HL Deb 22 October 1986 vol 481 cc301-11

4.55 p.m.

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

My Lords, with the leave of the House I shall now repeat a Statement being made in another place by right honourable friend the Secretary of State. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement about the next uprating of Social Security benefits, which will take place in the week beginning 6th April 1987.

"This will be the third increase over 16 months and covers the eight months from January to September 1986. It will complete the process of transition to the new timetable for benefit upratings which, in future, will take place annually in April. This will ensure that pensioners and other beneficiaries receive increases in their resources at the same time as most other financial changes take place.

"The Government are pledged to increase pensions and other linked long-term benefits in line with the rise in prices. The retail price index published last Friday showed a rise between January and September 1986 of 2.1 per cent. Accordingly, the retirement pension for a married couple will rise from £61.95 to £63.25, an increase of £ 1.30 a week, and for a single person the pension will go up from £38.70 to £39.50, an increase of 80p per week. Widows' pensions and invalidity benefit will also be increased by the same percentage, as will public sector pensions.

"In the 16 months of the transitional period the pension for a couple will have risen by £5.95 a week as a result of the three upratings and that for a single person by £3.70 a week.

"Turning to benefits for families, the Government have made it clear that in considering the uprating of child benefit account must be taken of priorities within the social security budget—every 10p increase costs over £50 million a year. We have decided that child benefit will go up from £7.10 to £7.25 a week, which is fully in line with the increase in prices. The Government also remain committed to the protection of low-income families with children. The prescribed amounts in family income supplement will therefore rise by between 2.1 and 2.3 per cent, depending on the age of the child. This increase will ensure that low-income working families with older children on FIS have seen the real value of their benefit increased by some 20 per cent. since 1978.

"Over the eight months period for this uprating the retail price index excluding housing costs rose by 2 per cent., almost the same as for the RPI. The short-term rate of supplementary benefit will therefore increase from £48.40 for a couple to £49.35, a rise of 95p. There will be corresponding increases in the other scale rates. Additional requirements in the supplementary benefit scheme will be increased in line with appropriate elements of the retail price index. The cost of fuel and light has remained stable, and so there will be no change in heating additions. But dietary additions will be increased—by 10p a week for someone receiving the higher rate of addition.

"As in July I have decided to link the increase in the basic needs allowance for housing benefit to the cash increase in the basic retirement pension and in child benefit. This will ensure that virtually all pensioners do not lose housing benefit as a result of the increase in retirement pensions. It will also minimise the operational problems for local authorities next April. Full details of the increases in the housing benefit needs allowance and nondependent deductions, together with the other benefit changes, are set out in a schedule which I have placed in the Vote Office.

"I am also proposing to adjust the rent taper for relatively better off housing benefit recipients—those with incomes above the needs allowance—from 29 per cent. to 33 per cent. Those at supplementary benefit level and some way above it will not be affected. This change is subject to consultation with the relevant organisations. The amount of earned income which is ignored in the housing benefit calculation will be held steady for the second uprating in succession. This will ensure that those on low earnings continue to benefit from last April's tax reductions.

"Benefits payable to sick and disabled people, including sickness benefit, invalidity benefit, severe disablement allowance and invalid care allowance, will all rise by 2.1 per cent. So too will attendance allowance and mobility allowance. I am also taking the opportunity to make a further change. Funeral expenses will be paid in respect of war pensioners who die as a result of their accepted disablement whether the funeral is arranged privately or by the War Pensioners Welfare Service.

"The House will shortly have an opportunity of debating these changes. I should add that they will apply in Northern Ireland as in the rest of the United Kingdom.

"The changes I have just announced will add over £700 million to the social security budget next year, on top of the £420 million from the July uprating. Since 1978–79, spending on pensions has grown in real terms by over 25 per cent. at an additional cost of £4 billion a year. About £1¾ billion of this reflects an increase of 850,000 in the number of pensioners; the remainder represents a real improvement in the value of the pension.

"The new rates will mean that the retirement pension has more than doubled in cash terms since November 1978; and that we have protected the position of other beneficiaries, including low income families with children, and the sick and disabled."

That my Lords, concludes the Statement.

Baroness Jeger

My Lords, I should like to thank the Minister for repeating that Statement. I hope that there will be Members on more than one side of the House who agree with me that it would be useful if the logistics of the repetition of Statements could be altered. I do not think that the business of your Lordships' House is helped very much by the introduction of Statements when we do not know at what time or what will happen. I do not know the answer and I should not presume to suggest one. However, I know that many noble Members on both sides of the House with whom I have discussed this problem feel that we are not dealing very efficiently with this aspect.

