§ 12.8 p.m.
§ Lord Skelmersdale rose to move, That the draft order laid before the House on 7th December be approved [3rd Report from the Joint Committee].
§ The noble Lord said: My Lords, I understand that it will be for the convenience of the House if we debate this order and the Social Security (Contributions and Allocation of Contributions) (Re-rating) Order 1988 together.1474
§ Only a successful economy can enable us to afford to make nearly £50 billion worth of social security payments a year—and the uprating of benefits from next April will add more than £2 billion to that figure. About half of that is spent on the elderly. Our job as a government is to strike the right balance between the interests of benefit recipients and the interests of the working population who pay for those benefits. That is why we have pursued policies which take both of those interests into account and concentrate expenditure effectively where it is needed most.
§ I turn first to benefits uprating. Our proposals mean that we have kept our promise to continue to maintain the value of the state retirement pension—which goes to nearly 10 million people—and provides a secure foundation for income in retirement. As my right honourable friend the Secretary of State has announced, the basic pension for a single person will rise by £2.45 a week to £43.60, and for a married couple by £3.90 a week to £69.80. The uprating of basic pension alone from next April will cost nearly £1.2 billion in 1989–90. In other words it represents no real terms increase.
§ Nonetheless, like Beveridge all those years ago, we believe that the basic state pension is only a part, and a declining part at that, of pensioners'. total income. The Government believe that pensioners want to make their own preparations for retirement where possible and recent figures indicate that they are.
§ What pensioners want is total income buying more goods and services. During our first seven years in office pensioners' total incomes grew overall twice as fast as those of the population as a whole—and more than five times faster than under the last Labour Government.
§ As the House will recall, we restructured these benefits last April in a simpler scheme with new rates, which is proving easier both to understand and operate. And my right honourable friend the Secretary of State recently announced that from next October extra help is to be made available in the form of a new and extended structure of pensioner premiums in income support. These arrangements will provide an extra £2.50 a week for single pensioners and £3.50 for couples. This money will be extra; it will involve a total additional cost to the taxpayer of nearly £100 million in 1989–90 and nearly £200 million in a full year.
§ I should now like to set out our intentions for financing these and other contributory benefits, on which we plan to spend nearly £27.5 billion in 1989–90. As the House is aware, the key to the contributory principle is that entitlement to these benefits is earned by the payment of national insurance contributions. The Government's proposals for national insurance contributions were announced by my right honourable friend the Secretary of State on 1st November. We do not propose to change the rates of Class 1 contributions in the coming year. 1989–90 will be the sixth year in succession when we have not increased the main Class 1 rates. The lower earnings limit for Class 1 contributions, which is linked by statute to the basic retirement pension rate rounded down to the nearest 1475 pound, will be £43 a week from next April. The upper earnings limit will be fixed at £a325 a week, nearly seven and a half times the basic pension level. The regulations which bring the new earnings limits into effect will be made and laid as soon as the benefit uprating order has been approved by Parliament.
§ I turn now to the draft Social Security (Contributions and Allocation of Contributions) (Re-rating) Order 1988. The House will recall that in 1985 we reduced the contribution rates paid by lower paid workers and their employers to help those workers and reduce employment costs. The reduced contribution rates cut significantly the impact of contributions on people on lower earnings, but they did not affect their benefit entitlement in any way. We now propose to increase each of the earnings limits below which the lower contributions rates are payable in line with inflation rounded to the nearest £5. These proposals ease the burden on some lower paid workers and their employers and I am sure that the House will welcome that. Most other employees will not pay any more in contributions unless their earnings rise.
§ The House is aware that self-employed people pay their national insurance contribution in two parts—the flat rate Class 2 contribution and the profits related Class 4 contribution. We do not propose any change to the Class 4 rate, which will remain at 6.3 per cent. in the coming year. The profits limits for Class 4 contributions which determine the level of profits on which contributions are payable will be increased broadly in line with the earnings limits for Class 1 contributions to £5,050 and £16,900 respectively. The upper profits limit is exactly 52 times the Class 1 upper earnings limit. The order also increases the Class 2 contribution by 20 pence to £4.25 a week from next April. The Class 2 rate is linked to the Class 1 lower earnings limit and its increase reflects the proposed rise in that limit.
