§ 4.45 p.m.
§ Lord Skelmersdale rose to move, That the draft regulations laid before the House on 10th November be approved. [5th Report from the Joint Committee.]
§ The noble Lord said: My Lords, I beg to move the first of the five Motions standing in my name on the Order Paper and, with your Lordships' permission, I should like to speak to the remaining four.
§ These draft instruments form a legislative package of considerable and lasting importance to many millions of people. Not only do they determine the rates of social security benefits which will assist some 70 per cent. of the population; they set the framework for a new and simpler system of income-related help for the least well-off. I know that many of your Lordships have doubts about particular aspects of these reforms. However, I hope that tonight, as we consider the details of the regulations, the House will join with me in welcoming the overall concept of common rules, common rates, common thresholds, and a simpler and more accessible structure for the reformed scheme. The instruments before us are the product of much careful thought and of the hard experience of 40 years of administering social benefits. They mark a return to a coherence of ideas which has, unfortunately, become lost.
§ I should like first to deal with the normal annual social security uprating order which sets the rate of 37 most benefits for the year commencing the April after it is approved. It will in future years contain also the rates of the reformed benefits, which are set out for the first time in the other instruments before the House. At this stage I should only like to single out two of the vast range of benefits it covers, although obviously I should be happy to respond to others when I wind up this debate.
§ First, the amount of retirement pension at £41.15 for single people and £65.90 for couples fully honours our commitment to protect the 9.8 million pensioners against rising prices and gets us hack at least to annual uprating for this group. I am well aware that the extra £2.65 a week for married couples and £1.65 for single pensions will be described as penny pinching by the party opposite. However, members of that party hardly speak from a position of strength. They do not tell us that at the end of their period of office pensioners' incomes as a whole had only increased on average by .6 per cent. a year, while over the lifetime of this Government it has increased by 2.7 per cent. a year. Furthermore pensioners' income as a whole has risen, since 1979, twice as fast as the net incomes of the population as a whole. It is nonsense to claim that pensioners have not been able to take a full share in the nation's growing prosperity. That we have achieved this when there are now a million more pensioners than the party opposite had to contend with, and reduced inflation at the same time, is something to boast about.
§ The other benefit I wish to single out is child benefit. No doubt other noble Lords will wish to do the same. The draft order keeps it at the same cash level as previously, although it does contain increases in one-parent benefit and child dependency additions. I have no reason to blush at that. Both my noble predecessors and I have emphasised over and over again that the Government's objective is to target money to those who need it most and so we have done just that. The 30p per week that increasing child benefit by 4.2 per cent. would have meant would have cost £120 million. We have not only recirculated this money but added more into family credit and a new family premium in income support, which means that around £300 million will be spent on families in lower income groups.
§ I turn now to the four other regulations in today's series: again, I do not propose to go through them in fine detail. I hope that all noble Lords have the memoranda explaining the individual provisions before them. As I have already said, I am concerned with how these orders fit into the principles underlying the Act. It is widely appreciated that supplementary benefit is a mass of tangled entitlements which are difficult enough for professionals to understand and impossible for claimants. Under the new scheme, these complexities are swept away and the level of support for living expenses will be based simply on age, family circumstances, and the group to which the claimant belongs. This area of simplification is covered in Part 4 of the income support regulations and the associated schedules.
§ The rules for taking into account things like the surrender value of insurance policies, any local authority discretionary maintenance allowances to 38 someone staying on at school, and all payments in kind, are swept away at a stroke. Good news, my Lords, for claimants and staff alike, because this is simpler and more generous for claimants.
§ A few moments ago I mentioned targeting and I believe we have achieved that too without asking the kind of intrusive, highly personal questions, which are too often necessary now. Extra help by way of clearly understood premia will go to pensioners, lone parents, families with children and disabled people. I would stress that there are extra resources going into the new scheme. We shall be spending £420 million more next year (including £200 million transitional protection) than if supplementary benefit had continued. Most of this will go to families and people who qualify for the disability premium.
§ Perhaps I should emphasise that those receiving supplementary benefit, who meet the condition of entitlement to income support, will generally have their benefit level protected. Under the transitional regulations, a draft copy of which is in the Library of the House, we shall provide that people in this position, but who would otherwise lose from the changes, will continue to receive the existing cash value of their benefit support. This will cushion them from the changes in the scheme.
§ I hope that we shall not hear today the argument put forward in the early days of the right to buy; namely, that because benefits are not linked to specific purposes, claimants will not be able to manage their affairs. What these orders do is to provide recipients of benefits with an income calculated on straightforward and non-intrusive criteria on which they can reasonably be expected to manage. Moreover, the income support rules are more generous to those with savings than ever before, by doubling the upper capital limit to £6,000 with a tapered reduction of benefit for those with savings above £3,000. I believe that that improvement will be widely welcomed.
§ Another mess, though of a different nature I accept, is housing benefit to which I now turn. This may not be the most expensive of the three income-related benefits but it is certainly the most extensive in scope. If you walk along a street today every third householder is financed by those living in the houses on either side. A staggering 7 million households receive rebate or an allowance towards the cost of their rent and/or rates.
§ The independent review team, which examined housing benefit in 1984, identified four key problems. First, there was inequity—people treated differently according to whether they are in or out of work or are supplementary or occupational pensioners. Linked to that was complexity. The hybrid housing benefit supplement is perhaps a prime example. Then there is an overall lack of efficiency and effectiveness, with some fairly wide variations in the standard of administration at a local level. Finally, there was concern about the rising costs and case load, something of which we have never made any secret. Although certain adjustments to the scheme which have been made in recent years have begun to stem the tide, we are still faced with a case load which has increased by over a third since 1979, and a cost which 39 has more than doubled even after allowing for inflation. To ignore these trends would, I believe, have been the height of imprudence and irresponsibility.
§ How have we tackled these problems? Under the new rationale of income-related benefits, all three schemes—income support, family credit and housing benefit—will have the same basic tenets. What this means is that, for the first time, people will be treated on the same basis for housing benefit purposes whatever their circumstances. People on income support, or an equivalent net income, will get the maximum housing benefit while for those with income above that level benefit will taper away according to a simple sliding scale.
§ Other parts of these regulations—such as those dealing with entitlement to housing benefit, eligible housing costs, claims, and payments—are not significantly different from the exisitng provisions, although in many cases the wording has been improved and matters of doubt resolved. I know that the noble Lady, Lady Saltoun, will wish to comment on one of these, and I look forward to hearing what she has to say. I shall certainly not duck the issue, nor indeed the other controversial issue about these regulations. It is no secret that the proposed rates within these regulations are consistent with a case load reduction of a little over a million and with a reduction in expenditure of around 12½ per cent. Headline grabbing stuff, my Lords, I agree! However, what those headlines do not say is that Parliament approved the Social Security Bill—now the Social Security Act 1986—knowing full well that reductions of this order would occur. In fact the indicative figures included in the technical annex at that time suggested that the number of losers would be 10 per cent. (1.1 million) more. In other words, there are fewer losers than any of us thought there would be 18 months ago. Therefore, although expenditure on housing benefit is being substantially reduced, the net position of income support recipients will be better than envisaged at the time of the 1986 Act. In other words, I would caution against looking at housing benefit too much in isolation. What matters is claimants' total income.
§ In summary, we are establishing a much improved and more robust structure for housing benefit, and at the same time going some way—but by no means the whole way—to reverse the massive increase in cost and coverage which has occurred over recent years. But the key to all these reforms is alignment, and I shall turn now to the third leg of the income-related benefit scheme—the new family credit.
§ Since the 1985 Green Paper, the Government have had as a top priority the need to do more to help low-income families with children. The Family Credit (General) Regulations present the detailed rules for the new benefit focused specifically on this group. The regulations have been framed with two basic considerations in mind. The first is to align the rules for entitlement to family credit as closely as possible to those in housing benefit and income support. This will make the relationship between the benefits much fairer and more comprehensible than at present. The second is to continue the practice of 40 family income supplement of establishing "normal income" and using that to determine benefit at a fixed rate for a fixed period.