I thank the noble Baroness for repeating the Statement, as I said. However, I wish to ask her a few questions, although I assure her that I shall stick to the traditions of the House and not initiate a debate. I am very glad that she said there would be a debate. She said that the Government are pledged to increase pensions in line with the rise in prices. I should like to ask her whether the practice of the previous Labour Government of linking the increases to incomes would have brought about more generous increases. I am told that if that had been done the increase would have been about 10 per cent. instead of 2.1 per cent.

I should also like to ask the noble Baroness whether the Government have given serious consideration to the question of linking retirement pensions to the retail price index? I ask this question because for some reason which I do not understand I have read the Department of Employment's Retail Prices Index Advisory Committee report, which I hope we shall have the opportunity to debate at some time. At Page 17 of that report it states: Pensioner households are defined for index purposes as those deriving at least three-quarters of their total income from state pensions and benefits, and such households are excluded from the coverage of the general index". If these pensioner households are excluded from the general index, why does their pension have to be linked to the general index? I ask this question in a not unfriendly way. I do not understand arithmetic, but it appeared to me, having read this boring document, that I should ask someone about it.

I also understand that the general index of retail prices does not include housing. The advisory committee has suggested that it should. Housing is one of the most sensitive and expensive elements in any family budget. We know that repossession of housing, because of failures in mortgage repayments, has become a very serious social problem. I am not sure whether the Government have taken on board the expense of housing, particularly at a time when mortgage rates are going up. Is the increase in mortgage rates to be reflected in the retail price index, and if so, when?

I should like to ask the noble Baroness a question, which we discussed before during the passage of the Social Security Bill, concerning the Government's pledge that only 50 per cent. of mortgage payments should be made to unemployed people during the first six months when they are trying to keep their heads above water. In view of the present situation with increasing mortgage rates, will the Government do anything to be more generous about this?

Perhaps I may ask about the severe weather payments, as this is something we have often discussed. I have found that in the Library there is a paper from the Social Security Advisory Committee which I understand is not generally available. I think perhaps I spend too much time in the Library. However, as the paper is in the Library one must be able to use it. This paper suggests that there should be standard single payment of £5 each week in any local office area where the temperature averages minus 1.5 Celsius, or less.

Lord Harmar-Nicholls

My Lords, I may be wrong, but the questions that the noble Baroness has asked so far seem to bear no relation whatever to the Statement. They are general arguments on the whole picture. Should we not confine our questions to the Statement itself, when it has been passed on to us from the other place?

Baroness Jeger

My Lords, I thank the noble Lord, with whom I have had a happy relationship for many years. I did not think it was out of order to ask why something was not in a Statement, as I know that many pensioners and many people who are looking after them are concerned about hypothermia and all the problems of severe weather. When we have a Statement which does not mention this matter I am entitled to ask why it is not mentioned especially when I find that there is an enormous piece of paper in the Library telling me of the submission from the Social Security Advisory Committee and when I ring up the department I am told they have nothing to say about it. If the Social Security Advisory Committee has submitted this Statement and the department has nothing to say about it, I think that I am perfectly in order to ask the noble Baroness, with her usual courtesy, to tell me something about it.

In case other noble Lords have not bothered to go to the Library and find these papers, I shall, briefly, point out that the suggestion is that there should be a heating allowance of £5 a week where the temperature is 30 degrees Fahrenheit—I shall not mention Celsius because I do not understand it. That is the department's definition of "cold". Some noble Lords might be too hot and some might be too cold, but I am told that the temperature in this Chamber is on average 75 degrees Fahrenheit.

Lord Wallace of Coslany

My Lords, it is hot air!

Baroness Jeger

My Lords, it might be too hot, but I suggest that 30 degrees Fahrenheit is too cold for people, and this is no way to deal with the problem. Nor can I find any help in the Statement for people who have prepayment meters or who buy coal in advance. The Statement contains nothing about the problems of the old regarding the cold or hypothermia which caused so much anxiety last winter.

I have said that I shall not extend this exchange into a debate, but I should like to make one or two very brief points. We understand that, because of the Social Security Bill, from next April there will be a reduction in benefits and that the death grant and certain maternity grants will be abolished. There are suggestions that 20 per cent. of the rate bill will have to be paid by individuals. Therefore, I have to ask whether we are right in relating these increases only to the retail price index, as the poorest people in our country will be deprived because of the reductions in social security payments which will be introduced next April. Therefore, the relevance of the retail price index becomes less important in as much as it relates to the family budgets of these people.