§ The draft order also increases the amount of Class 1 contributions which are allocated to meeting the costs of the National Health Service. From April 1989 we propose to increase the employees' NHS allocation to 1.05 per cent. and the employers' allocation to 0.9 per cent. in respect of earnings on which Class 1 contributions are paid. The NHS allocation will raise over £4 billion for the National Health Service in the coming year.
§ To return now to the uprating of benefits, successive upratings by this Government have also ensured that the benefits paid to people with longterm illness and disabilities have kept their value. Indeed, many of these people have had real-terms increases in the amount they receive—notably those with mobility allowance who have had a 9 per cent. real-terms increase since July 1978—and an estimated 190,000 people under pension age receive more from the disability premium with income support than they would have done on supplementary benefit. This record of sustained or enhanced value of benefits must be seen against a background of a prodigous rise in the number of recipients, a point that is regularly made in this House.1476
§ The combination of real increases in the amounts of benefits paid and the large increases in the number of recipients has produced a 90 per cent. rise in real expenditure since 1979 on benefits for the long-term sick or disabled. Total expenditure on these benefits now stands at over £7.3 billion—a real-terms increase of £3.5 billion since 1979.
§ With that sort of success in mind I was therefore particularly glad that I was able to repeat to the House in the uprating statement that we should be providing £5 million and the banks a further £5 million to set up a trust fund to enable Motability to increase its help to disabled people to obtain vehicles.
§ Turning now to family credit, let me illustrate the effect that this will have from next April with the specific example of a hairdresser in my home town of Taunton with gross weekly earnings of £78.80. A family with just one child aged five would at present get family credit of about £23 a week and would still be entitled to about £28 under the new rates from next April. A family with three children aged eight, 11 and 15 would at present qualify for family credit of about £45 a week; under the increased rates from next April they will get about £54 a week, which is an increase of around £9 a week. So this benefit is not limited to the very poor. Many families on quite reasonable earnings can qualify for this extra help.
§ Perhaps I may just clear up some confusion that occurred the other day. Family credit payments are paid to the mother£a point on which your Lordships are very keen. Only in exceptional cases, for instance, when the children are living with the father or where the mother is unable to manage her own affairs, is the position different. Nonetheless, we are concerned to see that take-up of family credit has increased from its present level of recipients. I should say that the present level of expenditure is already at the level we expected when we introduced it.
§ The uprating package which my right honourable friend the Secretary of State has already announced can best be described as a package for poorer families. It combines with other measures we have introduced to focus help on those most in need. It does not spread the jam thinly across the population as a whole, as some would wish. Such targeting is an essential element in the Government's policy of concentrating help on those who need it most. To this end we are making additional resources available to children and young people through income support, housing benefit and family credit at a cost of £70 million. This will mean an increase in benefit which is substantially more than inflation. For example, the income support allowance for a child under 11 has gone up by no less than 9.3 per cent.
§ While the Government understand the argument for universal rather than targeted benefits, we believe that our priorities this year are right. We are concentrating help where it is most needed.
§ As already announced, we propose to uprate all income support rates by 4.7 per cent. This represents the September on September increase in the retail prices index less housing costs. It is right that we should use that index because it is the index that most accurately reflects the cost of living increases for income support recipients. We have also made a 1477 separate provision for the 20 per cent. compensation for the introduction of the community charge. The rates that we have announced more than meet the promise that income support personal allowances would include the average amount that recipients would have to pay. Indeed, the compensation is a generous one and will cost more than £500 million.
§ I believe that this is a generous uprating which directs massive resources to where they are most needed. It is a substantial increase to spending on a programme which is already the biggest in Government. We believe that our proposals strike a fair balance between protecting the interests of benefit recipients and the interests of those who pay for them. I commend both orders to the House.
§ Moved, That the draft order laid before the House on 7th December be approved [3rd Report from the Joint Committee.]—(Lord Skelmersdale.)
§ Baroness Jeger
My Lords, when I first heard that these Motions were to be taken today, I thought that it was a very bad day to discuss them. I had a vision of noble Lords departing from the House as early as possible for Christmas merriment and I thought that it would be rather hard to have to concentrate on complicated problems. Of course this is a bad day for many terrible reasons and it is difficult to have to pursue an argument at this time. I must congratulate the noble Lord on his powers of concentration which he focused on the detail of these orders.
