Social Security Bill

HL Deb 20 April 1990 vol 518 cc234-67

11.24 a.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)

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

In another place my right honourable friend the Secretary of State for Social Security said at Second Reading that there had been a Social Security Bill before the House every year since this Government took office. This year's Bill is not a major piece of social security legislation but its scope is substantial. As with most social security Bills it has some necessary fine tuning and some substantial measures to implement new policy.

The Bill as it now stands has broadly three main themes. It makes changes to disability benefits—part of the comprehensive strategy set out in The Way Ahead. It provides greater protection for the members of occupational pension schemes —particularly with the changes introduced at Report stage in another place by my right honourable friend. In addition, the Bill now contains a package of interim measures to help obtain maintenance for lone parent families. The Bill makes a number of minor changes to the law relating to income support and the social fund, to the law relating to various other benefits, to national insurance contributions, and makes a change to the scope of the National Insurance Fund. The Bill also gives new powers to my right honourable friend the Secretary of State for Energy to introduce a new scheme of grants towards the cost of insulation measures in low income households.

In the course of my speech I intend to dwell on the important themes in rather more detail. I am sure that the whole Bill —including the minutiae —will be of interest to the House. I am equally sure, however, that the House will think it right that I should not detain it over long in attempting to be too comprehensive. I do, however, want the House to bear in mind at the outset that the changes in this Bill represent only one chapter in our continuing development of the social security system.

We are now spending over £1 billion each week on social security. The total of £56 billion is over a third higher in real terms than expenditure in 1979. We have to make sure that those enormous sums are spent efficiently, wisely and fairly and that we respond quickly to changing demands. Together with the many other changes we are carrying forward separately —for example, in the uprating of benefits that has just taken place—the Bill is designed to help prepare both the social security system and the arrangements for occupational pensions to meet the needs of the next 10 years.

The first part of the Bill concerns benefits for the disabled. The House will know that we came forward last January with major proposals for improving the balance and structure of social security benefits for people who are disabled. Those are contained in The Way Ahead: Benefits for Disabled People. Those proposals include the introduction of a disability allowance and a disability employment credit, both of which we aim to have in place by April 1992. Much detailed work is still required in developing our proposals for those new benefits. In carrying out that work we shall, of course, take account of comments made by disabled people and those who represent them.

Other proposals are reflected in some of the measures which are in the Bill before the House today. They are intended to enhance the benefits of severely disabled people who were never able to work or who were disabled early in life. At the same time we are ensuring that there is a better overall structure of income replacement benefits, taking account of the encouraging growth of occupational provision in this field.

It gives me particular pleasure to introduce Clause 1 of the Bill. It follows directly from debates during the passage of last year's Social Security Bill concerning the problems faced by people who satisfy the criteria for attendance allowance but who, sadly, die before they become eligible for payment. The House will recall in particular the close interest taken in this matter by my noble friend the Duke of Norfolk. This clause will bring into effect the commitment made then by my noble friend Lord Skelmersdale to tackle this problem. It will ensure that people who suffer from a progressive disease and for whom death in consequence can reasonably be expected within six months will be able to qualify for attendance allowance without having to satisfy the normal six-month qualifying period. They will be awarded the higher rate allowance —that is £37.55 a week—and if they are on income support, housing benefit or community charge benefit they will also benefit from the disability premiums. Their carers will be eligible for invalid care allowance and, for those on income support, housing benefit or community charge benefit, the new carers premium.

About 58,000 people each year will benefit. By the year 1992-93 the total extra benefit for terminally ill people, their families and carers will add up to some £35 million. When added to the extra help that we have already provided for disabled people and their carers this year—for example, by removing the lower age limit on attendance allowance to allow people to claim it for severely disabled babies, by increasing the invalid care allowance earnings limit from £ 12 to £20 and by the extra £ 10 carers premium in the income-related benefits—I hope that the House will agree that this package represents a large improvement in the balance and structure of the benefits provided for disabled people.

Clause 2 introduces age-related additions to severe disablement allowance, which is a benefit available to people who have not paid the necessary national insurance contributions to qualify for invalidity benefit. There will be three rates of addition, with the highest payable to people who become incapable of work before reaching the age of 40. This will increase their benefit by £10 a week to £38.20.

Clause 3 deals primarily with the abolition of reduced earnings allowance for new claimants. Reduced earnings allowance is payable where a person loses earnings as a result of an industrial accident or prescribed industrial disease. In bringing legislation before the House, we have uppermost in our minds the needs of the disabled population as a whole and the needs of those among them who suffer the most disabling of incapacities. The abolition of the allowance is part of the consideration of the balance of provision among disabled people generally and should be seen particularly in the context of the two new benefits.

The abolition of reduced earnings allowance will remove a clear overlap between benefit provisions for the majority of the recipients of the allowance who are not working. Those people in the main also receive the normal long-term national insurance benefit—invalidity benefit—which is available for those who are unable to work as a result of sickness or disability.

I should stress, however, that present beneficiaries and new entitlements established before the Bill becomes law will be fully protected. They will continue to receive reduced earnings allowance so long as they fulfil the qualifying conditions and of course the benefit will continue to be uprated on the same basis as of now. In addition, claimants with occupational disabilities assessed at 14 per cent. or more which occur after the Bill comes into force will continue to be eligible to receive disablement benefit.

The final disability measure relates to invalidity benefit. That benefit consists of three elements. First and most significantly, there is the basic invalidity pension payable at the same rates as retirement pension. Secondly, there is the age-related invalidity allowance and, thirdly, the earnings-related additional pension. Clause 4 is concerned only with the additional pension.

The average payment of additional pension with invalidity benefit at present is about £9 a week, with a maximum payment of £41 a week. That currently costs some £450 million a year, but by 1998 those amounts will, if unchecked, have risen to an average payment of £21 a week, a maximum payment of £84 and an annual cost of some £1.6 billion. Growth on that scale would not only inhibit the welcome expansion in occupational sick pay coverage for the long-term sick, which has trebled to something approaching 60 per cent. in the last 15 years, but would further widen the gap between those who have been able to work and those who have not.

That would be contrary to the Government's objectives in The Way Ahead to which I have already referred. We want to ensure that both now and in the future we can give proper emphasis to the needs of the most vulnerable among the disabled who are least able to make financial provision for themselves. That is why we are concentrating the available resources on those people who have unfortunately been disabled from birth or from very early in their working lives.

Clause 4 therefore provides that no new—and I stress the word "new"—entitlement to additional pension with invalidity benefit will arise after the 1990-91 tax year. However, I should make it clear to the House that all rights built up in the year up to and including 1990-91 will be preserved. That will apply to both existing claims and to those made in the future.

