§ 5.1 p.m.
§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Skelmersdale)My Lords, with the leave of the House, I shall repeat a Statement on social security benefits which has been made in another place by my right honourable friend the Secretary of State for Social Services. The Statement is as follows:
"With permission, I wish to make a Statement about the next uprating of social security benefits and the introduction of a reformed system of income-related benefits. This will take place for most benefits in the week beginning 11th April 1988, the first full week in the tax year, and the same provisions will apply in both Great Britain and Northern Ireland.
"The retail price index published on 9th October showed an increase in prices over the 12 months to September 1987 of 4.2 per cent. Retirement pension for a married couple will accordingly rise from £63.25 a week to £65.90 and for a single person from £39.50 to £41.15. These increases of £2.65 and £1.65 a week respectively mean that the cash amount of basic retirement pension has risen by almost £35 a week for a couple since this Government came to office. The increase will add some £780 million to the social security budget next year. It must be seen in the context of significant improvements in pensioners' total incomes. Total state pension provision represents on average about half of pensioners' net incomes—and those net incomes have risen by 18 per cent. in real terms since 1979. The uprating increases will ensure that the value of this provision is maintained. They are fully in line with our pledges to pensioners and recipients of other linked long-term benefits.
"I have decided to uprate all contributory benefits, benefits for the disabled, war pensions and similar benefits by 4.2 per cent. also. Public service pensions will likewise increase by 4.2 per cent. as will statutory sick pay and statutory maternity pay paid by employers. Because of the payment arrangements for statutory sick pay and statutory maternity pay, the changes will take effect from the start of the tax year.
"In April 1988 we shall be introducing our new system of income-related benefits. Supplementary benefit will be replaced by the simpler income 445 support; housing benefit by a reshaped system aligned with income support; and family income supplement by the new family credit which will provide help to more than twice as many low paid working families. This new, more coherent and better targeted structure will direct help more clearly where it is most needed and will foster incentives to work.
"I shall shortly be laying before the House regulations for the new benefits. Since these are new schemes the regulations will include the relevant rates. I shall also be laying revised regulations on claims and payments which will provide common basic provisions between benefits. Earlier this month I consulted the local authority associations, as I am required to do under the Social Security Act 1986, on the proposed rates for housing benefit. Because of the close alignment of the benefit rates for all three income-related benefits, final decisions cannot be reached until I have considered their responses.
"The income support rates proposed are £33.40 for single people aged 25 and over and £51.45 for couples. These would also apply as the applicable amounts for housing benefit purposes and as the threshold in family credit. The family premium would be £6.15, the premium for a single pensioner £10.65 and for couples £16.25.
"The personal allowances include the average amounts which we expect householders who are income support claimants will have to pay next April as their minimum contribution to domestic rates. These amounts are £1.30 for couples, lone parents and single claimants aged 25 and over, and £1.00 for other single claimants over 18.
"Compared with the illustrative figures published at the time Parliament approved the reformed benefit schemes, the premium payments would be some 6½ to 7 per cent. higher—essentially the movement in the relevant price index. The personal allowances, leaving aside the element for domestic rates, would be some 4½ to 5 per cent. higher; including that element they would be 7 to 9 per cent. higher. So overall income support claimants would be receiving higher real levels of benefit than under the previous figures. The numbers of gainers from the structural reform would rise by a million—from 2.2 to 3.2 million.
"The number who gain or are unaffected would go up to 4.9 million, while the number who lose would drop to 3.7 million. In reality of course existing supplementary beneficiaries moving to income support would not lose any of their benefit at the point of change. We are spending £200 million to make sure of that.
"We are proposing to introduce the capital limits and the family credit and rate rebate tapers at the same level as those illustrated in the 1985 White Paper. Under the new schemes, housing benefit claimants at all income levels will be fully reimbursed for any increases in their rent. In view of this, I now propose that the rent taper should be 65 per cent. calculated on the basis of net income. This is equivalent to 42 per cent. in the present system based on gross income for someone paying standard rate tax and national insurance.
446 "For the convenience of the House I am today publishing tables which show the likely distributional effects of the new schemes. Copies are available in the Vote Office. I am particularly pleased to note that the figures show for sick and disabled people getting the disability premium an increase under the new scheme of nearly £5 a week in disposable income. This is in addition to substantial increases in estimated expenditure on the disability benefit themselves.
"Complementing the new structure of income related benefits, the social fund will be fully introduced next April. Its gross budget for community care grants and budgeting and crisis loans for the first year will be just over £200 million, of which some 70 per cent. will be in the form of loans recoverable over a period. A separate announcement will be made concerning social fund provisions in Northern Ireland.
"I turn now to child benefit, which currently costs over £4 billion, nearly 10 per cent. of the whole social security budget. Every 10p increase has a net additional cost of over £40 million. Yet higher child benefit would be of greatest help to people who are already relatively well-off and whose living standards are already rising. By contrast, it would give no extra help to over 3 million children in families on benefit, including low income working families: they gain the same from the uprating whatever is done to child benefit. Against this background, and the particular need to target help on those who most need it and to control the overall growth in social security expenditure, I have concluded that an increase in child benefit would not be the best use of resources at present. I therefore do not propose to increase the rate next April. One-parent benefit will, however, increase to £4.90 and the maternity payment from the social fund will be increased to £85.
"Let me emphasise to the House that even with no change in the rate of child benefit, we will be increasing, not reducing, the overall level of resources devoted to families with children. We will be spending £220 million extra on the new family credit and £100 million extra on families on income support. By contrast, a full uprating of child benefit would have cost £120 million. Moreover, family credit will go directly to help low income working families with children and will reach twice as many people as the present family income supplement. Thus more will be spent on families overall but the greatest emphasis will be on those with the greatest needs.
"The details of what this announcement will mean for individual benefits and the proposed housing benefit rates as issued for consultation are set out in a full schedule of rates which as previously is now available in the Vote Office and with permission will be published in the Official Report. The schedule also covers our proposals for board and lodging limits for the coming year.
"Overall the uprating increases will add some £1.3 billion to a social security budget, which already stands at over £44 billion this year. This is a substantial increase to spending on a programme 447 which is already the biggest in government. We believe that our proposals strike a fair balance between protecting the interests of the poorest and of those, such as pensioners, who have substantial reliance on state benefits; and protecting the interests of those whose taxes and contributions pay for benefits".
My Lords, that concludes the Statement.
§ Following is the schedule referred to: