, contributions to which will qualify for tax relief. Everybody will be able to choose such a pension instead of remaining in the state scheme or in an employer's scheme. Personal pensions will enable people to select the kind of pension savings scheme that suits them. They will be able to choose the type of body with whom they save—banks, building societies and unit trusts, as well as insurance companies—and to have some say in how those savings are invested. Their savings will be fully portable: if they change jobs, they take their savings with them and can go on building them up on the new job. When they reach retirement, they will use their accumulated savings—the contributions plus the return earned on their investment—to buy an annuity.

I want to draw to your Lordships' attention our full recognition of the importance of proper investor protection in personal pensions. It is vital that people should have their savings for retirement properly safeguarded. We propose to make full use of the regulatory framework which the Financial Services Bill will provide and, to the extent that there may be any gaps in it for pensions, to fill those gaps through the provision in Schedule 1 to this Bill. We have also taken powers in Clauses 12 and 13 to control such matters as advertising and misleading projections and my right honourable friend has set up an advisory group to help him decide how best to achieve this investor protection. Overall, the requirement in Clause 2 for contracted-out personal pension schemes to be approved by the Occupational Pensions Board will provide a further safeguard.

If I may turn now to the administrative proposals for personal pensions, I want to reassure your Lordships that they mean that no employer, unless he wishes to do so, need be involved at all in his employee's personal pension. All he need do is pay over contributions at the full rate and my department will be responsible for paying over the amount of the rebate to the personal pension scheme of the employee's choice. It will, of course, be open to both the employee and the employer to put more than the minimum amount into the personal pensions; and we hope that many will wish to do so. But the employer's contribution will be a matter between the employee and the employer; it is only if the employer agrees to put in more than the minimum that any action will be required of him. So much then for the new freedom for the individual to choose his own pension.

I now come to the incentive which the Bill will provide for a limited period to people taking out personal pensions. The incentive, which your Lordships will find in Clause 3, is in the form of an extra 2 per cent. added by my department to the amount of the rebate for five years from 1988.

Few aspects of our pension proposals have aroused as much interest as this one, but I believe that it is important to get it into perspective. Essentially, the 2 per cent. is a pump-priming exercise, a modest inducement aimed at those who do not at present have the option of a pension with their job, and it is available for a maximum of five years. I have explained that personal pensions are a new opportunity. In pensions, old attitudes die hard. I am convinced that once they start saving through a personal pension scheme people will want to go on doing so. It may be harder to get them started; we believe that the 2 per cent. incentive will help by drawing their attention more graphically to the option open to them and by making it more attractive to take that vital step.

I recognise that some of your Lordships will echo the worry expressed in another place that the 2 per cent. incentive, if available to people who leave employers' schemes in favour of a personal pension, will threaten the viability of salary-related schemes. To the extent that this reflects a concern to protect such schemes, I am wholly in sympathy with it. This Government have already done much, notably in last year's Act, to strengthen salary-related schemes and we have at all times made clear our support for them. That is why the charge to which I referred earlier, that we are threatening schemes, is absurd. We do not, in fact, believe that the 2 per cent. is a threat, simply because the evidence to which I have already referred shows how satisfied most people are with their salary-related schemes.

Interest in personal pensions is highest among those not in schemes, and we do not believe that many people would be tempted simply by a temporary 2 per cent. inducement to leave behind the advantages that such schemes offer. But our minds are not finally made up on this. My right honourable friend the Secretary of State said in another place that he was prepared to think again about the effect that the 2 per cent. incentive might have on existing members of occupational schemes and he did not rule out any change. I am sure that he will equally take into account the views expressed today by your Lordships on this matter.

Clauses 4 and 5 carry through to personal pensions provisions for the reduction of state earnings-related pension and for the approval by the Occupational Pensions Board of arrangements when schemes cease to be appropriate. Clauses 6 to 10 of the Bill concern occupational pension schemes. They will make it far easier for employers who want to contract out of the state earnings-related pension scheme by allowing money purchase schemes, based on a defined level of contribution, to do so. As for personal pensions, the basic qualification will be the amount of the contracting out rebate and the extra 2 per cent. incentive will be available for the same limited period to newly contracted-out schemes. That should help achieve a substantial expansion among occupational pension coverage. Hand in hand with this new flexibility will go another: giving everybody in an occupational or personal pension scheme of any description the right to boost his pension savings by making additional voluntary contributions, up to the ceiling allowed by the Inland Revenue.

Clauses 17 and 18 at the end of Part I provide for modifications to the state earnings-related scheme to reduce its cost to a manageable level next century. The alternative is stark and has been spelled out by the Government Actuary. Without change, the cost of the earnings-related scheme will rise from around £200 million a year now to £25½ billion by 2033. What this could mean in terms of higher national insurance contributions will not be lost on your Lordships. Quite apart from the cost that this could place on contributors—and there will be proportionately fewer of them than now—it represents by any standard a massive pre-emption of resources without regard to the possible priorities of the day, 50 years on.

The Bill will reduce the emerging cost of the state earnings-related scheme by about £12½ billion by 2033. That will still leave a substantial state pension cost to be borne, but it is one that should in all conscience be bearable. And the cost will be reduced in the areas where savings can best be made, first, by basing state pension rights, like those in occupational pension schemes, on a lifetime's average earnings rather than on the best 20 years. But as your Lordships will be aware, there will be special protection for people who take time out of work to bring up children or to look after someone who is disabled, or because they are themselves disabled.

Secondly, the earnings-related pensions will be based on 20 per cent., rather than 25 per cent. of earnings. Thirdly, contracted-out pension schemes will have to have inflation-proof guaranteed minimum pensions, which broadly correspond to the state additional pension, by up to 3 per cent. a year once they are in payment. They will be fully compensated for this through the level of the contracted-out rebate, and any inflation-proofing above 3 per cent. will be undertaken by the state. Finally, the Bill modifies the inheritance provisions in the state earnings-related scheme, so that widows and older widowers in the next century will inherit up to half their spouse's additional pension, as well as getting their own in full; but the ceiling on the total amount which they can have will be at the same generous level as now.

These are sensible and responsible, and, I would say, courageous measures. They will bring the cost of the state earnings-related scheme to manageable proportions by making reductions where they can best be afforded. And they do so in such a way that the pensions of nobody retiring or widowed before the year 2000 will be affected.

Our second major objective is to direct help towards the people who need it most. Need is not something static: just because a particular group stands in the greatest need at one time does not mean that it will do so for all time. The present social security arrangements take too little account of how the balance of need has shifted over the years. The Green Paper which we published a year ago showed graphically what changes there have been. Where 20 or 30 years ago pensioners were the group most disproportionately represented among those on the lowest incomes and with the greatest needs, today that is not so. Their place has been taken by low income families with children, who now make up more than half the people living on the lowest incomes. Clearly a modern system geared to modern needs must do more to help such families. This Bill tackles the problem head-on through the family credit proposals and the family provisions in income support. It will also enable us to direct more help towards disabled people on low incomes, whom the review showed to be another group standing in particular need.

Clauses 19 to 21 in Part II are where we deal with the income-related benefits, and where the seeds of simplification and improving incentives are to be found. For the first time we shall have the three major income-related benefits—income support, replacing supplementary benefit; family credit, replacing family income supplement; and housing benefit—put on the same basis. It is significant that with our simplifications it is possible for these clauses to cover all three of those benefits. The common basis of assessment for them will be that of net income, instead of the mixture of net and gross that exists now. This, together with the structure of the benefit rates, will enable us to tackle the worst of the poverty and unemployment traps and make it genuinely more worthwhile for people to take work.

The effects of this simplification are profound. Many of the problems inherent in present arrangements lie in the different rules for different benefits: for example, allowances for children now are provided at different levels and on different structures in each benefit. This must be a nonsense in any coherent scheme designed to help people who are less well off.

Income support will, I believe, be a real improvement on supplementary benefit. Even a relatively short spell in your Lordships' House has convinced me of the rashness of describing anything in social security as easy, but I can confidently say that it will be a great deal easier than supplementary benefit for people to understand—and that applies both to claimants and to the staff of my department. We have managed to cut through a great deal of the complexity that is the plague of present arrangements, by designing income support as a basic allowance supplemented by standard additions according to the particular group to which people belong. There will be, for example, a family premium, a lone parent's premium and additions as now for each dependent child. It is why there will be a pensioner's premium with a higher premium for pensioners over 80. It is why there will be a premium for disabled people and an extra family premium for every disabled child in a family. This structure will make it simpler than now for people to add up the allowance plus the addition and work out what their regular weekly benefit should be.

The second benefit dealt with in Clauses 19 to 21 is family credit. The structure of family credit represents a major improvement on that of family income supplement, which it will replace. It will be a much more effective way of directing help at low-income families, twice as many of whom are expected to benefit from the new scheme as do now from FIS. We shall be spending £200 million more on help for this particularly needy group. But the improvements do not stop there. Entitlement will be based on net income, the same basis of assessment as for the other income-related benefits. And the structure of the rates, with the help in kind at present provided through school meals and milk replaced by cash, will be such that people working and on family credit will not find themselves better off out of work. Nor will they be caught in the poverty trap.

If I may run ahead of myself for a moment, I would point out that it is in Clause 73 that the discretion of local authorities to provide subsidised meals for school children is withdrawn. We estimate that family credit will support more children than the present scheme which largely rests on the discretion of local authorities; and I might remind your Lordships that only two-thirds of them have a discretionary scheme at all. Finally, perhaps I may say that the cash compensation will be paid for every week of the year instead of a school meal that may or may not actually be eaten by children and is not available for most children during the school holidays.

Your Lordships will know that a great deal of attention and discussion has focused on our proposal in Clause 27 to pay family credit through the wage packet, for which the Bill provides. The House will also be aware that my right honourable friend has undertaken in another place to look again at the whole mechanism for paying family credit, and to do so in consultation with bodies representing both employers' and women's interests. With those discussions about to get under way, your Lordships will not expect me to say any more on that particular point at this stage.

Baroness Jeger

Why not, my Lords?

Baroness Trumpington

My Lords, the third income-related benefit covered in Clauses 19 to 21 is housing benefit. As now, a person will be entitled to housing benefit if he is paying rent or rates for his home. If his net income whether earned or unearned does not exceed the income support level appropriate to him and his family he will be able to receive the maximum amount of housing benefit. This will be specified in regulations made under Clause 20. The Government propose that the maximum level of help for rent should be 100 per cent. but for rates it should be less in order to improve local authority accountability for the cost and provision of local services. This particular proposal will be developed in the light of the Government's wider proposals for reforming local government finance.

Clause 20 also enables the so-called taper to be prescribed for the reduction of housing benefit for those whose net income is higher than the appropriate amount but not so high as to justify withdrawing help completely. Putting housing benefit on the same footing as income support will be a major simplification and we shall be able to get rid of housing benefit supplement. The result is that we will have a single scheme with two tapers instead of the present six.

Clauses 28 to 31 set out the framework for the administration and funding of the housing benefit scheme. Your Lordships will notice that the scope for making regulations for housing benefit is much more clearly delineated than in the present legislation. When speaking about income support, I stressed that it would meet the general needs of particular groups. But we have recognised throughout that, however well designed a scheme may be to meet such general needs, there is no way of anticipating special or emergency needs. There will still be domestic crises, involving large unforeseen spending; some people will still face real problems in budgeting; others may face losses through flood or fire; and we must certainly not neglect the cost of helping people resettle in the community after long-term residential care.

It is for precisely those reasons that we will have the social fund, with which Clauses 32 to 34 in Part III deal. This again is one of the aspects of our proposals which has perhaps generated more heat than light. That obscures the fact that there is a very large measure of agreement on the need to change present arrangements. The social fund will provide a quick and flexible way of providing help to meet real need, in contrast to the rigidly regulated system which we now have.

The present system of single payments in supplementary benefit based on statutory entitlements has simply run amok. We are talking in terms of spending £300 million a year on those one-off payments, and they are not even well targeted. In 1983, more than 80 per cent. of the payments went to some 9 per cent. of claimants. And appeals against an adverse decision on even a minuscule amount can go through several tiers of formal adjudication lasting a matter of years before the final outcome is known.

That is the kind of thing we want to get away from; that is why are proposing to move towards a much more flexible system of help. Because the social fund will be administered on a discretionary basis by specially-trained staff in my department's local offices, the help provided will not only be available more quickly but will be more effectively directed towards real need—a return to that key theme of our reforms. In case there is any doubt remaining in your Lordships' minds, let me stress yet again that payments from the fund for maternity and funeral expenses to people on low incomes in place of maternity and death grant abolished in Clauses 36 and 39 will always be paid when the qualifying conditions are satisfied.

Some of your Lordships were, I know from our debate last summer, concerned about the need for an independent review of adverse decisions. Your Lordships would, I am sure, readily accept that it would be foolish to introduce the new discretionary approach which I have described and at the same time retain the rigid adjudicatory machinery more appropriate to a regulated scheme. What we are after is a quick but dispassionate review of decisions, so that claimants know exactly where they stand, instead of dragging through months and years of appeals. But we recognise the level of interest in reviews and, in particular, that they should be seen to be more than mere rubber-stamping.

That is why we have added Clause 34. It provides for a statutory right of review of a decision of a social fund officer and for further reviews of a decision beyond the local office to be undertaken by a social fund inspector. The inspector will be appointed by my right honourable friend the Secretary of State and—this is the crucial point—he will be outside the chain of local office managements. That means that we shall have responded to the concerns expressed without sacrificing the speed and flexibility that are the essentials of the social fund proposals.

I have already mentioned that disabled people are a particular group whom we want to help. I believe your Lordships would wish me, in the context of the social fund, to say rather more about the disabled. A great deal of attention was given in another place to the needs of the very severely disabled, but it is important to get the scale of the problem into perspective. Most disabled people will be better off as a result of the changes. Many of those who do not get the disability premium in income support may get another premium. For example, younger disabled pensioners will immediately get the over-80s premium, which is set at the same rate as the disability premium.

Having made the general point, let me stress that we are concerned about the very small number of disabled people who get immensely high additional requirements at present and who would do less well under the new scheme. The lobby of Parliament today by severely disabled people has reminded us once again that the needs of the disabled are a priority. But I must make two points here. First, as your Lordships will know, we have started a major new survey to secure more comprehensive and up-to-date information about the numbers, circumstances and needs of disabled people. We expect in the light of the findings of the disability survey to look again at the whole range of provision for disabled people. The fact that we are making much-needed changes now does not ring-fence them from re-examination when those in-depth findings are known. Secondly, the flexibility of the social fund will be available to help with the needs of individual disabled people.

I now turn to Clauses 35 to 43, which amend provisions under the Social Security Act 1975. The main provision is to replace the existing widow's allowance with a tax-free lump sum widow's payment of £1,000. That will be paid immediately after the husband dies, and it will be completely disregarded in deciding whether or not a widow qualifies for help with funeral expenses from the social fund. Widow's pension and widowed mother's allowance will also be paid immediately after bereavement, rather than after six months as now; and the reduced rate of widow's pension will be paid between the ages of 45 and 55. rather than 40 and 50.

Clause 37 and Schedule 3 contain important proposals for changes to the industrial injuries scheme, to concentrate help more on those with significant disabilities. Your Lordships will know that those provisions were added to the Bill following consultations with the bodies most concerned. Clause 41 extends the maximum period of disqualification of unemployment benefit for those who leave their employment voluntarily. The maximum period will be 13 weeks rather than six weeks as now.

Part V covers maternity provision and represents a major rationalisation of existing arrangements. The Department of Employment's maternity pay scheme will be amalgamated with the DHSS maternity allowance, providing a more streamlined and better-directed benefit. In particular, it will concentrate help on women who have been in recent work—in other words, those who do actually give up work to have a baby. It is after all, for those women that the benefits are most obviously intended.

It will surprise none of your Lordships if I re-emphasise that the third major aim of the review and of the Bill is to create a simpler system of social security. Part VI introduces common provisions across a wide range of social security benefits, so removing many of the anomalies to which I referred at the start of this speech, and thus achieving yet more simplification over the whole scheme of social security. I am conscious of having spoken for a long time, and I am sure that the noble Baroness, Lady Jeger, is glad that I did not accept her invitation to go on at an earlier stage. Your Lordships will be relieved to learn that I have now covered the major elements in the social security review and the reforms in this Bill. The proposals have been the subject of extensive consultation with interested bodies. I remind your Lordships that the whole discussion process, from the launching of the first review team to now, has taken two and a half years. I stress the continuity of that review process because we have made it clear all along that if we can make improvements to our proposals without sacrificing the principles behind them, then we are ready to do so.

I have already referred to the Secretary of State's undertaking to look again at the mechanism for paying family credit and to our response to concern about independent reviews on the social fund. On housing benefit subsidy and administrative costs, we have demonstrated our willingness to be flexible without compromising the principles of our reforms. In the same way, we succeeded after consulting on the Green Paper in finding a way of giving more people a pension of their own while preserving the basic state pension and a modified earnings-related scheme.

My Lords, I know that this Bill will be subjected to constructive and critical examination in Committee, drawing on the breadth of experience that exists in this House. We make no apology for the principles underlying this measure. If social security is to serve the ends for which it is intended, it must be better directed; it must be simpler; it must strengthen rather than weaken incentives; and in retirement provision, more people must have the chance of a pension from their job. The flaws in the present system prevent that. We have come up with solutions which will remedy those flaws and which will restore social security to its true purposes. Those solutions are in this Bill, and I commend it to your Lordships.

Moved, That the Bill be now read a second time.—(Baroness Trumpington.)

6.40 p.m.

Baroness Jeger

My Lords, I must begin by protesting about the Government's handling of the timetable. It is absolutely disgraceful that a measure which affects every person in this country—literally from the cradle to the grave—should have been given second billing to another important measure. But it is not surprising. This Bill has aroused such anxious and deep opposition to some or other of its provisions from the widest spectrum of informed and responsible non-political organisations that the Government must be deeply ashamed of it. They must hope to have the minimum of debate and publicity in your Lordships' House. However, I say to the Government that they will not be able quietly to hustle the Bill here. There are expert and experienced people in every part of the House who have criticisms to make.

Representations about all or part of the Bill have come from independent bodies like the Family Policy Studies Centre—financed in part by the DHSS—the Economic and Social Research Council, the Family Welfare Association, Family Service Units, the Association of Municipal Authorities, the Disability Alliance, the National Consumer Council, Dr. Barnardo's homes and the Spastics Society. It would save the time of the House if the Minister, or whoever is to reply, could tell us how many organisations have agreed to the Bill rather than for me to go on reading out the number of organisations who are anxious about it, including the British Association of Social Workers. I have letters from organisations concerned with the blind, refugees, widows, homelessness and the unemployed. Therefore, I cannot understand why the Government should feel that there is any support for this measure among people who are working at the sharp end and who know what they are talking about.

However, I refer back to the timetable, about which my noble friends and I must protest. Owing to the limitations on time imposed in the other place, out of 70 clauses and eight schedules only 33 clauses and two schedules were fully discussed and examined in Committee. So the Bill comes here incomplete in its examination—and much of it dismissed, I would say, in a cavalier fashion if that were not an insult to cavaliers for whom I have some affection.

I was especially interested in the words of the Leader of the House in the other place on 15th April (reported in col. 750 of Commons Hansard). He said: It is perhaps appropriate also, in the context of a Bill which has aroused such strong feelings in this place and in the public at large, to mention the role of the other place"— that is, this House— in considering legislation. The other place has shown that it takes seriously its role as a revising Chamber, and no doubt it will continue to do so. Indeed, we shall. In defending the guillotine in the other place, the Leader of the House said on the same day (at col. 749 of Hansard]: This constraint is necessary for the Bill to receive reasonable attention in another place". So we all expect time here for "reasonable attention"; but I must say that the Government have not made a good start in the way that they have arranged today's business.

There are several fundamental difficulties about the Bill and I do not blame the noble Lord the Minister for not having gone into them all. In the first place, the Bill is chaotic. It should have been three Bills. Some experts say it should have been seven, but I shall settle for three. Certainly Part I, which deals with pensions, deserves its own primary legislation. Secondly, it is impossible to deal effectively with national insurance provisions for the whole nation in a vacuum, separate from taxation proposals. We have a Green Paper on personal taxation before us; but we do not know the Government's intentions except by leaks—and that seems to be the Government's favourite method of communication nowadays.

I give one example, and it is not mine. I read this in a report from the respected Institute of Fiscal Studies. The report suggests that if the Chancellor's preferred plan of transferable tax allowances is implemented it would cost £4.5 billion to ensure that working couples are not to be worse off. I quote from the report: For the same money the Chancellor could double child benefit to 13 a week and cut the basic rate of income tax to 25 per cent. I give that example to emphasise the inseparability of personal taxation and personal benefits.

The Prime Minister and other Ministers often refer to the desired preference of raising tax thresholds in order to help the unemployed and low-paid families. On 28th January the Secretary of State said (reported in col. 819 of Commons Hansard): Families with children now make up more than half of the people living on the lowest incomes—unemployed families, but also low-income families in work. The Government have emphasised that the Bill is supposed to target on the most needy. I can tell the Government that the most accurately targeted improvement for poor families happens to be called child benefit. The Government's response on the last up-rating was to keep the child benefit increase below the rate of inflation by 5 per cent. and thereby erode its value. Of course, all taxpayers would like the thresholds to be raised; but that is not targeting because by a process of osmosis the benefits spiral all the way up the income scale and therefore are not targeted among the poorest people in our country.

Having set themselves an impossible task because of the dichotomy between the Treasury and the DHSS, the Government now produce a Bill of utmost confusion, complication and social divisiveness, leading to anxieties among those least able to sustain them; people whose lives are already disfigured by poverty. Here there is a fundamental division between us. I know that there are many noble Lords in other parts of this House who are concerned and who are generous in their voluntary work. But, basically, social security is not a matter of helping lame dogs over stiles. It should be concerned with knocking down stiles and with preventing or healing the lameness. There is nothing in the Bill dealing with poverty, the causes of poverty, the causes of unemployment and distress which are at the heart of the matter.

The phrase "social security" is not a happy one. I prefer what a civilised nation should regard as "collective security", in which we all give and we all take, each preserving self-respect, and where payments to those who need them are not denigrated as feckless public expenditure but as a transfer of resources between civilised people. It is not merely the relief of poverty but the response to an aspiration for security in its widest sense which will give people confidence in their own value whether they give or whether they receive. Against that background this Government could not do other than produce a bad Bill. Since 1979 they have passed five major social security Bills and many regulations, all with the basic, crude objective of diminishing help in various spheres.

I pay noble Lords the compliment of presuming that they have read all 158 pages of this Bill. The Minister's summary may have helped the House, but I must turn to the main criticisms of the Opposition, to many of which we shall return later. I hope that my noble friends will deal with some of them in more detail today. There is one part of the Bill that divulges some facts, though most of the Bill is very short on facts. I refer to the Financial Memorandum, which in turn refers to the report by the Government Actuary—Cmnd. 9711, in case all your Lordships have not yet read it.

I quote a few sentences from page xv of the Bill: in 1988 (the first full year) the replacement of the existing maternity allowance will reduce public expenditure by £140 million". How are more mothers to be helped if the Government intend to save £140 million? From whom are they taking that £140 million if not from the mothers of this country? The statement continues: The effect on the Consolidated Fund of the replacement of maternity pay by statutory maternity pay will be to reduce public expenditure by £80 million". The Minister tells us that mothers are to be better off, and the Financial Memorandum to the Bill tells us how much the Government are saving. This is money that is taken away from families in this country by a government who profess their reverence for the family. No wonder that all the organisations which try to help our poorest families are disturbed and anxious. I quote again from the Financial Memorandum: The extension from six to thirteen weeks in the maximum period of disqualification of unemployment benefit for those who are voluntarily unemployed is expected to save about £50 million in … the first full year"— save for the Government, not for the poor people.

The Financial Memorandum states: spending on housing benefit would be reduced by around £450 million". This comes after a reduction last year of £200 million, and goes hand in hand with reductions in spending or, as I prefer to say, investment in housing. It appears that this Government prefer to have an increasing number of homeless families expensively and inadequately housed in bed and breakfast or board and lodging accommodation rather than put money into housing the people.

There is also the recent news that payments in respect of mortgage charges are to be reduced by 50 per cent.—that the Government intend to reduce by half the assistance that is given to people on supplementary benefit to keep up with their mortgage payments. This simply means that the Government are transferring costs from the Department of the Environment (which ought to be building) to the DHSS, and they then complain about the poverty which they themselves have created.

The Financial Memorandum does not refer to blind people. I hope that whoever answers for the Government in this debate can tell me what is to happen to blind people. Since 1969 there has been an extra supplementary benefit allowance of £1.25 for blind people and this has not been increased in line with inflation. Is this small amount to be abolished so that blind people will be treated in the same way as sighted people, in spite of their special needs? Will the special income tax allowance for the blind continue, together with other concessions for radio licences and postal charges; or will these small ameliorations to their dark lives be taken away?

I am sure that many members of your Lordships' House have also received representations from widows and those who try to help them. I have been informed that 25,000 widows will be worse off as a result of this Bill, largely because of the age qualification change and because they will lose benefits when their children go out to work. Perhaps the Minister will explain this point.

I have to mention very quickly the problem of the disabled. I mention it quickly not because of lack of concern but because of lack of time. The representations that I have received show that there is anxiety among the disabled because they do not know whether, after the abolition of extra supplementary benefits, the revised payments will be equivalent to what they receive at present. There is more to come, and I do not apologise for quoting once more from the Financial Memorandum to the Bill: the proposed changes to the industrial injuries scheme will save about £45 million in the first full year". This means that from people who have been injured at work the Government intend to save £45 million a year. That is money which is taken away from people who have been injured at work.

I find all these facts, which are in the Bill, totally inconsistent with what the Minister said earlier today.

Lord Ennals

My Lords, she must have been talking about another Bill.

Baroness Jeger

My Lords, it must have been another Bill that the noble Baroness was talking about.

There are many other fundamental problems. I find that this is a kind of ectoplasm of a Bill, because it has no definition or quantification for claimants. It is very difficult to have a constructive and informed debate about this Bill because there is so little information in it. The major changes are to appear in regulations and not in legislation. Your Lordships are being asked to vote blindfold on a minefield of unclear and unspecified regulations that are to be brought in at unknown dates and are of unknown content. This is not legislation; it is dictation; and it undermines the authority of Parliament.

I am always willing to be corrected if I am wrong, but I think that there are 24 references to facilitating regulations, giving rise to some 85 separate provisions plus several orders and directions. I remind your Lordships that of course statutory instruments cannot be amended. I refer noble Lords to Clause 59, which provides that regulations may be made before they have been referred to, or before a response has been received from, the Social Security Advisory Committee, the Industrial Injuries Advisory Council or the Occupational Pensions Board.