The complete package of measures for the disabled outlined in The Way Ahead will give extra help to an estimated 850,000 people. The total net effect by 1993-94, even allowing for the savings, will be to add some £300 million to the total costs of the benefits that we pay to the disabled and their carers. That is over and above the money that we shall pay on account of inflation and over and above the money paid on account of increased demand. That amply demonstrates the substantial extent of our commitment.

Clause 8 contains a package of interim measures to help obtain maintenance for lone parent families. The number of families in Britain headed by a lone aprent has risen substantially in recent years, as has the proportion of those families on benefit. However, the proportion for whom maintenance is paid has fallen. We must ensure that there is a framework which will ensure that absent parents do more to meet their responsibilities. The Government have already announced that they are reviewing the whole system of maintenance and we have commissioned a survey to give us a proper basis on which to assess possibly radical changes to the system. The Bill makes three changes that we can introduce on a faster track. It will ensure that, where the absent parent has the means to pay, realistic account is taken of the benefit cost of the lone parent because of her responsibility for caring for the children. That is consistent with powers available to the court under family law.

The Bill will enable the Department of Social Security to transfer a maintenance order that it has itself taken out under social security legislation to the lone parent when she leaves benefit. The lone parent need not therefore go to the trouble of taking out her own order in those circumstances. Finally, the Bill will enable the department to take action to enforce payment of existing private maintenance orders taken out by lone parents on benefit. At present the lone parent has to approach the courts herself. I hope that the House will welcome all these steps. They address issues which are of particular concern to lone parents and all will benefit, both the mothers and their children.

The House will expect me to say a little about Clause 9. Clause 9 was introduced by my right honourable friend at Report stage in another place in response to concerns expressed about the way income support is paid to residents of residential care and nursing homes. The Secretary of State will take account of the charges negotiated by local authorities with homes as part of the new community care arrangements when setting the limits for people in homes after April 1991 under the preserved income support arrangements.

That power is designed to assist in setting up a system of local limits; namely, a move to some system of geographical variation specified for districts or areas of Great Britain. At present, as noble Lords will know, the limits are set nationally across the country with only a limited variation in the case of London.

The House will recall that at the same time as announcing that new power my right honourable friend announced further action ahead of 1991. There will be a second stage to the increase in the current limits in 1990-91. In addition to the changes already effective from this month, from 13th August further targeted increases to all the income support limits will be made to help maintain their value during the coming year. In all, we estimate that more than 200,000 people will benefit from these additional increases.

I turn now to occupational pensions, an area in which we have introduced some important measures in recent years. In Clauses 11, 12, 13 and 14 of this Bill we are building on that platform. That platform has encouraged individuals to make proper financial plans for their retirement and has given them greater choice in deciding what is best for them in their particular circumstances. There has of course been a tremendous response and the numbers of people taking out personal pensions is just one indicator of that.

Our measures have been designed to create a more stable and sustainable pensions structure, in which a larger part of provision over and above the basic state retirement pension will be as a result of people's own savings while in work.

There are significant measures in the Bill designed to give greater protection to members of schemes. Most of the measures stem from the recommendations of the Occupational Pensions Board, whose report was entitled Protecting Pensions. I must acknowledge the expertise of the noble Baroness, Lady Turner, who has been a member of that board for a number of years. I know that our debates on these matters at later stages of the Bill will be all the more informed for the contribution that she will make to them. As the House will be aware, the Government have accepted the vast majority of the OPB's recommendations, and our proposals have been widely welcomed. The main theme is to improve benefit security and give greater assistance to scheme members.

We are therefore introducing a number of proposals. First, revaluation is to be applied to the whole of the preserved pension rights of future early leavers, not just that fraction accumulating after 1985. This will help a large number of people in this country, and especially those who change jobs. The value of the pension rights above the guaranteed minimum pension level will be revalued until they come into payment in line with price increases, or by 5 per cent. if that is less.

Secondly, schemes will have to pay annual increases to members for pension rights for future service. For these rights members should be guaranteed increases in line with the RPI up to a maximum of 5 per cent. a year. We are also requiring schemes to use their surpluses to pay increases to members for pension rights which they have already built up. This will improve very substantially the attractiveness of schemes to their members and will turn what are at present often only discretionary increases into guaranteed entitlements.

Clauses 12 and 13 of the Bill are concerned with providing a better service for individual members of schemes. We believe that the introduction of a pensions ombudsman is a major step forward. Although assistance is already available from various sources, such as the Occupational Pensions Advisory Service—and again I acknowledge the valuable support which the noble Baroness has given to this body since its inception —there is a clear need for a straightforward method of redress for consumers' problems. Individuals will be able to approach the ombudsman and schemes will have to abide by the decisions given.

A tracing service should also assist many people to track down where past pension rights may be held. A levy will be charged on occupational and personal pension schemes to help pay for those new services.

The final item that I wish to mention at this stage is Clause 15. This gives power to my right honourable friend the Secretary of State for Energy to introduce a new scheme of grants towards the cost of household insulation measures. I hope that this will be welcomed by the House. The new scheme of grants will build on the success of the community insulation projects and the home insulation scheme.

The clause does no more than give an enabling power to my right honourable friend to make regulations governing the new scheme. Those regulations will set the detailed framework for the new arrangements. I know that my right honourable friend is consulting widely on the details of the scheme at present.

As I said at the beginning, I shall not trouble the House with all the various provisions. They cover much of the social security field and are, I hope, clear from the face of the Bill. We are all primed and ready to debate everything in detail at Committee and during the later stages.

The main purpose of the Bill is to begin the process that we have embarked upon to give a better balanced system of disability benefits. It also makes major and necessary changes to the maintenance arrangements for lone parents, and to the operation of occupational pension schemes. As an important element of this Government's measured and deliberate strategy across the field of social security I commend it to the House.

Moved, That the Bill be now read a second time. —[Lord Henley.)

11.44 a.m.

Lord Carter

My Lords, the House will be grateful to the Minister for his lucid exposition of what he correctly said is not a big Bill. But it is a very important Bill, even though we are discussing it at what I can only describe as the connoisseur's hour of 11.30 a.m. on Friday. As the Minister said, we are used to having a social security Bill every Session, and like all such previous Bills from this Government it contains a number of measures which are welcome and a number which we regard as a step backwards, but the Bill also omits a whole range of important provisions which I shall mention.

As the Minister said, the Bill has two broad divisions: benefits and occupational pensions. I propose to concentrate on the benefits provisions and, like the Minister, I shall not attempt to deal with every clause. My noble friend Lady Turner has great expertise in pension matters and will deal with the pension provisions.