In this connection I should like to say that I hope that support for all victims will be immediate and generous. The situation is complicated because these are more matters for the Secretary of State for Scotland. However, I hope that there will be consultations which will ensure that people who have lost their homes, possessions and in some cases their businesses will not have financial worries added to their grief and shock; and that the practical help will not come only from the account of the local authority in this stricken district. I trust that the Minister will somehow work out ways for the maximum amount of help.
I wish to raise one general point with the Minister. Have the Government given any thought to the possibility of shortening the time between the announcement and assessment of the ratings and their implementation? I seem to recollect that these upratings were based on an RPI increase of 5.9 per cent. However, as people will not receive this uprating until April, I also understand that it is likely that the increase in inflation by April will be between 6 and 7 per cent.
I do not know why there has to be about six months between the calculation and the implementation. When I was in another place we used to be told that it was because it took so long to prepare the new books. I had a vision of hundreds of clerks with quill pens writing copperplate entries in pension books. I am sure that that is not the case now. However, as a septuagenarian I have many elderly friends in differing financial situations. They all feel a great sense of unfairness that at this expensive time of the year we have to wait until April for that extra money. I do not expect the Minister to 1478 give me an answer this morning, but I leave that thought with him.
I am sure that the Government know the Opposition's view about child benefit. I do not propose to go into that question fully today. I wish to ask the Minister whether he has had time to read the Statement made by the Minister in another place on 20th December (at col. 307 of Hansard). He said:My right honourable friend is under a duty year by year to review child benefit and to decide whether it should be uprated. It may be that next year or the year after it will be appropriate for child benefit to be increased and to be uprated in line with inflation, but this year we have decided to follow a different path".Some of us welcomed that Statement because it seemed to differ from an earlier impression that the Government were thinking about letting child benefit wither on the vine. I should be glad if the Minister would confirm that it is the Government's intention to fulfil their statutory duty to review child benefit annually and that the Government have not taken a hard view against uprating.
The benefit for many families is that this income is regular and reliable. Of course it is part of the fiscal structure, and many of us believe that it should be linked more to taxation philosophy than to social security. I am not sure whether the Minister knows whether his hairdresser friend is claiming family income supplement. All we know is that more than half the people who are entitled to it are not claiming it. I agree that the Government have set themselves a difficult task in persuading people to apply. It is all very well to talk about targeting benefits, but families are moving targets. A father is in and out of work. A child becomes ill and a mother has therefore to stay away from work. There is short-time working for a few weeks and then perhaps suddenly some overtime. I know that this complicates the issue, but at least, whatever the circumstances, the child benefit is there, and there it must stay. We look forward very much to its uprating next year.
There is a great deal of anxiety about the next point that I wish to raise: it is the effect that the social security changes have had on homelessness. I am not sure whether the Minister was involved, but I understand that 23 voluntary organisations which work at the sharp end with homeless young people came to see one of the Ministers because of their anxiety about the increasing number of young people between 16 and 18 who are homeless in London, are in all kinds of danger and whom the voluntary organisations are finding it increasingly difficult to help. These representations have not come from political parties but from people who know what it is like to face the problem.
There must be something wrong with a social security system which increases the amount of homelessness. I read in Hansard on 81h November 1988 that in 1979 the Audit Commission reported that there were 56,750 families known to be homeless. In 1988 it is 112,730. There must be sorneting wrong with the housing benefit system, the general housing policy of the government and the social security arrangements.
Crisis at Christmas is certainly a non-political organisation. I know that many noble Lords support it. It has estimated that between 10,000 and 11,000 1479 people are sleeping rough in London alone. It expects the figure to double over the Christmas holidays. That is not an indication of a caring society.
I am very glad to know that the University of Surrey is trying to investigate this difficult question. There are many reasons why people are sleeping out of doors but one of them should not be that their social security is inadequate for them to find lodgings. When the University of Surrey sent some people round to try to find the extent of the problem, they counted 2,307 people in a total of 1.75 square miles, bounded by Vauxhall Bridge, Oxford Street, Blackfriars Bridge and the Thames. There were probably many more who were not visible to the people who were counting. I am leaving out the health questions and people being turned out of hospitals too quickly without proper support.