§ I shall not go in depth through the family credit regulations. The net result is to ensure that almost every family with children will be better off taking a job than remaining unemployed. Although much of the detail is common to the other income-related benefit regulations, there are some technical differences to reflect the fact that family credit awards will run unchanged for 26 weeks. The House will clearly be interested in the rates of credit, which are set out in Schedule 4. The adult credit is to be £32.10 for both lone parents and couples. Credits for children are age related and include an amount of £2.55 in place of free school meals and welfare milk. Spread over the year, this is rather more than the average local education authority charge for a fixed price school meal. The threshold, which is the level of net earnings at which maximum credit starts to reduce on a straight line basis, is £51.45. This is aligned with the personal allowance for a couple under income support.
§ Family credit will represent a valuable improvement in the help available to low income working families with children. Like child benefit it will normally be paid to the mother. We estimate that more than twice as many families will receive family credit as now get family income supplement, and that expenditure on family credit will be over twice as much as on the latter benefit, and the free school meals and free milk which go with it at present.
§ Finally, I turn to the social security claims and payments regulations. They replace in whole or in part separate provisions in 10 existing statutory instruments. They represent a significant move towards a more readily understood structure.
§ There are four main changes from current practice. First, they simplify the rules on time limits for claiming benefits, an essential element for efficient administration of the scheme. Secondly, the regulations will end some of the present inconsistencies between the period for which benefits are paid. These regulations will mean that income support and family credit are paid in arrears to nearly all claimants below pension age to harmonise with other benefits. Pensioners and widows, however, will continue to be paid income support in advance, consistent with the rules for retirement pension and widows benefit.
§ Thirdly, the regulations permit deductions to be made from the main contributory benefits when paid with income support in order to make direct payments to a third party such as a fuel board. This means, for example, that direct payments can now be made in cases of failure to pay fuel and water bills. Finally, the regulations introduce a new provision to enable benefit to be suspended for a limited period of one month in cases where a social security appeal tribunal has made an award and there is a possibility of an appeal to the social security commissioners. Suspension will lapse if the adjudication officer has not given notice within one month of application for leave to appeal.41
§ I have taken up too much of your Lordships' time but the package of orders and regulations we are discussing is of major importance for the future shape of our benefit system. The Government remain of the view that income-related benefits should primarily help the poorest and most vulnerable in society. These regulations are totally consistent with that view. I commend them to the House.
§ Moved, That the draft regulations laid before the House on 10th November be approved. [5th Report from the Joint Committee.]—(Lord Skelmersdale.)
§ 5.2 p.m.
§ Baroness Jeger
My Lords, I am sure that we all thank the Minister for having taken us on this cross-country run around these regulations. We have a heavy workload before us, heavy in more senses than one. These five orders with which we are loaded this afternoon weight 820 grammes, which in my English is nearly two pounds. They are heavier in more ways than the avoirdupois aspect of them. It is right for some of us to protest about the way these matters are being handled. For example, in the other place Members are not being confronted with all five orders at once. They are taking extra time so that the orders may be dealt with in more detail. If the Minister thinks I am trying to make a political point, I must tell him that the impartial Joint Committee on Statutory Instruments said:the Committee draw the above draft instruments to the special attention of both Houses on the ground that the timetable adopted for the laying of the instruments and their approval by Parliament has left insufficient time for adequate consideration of them by the Committee".I am sure that many of us share that thought.
As the Minister has rightly said, about 70 per cent. of our population live in families in receipt of some form of benefit. The regulations will have a widespread impact throughout the country. Our problem is that the policies which have spawned these regulations have been discussed inside and outside Parliament over several years. Our opposition to the Social Security Act 1986 is rooted in our totally different political and philosophical thinking about the social responsibilities which we carry. Therefore I am sure the Minister will be relieved to hear that I do not intend to re-run every aspect of the legislation. However, I must remind the Government that the Act was much criticised for the powers it gave to the Secretary of State to govern more through orders than through primary legislation. Today I consider that the Government have been unfair to this House in having put such a large parcel of orders before us.
I shall try to be as helpful as I can, though I cannot think why, to the Minister. To save time I propose to express the Opposition's views on just certain matters referred to in these documents and to ask the Minister for clarification in some cases. Other of my noble friends will deal with other parts of the legislation. When we take so many orders together it is not always easy to keep a proper sequence, but I shall do my best.
My first query concerns the Social Security (Claims and Payments) Regulations 1987. On page 13 there is a reference to child benefit payments. This matter was discussed following the announcement in the House 42 of the April benefits for 1988 on 27th October. I hope that the Government have taken note of the widespread public concern about the fact that child benefit is not to be up-rated. I noted what the Minister said and I am sure that other Members have taken note of that, but what are we to say to 70 organisations which have come to both Houses with their protests about the failure to up-rate? These are not organisations of militant Trots trying to make political trouble; they are the most respectable organisations, of which I am sure even the Prime Minister would approve. We have had the Mothers' Union, the Save the Children Fund and other organisations which obviously have no political axe to grind but which are very concerned about the impact on families that they are trying to help.
The Minister might think that he is converting the House to his point of view, but he certainly has not converted thousands of people outside who have to deal with the sharp end of these problems.
If I have the figure right, the Minister maintained that child benefit costs the social security budget about £4½ million. In my view this is an accountant's fantasy. Child benefit is different from other benefits in that it is a Treasury matter, because it replaces the child tax allowance. It ought to appear on the treasury accounts and not on the social security budget. The Government talk about targeting help where it is most needed, but they contradict themselves by apparently asserting that tax allowances are good, however rich the families are who will enjoy them, but that benefits are questionable.
A single person's tax allowance has increased by 14 per cent. in real terms since 1979. A married man's allowance has increased by 17 per cent., but child benefit has gone down by about 3 per cent., so couples without children under the Government's so-called family policy are much better off than couples with children. Many of us in all parties thought that the whole object of child benefit was to ensure that families with children had more favourable treatment than couples without children.
The noble Lord referred to the poverty trap. However, there are many families who under these arrangements will fall into the poverty trap; families who are just above eligibility for income assistance—and a quite modestly paid worker might find himself in that position. Such a man might by endeavour and training or working a lot of overtime raise his income. I should have thought that noble Lords opposite would have been glad that people try to improve their circumstances. If he is receiving support through family income supplement or otherwise, then any increase in his salary will be taken into account and deductions made. If, on the other hand, he is above that limit and is getting child benefit, as, of course, he should be, then there is a real increase in his family income because there is no deduction from his child benefit. That is the only benefit from which there is no deduction for people who try to improve the situation for themselves and their families.
On page 13 it is also stated that unemployment benefit will be paid fortnightly in arrears—the noble Lord referred to this—and sickness, invalidity and 43 severe disablement allowance weekly in arrears. I cannot make sense of this. Why is an unemployed man to be paid fortnightly in arrears? Might this not cause some hardship in certain cases? Is this a change from the previous policy? Is the noble Lord sure that such arrears will not cause hardship? When the changeover comes next April, is there likely to be a gap in payments during the switch-over? This worries some of us a great deal. Is the department taking on extra staff to ensure that those arrears are not increased because of administrative delays?
I understand that transitional arrangements are being made. But it appears from col. 606 of the Official Report of another place for 12th November that income support will be paid in arrears, except for pensioners and widows. At present supplementary benefit can be paid in advance, so this seems to be a backward step for claimants. Many staff are anxious about it. They tell me that penniless applicants may well distress them; and, even worse, members of staff in the local offices will have to tell people with no money that they have to go away for seven days.