With regard to benefits and Clause 15 we welcome the removal of the six months' waiting time for attendance allowance for the terminally ill, particularly as this change was the subject of an amendment moved by the noble Baroness, Lady Faithfull, in the 1988 Bill when the Government undertook to deal with the matter in this year's Bill. The Government have kept their word. They have tried hard to obtain an acceptable definition. I congratulate them on their effort. As the clause states, it is where death, can reasonably be expected within 6 months". However, as I understand it, there is still considerable concern in a number of quarters regarding the wording and operation of the clause. We shall investigate that in the later stages of the Bill. For example, there are the terminally ill whose life expectancy is greater than six months—for instance, those who suffer from AIDS. There are also the proposals to merge attendance allowance and mobility allowance (which are not dealt with in this Bill) to have a common qualifying period of three months. On the face of it that would appear to have a direct and contradictory bearing on Clause 1 of the Bill. There is a strong argument that all those whose illness, while not terminal, is permanent should qualify for attendance allowance with no waiting period. We shall wish to explore that possibility further in the later stages of the Bill.

The proposals in Clause 2 for age-related additions to the severe disablement allowance are not at all what they seem. That is because SDA claimants in receipt of income support or housing benefit will not receive the addition because it will be deducted from their means-tested benefits. I believe that this will affect well over half of those in receipt of SDA. There are no proposals in the Bill to abolish or amend the harsh qualifying conditions for SDA.

The proposals in Clause 4 to end the new rights to earnings-related additions to invalidity benefit after April next year are quite simply a cut in benefits but with no commensurate reduction in contributions. This is just another in the series of cuts in invalidity benefit which started in 1985. The effect of the change can be gauged from the fact that that resultant savings in expenditure from this measure are estimated to amount to £350 million by 1999.

As the Minister said, Clause 9 deals with the very important question of income support from those in residential or nursing homes. It is fair to say that this is a matter on which the Government got into a fair muddle in another place. Clause 9 has now been drafted but I am not at all sure that the provisions in fact deal properly with the problem.

There are two aspects to the matter. First, there are the people who are on income support now who cannot meet the full cost of their residential or nursing care. As the Minister said, the Government have come forward with an interim rise of £5 to £15 per week, which will be payable from August, depending on the type of care. That is to cover a gap which ranges from £30 to £60 a week at the highest. As a result there are now many frail and frightened old people who are fearful of eviction from their residential or nursing homes. I must ask the Minister what the Government propose should be done for those people now. Who is supposed to foot the bill now for any shortfall?

The second aspect concerns the question of what happen:; after April 1991 when community care becomes the responsibility of the local authorities. I have read extremely carefully what the Secretary of State, Mr. Newton, said in another place at col. 590 on 28th March. He stated: The power that I am taking in the new clause is designed to set up a system of local limits … In fairness to my hon. Friends, whose concern I understand and respect, I am not saying that it would necessarily be possible to make use of those powers at the absolute starting point in April 1991. It is clear that we shall need to gain experience of what local authorities are negotiating. For a long time, there may be many homes in which local authorities have not negotiated and have not placed people. It would be foolish of me to suggest that we can suddenly produce a wholesale change in the system … However, once we have adequate information on the scale required, the new clause will give me the power to respond", and so on. I have a simple question for the Minister. How long is a long time? When will the Government have the information they need to ensure that there is not a continuing shortfall between income support and the cost of nursing and residential care after April next year with all that that will mean to elderly infirm people and their families?

I must also say a word about Clause 10 which relates to the social fund. The relevant words in the Bill are worth studying. They are stated on page 15 in subsection (10ZA): The Secretary of State may issue directions… for the purpose of securing that a social fund officer … shall not in any specified period make awards of any specified description which in the aggregate exceed the amount, or a specified portion of the amount, allocated to that oficer". So much, my Lords, for flexibility; so much for discretion; so much for a fund that we were assured in this House would not be cash limited. Clause 10 does nothing to remove the fundamental flaw in the social fund. One cannot have a flexible, discretionary fund which is cash limited. The proposed changes are bound to lead to an increase in the number of applicants who are refused help because local funds are inadequate, regardless of the level of the applicant's need.

I should like to quote two examples out of many supplied by the National Association of Citizens Advice Bureaux. A CAB in Dorset reported an elderly client with a heart condition refused money for removal expenses because there was no money available. A CAB in Yorkshire reported a family with two young children rehoused by a housing association. The social fund officer was upset but said that there was no money available to help them start up home even if there were a danger of the children being taken into care.

The concept of the social fund is deeply flawed. There is nothing in the Bill to put right. The Government have simply been forced to spell out on the face of the Bill what they tried to slip in through the back door in the so-called "guidance" to social fund officers—a guidance which was found to be illegal.

Noble Lords may have seen in the press this morning the extraordinary story of the homeless family who were offered a loan from the social fund to buy a tent. Obviously there was something seriously wrong between the social fund office and the local authority. However, I thought that the story was curiously symbolic of the social fund with its mixture of maladministration and insensitivity.

I referred at the beginning of my speech to omissions in the Bill. I should like to refer first to disability benefits. What I say is not the ritual Opposition denunciation of a government measure. The Government must know that there is a deep sense of anger and frustration among people with disabilities at what they regard frankly as deception by the Government. To their credit, the Government set up the OPCS surveys in 1984 and we congratulate them for that. For five years until the last OPCS report was published in July 1989, the Government promised that there would be a comprehensive review of disability benefits to follow the OPCS surveys. At one stage there was even talk of an independent review. What happened after five years of surveying and the promise of full consultation and a comprehensive review of disability benefits? The Government allowed one day between the publication of the White Paper, The Way Ahead: Benefits for Disabled People, and the publication of the Bill. I cannot help feeling that the Government would save much parliamentary time if they just gave us the Acts of Parliament and obtained the Royal Assent before they gave us the Bills.

The package of government proposals in the so-called comprehensive review will help 850,000 people. That is 13 per cent. of the 6.5 million disabled people who were identified in the OPC surveys.

In a speech to the Industrial Society on 3rd April, the Secretary of State, Mr Newton, said: Disabled people are another group whose needs have become more apparent against the background of social change and economic growth. The numbers of disabled people and the nature of their disabilities have changed. The growing elderly population leads to an increase in the disabilities associated with old age. Medical advances have also prolonged the lives of many people with chronic conditions. The Secretary of State is absolutely right. The OPCS survey showed that the largest single group of disabled people are those over pension age. Those are 4.2 million out of 6.5 million—two thirds of the total. There is virtually nothing in the Government package to help that very large and needy group. I suspect that the paucity of the government proposals was the cause of the total absence of consultation and the simultaneous publication of the White Paper and the Bill.