It seems to me that by taking away this process of consultation the Government are taking unto themselves the most extraordinary dictatorial powers. I suggest that Clause 59 is a very arrogant clause that destroys the pattern of consultation which has created some consensus over the years and has helped the public to have some confidence in the fairness of decisions. We live in a complex society and the aim of any government should be to resolve those complexities and not aggravate them.

I have said that the extension of government by regulation is unacceptable in a democracy and that the Bill does not provide Parliament, nor the public, with sufficient clarity, leaving alone what the lawyers will make of this miasma. There are many difficulties about the Bill that our legal friends will have to face.

I wish to speak briefly to five especially controversial themes. I hope that in accordance with the promise of the Leader in the other place we shall have days and days for the Committee stage of this important Bill. The first anxiety is about the emasculation of the state earnings-related pension scheme. But I shall leave other noble Lords who are cleverer than I to deal in detail with that. Secondly, there are the new income support arrangements which will require the poorest people to pay 20 per cent. of their rates out of what will be for many an eroded income. That is another example of the Government's failure to integrate their policies.

On 28th January (at col. 829 of the Official Report) the Secretary of State referred to an impending review of local government finance which would involve the proposition that all adult residents, not just householders, should contribute to the cost of local services. He said: The proposed social security structure will have to be developed in the light of discussions on the Green Paper. One option would be to extend the present rebate arrangements to the proposed new community charge. That could be done only after introducing new primary legislation". Why are we pre-empting this further new primary legislation and causing unnecessary anxiety? Does "all adult residents" include everybody over 18—students, young people on Manpower Services Commission courses, refugees and the sick? How will the Bill be divided among the family and lodgers? Will there be imprisonment for debt? It is impossible to accept that part of the Bill without linking it to the other considerations about local government finance.

The third anxiety is about the proposal to switch the new family credit to the wage packet, usually that of the husband. I appreciate that the Minister has said that discussions are going on about this. I hoped that she would be able to tell us today what amendment the Government are prepared to make. What with a Green Paper, a White Paper and the Bill having gone through all its stages in another place, I should have thought that someone would have had time by now to decide whether a family credit payment to the husband was right. I hope that many Members of your Lordships' House will insist that there must be a change, however it is made, in that situation.

There has been widespread opposition to the proposal not least, I find, from employers. On 19th May (at col. 149 of the Official Report) the Secretary of State promised to reconsider the mechanism of payment of the the family credit scheme, so that time for amendment can be found in another place". When are we to have that amendment? "Another place" means us; so we must know about it fairly soon.

At present the take-up of family income supplement is only about 50 per cent. The new family credit system may find even fewer applicants, especially if a man's employers are involved. He may not want his employer to know how many children he has, legitimate or illegitimate; whether he is married, single, separated, divorced or a fly-by-night, as some of the most attractive men are. Many employers will not want to know and will not want that accounting nuisance to be a burden on their small business—which this Government are supposed to be encouraging! We had a piece of glossy paper last week about reducing government interference. The noble Lord, Lord Young, is keen to reduce red tape for small businesses; yet the Government are bringing in a provision that will mean that every employer, small or large, has to find out who is married, who is sleeping around, who is wicked and whose children are deaf, dumb or stupid. It is a most appalling situation.

We have to bear in mind that people change their jobs. Will this piece of paper—the kind of piece of paper that the noble Lord is trying to abolish—follow the man around from job to job? I think of itinerant building or agricultural workers who will have this ball of string or paper tied on to them in order that the Government and their employers may know the circumstances of their personal life.

Moreover the Bill is unclear about what benefits are to be included in the credit payments. There could be complications with housing benefit. I understand also that instead of free school meals, to which the noble Baroness referred, a notional amount will be included in the family credit to cover the cost of school meals. That seems to me—and I am open to correction—that the children must take the money to school. In how many poor households will there by any money left at the end of the week or in times of urgent need?

Clause 59 takes away the discretion of local authorities to provide free meals to children from poor families who may be just above the family credit line or who may have other problems, perhaps of uncaring or inadequate parents. Goodness knows, there has been enough publicity in recent times about the difficulties of children with uncaring parents.

The fourth major cause for distress is the proposed cut of about £450 million in housing benefit. I mentioned this earlier, but it is relevant to remind your Lordships of the absurd suggestion of taking away half of the mortgage interest help for people on supplementary benefit. A struggling unemployed worker, trying his best to become an owner-occupier in Thatcherite Britain, will be in fear and danger of losing his home. In 1985, 16,600 homes were repossessed for mortgage default. Ten per cent. of homeless families are in that plight because of repossession. It seems that the Government are determined to increase the number of those in trouble.

The fifth anxiety to which I wish briefly to refer arises from the social fund concept. That is supposed to amalgamate existing benefits and single payments to people now on supplementary benefit. The Bill empowers the social fund to make loans, not grants. People are on supplementary benefit because they are at or below the accepted poverty line, which, goodness knows, is low enough. According to the Bill, those loans are to be recoverable by deductions from weekly benefit, thus burying the poorest people deeper in the pit of their poverty. Under the Bill, they are to pay 20 per cent. of their rates out of their benefit; they are to lose 50 per cent. of their help with mortgage interest, and they are to pay whatever is decided as a repayment to the social fund.

How much poorer do the Government want the poorest people of this country to become? It is not targeting on the worst off; it is crucifying the worst off. It is an escalation of deprivation. This measure should be called the social insecurity Bill. In my view, only the pawnbrokers will benefit from it. The proposals will turn disadvantaged men and women into mendicants: the Bill pauperises people who already feel rejected and desperate, or otherwise they would not be appealing to this reincarnation of the board of guardians.

It is difficult to go into further details because we do not know how the fund will work, what money it will have, what will be the basis of the assessment of peoples' entitlement, whether there will be continuity in its payments or whether people are to be left in miserable uncertainty about what they will receive the next time they apply. The worst aspect of the proposed social fund machinery is that at present the Bill provides no right of appeal to an independent tribunal.

I appreciate that the Government have promised to look at that matter again. Whatever may be the views of noble Lords on the Bill, I submit that that is an outrage against natural justice and civil rights. I refer noble Lords, not to my thoughts, but to the special report of the Council on Tribunals chaired by the noble Lord, Lord Gibson-Watt, whom I seem to remember as a loyal member of the Conservative Party. The report comes from people who are not exactly a militant commune. Paragraph two states: One of the proposals in the White Paper concerns appeals. It is that there should be no right of independent appeal against decisions made about payments and loans from the Social Fund … The Council on Tribunals believe this proposal to be misconceived. It would abolish a right of independent appeal which has existed for over 50 years … The further right of appeal to the Social Security Commissioners and the courts would also be eliminated". Whatever one's views are about the social security system in this country, I submit that that is completely wrong in principle. There are few processes in which the citizen is prevented, through executive decisions, from making an appeal, giving him an opportunity to assert his rights and to query decisions about himself made by other people. It is not clear—this is very important—that aggrieved people would be able, through their Member of Parliament or otherwise, to take the matter to the Minister who is answerable ultimately to Parliament.

In paragraph six, the report states: It is most unusual, if not unique, for neither of these methods of redress to be available. It would involve an important constitutional change in the field of social security, which is anyway difficult and sensitive. The findings of an official in a DHSS office would be final". The report adds that in the four years 1981–84 over 25,000 decisions on single payments were changed on appeal by tribunals. To abolish those tribunals means that there could be at least 25,000 people who do not obtain fairness and justice. The report goes on to say: It is generally accepted that more than a quarter of all decisions on supplementary benefit are incorrect. I respect the noble Baroness the Minister who has to repeat only what her friend in the other place has said about listening to the arguments, but I hope that it will not be long before we hear more of the arguments. I apologise for going on so long, but I do so only because the Bill is so long and so important.

The Minister for Social Security has undertaken to appoint people called "social fund inspectors" to whom appeals can be made. However, he clearly stated: They will be officials of the Department."—[Official Report, Commons, 19/5/86; col. 43.]. I have read all that. It ruined my holiday. That does not meet our objections. Unless an amendment of substance is made in this House Clause 33(10) will remain, and, in case not every noble Lord has had time to look at it, I shall read it. It states: An officer shall determine any question under this section in accordance with any general directions issued by the Secretary of State, and in determining any such question shall take account of any general guidance issued by him". How is a poor disabled person to contemplate his rights under such a law?

I should like the noble Baroness the Minister to tell me whether people who feel that something has gone wrong with their application to the social fund will be able to apply to the courts. I remind her of the case of the board and lodging payments—the famous Cotton case which cost the Government a great deal of money because the applicant was able to apply to the High Court against the considered injustice of payments being made under regulations.

Disabled people will not know what they are or are not to receive. We do not know how much money will be available. We know only that the death grant is also to be abolished. I mention that briefly because I think that it is a serious breach of a contributory insurance benefit for which some of us have been paying for over 30 years. Of course, there have been discussions by all parties about the future of that payment. Strictly speaking, it is not a grant but an insurance payment. No commercial insurance company would be able to divest itself of such an obligation. Some of us who may now be in the funeral belt had thought that our lifetime contributions might have bought a few daisies for £30 or perhaps a bottle of bubbly for anyone who mourns our departure. That £30 is not much, but it is my £30. It is a contractural benefit to which I have contributed all my working life. I feel that this is a serious breach of what should be a government contract.

It is in such a context that we must discuss this abominable Bill. I believe that the Government have misjudged the mood of the people. They seem to presume that we are a selfish, greedy people who enjoy telling a thin man to tighten his belt or a one-legged man to stand on his own two feet. They deliberately alienate the most disadvantaged and create the social tensions which they profess to deplore.

I was reading the Bill the other Sunday. I should have had something better to do. I made myself read it while I had one eye on the television films of millions of people running the world for Africa. They were making a definitive statement of personal concern for other people. That I believe is the spirit of the future. This Government will destroy that spirit at its peril; and they will destroy themselves.

I end on a note of hope. I think that the sun is rising somewhere. This Bill in its present form will be an albatross round the neck of every Conservative candidate in the next election. But the position is that the changes in maternity and funeral grants do not start until April 1987. Other parts of the Bill take effect from April 1988. There may, sadly, still be a Conservative Government in 1987, but, I am confident, not in 1988.

7.20 p.m.

Lord Banks

My Lords, I should like to thank the noble Baroness, Lady Trumpington, for her comprehensive explanation of the contents of the Bill. However, I must support the protest made by the noble Baroness, Lady Jeger, about the fact that this Second Reading debate on a very important Bill comes on so late in the day.

I must declare an interest. I am an insurance broker specialising in life assurance pensions. Our first criticism of this Bill from these Benches would be that as far as we can see no attempt has been made to arrive at a consensus with the Opposition parties particularly in the field of pensions. An attempt of that kind might not have succeeded but it would have been worth trying because of the disruption which continued disagreement between the parties over pensions in the years ahead is bound to cause.

Our second criticism is that the proposals—although they are set out in a lengthy Bill—are nevertheless not comprehensive. They do not cover and tie together the whole of the benefit field. Tax and social security are not to be integrated. It is true that as a result of the Bill they will be better aligned. The use of net income in the calculation of the three income-related benefit and common rules will see to that. We welcome that; but it is still far short of the full integration of income tax and social security benefit which we on these Benches are pledged to achieve. In fact there will be no tax credit scheme.

The Government have made it clear in their Green Paper on personal taxation that they oppose what they call Big Bang solutions. Among those they include tax credit or basic income guarantee schemes. This means that no effort is made in the proposals to take people in large numbers off means-tested benefits. That some 8 million people are dependent today on supplementary benefit is in our view a very unsatisfactory aspect of the current situation. Too much is left in the Bill—and here I agree with the noble Baroness, Lady Jeger—to regulations. It is difficult to see how the problems in the social security field can be solved on a nil cost basis.

The consequence of trying to do that is that one inevitably has losers and gainers—and more losers than gainers it seems. Some 2.1 million people would be better off as a result of the Bill and 3.8 million people would be worse off. There is much shifting of resources from the poor to the poor, from the right-hand pocket of the poor to the left-hand pocket of the poor. In the pension field the emphasis is on future pensions rather than on today's pensioners. The basic pension is not to be raised. Nearly 2.5 million pensioners will lose out under the proposals that are set out in the Bill.

Perhaps I may enumerate various particular concerns. We are concerned whether the client group premiums under income support will compensate for the loss of supplementary benefit payments for additional requirements. We are not satisfied that the family premium would be high enough. We are particularly concerned about the position of those in receipt of the disabled premium. What is the position going to be, for example, with regard to payment for domestic help? Will all disabled people who now receive payment for additional requirements be eligible for the disability pension? Should there not be a premium for carers?

With regard to family credit, we are glad that the Government are thinking again about payment through the employer. It is sometimes said that this is what would happen under a tax credit scheme. But in the scheme of that kind which was drawn up by my party the benefits in respect of children are paid direct to the caring adult, which would normally be the mother. We are worried about the future of child benefit. We seek a guarantee from the Government that they will maintain the real value of child benefit in the future which they did not do last November.

We continue to oppose the 20 per cent. contribution to rates by every householder. For the poorest this will simply have to come out of benefit, which seems to us to be absurd. We are very unhappy about the discretionary cash limited social fund. We do not view with favour—nor did the noble Baroness who preceded me—loans instead of grants to people on income support. We deplore the absence of a right of appeal, as again did the noble Baroness. We do not see any reason for a lower rate of income support for single people under 25. We shall want to look carefully and critically at the Government's proposals as they affect widows, and at the effect of the withdrawal of the free school meals from those receiving family credit. We are also concerned about the effect of the Bill on refugees—and my noble friend Lord NcNair will refer to that.

Perhaps I may now say a word about pensions. There are three specific points. I must confess that I am not happy about the right being given to a member of an occupational pension scheme to opt out of it at any time. I fear that that will undermine good final salary schemes. I would have preferred it if the option not to join had been available only when first becoming eligible to join such a scheme. I do not oppose personal pensions, but I would point out that an employee not covered by an occupational scheme already has the option to take out a Section 226 personal policy in addition to SERPS. All the Bill will do is to allow the employee to forgo his SERPS and have the rebate added to his personal pension policy. That is I think of limited advantage.

I am concerned about the 2 per cent. incentive to encourage employers and employees to contract out. It seems unfair that those who have already done this should not receive the 2 per cent. It seems positively wrong that 2 per cent. should be paid to induce employees to leave a contracted-out final salary scheme, for a contracted out personal pension policy. If I understood aright what the noble Baroness, Lady Trumpington, said, I am glad that the Government are prepared to think again about that.

Perhaps I may make one or two general comments about pensions. Good pensions are as necessary today as they will be in the middle of the next century. People are very worried—and rightly—that in the middle of the next century employees may be retiring on an inadequate basic pension. But what about the fact that many people are already retired today on an inadequate basic pension? After all, it is for today's pensioners that we are asked to pay. Somebody else will have to pay for tomorrow's pensioners. If an adequate state pension of, say, 50 per cent. of average national earnings for a married couple and 33 per cent. for a single person were achieved then I believe earnings-related pensions could be left to the private sector. But in my view all employees should have the opportunity to secure an employers' contribution to a private pension if they themselves are prepared to save. It is not a sound principle to ask future generations to pay more for their pensioners than we are prepared to pay for ours.

A piece of briefing material which I received in the course of the last few days contained the following information: The state earnings-related scheme plays an important function providing a satisfactory means of saving for retirement for all employees". Of course that is quite untrue. There is no saving at all. The money which is paid today goes to pay for today's pensioners. A commitment is placed on future generations, but there is no saving for it.

I made all those points on 24th June 1975 when we had the Second Reading in this House of the Social Security Bill which set up the present arrangements. I believe that those points are as valid today as I believed them to be at that time. I suggested when we discussed the Green Paper recently that the logic of those points might suggest that the best way to proceed would be to abolish SERPS, maintaining accrued rights; to end contracting out; and to have everyone pay contracted-in rates, which would provide the £4 billion necessary to increase the basic pension by 25 per cent. Over and above that I suggested that we should provide that any employee without an occupational scheme and who saved in a personal pension policy could receive a matching contribution up to 3 per cent. of his earnings from a central account administered by the Government but financed by a levy on all employers without an occupational scheme. That would be a less complicated version of employer-supported personal pensions.

The consequences of those arrangements would be a substantial improvement for today's pensioners. In the year 2026 approximately the same amount would be being spent on state pensions as under the Government's proposals, but it would be spent differently because more would go to the less well off and less to the better off The cost of course would drop off as the accrued pensions ran out, allowing the opportunity to increase the basic pension further. There would be no more contracting-out complications. There would be a clear demarcation line between state and private sector, whether the private sector were an occupational pension or a personal pension plan. No employee would be without the opportunity to secure an employer's contribution to a private pension if he were prepared to save himself. A further increase in the basic pension could be made as and when this was possible.

That is a possible alternative to the proposals which are set out in the Bill, and it is an alternative which I should have liked the Government to consider. However, my principal plea tonight is for a substantial increase in the basic pension so that today's pensioners can enjoy what is planned for tomorrow's.

In conclusion, I repeat that while there are some improvements in the Bill, we regret that it is not comprehensive and that it does not integrate income tax and social security benefits. We do not think a satisfactory reform can be achieved on a nil cost basis, and we are very concerned about the effect in practice of a great many of the proposals which the Bill contains. In the pension field we think that the proposals give today's pensioners a raw deal.

7.34 p.m.

The Lord Bishop of Southwark

My Lords, after listening to three such careful and substantial speeches, I am sure that your Lordships will agree that social security systems are about, or are meant to be about, the meeting of some very basic human needs and about the ways in which society attempts to do that.

In responding last year to the Green Paper on the reform of social security the Church of England Board for Social Responsibility warmly welcomed the Government's readiness to consider how the present system is working and to think in fresh ways about its future. Our submission contained and reaffirmed two Christian convictions in particular—convictions which I know are shared by members of other faiths and many Members of this House.

First, every person is made in the image of God, and so all should be respected and valued. In that sense we are all interdependent and have a shared responsibility for one another, which includes meeting the genuine spiritual, mental and physical needs of those who are poor or handicapped.

Secondly, welfare policies should aim to help every person to grow and develop as individuals, so that each one can make his or her contribution to the wellbeing of the community. That goes a little further than simply saying that it is about the relief of need. From that point of view children and young people are often the most vulnerable, since the effects of damage done to them in the early years can be very hard to overcome later. Therefore, any change of policy which puts children or young people more at risk in our society is to be resisted the more strongly.

Since last autumn we have had the White Paper, and now this Bill is before us today. The first part of the Bill has already been extensively discussed in another place and for that reason at least I do not want to comment on it now. The proposed simplifications in the structure of social security are welcomed for the sake of both those who seek help and those who have to administer the present complicated mass of regulations. The efforts made in this Bill to alleviate the worst effects of the poverty and the unemployment traps through the proposed family credit scheme will be good news for many low-paid families with children. We in the Churches certainly welcome those aspects of the Bill.

Yet, in spite of those gains, there is still considerable disquiet—some of which has already been voiced—and not least among many of our Church-based organisations which are closely involved with the relief of distress, the support of the family and work among children and young people. I believe that there are at least two fundamental reasons for this disquiet as well as some specific criticisms of the Bill itself and about how parts of it may work in practice.

The first general or fundamental point is the one that has already been mentioned by the noble Baroness, Lady Jeger, and by the noble Lord, Lord Banks. Any substantial improvements to the social security system in this country will have to move away from the present emphasis on means testing to an emphasis on integrating basic benefits for all with personal taxation.

There are a number of reasons for that, all I think emerging steadily more clearly as the present system becomes ever more expensive and difficult to administer. For example, means testing, especially where unemployment is concerned, acts as a disincentive to part-time work and initiative. Conversely, it feeds the so-called black economy. All the signs are that employment patterns in the future, the long-term future, will have to be more varied and more flexible. Our laws on taxation and social security should help that to happen, whereas at present they very seldom do.

Again, as we know and as has already been said very clearly, Beveridge rested his policy on an assumption of near full employment in the country; a modern social security system cannot do so. That must mean that we now start in a very different place. Again, the provision of basic income for all (which would not be all that different in principle from the income support now proposed in the Bill for some) together with generous child benefit and housing benefit or credit appropriate to each part of the country would lead to a major reduction in the huge numbers of people now claiming some kind of benefit. It would reach those who fail to claim, and it would reduce also the large numbers of people required at present to means test their fellow citizens. That in turn should mean that a more thorough and humane service could be provided for those who would still require some extra care and support.

Arguments centre on the cost of such a change, and I recognise that much work needs to be done still, but I am more and more sure that a final solution is far more likely to be along this path than any other. Although it is not fair in one sense to criticise this Bill for not dealing with that, one has to say that that is a fundamental weakness which makes it more difficult to judge the rest of it dispassionately.

The second main question is this: what is the nature and extent of poverty in our society at the present time? It is a word we are using all the time, and a word we are going to use a great many more times this evening. Clearly standards change in certain respects. The Family Policy Studies Centre has been mentioned as one of the bodies which has done work on this, and so have many other groups including the Family Service Units, but usually only enough to show how much more remains, and needs, to be done.

Until we define poverty more precisely in ways which are appropriate, for instance, to the actual family situations widely prevalent today, such as the distressingly large number of single families, it is difficult to say whether we are in fact spending too much, or too little, or have it about right. We know roughly what the present system costs. We know that unemployment has pushed these costs up massively in the last few years. We know much less about the long-term effects of this trend and about the hidden costs to other bits of government spending on health or education as a result of, say, bad housing, malnutrition, or hypothermia.

Understandable anxieties about what is called "demand-led spending" can sometimes direct attention from what must logically be our paramount and primary task, which is the prevention, as well as the relief, of genuine, injurious poverty and hardship, and then to the identification of where that is to be found in our society today, and how it can best be met and overcome. This has a first claim on a nation whose standard of living continues to rise in real terms for a majority of its citizens. Will the level of benefits be sufficient when we seem to have done so little work recently on the extent of the needs they are designed to meet? More precisely, by what process will decisions be made, for instance, on the "applicable amount"? Will such decisions be open to public scrutiny or debate?

I turn now to some more particular points, some of which have already been mentioned, and others of which, or the same ones, I am sure will be dealt with in much more detail by later speakers, but which I am aware, as your Lordships will realise, have aroused particular concerns in many Church and voluntary organisations. First, the proposed method of paying family credit runs contrary to a widespread conviction that it ought to be payable to the mother, unless of course she has left the home. The Secretary of State stated in another place that he now recognised the strength of feeling on this issue, and would think about it again. I am glad to know that the noble Baroness confirms this, and I hope it will not be long before we hear what that alternative method might be.

Secondly, there is great unease about the proposal to make some payments out of the social fund as loans. History is littered with examples of how lending can actually increase poverty, whether for nations or for individuals. While it may be appropriate in some cases, and I suppose therefore helpful, to have the freedom to do this, can we be assured that grants will remain the norm, and will the Minister be issuing clear and specific guidelines in this controversial area? In the notes that I received only half an hour before this debate began, I tried to find an answer to this question but I am afraid I did not do so. Therefore, I hope the Minister will forgive me if I missed the answer there.

Thirdly, any Bill which gives discretionary powers to civil servants will not only indicate the limits within which those powers can be exercised—or one hopes that it will—but should provide some kind of appeal mechanism—this has been stressed already—and especially, as with taxation, when discrepancies could arise between different offices. Will the proposed mechanism in Clause 34 be sufficient to cover, for instance, that kind of wider issue, and again will claimants making an appeal for review be entitled to legal representation?

Fourthly, child benefit is hardly mentioned in the Bill since it appears to remain intact. Here is a benefit which is not means tested, although it can be clawed back in part through taxation, and which by and large is simple to understand, simple to administer, helps those it is intended to help and goes right to the heart of some of the greatest areas of need in our community at the present time. It is, in short, a most popular benefit, but is it as safe as it looks? In Chapter 9 of the report, Faith in the City, it was particularly recommended that this benefit should not only be retained but increased as "a crucial means of preventing poverty". Can the Minister assure us tonight that this benefit is still high on her priority list and that of her department?

Faith in the City devoted quite a lot of space to the future of social security and related issues, and it would perhaps be appropriate for me to end with a quotation from paragraph 97 in Chapter 9 of this report. Politicians may well ask: do you really believe that those in work would be prepared to make real financial sacrifices to help those who are in poverty—particularly those out of work? We believe that they would—provided that the sacrifice was a shared one and equitably made. There is a collective concern about poverty and unemployment which has yet to find a means of being translated into action. A survey carried out in 1983, reported in the Government's Social Trends 1985, indicated that by a substantial margin (72 to 22 per cent.) the public's view was that the gap between those with high incomes and those with small incomes was too large. In the same survey, 32 per cent. of people said that more should be spent on health, education and social benefits out of increased taxation. Only 9 per cent. wanted cuts in taxation with less spent on health. education and social benefits. There is then a reference to a Gallup Poll in November 1984 which came out with similar findings. The report ends: We are aware that social survey evidence of this kind cannot be conclusive. But it does indicate—and the Church should affirm—that there is a national tradition of collective altruism". My Lords, it is our hope that this Bill can be so amended in its passage through this House as to confirm that national concern.

7.50 p.m.

Baroness Macleod of Borve

My Lords, the time is late. Some of us say that at five o'clock some afternoons, but as one of the "also rans", one of the first Back-Benchers speaking, I hope to set a good example by speaking very briefly.

We have heard brilliant speeches on this very important Bill. I do not think that the noble Baroness, Lady Jeger, for whom I have a great deal of respect, has spoken to the same Bill. I could not quite understand what she was talking about, but I know she has given a great deal of time to studying this Bill, as I have; but we have obviously come to different conclusions. I too have had many representations from organisations and private people, all of whom have been anxious about their own particular part of the Bill. They obviously do not seem to think that change is necessary. But they did not even know, for example, that at the moment there are 16,000 paragraphs on supplementary benefit. I do not know how on earth people, whether they are recipients or those who are administering supplementary benefit, are expected to understand the Bill as it is now.

Your Lordships will not be surprised to know that I welcome this Bill. I should like to congratulate my noble friend the Minister on the clarity with which she put it before the House this afternoon. It is necessary that the arrangements which are made for those less well off and for the pensioners in this country should be overhauled as soon as possible. That is desperately needed in view of the changing circumstances.

I am very interested and am helped in my knowledge of the Bill to realise that so much has been done to bring the Bill as it is drafted before your Lordships after it has been in another place. In the different circumstances, to which the right reverend Prelate so eloquently referred, it is designed primarily to help those who need it most, who need the finances of this country, especially the low-paid families with children. Those surely must be the top priority in our country today.