I must ask the Minister one or two questions about the social fund. The Social Security Advisory Committee was worried about this. It said on page 7 of its fifth report:Allowing for the fact that the personal allowances and premiums under income support may absorb some of the current single payments expenditure, we remain firmly convinced that there are many areas of capital expenditure which claimants cannot hope to meet from their weekly benefit, no matter how long the period for repayment of the loan".I am not asking the Minister to answer me. I am asking him to answer the Government's own advisory committee. I understand from all the pages through which I have ploughed that there is to be a gross budget for the first year of £200 million, of which 70 per cent. is to be in the form of recoverable loans. I make that £60 million in grants, which appears to be a very small budget if it is to cover the whole country. I am not sure whether it includes Scotland and Wales but I understand that separate arrangements are being made for Northern Ireland. Perhaps the Minister will be able to tell us about that. How is this money to be spread around the country? How will applicants in serious trouble avoid delay, especially if appeals are involved, although as we know after long debates in this House there will be no appeal to any independent body?
If the money that is lent is to be recoverable by deductions from benefit, how will people manage? By saying that loans will have to be recovered from benefits the Government are suggesting that people are getting too much benefit already. When benefits are at subsistence level I have to ask whether the Government have given sufficient consideration to the dangerous poverty and deprivation that may well confront many people? What will happen if the £200 million runs out before the end of the year? Many of these points are not answered even after the most conscientious reading of all this documentation.
I am sorry to ask the noble Lord some more questions but it is the fault of those who have brought five big books before the House this afternoon. I am sorry for him—almost as sorry as I am for myself. I 44 gather that in order to help people pay the 20 per cent. of their rates, which we know is government policy, there will be a payment of £1.30 for couples and £1 for single people. On what basis has this £1.30 been worked out? There are many places in this country where 20 per cent. of the rates is a good deal more than £1.30 a week. What will happen to people who through no fault of their own live in areas where 20 per cent. of the rates will be much more than £1.30? From where are they to get the money? Is it not a fact that in practice part of it will come from a deduction of 50 per cent. from the income support rates?
I should like to say a few words about the disabled. This is not a political point. We had long debates in the House on this subject and it was largely as a result of the work here that the Government agreed to a special severe disability allowance. How can the noble Lord answer the very large numbers of organisations which work for the disabled and which are at the coalface, as it were, in this work? They have no political axe to grind and only want things to be better for the people they are trying to help. They cannot all be wrong. It is too easy for the Government to concentrate on cases where there will be some improvement and not answer the real fears of those organisations which feel that for new applicants especially there will be a drop in support.
I want the Minister to clarify one point, because we must get this right. In col. 743 of the Official Report of another place for 2nd November 1987, the Minister there, when talking about the disabled, said:People who would otherwise have received many additional requirements will receive less benefit than their predecessors receive at the moment. I am conscious of that … However, we are referring to very few people".—[Official Report, Commons, 2/11/87; col. 743.]How few is few? If it is only one, it is one too many. The organisations seem to believe that thousands of disabled will be affected.
My confusion is increased because on 3rd June 1985, at col. 49 of the Official Report, the then Minister, the right honourable Member for Sutton Coldfield, said:We shall ensure that the structural changes will not result in cash losses by those who are now in receipt of supplementary benefit".There is some justifiable confusion which I think the whole House would like to be cleared up.
My noble friend will be asking some relevant questions on housing benefit. I do not see why I should apologise for having kept the House for so long. If I went line by line through this two pounds of paper I could have asked a hundred or more questions. I realise that there will be other opportunities and I assure the noble Lord that we shall not let these matters rest. We shall monitor carefully what happens. I hope that he will try to find answers to these questions because for so many of these people they are not political points but anxieties about their lives, their standard of living and the prospects for their children and how they are going to manage. Those are sincere anxieties and I hope the Minister will take that on board.
§ 5.20 p.m.
§ Lord Banks
My Lords, I should like to thank the noble Lord, Lord Skelmersdale, for his exposition of 45 these orders and regulations. He has, as the noble Baroness, Lady Jeger, pointed out, had rather a wide field to cover. In addition to the usual annual up-rating order we have these regulations for the new income-related benefits with means-tested benefits which are to be introduced in April. They include for the first time the actual rates that are going to be paid.
I turn first to the up-rating order, and that is fairly routine. It increases national insurance benefits by 4.2 per cent. to take account of higher inflation, although I have noted that since this was done inflation has risen to 4.5 per cent., and therefore these new rates will to that extent be inadequate. They will cost about £780 million a year, but we should bear in mind when thinking about that sum—that is the cost of the increase—that national insurance benefits are paid for by earnings-related contributions, and we know that earnings have been increasing faster than prices and so we would expect a buoyant revenue under the scheme.
I should like to draw attention again to the position of the basic retirement pension. Before the present Government came into office the increase in pensions each year was linked to the increase in earnings or the increase in prices, whichever was the higher. The Government objected to the fact that there is in theory a ratchet effect from this arrangement, and they could visualise that if prices increased some years faster than earnings (and in some years it was the other way round) that the ratchet effect would result in a continual increase in the proportion of average earnings which was represented by the basic pension. Of course we all know that earnings have in fact been increasing the whole time faster than prices, and so there has been no sign of any ratchet effect in recent years.
However, that fear led the Government to break the link with earnings. When the Government did that they were careful to say that pensioners would receive through the basic pension—never mind their other income—a share in any increased prosperity that there was. But of course as a result of breaking the link, and the fact that no steps have been taken to ensure that that share is passed on, pensions have been falling behind. A research note from the Library of another place in May of this year pointed out that the basic pension had increased in real terms by 2.2 per cent. between November 1978 and April 1987, while earnings during that same period had increased in real terms by 40.2 per cent. The value of the single pension has dropped as a proportion of average male earnings during that same period from 20.4 per cent. to 17.7 per cent., and I believe that now it is down to 17.2 per cent.
Therefore pensioners, through the basic pension, are not getting an increased share; they are in fact getting a lower share, yet this at a time when the Government are reducing further the Treasury contribution to the national insurance fund. It was at 18 per cent. of contributions when they came to power; it is now reduced to 6 per cent. This is a time when the public sector borrowing requirement, having been estimated at a given figure, is proving to be much less. This is a time when the Government talk a great deal about the comparative prosperity, as they see it, of this country compared with other 46 similar countries. When is there going to be a better time to ensure that pensioners, through the basic pension, receive a share in the general prosperity? I am sure that the Minister realises that the basic pension will wither away gradually over the years unless pensions are allowed to catch up with earnings, and when will the Government begin that process?
Now perhaps I may turn to child benefit. I have already stated in this House that we on these Benches very much regret the fact that this year there is to be a decrease in the real value of child benefit. There was a similar decrease in 1985 and the child benefit is now some 65p lower than it should be if it is to keep up with the increase in prices; if it is to keep up with inflation. The noble Baroness, Lady Jeger, has pointed out that the child benefit was introduced partly to replace family allowances but partly to replace income tax allowances for children, and that therefore one would expect it to go up as the other personal allowances go up. However, as she pointed out, the reverse has been the case. It has gone down as the value of the other allowances has gone up. The Government expect that two out of five who could claim family credit—which is to replace family income supplement—will not in fact do so. Those people will lose out as a result of the freezing of child benefit.
We on these Benches have regarded child benefit as the first tax credit in what we hoped would be a tax credit system, and we should like to convert the other personal allowances into similar credits. The Government have said that they have been able to put £120 million towards increasing support through family income supplement and family credit as a result of freezing child benefit. But it would be just as logical to reduce the single person's allowance, or to reduce the married man's allowance, in order to pay for that help. Surely any increase of that kind ought to come from general taxation.
Let me now turn from the up-rating order (which is concerned with benefits paid as of right) and turn to the new regime for means-tested benefits, income support, family credit, and housing credit. Let me say straight away what I have said before: we welcome the fact that here would be a better alignment —as the noble Lord, Lord Skelmersdale, said —between the three benefits themselves and between them and the tax system. That is an important improvement.
Nevertheless, the principal objections that we expressed when the Social Security Bill 1986 was before the House remain. We are concerned that the replacement of special payments by premiums will leave some people much worse of. We cannot see the sense in compelling people on benefit to pay 20 per cent. of their rates. We think it is wrong to insist that income support for young, single childless adults under 25 should be less than for those above that age. We do not think that there should be two classes of adult. We share the concerns expressed by the noble Baroness, Lady Jeger, about the way in which the social fund will operate with loans replacing grants. We are concerned too about the effects of the new tapers in housing benefit, particularly on pensioners.