We are committed on this side of the House to a comprehensive disability income and a disability cost allowance. They will take time to achieve, but achieve them we shall.

There are a number of other matters which are not in the Bill but to which we shall certainly wish to address ourselves as the Bill proceeds through the House. Those are the issues regarding child benefit, the extension of the mobility allowance to the severely mentally handicapped, the compensation for nuclear test victims and the situation of students and social security.

Once again there are no proposals to uprate child benefit. The arguments are well known to noble Lords but they are none the weaker for that. We shall certainly wish to put down amendments to restore the sums that the Government have filched from child benefit.

In the 1988 Bill this House accepted an amendment moved by myself and the noble Lord, Lord Allen of Abbeydale, to extend the mobility allowance to a carefully defined group of severely mentally handicapped. The Government rejected the amendment in another place, so robbing about 10,000 people of £26 a week. We shall try again to put that right in the Bill.

An amendment was put down by Mr. Bob Clay and defeated in another place. It attempted to deal with compensation for servicemen who were victims of nuclear testing in Australia in the 1950s. I believe that some 28,000 people are involved at a total cost of about £4 million. The numbers, for obvious reasons, sadly, are reducing all the time. America now has legislation which allows for compensation. It is high time that similar legislation was introduced in this country. We shall be putting down amendments to that effect.

Another area to which we shall pay attention is the decision to deprive students of unemployment benefits, income support and housing benefit. I understand that there may be procedural difficulties in dealing with that as a result of the passage of the student loans Bill, but if we can deal with the issue in this Bill we shall certainly attempt to do so.

However, the biggest omission in the Bill is the failure to deal with the increasing gap between the rich and the poor in our country—a gap which the social security system should be closing and not widening. We now learn that the figures regarding poverty that have been quoted for the past two years by Ministers, in particular the Prime Minister, were badly wrong, Ministers have been saying that the income of the poorest 10 per cent. of the population has risen faster than the average. In fact we now know that it rose only half as fast as the average. The reason for the discrepancy was an error in the calculation of housing costs.

Lord Ennals

And repeated time and again.

Lord Carter

It was repeated time and again, as my noble friend says. The increase for the poorest group was in fact 2.6 per cent. against an average increase of 5.4 per cent. Those figures show that the poor have become relatively poorer, as many of us have been arguing for some time. The income divide between the top 20 per cent. and the bottom 20 per cent. of men in work is now wider than it was 100 years ago. The relative pay of the lower paid is now the lowest on record. Seventeen per cent. of the population is receiving income support, which is a 50 per cent. increase since 1979. There has been an increase in poverty and homelessness, a reduction in the real value of social security benefits, a widening of the gap between the rich and the poor and the creation of the so-called underclass. It is sad to say that, while in the traditions of this House we shall support the Second Reading of the Bill, it does nothing to deal with the situation that I have described.

12 noon

Earl Russell

My Lords, I wish first to take up my noble kinsman's remarks about the size of the social security budget. I hope that by raising the matter now I shall save myself the need to run through the argument 10 or 20 times in Committee, which may bore your Lordships.

My noble kinsman gave a figure of £56 billion, which is a considerable sum of money. He spoke of "enormous sums" and it is not fanciful to imagine the voice of the Treasury repeating those words in a slightly different tone. I have a suspicion that the department is under a certain amount of pressure. If so, I hope that the Secretary of State will give the robust reply that the difficulties in his budget are a result of the failure of the policies of his right honourable friend the Chancellor of the Exchequer. A great deal of the social security budget is the result of unemployment. I did not say "registered unemployment" because one area in which the difference between unemployment and registered unemployment shows up most clearly is the cost of income support.

Another area in which costs are falling on the Department of Social Security in its usual position as long stop is the results of the part-time revolution. Far too many people in part-time work are not receiving a living wage or a proper occupational pension and have to fall back on the department to top up inadequate wages. In talking about the size of the budget we are not talking about the profligacy of the department—it is not the department's fault —but about the policies of the Chancellor of the Exchequer and the Secretary of State for Employment. I hope that the argument will not be unduly deployed in order to block actions which need to be taken.

In considering the Bill we should to a large extent regard this House as being the initiating House. At the Report stage of the Bill in another place three new government clauses were introduced, two of which will detain us the longest time. It is not for Members of this House to criticise the way in which another place chooses to manage its business. However, the Guillotine then used had the result that some of the clauses now come to us almost undebated and in at least one case almost entirely unexplained. It will take a little of the time of this House to pursue those matters. Before the provisions become law they should receive parliamentary scrutiny in at least one House, and that cannot be done without spending a little time.

This is a miscellaneous provisions Bill and, as with any such Bill, some of the provisions are better than others. Clause 1, dealing with the attendance allowance, represents a concession from last year's Social Security Bill in response to pressure from the noble Duke, the Duke of Norfolk, the noble Baroness Lady Faithful!, and my noble friend Lady Seear. It represents a government undertaking honourably discharged, which I warmly welcome. However it is the function of this House to look gift horses in the mouth and I hope that I shall not be misunderstood if I raise one or two questions. I gave my noble kinsman notice of my question about the uprating order.

The first question is whether the phrase "progressive disease" is correct when applied to AIDS or whether the progressive disease is the AIDS or the pneumonia or cancer which is consequential on it. If one matter became clear in the debates on the clause: it was that the whole House, including the Government, intended the phrase to apply to AIDS. Perhaps before the Committee stage my noble kinsman can discover whether that intention was achieved.

Another matter to which we should pay attention, which was mentioned by the noble Lord, Lord Carter, is the phrase, reasonably expected to die within six months". Having regard to the kind of spirit in which social security is sometimes administered, I should not wish to find people being told that they are not entitled to the allowance because they might live for seven months instead of six. That would create a great deal of unfavourable publicity and we should check to ensure that we have not inadvertently achieved that effect.

I agree with practically everything said by the noble Lord, Lord Carter. The OPCS reports are cases of the mountain labouring and bringing forth a mouse. I know that we are told that there is yet a further stage in prospect. I hope that it will be larger than anything we have had so far. I shall not soon forget the noble Lord, Lord Carter, saying in July last year that he expected the Minister to rise, say "OPCS" and then sit down again. We have not yet gone beyond that stage. The Government should consider that it is a grave political failing, and one usually severely punished, to raise massive expectations which one then fails to satisfy.