The noble Lord, Lord Banks, covered the pensions adequately. As I do not know anything about them, I shall not even allude to them. However, I should like to mention widows first and briefly, because I have an interest, as well as one or two other Members of your Lordships' House. I am national chairman of the National Association of Widows. I should like to say how much we welcome the £1,000 tax free that will be given to widows on the death of their husbands. They will not have to wait or to queue up for it; it will be automatic. Obviously I have not been able to take a raincheck on all of them, because there are over 3 million today, but the widows will prefer the £1,000 tax free to the 26 taxable instalments that they have received up to now.

I am pleased to read that the £1,000 will be disregarded when and if help is needed by widows for paying for funerals and other expenses, from the social fund. Other Members have mentioned the social fund. I take up something that other Members have mentioned. Obviously the social fund—although the people administering it will be properly and adequately trained—must be flexible. Therefore I submit that the guidelines set out cannot always be adhered to. I think that is right. The trained staff will, I am sure, do their best, but where the Bill allows wide discretionary powers, problems and queries are bound to arise.

I find the same problem that other speakers have found about appealing on the amounts that those who administer the social fund award to the various people who appeal for help. That is why I am pleased that the Minister announced this afternoon, I think for the first time, that inspectors will be able to hear appeals from local offices. She also mentioned—this is another of my interests outside this House—that people who have probably been in psychiatric hospitals and are sent out from hospitals into the community for the first time in their lives will be able to appeal to the social fund for help in setting themselves up in their new surroundings in the community. I think I am right in saying that. This is often, to my certain knowledge, a great trouble to them, for they try to get help from voluntary services and organisations. If they can go to the social fund that will be of help to them.

For the first time since 1974—that is, 17 years ago—when the National Association of Widows asked the government of the day whether pregnant widows could also have maternity pay, the Government have now agreed that they should have maternity pay. There are very few widows in this particular category. Unfortunately it seems that because the age of the widow receiving widow's benefit is to be raised by five years, bringing the new age for receiving widow's benefit up to 45 years, it is not really likely even in these days that a pregnant widow will be able to have widow's benefit. I may be wrong, but I do not believe that science has quite got that far.

My noble friend Lady Lane-Fox will be talking about the disabled. I want to make two or three comments. First, I am glad to see that the earnings disregard is going up from £4 to £15 and that also there will be an extra premium for a family which has a blind child or a child who is receiving attendance or mobility allowance. I do not know how many families are involved, but there must be a considerable number. I think that is an imaginative part of the Bill. Also, an extra premium will be paid if necessary to the disabled. I think my noble friend will be covering that.

I want to say a little about families on low income and the fact that so far as I am aware it stands out in the Bill that those are the people to whom the Government are giving top priority. Child benefit will continue to be paid to the mother through the Post Office. I believe there will be a certain amount of query about the payment of family credit instead of family income supplement. It is estimated that the family credit will go to twice as many families with children who work for 24 hours a week or more.

At the moment—and I say "at the moment" because I think that there might be some query about this—it is to be paid by the employer to the wage earner. I think that it is assumed that the wage earner will be the father of the family, but I do not think that in the north of the country at this time—and I hope that it will improve—it is necessarily the father who is the wage earner. I think that it is very often the mother who is now the wage earner. Therefore, I have given this as much time and thought as I could. At first, I came up with the thought that it should be paid to the mother, but on reflection and also for the reason which the noble Baroness has put before us tonight (that is, that the employer would then have to know a considerable amount about the finances of his employee) I am not certain that this is quite the right way of approaching the payment of the family credit. Also, there will be a family premium to help the people with low incomes.

This Social Security Bill, as I have said, is going to change a great deal of people's thinking in this country. I hope that those who, like me, are prepared to help this Bill along, will be ready for change, because change is not only our ally; it has to be made. The way that the system is administered at the moment is inadequate. It is very expensive to operate and I personally think that it is often very unfair. I hope that noble Lords will never again say that this Government are not a concerned government and not a caring government. Personally, I think that this Bill proves that this Government are both and I wish them well.

8.2 p.m.

Lord Stallard

My Lords, I can certainly join with the noble Baroness who has just sat down in congratulating the noble Baroness who opened this Second Reading debate on her comprehensive outline of how she sees the provisions of the Bill. But I cannot really go any further; the noble Baroness will not be surprised to hear that I cannot follow her any further down the road she takes.

Since 1980 we have had a series of Social Security Acts all designed to deal with one or other aspect of the system, all with two things in common: first, a nil-cost basis or nil-cost approach, and then an extension of means-tested benefits. Like other noble Lords, I have been critical both here, and in the other place when I was a Member there, of this approach to the problems of our social security system. I have opposed this Government's piecemeal approach whenever they have brought their smaller Bills forward in this House because it seemed to me—and I see nothing different at the moment—that their attempts to solve all the problems of social security simply by cutting resources and cutting staff and redistributing what is left more thinly over the whole system were not the right way to go about the review or reform of the social security system.

I have always believed, too, that the changes proposed in all the measures that have been enacted since 1980 have never been sufficiently funded. Based on the nil-cost approach, they were never adequately funded and, because they were never adequately funded, the system has gradually fallen into crisis—though, come to think of it, perhaps not gradually.

The social security system is now in serious crisis, and I do not think that anybody should have any doubts about that. The Secretary of State himself realised that when he announced the complete review. He called it the most thorough review since Beveridge. He announced that in 1984. Like other Members of your Lordships' House, I queried at that time the terms of reference of the review and the period that was to be allowed for the consultative process. Nevertheless, I accepted that there was a need for review and, with others, I awaited the outcome.

My first disappointment came when the structure of the review became clear. It was in fact a number of separate reviews, each covering only partial aspects of the social security system, but with no apparent overview of the whole system. I took the view that the separate elements of the social security system could not be put right unless the basic structure was right, unless the fundamental principles outlined by Beveridge were accepted and maintained, and unless there was a willingness to provide resources to fund the changes which we all felt were necessary. So I take a completely different stance from that of the previous speaker in that regard.

I can give some examples of my disappointment. One of the changes in conditions as compared with when the scheme was first introduced in 1948–49 has been the massive increase in unemployment—an increase from 1 per cent. then to 13 per cent. now. What is the Government's long-term view about how unemployment should be funded? What do they think the future unemployment figure will be and when will it flatten out? That should have been a part of the public review, part of the consultative process. We should have had answers and discussions on that very vital point. There was none.

There has also been—and this has been mentioned—an enormous increase in the number of single-parent families, for a number of reasons. There are now over 2 million single-parent families. But there was no real public discussion or public review in the consultative process on how the Government envisage dealing with this aspect in the longer term rather than by the piecemeal measures that they have included even in this Bill. My disappointment lay there as well.

Then there has been a swing to community care from institutional care for the handicapped and disabled. That has created a need for change. It is not just my view but also the view of most of the organisations which deal with and represent disabled people that the Government, by some of the provisions in the Bill, might force people back into institutions by putting community care beyond their means, and so undoing what has been attempted by successive governments. Again I was disappointed and dissatisfied with the inadequacy of the consultative process.

The Green Paper was published in June 1985 and we were given three months to complete the consultative process. Those three months included the two holiday months of July and August. It was not really in my view a very fair and long enough term in which to carry out this consulation. The White Paper appeared in late November and the Bill was given a Second Reading just a few weeks later in January 1986. Given the length and complexity of this Bill and the tight timetable that I have briefly outlined, I think that one could be forgiven for thinking that the Bill was already in draft while consultation was still in progress and that the Government had made up their mind well in advance of that consultative process about what they were going to propose.

As well as that, I would argue that the Government have no mandate for the changes now being proposed in the Bill. On the contrary, in previous elections and since the Prime Minister herself has given specific pledges on both pensions and child benefit, and both of these will be radically altered if this Bill becomes an Act.

There will undoubtedly be some long debates during the Committee stage on the proposals contained in this Bill and so I shall not now go into too much detail on many of the points that worry me. But I should like to touch in general terms on just one or two aspects of the Bill that cause me particular concern. In her opening remarks my noble friend Lady Jeger referred to a number of facilitating regulations, orders and directions and the enormous powers that are given to the Secretary of State under this Bill. I have calculated, and so have others, that at least 19 of the 70 clauses in the Bill create major new powers to determine matters by regulations. I hope this is something that will be vigorously pursued when we come to the Committee stage.

The noble Lord, Lord Banks, as always, has helped most of us by dealing in his expert fashion—none of us would dare to contradict him on this subject—with the subject of pensions. He relieves us of a tremendous task in that respect. The SERPS and the pension provisions have been probably the only aspects of this Bill which have had much public discussion at all. This is one aspect of the Bill that has been widely discussed in public. I do not quarrel with that and I would have loved all the other aspects to have had the same treatment; but unfortunately that has been reserved for pensions. So again, when we come to the Committee stage, I am sure we shall be able to support what the noble Lord, Lord Banks, has already started.

I should like to concentrate on one or two other aspects. First, it seems to me that the Bill is really an enabling Bill. I do not know whether the noble Baroness has found the same, but I find it is very difficult to study the Bill without cross-reference to the White Paper. Much of what might have been in the Bill and which is alluded to in the Bill is contained in the White Paper, and so it is difficult to study the Bill without reading the White Paper in conjunction with it; and that makes for complications.

One of my main concerns has been mentioned already: that is the proposals for the increase in private provision and for means-tested benefits. I am concerned mainly with Part II and the income-related benefits. It was the Secretary of State himself, Mr. Fowler, who admitted in a letter to the Child Poverty Action Group in 1984 that by their nature means-tested benefits are complicated to legislate for, to administer and to understand, and they are generally the most expensive benefits in terms of the manpower needed to administer them.

More recently, Sir Brandon Rhys Williams, MP, in a speech made in the other place in July, 1985, said that means-testing creates effects that are the precise opposite of the Government's much praised and often stated aims of hard work, thrift and self-reliance. Yet here in this Bill we have a deliberate attempt to diminish the role of contributory benefits in favour of private provision and means-testing.

I am one of those who believes that the contributory benefit should be paid as of right to the sick, the disabled, the unemployed, the elderly and the handicapped; and to be forced to apply for a means-tested benefit takes many of us back to the 1930s and earlier. We all recall the stigma that still carries. That is the reason for the low take-up of means-tested benefits, certainly among older people, today. To force them back into that system is something that must be resisted. I say that it is against all the principles enunciated by Beveridge and operated in the main by successive governments ever since 1948–49.

Part II also deals with income support, and I am very concerned about all three elements: income support, family credit and housing benefit. On income support, the consensus of informed opinion and all the professional evidence available that I have seen clearly demonstrates that severely disabled people who normally get help with heating, diet, laundry and domestic cleaning, could lose heavily. I am glad that the noble Baroness in her opening speech has committed the Government to taking a further look at this. We understand that they will perhaps be coming forward with further proposals, and we look forward to those.

The heating needs of pensioners have been ignored in the Bill and I should have thought the Bill would have been an excellent opportunity to clear up a muddle and a fairly messy business; but that has been ignored. Also, the £400 million spent each year on heating additions is absorbed within the premium rates, but there is no detailed break-down of those rates. As a result, many thousands of pensioners will suffer an average loss of 80p per week. Some will lose more and some will lose less, but thousands will lose that amount. As regards the provision of an average sum for water rates in income support, this fails to recognise that some of those whose water rates are unavoidably above the average are people who live alone. Many of them are elderly, and they will suffer from the averaging-out of the water rate.

Paragraph 3.42 of the White Paper dismisses the need for continuing help with housing costs. That again will adversely affect many elderly and disabled people. Perhaps I might read the paragraph very quickly. It says: The Government also proposed in the Green Paper that the income support scheme should no longer include separate assessment of water rates or other subsidiary housing costs such as insurance. Many of those commenting have expressed reservations about this, but the Government believe that they have exaggerated the effect on claimants and under-estimated the gains from this simplification for local office staff. These costs are among many elements of claimants' basic commitments where expenditure varies, and there seems no reason to make special provision for them to be met separately. That is not a view which is shared by any of the voluntary organisations with which I have been involved for many years, and it is certainly not shared by the claimants and the pensioners who understand how that will work.

I am glad to learn that the Government are thinking again about paying family credits into the wage packet. I could have read out from a list of 60 different organisations covering every aspect of society, including the CBI, the Institute of Directors and small employers, to mention just a few. Of those 60, I could find only one (the Monday Club) who were prepared to accept the Government's original proposals. I hope that even they will now be prepared to accept that the Government are bringing forward alternative proposals.

On housing benefit, your Lordships will know that we have discussed this again and again, and I have participated in a number of discussions in your Lordships's House. I think it has become generally accepted that the scheme introduced by the present Government has become more unacceptable and more complicated than the two schemes it was supposed to simplify. I believe there is still scope for improvements in the Bill and I hope that we shall be able to amend it in Committee in line with the accepted opinion of people on the ground. We know that pensioners will again be losers in respect of this housing benefit. There are 170,000 working families with children who currently get help with rates and they will lose that help altogether. A further 290,000 families will lose all the help they get with rents. That is so that £450 million can be saved on the housing benefit cuts and, as I have said, they will be spread out more thinly over the rest of the system.

Just a few words on the social fund: this has been mentioned by previous speakers but on the question of discretion—this fund is to be administered at officers' discretion—I was privileged to be a member of the Committee studying the 1980 Social Security Bill which ran for months and had all-night sessions. I can recall the fierce fight that the then Secretary of State, Patrick Jenkin, put up for the abolition of the discretionary system which had operated prior to 1980. In fact at that time he said: The present discretionary system has become unmanageable: unmanageable for claimants who do not understand it; unmanageable for staff at my department who cannot operate it; and unmanageable for the public who suspect it of abuse. Setting down the supplementary benefit frame in regulations will give a firmer and clearer framework. Then, having fought for it and destroyed the discretionary system that had existed, they now bring in the discretionary system as the answer to all the problems. I do not say that some changes were not necessary, but I certainly would not accept a discretionary system with no appeal. That is important, because in fact there is no appeal against that discretion at the moment.

The death grant has been touched on. Again, I can recall a grouping of 49 volunteer organisations under the umbrella of Dignity in Death Alliance. I can remember 1 million signatures being taken down Whitehall in a hearse and delivered to the present Prime Minister at No. 10 Downing Street. I can remember the campaigns by the spina bifida committees, the soldiers' and sailors' and airmens' funds and the British ex-servicemen's organisations and the Churches and all the volunteer organisations.

This death grant should be retained and brought up to its 1949 value. The estimate for doing that is 3p per week. That is the amount that would be necessary from the taxpayers to bring it up to its 1940 value. But in spite of these huge campaigns, often by their own people, the only reply from the Government is that it has to be abolished. They have allowed it to deteriorate to such an extent that it is now worthless; therefore, they wish to abolish it and introduce a means test. Like the noble Baroness, Lady Jeger, I think that that is an affront and an insult to all those people who have contributed through national insurance contributions to the death grant.

I know that there will be repercussions and I firmly believe that if the people of this country were consulted in the kind of review that I should like to see (preferably through the ballot box) they would be prepared to accept and fund a comprehensive and sound social security system. That has been laid out in detail by a number of organisations. The trade unions involved and the DHSS themselves have put forward their proposals in two documents that they submitted to the Government. But the listening government did not listen. They produced this Bill instead. I hope that during the Committee stage of the Bill we can persuade the Government that they ought to listen to what is being said outside this House by people who understand these things and people who need the benefits to which in our view they are entitled.

8.23 p.m.

Lord Seebohm

My Lords, my problem in making a speech appropriate to a Second Reading is that we are now living in an entirely different world from that which existed when the present social security system was devised. The main weight of the problem is no longer principally in alleviating the special needs of the disabled, the handicapped, the old and very young, or even those who are in difficulties from unexpected or temporary unemployment. Although these people are as numerous as ever, they fall into insignificance compared with the mass of unemployed who, through no fault of their own and having no physical or mental disabilities, find themselves among the poorest in the land. A majority of these are first-class workmen. Many have considerable skills acquired over many years which, through structural or technical change, have become obsolete.

These people, who may be called the structurally unemployed, probably at present (or soon will) exceed 5 per cent. of the total workforce. They receive benefits lower than those of many other claimants, finding themselves some of the poorest in the land and undergoing an experience of frustration and hopelessness which is completely undeserved. There are many who say that if the conditions of the unemployed are made too comfortable they lose the incentive to work, but however great the incentive, if there are no jobs to go to it serves no purpose.

While I therefore welcome this Bill as a genuine attempt to make the system more efficient within the present resources and under the same basic policies, it remains a mass of detail which is hard to assimilate, and we must look forward to a long and contentious Committee stage. We must, I suppose, put aside to another time thoughts of a carefully co-ordinated system of benefits, national insurance, taxation and unemployment policy.

Coming to the contents of the Bill, the Policy Studies Institute points out in its pamphlet Selective Social Security the four principal problems of the current weekly supplementary budget. These are, first, complexity for staff and confusion for claimants; secondly, failure of the arrangements for the sick and disabled; thirdly, discrimination against the unemployed in the setting of scales; and, finally, the hardship observed among families with children.

Richard Titmuss said some years ago that the criteria for an efficient social service must be accessibility, acceptability and comprehensibility. In the case of accessibility, this refers not only to the physical problems but to access to information and to the appropriate personnel for advice and help. There is much improvement needed in this connection and I believe that this Bill makes a real effort to do that. In the case of acceptability, something is surely very wrong when only 50 per cent. take up their entitlements and the DHSS expects only 60 per cent. to do so under the new arrangements. When we come to comprehensability, there is no need to make any comment!

The Policy Studies Institute report, when dealing with the adequacy of the benefits, shows that a DHSS-sponsored survey carried out in 1982 revealed that half of the couples with children on supplementary benefit ran out of money most weeks before the next payday. More than half experienced acute anxiety about money problems, and more than half (both parents and children) were missing items from a very meagre wardrobe. A similar number were in debt. The survey also showed that couples with children were considerably worse off than those without. All that points to a need for change, and in so far as it directs its attention to such problems as these, one must welcome the Bill.

I want now to deal with the welfare of children. I am quite sure that the payment of child benefit, as was said by the noble Lord, Lord Stallard, direct to the caring parent (usually the mother) was a great source of relief and comfort to those most in need. To replace that, even in part, by processing the proposed family credit through the wage earner's pay packet is a grave mistake. There seems to be objections from employers as well as from the various authorities and institutions who have studied the matter and I am glad this is going to be looked into again. I would go further and state that in my opinion child benefit should be substantially increased. The method of doing that, as recommended by many organisations, is to abolish the married man's allowance, which in fact would enable the present benefit to be doubled without costing the Exchequer a penny. I am not advocating going that far, but some compromise is surely justified.

It is almost certainly true that the poorest group of people in this country are the unemployed couples with children, and there seems to be ample evidence that families should be brought up to the same level as other claimants. Social research from the days of Rowntree at the beginning of the century and up to the present shows that family incomes are at their lowest when they are most needed. It may be that the intention of the Bill is to rectify this through the new family credit and the family premium, but there are grave doubts as to whether this will solve the problem. Statistics vary on this point but many show that it will not solve the problem at all. It is not only the poorest who have grave financial problems. With married couples who have children, the problem goes way up the wage scale. Couples with children must from now on have greater assistance than they have at the present time.

Of the many complexities and doubts that one has about this Bill, including the transfer of allowances, which is a great mistake, a small but very important one is the expense allowance of only £5 to unemployed people when they are on community service. Many voluntary bodies have told me that if it were limited to £5 their schemes would die overnight.

I will speak about only one other matter and that is the social fund, about which practically everybody has talked. In the numerous letters and pamphlets that I have received in the last few weeks, comments have varied from outright condemnation to serious doubts. One of the most important elements of this Bill is to remove the powers of discretion from the local social security offices to a new body. The present system is chaotic and this change makes a lot of sense, provided that the new service is really efficiently run and that the guidelines, which I now understand are to be made public, are sufficiently comprehensive and comprehensible.

But the great change from single grants to loans is distinctly daunting. I hope that the Minister in her reply to this debate will give the House further information about this. For instance, is it the intention to make single grants very much the exception? Will claimants be required to give very full details of both needs and means? Will there be no means of appeal other than some form of internal monitoring, described as an inspector? The Bill seems to me to be heavy on detail and somewhat light on policy. Perhaps I may end by calling the attention of the House once more to those three vital criteria spelt out many years ago by Richard Titmuss—accessibility, acceptability and comprehensibility.

8.32 p.m.

Baroness Lane-Fox

My Lords, after such interesting speeches from distinguished Members of your Lordships' House, I promise that I shall be very quick. From my corner, I welcome the Bill, which faces facts realistically and is so very forward-looking. The seedbed that we now prepare will, among other things, grow a method to save those who follow us in the year 2000-plus from being overburdened with taxation to support elderly and disabled people. Do not mistake me, my Lords. Those groups of people will still be there all right. It is the means of their support that is to be shifted.

I welcome the Bill, too, in that it simplifies and streamlines some benefits, especially those claimed by disabled people. It appears to some experts that the majority of disabled people will receive £4 to £5 extra in benefit per week, so a word of appreciation may not go amiss here. It will make a change at least, from the usual line taken by the media and by some pressure groups, and perhaps also by some Members of the Opposition, which suggests that disabled people are totally ignored and forgotten. Clearly there are some who did not live through the times when this really was the case—for instance, from 1945 to the 'fifties, when the needs of disabled people were entirely ignored. Today we should acknowledge improvements as they come, and sums of £4 to £5 per week extra are no small increase and deserve to be properly spoken about.

After saying that, I have to say that I am anxious about two aspects of the Bill—those aspects which affect the most severely disabled people, who are least able to help themselves and who are most dependent on society. Here I am grateful to my noble friend the Minister for her reference to the current survey and for her suggestion that its findings will be used to fit provision to existing cases.

The fear was that policy would, over the years, reduce the cash paid to those disabled people who pay for their own care. Although I can see the advantage of turning this into a flat rate provision, that simply does not do the trick where there is even a tiny rate of inflation. Where there are rising costs, the cost of paying for a carer does not remain static. Those disabled people are worried, especially as they fear also that if they are away—and many have to go to hospital—they may be ineligible for the premium on their return. Disabled people are extremely worried that these things will be enough to break down the delicate structure on which they manage precariously to live in the community.

This threat to their routine is increased by the fear that this signals other threats to their most precious independence for the future. They feel that their quality of life is jeopardised. Let me hurry to say that I believe their fears are unjustified, but I wonder whether the thinking behind the disablement premium does not take account of the situation of those unable to help themselves. It may not always be realised that any uncertainty over finance rocks the boat at home for extensively disabled people. I hope that my noble friend the Minister will make widely known her reassurances about this. It will help many anxious disabled people to overcome the threats and the rumours that are circulating and that can cause panic.

On the question of insurance, it must never be forgotten that private insurance companies are necessarily harsh on severely disabled people. To many handicapped people this cover simply is not obtainable. We should be unworthy forerunners of the next century unless we pointed out these worries. Before ending, I have to ask the forgiveness of my noble friend the Minister and of your Lordships' House because, for reasons of care, I, alas, shall not be able to hear the end of the debate on the Second Reading of this Bill, which has my very best wishes.

8.36 p.m.

Baroness Turner of Camden

My Lords, since the Government issued the Green Paper last year, there has been a substantial amount of discussion and a great deal of criticism. Some of it has been heeded but, nevertheless, the main thrust of Government thinking, as exemplified in the Bill, appears to remain the same.

It is useful to recall the Government's stated aims, which were referred to by the Secretary of State when speaking on the White Paper in December last year, and were referred to this evening by the noble Baroness, Lady Trumpington. The first was a simpler system of social security which provides a better service to the public. Social security is too complex with some 50 benefits each with separate, and sometimes conflicting, rules of entitlement.

Secondly, the Government wanted to see people looking forward to greater independence in retirement. The aim was to have a financially more secure system, with more people covered by occupational and private schemes. Thirdly, the intention was to have more effective help going to those most in need. Families with children, low income families and the unemployed were identified as those most in need. Very few would disagree with these worthy objectives. The trouble is that the Bill before your Lordships' House this evening does not achieve those objectives.

First, I should like to give some attention to the matter of pensions. It is really surprising that we should have had a new look at pensions when it is not so very long ago that legislation established—with what was then all-party consensus (and consensus was referred to earlier this evening by the noble Lord, Lord Banks)—an acceptable basis. Unions and employers accepted it and, in the time that has passed since the present legislation was enacted, have learned to live effectively with the system.

The notion that pensions in retirement should bear some relationship to earnings while in work has attracted wide support. The state earnings-related pension scheme, SERPS, which was to have taken 20 years to mature, was seen as a tremendous step forward in pension provision. Of course, there were and are flaws. These were, and are, the failure to stipulate that there should be equality of benefits as between men and women, and in regard to pension provision for the early-leaver. However, steps have been taken already towards rectifying some of these flaws and the basic structure was and is a sound one.

The concept of a partnership between good occupational pension provision and the state has been instrumental in encouraging the growth of occupational pension schemes with good minimum conditions, so that they could be contracted out of SERPS. Indeed, I believe that about 11 million people are currently covered by occupational pension schemes.

The Government intended originally to get rid of SERPS altogether, but there was a great deal of opposition to this. What we now have, as my noble friend Lady Jeger said, is an emasculated SERPS. In the Bill SERPS pensions are to be based on a lifetime's earnings, not on the best 20 years. Special protection is, it is true, to be built in for women who have breaks in work to bring up families, and for those who become disabled and the people looking after them. Although this modification is to be welcomed because it shows that the Government are alive to the problem of breaks in work, it does not deal satisfactorily with the problem.

Unemployed people lose out altogether, since they are not covered. Moreover, there are anomalies so far as women are concerned, particularly those who follow the quite common pattern of part full-time and part part-time work. The part-timers will lose out under that provision. The "best 20 years" provision was meant to assist all those with a chequered work pattern including low paid manual workers, those who suffer unemployment, and women with breaks in employment for domestic reasons. It is grossly unfair that these groups, already disadvantaged, should be further disadvantaged by the proposals in the Bill in relation to the future of SERPS. Incidentally, there is a disadvantage to the disabled as well because, as the noble Baroness, Lady Lane-Fox, pointed out, disabled people will have great difficulty in getting private personal pension provision. The disappearance of the "best 20 years" provision in SERPS will disadvantage disabled people in particular because they also are inclined to have a chequered work pattern.