However, I feel that the social security policy ought to take more care of this. Even when young people are on YTS the average pay during the first year is £29. How can a young person find a home in London and support himself on £29 a week? Some of these young people are homeless through no fault of their own. They are not drop-outs; they are not meths drinkers. They are the young people who have come to look for work and who go on a scheme to try to make something of their lives.
These are the matters that worry us most at this season of the year. The Minister had to read out many figures. However, he will be glad to know that I shall not repeat them or put forward esoteric arithmetic about how much they should increase. We all agree that we have to do a great deal better. The increases are not sufficient to meet what we believe will be the rate of inflation next April. We shall therefore be returning to these complicated subjects at another time.
§ 12.30 p.m.
§ Lord Banks
My Lords, I thank the noble Lord, Lord Skelmersdale, for his explanation of the purpose and content of the orders. We are approaching the first anniversary of the introduction of the new social security regime. When are we to have a report from the Government explaining exactly how the new scheme has worked out and who have been the gainers and the losers. We read alarming reports from some of the voluntary organisations and we like to be able to set against them what is revealed by the Government's monitoring.
One of the orders provides for the usual increases to allow for inflation. The Government praise themselves for meeting the cost of that rise but the higher the cost the more the Government should be condemned for having permitted the inflation in the first place.
I am glad that the mistake contained in the retail prices index has been rectified. It is encouraging to know that pensioners' total incomes, including their occupational pensions and savings, have grown on average by 23 per cent. since 1979. That was made clear in the uprating statement.
1480 That is good but there are some worrying features about the present pension scene. First, the oldest pensioners have the lowest state pension, whatever they may receive from other sources. Secondly, in terms of state pension, pensioners are receiving an increasingly lower share of the national income, because pensions are no longer linked to earnings and earnings have increased faster than prices.
The worst-off pensioners are the oldest and the poorest. They are those with little or no state earnings-related pension or no private means. It is now proposed to help those people by providing additional means-tested benefits during the lifetime of the present Government. However, we must not forget that they have two unhappy characteristics. First, they divide society into two: those who can look after themselves and the poor who are patronised. Secondly, they have a low take-up. Should we not be looking for a system of universal benefit, coupled with the operation of the tax system on the remaining taxable income? Should not our aim be to find a system which will allow a great reduction in all means-tested benefits while targeting its universal benefits on those who need them most by the means that I have outlined?
Those considerations apply to the conflict between child benefit and family credit where this year the real value of child benefit is being allowed to fall again. However, as the noble Baroness, Lady Jeger, explained, we must bear in mind the fact that child benefit replaced child income tax allowances. Therefore, when thinking of child benefit, we are concerned not only with the poor but with all those who have children. Child benefit should be increased in line with other personal allowances which give more to the better off whereas child benefit does not. If child benefit is not uprated the position of those people with children will continue to decline when compared with the rest of the community.
The take-up of family credit is so low. We understand that more than half of those entitled to receive it do not draw it. At Question Time last week the Minister agreed that those people suffer from the freezing of child benefit. In that respect I realise that I am talking to the converted because this House passed the amendment calling for an annual review of child benefit. That was a clear indication that the House wished child benefit to be uprated. However, we have yet to convert the Government to that point of view.
I turn to the Treasury supplement. During the lifetime of the Government it has been reduced from 18 per cent. of contributions to nothing. The final reduction made this year was from 5 per cent. to nil. The argument has been put forward that the rising cost of non-contributory benefits has meant that resources must be shifted. In effect, if not technically, the contributors have been asking to subsidise the recipients of non-contributory benefits. We believe that that is wrong and we wish to put that view firmly on the record.
§ Lord Kilmarnock
My Lords, we on these Benches should like to thank the noble Lord for explaining the orders with his usual lucidity. I have only three points to make. The first concerns the allocation to the 1481 National Health Service. The noble Lord told us that the percentage of Class 1 contributions which has been diverted to the National Health Service will rise from 0.95 per cent. to 1.5 per cent. from employees and from 0.8 per cent. to 0.9 per cent. from employers. The Minister said that it would amount to approximately £4 billion. Can he say whether it affects the sums allocated to the National Health Service in the Autumn Statement? The noble Lord will recall that the Secretary of State allocated important sums of money to the National Health Service at that time. Were they inclusive of the transfer from the National Insurance Fund?