I understand that there will be 3,190,000 gainers as a result of the new regime but that, there will be 47 3,650,000—a slightly larger figure—losers. But the total expenditure on the three benefits will be about the same. The Government may say that it is better distributed, and that it is going towards those who are not so well off, but it is by no means clear that that will always be the case. In so far as it is the case, what they are engaged upon is a redistribution from the poor to the poorer. They are financing the extra help for the poorest by taking from those who have very small incomes but who get some benefit, particularly from housing benefit, at the moment. Looking at income support, it seems that the personal allowances as set out in the technical annex to the White Paper in November 1985 have not been fully up-rated in line with inflation since then. They appear to be some 2 to 3 per cent. less in value. I wonder why that is. Perhaps the noble Lord the Minister can explain.
The noble Baroness, Lady Jeger, pointed out that the Secretary of State has said that there is compensation in the personal allowance for the 20 per cent. payment of rates: £1 for single persons under 25 and £1.30 per week for others. But we do not really know how the personal allowances are constructed. What is the breakdown for the different elements that have to be met? Does it mean anything to say that compensation is included for rates if the allowances have not been fully up-rated for inflation? Is it correct that the lower rate of compensation for the under-25s is based on the assumption that the majority of people in that group are non-householders? Is it not a fact that in 1985 there were 100,000 householders under the age of 25?
The family premium which is paid with income support is set at £6.15, which just up-rates the original figure of £5.75 to take account of inflation. However there was a widespread feeling that £5.75 was not enough. Will not this mean lower incomes for many families with children than they would receive under the present system? The all-party House of Commons Social Services Select Committee stated this:The family premium must be set at a level at least high enough to compensate for the loss of additional requirements"—the special additional weekly payments—and single payments".It is true that in 1983 three-quarters of families with children on supplementary benefit received one or more of these additional weekly requirement payments; and two-thirds of all single payments went to families with children. It has been estimated in research done from the Policy Studies Institute that the loss of single payments under supplementary benefit is equivalent to £4.15 per week on average. That is the loss sustained on average by the withdrawal of single payments.
If we take that into account and consider an unemployed man with two children aged four and six, and if we assume that he has one of these additional requirements of £4.40 for heating, and if we add in the £4.15 for the loss of the single payment, and £1.87 for the payment of water rates, we find that the figure of weekly payment is £82.87. Yet I understand that under the new arrangements it will be £79.10; that is, £3.77 per week less. I should like to ask whether the Minister would agree that that is a fair comparison.
48 There has been the fear that some disabled people with several additional requirements will be worse off—some of them considerably worse off. That has led the organisations which represent disabled people to ask that new claimants should be able to claim under either the old arrangement of additional requirements or the new arrangement of disability premium or severe disability premium, and be allowed to take whatever would be the higher of those two assessments. They have also asked whether current claimants, who will receive the transitional protection to which the noble Lord the Minister referred, will have that transitional protection index-linked. If it is not, then they gradually reduce to the new lower level which new claimants would have.
We are concerned about the effect of the new housing benefit tapers on pensioners and we understand that 280,000 of them will be worse off in real terms.
We are also concerned about the position of people who come to this country seeking asylum who are to receive, while they are waiting for their case to be decided, 90 per cent. of the benefit instead of 100 per cent., although the average time that they can be waiting for their case to be decided is 13 months. I should like to ask why there is that reduction for those people.
I think that I have said enough to indicate that there are grounds for apprehension and concern about how the new regime will work in practice. We shall, as the noble Baroness said, have to monitor its operation with great care and attention to detail, in order to see whether the declared aims of the Government, which sound so fine, bear any close relation to what is happening in practice.
§ 5.35 p.m.
§ Lady Saltoun of Abernethy
My Lords, as the noble Lord, Lord Skelmersdale, has already said, I am going to say a word about the housing benefit regulations. At one time I toyed with the idea of praying against them but I have decided not to because it would seem really rather like throwing out not only the bath water but the bath too in order to get rid of one very nasty little baby. The small nasty baby is in Schedule 1, paragraph 1(c) under which dispersed alarm systems are to be specifically excluded from housing benefit for those who live in their own homes, although subsidy will continue for those who live in sheltered housing or purpose-built accommodation. The essence of dispersed alarms is flexibility of installation anywhere where someone who is at risk is living. They are also easily removed if no longer required. It really is ludicrous to limit support to the type of housing rather than to people in need.
The Government say that under Section 2 of the Chronically Sick and Disabled Persons Act 1970 local authority social services have a duty to provide these alarms where need has been determined. This is perfectly true, but a number of local authorities have already said that after the regulations come into force they will no longer be able to provide them for those who cannot afford to pay the service charge or rent themselves, because they, the local authorities, do not have enough money. I would be interested to know, 49 and I hope the Minister can tell me, how the Government, who are taking the line that no one should suffer under the new regulations, propose to force local authorities to carry out their duty in this respect, or, if they cannot, how they are going to make sure that no one is going to suffer.
In the first place, this seems extraordinarily shortsighted on the part of the Government since the cost of an alarm is under £5 per week, whereas the cost of sheltered accommodation is far greater, and nursing home accommodation can cost up to £175 per week. That was this year; it will be more next year.
Secondly, the Government say they are committed to care in the community. Withdrawing subsidy through housing benefit flatly contradicts their stated intentions. They say they want benefits targeted to the most needy. Withdrawing the funding of emergency alarms is taking away a major form of relatively inexpensive assistance from a highly vulnerable group. Many of those who have these alarms, or were hoping to get them, are deeply distressed at the possibility of not having them, and various bodies which organise the provision of them are greatly concerned for those who need them and face losing them.
I ask the Government again to lose no time in providing some certain alternative means of funding for them, and, pending doing so, either to continue assistance through housing benefit or to find some other means of assisting those on low incomes during the interim period.
§ 5.40 p.m.
§ Lord Nugent of Guildford
My Lords, I should like to thank the Minister for his lucid exposition of the vast and complex range of regulations. I welcome them because I believe that the Government are right to review the working of the vast system of administration. It spends nearly one-third of the total national budget in order to provide help for those in need. I believe that if they had failed to carry out the review of the past three years they would have been at fault.
The product of their review appears in the regulations which we are debating. I have listened to the cogent expressions of anxiety felt across the board which have been expressed by the noble Baroness, Lady Jeger, and the noble Lord, Lord Banks. The special point which the noble Baroness sought to express will no doubt be dealt with by my noble friend but it is way beyond me.
I should like to refer to a point raised by the noble Baroness as regards the Government's decision not to up-rate child benefit. That seems to me to be sensible. I do not see that it is good sense or good housekeeping for the Government to pay extra child benefit to many millions of families who do not need it. It is far better that whatever public money is available should go to those who are in need. We have been told specifically that there will be an increase in family credit of £220 million a year and in family income support of £100 million a year; a total of £320 million. That will ensure that families in need will receive something extra for their children. The whole package put forward by the Government will cost an extra £500 million and it adds substance to 50 their statement that this is not a cheese-paring exercise. As the Government see it, it is an attempt to distribute the money available most effectively to those who need it most.
I understand that the review of procedures is welcome and I believe that it is good sense. There has been a tremendous volume of complaint as regards the working of the old scheme which was vastly complex. I understand that there were no fewer than 16,000 regulations—perhaps with a few gaps here and there—and it must have been a nightmare for the administrators. It seems rudimentary to attempt to simplify the regulations, and especially to make the assessment on the same basis, and it is extraordinary that it has not been done before. Undoubtedly, there must have been many cases where families in receipt of the same income and in the same circumstances were treated differently. We hope that such anomalies will be removed under the new regulations.
I should like to comment on the housing benefit regulations because evidently it was a tough decision for the Government to make. The cost of the scheme, which was £1.2 million in 1979–80, and which was paid to approximately 5 million families, last year rose to over £5 billion and it was paid to 7 million families—that is, one in three of all the households in the country. It cannot be right that public funds should be paid in the form of housing benefit to an ever increasing number at a time when as a nation we are becoming better off across the board. There can be no doubt that those at the top end of the income scale in receipt of the benefits have been paying taxes in order to finance their own benefits. That must be the worst kind of administration, costly to carry out and wrong in principle as a use of public funds.