I know that, with her usual courtesy, the noble Baroness will give answers to all these questions, and I look forward to a debate when we can go into them in greater detail.

Lord Banks

My Lords, I should like to join in thanking the noble Baroness for repeating the Statement made in another place. It would appear that this is a fairly routine uprating Statement compensating for the 2.1 per cent. increase in inflation. On previous occasions we have made it clear from these Benches that we support the move of the uprating date to April.

I am glad that child benefit has been increased in line with prices. However, last year's loss has not been made good, and that I regret. I should like to ask the noble Baroness whether the Government propose to restore that loss at some time in the future. There have been some suggestions in the press that an attempt was made by the Treasury to reduce the increase in child benefit this year to below the increase in prices, and one wonders whether there is to be a battle of this kind every year. It would be reassuring if the noble Baroness could say that it was the Government's intention to maintain the real value of child benefit.

Perhaps the noble Baroness can give the amount of the saving to be made by the adjustment of the "taper" for rent in housing benefit. Is this not a case of reducing the benefit of some who are not far above the poverty line? Do the relevant organisations, to which this particular proposal is to be referred, include the Social Security Advisory Committee?

Have the Government thought any further about the level of the basic pension? Although there was some increase in real value in the first years of this Government's period of office, is not the position that, with the break in the link with earnings, to which the noble Baroness, Lady Jeger, referred, and with earnings increasing faster than prices, pensioners are now being left behind earners? When will the pensioners be permitted to catch up? If they are not so permitted, is it not a fact that eventually the pension will almost entirely consist of the earnings-related portion, to the detriment of the poorest? Is it also not a fact that virtually all benefits are falling behind as a percentage of average earnings?

We shall certainly want to consider this uprating carefully and discuss it further when the appropriate orders come before the House.

5.15 p.m.

Baroness Trumpington

My Lords, if I agree with nothing else that the noble Baroness, Lady Jeger, has said, I certainly agree with her about the temperature of this Chamber, which seems to be overly warm this afternoon.

The noble Baroness raised several points and I shall do my best to reply to them. With regard to the increases in relation to earnings, the noble Baroness asked what the uprating would have been. The uprating would indeed have been higher if it had been linked with earnings, but the Government have to take account of what the country can afford. Each 1 per cent. increase in benefit rates costs over £400 million, and unfortunately the Government do not believe that a higher increase can be afforded at this time.

The noble Baroness asked why we use the historic method. The actual figures for inflation provide a much more reliable guide than the forecast method which was favoured by the Labour Government, which was wrong five times out of seven. The pensioners' price indices cover only those pensioner households in which at least three-quarters of the total income comes from state pensions or benefits. That rules out 60 per cent. of retired people. Because of technical difficulties the indices do not include the housing costs which most pensioners have to face. The indices are not considered to provide a better indication of the spending patterns of pensioners in general than that provided by the retail price index. In recent years at least the PPIs have anyway tended to rise less fast than the RPI or pension rates, and pensioners have done better with the RPI.

Perhaps the noble Baroness may have misunderstood some aspects of RPI and the separate pensioners' price index, which concentrates on poorer pensioner households and does not include housing costs because they are generally met by benefits for such households. However, I shall gladly write more fully to the noble Baroness about the points she has raised concerning the RPI.

There is quite a lot that I should like to say about the question of the winter premium. Our main help with fuel costs for those in receipt of supplementary benefit is through the weekly scale rates. Extra weekly heating additions are not being increased because, as the Statement said, the fuel price fell by 0.1 per cent. between January and September this year. That means that all heating additions are now worth more in real terms than they were in April, when benefits were last uprated.

We are very concerned about the dangers of hypothermia, and we are investigating the increase in references to hypothermia on death certificates last year. In the meantime we are concentrating extra help with fuel costs during periods of very cold weather on the groups most vulnerable to hypothermia—households with someone over the age of 65 or under two years old or with sick or disabled people. The Labour Party's winter premium idea, put forward at the Labour Party Conference, of a £5 winter premium for poor pensioners and widows on supplementary benefit, plus another million slightly above that level, would cost about £150 million. There were a lot of promises made by the Opposition. But the most important thing for everybody to whom these uprating measures apply is that this Government have kept down inflation, which is the best means possible for increasing the general wellbeing of these people.