I give a warm welcome in principle to Clause 15 providing for energy insulation. Anyone familiar with old houses in London will know that a vast amount of money is being wasted through the cracks in those houses. That is of considerable cost to the country as a whole. However, I have one or two misgivings about the provision. Twelve million pounds is not much money, and I hope that after the initial experiments the scheme will be implemented on a more generous scale than is now envisaged. Perhaps if it were it might in the end save the country money. I have misgivings about the use of agencies to implement the scheme. I am not clear about the precise objectives of the agencies and how far they will genuinely involve a true concept of public service.

I also have misgivings about Clause 5. It reverses a court judgment and has a retrospective effect, both of which we should view with misgivings. Indeed, I wonder whether the Government's attitude to the courts is becoming a little like their attitude to this House. Another reason why we should look carefully at Clause 5 is that in another place it received no more than two-and-a-half minutes in debate. The Minister was unable to finish her speech explaining the clause; indeed, she was unable to finish her sentence. At some stage Parliament must be told what the clause is about. I shall facilitate that by tabling a Motion in Committee opposing the Question that the clause stand part. I do not necessarily have the objective of removing it—I reserve judgment about that—but I simply wish to discover what it is about.

The issue of single parents will detain the House for some time. As my noble kinsman said, it is one of interim changes which I provisionally welcome, as did my honourable friend Mr. Kirkwood. The aim of requiring fathers to take financial responsibility for their offspring is a rule of civilisation and it is not one which will be opposed from these Benches. On the other hand, we should bear in mind that it is an aim which has been pursued by Parliament in various forms for more than 400 years. Success in that area has been distinctly limited. As has been said, it is difficult to get blood out of a stone, especially if it is a rolling stone.

I was very glad to see that the Secretary of State in another place said that there was sometimes good reason for mothers not naming fathers. Even if there were no good reasons, that has sometimes proved impossible. This Government are not the first to have considered the possibility of forcing mothers to name fathers. The very earliest attempt in that direction was made in the reign of Elizabeth I by the justices of the peace in Wiltshire. The effect of that was that the mothers named not the fathers but men who had subjected them to sexual harrassment and who found it difficult to clear their names. Therefore, I hope during the further review that the Government will bear in mind that the success of measures of that type is limited.

It has never been possible to get all fathers to accept their liabilities. There has always been a problem of fathers not feeling that they can pay as much as they are assessed to pay. While one may not necessarily have any moral sympathy with that claim, an attempt to get too much sometimes results in getting nothing at all which could defeat the object of the exercise.

The other matter which I hope will be borne in mind in the review is that in the whole history of legislation on this subject many times people have thought that legislation could deter people from becoming single parents. That hope has been invariably disappointed and I hope that the Secretary of State does not entertain it.

As regards the present Bill, I welcome the use of the Secretary of State's power in obtaining maintenance orders but I rather share the regrets expressed by Mr. Frank Field in another place that he has not taken that rather further and carried on with the power of enforcing maintenance orders even if the person concerned is off benefit. There is a rather general problem which stretches well beyond maintenance; namely, that it is not very clear that among those who are extremely short of money the right to initiate a civil action is a very valuable protection especially in the light of the current difficulties with the legal aid system. If there is to be any really adequate protection and any regular recourse to the law to obtain maintenance orders, then there must be a machinery of public enforcement. Otherwise, I do not believe that that will happen.

We shall also have to spend considerable time on the Social Fund. On that, I agree with practically everything said by the noble Lord, Lord Carter. Lord Justice Woolf's judgment is worth a good deal of study. Lord Justice Woolf expressed surprise that Parliament should have authorised the Secretary of State to give directions having the force of law without even recourse to Parliament. However, he said that although he was surprised that Parliament should have intended any such thing, he had come to the conclusion nevertheless that Parliament had done so.

What is remarkable and what gave rise to that judgment is that although the Secretary of State had power to issue directions he chose to conceal his cash limiting instructions under the guise of less mandatory guidance. That is an interesting decision. I can only say that the use of guidance instead of directions appears to me to be—and I choose my words carefully —a homage which cash limit pays to entitlement.

I shall not develop further the examples from the NACAB report to which the noble Lord, Lord Carter, referred. I have a number of examples here but I am running out of time. We need to think very hard about the notion of flexibility and cash limiting. The noble Lord, Lord Carter, said that they were incompatible. I think that depends on what is meant by flexibility and I fear that what the Government mean by flexibility is that whether a need will be met depends on how many people have that need. The more people who have it, the less likely it is to be met.

Again, that is something which has been tried before. In the early centuries of the history of this system attempts were made to limit relief to the amount which could be raised from a local rate in one area; that is the same idea as a local cash limit which is now being tried. Inevitably, need did not follow predictable levels. For example, there was a famous situation in Sheffield some 350 years ago when the number of people paying for poor relief was a good deal smaller than the number receiving it. There is always a severe problem where there is a collapse of local industry, a severe local epidemic or perhaps a town where there are more broken marriages than usual. Need does not not follow planned guidelines. Therefore, if there is to be cash limiting there will be a failure to meet need.

I shall touch very briefly—and it can only be briefly —on the problem of residential homes. That is a concession as a result of a government defeat in another place. It is entirely a good thing that we should be reminded that we are not the only people who defeat the Government. I welcome the concession. I think that the Secretary of State has done his best. He has bought himself time but I do not think he has done much more than that. He must look closely at the system of income support and residential homes which seems to me to combine all the disadvantages of both the free and controlled markets.

We have something which is rather like the system of contract funding designed for universities on which the noble Lords, Lord Beloff and Lord Swann, spoke very eloquently a few years ago. We have a near monopoly provider of money trying to buy services for a number of people who do not really have the ability to shop around at a rate to be fixed by the Government. I cannot think of any case in which the Government have fixed a financial limit where they have got it right. This is no exception.

Therefore, there is still a gap between the amount of income support provided and the actual cost of residential homes. I do not see any way in which that gap can be closed. The Government will have to consider taking over the homes themselves, in which case they can control both costs and the amount of funding, or completely free the market and meet whatever that costs. I do not see any way out of that other than continuing with the same problems which we now have. I shall not pursue that matter further but there is a good deal in this Bill which we can take up in Committee.

12.17 p.m.

Lord Boyd-Carpenter

My Lords, as the Minister said, a Bill of this kind is now an annual event. In itself that is an interesting indication of the way in which our social security system has developed and is partly a by-product of the sheer complexity of the system. Many years ago when I had responsibility for it, the system was comparatively simple. It has now developed into a system of such complexity that, as one sees in your Lordships' House this afternoon, only a limited number of your Lordships feel able to be present in order to deal with further developments.