I agree with the noble Baroness that there is a basic difference in political philosophy between Labour policy on such matters and our own. I believe that the Government were right to change the practice. There may inevitably be some hard cases which arise in the considerable redistribution. However, they can be compensated under either the income support scheme or the family credit scheme. I believe that to be the right way of dealing with the matter.
The housing benefit scheme is to be seen against the background of the Government's general policy to reduce taxation in the belief that it strengthens the incentive to work and to save and, therefore, at the end of the day it makes the community better off. We must always watch inflation. The noble Baroness and the noble Lord, Lord Stallard, with his long experience in the other House, will remember that the nation suffered desperately during the last decade of high inflation. In terms of overall budgeting, good housekeeping must be basic to every government. Although some of the decisions appear to be tough, I believe that at the end of the day the country will benefit because inflation will be kept to a manageable level of approximately 4 per cent. I should like to see it decrease further because not only does that preserve the value of the benefits but, equally important (especially for pensioners, 70 per cent. to 80 per cent. of whom have savings of their own) it preserves the value of savings and the income from those savings. That is an important part of their total income.
51 I should like to say to my noble friend and to his right honourable friend the Secretary of State that I welcome the regulations. The Secretary of State has stood up well to the detailed cross-examination to which he was properly subjected in the other place. I believe that he has satisfied most people of the fact that the scheme, under the vast fundamental revision, is well conceived, although it creates many anxieties, and will provide benefit. If hard cases come to light, it is sufficiently flexible for those to be catered for. On balance, it will benefit those who are most in need and it has my support.
§ 5.49 p.m.
§ Baroness Elliot of Harwood
My Lords, I apologise for the fact that my name does not appear on the list of speakers. I notified the noble Lord that I wished to make a short speech. I apologise to the noble Lord, Lord Stallard, but I shall be no more than a few minutes.
Like the noble Baroness, Lady Jeger, I found the number of books alarming to read. However, I am concerned with the housing benefit regulation and I should like to support the point made by the noble Lady, Lady Saltoun. I am concerned with page 56, Schedule 1, paragraph (c) dealing with the changes in respect of the emergency alarm services. I should like to ask the Minister to reconsider the paragraph which provides that grants under the system will no longer be awarded. The system is vital for old people living alone, for the handicapped and for those who we do not wish to go into hospitals or homes but who we wish to be able to live on at home.
The system works well. It is economical and it is better to keep people in their own homes, even if they are drawing social services benefit or being visited by social services employees, than to put them into hospitals where they cost at least £400 a week and where they are not nearly so happy. As we all know, a lot of old people are much happier on their own so long as they can be cared for and looked after. This sytem, which has worked so well so far, as the noble Lady, Lady Saltoun said, is very inexpensive and simple. It can be carried through without any trouble and should be continued under these regulations.
I have read the regulations with some care, and at this point there seems to be no reason at all for changing them. It will not make anybody any better off and will probably cost a great deal more. I am very keen on the system which keeps people in their own homes and does not send them to institutions of any kind. That is something that we have been able to do successfully. If we give up that system then many of those people will not be able to afford the emergency services. They will not be able to live by themselves because there is a risk that they might fall down and be unable to get up or that they might have a sudden heart attack and the like. They will not be able to manage unless they have those services.
I hope that when the Minister is considering this matter, he will think about this very small but very important point. It is a point of economic value, and will serve hundreds—perhaps even thousands —of handicapped people, both young and old. I hope very much that he will reconsider this arrangement.
§ 5.52 p.m.
§ Lord Stallard
My Lords, I should like to thank the noble Lord, Lord Skelmersdale, for his remarks when introducing this package of measures, whose weight has already been referred to and whose price—£25 almost—is nearly as heavy. There will not be many local claimants who are able to buy a set of regulations in order to read them. I can assure the noble Baroness, Lady Elliot, that I am only too pleased that she was able to intervene, particularly as I agree with every word she uttered. I am very grateful that she spoke.
I must take up one or two points made by the noble Lord, Lord Skelmersdale. I shall come later to the subject of pensions, although the noble Lord, Lord Banks, went into the issue in some depth and has almost wiped out a chunk of what I wanted to say. The effect of these orders on pensioners is so obvious and well known that I had hoped the Minister would not bring out such a hoary old chestnut and repeat how well off they are and how much better off under this Government than they were under the previous Government. It does not mean anything and it is not true, as the noble Lord, Lord Banks, pointed out and as I shall shortly reiterate.
The noble Lord, Lord Skelmersdale, touched on the impact of the change. The noble Lord, Lord Banks, also mentioned the possibilities inherent in the change. As he said, it is difficult at this stage to know what the impact will be. However, we have enough experience of previous regulations to know the kind of impact that will emerge from these regulations. From discussions with the people who are bound to implement them—social workers, and so on—some constructive guesses can be made about how they will work.
For instance, as mentioned by the noble Lord, there is the effect of removing the single payments and the right of people to claim under a scheme in which the criteria are clearly set out in regulations. People knew exactly to what they were entitled when they made a claim. Under the new regulations that has all disappeared; the single payments have been abolished. In fact, most claimants will be worse off as a result of the abolition of single payments. More people will be poorer. We know that that will be the result.
We know, too, that people will sink deeper into debt as a result of the application of the social fund. Sadly, there are already far too many people in debt under the existing regulations and because of previous cuts; but the position will get worse because people who are hard up or broke and in real difficulty will borrow money. In the inner city areas there are far too many loan sharks prepared to lend money at fabulous rates of interest and so thrust poor people into more debt and misery. That is another obvious impact of the kind of approach laid down in these regulations.
We know, too, that the social security officers will now be given the right to decide which are deserving cases. That is explicit in the regulations. One does not have to be very clever to understand the impact of that. It means that if the officers are to carry out their duties properly, they will need to pry much more 53 deeply into people's affairs. I understand that they will be able to ask questions such as: "Have you any relatives who will help you out with this problem before you come to me?" They will be able to go into such detail to see whether any payment from the fund can be avoided. If the claim fails they will refer people to the voluntary organisations and the charities, who also are very short of resources and will be unlikely to be able to help. As I said, people will not know to what they are entitled under these regulations. Worse still, as the noble Baroness pointed out, the fund will be limited and if cash runs out before claims have been met, it is just hard luck. There is no further provision, there is no more money in the fund, and it is just too bad.
One of the more serious implications that can clearly be seen was again mentioned by the noble Lord; namely, that there will no longer be the possibility of an appeal. People will not be able to appeal in the way that they have done for the past 50 years. That recourse will no longer exist. The social security manager will simply have power to reconsider the decision of his junior officer. As anyone who lives in the real world knows, it will seldom happen that a social security manager will query his junior officer's decision. That is another impact.
We also know that it is the most vulnerable people who will be at risk from the confusion and chaos that will arise from these regulations. For instance, there will be confusion resulting from the differences in interpretation about old people's heating. Previous speakers have mentioned the special needs of the disabled and the noble Lord, Lord Banks, raised the question of families with young children who will have less money because the present power of the DHSS in special circumstances and emergency situations will be severely limited. So we are aware of some of the impacts of the changes. I only noted down a few of them when noble Lords were speaking but there are many others which will become clear when the new regulations begin to operate.
The noble Lady, Lady Saltoun, referred to an issue that she raised a few months ago in a Question to the Minister. I supported her then and I support her now. She is absolutely right. As the noble Lady pointed out, there is no reason at all for the Government not to accept the proposals made by her. I think that the Minister should be able to tell us that he does accept them.