The question of mortgage interest and supplementary benefit was raised by the noble Baroness. The Government's main proposal is to limit the mortgage interest payable with supplementary benefit to 50 per cent. for the first six months on benefit for all under 60. The change was foreshadowed in both the Green Paper and the White Paper on social security reform. It is planned to save around £30 million of the current expenditure of £150 million in a full year, and to affect 90,000 claimants at any one time of the £9 billion paid in mortgage interest to building societies alone by 6 million borrowers.

Two proposals will help home-owners to adjust to the change. First, a special disregard will enable those with mortgage protection policies to use the income to meet the balance of their mortgage payments. Secondly, those who stay on benefit after six months will be eligible to receive help with the extra interest on a loan which has been rescheduled by a lender to incorporate arrears arising out of the six months' limitation.

The noble Lord, Lord Banks, asked about child benefit. We are increasing child benefit by 2.1 per cent. from £7.10 to £7.25 in line with inflation. The level of benefit has to reflect the ever-increasing size of the social security budget, in the context of which the Government have channelled resources in the most effective way. The universal nature of child benefit attracts a high cost, and yet despite competing demands on the available resources we have been able to retain child benefit as a valuable, non-means tested and non-taxable contribution to the cost of bringing up children.

With regard to housing benefit, the housing benefit needs allowances are the starting point for calculating housing benefit for those not on supplementary benefit. They are usually set via a formula which would have taken account of last April's rent and rates increases. The needs allowances are being increased. They are not being increased by as much as they would have been. The point I wish to make is that we are not altering the fact that rent and rate increases will feed into the housing benefit calculation in the normal way next April. Those increases will normally outweigh in cash terms any losses arising from the two savings measures.

The other point I should like to deal with that the noble Lord, Lord Banks, mentioned was the question of the break in links with earnings. When will pensions be able to catch up? The noble Lord's question deals with a very long timescale. It would not be responsible to move to a system which would result in substantial increases in real terms in future years irrespective of the country's ability to pay for them, but we shall continue to honour our pledge to increase in line with prices, which we are already doing. I hope I have answered the questions of the noble Lord and the noble Baroness. If not, of course I shall write to them.

Lord Boyd-Carpenter

My Lords, arising out of my noble friend's last few sentences, can she bring out that any attempt to link social security benefits with wage levels would undoubtedly be frustrated by the substantial increases in wage rates taking place at the moment? Can she, with all the authority of her office, emphasise that those who push these substantial demands are jeopardising the position of those who depend on social security?

On a separate point, can she amplify a little her reference to both war pensions and war widows? Can she confirm that the traditional policy of her department, going back many years, of giving priority to war pensioners still remains, in view of the fact that many of us feel that they have the highest of all claims on the national conscience?

Baroness Trumpington

My Lords, with regard to the first point made by my noble friend, I think he has said it all himself, and I gladly agree with his words. On the second point, as the person responsible for war pensioners I am particularly pleased to have noted in the Statement—and I hope that other noble Lords and noble Baronesses will echo my great pleasure—that the worries of the charges for a funeral, and having to have it done through the department, have now been relieved. That is a step that I know my friends in the war pensions world will greatly welcome.

War pensions are going up by 2.1 per cent. A 100 per cent. disabled former private soldier will receive an increase of £ 1.30 a week from April 1987. This means a rise in his weekly payment from £63.20 to £64.50, tax free. The main allowances payable with war pension will also be increased.

The standard rate for war widows—and I know that my noble friend is interested in this situation as well—will be increased from £50.30 to £51.35, tax free. The maximum rate of rent allowance payable to a widow with dependent children is being raised to £19.55 a week. There are currently 215,000 war disablement pensioners, and 63,000 war widows, mainly from the two world wars.

Allowances such as comforts allowance, age allowance, clothing allowance, which are available only to war pensioners, are being increased. The war widow's differential over the national insurance widow will go up to £11.85 a week. Under the war pensions scheme, all disabled ex-servicemen and widows of ex-servicemen receive the same standard rate of pension, irrespective of when service ended. I think that that gives as full an answer as I can give. I am sorry that I get carried away, but they are so near and dear to my heart.

Lord Stallard

My Lords, perhaps I may also thank the noble Baroness for repeating the Statement. At the same time, I should like to indicate my support for the initial remarks of my noble friend Lady Jeger when she protested about the way that these important Statements are introduced into this House; and particularly today when it is sandwiched in the middle of a debate on linked amendments. That cannot be good for the best management of the House.