SERPS is to be calculated on 20 per cent. of earnings rather than on 25 per cent. Widows and widowers over 65 will be allowed to inherit half of their SERPS rights rather than the full amount as now—a particularly mean economy measure it seems to me. The main thrust of the Government's proposals on pensions, however, appears to be designed to give encouragement to the growth of personal private pension schemes. A very substantial inducement—the noble Lord, Lord Banks, has already referred to this—is to be given to those who choose a private personal pension and in so doing opt against their own occupational pension scheme. A 2 per cent. rebate on national insurance contributions will be given to encourage not only new occupational schemes but also personal private pension scheme holders.

The 2 per cent. bribe—and it is a bribe—has already occasioned a great deal of criticism not only from unions but also from employers, particularly those who have made good pension provision for their employees. It is a highly dubious proposition. It will give encouragement to inferior contracted-out schemes. It will be paid for by the national insurance contributions of all workers. It is quite unfair that contributions of everyone should be used to subsidise private personal pension schemes, some of which may be of doubtful value.

It is the belief of both the CBI and the TUC that the arrangements proposed here will make personal pensions appear, in the short term at least, a low -cost and financially attractive option for younger people. They could thus be encouraged to opt out of occupational schemes and SERPS. Personal pensions are not likely to hold much attraction for older employees in good occupational pension schemes. But if the younger people opt out, this is likely over a period to undermine good schemes. Moreover, the protection for the good schemes—the requirement that membership of a scheme is a part of normal conditions of employment—is to be removed.

Such a contractual provision will not be possible if the Bill passes unamended. This will inevitably lead to poorer pension provision when people are older. It will weaken the occupational pension structure so painstakingly assembled over the years; it will mean a decrease ultimately in private funding as good schemes become destabilised by younger people opting for private pensions sold by entrepreneurs—whose efforts, it is true, are to be monitored, which I think will be a difficult and horrendous task. In the end we shall all be paying more as taxpayers to maintain those who have lost out earlier in life and have not taken steps adequately to provide for themselves in old age.

Good occupational pension provision should not be undermined. Money-purchase schemes should not be encouraged over and against provision based on final salaries or earnings. The concept of the guaranteed minimum pension—which was such an advance on anything we had before—should not be undermined. In the pensions field the Government should have left well alone. The Bill as it stands is committed to much poorer pension provision in the next century, and we should not agree to it.

I should like to turn briefly to those aspects of the Bill concerned directly with social provision. A striking feature of it—other noble Lords have already referred to this—is that so much is left to regulations. This is particularly true of Part II where hardly anything is actually prescribed in the Bill. All is left to the regulations to be laid by the Minister. In regard to family credit, regulations will make provision as to the circumstances and the time at which the award is to cease, when family credit is to terminate, the circumstances in which a person is to be treated as being in or not being in Great Britain, what is relevant education, the circumstances in which a person is or is not to be treated as dwelling at his home, and so on.

Further on the regulations will prescribe the manner in which appropriate maximum family credit and maximum housing benefit are to be determined. This seems highly unsatisfactory. It means that Parliament is expected to vote without knowing what the final shape of some of these important social provisions is likely to be. If so much is to be left to regulations, these should surely be published before the Bill passes into law. Parliament should have the opportunity to debate them before they become operative.

On family credit, however, the important principle is the intention of the Bill that the payment is to be made through the wage packet, by the employer. I welcome the statement this evening by the noble Baroness, Lady Trumpington, that this is to receive some further consideration. It must be said that neither side of industry relishes this proposition. The CBI does not like it; and the trade unions do not like it for the reason that it redistributes from women to men and because they regard it as an inducement to unscrupulous employers to pay lower wages. The CBI does not want it because of the added administrative burden the provision would put on its member firms. Quite rightly and sensibly, the CBI does not want to get its member firms involved in the private and family affairs of its employees. I hope that the Government will think again about this because unless they do so, we shall certainly put down an amendment. We are very much opposed to this provision and will press such an amendment in Committee.

On the matter of the social fund (and I do not want to go over ground that has already been covered by other noble Lords) it seems essential that we should look at the proposal to have repayable loans rather than grants. It is quite unrealistic to expect people to budget out of already low benefits, out of a very low weekly income for basic essentials, and then to repay out of that the amounts of money necessary to purchase these items. Secondly, it is proposed that the fund should be cash limited. This will produce unfairness, with people with identical needs being treated differently, depending on the time in the financial year when they make their application. Thirdly, there is the whole matter of the right of appeal. The Government have said—and I am glad to see that there is some shift in thinking on this matter—that there is to be a review. But a review mechanism is not a right of appeal. The right of appeal which exists in the present social security system is a right to go usually before a tripartite body and to make an appeal submission. It is not the same to say that it will be subject to review. I hope that further attention will be given to that.

There are other aspects with which I am sure other noble Lords will wish to deal. I refer to the removal of the right to free school meals for families on FIS. No doubt we shall return to this in Committee. However, there is one matter to which I must refer in some detail before I sit down. It is the provision about industrial injuries which I understand was added to the Bill at a very late stage in Committee in another place. As a result of that, if this provision leaves your Lordships' House unamended, employees with less than 14 per cent. disability will in future qualify for no disablement payment at all. Most work injury or disease victims would thus receive no payment unless they could establish negligence through the courts. The large majority of disablement awards are below the 14 per cent. figure and include those suffering from common prescribed industrial diseases such as dermatitis, occupational asthma and vibration white finger.

There has been a steady decline in the number of new claims. That may be due—and I hope it is—to improved health and safety provision. On the other hand, it may reflect a decline in manufacturing industry that has resulted in fewer people working in high-risk environments. However, the amounts of money are quite significant for the individuals concerned. A life gratuity for a 13 per cent. disablement is currently worth £2,905; for 10 per cent. disablement, £2,300; and for 5 per cent. disablement, £1,245.

I know it will be argued—indeed, it already has been—that it is the intention to put the money where there is most need. But those who have been injured have a need. They have been injured while working to provide us with goods and services. Our industrial injury scheme is the nearest thing that we have in this country to a no-fault system of compensation; such systems exist in some other countries. Remove that scheme and all that injured workers would be left with is the possibility of common law action in the courts. They would then be faced with the often formidable task of proving negligence—and the financial risks involved if the case is a difficult one are quite substantial.

The proposals are clearly intended to save money overall. Indeed, a figure of £45 million has been mentioned. However, they will be bitterly resented by those who run the risk of such injury at work. Some work-places are inherently more unsafe than others and carry a higher risk of injury to those who work in them. It was a part of the thinking behind the original industrial injuries scheme that workers should be compensated for injuries sustained at work. It is not appropriate that those provisions should be introduced at a late stage in a Bill that has to do with social security provision.

Since 1934 it has been a part of the social thinking in this country that there is a duty to promote the welfare of claimants. In a number of major and important respects the Bill appears to depart from that philosophy. I hope that we shall have the opportunity while the Bill is before us to return to that concept in suitable amendments.

8.52 p.m.

Viscount Hanworth

My Lords, the Government have introduced this Bill under the pretext of trying to simplify the social security system and to ensure that help is given to those in greatest need. That is something we would all welcome, but hidden beneath the facade is a Bill that cuts £450 million from housing benefits; makes everyone, even the poorest, pay at least 20 per cent. of their rates; makes some 360,000 young unemployed worse off; revises upwards the age at which widows can receive a pension; abolishes the death grant: revises the maternity provisions; and halves the pension expectations of those in the next century. In all, it is a package that will make nearly 4 million people worse off.

When the Government cannot provide special funds for those social benefits, for education, and for the National Health Service, it seems the height of folly to reduce income tax. Most of the extra money will be spent on imported goods, and it will provide only a very small boost to our industries—and then in those areas where it is not very important for our exports to do so.

The Government's main objectives throughout the debate on pensions has been to modify the state earnings-related pensions scheme by drastically cutting the value of pensions that would otherwise be paid to people retiring 20 years from now or later; to create a system of individually-owned pensions to be known as a personal pension; to change the thrust of occupational pensions from an earnings-related basis to one based on money purchase; and to encourage the break-up of large occupational schemes through the introduction of personal pensions.

The effect of the modification of SERPS will be virtually to halve the benefits that could be expected under the present scheme. The Government's argument for that is that SERPS is too expensive and that by the year 2035 it will cost £25.5 billion. However, the Government are not being entirely honest about the problem. The year 2035 is a central year following the pensioners peak caused by the baby boom in the 1960s. The years following will show a gradual improvement in the ratio of persons of working age to those over retirement age, resulting in a reduction in costs.

SERPS was introduced not so long ago—in fact, in 1975—with the agreement of all the parties. It was done to ensure that future pensioners would have a better standard of living in their retirement in their own right, and not have to rely on state benefits for their survival. That surely has been the policy of both the Labour Party and the Conservative Party in the past. The continuation of SERPS in its present form should, therefore, not depend on what we can afford but on the overall standard of living and what we choose to spend our money on.

The figures are based on a low-level growth of 1.5 per cent. a year on average over the next 40 years, but the estimates for growth of personal pensions are based on investments giving a rate of return of 3 per cent. to 4 per cent. above the rate of inflation. Although in the short term investment returns and interest rates fluctuate, in the long term they generally reflect the rate of economic growth. It would be more reasonable and therefore fairer for the Government's estimates of personal pensions also to reflect that fact. With a reasonable level of growth, everyone's standard of living can go up. To give more to one group in the population—the pensioners—only means that the living standards of other groups rise a little less fast, but they keep rising. To keep the existing benefits of SERPS, the extra cost in national insurance contributions would be just under 1 per cent. in the peak year of 2033–34.

The Government have also failed to make any assumption on the amount that would be saved in social security benefit if offset against the current estimates of the cost of SERPS. That is because they will not admit that by ending the best 20 years' earnings rule and basing the pension on 20 per cent. of earnings instead of 25 per cent., poverty in retirement will continue. The hardest hit will be the long-term unemployed; women, the sick, and the disabled who are unable to earn a full pension from a normal 40 years' working life. The effect of the modification of SERPS will mean that many people could get caught in a pensions trap; that is, having insufficient income to enable them to live comfortably and to enjoy a fulfilling retirement, and having too much income to be able to claim state benefits.

The question of what the Government can afford is a matter on which there can be differing points of view. However, the question of what individuals can afford in providing pensions for themselves is separate and, for many people, of greater significance than the modification of SERPS.

The Government propose a system by which personal pensions will substantially take the place of occupational pension schemes on the grounds of giving all employees a new dimension of choice. Personal pensions have their place in the pensions market for some people, but they should not be encouraged at the expense of the established occupational schemes. Few people will have the expertise or the advice to avoid being taken for a ride by insurance companies and certainly not to select the best scheme available. It has been estimated that the proposed minimum contribution to a personal pension scheme would probably buy a pension worth only about 20 per cent. of the value of benefits in a good occupational pension scheme.

The Bill provides for an additional incentive for those taking out a personal pension, and for new occupational schemes becoming contracted out after 1st January 1986, of an extra 2 per cent. of earnings to be paid by the Government for a period of five years. This has commonly become known as the 2 per cent. bribe and is obviously designed to encourage individuals to leave SERPS and take out personal pensions instead, and so reduce the long term liabilities of SERPS. But the Government have gone further and the 2 per cent. will also be paid to anyone who has contracted out of SERPS and is a member of an occupational pension scheme, provided he opts for a personal pension and leaves his occupational pension scheme.

The Government do not envisage many people leaving the long-term security of occupational pension schemes, but, faced with the prospect of paying lower contributions, many people—in particular the young married women and the lower paid—may be tempted to have the money today and let the future take care of itself. I used to think that what happened after I reached the age of 45 was too far ahead to matter.

This 2 per cent. bribe is unjust to existing occupational schemes. The effect would be to reduce the membership of occupational pension schemes and seriously undermine the viability of such schemes. In the long term it would be likely to increase the number of those dependent on state benefits because of the inadequacy of their personal pensions. But, further than that, it cannot be right to use money from the National Insurance Fund, which has been paid in by all working people, to encourage personal pensions at the expense of the existing high quality occupational schemes which are already contracted out and will not benefit. If only one-tenth of the existing occupational pension scheme members were tempted by the bribe, the cost to the nation would be £1 billion over the five years.

The proposal that employers can no longer make their occupational pension schemes compulsory overlooks the historic fact which created the necessity for membership of such schemes to be made compulsory; that is, substantial numbers of individuals will not, for a variety of reasons, plan adequately over the years for their old age. The compulsory nature of some occupational schemes is a compassionate and intelligent policy by which an enlightened employer can recognise and provide for his or her employees to live in dignity when their working life has ended, or to provide for their dependants should they die before retirement.

Personal pensions would be a bad option for most people. They would be based on the money purchase system and the benefits cannot be predicted as they can with final salary occupational schemes. The return at retirement will depend on money invested, interest rates and dividends earned. Those may vary very much at the time retirement occurs.

There are two other factors which will reduce the benefits of personal pensions. First, the DHSS is to be the clearing house for payment of the minimum contributions to the pension provider. Recent inquiries to the DHSS reveal that these contributions will be paid annually in arrears in September of each year. The effect of this initially is that if a personal pension is started in April 1988 the pension provider will receive no money until September 1989, thus losing 17 months' investment income.

The second factor is one of administration charges. A recent study by the Institute of Actuaries showed that about 20 per cent. of the amounts invested in personal pensions are divested to meet insurance company charges. This compares with about 5 per cent. for occupational schemes and about 1.5 per cent. for SERPS.

The implications of these measures are far-reaching both for those who contribute to SERPS and for those who contribute to occupational pension schemes. However, the Government have been astute in their proposals for modifying SERPS because they will not materially affect anyone who is in work until the year 2002. Anyone retiring in the 15 years following implemention of the proposals will still receive his expected pension. So it is the younger element in our society, who at the moment probably do not appreciate the value of a pension scheme, who will suffer. The introduction of personal pensions will make people vulnerable to the high pressure salesmanship of insurance and finance companies, banks and building societies. These are the people who will gain most from the measures; not, of course, the people who are trying to get the best possible pension scheme for themselves.

The introduction of the present system of pensions for every employee was the product of an all-party agreement. To make these changes now without a consensus of the parties can only cause uncertainty for the future of pensions and once again make pensions a political football with each change of government.

The Government envisage that consultation and legislative processes will be completed in time for the changes to be implemented from April 1987. The possibility of the proposals being overtaken by a change of government is by no means out of the question. It happened in the early 1970s and it is one of the reasons why the political consensus represented by the 1975 Act was so widely welcomed. It would therefore be wise if the Government were asked to think again, with a view to returning to that happy situation.

9.9 p.m.

Viscount Buckmaster

My Lords, whatever the merits of this Bill, on the basis of the speeches that we have heard so far, I think that your Lordships will agree that it will cause hardship to many. I should like to give your Lordships a few examples which are drawn from my own borough of Kensington and Chelsea, and which cover as far as possible areas that have not yet been dealt with in detail.

Let me take first the case of a lady who lives in a typical flat in a sheltered housing block in Earls Court. She is nearly 80, totally deaf and nearly blind. If one adds up the combined effect of 20 per cent. rate payments, which have to be met out of normal income, plus the payment of the full cost of water rates, for which there is no provision in the new Bill, plus the cost of the centralised heating provision, then the total additional sum which this unhappy lady will have to pay will be £5.98 per week. But this is not the end of the story. The knock-on effect of a reduction in housing benefit and the loss of housing benefit supplement may well result in tenants such as this lady having to leave sheltered housing and move to other rented accommodation.

I wish to devote the major part of my speech this evening to the likely impact of this Bill on a section of the population with which I am particularly concerned, and that is the immigrants, including refugees. It seems to me that the provisions in Part III of this Bill which cover the social fund will severely affect such people. Perhaps I may give your Lordships one example of this. In the proposal for income support, the abolition of single payments and the replacement by the discretionary social fund will put people who are not fluent in English at a grave disadvantage. For instance, to obtain a loan from the social fund it will be necessary to put forward a convincing case. Claimants may not be told the basis of refusal of a loan and there will be no right of appeal to an independent tribunal. Consequently, it will only be the articulate and the forceful who will be likely to obtain loans while the people who have a relatively poor command of English will probably suffer.

Yet for immigrants and others there are more serious implications in the replacement of the urgent cases and single payments regulations by this cash-limited, discretionary social fund. Although Ministers have emphasised the flexibility of this fund, to judge from past practice it may well be that such flexibility will result in benefits being denied to people who are applying to vary their leave to remain in the United Kingdom or who are challenging a Home Office decision. If immigrants are to be excluded from income support then it seems essential that their right to benefit from this social fund must be protected, particularly in emergencies. Therefore it seems desirable that specific regulations should be made under the fund to ensure that victims of disaster, whatever their immigration status, immigrants whose funds from abroad have been temporarily cut off and those who have applied to the Home Office for variation of leave to remain or who are challenging a Home Office decision, should have access to payments as appropriate from this social fund.

The proposal to replace the single benefits regulations by the social fund also raises concern for refugees; but I do not wish to speak at length about such people because the noble Lord, Lord McNair, will cover that matter rather more fully than I. However, let me say that those refugees newly arrived often have an immediate need for items such as clothing and footwear, especially where someone has had to flee his country with no luggage or warm clothing. Some of those refugees may also need help in paying for accommodation deposits and buying furniture. If entitlement where genuine need exists is swept away, the consequences may well be disastrous for refugees as well as for claimants generally.

There are many other classes of people who will suffer as a result of this Bill, as has been shown already. The noble Baroness, Lady Jeger, gave us an impressive list of organisations that have appealed to her. Perhaps I could add to it a little by showing the range of organisations that are concerned. I have received representations from MENCAP, Age Concern, the Child Poverty Action Group, the National Council for One Parent Families, London Advice Service Alliance, Community Information Project, the British Refugee Council, the Joint Council for the Welfare of Immigrants, the Committee for Non-Racist Benefits, North Kensington Action for Benefits and Hammersmith and Fulham Volunteer Bureau. That list is not comprehensive, but I think that it shows the wide range of concern.

Clearly I cannot hope to deal with those submissions in my brief speech, and other Members of your Lordships' House will be more familiar with most of the areas that they cover than I am. I must make one brief point and it has probably been covered before. The National Council for One Parent Families is greatly concerned at the proposed abolition of free school meals for families in receipt of family credit.

I conclude by expressing the hope that we may expect a wide range of amendments at the Committee stage. I shall try so far as possible to confine myself to those covering the needs of immigrants and refugees on the lines that I have already indicated.

9.15 p.m.

Baroness Vickers

My Lords, I am delighted to have the opportunity to congratulate my noble friend on the excellent way in which she introduced the Bill. She gave us full details and she must have made a tremendous study of it to touch on so many points. I should also like to thank the voluntary organisations and others who have done a tremendous amount, as the last speaker said, on ideas to help us with the Bill. Thorough research has been done by many of them. That must have taken a long time and we are grateful to them. I should also like to tell the noble Lord, Lord Banks, how much I appreciated his speech. He is an expert on the pension side. I had the pleasure of working with him some time ago. I hope that he may be able to shed a little more light on this matter in the future.

In 1979, Mrs. Lynda Chalker, who was then the junior social security Minister, said: It is not sufficient to assess poverty by absolute standards. Nowadays it must be judged by comparison with standards of other groups. Beneficiaries must have an income which enables them to participate in the life of the community". I hope that the Bill will do a great deal to help with that. We want all those people to be able to partake in the life of the community.

I remember when I was on the poor law committees of the London County Council that we had most tragic cases. I shall always remember one woman who had a wooden leg. She came along just because she could not get a sock for her wooden leg. Thank God, such things never happen now!

The noble Baroness, Lady Macleod, mentioned the question of widows' payments. I should like to ask my noble friend whether that includes war widows whose husbands may have been killed, for example, in Northern Ireland or in various places overseas. Will they be considered to be war widows and receive the same £1,000?

I should now like to ask my noble friend whether she can tell us something about the social fund itself. How much money will be in it? Will it be funded on a yearly basis or on the basis that if it runs out of money it can apply for more? How is the money to be allocated and who will watch the allocation? Where will the money be paid into and where will it be pulled out of? Also, what about the training of the social fund officers? Surely they will need a considerable amount of training. They will probably be doing a completely different job from their present one. I should like to know what preparations have been made for them to have the necessary training. Will the inspectors be civil servants of the same calibre as these men or women—and I hope that there will be some women?

The question of loans worries me. Loans will encourage debts. A great many people do not have bank accounts or any spare cash. I only hope that if they take a loan, they will be able to repay it. It is rather like going to a pawnbroker and putting in one's garment; one is not certain of being able to get it out again. I should like to know what will happen if they cannot afford to pay back loans. In rural areas a great many families earn only £100 a week, if that. They are poorly paid. They are also proud. They do not borrow if they can help it. They have to put away each week so much money for electricity, other fuel, the telephone bill and so on. That takes a great deal of the money that they should be spending on the family.

Every organisation, as I understand it, including the CBI, excepting the Conservative Monday Club, which the noble Lord mentioned, has expressed views about the family credit system. They feel that it should be paid by the state. I hope that it will be paid by the state because I well remember when it was paid to husbands. They seldom paid it to their wives. In one of my constituencies the women queued up outside the factories and in the dockyard to get money from their husbands because they did not think they would get it otherwise. We know all about that. It does not happen so much now, but there are still queues for pay packets. One woman said to me the other day that she does not like to ask her husband for money because he is so nasty when she does. She felt that it should be paid to her or to the divorced wife if she takes the children, instead of to the husband.

I have one question about pensions. I have a letter from someone who calls herself a pensions specialist. I am sure that is what she is. She says: the saddest cases I have had to deal with are those in which people have made foolish decisions about their pension provision early in their working lives, e.g. by surrendering a few years' reckonable service for a return of contributions. It is very tempting to the young to minimise the cost of provision for retirement. A money-purchase personal pension will be a sufficient temptation for a young worker to leave a contracted-out Occupational Pension Scheme without the additional incentive of a 2 per cent. contribution from the National Insurance fund". I hope that young people will be given the chance to learn from people such as that, because it is a great pity if they spoil their future pensions by taking that action.

The other point that I should like to make relates to free school meals. I have been in favour of them all my life, especially when I saw what happened during the last war. Children who have them benefit enormously. It is necessary to have school meals in rural areas. I gather than under the Bill—I hope that I am wrong—education authorities will no longer have the discretionary power to provide free school meals for those no longer entitled to them under the law. It is extremely difficult for parents to provide school meals in country districts. In small villages if there is a school, there is probably no shop. The parents have to go into the major towns to obtain any food. In my case the town is 10 miles away. There is then the question of storing it. It is difficult to make nice fresh sandwiches for a whole week. I hope that it will be possible to reconsider the question of school meals. I gather that about 500,000 children will lose their entitlement to free meals.

In many cases I do not think that mothers would mind paying towards school meals, but the difficulty is in providing them. The children mostly have to go to the schools in buses and they have to pay the bus fares. It all adds up to a great deal. I hope that my noble friend will be able to consider that point. The £2.20 a week compensation through family credit will be worth only 44p a week to those families which also receive housing benefit. This is because the family credit counts as income for housing benefit purposes. The increase in family credit to compensate for the loss of free meals will lead to reduction of housing benefit. I do not know whether the Minister dismissed this point in Committee in the other place, but I hope that in this House we may reconsider it.

There are only two other points I wish to make arising from what the noble Lord said about refugees and so on. I should like to ask the noble Baroness whether it is possible for her department to employ some interpreters. Some of the other departments have interpreters. I have been trying to get some interpreters into prisons, too, but so far I have not been very successful. However, we now have some literature written in different languages. It would be an enormous help—I think that the noble Baroness would agree—if we could have interpreters, especially now when new action is being taken. Perhaps we could have some leaflets written in different languages. That would be of enormous help to those giving advice. Perhaps they could be attached to the department of my noble friend.

My final point is on the question of special diets for small children. A lot of doctors are giving special diets to children who have difficulties. They may be overenthusiastic. There are many areas where the health of these children can be improved by special diets. I understand that these diets cost on average about £17 a week. A great many people have told me that they cannot afford that amount. Diets can alter the whole trend of the child's life in the future.

I hope that my noble friend believes that I appreciate what she is doing and that I support her in many ways. But if she if takes notice of some of the points I have raised I shall be delighted.

9.27 p.m.

Lord Houghton of Sowerby

My Lords, despite the gentle gloom that is now descending upon us I am not a candidate for the chorus of discontent on this Bill. There is a great deal in this Bill that should be welcomed and it would be a mistake to undervalue its purpose and its achievement. I should like to congratulate the noble Baroness on the lucidity and the flow of her presentation of a very difficult explanation of this Bill.

I should first like to take up the question of administration. This Bill is an attempt to improve administration, to make it more tidy, more comprehensible and fairer. There are 120,000 tax and social security officials loose in this country. They are meeting members of the public by the thousands every day of the year. They have some very pleasant and some unpleasant duties to perform. But the public regards them as "they"—they who can muck you about; they who can be decent to you; they who get it right or wrong; but it is "they" all the time. That is why is it important to put in the hands of "they" the equipment and the tools for the job they have to do. Otherwise they will be in difficulties with their clientele. What is more efficient in the Bill is therefore to be welcomed.

The Bill tries to clarify the classification and the status of benefits. That is also important; otherwise we tend to lose our way. First, one has to define the benefits which are so universal and fundamental that they should be granted as of right. The necessary financial support will be provided for them either through taxation or by special contributions, or both. Secondly, there is the area where needs exist and where help should be given but it is not easy to describe those needs as universal, although they are widespread. Many of the needs have a great deal in common. However, in this area you cannot provide benefits as of right, first, because they are difficult to evaluate, and, secondly, it would be very expensive if those benefits were given as of right to everybody.

There is a third area which is even more difficult; namely, needs of varying character. There are, for example, needs concerning exceptional circumstances, feckless parents, disablement, large families, the casualties of society or the victims of society. As regards those needs you require machinery for the regulation of benefits and, at the end of the tale, the provision of a good deal of flexibility in the social fund.

That seems to me a logical classification of the benefits to be provided. If we are trying to reduce the amount of discretion in the hands of officials, I would point out that officials also do not like full discretion because they then have to exercise it and they are there to be shot at if they do something for one person which another person complains is not done for him. Discretion is one of the most difficult things to administer in public life because there are precedents and questions of equity. The British people are nuts about fairness. Anything that is unfair must be put right. However, life is unfair; it is all unfair and one cannot always make it fair. Those are the problems which have to be dealt with. So reduce the area of absolute discretion in which those who operate it shall have freedom to the smallest possible dimension; that is what the social fund proposes to do.