I do not suppose that the noble Lord, Lord Nugent, and I will ever agree politically or philosophically. We do not even agree about inflation, on which there are two schools of thought, one of which believes that the price of lowering inflation below a certain rate may be too high in terms of unemployment, loss of jobs and social cost. We have to take that into account in our application of priorities. The Minister talks about redistribution, which is a wonderful word. In the context of these orders it means that we are redistributing the cuts that have been made in the benefits to the poor, in order to give out benefits in the form of tax reductions to those who do not need them. That is redistribution that the Minister did not mention, but that is the real nub of the difference between myself and him.
54 I want to turn now to one or two points of my own.
§ Lord Nugent of Guildford
My Lords, perhaps the noble Lord will give way for one moment, please. I made the point, of which I am sure he took note, that the total package is making available an extra £5 million per annum. So it really cannot be said the changes are going to release public money which can then be redistributed as cuts in taxation.
§ Lord Stallard
My Lords, I can only say to that, we are not sure about that total package cost, either. There are so many figures and statistics. I have avioded using some because there are so many different interpretations. It would be dangerous to repeat them. Even having said that, we still do not know how much the Chancellor is going to have out of all his machinations to redistribute in tax cuts to those people I mentioned who do not need them. I think the question is academic at this stage; but we shall come back to that no doubt as it develops.
Perhaps I can come back to the first point the noble Lord, Lord Skelmersdale, mentioned, the question of pensions. We have to start at 1979, as far as this particular saga is concerned because it was almost as soon as the results of the 1979 general election had been announced that the then Chancellor of the Exchequer in the first Budget showed us the direction and the approach that the Government intended to take on the question of social security. He then announced, as the noble Lord, Lord Banks, said, the breaking of the link between pensions and earnings.
This was taken up in the 1980 Social Security Act, and we spent long, long nights and long days (as other Members who were involved will probably remember) on that. However the break has meant—and I shall not repeat all the statistics—that a single person would now be getting £27.90 instead of £23.75. That is a difference of £4.15. A married couple would now be receiving £74.55 instead of £63.25. That is a difference of £11.30.
These are quite significant figures if you are at that level of income. It is no good just glossing over them and saying: "Because we gave them more than the previous government gave them …". These are the actual figures. The noble Lord, Lord Banks, reminded us that the Secretary of State for Social Security, when he spoke in the debate on the 13th June 1979, said:I should like to make it clear, however, that it remains the Government's firm intention that pensioners and other long-term beneficiaries can confidently look forward to sharing in the increased standards of living of the country as a whole. That has always been the intention and the achievement of Conservative Governments. It remains the intention of the present Government."—[Official Report, Commons; col. 439.]But the link with earnings has never been restored. Pensioners and other claimants are still "looking forward to sharing in the increased standard of living".
As has been said, the single pension in 1979 was 21.1 per cent. of the average male earnings, and now it is 17.2 per cent. I am grateful to the noble Lord. Lord Banks, for his up-to-date figure. It does not matter how you juggle statistics, those are facts. It was 23.1 per cent.; it is now 17.2 per cent. That is 55 quite a massive reduction in their standard of living on anybody's statistics.
We know, too, that the result of that cut—and many others that followed it right across that whole spectrum of benefits—was a saving of over £8 billion to the Exchequer, most of it at the expense of those who could least afford it. Worse still, it was a diminution of the whole principles of social security as we had come to know them. The cuts have gone on, there have been about 46 major changes since then, and many more consequential changes. The savings have mounted still further, and the Government's real intention (which is the eventual break up of the whole system of benefits that comprise the welfare state) is now only too clear so far as I am concerned.
Noble Lords who have participated in debates on these questions in your Lordships' House before will recall that all parties on this side of the Chamber have objected most strongly about the methods used by governments to announce changes in social security. A series of vague, panicky, ill thought out Bills, often guillotined in the other place, always full of references to unavailable regulations and massive new powers to the Secretary of State, followed by statutory instruments and orders giving details of corrections and changes omitted from the Bills, rushed through the other place and then agreed here without any right to amend them or to vote. A totally unsatisfactory method of determining the quality and standard of life of millions of our citizens.
This approach to social security legislation has been accompanied by cuts in staff at the benefit offices, massive disruption has been caused, almost constant industrial unrest, confusion in administration of new benefits, because of overloading of remaining staff, and inevitably, even more confusion, fear and hardship to hundreds of thousands of people, and to the voluntary organisations who are trying to help them. Now we have another set of statutory instruments. Those are more regulations which should have been debated, and should have been made available in time for the 1986 Bill when it was going through your Lordships' House.
I want to spend just a few minutes on one set of regulations; the housing benefit. I know that other noble Lords have mentioned this. Housing benefit is a good example of the kind of legislative approach that I have just outlined. The introduction was a disaster; the first months were characterised by errors in assessments, breakdowns in computers, widespread delays in payments causing increased rent arrears, threats of evictions to claimants and total confusion for claimants and administrative staff generally. The introductory arrangements themselves had to be rearranged twice. Even then, some local authorities still failed to make the deadline, and for a further year cases were still awaiting assessment.
In my view it has never operated satisfactorily, even now. The Government dismissed these difficulties as teething troubles. The Times described it as the biggest administrative fiasco in the history of the welfare state. The Institute of Housing called it an administrative nightmare. The National Citizens' 56 Advice Bureaux argued that it was unworkable. By August 1984, 25 sets of regulations and 20 circulars had been issued.
Further regulations were introduced in 1985, then in 1986 and again at the beginning of this year. From next April, we have a complete restructuring of the housing benefit scheme. That is not to put right the problems that I have just mentioned; but purely to effect still more savings in the social security expenditure.
Previous changes have been debated and an attempt made to amend the legislation, but to no avail. Hundreds of thousands of claimants have suffered losses in benefit, and thousands have become ineligible for any benefit at all as a result of a repeated stepping up of the tapers (that is the rate of withdrawal of benefits), and adjustments to the calculation of income, and of disregards at the same time.
Now these regulations step up the withdrawal rates yet again. While it is true that the basis of assessment has been changed from gross income to net income, any benefit that that may have had has been negatived because of the interim changes that took place earlier this year. It has been estimated that for a typically low paid worker the loss will still be in the region of 13p in the pound as compared with the position in mid-1986. Rate rebates, as have been mentioned, will also be reduced by these regulations to 80 per cent. of rates as opposed to the 100 per cent. that exists now in the housing benefit regulations. The remaining 20 per cent. will have to be found by even the poorest of claimants—even those on income support.
We were told that these basic allowances would include an average amount for compensation. The noble Baroness, Lady Jeger, put a figure to that compensation. However, as has been pointed out by the noble Lord, Lord Banks, no details have ever been made available. How has it been worked out? I think that we are entitled to know, and I hope the noble Lord will be able to give us some information on that tonight.
But in any case, any average amount will not help those people who are trapped in areas of high need which have higher than average rates. For example—dare I mention?—the average rate in Camden is £14.58 per week. Twenty per cent. of that is £2.92. The average rate in the Rhondda is £2.98 per week. Twenty per cent. of that is 60p. So from the same total income of £33.40—that is, the income support rate for a single unemployed person aged 25 or over—there is a vast difference between £2.92 and 60p. Certainly if you are a claimant there is a huge difference. So there is an unanswerable case for rebates to continue to be based on actual rates and to end this type of discrimination. Again, I hope the noble Lord will be able to say that that will be reconsidered. The regulations also introduce for the first time—and the noble Lord glossed over this—on housing benefit anyway a capital limit. He tried to make a virtue of it, and it may well be on some of the other benefits, but on this benefit it is the first time that a capital limit has been introduced.
57 At present housing benefit takes account of only the actual income generated by capital saved up—that is, the difference—but in future there will be standard reductions for savings over £3,000. For every £250 of savings there will be £1 per week of notional stoppages up to £6,000 and at £6,000 the benefit will disappear completely. It is completely cut off. These are facts that have been written down in the papers before us.
Most organisations have said that they cannot understand why this change has been introduced. Age Concern summed up a general view by saying that it is unable to support regulations which penalise elderly people for having been thrifty in saving for their retirement. I think that is how a lot of those people will see it too. Thousands of pensioners will lose benefit as a result. To say that savings must be treated in the same way for housing benefit as for income support cannot be justified and the existing method should in my view be retained.