Family credit has been mentioned by both the noble Baroness, Lady Jeger, and the noble Lord, Lord Banks. The Minister said that many families receiving reasonable e arnings can claim. As the noble Lord, Lord Banks, said, the take-up is relatively low. I also heard the Minister say that present expenditure is already at the level that the Government had expected. Does that mean that they had planned on low take-up?
In a recent Starred Question the noble Lord gave some raw figures on take-up but he did not give a percentage figure. Does he have a current percentage figure? Does he know what additional money will be required if take-up were 80, 90 or 100 per cent.? In those circumstances, what steps are the Government taking to improve take-up? Are they doing their best? That is an important test of the sincerity of their commitment to the benefit, particularly as they often quote it as compensation for not uprating child benefit.
Although there is little reference in the orders to the disabled, can the Minister say when the Government expect to reply to the report of the Social Security Advisory Committee entitled Benefits for Disabled People: Strategy for Change which was published on 29th November? The report included an interesting proposal of a new benefit on the lines of family credit which would supplement the incomes of disabled people who work but who cannot fully support themselves. It would therefore help them to become more independent.
§ Lord Boyd-Carpenter
My Lords, I hope that the noble Baroness, Lady Jeger, will not think it offensive if I say that her speech has fairly accurate precedents in debates of this kind over the past 30 years. When proposals for uprating social security benefits are discussed in either House the Opposition always say that they are not good enough and do not go far enough and the Government say, on the contrary, that they represent a considerable improvement on the previous position. Therefore, I hope that the noble Baroness will not expect me to respond to her points because that is the job of the Minister.
However, in response to the noble Lord, Lord Kilmarnock, I should say that the low take-up of the benefits to which he referred is not new. I draw on recollection going back to the late 1950s when retirement pensioners who were better off very often refused to draw the pension. They thought that it was somehow demeaning. Your Lordships may be amused to know how I dealt with that. I persuaded 1482 the gallant Field Marshal Lord Montgomery of Alamein to allow himself to be photographed going into his local social security office to draw his retirement pension. The effect was enormous. People felt that if one of the great heroes of the war was happy to draw the benefit to which he was entitled, there was no reason for them to hang back.
§ Baroness Jeger
My Lords, perhaps the noble Lord will give way as he particularly referred to me. If Lord Montgomery had been means tested he might not have hurried to the post office so quickly.
§ Lord Boyd-Carpenter
My Lords, the noble Baroness has missed the point. The retirement pension has never been means tested. The point I am trying to make—and I am sorry if I did not make it with sufficient clarity, and I shall try again— is that even the retirement pension, a contributory benefit, was in that era regarded as something which better off people were slightly ashamed to claim, and I explained how that was dealt with.
I shall come to the means test, but equally with a means tested benefit it is very interesting that the take-up is so low. The reasons for that may be difficult to ascertain. In some cases it must be that people do not feel the need for this, because anyone who is really in need will not be deterred by such considerations from claiming a benefit to which Parliament has said they are entitled.
I then come to the means test point. Here there is a real difference of philosophy. if one is going to concentrate improvements, as this order does to a considerable degree, on the poorest and those who need them most, the only practical way to do so is to have a means test so that it is clear that I t is the people who are in need who will receive the benefit. I know that in the Labour Party the words "means test" evoke violent memories. In view of the way in which a means test was administered many years ago, I understand that. With modern techniques of social security administration I am sure it has lost that particularly harsh aspect.
We then come back to a dilemma. Some of your Lordships wish to see child benefit increased. In that case public money will be handed out to everybody, whether or not they need it. Alternatively, social security should be confined to contributory benefits and the additional benefits used to help the poorest should be on a basis which must be means tested. I believe that your Lordships must face the fact that if you want to concentrate on these people a not unlimited amount of financial resources—enormous though the amount now is, as my noble friend said—there has to be some form of means test. People have become accustomed to benefits which are means tested and now draw those benefits.
With the particular example given, I believe that it is a matter of time and of sensible and humane administration. The objection will be withdrawn just as the objection was withdrawn to fie retirement pension in the episode which I mentioned to your Lordships. Therefore, 1 welcome this order. I believe that it is following the right policy of the Government. I dislike the word "targeting", which 1483 has a slightly bellicose implication that I do not like, but I like the concept which lies behind it; that is, of concentrating benefit paid for by the taxpayer, not contributed to, on those who need it most. I hope that the Government will continue with a policy on those lines.