However, the noble Baroness will be glad to know that I cannot go into detail on this matter because I have not seen the Statement, and I should like to read it. I therefore welcome her indication that there will be an early debate, when we shall be able to participate.

Baroness Trumpington

My Lords, I did not say that.

Lord Stallard

My Lords, the noble Baroness says that she did not say that. May I ask her to say it? She ought to have said that there will be an early debate on such an important matter as this; and perhaps she can say it. The noble Baroness will recall that in all the discussions we have had on upratings there has always been a great point made of the fact that the increase was announced in the Budget, for a number of obvious reasons, but it was never paid until November, by which time it had been gobbled up by all sorts of other increases; and there were arrangements made to take care of that.

I have always argued that there should be a biannual increase—twice a year. In the days of computerisation that ought not to be beyond us, and it would at least take care of some of those arguments. But if we are now to see the announcements in November—perhaps the noble Baroness will tell us that will be the norm; that the intention of the Government is to make the announcement in November for April—we are back to that position.

I understand from the Statement that the increase was based on inflation at 2.1 per cent., when it is now over 3 per cent. and still rising. Again the up-rating will already have been gobbled up before it is received next April. The 25p pensioners were given last July has long since disappeared and that, when added to the 80p envisaged in this uprating, £1.05, will certainly not compensate for the increases between last April and next April. Will the noble Baroness say what consideration has been given to the proposal still on the table for a bi-annual announcement?

Finally, on the same point I feel very strongly about the staff who have to deal with the numerous changes, procedures and introductions of up-ratings on a wide range of benefits. They are always on the receiving end. The people on the receiving end to whom I have spoken do not blame the Minister; they blame the fellow up in the office. They have had a difficult period over the last couple of years or so. I hope that the noble Baroness will join me in congratulating them on how they have coped so far and will perhaps commiserate with them on how they might be asked to cope with any future increases.

Baroness Trumpington

My Lords, I was rather puzzled when the noble Baroness, Lady Jeger, spoke about my having said there would be a debate, because at that time all I had done was to repeat a Statement. In no way could I have said that there was to be a debate. That does not lie in my gift anyway. It is a matter for the usual channels.

Baroness Jeger

It says so here, my Lords.

Baroness Trumpington

My Lords, the same point applies to the way that Statements appear before your Lordships. That, too, is a matter for the usual channels. This year we have effectively had two up-ratings in a year and it is for that reason that the level of the up-rating is less than the 3 per cent. annual rate of inflation that the noble Lord, Lord Stallard, quoted. It was for only eight months, as was the July increase.

The noble Lord, Lord Stallard, gave me one very welcome opportunity and that was to thank and to congratulate the staff who work untiringly and loyally in offices throughout this country. It gives me very great pleasure to be able to pay a warm and deserved tribute to all those people.

Lord Wallace of Coslany

My Lords, I can understand my noble friend Lady Jeger misunderstanding the situation. The Statement said that the House would shortly have an opportunity to debate these changes. However, that applies to another place. But what applies to another place must surely apply to us, because for the last three weeks we have been trying to keep the Members of that place straight by working longer than they have.

In view of this anticipated debate there is one point which I wish to put to the noble Baroness and that is the question of the retail price index increase of 2.1 per cent. and the retail price index itself. My impression is—I think I am right—that a number of housewives believe it is a fiddle and a majority of them do not understand it, probably including myself! If we have this debate, as indeed we should, can the noble Baroness say whether the House will be provided with a breakdown of exactly how this index is constituted item by item and its application to pension payments? That is all I am asking for at the moment, but the public at large do not understand the retail price index. They are very suspicious.

Baroness Trumpington

My Lords, I can only repeat that it is not in my gift to talk about future debates. I feel sure that the noble Lord, Lord Wallace, will speak to the usual channels and it will be arranged in that way.

I have been given a note from on high which says that the retail price index is the average of 130,000 items. If the noble Lord, Lord Wallace, understands that, good on him.

Lord Harmar-Nicholls

My Lords, is my noble friend aware that if the Opposition want to debate the subject they can have a debate by giving up their own time? They are allocated time and they can choose to take this subject. I rather suspect they will not use their time for it because my noble friend has repeated an excellent Statement, which reflects so much credit on the Government that the Opposition are not likely to want to emphasise that.