All the time that I have been concerned with social security matters I have been saying that the chief problem of social security is to find an acceptable means test. That has been the problem since the time of Queen Elizabeth I, who introduced the Poor Law to try to get an acceptable means test. The problem of the first old age pensions Act in 1908 was to find an acceptable means test. The first benefit as of right under our social security scheme was in 1911 and that was sickness benefit added to by unemployment benefit. However, the first pensions as of right were granted only in 1926. Therefore, ever since then we have been seeking an acceptable means test because social security cannot be properly administered and needs cannot be adequately met by benefits as of right.

Let us consider what the means test should be. I believe that a good deal of the means test problem could be met if there were a closer study of the relationship between taxation and social security. Much work has been done on that. We came very close indeed to a taxation credit scheme which would have gone into the field of social security quite extensively. We came very near to that some years ago under a Conservative Government.

However, political change has been the enemy of the progress of social security in this country. It has wrecked and checked progress. I ask your Lordships to study your history in that regard. It is true. Bills and schemes have been introduced which have gone to the ground. Some have been put on the statute book but never put into operation. It was not until 1975 when a Labour Government happened to be in office that we managed to get the consensus necessary to bring about the Social Security Act 1975. That is what is under review at the present time. It has lasted 10 years.

We must keep consensus here. If we do not keep in step reasonably and with considerable goodwill and give and take, and if we cannot keep together on this, we shall not make progress in the future because our parliamentary system enables one political party to repeal what its predecessors did when they were in government, and that is what we have done more than once.

I am not going to deal with some of the suggested anomalies in the details of any of the benefit schemes which relate to current affairs. We have a Committee stage for that. But I urge your Lordships, when studying the clauses of the Bill, to analyse the winners and the losers very carefully indeed. If we have examples, let us have them on the table. Let them be investigated so that we can verify the truth about particular examples quoted as being an example of how the scheme would operate.

There is a good deal of misapprehension and, I regret to say, some misrepresentation. I read the other day that under the family credit scheme a wife could lose £16 a week. How dreadful it was. A wife could lose £16 a week! But what was the explanation of that? The explanation was that she might lose £16 a week if her husband drew the money. So a wife loses £16 a week if her husband does not give it to her. That is not social security, that is relations between husband and wife.

Another thing to bear in mind is that the family credit scheme, replacing the family income supplement, is a topping up of the wage earner's pay packet. That is what that is. It is not surprising that the wage earner might think that he is entitled to the money. But one of the legends of social security that I have discovered is that if there is anything that the wife thinks she ought to have, the husband must be prevented from keeping it for himself because he cannot be trusted to look after the kids. He raids their money boxes, and he keeps the money and he smokes it, gambles it and drinks it away. So give it to the mother, who probably is as feckless a creature as you could meet, but she is the saint of the household.

We must get this in proportion. Not all fathers and mothers are bad examples of their species. It may be that it is a matter for choice for the persons concerned as to whether they should have it or give it to the wife. What we have done—and I thought that it was the end of the story of the wife's claims—is give the child benefit to the wife, and she gets it as of right, and tax free at that. The question that the Secretary of State is now considering is how much further her claims upon social benefit should go. Well, that is all right, and I think it probably should go both ways in certain circumstances.

The important part of this Bill has probably had the least discussion, and that is the first 18 clauses dealing with the pensions position in the next century. Clauses 1 to 18 legislate for the next century, which is only 14 years away. We shall need another review of this scheme just about the time the year 2000 dawns. In my judgment it will not last a day longer than that, because the changes that are taking place, and have taken place, are going to be so rapid and so vast that it will be necessary to adjust our scheme yet again.

Consider what has happened since 1975. Look what inflation has done to social security. Look at how family circumstances have changed and the position of women has changed. When I was concerned with this, my main purpose in social security life was to emancipate the women in social security. It was mostly about women and they were the least attended to of all the beneficiaries.

Here I praise the Green Paper for the way it explains so clearly and so candidly what our scheme is all about. As far as I can tell on a rough skirmish through it the Bill mentions the word "insurance" only twice for identification purposes. We have sounded the death knell, I hope, of the legend that this is insurance. The Green Paper certainly makes it clear beyond any remaining doubt that none of us is paying for his own benefits. We are paying for the benefits of those who are receiving them now. So if we were to liken ourselves to a vast insurance corporation, we are paying benefits day by day out of the premiums that we receive currently day by day.

If we were a private corporation running our business on that basis we should be put into liquidation. It would be a bucket shop, but it is reputable because it has the credit, the authority and the financial backing of the state. But the state is only what its politicians allow it to be. The state is only what Parliament decides the state shall be and do. If anybody likes to put absolute faith in the promises of politicians and say that they are such good people that they will always honour what they have said, all right get on with it. That is what I say to that. The history of governments all over the world is strewn with dishonoured commitments. In those circumstances, I think we have to be pretty sure that what we are doing will be viable when the time comes for the accumulation of promissory notes now going on to be presented for cash.

I think it is as well that where doubt exists (and none can be sure) the committee and the review team have taken note of what the demographers have said, what the actuaries have said, what the economists have said, what the Treasury has said and what the stars foretell. Taking all the things together they think it is doubtful whether our scheme would be acceptable in its commitments to those who would have to pay for it when the time comes and that we ought to modify it to make it more acceptable in any foreseeable circumstances. That I call prudence and I think it is to be commended.

In passing I would say that I believe that it is becoming unacceptable to charge the general public with a part in providing the pensions of occupational schemes for those who are so much better off than many of the people who are having to help to pay for them. I think that is probably the next development. The state should not embark on earnings-related pensions schemes which are based upon the pay-as-you-go system. Those who are to draw so much higher pensions should draw them not from current production when they get them, but should draw them from a stored-up investment in the same way that most people draw their annuities on money invested and on productivity and wealth creation which has flown from that. That is the way I think things are likely to go.

But I conclude by saying that I think that the tax system and the social security system are the next things to study in closer harmony and interrelationship. Every tax concession which is given not for fiscal reasons or for reasons of fiscal equity but for social, sectional or economic purposes is an indirect form of public expenditure. Look at what the Government are proposing to do on tax reliefs on donations to charities!£100 million of revenue is to be forgone to give the additional benefit to charities under that scheme. Why? It has nothing to do, in my opinion, with anything that the public should be doing. That money could be put to much better use inside the scheme of things where the state has much stronger obligations.

Then again, why should £3¼ billions of revenue be forgone every year in order to finance tax relief on the interest on mortgages? The building societies are bursting with money; they are going to have a boom period on more lending; and all the time there is an absolutely unlimited demand upon the tax system for revenue to be forgone on the interest which is paid on those mortgages—£3¼ billions going on that form of social policy, that form of housing policy, at a time when we are going to take £450 million off housing benefit.

Why should we be having pensions under the state scheme for higher salaried people who have opportunities for pensions elsewhere and for whose benefit we pay £3¼ billion in tax relief on pension contributions, on investment income, on the pension schemes and on the contributions of those who are both employer and employee who make them? Six and a half billion pounds in revenue forgone on those two schemes alone!

Here we are, saving pennies and chipping off bits here and there in order to make this scheme more tidy and more economical. I have said enough. There will be fresh opportunities to make some of the points in detail later on. I think that the Second Reading of a Bill is the opportunity of looking forward and I think this is the direction in which we have to look. The family credit schemes could be run by the Inland Revenue. So could other benefits as of right. Also, some benefits which are regulated by income could be done under the tax system.

But that is for another day. We got very near to it a few years ago but, with a change of government, it went into limbo. They could not decide whether they were going to continue Pay As You Earn at all. Now, in 1986–87–21 years after we first started—we are computerising PAYE. That is the record of progress in the administration of one of our biggest departments, checked and wrecked by the lack of consensus between the parties and the destruction of work done by one government by the one that succeeds it. That is where I finish.

9.49 p.m.

Lord McNair

My Lords, most of the people who will be affected by this Bill will be among those citizens of this country who were a little surprised, and in some cases perhaps mildly outraged, to be told the other day that they were having a better time than they had ever had before. I want to speak briefly, I hope, about a very small fraction of the potential victims of the Bill who are not citizens of this country but who have come here, or may come here in the future with great difficulty, often in circumstances of appalling danger, seeking refuge from one or other of the totalitarian regimes which cover the greater part of our planet in this 20th century.

It is important that we who live here should remember that persecution of your political opponents is now the norm and that pluralist democracy such as we enjoy in spite of a few recent successes is still a minority pursuit in the world of today. The refugee is not a new human phenomenon and the reputation of this country as a country of asylum has a long and honourable history. Our welcome in the past to refugees of many sorts has not only done us credit but has also brought us incalculable benefits. I am sure that the authors of this Bill had no thought of damaging our proud reputation for hospitality. Their motives were quite different, and yet that is likely to be one of the incidental effects of the Bill. If we are to treat the refugees of today and tomorrow as we treated the refugees of the past, this Bill will need the most careful scrutiny and judicious amendment later on.

A word is necessary here about terminology. On arrival in this country, people fleeing persecution in their countries of origin are not legally refugees, as defined in the United Nations Convention, of which we are signatories. They are asylum seekers: they seek the status of refugees. It will normally take about a year and sometimes as much as two years for them to attain that status, assuming of course that they are ultimately successful.

It is during this initial period that the asylum seeker, the would-be refugee, is at his most vulnerable. At present he is entitled to benefit under the urgent cases regulations, if he has no other means of support. But if these regulations are to be replaced by the discretionary social fund, does that not destroy the firm legal basis of his entitlement? Let us take an imaginary but typical case history. After this Bill has become an Act, you manage to get out of some country in the Southern hemisphere just one jump ahead of the secret police. You are lucky—luckier than some of your friends or relations—but you arrive here in your light tropical suit, cotton shirt and canvas shoes to find snow lying thick on the ground and the air temperature 50 degrees or more cooler than you are used to.

However, your luck holds and you find somebody here who can help you—somebody in one of the refugee organisations or in a law centre. With his or her help, you draft your application for asylum and it is posted off to the Home Office. But where will you spend the night? Your helper does his best but the only accommodation to be found is a shared room in an hotel, for which the landlord, not unreasonably, demands a week's payment in advance.

At this point your helper can only refer you to the nearest office of the DHSS. There you will do your best to explain your situation and your needs, which include some warm clothing, your week's advance payment for the room and something for your subsistence. But of course you will be explaining all this to the social fund officer. It is near the end of the financial year. The inclement weather has led to a multiplicity of claims for heating allowance from elderly and hypothermic natives, and this particular officer's allocation is all but exhausted. So, though not unsympathetic, he feels obliged to refuse, your application. You go back to the law centre and your helper there will help you to frame your appeal. Then you go back to the DHSS, where the manger regretfully turns down your appeal and maintains the original refusal.

At this point I have to abandon this imaginary but typical case history because I simply do not know what happens next. We leave the helpful person in the law centre nostalgically remembering the days of the single payments regulations, when his client would have had a clear entitlement to a payment to secure his hotel room and buy something to eat. as well as an entitlement to help with the purchase of warm clothing and footwear.

He would have had the right of appeal against a refusal to an independent tribunal which would have led to a more just review of the decision. It must, 1 fear, already be apparent that for me this Bill is a maze in the middle of a jungle in which I am irretrievably lost. But in my bewilderment may I ask a question or two about the position of the claimants below the age of 25?

Having read section 273 of the Green Paper and paragraphs 38 to 314 of the White Paper, I am surprised to be unable to find anything in the Bill about that age group. In these papers of various colours the Government stated their intention of replacing the householder and non-householder distinction by an age distinction. This would mean paying all single claimants under the age of 25 a lower rate of benefit on the basis, if I understand it correctly, that most people under 25 are not really fully independent.

In the case of asylum seekers from abroad, this is manifest nonsense. Moreover, the British Refugee Council finds that over a third of the applicants it sees are under 25, and this is not surprising. First of all, it is a grim demographic fact that in the Third World most people are under 25 years old. It is also a psychological fact that resistance to tyranny is more likely to be found among the young than among the old. How can young asylum seekers expect to survive on the lower level of benefit, contributing to their general rates and their water rates? Is there any Minister so rash as to assure us that water rates will not rise considerably in the next few years?

I had hoped not to take up as much of your time as I have, and there are many other questions that I could ask which I will leave for some future occasion. But may I finish by supporting the plea make by the noble Baroness, Lady Vickers, about interpreters? Every claimant has a right to be understood, and for many asylum seekers this requires the presence of an interpreter. This is well understood by the Home Office and the Immigration Service but is it appreciated by the DHSS? Am I right in believing that they are prepared to pay the travelling expenses of interpreters but not the professional costs—in other words, the fares but not the fees? If I am right, is this in accordance with natural justice?

9.57 p.m.

Lord Swann

My Lords, this Bill covers a wide range of complex issues and you will be relieved that it is only in one area that I feel competent to speak. It concerns occupational and personal pensions. Like many of us, I suffered from the vagaries of pensions, but it is only during the last year or so that I began to learn about them in earnest, when I became Chairman of the Company Pensions Information Centre, a post previously held with distinction by the late Lord Byers. Some of your Lordships will know what this organisation does, but for those who do not I should say that it provides detached education and information for a wide range of bodies, ranging from employers and trade unionists to accountants and Citizens Advice Bureaux.

Unlike some noble Lords, I think there is a lot to be said for the central point of the Bill in so far as it relates to pensions; that is to say, it is making it possible for people in final salary company schemes to opt out and take the money purchase schemes instead. But I doubt whether there is quite as much to be said for it as the Government have made out.

This is not the time of night to go into all the pros and cons and the details of which pension is most suitable for which person, because the answer depends on a lot of imponderables, primarily the incidence of inflation and the individual's career pattern. I hope profoundly, therefore, that the Government will not overplay the advantages of personal pensions. For some people they will prove the right answer; for others they will not.

There are some snags in the arrangements for personal pensions outlined in this Bill and I hope that the Government will ponder them. They have already been touched on by a number of noble Lords. For instance, the Bill requires the individual to contribute only 2 per cent. of his pay to a personal pension, and the employer a further 2 per cent. or thereabouts, plus for a period an extra incentive from the National Insurance Fund of 2 per cent. We have heard a certain amount of this already. These sums, as other noble Lords have commented, will most certainly not add up to a worthwhile pension at retirement unless the individual or the employer, or both, contribute considerably more. But will they? I have to say that I doubt it.

Moreover, since in most company final salary schemes the individual contributes 5 per cent. or thereabouts, is there, as we have already heard postulated this evening, a risk that people—and young people especially—will opt out and take personal pensions, preferring money in their pocket now to a better pension at retirement? I think it is all too likely. The result could be, years hence, a lot of disappointed and reproachful people. So, once again, I hope that the Government will do all they can to make clear the pros and cons of the two types of pension. Certainly the Company Pensions Information Centre will be doing so, and I learn that many trade unions intend to advise their members accordingly in no uncertain terms. So much for generalities.

I want to make just two more detailed points that concern me. Your Lordships will be glad to know that, unlike so much of pensions detail, they are not complicated, and they rest on simple principles—I might almost say moral principles. Company final salary schemes have come in for a good deal of criticism in recent years, not least from the Government, and they have often been compared unfavourably with personal pensions. As I tried to explain earlier, the truth is a lot more complicated and, ironically, it was the inadequacies of personal pensions that led, 30 or more years ago, to the growth of final salary schemes. Be all that as it may, the arguments have clouded an appreciation of a number of the things that existing company pensions do very well; in particular, how they look after dependent widows, widowers and children.

I ask your Lordships to consider the case of people in their twenties or thirties who die by illness or accident; in fact, far more than is ever realised. In most company pension schemes if the employee dies before retirement, the widow or other dependants will get a substantial lump sum and a continuing income. Such benefits are usually automatic, with the cost borne by the employer. With a personal pension the widow or other dependants will indeed get the accumulated sum of money, but the younger the employee when he dies, the less will that sum be and, in early years, it can be only trivial. The problem can be overcome if the employee takes out an insurance policy, at his own expense, of course, but how many actually do? Not many.

I ask your Lordships to consider an even more distressing situation. The young employee opts out of his company scheme in favour of a personal pension. Does he tell his dependants that, if he dies, they will not get the benefits to which they are currently entitled?—probably he forgets. Does he even realise?—quite possibly not. Will he do something about it?—again, quite possibly not. And will the widow suddenly discover that she and her children will suffer a drastic diminution of income? All too often, I fear, the answer will be, yes. If it is a good idea that employees should be free to choose which sort of provision to make for their pensions—and I think it is—part of the price for that freedom will be paid, in the event of early death, not by the employee but by his or her dependants. It leads me to put two questions to the Government. Is it reasonable that a dependant should have his or her cover for death benefits reduced without being made aware of the fact? Secondly, if it is not right, what do the Government propose to do to make sure that dependants are made aware of the position?

I do not go so far as to ask that the dependant should consent to the reduction in cover, because obviously that would raise appalling difficulties. I ask only that the dependant should in some manner be informed. I say this primarily because I am concerned for the dependants. But I can also see the unhappy position of the employer who finds himself confronted (shall we say?) by the widow of a young employee who has recently died. She, reasonably enough, expects the benefits detailed in the booklet of her husband's company pension scheme. But what if he omitted to tell her that all was changed when he withdrew when he was given the opportunity to do so by this legislation? As an old media man of sorts, I cannot help thinking that Fleet Street and the broadcasters will have a field day.

My second concern stems also from simple principles. Most people prefer not to think about retirement and underestimate how long it will last. So I share the Government's aim of wanting people to make realistic provision for themselves and their dependants while they are at work. And I have to agree that the alternative approach of one generation promising itself better pensions but leaving the next generation to pick up the bill is liable to give rise to all sorts of problems.

I understand therefore why the Government want to offer a 2 per cent. incentive to those presently in the earnings-related part of the state scheme in order to encourage them to leave that scheme and make adequate provision through a properly funded contracted-out scheme. We have heard quite a lot about this already. But what I find unjustifiable—and clearly this view is shared by quite a number of noble Lords—is the proposition that people who are already contracted out under a company pension scheme, which has to satisfy quite high standards to be contracted out in the first place, should also be given the same 2 per cent. incentive simply to encourage them to switch to being contracted out under a personal pension scheme which only has to meet lower standards. It has indeed, even in this House, been widely described as a bribe.

I do not make this point because I think company final salary schemes are necessarily better than personal pension schemes. I hope I have already made clear that I do not, and that the choice as to which is better for any one individual depends on many imponderables. Nor do I fear that the proposal constitutes a serious threat to existing company schemes and their managers; and even if I did, I would have to say that the proper concern for your Lordships should only be the ultimate benefit to the individual. I believe therefore that people should be free to make their own choice in the matter on the merits of the situation, and uninfluenced by fleeting incentives, bribes, or whatever one cares to call them.

Putting all this together, I see no legitimate case for the Government to offer this 2 per cent. incentive payment for people to move out of a company scheme which already provides benefits high enough to qualify for contracting out of the state scheme. The Government have said that they want to encourage good occupational pensions. I suggest that you do not encourage anything by paying people to abandon it. There are, I know, Members of this House who would like to go further and abolish the 2 per cent. incentive completely. I should not wholly disagree with them, but I can see a case for an incentive to help a new scheme in getting off the ground, though certainly not at the price of discouraging admirable existing schemes. I hope most earnestly therefore that the Government will think again and bring in an amendment of their own at the Committee stage of the Bill. It might be argued that this would introduce tiresome complications. I can only say that I have taken expert advice and I am not persuaded.

I was encouraged to hear that the Secretary of State in another place, faced with the same argument, said that he did not want to close the door to any change and that he would think about it. I hope that the noble Baroness the Minister is similarly disposed, and to the extent not merely of thinking about it but of actually doing something about it.

10.10 p.m.

Baroness Gardner of Parkes

My Lords, I am delighted to be here even at such a late hour to support my noble friend the Minister in the Second Reading of this Bill. Her opening speech was so clear, and it explained in detail a Bill that is extremely complicated. But the speech that I have enjoyed most tonight has been that of the noble Lord, Lord Houghton of Sowerby. He said almost everything that I wish I could have said. That is quite a contrast to the occasion when we met in the same way over fluoridation, when I could have wished him much further away.

The point that the noble Lord made that is so relevant is that although SERPS was accepted by all parties when it was introduced in 1975, 10 or 11 years have now elapsed and it is time for review. He made the very practical point—and it was a very sound one—that no doubt in another period of years this Bill will be due for review. At the time when SERPS was introduced in 1975 no one really thought that there would be such demographic changes. that there would be such an ageing population, and that there would be the fall in the birth rate that certainly has taken place. Those are very important reasons why the Bill is now required.

I do not intend to go into detail on the Bill but rather to pick up some of the points that have been made and to ask my noble friend the Minister to comment on one or two others. Much has been said about loans. My noble friend Lady Vickers said she was concerned that people got into debt over loans that they could not repay. My experience is that people borrow money from what I can only describe as loan sharks, where the interest rate is so enormous that they can never manage to repay it. But the loans that will be available through the Bill will, I hope, be either interest-free or at a very low rate of interest. I ask my noble friend whether she will confirm that at the end of this debate. If people are in real need at a particular moment, it will be helpful if they can borrow money without paying interest—which is what the whole of the third world is asking for today. It is the interest on loans that causes the difficulty for many people who need help at a particular moment to meet a certain necessity that arises.

The question of school meals has also been discussed. The debate about whether or not children should have school meals provided free, when other children know that this is being done, has gone on for so long. Some children who are entitled to free school meals will not accept them, or their parents will not allow it to be known that their children are having free school meals. The system proposed in the Bill will be much kinder to those people because the child will receive the money "invisibly" at home and with it will be able to pay for his own school meals. As has been mentioned, children will receive the money for every week of the year and not just for the period of the school term. That must be of benefit to families.

I did not like the speech of the noble Viscount, Lord Hanworth, who said that the Bill was presented on the pretext of providing help to those in greatest need. I do not believe that there is any pretext. I believe that this Bill is being introduced with a genuine motive behind it and that it will do good. The noble Viscount made many points, such as that about not depending on just what we can afford for the future of SERPS, and so on. All his points were answered superbly by the noble Lord, Lord Houghton, and no further reply is required from me.

The family credit system interests me greatly. I must point out that women constitute 40 per cent. of the workforce and that 60 per cent. of all married women now make a contribution to the family budget. In fact, nine out of 10 single parent families are headed by a woman. Since we have the Matrimonial and Family Proceedings Act—on many sections of which I have grave doubts—women can no longer rely on marriage as a guarantee of financial security. I am not sure what will happen to divorced women under this Bill. Certainly I think that the Act to which I referred has thrown so many women, and will increasingly throw so many women, back on the social security system because there is now no obligation on a husband to provide for a first wife once it is a case of not looking after the children. But many of these first wives are unable to obtain employment because they have been out of the field of work for many years, and when they are divorced they find themselves in an entirely new situation.

I should like more reassurance on the matter of breaks in work and the regulations that will cover the allowances for breaks in work for women. By that I mean those women who are looking after the disabled or children—the various categories are set out in the Bill. I want assurance that that will be done in a very thorough way because I believe that is most important. I remember so many women, and know so many women now, who opted to pay virtually no contributions years ago when one had the choice—a choice which no longer exists for women in employment—and then, having paid reduced rate contributions, eventually found themselves in an unhappy position. It would be a good move if the Government could see their way clear to giving invalid care allowance to married women now rather than wait for the decision of the European Court which it appears will make that essential.

I feel the other way in regard to the death grant. It is time that was abolished. It has been unrealistic and out of date for a very long while. When I was chairman of a local authority social services committee people were protesting then; and I must say that it was under a Labour Government. They were protesting that it was totally inadequate and that it should be brought up to date. All the things that I have heard today were said then. It has been hopeless and out of date for too long. The noble Baroness Lady Jeger, said that it might buy a drink for your friends and that is about all it will buy now. Certainly £30 is not enough to pay for a burial. Even at the special reduced rates that existed for the council about 10 years ago we could not get anyone buried for that price. People are unrealistic on these issues.

I know that when I started in dental practice people paid every week into their own insurance schemes for their funeral. It was common practice among the people in my area. In fact, they took pride in making that provision. Certainly if there is a death grant it needs to be sufficient to cover everything.

My understanding is that under this new Bill instead of everyone getting the £30 whether or not they need the money, those who really need help will receive adequate assistance. I think that is much more satisfactory. What is the point of giving that £30 which, as the noble Baroness suggested, will buy only a few drinks? It is far better to put together all the £30 payments which people do not need and give it to those people in real need.

I agree with the noble Lord, Lord Houghton, that we need what is called, I believe, either negative income tax or a tax credit system. I strongly supported that system. I occasionally ask the Inland Revenue what has happened to the proposal and I am told that it has been shelved but that it is still there, dusty, on the shelves and it could be brought out and dusted off at any time. I think that is the best proposal of all; linking together the social security and tax systems to make the whole process more simple and a way of topping up income. But at least under this present Bill we shall be coming considerably closer to a link between tax and social security.

There are many points that I am putting to one side because I know that they have been discussed and I do not wish to take up unnecessarily the time of the House. I was quite fascinated to hear the speech of the noble Viscount, Lord Buckmaster. It was interesting to listen to the heartrending tale of the 80 year-old lady in Kensington, but I consider that there were a few inaccuracies in the story and I am sorry that the noble Viscount is not here at the moment because I should have been pleased if he had been able to stand up and respond. Above all, I thought that it was a scare story and the typical sort of alarm that people like to spread about every Bill that comes forward. When I was on the GLC, I remember very well the scare stories about bus passes and those wicked Tories who were going to take everyone's bus passes away.

But there is always someone who will try and paint a picture in the most alarming colours that they can possibly find. It is the same with concern about the immigration appeals. If the present Leader of the Opposition has his way there will not be any problem because, as I read in the press, he said that all immigration control will be abolished.

Lord Ennals

No, my Lords, he did not say that.

Baroness Gardner of Parkes

That, my Lords, is the way it has been quoted.

Lord Ennals

No—misquoted. He did not say that, my Lords.

Baroness Gardner of Parkes

My Lords, I might add that it has also been quoted that he said in India—

Lord Ennals

My Lords, perhaps the noble Baroness will give way for a moment. I can assure your Lordships that the Leader of the Labour Party in another place did not make any such statement. He actually said that he recognised that there needed to be controls but that they should be fair. I think I must correct the noble Baroness because otherwise the impression will be gained that that is what the Leader of the Opposition said. He did not.

Baroness Gardner of Parkes

My Lords, I thank the noble Lord for that clarification. But I should like also to ask whether or not the Leader of the Opposition said that the British Nationality Act was a racialist measure.

Lord Ennals

He did, my Lords.

Baroness Gardner of Parkes

My Lords, he did say it was a racialist measure. I am as affected by the British Nationality Act as any other immigrant of any colour. I do not accept that it is a racialist Act. I do not look racially any different from any other European; but all my family are prevented from coming here in the same way.