On the other hand, it is important that there should be these annual reviews of the system, not least from the point of view of what is rather crudely called targeting. That is not a phrase which I particularly like but I think it is intended as an indication of something very important. The importance is that there are innumerable good cases to be made—and we have heard some this morning—for various increases, improvements and benefits for further help to all sorts of people with misfortunes. However, there is and must be on the Government a responsibility for deciding which of those particular matters should be given priority. Given the immense expenditure to which my noble friend referred in moving the Motion and given the very large effort made in respect of social security throughout the country, it is obvious that there must be a degree of selectivity in picking out not merely good cases but the cases with a justification for priority.

Noble Lords opposite may recall that the late Mr. Ane jrin Bevan once said that the language of socialism is the language of priorities. In fact it goes a good deal further than that; the language of social security is the language of priorities. Few people with practical experience of social security administration fail to appreciate that there are many admirable things which one would like to do but which it is not possible to do. Ministers therefore have the difficult responsibility of choosing the directions in which it is possible to make improvements. That is true of Ministers in any government. It has certainly been true of Ministers in the past. I am not saying particularly Ministers in the past; they may be wrong on occasions. All humanity is subject to error. Nonetheless, Ministers have always seriously and earnestly tried to distinguish which particular claim is the strongest.

That is the reason why I have sometimes ventured to comment in your Lordships' House when a particular issue has been raised and people feel strongly about the merits of particular claims that it is not quite fair on the Government or the House simply to take one issue and point out its merits unless one is in a position to weigh it against other competing ones. That is the advantage of this annual Bill. It gives the Government the opportunity to choose their priorities, to say which items have a claim on resources in priority over other admirable claims and then for your Lordships' House to decide whether the Government are right. That is the object of the Bill and the debates, rather than, if I may say to the noble Earl, Lord Russell, general consideration of the economic policies of the Government. Our time in Committee, but also on Second Reading, will be spent more profitably if we look at the individual items and try to come to a conclusion as to which are entitled to priority in the circumstances of today.

One of the reasons for an annual Bill is that the priorities vary over the years. The needs of the situation today are not the same as they were a few years ago, It is therefore up to the Government to suggest remedies for what are at the moment the most difficult problems. The Bill is evidence of some success in that direction.

I was delighted to see Clause 1, which deals with the attendance allowance particularly in the case of the terminally ill. As your Lordships were reminded, this has been discussed in your Lordships' House before and the Government's response to the discussion is extremely welcome. I particularly welcome one aspect of Clause 1 which has not so far been mentioned. At the top of page 2 of the Bill, subparagraph (b) states: where a person purports to make a claim for an attendance allowance by virtue of that subsection on behalf of another, that other shall be regarded as making the claim, notwithstanding that it is made without his knowledge or authority". In the case of people who are terminally ill it is vital that somebody else should be entitled to make the claim without involving them. I speak with some feeling on the matter because in my family I have experienced a somewhat similar situation. A person was known to be terminally ill, for it was around six months that life was forecast, and it proved possible not to disclose to her what her condition was. The advantage of the provision which I read out is that one does not need to frighten or embarrass the person concerned in order to apply for the allowance. An independent person, without consulting the person who is ill, can apply for the allowance. That is a very humane and extremely sensible and sensitive provision in the Bill.

I do not wish to detain your Lordships for very long this afternoon because we shall be discussing the individual clauses no doubt at length. However, I should like to welcome the provisions of Clause 2 in respect of severe disablement allowances. There are adjustments to be made when disability comes on, shall we say, in the mid-30s and early 40s. Again this is a sensible attempt to deal with a very real situation.

I have two questions to ask my noble friend to consider when he replies where I have not been able to follow what is proposed. Clause 16 concerns industrial injuries and the transfer of part of the charge from the National Insurance Fund to the Consolidated Fund. Perhaps my noble friend will explain that provision. I should also be grateful if he could tell me who "an authorised complainant" is as referred to in Clause 12 and Schedule 3. How does one become an authorised complainant and what sort of people might be complainants but not authorised? I foresee certain difficulties in that direction, but it may be that there is a perfectly simple answer.

Finally, I welcome the appointment of the pensions ombudsman. It is curious how we have adopted into the English language that foreign expression, and how the sex discrimination enthusiasts have not insisted on "ombudsperson" or "ombudswoman". Apparently it is felt that in this vital area it is a man's job. I welcome the appointment in the Bill and do not suggest any proposed amendment. Given the complexity of these matters and, as has been emphasised, the importance of them to a great number of the least fortunate of our fellow citizens, it is very useful to have an independent person who can help with guidance, advice and the taking up of cases.

I am not necessarily an enthusiast for every provision in the Bill, but on the whole it is a good Bill. It is moving in several of the right directions and I hope that when it emerges from your Lordships' House it will be not only a good Bill but a splendid one.

12.29 p.m.

Lord Stallard

My Lords, I find myself in the strange position of agreeing with almost everything that the previous speaker said. I seldom agree with him, but I agree with most of what he said this afternoon. I well recall his stint when he was Minister for Pensions and his contribution in that field.

The only point on which I might take issue with him is his description of the Bill as an "annual" Bill. It is not annual. We have had 12 Bills in 10 years, so it is a little more than annual. It is the twelfth Bill in just over 10 years under this unfortunate Government.

The noble Lord said that the annual Bill gives the Government an opportunity to rearrange their priorities. That may be true, but I do not happen to agree with their priorities. Does it not also in many cases make the complexity of the situation referred to by the noble Lord, Lord Boyd-Carpenter, more complex? Each and every Bill that comes forward makes the position more and more complex and impossible for staff to keep up with training on new regulations and so on. The situation becomes totally impossible for the people who are on benefit—the claimants, or the targets, as the noble Lord said. The regulations are a jungle. By and large, people probably do not even understand the first Bill and we are now on Bill No. 12. The position becomes worse and worse, like some awful snowball that trundles on.

Having made those few remarks about the noble Lord's contribution I come to my own comments. I am a little less enthusiastic about the Bill than some, though there are measures contained in it that we all welcome and I shall come to those in a moment. I am less enthusiastic because I was frightened when I heard the Minister say that the Bill forms part of a continuing policy in the Government's social security programme. That frightens the life out of me because government policy so far has been disastrous in my view and in the view of millions of ordinary working people. Those people cannot say that, considering the facts, they are pleased with progress so far, and I share their apprehension about continuing progress if it is in the same direction.

All 12 Bills so far introduced have something in common. They were all designed to reduce public expenditure. They were designed to take pressure from the Treasury and in particular to reduce spending on the social services, which was said to be getting out of hand; that much could be privatised, much abolished and so on. The aim—the target, as the noble Lord said —has been to cut down on public expenditure and the obvious place is the biggest spending department—social services. That is also a worrying aspect of this policy.