Finally, I should like again to repeat that I support entirely the case made out by the noble Lady, Lady Saltoun, and the noble Baroness, Lady Elliot, on the question of alarms and I hope we shall get a positive response to that. The changes outlined in these regulations are expected to reduce the number of housing benefit recipients by 1 million and, according to a Conservative Party Members' brief that I saw on the up-rating Statement, the savings produced by the revised housing benefit scheme alone will be around £650 million. That is the real reason for the restructuring of the housing benefit scheme. All in all these latest cuts amount to a fairly shabby and squalid attack on the poorest people in the community, while at the same time handing out further tax reductions to—and looking for more tax reductions for— those least in need. It is my hope that public opinion, when alerted to the effects of these cuts, will persuade the Government to have another rethink. Rest assured, my Lords, we shall certainly return to these issues as and when the opportunities arise.
§ 6.13 p.m.
§ Lord Skelmersdale
My Lords, this has been an important and wide-ranging debate and we have heard a number of thoughtful contributions from different parts of this House. We are of course covering a number of important, technically complex and sometimes controversial issues in these regulations. However, if I were to concentrate on the speech of just one noble Lord I should be here for a good 20 minutes, and if I were to concentrate on those many points made by all noble Lords who have spoken in this debate I should be here for well over an hour, which I do not think would be a proper use of the time of the House. Nonetheless, I shall do my best to return to the particular issues that have been raised.
But, first, I simply re-affirm that what we have today is more than a rag-bag of unrelated proposals. In spite of what the noble Baroness, Lady Jeger, said, the regulations taken together constitute a serious attempt to overhaul the creaking structure of social security, to create a more consistent and coherent structure, to simplify it, to make it more 58 understandable and not least to ensure that the huge resources which the system consumes are indeed directed to those with the greatest needs.
Of course achieving these aims—which I think have been widely welcomed—cannot be straightforward and I accept that in the process of change there will be some who do less well than if we had simply carried forward the present obscure structure unchanged. I disagree therefore with the noble Lord, Lord Stallard. But I think that in the end when we look back on the changes we will see them as a major achievement and a major improvement over what we have today.
I think it is worth remembering that in the next financial year, for the first time ever, we shall be spending £48½ billion. So the idea of cuts in a general sense must clearly be ridiculous, although I fully take the point, which was explained very well by my noble friend Lord Nugent, that where we have found it necessary to take the knife— for example, in housing benefit for the more well-off—we have not hesitated to do so.
The noble Baroness, Lady Jeger, repeated a complaint of the Joint Committee on Statutory Instruments that it did not have enough time to consider the regulations properly. That is a freestanding committee of both Houses, as the noble Baroness will know, and it is entirely up to it—indeed, it has done so on other occasions—to deign not to report, which is a very much more serious matter than what it has actually said. But I would point out that had we delayed parliamentary consideration for longer there would have been less time to prepare for the actual changeover next April.
I think that the noble Baroness asked questions of detail about training for the social security desk officers who are going to operate the changeover. I can say that this is going ahead very well. Extra staff have been employed to achieve it and I have no doubt that we shall be ready on time. The noble Lord, Lord Banks, zeroed in on the incomes of pensioners and the difference between prices and earnings as a basis for calculation. There is more than one way of ensuring that pensioners have a secure retirement and that is surely the objective of all sides of the House.
I would remind the House that we are spending £18.5 billion this year on pensions and the uprating increases before us will add another £780 million to that staggering bill. Against this background of high public expenditure, and particularly against the background of pensioner income rising in real terms by more than double the rate for the population as a whole, we do not believe it is justifiable to increase pensions by more than the increase in prices on this occasion. I accept that if pensions had been increased in line with earnings in recent years, the level would now be higher. But the fact remains that pensioners' incomes have risen both in real terms and as a proportion of the net incomes of people in work, without the need for higher expenditure on the basic pension. Pensioners have shared in higher living standards, which was, I think, the promise we made—
§ Lord Banks
My Lords, does the noble Lord accept that there are some pensioners who have no income 59 other than the pension? Are they not entitled to a share in the prosperity?
§ Lord Skelmersdale
My Lords, that is a very valid debating point, but pensioners are backed up by income support where that is necessary. I am sure that the noble Lord's question, as usual, has a lot more implications than the ones which are obviously apparent and I shall therefore consider the question which he has just asked me.
Up to the latest date to which incomes can be fully compared, pensioners' incomes rose more rapidly than those of people in full-time work—a point I made in my opening speech. Pensions are only about half of pensioners' total incomes. Changes in the relationship between basic pension and average gross earnings say nothing about real changes in pensioners' wealth.
I turn now to family credit and the poverty trap. Family credit will end the worst of the poverty trap by calculating it and housing benefit on the basis of net income; that is, after tax and national insurance deductions. No employee should find that reduced benefits leave him worse off as a result of higher earnings, which can happen at present over a wide range of earnings. We recognise that more people are going to have higher marginal tax rates but below 100 per cent.—a piece of technicality which I hope the noble Lord, Lord Banks, will appreciate. This is unavoidable if we are to target help to those most in need. But there will still be a delay of up to five months before higher earnings reduce family credit. The simpler structure with a clear relationship between gross earnings and overall income will improve incentives to increase effort and rewards.
On a point of detail, the noble Baroness, Lady Jeger, suggested that child benefit would not reduce the income of someone in relatively low paid work but it would of course reduce family credit and leave such a family no better off.
The noble Baroness, Lady Jeger, and several other noble Lords raised matters relating to the social fund. While I should be delighted to debate the social fund, it is the subject of a different order, which, I understand, is to be laid before the House fairly shortly. However, for now the total sum available for community care grants and loans at £203 million is comparable to the expected level of expenditure on single payments this year.
The House is clearly worried by the subject of the compulsory payment of 20 per cent. of rates for people who receive income related benefits. I make the point because it is now law that it is for local authorities to recognise the impact their spending plans have on low income ratepayers. That is the whole point of accountability.
I accept the distinct examples that the noble Lord, Lord Stallard, raised on the position of a claimant in Wales compared with that of a claimant in, say, Sheffield or Greater London, but the whole objective of the exercise is to make the local voter closer to the actions of his or her local authority.
This House rightly prides itself on its care and support of the long-term sick and the disabled.
60 Therefore I was more than a little surprised when neither the noble Baroness, Lady Jeger, nor the noble Lord, Lord Banks, pressed me on that unfortunate group of people when questioning me on the annual up-rating statement the other day. In relation to the reformed benefit schemes the great majority of the 270,000 sick and disabled people on income support will either do better or experience no financial change. Some 70 per cent. will gain in real terms at an average rate of £5 a week. The system will be simpler and instead of a host of special additions which the disabled person may or may not claim there will be a straightforward disability premium paid at two rates.
This House has good reason to be proud of the higher rate of £24.75, which will give appreciable extra help to the relatively small number of disabled people, about 7,000, who have very substantial needs. It results of course from an amendment successfully moved by the noble Lord, Lord Henderson of Brompton, during the passage of the 1986 Social Security Act. When the noble Lord, Lord Stallard, makes the point that it is impossible to vote on these things perhaps he will reconsider the remark in that particular instance.
I accept that a tiny minority of disabled people who receive an extremely high level of support under the current scheme would lose substantially, except for transitional protection. We estimate that there are about 250 of those but I take the point made by the noble Baroness, Lady Jeger, that one is enough.
My honourable friend the Minister of State in his review of what might be done for that very small group recognises that neither the brains of the department nor the wit of the organisations have yet come up with a satisfactory way of giving extra assistance to them, but we shall not stop trying and any suggestions that your Lordships may have will be gratefully received.
§ Baroness Jeger
My Lords, before the Minister leaves the point of the disabled I wish to say that we have had many representations from their organisations claiming that it is the new applicants—that is, anyone who becomes disabled after April—who will be in a worse position than those who are presently disabled. Can the Minister explain that?