The noble Viscount, Lord Buckmaster, went further, and the noble Lord, Lord McNair, also brought up the issue of refugees. I thought that was very interesting and I listened very carefully to what was said, but I imagine and hope that there will always be some special provision for refugees in this country. Normally there have been special provisions made. When the Vietnam refugees arrived, accommodation was actually provided for them, and I understand that there are still camps where many of them are living. But I certainly would be interested to know the answer to that point.

I shall come to two points on which I take a very strong view and which I think I must press. One is that I believe there should be an appeal procedure, though I am not sure what form it should take. I sit on an industrial tribunal, and when I see what a vast enterprise that has become, I do not know whether one wants anything quite so enormous. Under the health service regulations there are two stages in appeals, should someone be dissatisfied with the form of dental or medical treatment that he has received.

First, there is an informal proceeding, which can be undertaken very quickly and easily, to decide whether or not the case should go to a full appeal. Perhaps it would be good if there were something similar to that, where specially trained people could make a first assessment and then, if one was not satisfied, there would be the right of appeal to some small tribunal rather than going to a full, extensive and expensive hearing in the first instance. I think that in the industrial tribunals the preliminary hearing procedure has saved a lot of money. It sorts out the cases which are rather frivolous or vexatious from those which are genuine. I think that there is a case for some type of appeal procedure.

The second point that I must pursue is the one of fairness to women. This was the only point about which I thought that the noble Lord, Lord Houghton, was rather cynical, when he said that a mother was always wanting some money. Many women have no idea of what their husbands earn. If the husband received the money through the family credit system, he would simply stick to it and not tell the wife that he had it.

If the husband is unemployed and the family receives supplementary benefit, that is different. Although the money is paid to the husband, the wife can go to the DHSS to ask what her husband is getting. She can find out exactly what sum they are being given to live on, and so she has a basis on which to demand enough to bring up the children. But if the money is paid to the husband at his place of work, a woman has no right to know what is his income. There is still quite strong discrimination in taxation, as we know from other debates. The woman will not be in a position to know what her husband has been given and what he has done with it. I am delighted that the Secretary of State is to look at that again. I hope that the Government will bring forward an amendment.

Thought might also have to be given to what I would call the unpaid working women. That is a title that I came across in Strasbourg last week when I attended the women's committee. It was used to define those women who work full time; for example, the farmer's wife or the doctor's wife, though I explained that in this country most of our doctors' wives get paid for acting as receptionists. The term defines a woman who is working full time in a family occupation but who is not strictly classified as a working woman. I am not sure where those women fit into the Bill. We must think about that. I should like to be assured that the Bill will be fair to women and to part-time workers, most of whom are women. Those are the ponts on which I seek reassurance, but I strongly support the Bill.

10.26 p.m.

Lord Tranmire

My Lords, just over 35 years ago I started a stint as Parliamentary Secretary in the Ministry of National Insurance. Listening to the debate I thought how shocked I should have been had I realised in 1951 that we had to wait 24 years before we had a comprehensive review of the national insurance scheme. I congratulate my noble friend Lady Trumpington and her Minister on having undertaken the rather hazardous task of reviewing the scheme. Ministers come and Ministers go and they all add little complications to the scheme. There is a great need for simplification, but it has its dangers.

I have certain reservations on one or two points. I should like to raise two of these in the hope that I may have an explanation or reassurance. First, I am a member of the Chartered Society of Queen Square, which looks after the financial problems of those suffering from multiple and disseminated sclerosis, Parkinson's disease, epilepsy, and what have you. Nearly all those we try to help and look after are chairbound, and if in winter you are chairbound you are in disproportionate need of warmth. Nearly all the people we deal with go to the supplementary benefit commission and get a generous heating allowance. Their heating bills are astronomic. What will happen under the Bill, for the heating allowance, I gather, goes and the claim comes under the flexible scheme of the social fund? That is all very well, but I hope that it will be generous. These are serious cases. They are nearly all terminal. I should like an assurance that they will not lose out on the heating allowance. There is a fear of that in the quarters with which I deal, when we meet. That is my first point. I should be grateful if my noble friend can give some reassurance about that.

My second point is more difficult. It goes back to the 1975 Act when the then Government invented a curious device called the married woman's half test. Under that, women who had spent their lives as insured contributors with full contributions and who married at about the end of the war were not warned that when they married they should become voluntary contributors. As a result, they lost the whole of their retirement pensions and their contributions went for six. I know that that matter has been dealt with piecemeal. In 1979, the Government passed an Act which exempted from the rule married women who reached pension age after 6th April, 1979. They were all right. They were freed from the married woman's half test.

In the 1985 Act, provision was made for the abolition of the married woman's half test as a result of a directive from the European Community which said that it was wrong to have such unequal treatment. The rule was cancelled and women could obtain a pension backdated to 22nd December 1984. The rule has created a great deal of injustice. It is even more unjust because older women are being denied retirement pension while younger women escape the provision. When the Bill was introduced I was not alone in hoping that the Government would deal with the problem of the married woman's half test.

I shall illustrate the point. I have a case of Miss A who was serving with the Red Cross in the Far East during the war. She married a Far East prisoner of war in August 1946. She had a full national insurance record until her marriage. No one told her that she must continue to pay contributions under the married woman's half test rule—not surprisingly, because the half test rule was invented by an imaginative government in 1975.

When she became 60 in February 1972 she wrote in expecting that she would receive a full pension. She eventually learnt for the first time that under the married woman's half test rule she was not entitled to any pension. It was a shock to her. She wrote letters to Newcastle with, of course, no effect until eventually we passed the Act in 1985 and she obtained her pension backdated for a year. The weekly pension amounted to £ 10.02, whereas at the date of her marriage she was entitled to a full pension. I ask the Government to look again at the married woman's half test. It is a blot on our pension legislation. All governments make mistakes. The 1975 Government made a grave mistake on that. I hope we can have some assurance that it will be put right at the Committee stage of this Bill.

Baroness Ewart-Biggs

My Lords, this must be one of the few Bills that is so complex that there are still some new points to be made by the nineteenth, twentieth and twenty-first speakers. I feel very honoured to follow the noble Lord, Lord Tranmire, with all his experience as Parliamentary Under-Secretary to the Ministry of Pensions and National Insurance as far back as 1951. I found his comments of enormous interest. But it is getting very late; I shall therefore confine myself to a very few remarks.

First, I should like to reiterate some of the principles which lie behind the social security system and without which one cannot judge this Bill. Secondly, I should like briefly to comment on some of the proposals in this Bill which I find of particular concern. They are proposals which I feel will disadvantage some of the poorest members of this country.

We all start from the same premise that flexibility and change is necessary for a system to be kept in line with the needs of a society which is rapidly changing. I know that that is said very often but it is true. The importance of simplifying social security has often been stressed, and it is indeed very important. But I would maintain that while the structure of society becomes even more complex we can hope only to adjust rather than simplify. As the noble Lord, Lord Tranmire, said there are dangers in oversimplification. A complex system is the only way that benefit can be directed to the different categories of people whose needs change as society changes. When the pattern of life becomes less complicated then our social security system can become less complicated; but I cannot believe that that is the case today.

What should a review of the social security system seek to do? I know that these criteria have been put forward. First, it must aim to prevent poverty in the first place through pooling of risks and resources and not merely be based on the relief of poverty. It should be concerned with the protection of those members of society who are not economically productive. This category includes our children, the elderly, the sick and the disabled. It includes that vast army of people who, although not classed as having jobs, spend their time bringing up children, providing homes and care for elderly relatives, looking after the sick, and, as the noble Baroness, Lady Gardner, said, supporting their husbands in a very close way in their jobs. Secondly, there is a growing army of unemployed, and these are more and more the inactive group who need support.

A further criterion for the reform should be, as almost every speaker on this side has said, to reduce means testing. It is expensive for the state and is stigmatising and demeaning for the individual. Likewise, any reform should, as a priority, aim to avoid trapping individuals and families into dependence. People should—and indeed they wish to—contribute to society through their own efforts.

Lastly, in this day and age our modern state requires a single integrated system whereby any social security reform is inseparable from reform of the tax system and the whole operation of the fiscal welfare state.

Set against these criteria I feel that this Bill fails on all grounds. It is a Bill which has nothing to do with creating greater social justice. The right honourable Member for Kensington said in the debate in the other place, reported in my local paper, that fewer than half a million people receiving income-related benefit would gain from the Bill. One million recipients would be in the same position, and five million would come out worse. He added that the Bill might well end up hanging like a millstone around the necks of Conservative candidates at the next election.

It is clear to us all that the Bill will merely bring about a more ruthless distribution of a yet smaller cake among the poor, taking from the poor to pay the even poorer. In fact, a greater polarisation of society will come out of it. It is quite obvious that there has been no genuine assessment of need. Had there been such an assessment, how could those who by definition cannot afford it be asked to pay 20 per cent. of domestic rates while at the same time, as the noble Lord, Lord Houghton, said, the regressive system of mortgage tax relief is permitted to increase its toll on the public purse each year? How can the fearful limitations imposed by the repayable loans of the social fund do anything but drive people deeper into poverty and debt?

Secondly, I should like to say a few words about the particular measures that I hope to raise during the Committee stage of the Bill. First, there is the question of the proposed restrictions on school meals which, as noble Lords know, it is estimated will mean that 545,000 children currently in receipt of school meals will lose their entitlement. As we know, the Government argue—and the noble Baroness who has just spoken has supported them very strongly in this regard—that poor families will be compensated for this loss through extra cash entitlement. The noble Baroness argued that it would be very much better for the children because they would not be so stigmatised. However, in the first place it is doubtful whether that extra cash will be forthcoming. If it is forthcoming, it is indeed doubtful whether it will actually be translated into anything as tangible as a nutritious meal in the belly of those school children.

There are all kinds of reasons for that. For example, significant numbers of those entitled to family income supplement at the moment will not qualify for family credit. Family credit, unlike family income supplement, will most commonly find its way into the man's wage packet—a point which has been brought out many times. Although the Government have given an assurance that they will look at it again, I hope that the message from this Second Reading debate will persuade the Government to change their mind on this particular point.

Another reason why the cash may not be available for children's meals is the interaction between family credit and housing benefit. For many recipients the real amount received each week may well be 44p rather than £2.20. Meals vary as between different schools, and I can foresee many children who at present receive the great support of a nutritious meal, no longer receiving it. It has been proved that there is nothing of greater benefit to children of very poor families than to be assured of that meal in the middle of the day.

I shall not go over the anxieties about the social fund because they have been repeated so often today. However, the Family Welfare Association, which is very closely involved with families in need, has issued a very good comment on it. It says: In 1980 the single payment system was curtailed—and since then charities have been overwhelmed by people asking for money to pay for particular needs, such as children's clothing. The Social Fund will make matters worse—at a time when charities simply cannot cope. This year we have had to close the office for 24 weeks out of 52 because we cannot accept any more applications. We have no more money to give away". That was the comment of the Director of the Family Welfare Association in March 1986.

Thirdly, the removal of single payments will, I know, have many repercussions which have been mentioned today, but another will be its effect on the local insulation schemes run by voluntary organisations who depend on this payment to finance the insulation materials and who through their work have helped with the fuel bills of innumerable old age pensioners and poor families.

Finally may I stress how deeply affected the people in Northern Ireland will be by the changes proposed in this Bill? The loss in the Province is estimated at £33 million, and it is inconceivable even to imagine the extent of the suffering which this will cause to a community such as the one in Northern Ireland. where unemployment is much higher. Officially it is 21.7 per cent. but more realistically it is thought to be as high as 28 per cent. Wages are lower and fuel prices higher, and the level of need is unequivocally proved by the fact that although Northern Ireland represents only 2.8 per cent. of the United Kingdom population it claims 10 per cent. of the single payment budget. I have on many occasions argued in this House that, putting compassion and caring to one side, if we really want to do something about Northern Ireland's political future then we must do something about its poverty, and this Bill will exacerbate that poverty.

I end by saying that I have never prior to any other Bill—except perhaps the Sunday trading Bill, and we all remember what happened to that—received more representation from organisations involved with social matters and family issues, and all expressing their desperate concern and anxiety. Social workers know that they will be inundated with requests to which they will be unable to respond, and charities will be equally inundated with requests for help from claimants who have lost out on social security benefits.

The Family Policies Study Centre, an entirely independent body, has brought out a paper called Family Impact which shows how the Government's proposals will affect people in everyday family situations from birth through childhood, youth, marriage, caring for the elderly and right up to old age and death. The Government will be wise to harken to this voice as well as to all the other anxious voices that have been raised over this Bill.

10.48 p.m.

Baroness Faithfull

My Lords, I congratulate my noble friend the Minister on her opening speech in this debate. There are many things of which I approve in this Bill, particularly the effort to streamline the administration of benefits; but time is short and the hour is late and therefore I shall not concentrate on what I think is good in the Bill but on what I think we ought to put right in this Bill during its passage through this House.

Like my noble friend Lady Vickers, I should like to thank all those who wrote to all of us explaining the Bill in clear ways so that we were helped to understand it. I should like to speak today as a practitioner. I have been a children's officer, a director of social services. I have visited offices with claimants. I know what they go through and I feel for them. Therefore it is really as a practitioner that I speak today, as well as president of the National Children's Bureau and council member of Barnardo's, and also chairman of the All-Party Parliamentary Group for Children.

Everything that I have to say has been said, but nevertheless I am going to say it again in order that I may nail my views to the mast, so to speak. First, I want to mention Part II, Clause 27, concerning family credit. This has been spoken of a great deal. At the moment the mother draws £7 from the post office. Her husband, if he is earning a low wage, at present draws family income supplement. The wife draws it through the post office.

I wonder whether it has ever occurred to Members of your Lordships' House what that means to a woman: to have a sense of independence, to have a sense that she does not have to ask her husband for the money and that that money is hers to spend on the children. With other noble Lords, I worry considerably over the fact that this money is now to be gained through family credit through the pay packet. It is inevitable that the man will feel that it is part of his wage. He will not calculate that he should give it to his wife. It may be said that this is wrong, but I think it is realistic. It is very hard for the woman to have to haggle with her husband over how much he should give her of something which is really hers by right to help her to look after the children; that is, if she is the person looking after the children.

I have to confess that I am worried over the figures because it seems to me that with family credit in a way one is robbing Peter to pay Paul. Will the family really get more money on family credit, because there are proposed cuts in the housing benefits and, as has been said before, proposed cuts in meals? Here again reality comes to the fore. What my noble friend Lady Gardner of Parkes said about school meals is right, ideally and in theory, but I would suggest that it will not work out in practice. I would rather children had their school meals at school (so that they had them) than have money for meals which they do not then get in the holidays. I have had to run various centres for children in the holidays and I have to say that, whether we think they ought to or ought not to, many children do not get meals during the school holidays. Looking at it from a cost-effective point of view, it is disastrous for children not to have a good meal every day.

On this point, will my noble friend the Minister make representations to her right honourable friend the Secretary of State? A significant increase in child benefit is central to any reform of the financial support for children and this should be paid through the post office to the carers, usually the mother. With our present financial situation I hesitate to say that I wonder whether it ought to be index-linked.

From the point of view of its being paid by the employer, this question has been touched on by many people here. May I say that all the men I have worked with hate having—I am sure your Lordships' House will agree—their personal and private lives mixed with their work lives. It would be disastrous if this money were to be paid through the pay packet. A man likes to feel that his private life is his own and is not part of his work life. I hope very much that my noble friend the Minister will be able to tell us that Her Majesty's Government will look again at this matter.

Family premium, this new benefit which is to be paid to families with children on income support, will replace supplementary benefit. Is my noble friend the Minister aware that the Government figures are challenged by the Policy Studies Institute? It maintains that when account is taken of the loss of weekly additions to meet extra requirements, the loss of single payments and their replacement by a loan and the requirements to meet 20 per cent. of rates, the resultant family premium will be inadequate. I spent an hour yesterday trying to work out these figures. If only I had had the noble Lord, Lord Banks, with me, I probably would have got the right answer. But, as I worked it out, the family premium is going to be less, not more; certainly it is not going to be the same.

On the social fund, which is dealt with in Clauses 32 and 33, I have to say that pre-1980, when there were discretionary grants, I found it very worrying—and I was at that time working as a director of social services—that the discretionary grants varied very much from place to place and from person to person in the office. This caused great feelings of resentment. Mrs. Jones used to say, "Mrs. Smith got something and I didn't. Why didn't I?" I could not tell her. I must say that I do not really agree with discretionary payments. I would much rather have it written down exactly what the payments are, with in some instances a balance involving discretionary payments. The noble Lord, Lord Tranmire, has spoken about people who are particularly ill, such as kidney patients and children who are enuretic, who soil and wet their beds through some form of illness. There must be some discretionary payments, but I would prefer there to be grants every time. I think that those who have to draw, the claimants, would prefer to have grants because they would then know where they stood. My Lords, I am trying to cut down the length of my speech—

Noble Lords

Do not cut it down.

Baroness Faithfull

My Lords, on the question of loans and repayments, again reality and idealism simply do not go hand in hand in this area. I have to say "Neither a lender nor a borrower be." Make a loan, let it be a loan; and that is the end of that. A homeless family who are in a homeless family unit or in bed-and-breakfast accommodation and who have to move may be given a council house. There is the joy of thinking that they are to get a council house; but a council house with what in it?—nothing. If they are to have a loan for the furniture in the council house, how is it to be repaid when they are practically on the poverty line?

One or two things may happen. Perhaps, as I think my noble friend Lady Vickers said (or perhaps it was Lady Gardner) they will go to the money lender down the road. The money lender's interest rates are very high. Then the awful day will come when the money lender takes them to court. Then what happens? I am not at all sure from the Bill exactly how the loan is to be repaid. As I read the Bill, it seems that it is to be taken off the payment. I asked a woman the other day, "If they cut the amount of money coming to you because you have had a loan instead of a grant, what will go?" She said, "My rent and my food." This, my Lords, is not cost-effective. Therefore, on the whole question of the social fund I do not think that we have got it right.

Perhaps I may turn to a matter that I still do not understand; namely, the 20-year earnings rule which is dealt with in Part I of the Bill. I think that my noble friend the Minister said that there were certain categories that would be taken into account; but it seems to me that married women, the carers of those who are ill and those who have elderly relatives will be really worried if they feel that those years are not going to count. I think that my noble friend the Minister said that they would count. But I wonder whether this is quite clear in the Bill.

May I make a point which was referred to by the noble Lord, Lord Seebohm, concerning volunteers? There are many unemployed people at the moment who are giving magnificent service in the voluntary field and are helping. However, if their expenses can be only £5 a week they will have to give up or give much less time; the work will suffer and the volunteers (themselves out of work) will have a sense of being devalued.

The noble Lord, Lord Seebohm, said that there must be accessibility, acceptability and comprehensibility. I think we both read Professor Titmus! I served on the Fisher Committee which was looking into supplementary benefits. May I make a plea to my noble friend the Minister on the one subject which has not been touched on so far in this debate? That concerns the way the local offices are run. I look round the Chamber and see the noble Lord, Lord Houghton. How I would love to take the noble Lord to a local office one day!

When I sat on the Fisher Committee, I said to the chairman, Sir Henry Fisher: "We must recommend that offices must be quite differently run; we must have the best people on the counter and the less good people behind." He said: "You can't do that. In an army you don't have the colonels in the front and the privates at the back." I said, "In my social services office in Oxford I have the colonels in the front and the privates at the back."

It is cost-effective because you have people in the front dealing with clients, not behind glass—because there is nothing more awful, if you are in real trouble, to talk through glass at someone on the other side who does not really understand you and is really frightened of you (because that is why the glass is there). I shall make an offer to my noble friend the Minister to design a supplementary benefit office: I should be delighted to do so. It would be cost-effective in staffing and money, and it would add to the dignity of people who have to apply to the offices for benefits.

I would make a plea that as a result of this debate we should realise that with the tremendous rise in unemployment, with the tremendous rise in people who must apply, we should accord to them a service which is dignified, a service that is realistic and a service that will pay in good returns.

11.3 p.m.

Lord Vinson

My Lords, in welcoming this Bill at this late hour I should like to concentrate primarily on the cost of retirement provision, pensions and where the money comes from. I am sure that in this House we would all wish to see that those in retirement have the highest possible standard of living, relative to the economic fortunes of the country. But outside this House much of the debate is conducted by company pension fund managers, and of course they are primarily concerned with the sector whose members are fortunate enough to have three pensions: basic, state, old age pension, the contracted-out state earnings-related pension and, on top of that, a company pension.

Your Lordships will need no reminding that this represents only about half the working population of this country; so the recommendations of such bodies as the NAPF and others should be quite reasonably seen against this backgound. But governments, of whatever political complexion, should be concerned to see that those who are not fortunate enough to have a company pension—for example, those wives whose work pattern reflects the priorities of rearing their families, those people who have been made redundant through no fault of their own, and part-timers, as was mentioned earlier, generally, and those who through incapacity or misfortune have hardly been able to work—all have an adequate and reasonable provision in old age.

We have in this country an ageing population, and all the demographic trends indicate an increasing number of dependants and elderly people. The burning question, then, is: how much can a nation pay those who are in retirement when inevitably the burden of such payments falls upon the working? If one goes back to simple tribal economics, the rice is grown by the able-bodied and divided among the tribe according to need. Nothing has changed in our present society. All pension payments are a transfer from the working to the non-working. Unfortunately, this fact is little understood, but it should underpin all our considerations.

The old age pension is of course an identifiable component of the tax paid by all of us. However, pensions paid via funded schemes are a far less discernible transfer, but the cost is extracted from the working nonetheless. Funding merely blurs the process of transfer. Every time a pension fund buys a Government bond, the dividend falls as a charge on other taxpayers. Every time a gross fund buys a company share, the Treasury is denied the tax it previously enjoyed on the dividend. Every time an institution buys a property, no tax is paid on the rent which becomes a revenue charge on the occupant.

There may be sound reasons for tax exemption, but inevitably all tax exemption erodes the tax base. I am given to understand that if the total tax exemption given to gross funds were withdrawn, the tax base in this country would be so enhanced that the income tax could be cut by at least 10 pence in the pound. Of course, this proposition is absurd; nevertheless, it illustrates that there is no such thing as a free pension, any more than there is any such thing as a free meal.

One man's concession is a poor man's tax rise. We hear much about the preservation of pension fund privilege; but the consequence of higher taxation for everyone is never mentioned. The working support the non-working, however civilised the tribe and whatever the level of economic sophistication they have built around themselves. Society funds the future in name alone, and I was delighted that this has been put far better than I could have done by the noble Lord, Lord Houghton.

The key questions then are: what should be the total level of transfers from the working to the non-working; what standard of living should those in retirement reasonably expect as a percentage of the earnings of the working; to what extent should this depend on their ill-luck or disadvantage; and to what extent should this depend on their personal savings? In any society, is it equitable that those fortunate enough to have had stable employment throughout their working lives and made little, if any, employee contribution to their pension should have a retirement infinitely better supported than those who, perhaps through no fault of their own, have been less fortunate?

I think that from time to time it is proper for us all to draw back from the minutiae of pension considerations and look at the wider picture. The full crunch of the cost of pensions is beginning to bite. The pension arrangements that have been set up over the past 30 years are beginning to mature. I have to say that while pension provision for many people is still quite inadequate, pension provision for an increasing number is being overdone. Noble Lords will know of many instances where pension payments are not fully integrated with the state pension and as a result the pensioner often receives, in cash terms, a sum greater than he would do if he were working. Of course, at that stage in life, pensioners seldom have the burden of mortgage repayments, nor do they have the cost of travel in getting to work, and often their families are grown up. All in all, they are considerably better off in retirement than when working.

This may be fine for them; but is it an equitable distribution of rice in the rice bowl? It is my belief that it is an unreasonable and inequitable burden on the working. It is so because, above all, it means that the standard rate of tax on the working is kept much higher than it otherwise would be.

We have spoken tonight of the poverty trap and we recognise the appalling handicap this puts on the labour market and on people's ability both to take jobs and to wish to take jobs. The higher the pension paid to those in retirement, the higher will be the level of regressive taxation. This is inescapable. So excessive pension provision perpetuates the poverty trap.

What can we do about it? I suggest that we have to try to strike a sensible balance between the interests of the working and the retired. When income tax was introduced, it was never meant to be applied to low incomes and it is now deeply regressive. We are overtaxing the poor to over-privilege many in retirement. There is little element of social justice in the present arrangements and I so agree with the noble Baroness, Lady Jeger. So the question is: how do we make more realistic the anticipated level of pension, and how do we make certain that pensions are paid equitably across society?

Your Lordships will need no reminding that pensions fund were set up with mixed motives, partly philanthropic and partly as golden shackles to hold long-serving employees. I do not have to tell noble Lords that the pooled funding arrangements for many pension funds depended at one stage, and still do to some extent, on the contributions of younger people and early leavers to pay for the pensions of the long stayers and high fliers. Companies are, of course, principally concerned to see that those who have worked for their company for most of their lives have a well endowed retirement, but are far less concerned, and understandably so, to see that those who more typically work for a number of companies throughout their lives are also fairly treated.

There are, of course, many fair-minded companies which are in a fortunate enough position to do something about this, but the Government were forced to act to improve the lot of the early leaver and introduced legislation to enhance frozen benefits in line with inflation. But the fact remains that a long serving member of a company does far better than one who has changed jobs a number of times throughout his career and, in particular, towards the end of his career. They are also infinitely better provided for than those who have been in part-time work or out of work.

How then can we gradually begin to bring things into better balance? I think there is much merit in the suggestion that pensions should be based on lifetime earnings and not necessarily on the peak last five years. I also like the suggestion that company pensions should be compulsorily integrated with the old age pension and no tax allowances given for an anticipated total pension greater than two-thirds of final salary over the last 10 years.

I think there should be greater pension penalties for retiring early. It seems to me quite wrong that somebody in a sedentary office job can now, it is suggested, retire at 55, yet somebody who does heavy manual work—say, in the agricultural industry —cannot retire before 65. This, of course, reflects the fortunate pattern of their job history, but looked at in overall terms it is positively unjust. What is more, over-generous pensions to the early retired damage the economy by putting too great a burden on the working, so the unemployment problem cannot be solved satisfactorily in this way.