§ 12.45 p.m.
§ Lord Stallard
My Lords, perhaps I may also thank the noble Lord for his concise explanation of the ora,:rs. I should also like to support my noble friend Lady Jeger when she mentioned the timing of the presentation of the orders, as well as the fact that the tragic disaster is on all our minds following last night's air crash. For many of us that makes it difficult to concentrate on the finer details of the orders.
At this point I do not intend to follow the noble Lord, Lord Boyd-Carpenter, who raised some extremely interesting philosophical points on the administration of social security. However, I hope that we shall be able to return to those discussions in more detail early in the New Year. I shall look forward to that debate because it is long overdue. I do not care if it has taken place every year for the past 100 years. There is still a need for this to be done as soon as possible so that we can get some more 20th century wisdom into how those matters should be dealt with.
The Minister gave some examples of income support and so on. He will have read the Official Report of the House of Commons on 20th December and have seen a number of other examples. I am sure that from this side we could give him further examples and match and outdo each other with examples if we stayed here for the rest of the day. I do not know what the score would be at the end but I believe that we should be hands-down winners if it came to that. However, I do not want to give further examples although I am happy to do so if necessary.
I should like to sketch in some background because it is necessary to understand what is happening. Let us look at the backcloth of this debate on the upratings and then we may understand it slightly better. At this time of the year it is customary to take stock. We look back over the year and look at the different aspects of various policies. If we look back at the working of the social security scheme we find a very sad picture indeed.
I have jotted down some matters which are immediately relevant to this discussion. We find that one in six of our fellow citizens is forced to get by at the official poverty level or below. The number of homeless people has doubled. My noble friend, the noble Lord, Lord Banks, and others mentioned the position of the homeless. That must be something at the forefront of all our minds particularly at this time. The voluntary organisations mentioned by the noble Lord, Lord Banks, and my noble friend are raising the issues so sharply just before Christmas and expressing fears that many hostels are on the verge of closure and collapse because of the new system.
If hostel residents are switched from board and lodging payments and personal allowances to 1484 housing benefit and income support, they will all receive less money. Figures clearly show—and it has been documented by all those organisations—that no one between the ages of 16 and 60 years if switched to housing benefit and income support will have enough money to pay for a hostel. Those facts cannot be disputed. It is a serious situation.
Before leaving the subject of homelessness, which is close to my heart, I ask the Minister to give the House an assurance that the Government will look at the present position and ensure that nothing will be done to worsen the crisis affecting hostels. I tabled a Written Question recently but the reply was very disappointing. It simply stated that the Government will be producing a statement on the future financial arrangements for these hostels, and so on, early in the new year. That means nothing to me. I do not know what early in the new year means. Something more specific is needed.
Hostels and the people involved need to plan ahead. They cannot plan on the basis of a statement being made early in the new year. They must plan now whether they will remain open, or close, and whether they can cope. They must make plans for the staff, and so on. Therefore, I shall be glad for some further information in that respect from the Minister.
The number of homeless people is growing. It has doubled and is getting worse. The number of longterm unemployed has trebled. Those people are in serious difficulty at this time. A report based on the World Health Organisation figures has condemned severe poverty and disadvantage among a substantial majority of pensioners as a result of these changes. It is not a joyful picture, and certainly does not give much scope for celebration for thousands of old people as we enter the Christmas season. They face a bleak Christmas.
The Citizens' Advice Bureau report—I am sure the Minister has read it—was dismissed too lightly by the spokesmen I have heard so far. It is a comprehensive report which goes into great detail. Statistics were obtained from bureaux all round the country in order to produce this report.
It states:The overriding impression of the April changeover from supplementary benefit to income support from the bureaux perspective has been the distress and lack of understanding caused by administrative confusion and poor communications. Nearly a third of bureau clients affected by the change were receiving less IS".than they received under the old supplementary benefit system even though their circumstances had not changed. Only one-half had gained anything and only then because of transitional payments which we know will disappear eventually, if not next April. Therefore, the background against which we are discussing this order is a serious and sad situation.