Second Reading of this Bill provides an opportunity, and after 10 years an additional excuse, to look briefly at some of the previous Bills. I start with the 1980 Bill. Together with many noble Lords I have served in some capacity on all these Bills and we have memories of some and nightmares of others. However, the 1980 Bill broke the link between pensions and other benefits and wages or the cost of living index, whichever was the higher. The cumulative effect is that pensions are now worth only four-fifths of what they would have been worth had the link remained. The single pension is now £12.65 less, and the married pension £20 less than they would have been had they been linked with wages.

That does not take into account the fact that pensioners almost always —in fact I go so far as to say always—lose out in relation to the rate of inflation. When the pension was introduced in 1948-49—I believe the Bill was introduced in 1948 and implemented in 1949—a year had already passed and the figures were based on 1948, so pensions were already one year behind the rate of inflation or cost of living index, whatever was the term used at that time. Pensions have never caught up since then. Last year, when we knew inflation was running at over 7 per cent. the pension was increased by 5.9 per cent. This year, with a magnanimous gesture and because the increase was so low the previous year, the increase is 7.6 per cent. but inflation is running at over 8 per cent. and rising. We also know that no compensation was made for the increase in inflation between last April/May and the time of the announcement of this year's increase. Therefore, pensions have never caught up with inflation.

I have not yet been able to calculate the figures on how much that has cost pensioners but it must be a fair amount. We hear of huge sums—billions of pounds— trotted out by Secretaries of State and other Ministries that the Government are spending on this, that and the other; and they always say that the figures are in real terms. However, the Government never say how much has been saved arising from all these measures. In other words, they never say where the money is coming from. It is usually being taken from one pocket to put in another pocket. There is very little new money in these transactions; it is always robbing Peter to pay Paul and we happen to be the Peters that are always robbed. Therefore, I have some apprehension when looking back at these Bills.

The No. 2 Bill in 1980, for example, cut benefits to strikers and their families as the general attack on the trade union movement was mounted. Earnings related benefits were abolished in that Bill. Again, we are talking about hundreds of thousands of pounds being saved. Unemployment, sickness, maternity and industrial injuries benefits were all cut by 5 per cent. We do not need to be mathematicians to obtain a mental picture of the huge sums of money involved in those cuts and the savings made by the abolition or cutting of various benefits. We are therefore able to obtain a rough picture of the savings made by these Bills. In 1982-83 the saving was £1.5 billion and by 1985 the total cuts amounted to £8 billion. By 1987 the saving from breaking the link between pensions and inflation was £12 billion and rising. It is now £18 billion.

That £18 billion is a lot of money, but it has not been put back into the social security services. On the contrary, between 1980 and 1983 sickness benefits were privatised, again, to save money. The industrial injuries benefit was abolished. I referred to the contribution made by the noble Lord, Lord Boyd-Carpenter, when he was at the Ministry of Pensions. I remember one or two discussions because I was a shop steward at that time. We were very much involved in the old Workmen's Compensation Act and the switch to the ensuing Acts. In the same period dousing benefit was substituted for rent and rate rebates, and we all know of the disastrous effects of that change, which are continuing. There are local authorities and departments which have still not caught up with that legislation, yet we have piled more and more legislation on top of it. They will never catch up. The only hope is that the legislation will be abolished before they have to catch up with it. That seems to be part of the ongoing policy —when legislation becomes too complicated abolish it, call it something else and start again.

This year's Bill—annual, biannual or whatever one calls it —should have dealt with some of those problems. In my view they are priorities. Some of the difficulties arising from previous legislation could have been dealt with. There has been no attempt in this Bill to alleviate the hardships caused to millions of people by those policies.

Occupational pensions have been mentioned. My noble friend Lady Turner is an accredited expert on the subject. I fully agree with the Minister on that. I may he hiding behind the noble Baroness but that certainly saves us from having to do too much homework in regard to occupational pensions. It is true that membership of occupational pension schemes is increasing. No doubt it is also true that the pro portion of pensioners' incomes derived from occupational pensions has also increased. It has increased from 15 per cent. in 1974 to 20 per cent. in 1986. There is no doubt about that. However, we must remember that only a small proportion of people receive a substantial occupational pension. The figures are average. Some people will always remain dependent on the state pension. Many people still do not receive an occupational pension and never will.

The figures are interesting. Apparently the people of this country are divided into quintiles, quartiles and percentages, but I think for this purpose quartiles are used. Single men of 65 and over in the first quartile have an average occupational pension of £3.50. The top quarter for men of 65 and over have an average occupational pension of £87.20. If those figures are put together one gets a fairly big average and it is. possible to say that pensioner incomes have increased. That is true if figures are added together in that way and the average is worked out. However, I am still concerned about the fellow who is receiving only £3 50 on top of his meagre and much knocked about retirement pension. He is struggling. I say nothing about the 20 per cent. poll tax that he will now have to pay. I certainly look forward to hearing my noble friend's contribution on occupational pensions.

There are no measures included in the Bill, as my noble friend Lord Carter said, to improve the financial position of the 4.2 million pensioners in the United Kingdom. As far as I can see, there has been very little consultation about some of the other measures in the Bill, welcome though some of them are. I welcome what the noble Lord, Lord Boyd-Carpenter, has said about the attendance allowance. The new measures are long overdue but nonetheless welcome.

The increase in the severe disablement allowance is also welcome. However, it will not be of much use if the allowance is not excluded from the calculations for means tested benefits. Of the 263,000 people receiving the severe disablement allowance, 140,000 also receive income support. Many thousands of others receive housing benefit. Those two benefits will be cut in line with the amount that is received from the increase in the severe disablement allowance. So, as always, the recipient will get it with one hand and have it taken away with the other. Therefore, that measure will not achieve what the Minister said it would. I should like to see the severe disablement allowance raised to the level of the retirement pension.

I wanted also to mention the reduced earnings allowance, but I know that my noble friend Lady Turner is an expert on the subject. I can only claim a slight knowledge of it from my personal experience and of the effect that it will have. I do not have the time to go into the matter in detail.