There is then, I think, a very strong argument that the basic old age pensions should be substantially higher and as high as society can afford at any stage. This treats all alike, whatever their employment history, and whether they have gone out to work or stayed at home to bring up the children. Then it would not be unreasonable, once the old age pension was raised, that one's income in retirement thereafter depended to a large degree on the consumption one had personally forgone by saving throughout one's working life. This would indeed more fairly relate pension to a personal contribution. In this, I closely parallel the thinking of the noble Lord, Lord Banks. Overall, what is totally predictable is that the present pension arrangements are unsustainable and will have to be changed.

Somehow we have to get over the fundamental truth, that prosperity in retirement depends absolutely on the successful performance of the economy, and pension and social security arrangements that seriously handicap that performance are no good for anybody, be they working or retired. So it is right that these arrangements should be changed, which may be worse for some but which will be fairer for most. The Government have taken tentative steps in this Bill to bring about necessary change, and perhaps I may ask the indulgence of this House, even at this late hour, for a few minutes more to look at the current employment patterns and anticipate the trends that they indicate.

The employment market is showing up a very big increase in self-employed and in multiple jobs, all of which begins to reflect the outcome of industrial automation and a consequent growth of our service industries. There will, indeed, be many less cradle-to-grave jobs and far greater labour mobility. We must cater for it. Surely there is something rather absurd in the present system where, throughout their working lives, employees build up a small pension entitlement in a number of companies, each of which has to record and monitor these entitlements for decades and then ultimately send the recipient a snippet of pension monthly when he retires. It is an absurd administrative anachronism, but of course it is based on a work pattern that used to exist of relatively stable employment with one employer.

So I would suggest that the Government's proposals that people should have the option to transfer their accumulated rights to a personal and portable pension, under conditions similar to those given already to the self-employed, but only if they want to, begins to fit the future rather better. They are a major step in the right direction—a practical and welcome alternative to the present status quo.

The wealth in pension funds is effectively nobody's money. Beginning to turn it into somebody's money will encourage people to save more in their own right. It will enable more citizens to have a direct and personal stake in and understanding of the wealth-creating process that ultimately sustains their pension. I would suggest that this is no bad thing. We shall bring benefits realism into pensions only if what you get out is related more closely to what you put in—over and above the state old-age pension. So everything should be done to encourage people to save additionally through deferred capital accumulation. You could and should have a higher pension but only if you have saved for it by forgoing consumption personally during your life.

Personal and portable pensions would encourage this because they would enable people to take with them their deferred capital when they change jobs. This would be clearly identifiable as their fund and one into which they could pay additional voluntary contributions. I believe that this concept is not far removed from the real requirements of an increasing number of our workforce. I am not suggesting that all company pension schemes are wrong—far from it—but they do not suit everybody.

This leads me to the question of compulsion. If in a free society an individual cares to go self-employed his pension requirements are now well catered for. We hear of no scandals on that front. If any individual wants to begin to accumulate his own personal pension with a view, long term, to working for himself, why should he be made compulsorily to join the company's scheme provided he has made reasonable alternative arrangements? It is absurd that a window cleaner can have a self-employed pension but a professor cannot. To argue, as did the noble Viscount, Lord Hanworth, that company pension schemes will become unstable without the contribution of new people entering them either shows the frailty of such funding arrangements or begs the question as to what would happen to the fund in the event of the company going into liquidation. If such funds must have a flow of young people joining them, then presumably, throughout the recession, companies have been recruiting young people to keep their pension funds solvent.

In practice, most companies have been shedding labour. The actuarial profession sees to it that all funding is on a realistic basis—able to provide appropriate pensions in the event of discontinuance. So, all in all, I do not think it unreasonable that the Government, in attempting to introduce a system that more clearly matches market need, encourage its take-up by way of a promise of an extra 2 per cent. bonus. This in no way affects existing pension schemes except in so far as fewer people may want to join them—something with which they have been living during the recession in any case.

In practice, of course, a similar inducement exists and was introduced to encourage companies to administer their own pension funds rather than to contract in. The benefit of contracting out is to many companies equivalent to at least 1 per cent. of their total payroll. The national insurance rebate was deliberately set high to encourage such contracting out; so to talk of such inducements as bribes is. I suggest, irresponsible. It is a natural human trait to resist change, and there are a handful of pension fund managers who resent and would question the right of any pensioner to withdraw from their beneficial administration. But equally there are many enlightened and far-thinking pension administrators who recognise that the present pension arrangements are cumbersome, inequitable and increasingly unsuitable for the work patterns of today.

The concern for the future welfare of pensioners is felt on all sides of this House, but that concern should be seen within a wider context—both the structure of the labour market and the nation's ability to support its dependants, whatever their working history. My Lords, I believe that the Government should be congratulated for having the courage to face up to those problems.

11.20 p.m.

The Earl of Buckinghamshire

My Lords, I first apologise for the lateness of my addition to the list of speakers tonight. I am doubly rewarded in that I speak twenty-third and that I follow my noble friend Lord Vinson, who has also spoken on my subject. Before going any further, perhaps I should say that I am professionally interested in the subject of pensions, and that should be noted.

I wish to address in this speech, first, the need for reform of the state earnings-related scheme; secondly, the proposal on personal pensions; and, thirdly, the additional 2 per cent. rebate for those who contract out for the first time. I also wish to say a brief word about what is happening to social security systems in many European countries.

The existing state earnings-related scheme involves the commitment of substantial resources in the next century towards providing pensions for those who are now working. Given that pensions are funded on a pay-as-you-go basis, we are really asking future working generations to provide the funds when the time comes for my generation at least to retire. The White Paper provided figures on the likely future costs of the scheme, suggesting that it could be £25.5 billion in 2033, at November 1985 prices. That is in addition to the basic retirement pension costs of £23.4 billion, also at November 1985 prices. That is a substantial part of the overall budget for all welfare and social security payments. Those projected costs are so significant that we must either deal with the problem now or wait until a future generation takes decisions on our behalf.

We have heard much about the consensus that occurred in 1975, but it was Sir George Young who, in another place, drew attention to the cost implications of the state earnings-related scheme. In the general air of compromise and, I suspect, exhaustion at that stage, that was not regarded as being of importance. Perhaps it should not have been disregarded. However, the cost implications are now regarded as being important by this Government and the proposals they are making should halve the cost- of the state earnings-related scheme in the next century. In fact, if the Institute of Fiscal Studies costings are correct the savings may well be larger than the 50 per cent. of the existing scheme's costs.

The Bill would be incomplete so far as pensions are concerned if a reduction in future costs did not go hand in hand with an attempt to encourage individuals to take out their own personal pensions. That encouragement is needed because it is clear that, apart from public service employees, there has been no growth in numbers in final salary pension schemes for the past 20 years. In saying that, I am not attacking the concept of final salary schemes but just recording a fact.

Personal pensions are a modest move towards encouraging individuals to be more responsible for their own retirement provision. Given that the amount of the rebate is, I believe, to be about 5.25 per cent. of upper band earnings, it will be advantageous to younger employees to contract out of the state scheme. There are difficulties—and I do not think this should be hidden—for the older age groups where the rebate is going to be insufficient. However, I do not share the fears that that will stop the flow of younger new entrants into occupational schemes, and I certainly do not wish to get involved in the rights and wrongs or in the funding programmes that we have in those arrangements.

It should be noted that occupational schemes generally offer benefits, particularly on death and retirement, and the early leaver problems of final salary schemes have largely been solved by earlier legislation. It is important to remember that this legislation is geared towards those who currently cannot, or will not, make provision for their retirement and who are of an age when they can make up for the leeway on benefits which are going to be reduced in the future.

I appreciate that there have been reservations expressed on the size of the rebate. Whether it should be 5¼ per cent. or 5¾ per cent. is not all that material. There is another school of thought which thinks that the rebate should be linked to age and sex. I dare say that the amount of the rebate will be a compromise in the end and, speaking personally, I see no future for age or sex-related tables for rebates—firstly, because of the administrative complexities (not least, I understand that the Social Security Act 1975 would require to be amended to permit it) and, secondly, because the trend, as your Lordships are well aware, is for a requirement by the EC to have male and female equality in pension provision and not differential rates.

This leads me on to the vexed question of the additional 2 per cent. rebate. Is it a bribe or an incentive? I do not think it should be seen other than in the context of encouraging those without pension provision to do something about it. I share my noble friend's doubts on whether it will encourage younger members to leave schemes to start up for a 2 per cent. additional rebate. If there is a danger to the occupational final salary schemes it is the removal of the compulsory element and not the 2 per cent. additional rebate. Having said that, what I think it should do is to make companies communicate more fully and more readily the advantages of their own plans—something which, with few worthy exceptions, is still not done with conviction by many companies.

Dealing with some other aspects, I have some fears on personal pensions primarily related to the ability of the Department of Health and Social Security to act efficiently in the delivery of contributions into the hands of the investment managers on personel pensions. There are, of course, many aspects to be dealt with in regulations, and other noble Lords have already mentioned this. I hope the Government will listen carefully to any constructive suggestions which are made to ensure that personal pensions operate effectively. In particular, I hope that the DHSS and the Inland Revenue will join together to remove the current anomalies that exist where Schedule D employees pay the full rate under national insurance for employed persons as if they were, in fact, Schedule E employees. These employees would be debarred from personal pensions and then contracting out in future.

Before concluding I should like to add a few comments on what is happening in the social security scene outside the United Kingdom. Germany, Holland and Belguim have all effectively been cutting back on existing state provision by either fixing the ceilings for benefits below index rises or curtailing and postponing indexation on benefits and payment. Last year Spain reduced the level of its state benefits and the situation in Italy is constantly under debate. Each of these countries is reaping the doubtful benefit of past generations promising too much to the current pensioners. It is better to recognise this problem now and allow the generation now working to plan properly for the future without fear of a cutback when there is no time to fund for retirement.

In conclusion, the Government are to be congratulated for taking this thorny question of future pension provisions now. Prudence has some merit. I have to agree with the noble Lord, Lord Houghton of Sowerby, that further reviews will be required but I hope that consensus will flow from a recognition of the positive aims of this part of the Bill in dealing with future pension provision.

11.30 p.m.

Lord Kilmarnock

My Lords, we have had a long and very thorough debate and I do not want to go over all the ground again. I shall try to summarise our overall view and put down some markers for Committee stage. I believe that there will be a lot of amendments and if the Government frown on this and mutter about sitting into August or a long overspill, they should rethink their programme and not bring so much contentious legislation before us in one Session.

Our general attitude to the Bill is one of disappointment. In the other place the Alliance tabled an amendment declining to give a Second Reading to the Bill on the grounds that there had been no attempt to secure all-party consensus on pensions, that the Government's proposals fail to reflect adequately the pension requirements of the low paid, that cuts in housing benefit approaching £½ billion will cause great hardship, and that there is little progresss toward integrating the tax and benefit systems. That list by no means exhausts our objections. Of course we do not vote against Second Reading here but at least we shall be able to voice those objections to the full in the Committee of the full House.

Let me take the point about integration first. The opportunity has been missed to forge at last the logical link between the tax and benefit systems except to a slight extent in the proposed family credit, which I shall come to shortly. The Beveridge scheme was a great endeavour to meet the circumstances of that time but it was postulated on full employment. A fundamentally new approach is clearly needed now to meet the demographic projections and to match the dramatic structural changes in the labour market. Here the Bill fails. It was aptly described in the other place not as a new Beveridge but as a regurgitated Neville Chamberlain. To continue in the pretence that a 29 per cent. basic rate of income tax and a 9 per cent. national insurance contribution is anything other than a marginal tax rate of 38 per cent., is frankly absurd. National insurance contributions are not paid into a trust for investment but are simply treated as a Government income on a pay-as-you-go principle, as the noble Lord, Lord Houghton, said.

To maintain the fiction of an independent national insurance fund does not make sense. It is a structural question, and a structural opportunity to make great administrative savings has been missed. Also integration would be much fairer and less regressive than the present system whereby national insurance contributions start well below income tax thresholds and are cut off at an arbitrary upper earnings level where the marginal rate falls back to 29 per cent. until it reaches the 40 per cent. level, thus introducing a serious kink in the progressive system of taxation.

Then there is the question of the morality of it. If one is going to introduce reforms on a cost-neutral basis or less than cost-neutral basis, then clearly one social group will have to bail out another social group. This can be done broadly in two ways. One can have vertical redistribution within from the top downwards or horizontal redistribution within those who are already poor. It is the latter type of redistribution that is favoured by this Bill. The Government's proposals give marginal improvements to those on low wages with children—with which we agree—but at the expense of the childless poor, mainly pensioners.

The technical annex to the White Paper which preceded the Bill shows that there will be more overall losers than gainers in virtually all sectors of the poor with the exception of poor young families with children. The big losers are the pensioners between the ages of 60 and 79, especially the single pensioners, the unemployed without children and all non-pensioners without children, particularly the under-25s. Of course there are gainers; namely, the sick, disabled, single parents and low income couples, but the gains for all groups, except for families in work, are very small indeed. Essentially the Government are simply trading one group off against another. I have reams of tables to demonstrate this but I shall not inflict them on your Lordships at this late hour.

I turn to the main areas of the Bill. There are some points on which we agree with the Government but I am afraid that these are outnumbered by those on which we do not. On pensions, the Government have had to withdraw their original proposals to abolish SERPS under a storm of protest. We indicated our support for the long-standing Liberal view, which has been reiterated by the noble Lord, Lord Banks, that money from the abolition of SERPS would be most effectively employed in substantially raising the basic pension. That is far the best way to help the elderly poor.

In the interests of consensus, however, we said that if the Government were prepared to negotiate a compromise with the other parties we should forgo our preferred option and join in that process. In our response to the Green Paper we suggested ways of remodelling SERPS, some of which the Government have taken up; but they have not taken up our strongly advocated proposal to change the formula so that more goes to the lower paid and less to the higher paid. The Government want to calculate SERPS at 20 per cent. rather than 25 per cent. of earnings across the board, but most members of the scheme are among the low paid and will suffer most from the change. We shall be looking for an amendment to Clause 17 to remedy that injustice.

Next, there would seem to me to be no reason why occupational pension schemes should not take on full responsibility for inflation-proofing the guaranteed minimum pension. The noble Baroness said that any additional inflation-proofing above 3 per cent. would be paid for by the Government. But it is the Government commitment to inflation-proofing the GMP that is calculated to have been responsible for one-third of the long-term costs of SERPS, which caused so much alarm and stoked the fires of abolition. I would suggest that company schemes, through judicial management, could perfectly well provide their own inflation-proofing at any rate of inflation above 3 per cent., thus saving the Government a lot of money which could be better employed. It is too often forgotten that the purpose of pension schemes is to provide decent pensions and not a hidden reserve for the company.

Despite the reservations of some noble Lords, I welcome the third option of individual money purchase schemes as an incentive to mobility and an enhancement of freedom of choice. I am not quite so worried about them as my noble friend Lord Hanworth or the noble Lord, Lord Swann, and I find myself more in sympathy with the remarks of the noble Lord, Lord Vinson, here. But we cannot support the 2 per cent. subsidy in Clause 7. It is an improper use of taxpayers' money to provide an incentive to certain people to go private. It diminishes the funds available for the state scheme and discriminates, as has already been pointed out, against existing as opposed to newly contracted-out occupational schemes. That money could be used for a more equitable purpose like raising the basic pension. The 2 per cent. subsidy for five years, in my view, is wrong, and we oppose it. It was interesting to hear the noble Baroness say that the Secretary of State may be going to think again.

As regards the regulation of money purchase schemes, which I repeat I support, I should like to ask the noble Baroness what scrutiny they will undergo to ensure their suitability. We must safeguard workers against possible cowboys in this field. My noble friend Lord Hanworth, I think, referred to the high pressure of salesmanship.

The noble Baroness in her opening speech referred to Clauses 12 and 13. But these are merely permissive clauses enabling the Secretary of State to make regulations. There has been much reference to the plethora of regulations in this Bill. In Schedule 1, entitled "Appropriate personal pension schemes", again we find: The Secretary of State may prescribe descriptions of persons by whom or bodies by which a scheme may be established", but again it is only permissive. If he decides to do so, it appears that the occupational pensions board will be the watchdog. I wonder whether that is the most appropriate way, to use the Government's expression, of ensuring that we get high quality personal schemes.

I recall that during the passage of the 1985 Bill, I think it was, we discussed the possibility of a central register. Can the noble Baroness say what view the Government take on that now? It seems to me that it is through proper ground rules for these schemes that we should seek to meet the concerns expressed by the noble Lord, Lord Swann, and others. The noble Earl, Lord Buckinghamshire, seemed to have some reservations here too.

On the family credit scheme, we support that structural change in principle as a first step towards an integrated tax benefit system, but we oppose the Government's method of paying it through the wage packet. As other noble Lords and Baronesses have said, that amounts to a major redistribution of money within the family, away from women who now receive it under FIS and into the pockets of men. I was rather more drawn by the arguments of the noble Baroness, Lady Faithfull, than by those of the noble Lord, Lord Houghton, in his otherwise brilliant speech. The object surely is to help low income families with the cost of bringing up children. It is the women who normally bear the brunt.

I was glad to see that in response to an amendment moved by Mr. Squire at Third Reading in another place the Secretary of State said that he would go away and think about that. It cannot be beyond the wit of the government machine to channel that money into the hands of the caring parent. We look forward to a government amendment in this House that we can support. I hope that the noble Baroness will give us advance notice this evening of such an amendment.

On housing benefit, we agree that now the switch has been made to local authority administration, it is sensible to leave it there. We also agree that it is an improvement to use the same entitlement rules for housing benefit, the new income support scheme and family credit. Those, along with the single taper for housing benefit, are desirable simplifications.

We emphatically cannot support the payment of a minimum of 20 per cent. of the rates by all householders. Age Concern has calculated that between 1.7 million and 2 million of the poorest pensioners will be worse off. On these Benches, we cannot tolerate that. Apart from saving money, I gather that the supposed rationale is that all householders, regardless of income, should be made to bear some of the cost of the policies of evil, high-rating, high-spending councils with a view, presumably, to influencing people to change their allegiance at the next election. That is not the right way to go about it. The way to get rid of irresponsible councils and to improve accountability is to introduce PR into local government, as we have argued, and shall continue to argue, no doubt, on future occasions. I obviously could not resist a little plug for PR even in a social security speech, and I do not think that noble Lords would have expected me to resist that temptation. After the loss of control of many councils the last time round, the Government may well be coming to that view themselves. Whatever the future, the present priority is to exempt pensioners from that 20 per cent., and we shall fight for that.

On the social fund in Clauses 32 to 34, deep misgivings have been expressed by many organisations and on both sides of the House, especially with regard to its cash limitation. The feasibility of the idea depends largely on the amount of money that the Government put into it. The noble Baroness, Lady Vickers, said that. In paragraph 2.26 of the Green Paper it was suggested that expenditure on single payments would be reduced from about £300 million in 1985 to about £200 million before the introduction of the scheme. Will the noble Baroness say whether that is still the Government's intention? After all, the new fund will have much wider responsibilities than the present single payments system, including extra heating allowances for the elderly. What would have happened in last February's cold spell if the fund had reached its limit for the financial year, which it might well have done at about that time? How many additional deaths from hypothermia should we have seen?

As I understand it, the fund may make loans as well as grants. I think that that is the intention. There is possibly something to be said for interest-free loans, as the noble Baroness, Lady Gardner of Parkes said; but it very much depends upon the balance of loans to grants which the Government envisage, which is not at all clear and nor are the methods of repayment. The noble Baroness may care to say something about that when she winds up.

The abolition of any right of independent appeal is unacceptable. That has been said by a number of noble Lords and by the noble Baroness, Lady Jeger. The Government's introduction on Report in another place of social fund inspectors does not provide an adequate safeguard. A right of appeal is more than ever necessary with the wide discretion that social fund officers will have. The Council on Tribunals, as the noble Baroness has said, stated that the proposal was misconceived and would do away with a right that has existed for 50 years. We agree with that. I have its report on that point which noble Lords might like to read. We shall seek to introduce an amendment or support a cross-party amendment in Committee to put that right.

There are plenty of other things to which we object, such as lower income support for single people under 25, the withdrawal of free school meals and the treatment of students; but I shall not go into detail on those aspects of the Bill now because we shall go into them in considerable detail in Committee.

I want to deal finally with what the Bill does not do. One of its glaring lacunae, which has not been mentioned at any length so far, is that it does nothing for informal carers. Recent research suggests that at least 1.3 million people are acting as a principal carer to elderly dependent people, to other disabled adults and to children receiving daily support. It has been calculated that if only one tenth of those dependent people had to be taken into publicly provided or financed residential accommodation the public cost would be over £1 billion per annum. Yet at present only 10,400 men and single women receive invalid care allowance, while some 96,000 married women are excluded from it.

It is likely that the DHSS will lose its appeal against the European Court's decision in the Drake case and that the Government will have to comply with EC rules on equal treatment in social security arrangements. Both to secure justice for those selfless and deserving women who are saving us all a great deal of money, and to spare the Government the embarrassment of being ordered to comply with the European Court ruling, I understand that an all-party amendment to extend invalid care allowance to married women will be tabled at the Committee stage. We shall certainly support it and I hope that the rest of your Lordships will do the same. This would be only a first step towards a carer's allowance proposed by the SDP in its Carers' Charter, which has commanded widespread support from women's groups up and down the country.

To sum up, this Bill has been heralded as the most extensive social security reform since Beveridge. The Secretary of State has obviously tried to do his best within the limits imposed on him. But fair support for the unwaged cannot be achieved on reduced funding in real terms—a point made by the right reverend Prelate. It is not fair to make the elderly poor subsidise the younger poor and those on low wages.

We shall not get a more equitable system until this or another Government bite on the bullet of getting rid of existing tax privileges which are no longer warranted and putting the money into a fully integrated system, which was one of the themes of the speech of the noble Lord, Lord Houghton. This means at the very least phasing out of the married man's additional tax allowance, as we are pledged to do, and targeting that money on the poor, whether pensioners, families with children, or the unemployed. It cannot be done merely by recycling existing money among those at the bottom of the pack and removing some of that money in the process.

Therefore this Bill does not draw a line under the social security debate. Whether this Government are re-elected to implement this legislation in full, or whether another government come in—as the noble Baroness, Lady Jeger, speculated—with fresh legislation, we still have a long way to go to get a sound system which will see us into the next century. In the meantime we on these Benches will as always do our best to secure improvements and remove injustices from the legislation before us.

11.47 p.m.

Lord Ennals

My Lords, this has been a debate which has drawn upon a great deal of experience from both sides of the House—experience in the pensions and the social security world. I congratulate the noble Baroness, Lady Faithfull, on what I thought was an extremely compassionate speech based on her own experience. Usually our speeches are best when based on our own experience.

I want to repeat at the very beginning the complaint made by my noble friend Lady Jeger about the timing of this debate. I think that for the Government to assume that this Bill is only important enough to come second on the agenda of your Lordship's House is to underrate the importance of what may well be the most important Bill that will have been introduced during the course of this Parliament. Although I do not intend to make a very long speech I do not believe that our speeches should be cut just because of the lateness of the hour. I hope that the noble Baroness will feel exactly the same. The Government should not have done it in this way.

This is a Bill which I find deeply disappointing. It is not a measure of social justice. The reviews which led up to the Green Paper, the White Paper, and the Bill, were in no way independent reviews. They were departmental reviews chaired in most cases by Ministers. Scant attention has been given to the views of the very many interested organisations. I have to say that on no Bill in this House or in another place do I recall so much representation from so many non-party organisations concerned with human welfare. Every single one of them has been extremely critical of the provisions within this Bill, most of which have already been touched upon and some of which I shall touch upon myself.

As the noble Lord, Lord Kilmarnock, said—and the noble Lord, Lord Banks, before him—no attempt was made to seek consensus in trying to take the question of pensions and benefits out of the field of party political controversy. The Government have done exactly the opposite; they have taken away what was a consensus in 1975. I must say to the noble Baroness, Lady Gardner of Parkes, that so far as I know the demographic factors which were taken into consideration at that time have not changed. The expected great increase in the number of elderly and the expected change in the birth rate have turned out to be true. However, what has changed is the state of the economy. There has been massive growth of unemployment as a result of seven years of Conservative rule. It is simply their expectations about the strength of our economy that have changed, and not other factors.

Admittedly, the 1975 Bill dealt only with pensions. However, I assure the noble Earl, Lord Buckinghamshire, that it did not come about as a result of exhaustion, though there was exhaustion because there was a very long period of negotiation during which there was absolute determination by a fine man named Brian O'Malley to bring about an absolute consensus across the parties. I accept that the Liberal Party was never fully in agreement with it, but the pension funds, the CBI and the TUC all went along with it, and it was a triumph. It was not intended by any of them that 10 years later that consensus should be—I shall not say scrapped (though that was the Government's original intention)—reviewed. The thought that every 10 years we throw pensions in as a political football to be kicked back and forth during elections is one which, frankly, I find nauseating.

The Bill does little to tackle the inequities and anomalies of the present situation. However, by design or otherwise it will reduce the income rights of millions of the poorest in our society. I wish that in replying to the debate the noble Baroness could give us, as it were, a credit and loss account to show how many and who will benefit from this legislation, and how many and who will lose as a result of the legislation. The noble Baroness knows that there will be more losers than gainers, because this is primarily or very substantially a Bill designed to reduce public expenditure. If it were not such a Bill, the Chancellor of the Exchequer and the Cabinet would not have allowed it to be introduced in the other place, let alone here. The reason the noble Baroness will not be able to do so concerns the general nature of the Bill.

As has been said by my noble friends Lady Jeger, Lord Stallard and Lady Turner, many of the Bill's clauses amount to little more than a series of subject headings, giving powers to make regulations. The regulations are not published and cannot be published until the Bill has completed its parliamentary passage. Your Lordships will therefore be voting on the Bill without knowing the full or detailed facts—details which can crucially decide the availability and the level of benefits in respect of the majority of claimants and pensioners.

We shall be taking a decision without knowing what we are doing for the people for whom the Bill is designed. For example, when the Bill makes a general provision for an income support scheme it does not set out the details of how the scheme will operate. The prescribed amounts and the rules governing the treatment of capital and income will all be laid down in regulations. Your Lordships will not know what you are voting on.

Similarly, the Bill only provides a framework for the proposed social fund, setting out the general powers of the Secretary of State and the social fund officers. It does not contain any detailed rules either for the administration of the fund or how, to whom, and in what circumstances payment should be made. The assumption that this Bill is going to produce a simpler system is one that has to be proved. We can only know whether it is simpler when we know what the regulations are, and none of us does. If we say that it is simpler because we shall be denying to a lot of people who have needs the needs that they have, only to that extent can we say that it will be simpler, but to that extent it will also be more unfair. The needs of people vary enormously from person to person, from family to family, and the simpler the system is often the more unfair it is and the less able to meet the needs of our population.