I shall not go into detail on child benefit because that has already been mentioned. but a great deal of misunderstanding exists in that respect. I have heard people say, "Why should it go to the better off? Why should people have that benefit when they can afford to do without it?" This goes back to the example given by the noble Lord, Lord Boyd-Carpenter, of field marshals.
1485 I have always been conscious of the fact—I was very much involved at the time—that child benefit was increased to replace income tax allowance. We mounted a great campaign, which we won, thank God, that the child allowance should be paid to women because many of them were not receiving the tax benefit. There are still the same difficulties. The child benefit was, in effect, a tax allowance transferred from the husband to the wife.
The statistics show what has happened to tax allowances over the past eight or nine years compared to child allowance. All tax allowances have gone up by 20 per cent. but the benefit has gone down. There is no way one can justify a reduction in this child benefit, or tax allowance. It cannot be argued that it should not be paid to everyone who pays taxes, irrespective of whether or not they can afford it. If people pay taxes and have filled in the means test, or income tax, form and qualify for child allowance they should receive it, whether as a child tax allowance or benefit.
If one says that the better off should not get child benefit then one must reintroduce the tax allowance to replace child benefit. If not, one is not beginning to understand the situation. I do not want to go further than that at this stage.
The order provides that pensions will be increased by 5.9 per cent. in April. But does anyone really believe that inflation will be only 5.9 per cent. next April? 1 understand that it will be around 7 per cent. Pensioners are on a loser from the start, and that is if we ignore what has happened since the last increase. Since then, electricity has been increased by 9 per cent. and is due for a further increase of 6 per cent. in April. Water rates have increased by 10 per cent., and in preparation for privatisation we are told that they will increase by another 10 per cent. by next April. Rents have increased by 12 per cent. since last April and will increase by a further 10 per cent. next April.
Against those figures, an increase or uprating of anything less than inflation will not be looked at with too much joy by claimants who are already in considerable difficulty. As I said, further hardship will follow the end of the transitional payments to claimants next year.
Before I conclude I should like to say a few words on the housing benefit situation, as this also worries me. I welcomed the advantages of the new housing benefit scheme on a unified calculation whereby those whose income is at or below income support level should generally receive maximum assistance with rates and rent. That ended the old distinction between the standard and the certificated claimants. I welcomed what I thought was a genuine step forward, which it was.
However, since then all housing benefit recipients are to pay 20 per cent. of their rates themselves. That measure was designed to save £350 million at their expense. Changes to the tapers of the housing benefit meant that people with incomes above income support lose housing benefit at a faster rate. For every £1 that their income exceeds income support level they lose 85 pence. That saves £150 million. When the capital cut-off was introduced at £6,000 it 1486 was estimated that 350,000 people lost all their benefits altogether. After nation-wide protest it was raised to £8,000 but it still cuts out an awful lot of people who deserve benefit. In all, £640 million was cut from housing benefit. As I said, although I welcomed the step forward to the new single unification method of calculation it is apparent that the resources put into that new structure were grossly inadequate and certainly do not meet the bill.
I shall not give too many figures, but the CAB points out that 88 per cent. of all people on these benefits lost money. Fifty-six per cent. of them lost up to £5; 22 per cent. lost between £5 and £10 and 23 per cent. lost over £10. What will the new rating and uprating do for those people? I suggest that it will do very little. There must be a great deal of fear and worry. From my own personal contacts I know that people are scared out of' their wits about 1989 with the threat of the poll tax hanging over them, with the changes that the Housing Bill will bring and the possibility of new landlords, rents being doubled or trebled, and so on. All sorts of fears are bedevilling ordinary people who did not think that in the latter years of their lives they would have to face such troubles and fears.
This new uprating will not allay those fears. It is sad that the debate should be timed at the beginning of the season of goodwill and show so little goodwill to thousands, even millions, of people who are struggling to cope with the existing system, let alone pile on this additional difficulty, before it is functioning in any way properly. I hope that the Minister and his colleagues will have another think about this between now and April and make the necessary adjustments which we will be happy to discuss with them as soon as possible in the new year.
§ 1 p.m.
§ Lord Skelmersdale
My Lords, 1 have listened with great interest—and to an extent with great appreciation—to the points made by noble Lords on both sides of the House. Like my noble friend Lord Boyd-Carpenter, I was not surprised by many of the points made by noble Lords opposite. On many occasions they have been made before and have been replied to before. Therefore 1 do not intend to follow all the points made this morning. My noble friend Lord Boyd-Carpenter has clearly not forgotten the record of the last Labour Government whose inflationary policies did so much damage to pensioners and others on fixed incomes.