§ Lord Skelmersdale
My Lords, the way we normally work out these things is by taking samples from social security offices so that we can arrive at an estimated figure. I am sure that the noble Baroness is well aware of that practice. When we did that for this particular group, those who currently receive or who will receive £6.25 a week, we discovered that 250 people were likely to lose out. I am sorry. I did not mean £6.25. I meant the £24.75 that I have just referred to. There are 250 people who currently receive considerably more than that in allowances. The noble Baroness looks confused.
§ Baroness Jeger
My Lords, I am confused. I was asking about people who will become disabled after April. I cannot see how the local offices can have any knowledge about how many people will become disabled.
§ Lord Skelmersdale
My Lords, that is true but one can work on percentages. If the noble Baroness would like to work out the percentage of 250 of 270,000 people—namely, the total number of longterm sick and disabled—one can carry that forward in exemplification for the future position.
Still on the disability organisations, the noble Lord, Lord Banks, asked why we were unable to accept their proposals. Their original proposal would have cost an extra £300 million. Their revised proposals, dual assessment for new claimants, would have meant running two benefit sytems side by side next April. I can imagine the views of my noble friend Lord Nugent of Guildford should that have been contemplated.
As regards the alignment of pay periods, current claimants will not lose benefit. Claimants who currently receive supplementary benefit in advance but who will be paid income support in arrears will receive a special transitional payment at the time of their transfer from supplementary benefit to income support. New claimants who are paid in arrears will accrue entitlement from the day they make their claim. Currently payment and entitlement does not normally commence until the first pay day following the claim.
When we switch to paying in arrears the claimant can make a claim against the social fund, but the majority of claimants will have received earnings from their last job to tide them over. Those earnings are disregarded in assessing income support entitlement when the claimants eventually receive it.
The noble Lords, Lord Banks and Lord Stallard, wanted us to restore the link of pensions with earnings. The level of basic retirement pension has to be set in the context of pensioners' incomes as a whole. On average state retirement pension and other benefits account for about 60 per cent. of pensioners' incomes. We have protected both state provision and other income by increasing pensions in line with inflation and by controlling inflation itself.
Why not index transitional protection, I was asked. The Government have provided that type of protection for very high additions in respect of domestic assistance additions—a very valuable safeguard. I cannot go further than that at present but I can assure the noble Lord, Lord Banks, that we shall be monitoring the position of all protection from next April.
As regards child benefit I wish to point out that we would need to ensure the best possible take-up of family credit whether or not child benefit was increased by 30p, which as I explained is what 4.2 per cent, would mean on this occasion. As regards those who might not claim, I must say that they stand to gain far more by claiming their family credit entitlement than they would by a mere extra 30p on child benefit. I took grateful note of what my noble friend Lord Nugent had to say in this connection.
As regards the long-term future the Government have announced no decision. However, my right honourable friend has made it abundantly clear that in view of its cost and ill-targeted nature, we are bound to keep this benefit, like others, under 62 continual review in order to assess its cost-effectiveness and relevance to the needs of today.
On the question of whether families with children lose out taking account of single payments, on the basis of the latest technical annex figures 82 per cent. of couples with children on supplementary benefit will be better off and 4 per cent. will have no change. I have to accept that 14 per cent, will be worse off. These figures compare normal weekly income under the two schemes. It is not appropriate to add single payments into that particular equation since they have quite a different purpose; in other words, one-off special needs, which, as I have explained, is part of the rationale for the social fund. The true comparison of single payments is with the social fund.
Personal allowances are not increased in line with inflation. The important point here is that personal allowances are higher in real terms than the rates we illustrate in the technical annex, the basis upon which Parliament discussed and approved the reforms.
I promised the noble Lady, Lady Saltoun, that I would not duck the question of emergency alarm systems. She spoke very forcefully on this subject and not surprisingly, because she has spoken very strongly indeed through the media in the last few weeks. She was backed up by my noble friend Lady Elliot.
The draft regulations simply carry forward existing policy. Housing benefit has only ever been intended to meet essential accommodation costs and not the costs of personal care. In the draft regulations before us now we have clarified our intentions to make it clear that housing benefit will be available to help with the cost of alarm systems where they are provided in the accommodation. This is particularly so when the accommodation is occupied by elderly, sick or disabled people. I am sure that this clarification will remove some of the misunderstanding about the effect of our policy and I hope that it will be widely welcomed.
I agree that the noble Baroness and the noble Lady are quite right when they say that wider community care policies are involved here. There are a number of possible sources of funding alarm systems apart from housing benefit. For example, social services authorities have separate responsibilities to provide care and personal social services from within their general budgets. This is taken into account in the annual settlement of the rate support grant.
It is clear to me from the concern which has been expressed during the debate and earlier that the question of funding for alarm systems must be considered in the context of the wider question of the funding for community care. I am therefore asking Sir Roy Griffiths to look at the issue of funding.
§ Baroness Seear
My Lords, may I interrupt the noble Lord? For the record would he agree that it is a very real economy to keep people in their own homes? Therefore the availability of emergency alarm systems for the assistance of people who are in their own homes and not in special accommodation is not only convenient for the recipient but also a very great saving.
§ Lord Skelmersdale
My Lords, I certainly agree with that. What I am not prepared to agree to is that housing benefit is necessarily the right way to pay for the alarms, which is what I was endeavouring to explain to the noble Lady, Lady Saltoun. I am therefore asking Sir Roy Griffiths to look at the issue of funding for alarm systems and other forms of domiciliary care in his wider review of community care.
The noble Lord, Lord Stallard, described as a fiasco the introduction of housing benefit in 1983. He then went on to say that the purpose of the regulations now before your Lordships was simply to cut housing benefit. This could not be more wrong. I am extremely grateful to my noble friend Lord Nugent because he explained why. I acknowledge, as I acknowledged in my opening remarks, that the current housing benefit scheme has proved difficult to administer, but these regulations tackle the fundamental structual problems in the existing scheme.
Let me give just two examples. The need for the housing benefit supplement and the high rent schemes is now removed. The new scheme, which is simpler in concept, will prove easier to administer in practice. I take the point made by the noble Lord, Lord Stallard, that as with all social security benefits we will keep this one continually under review and if it is necessary to adapt then we will adapt it.
§ Lord Stallard
My Lords, it will render 1 million people ineligible for housing benefit and it will save £650 million.
§ Lord Skelmersdale
My Lords, I wonder whether the noble Lord was listening when I made my opening speech. I explained then, and I am prepared to stick to it, that the position now is that there will be 10 per cent. fewer losers than there were at the time when Parliament approved the social security legislation. The relative figures were given in the technical annex which was supplied to both Houses at the time.
As regards the amount of money concerned, the noble Lord is broadly correct. It would be a mistake, especially as my noble friend the Chief Whip is sitting beside me, to go into the details of tapered changes. Perhaps I may write to noble Lords who raised various particular points. I hope I have dealt with most of the issues raised. I hope that your Lordships will agree that we are producing a better system which is easier to understand and to operate.
I sometimes gain the idea from the party opposite that all change is to be condemned out of hand. I hope they will review the operation of these orders just as seriously as we in Government will. As I pointed out earlier if we need to make changes then we should not be shy about doing so.
We are bringing the main rules together in comprehensive sets of regulations. All this represents a major advance towards a more rational and coherent structure of help. It is being backed up by a complete rewriting of our leaflets, and there will be publicity to improve communications with those we 64 are seeking to help. It will be followed by a major computerisation programme to improve the operation of the system. That represents a better system, better explained and able to provide a better service to claimants.
§ Lady Saltoun of Abernethy
My Lords, before the noble Lord sits down may I ask a question? Do I understand him to have indicated that there could be circumstances in which a person's own home was considered suitable accommodation for the elderly or disabled for the purpose of alarms under housing benefit?
§ Lord Skelmersdale
My Lords, I would have to study the implications of that question. I said that the regulations were amended from our original unpublished draft to make sure that any alarm system which was an integral part of the building would be covered by the housing benefit regulations. Within this any dwellings in the groups I have mentioned—namely, for the elderly and the disabled would be included. In practice the answer is yes.
§ On Question, Motion agreed to.