This Bill, in an unprecedented way, seeks to give the Secretary of State enormous powers to make fundamental changes to the social security system, without the need for these changes to be fully debated in Parliament. I deeply regret that, and it is a serious reflection on the Government. Ominously, the Government are seeking to remove from the legislation the provision which, as referred to by an earlier speaker, has existed in social security legislation since 1934, and by which the Government have been committed by successive Acts of Parliament "at all times to have regard for the welfare of the claimants". I do not think it is just a coincidence that that phrase has been taken out. And no wonder, since in its various provisions the new legislation will decrease pension entitlements for the elderly under SERPS. The supposition that somehow or other people are getting adequate pensions and that we ought, for future generations, to cut down the level of pension entitlement, is something that I do not accept.

The whole purpose of the 1975 legislation was to ensure that when the scheme came into full operation—and we are only halfway towards maturity—we would have relieved the elderly population of being dependent upon supplementary benefit. That was the simple objective. By changing it as the Government propose, they are taking that away and forcing a significant number of elderly people—we do not know how many—still to be dependent on means-tested benefits.

The Bill reduces benefits as of right by increasing means tests, and certainly currently universal benefits—and I think of maternity grants and death grants—are to be dropped. There is no sign that the value of child benefit will be increased, and not even that it will be sustained in line with inflation. It will undermine the basic principle of the right of independent appeal. If the noble Baroness says, as she did, that there will be opportunities for review by officials, that is not the same as appealing independently to a tribunal. I am glad that from all sides of the House there have been reiterations of commitments to establish an effective and independent appeal scheme, and "independent" is the word I want to emphasise.

There is also an undermining of the position of the under-25s, which is wrong. The assumption that those who are aged 25 and under either have less needs or are dependent on their parents—who may be as poor as they are, and may well be unemployed—is one that I do not accept. I hope and expect that there will be an amendment to deal with that unfairness. Then the Bill discriminates in a number of ways—as has been said by a number of speakers, including my noble friend—against women, and particularly in relation to SERPS, where it affects the rights of widows.

I wish that it was in our power to defeat this Bill, but it is not. The use of an overwhelming majority in another place and a timetable Motion which ensured that many of the clauses were not even debated and are therefore left to your Lordships' House to debate effectively means that we shall need many days of Committee stage to go through those parts of the Bill that were not effectively dealt with in another place. If another place makes a mess of its handling of business, the responsibility still lies with your Lordships, with the task that we have as a second Chamber to seek to put right the most disturbing and damaging of the provisions of a Bill, the existence and structure of which we cannot change.

As I said, we have all received expressions of grave concern from highly responsible, non-party welfare and consumer organisations whose sponsorship and record of achievement is impeccable. We are not just thinking of irresponsible pressure groups. We are thinking of organisations such as the Citizens Advice Bureaux. At least 40 organisations have been referred to. They are usually bodies that have had a long record of achievement and it would seem that the Government have not been prepared to listen. I appeal to the noble Baroness who will have the difficult task of conducting this Bill through your Lordships' House to listen and take seriously the views that are expressed by family service units and by other groups who have made their representations to us. Even if the Government do not do so, we must at all times have regard for the welfare of the claimants. I suggest that the following issues are those on which we should seek to concentrate in our Committee stage. I shall not say anything that is new, but I shall try to bring together the issues that we have to tackle.

The noble Baroness, Lady Turner, and the noble Lord, Lord Swann, who is not in his place, dealt authoritatively with SERPS. I want to repeat the three points, and to do so briefly. The Bill now proposes to change the basis of assessment of the state earnings-related pension scheme from the best years of a person's life to the total of his working life. The best 20 years clause was always designed—this occurred at the time when I was a Minister—to be of particular benefit to women, the sick and manual workers, who earned less than the average. It seems grossly unjust that those groups of people should be penalised in the way that the Government are proposing.

Secondly, the proposal whereby widows and widowers would inherit only half their late partner's state earnings-related entitlement, rather than all of it, understandably has caused a great deal of consternation among those concerned with the elderly and their future and those who will be elderly and retired in the next century. I recoil from the thought that we can at any time only plan for the next 10 years. If you say to those in charge of any occupational pension scheme, "No, no, you must not plan ahead; you must only plan for the next 10 years because we will constantly be making changes", planning becomes almost impossible.

The third item on SERPS is the 2 per cent. bribe, which I think is highly inequitable in that the contributions of everybody would be used to subsidise private or company pension schemes. I think there is something really rather immoral about the way in which it is suggested this should be done.

I do not want to go into greater detail on what is perhaps the most important part of the Bill—income support. But surprisingly little has been said during the debate about the community care needs of disabled people and others. It has been touched on in a general sense but there has been no recognition by some as to what it will actually mean. Short-term and long-term basic rates of supplementary benefit will be abolished and replaced by personal allowances according to age and family status. Additional weekly payments will be abolished and replaced by flat-rate premia including a disability premium at a suggested rate of £12.25 for single persons and £17.45 for a couple. Single and urgent needs payments will be abolished (for example, for furniture and bedding) and replaced by this new social fund. The great majority of payments from the fund will be in the form of loans payable at the discretion of social fund officers.

I think it is quite right that a number of your Lordships have been critical of the loan concept. One would always like to think that one would make a loan and it would be repaid. But we do not have to look just at this country, we look to the whole world when we see the burden of debt which is borne by the poorest.

How are people going to repay? And, if they are unable to repay the loan that they have borrowed, what will this mean to them? Have the Government not thought about the feelings of people about being in debt? There is something deep about this in our society. The vast majority of people, not all by any means, but the vast majority of ordinary, good, honest folk, do not like being in debt. The thought that they have to borrow and then, in order to pay back, they have to scrimp and cut back, as the noble Baroness, Lady Faithfull, has said, on rent or food, I find very disturbing, indeed.

Weekly additions are to be paid towards extra costs not covered by the basic rate. The majority are paid on the basis of ill health or old age, for heating. diet, laundry and domestic help. This is the present situation. Severely disabled people can receive additions of £40 to £50 a week or more to meet the extra costs of disability. For them, the flat rates of disability premium—and this is a point made by the noble Lord, Lord Banks—will not make up for the loss of weekly additions and the long-term rate.

Many disabled people will not qualify for the disability premium at all, as the criteria are much stricter than for additional requirements. As a whole, the changes will mean even more poverty and hardship for thousands of disabled people and their families, and also, as a result of the changes proposed, many disabled people will be unable to live independently in the community and will be forced into residential institutions. This is an extra cost in itself. I find it, therefore, disturbing that more of your Lordships who are involved with the needs of the disabled people have not expressed these points of view, because they have been put most clearly by the Disablement Income Group (DIG), by the Royal Association for Disability and Rehabilitation, by the Disability Alliance. All of them, speaking on behalf of disabled people, are extremely concerned about what this is going to do. I have already mentioned the independent right of appeal and I will not take that further.

Perhaps I may move on to family credit. I was very glad to hear the noble Baroness, Lady Gardner of Parkes, and I think that she was absolutely right. Her views have been substantiated by many of the other organisations. I was interested to see that this was supported by the CBI, who were very unhappy about what was proposed. It was also supported by the National Federation of Self-Employed and Small Businesses. They said: We see the proposed family credit benefit as a retrograde step for both employees and employers alike … it will just complicate the employment relationship. The noble Baroness, Lady Jeger, explained why it would—because people do not like their personal life being involved with their workaday life. The CBI said: The CBI does not consider that it is essential or appropriate for the proposed family credit to be paid by employers. I believe they are looking at the added burden of work that would be put upon employers. I think we should be concerned with that as well, in so far as we are concerned with the strength of the economy.

I shall pass briefly over school meals, but this is a matter of very great importance. I remember the statement made in the Black Report by Sir Douglas Black, emphasising the importance of youngsters, particularly from poor families, having a good meal at school. If that is to be taken away and if local authorities will have to charge for school meals, except for families who are receiving income support, the Government estimate that 500,000 children will lose a free meal. I do not accept for a moment the argument which says that if the family has the money they will still get as good a meal. They will not.

Finally, I should like to say a word about refugees. I was extremely glad that the noble Lord, Lord McNair, and the noble Viscount, Lord Buckmaster, both referred to the real problems that will be faced by refugees unless some change is made in the proposals. One speaker said he felt sure that the Government would make special terms for refugees. The noble Lord, Lord McNair, and I both serve as chairmen of committees on the British Refugee Council; and I am chairman of the Ockenden Venture. I am very worried about what the proposals are going to mean. I think we must have an assurance from the Government that refugees will be treated as a special category, and we must make amendments to ensure that they are so treated.

Never in my recollection has there been a Bill which has come in for more criticism than this one. One or two people have supported various parts of the Bill, and in particular those with pension interests and with knowledge and experience have spoken about certain parts of the pension scheme; but I noticed they did not talk about the social fund, family credits and the things that have attracted the greatest concern among the voluntary organisations.

When I read through the representations from organisations which see the damaging effect this Bill will have if it is carried through in anything like its present form on the elderly, the young, the disabled, the mentally handicapped, the mentally ill, the unemployed, those on family welfare and in receipt of child benefits, on refugees, and so on, there are so many interests that have been challenged by this Bill. They now look to this House to see that there is some fairness in the social security system that will be passed on and implemented. Whether it will be implemented by this Government or by some other government, if it is not changed, I do not know. I just think it is a tragedy that in the run-up to a general election the Government should introduce a Bill which is so controversial and so damaging to consensus and which inevitably will bring out the worst, in terms of political controversy, when what we should be seeking is consensus about the needs of the most hard-hit people in our society.

12.13 a.m.

Baroness Trumpington

My Lords, we have had a considerable debate on the principles of this Bill. I want to come to the major points which have been raised and to answer as many as possible of the queries raised by your Lordships. I fear I shall be writing many letters to those noble Lords whose questions time will prevent me from answering. Included among them, I fear, will be the noble Lords, Lord Kilmarnock and Lord Ennals. So far as I am concerned, though, the flavour of the month was contained in the wise and splendid speech of the noble Lord, Lord Houghton.

Before answering any of the questions raised, I must comment on something my noble friend Lady Faithfull said in the course of her interesting remarks. She talked about "colonels and privates" in local offices. It occurred to me that very little has been said during this debate about those who work in the local offices. To me, they are not either colonels or privates: they are people—and jolly good people they are, too. It is a very sad reflection on today's society that those glass windows, of which my noble friend spoke, are entirely necessary in local offices in some areas where the safety of staff is genuinely at risk. Before saying anything else I should like to pay a warm tribute on behalf of the Government to those splendid people who are actually carrying out the work that we merely talk about in the field.

The noble Baroness, Lady Jeger, in her swashbuckling speech made just the kind of baseless allegations which frighten people. How right my noble friend Lady Macleod was when she said that she wondered whether she and the noble Baroness, Lady Jeger, had been reading the same Bill. Where, apart from spend, spend, spend, I ask myself, are the actual proposals of the Opposition to get us out of the mess in which we find ourselves through outdated and too complicated laws?

It is astonishing that Lady Jeger should suggest that the Bill was not fully considered in another place. In fact, the other place spent 160 hours in Committee considering this Bill, which is more time than has ever been spent on a social security measure since the original Beveridge legislation of the 1940s. The noble Baroness, Lady Jeger, echoed, I think, by the noble Lord, Lord Banks, and certainly by the noble Lord, Lord Ennals, alleged that the Bill gives us too great a degree of latitude by delegating so much to secondary legislation, but this is not true either of the pensions proposals in Part I of the Bill or of the income-related benefits in Part II of the Bill. At present the entire structure and calculation of housing benefit stems from one very unspecific regulation-making power, Section 28 of the Social Security and Housing Benefit Act 1982. which provides that regulations may make two types of scheme, and very little more.

In contrast, the Bill before us today sets out clearly in Clause 20 how the benefit is to be assessed. All the regulations will be subject to the affirmative procedure first time round. I would also direct your Lordships' attention to Clause 49, which reduces 61 regulation-making powers from current legislation to 20 powers. Furthermore, we envisage one statutory instrument in place of 15 that exist now. We have indicated our intentions in making regulations in the notes on clauses that have today been made available to your Lordships. We cannot reasonably go further at this stage.

I welcome the expert contribution of my noble friend Lord Vinson, not least because it enables me to pay tribute to him as the "onlie begetter" of the concept of personal pensions now enshrined in this Bill.

The noble Viscount, Lord Hanworth, spoke about the delay in getting DHSS minimum contributions to personal pensions. Minimum contributions to personal pensions equal to the contracted-out rebate will be paid by the DHSS Central Office, Newcastle, as soon as we have the earnings information from employers on which those contributions are based. The noble Viscount, Lord Hanworth, referred to a delay until September after the end of the financial year. We have seen similar reports in the trade press. This kind of practical detail is still being worked on in consultation with pension providers but I can assure your Lordships that we aim to do a lot better than September. At the moment it looks as if the minimum contribution will start going out from Newcastle by the end of April, which is as soon after the end of the financial year as we can possibly make it. The Newcastle payments mechanism and the DHSS clearing houses involved were specifically designed to make the system as simple as possible and to avoid putting burdens on employers of people with personal pensions—both very laudable aims which I am sure your Lordships would support.

The noble Viscount, Lord Hanworth, also spoke about the high charges for personal pensions. We hope and expect that disclosure in competition will bring charges down to reasonable levels, but we shall not hesitate to exercise power sought in this Bill to control personal pension charges if that proves to be necessary.

The noble Lord, Lord Banks, the noble Baroness, Lady Turner, and the noble Viscount, Lord Hanworth, said that there was no attempt at consensus on pensions. There is a new consensus emerging on pensions. It involves widespread recognition, shared tonight by the noble Lord, Lord Banks, that something had to be done to cut the future cost of the state earnings-related pensions and to encourage more people to have a pension of their own.

The problem is that this cannot be an all-party consensus while the Official Opposition refuses ostrich-like to face up to what the Government Actuary has been telling us for some time about the burden SERPS could involve for those in the next century. Some extraordinary things have been said in another place by the spokesman for the Official Opposition. The honourable gentleman is only too happy to contemplate a steadily increasing bill for SERPS and is apparently willing to shrug aside the point that the larger and older retired population will also be making other major and growing demands on public services. The debate on SERPS is not just about affordability; it is also about priorities. We must give our children and their children some room for manoeuvre. It would be quite irresponsible to deny them that by lumbering them with all the excesses of SERPS which this Bill seeks to remove.

The noble Lord, Lord Banks, spoke about increasing the basic pension by 25 per cent. and abolishing SERPS and contracting out. To raise the basic pension by 25 per cent. and to abolish SERPS would cost £3¼ billion in 1987–88 net of savings in supplementary and housing benefits. If this increase were extended to widows and invalidity pensions, the cost would rise to £4 billion. The savings from abolishing SERPS would take a long time to build up, unless rights that people have already earned were to be taken away. SERPS currently costs only £200 million. Its major cost does not arise until the next century.

So far as national insurance contributions are concerned, the abolition of contracting out would have a broadly neutral effect for people who are contracted in, but contributions for those contracted out from SERPS would have to rise by £1¼ billion for employees and £2.9 billion for their employers—a quite horrific burden to add to employment costs. If I may offer a little advice to the SDP-Liberal Alliance, I think they would do well to pause and consider whether the major increase in basic pension that they constantly urge on us is really a bill that they would be happy to hand to the half of the workforce and their employers who are contracted out from SERPS. The system of contracting out which we are preserving, improving and extending with this Bill, for all its complexities, is a very valuable aspect of the state-employer partnership in pensions. We believe that this partnership is worth preserving and building on, and that is precisely what we are proposing in this Bill.

I fear that I must take issue with the noble Lord, Lord Swann, on the point he made about the adequacy of a pension resulting from the minimum contribution to a personal pension. The technical annexe to the White Paper demonstrates that personal pensions at the minimum level will be worth having. We hope and expect that most people will pay more than the minimum, but I can assure your Lordships that on reasonable assumptions about the future they should still get an adequate premium in retirement if they pay no more than the minimum.

The noble Baroness, Lady Turner, spoke about the present system encouraging the growth of occupational pension provision. Unfortunately this is not true. The percentage of the workforce covered by occupational schemes has stubbornly refused to increase from about half for 20 years. The major new options in this Bill are what is needed to get the expansion that we all want to see going.

The noble Baroness, Lady Turner, on the subject of SERPS, spoke about people not being covered by the proposed protection following the abolition of the "best 20 years" rule. We have taken care in our proposals for modifying SERPS to build in protection for parents staying at home to look after children and for people unable to work because they are caring for elderly or disabled people or are themselves disabled. Our proposals are much better targeted than the so-called "best 20 years" rule. I know that some concern has been expressed in another place about the position of other groups who currently stand to gain from the "best 20 years" rule but for whom we have not so far announced any special protection, in particular the long-term unemployed, some disabled people and mothers returning to part-time work. I am sure we shall have ample opportunity to debate the situation of particular groups when we come to consider Clause 17 in Committee.

There are just two points that I want to make now. First, there is no great urgency about any of this. The SERPS protection does not start to apply until 1999 which is when the "best 20 years" rule would have come into effect. Secondly, the regulation-making power in the Bill is wide enough for us or a future government to make further concessions if we or they are persuaded that this is the right way to proceed. My noble friend Lady Gardner of Parkes asked whether women who have breaks in employment to look after children or disabled would really be protected in terms of pensions. The answer is yes. Years spent in this way will not be counted in the life time over which earnings are averaged to calculate the SERPS pension, so they may still be able to qualify for a full SERPS pension on as few as 20 years in work.

The noble Lord, Lord Kilmarnock, spoke about help for carers. I can certainly assure the House that we recognise the valuable and selfless work that carers do, but we are not convinced that they face any financial problems additional to those of other people of the same age, a view with which the Social Security Advisory Committee had sympathy. Thus in our proposals we felt it more appropriate to concentrate on directing extra financial help towards elderly disabled persons through the new pensioners' and disablement premiums, and the severely disabled attendance allowance will continue to be disregarded in full in the assessment of income support.

The noble Lord, Lord Swann, spoke about pensions for widows and others. The new personal pension and money purchase occupational schemes will be required to provide minimum widows' and widowers' benefits in parallel circumstances to those applying to salary-related occupational schemes which are contracted out from SERPS. But the Government recognise that many occupational schemes are able, because of the pooling of risk, to provide good lump sum death benefits. There is of course no statutory obligation on them to do so and we could not therefore impose such an obligation on personal pensions, but we expect most personal pension schemes to offer access to a life assurance arrangement as an optional extra. The noble Lord may be aware that Clause 14 of the Bill, which prevents employers from making it a condition of employment that an employee belongs to a particular occupational or personal pensions scheme, includes a provision to prescribe exceptions. One possible exception at which we shall be looking carefully is whether we should permit employers to run compulsory schemes which provide only lump sum death benefits, particularly where, as is often the case, such schemes are non-contributory. The tax implications of such an exception would also have to be considered carefully.

With regard to the social fund reviews, I should like to make the following points. Social fund decisions relate to special needs and inherently require judgment. That is not suited to rigid, legalistic criteria and regulations. The problems of interpreting essential equipment and needs are really best left to be dealt with in the way they have been written in. Therefore, decision-making is different, and so should the checks on decision-making be.

Original proposals were built on the existing practice that if an appeal is received in a local office then the case is re-examined. In response to concern that has been expressed, the Government have moved substantially and have introduced a new clause providing the statutory right to review and further review at a tier outside the local office.

My noble friend Lady Gardner of Parkes asked whether social fund loans would be interest free or at a low rate of interest. I can assure her that loans from the social fund will be interest free. The noble Lord, Lord McNair, spoke about the position of refugees in relation to the social fund. He expressed concern about the effect of the Government's proposals on refugees, most notably concerning the social fund. We made clear in Committee in another place that we accept that some urgent needs payments are different from other one-off payments covered by the single payment machinery, in particular, in respect of people seeking asylum. We are considering whether such cases might indeed be better dealt with in the income support scheme.

My noble friend Lady Vickers and the noble Lord, Lord McNair, asked about the employment of interpreters. I am afraid that we do not necessarily think that is the best approach but we take the problems of non-English speakers very seriously. Leaflets are already translated into other languages as part of communications strategy, to tell people how reforms will affect them. I promise that we shall give consideration to specific needs, including language needs, of ethnic minority groups.

My noble friend Lady Vickers also spoke about the social fund budget, its size and its allocation. I can only say to my noble friend that decisions on the size of the budget have not yet been made. In the White Paper we made clear that those decisions will be made nearer the time and will be informed by future statistical analysis of single payment data, supplemented by information from local offices that will be more up to date and more directly related to social fund expenditure. That information will also be needed to reach decisions on the allocation of the budget by my right honourable friend. But I can say to my noble friend that we have made it clear in its early stages that the financial arrangements will be operated flexibly, so there will be no question of the local budget running out.

The noble Baroness, Lady Jeger, the noble Lord, Lord Banks, and the right reverend Prelate the Bishop of Southwark all spoke about the future plans for child benefit. The Government have expressed their commitment to child benefit. Child benefit is a simple, straightforward and well-appreciated way of providing a measure of financial support for all families. As announced in the Green Paper and White Paper last year, it will remain a universal benefit paid for children, not means tested, and tax free.

The level of child benefit is not tied to the retail price index, as are some other benefits. The future level of child benefit will be determined up-rating by up-rating according to the circumstances of the appropriate time, including in particular the pattern of family support as a whole and the needs of families on low incomes. Increases in child benefit cannot be viewed in isolation. Resources cannot be ploughed into child benefit, which by its nature is expensive—costing about £4.4 billion in this financial year—without regard to the totality of social security expenditure, which is more than £44 billion in a full year.

The noble Baroness, Lady Jeger, said that we were taking away £140 million from expectant mothers. I am afraid that is nonsense. The net saving is £25 million. The £140 million is overwhelmingly a transfer from public expenditure to revenue forgone. The Financial Memorandum makes this clear. The noble Baroness is scaremongering.

My noble friends Lady Vickers and Lady Faithfull were concerned that the abolition of free meals would mean that families would have to make other provision by taking sandwiches, and so on. I do not believe that is so. As my noble friend Lady Gardner of Parkes said, local authorities will not be able to provide free meals but they will still be able to provide meals at a charge. As far as those families receiving family credit are concerned, they will receive a cash element in the credit to help them pay for the meals.

The noble Baroness, Lady Ewart-Biggs, spoke of the abolition of school meals meaning that 545,000 children would lose their entitlement to free meals. I agree that that number will lose their entitlement but because family credit is a bigger scheme than family income supplement there will be 610,000 children receiving the cash compensation in place of the free meals. So there will be 60,000 more children who will benefit under the Bill.

My noble friend Lady Faithfull asked how generous family credit would be and whether people would be worse off because of the effect on housing benefit and the loss of free meals. Family credit will be much more generous than FIS. For example, on the basis of the illustrative rates, on gross earnings of £100 a couple with two young children would get £17.40 FC compared with £4.50 FIS. A couple with three children, aged 3, 8 and 11, would get £27.70 compared with £10.80 FIS.

My noble friend Lady Macleod of Borve, who works so hard for widows particularly with regard to CRUSE, said the National Association of Widows welcomed replacement of taxable widow's allowance with a tax-free lump sum paid immediately on bereavement. I am delighted to hear this and I hasten to reassure my noble friend Lady Vickers that war widows will be eligible for the tax-free lump sum and there is no change to their pension situation.

The noble Baroness, Lady Jeger, asked about the number of widows who would lose as a result of changes. I believe the noble Baroness quoted 25,000. We estimate that about 15,000 widows will suffer some cash loss in the first year of widowhood as a result of the changes in widow's benefits. About 55,000 widows will gain substantially as a result of the lump sum widow's payment and the immediate payment of widowed mother's allowance or widow's pensions which at present are not paid until after 26 weeks. For a widowed mother the gain will be over £600 in the first year and her benefit will be unchanged thereafter.

The noble Baroness, Lady Jeger, also asked about the effect of the Bill on blind people. Blindness will be a qualifying condition for the disablement premium for adults and for the additional premium for disabled children. Furthermore, the noble Baroness suggested that many disabled people are worried about the effects on their income at the time of change. We have always made clear that transitional protection will ensure that no one will suffer a reduction in cash income as a result of the change from supplementary benefit to income support.

There are many points of importance which I should like to answer but at the same time I feel that I must press on. The question of family credit was talked about at length and the right reverend Prelate the Bishop of Southwark said that he welcomed family credit because of the beneficial effects on the poverty and unemployment traps. I welcome his acknowledgement that family credit will help families in work and will combat those worse effects.

The payment of family credit through the employer, which was mentioned by the noble Baroness, Lady Jeger, would mean that the notice requiring employers to pay will have to follow the employee round when he changes jobs. The answer is, no. As we made clear in the White Paper, the intention was that family credit would cease when the recipient became unemployed and changed his job. He could then make a fresh claim based on his new job and a fresh notification would be issued from the DHSS to that employee. As regards the position of a divorced woman, which was mentioned by my noble friend Lady Gardner, I think there may be some misunderstanding here. A man will only be able to receive family credit for those members of his family who are living with him. If a wife is separated from her husband or becomes divorced from him, she will have to claim social security benefit in her own right—supplementary benefit (income support under the new scheme) if she is not working.

Many noble Lords asked about reconsideration by the Secretary of State of the payment mechanisms for family credit. Noble Lords will know that my right honourable friend has invited the CBI, the National Federation of Self-Employed and Small Businesses, the Equal Opportunities Commission and the Women's National Commission to discussions. These will take place over the next week or so. The aim is to examine whether we can find a way forward in order to try to meet the various concerns which have been expressed on this issue. Your Lordships must realise that, as always on these occasions, I cannot anticipate the outcome.

I fully realise that there are many subjects on which I have not touched, but at no time have we presented our proposals as set in concrete. My right honourable friend has stressed throughout that we do not want to close the doors to useful change, and I have already mentioned his willingness to look again at the 2 per cent. incentive and the payment mechanism of family credit. Several changes to the Bill have already occurred as a result of discussions both inside and outside Parliament and it may well be that your Lordships will propose others. However, I must stress that the principles of reform, simplification and help where it is most needed are indeed of rocklike substance.

It would have been only too easy for this Government to have adopted a laissez-aller attitude—others have—and to have done nothing and just muddled along. Criticism of certain changes there may be; there always is when changes occur. But I believe that this Government deserve praise—and that, too, they have received: praise for grasping the nettle, for having vision and courage and for demonstrating these virtues in bringing before your Lordships this Bill which will protect the social security future of people now and well into the 21st century.

On Question, Bill read a second time, and committed to a Committee of the Whole House.