I begin by agreeing with the noble Baroness, Lady Jeger, that this is indeed a bad day upon which to be debating these orders for many terrible reasons. Such support as we give both in Scotland and from headquarters in London will be as immediate as possible. However, I wish to make the point that social security officers should not under any circumstances interfere in grief. In my ministerial portfolio, I am responsible for policy on widows' payments and pensions. Following upon the other recent terrible train disaster at Clapham, I made inquiries. I made it absolutely clear that I wanted payments to be made as rapidly as possible. As I said, in many cases these payments have to he applied for, 1487 and one cannot put pressure upon people who are suffering in these terrible circumstances.
The noble Baroness, Lady Jeger, wondered about the statutory duty of my right honourable friend to review the rate of child benefit each year. He has the statutory duty and he has no intention to depart from it. What that review does to the level of child benefit at any particular time depends upon economic circumstances and all kinds of other matters including social policy. Therefore I am unable to say what conditions will pertain at any particular time. Several noble Lords mentioned the extent of homelessness. This is a far wider problem than social security benefits. My department has been keeping closely in touch with organisations representing homeless people. This is continuing and it helps us to keep in touch with developments. By the very nature of the group of homeless or potentially homeless people—for example, because of mobility and the lack of accommodation—it is very difficult to keep track of what is happening to them. However, the two specialist offices dealing with homeless people in London have seen no increase in the number of homeless claimants.
The noble Lord, Lord Banks, asked a detailed question on the Treasury supplement. We shall be discussing this at great length in the future social security Bill that will be coming before this House in due course. I shall certainly write to the noble Lord before then; but I feel it appropriate if I do not respond now to his question. I know that the noble Lord is very keen on the idea that income tax and employees' national insurance charges should be integrated. One of his concerns today was for pensioners and low-income older pensioners. Before any concertinering of income tax and national insurance charges is decided upon, I believe that we should take note of the fact that elderly taxpayers will pay more from a combined tax and national insurance charge since those over pensionable age do not at present pay any national insurance charges. To exempt the elderly from the combined tax and national insurance charges would introduce all kinds of further difficulties.
We are monitoring the effects of social security reforms, and we shall continue to do so. We are aware that there may still be areas where the shoe pinches. The monitoring that we are undertaking mainly consists of using statistical data such as that submitted by local offices, expenditure out-turn and the annual statistical inquiry. There are plans for two research projects. One has been commissioned for later in the year on the customer's perception of income support. The other is scheduled to take place some time next year on earnings' disregards and expenses connected with work.
I do not believe that inflation is out of control. What has happened is it has been very difficult to bring it back under control. The Government are still resolved to fight inflation. In order to control prices. action has been taken to increase interest rates and this is in line with good, tight monetary control. I can tell the noble Lord, Lord Kilmarnock, that the increase in the National Health Service allocation alters the balance of National Health Service 1488 expenditure that is paid for by the contributor. It does not affect the planned level of expenditure on the NHS, but alters the share of its costs between the contributor and the taxpayer.
Turning to the question of family credit, the cost of any increased take-up will depend upon the average level of the award. I make the point, as I did in my opening speech, that the amount of money being paid out on family credit is as high as we estimated for the full 450,000 take-up. This indicates that people claiming at the highest rate are getting it. I agree with my noble friend Lord Boyd-Carpenter that one assumes that those are the people who are most in need of extra income from the Government. Families with children, like taxpayers generally, have benefited from a reduced rate of tax and higher personal allowances under this Government. Child benefit has been in its present form for nine years and it must now be judged in terms of its effectiveness as a benefit.
I am well aware that there are several points that I have been unable to answer in these few words. I shall read Hansard very carefully and write to the noble Lords concerned. This up-rating adds some £2 billion to the staggering social security budget of nearly £50 billion each year which is one-third of all public expenditure. It reflects the success of our policies which we have achieved without placing an excessive burden on contributors and taxpayers and the higher earnings brackets. It has reduced the burden of national insurance contributions for some lower-paid workers and their employers.
On Question, Motion agreed to.