I also welcome the appointment of the ombudsman. There have been some reservations expressed, mainly by the Consumers' Association. I can do no better than quote its reservations while welcoming the decision to appoint the ombudsman. The association states: We welcome the proposal that the Ombudsman's decision should be binding on the trustees, managers and persons claiming under them, except on appeal on point of law … Experience has shown that where an Ombudsman's decision is not binding, some companies are prepared to ignore the decision. A decision against the Cheshunt Building Society by the Building Societies Ombudsman was ignored, and since the inception of the scheme, 89 local authorities have ignored the decision of the Commissioner for local Administration. However, we are extremely concerned that the consumer should have to give up his right to take a case to court, except on a point of law. Unlike trustees and managers, many consumers will be acting without legal representation. They may not be in a position to put their case to the Ombudsman effectively; even if he is correct on a point of law, the Ombudsman may misdirect himself on the face of the record, or fail to take vital evidence into account". For those reasons the Consumers' Association hopes that the decision of the pensions ombudsman will similarly not be binding on the complainant. That is a fair point to make.

I could have spoken at much greater length on the question of pensions but there is one other subject that I wish to deal with before I sit down. Young people represent another area of interest for me. I do not believe they are mentioned in the Bill to any great extent. No one can say that young people are not a priority. We have often discussed homelessness. It is mentioned every day; therefore it must be a priority subject. But this Social Security Bill which has been brought forward does not deal with the points that have been raised; it deals with other points that were raised in two other Bills introduced some time ago, particularly as regards hostels.

There are immediate and urgent problems which have to be looked into. We talk about the complexity of Bills. In Parliamentary Answers given in another place I have counted 66 changes which have been made since 1980 in the social security benefits specifically affecting the entitlement of young people and their parents. That is a great number of changes for young people and their parents to consider and understand. Young people have been very seriously affected by these measures.

Recently the Salvation Army made a rough survey and it counted 75,000 people sleeping rough. The London Research Centre adds to that the number of people who are living in bed-and-breakfast accommodation and under awful conditions. It makes the total 300,000.

I am involved with another issue. It is estimated that there are 3,000 convictions each year under the Vagrancy Act 1824. More people are now being convicted because they are homeless and that is now a crime. Certainly in London more people are being convicted for that than for burglary. That is a matter which this Bill could have dealt with.

The Government could have considered the Vagrancy Act and asked themselves how it is acting against youngsters in the present situation. They should have asked themselves whether they should be doing something about the situation instead of allowing young people to be arrested and convicted under the 1824 Act. The Act is not a deterrent and it is not proving anything. It makes a bad situation that much worse. I hope that the Minister will be able to say something on that subject.

At the same time, while these millions of pounds are being saved, the 1988 Budget and others handed out thousands of pounds. I believe that in the 1988 Budget £2,000 million was given to 750,000 of the richest taxpayers. Most of that money came from social security beneficiaries and claimants who did not get their payments. There is no argument about that. Noble Lords can shake their heads, but the facts and the statistics are there. Just up the road from here the people themselves are there to prove it. They are the people who are being deprived. It is almost a unique situation, certainly in Europe, where a government are redistributing from the poor to the rich. I read somewhere that to be old, disabled, unemployed or poor is to be regarded in Britain as a burdensome dependant on the enterprising taxpayers. That about sums up the situation.

The Bill does very little; it certainly does not do anything like what it could and should have done in order to alleviate some of the problems and hardships I have mentioned. We shall try to amend and make something decent out of this year's social security chapter.

12.47 p.m.

The Earl of Buckinghamshire

My Lords, I start by declaring an interest, in that I run an investment management company. Depending on which expert you wish to listen to, the proposals on the pension scheme amendments will either benefit those involved or not. I welcome the bulk of the clauses which are proposed to deal with pension schemes. However, I have some reservations. I wish to speak solely to Clause 11.

I congratulate the Government because I believe they have adopted almost all the proposals made by the Occupational Pensions Board. Reference has already been made to the role of the noble Baroness, Lady Turner, in that organisation. I also congratulate the Government on springing a small surprise on us, because not only did they take up the recommendations but they have gone further. It is on the going further aspects that I wish to dwell.

The real question I have is whether the Government have really thought through all the full implications. There are many good parts to the Bill and I can understand why they have introduced these measures. Nonetheless, there are implications that I wish to explore and see what replies I receive. As regards indexation, I am not terribly pleased to find yet another set of initials, LPI, introduced into our business. I am led to believe that the costs of final salary schemes are likely to increase. Experts will differ between 2 per cent. and 5 per cent.

A very good matrix has been produced by Bacon and Woodrow, a firm of consulting actuaries, in one of its analysis documents. I am happy to pass it on to my noble friend the Minister. The matrix sets out what are likely to be the increasing costs resulting from these proposals. I find it slightly worrying that long-established schemes may find themselves facing additional costs. If there is an increase in costs of employers—whether or not they split that increase between themselves and employees is a matter for employers to decide, but generally they do not —have the Government worked out what the impact of the additional costs will be? We are already in an inflationary era and we have to compete in world markets which perhaps do not have the level of occupational schemes that we have in this country.

Secondly, if we are to see an increase in costs there could be a move by employers to cut back on future service benefits. A typical example would be to move from a one-sixtieth scheme to a one-eightieth scheme. I am told that roughly that is a balancing phenomenon or balancing cost in the actual equation. I have worked out on my tables that it would take roughly six years even to get above a benefit which is based on sixtieths if it were moved down to eightieths.

I am also concerned that we seem consistently to be adding to the legislative requirements on pension schemes. If we do not find legislation coming out of the DSS we find it coming out of the Treasury. Employers may be disinclined to start new schemes, particularly final salary schemes. I am concerned that many employees in this country are not covered by pension schemes. I find myself in a slight quandary here because no matter how well intentioned the proposals are they may have a completely opposite effect on encouraging employers to start new pension schemes. Even if they do, they are most likely to go into money purchase arrangements.

The Occupational Pensions Board tried to look at the relationship between a money purchase scheme or a personal pension arrangement and a final salary scheme. It proposed that the impending pensioner should have a choice at retirement between either a reduced benefit with a higher rate of inflation protection or a higher level benefit. That is my understanding of what the Occupational Pensions Board recommended. From the way I read the Government's proposals they have moved considerably beyond that level. There is a cost factor involved. I should like that to be considered by my noble friend.

The concept of surplus is commendable but I am not entirely sure at whom it is aimed. Is it aimed at the pen dons asset stripper who takes over a company with a pension fund in surplus? Is it geared towards preventing employers taking contribution holidays? Is it geared towards giving the whole membership of a pension scheme a larger rate of increase on their pensiors? While the intention here is good I am not entirely sure that the Government fully understand what they are doing in this area. Furthermore, I feel somewhat concerned that we shall introduce yet another definition of "surplus". It is already defined under the accountancy rules. We have a surplus determined by the independent actuary in consultation with employers, and whoever his principal may be. Yet, as far as I can understand it, there now seems to be a possibility of a further definition.

There is a thought —my noble friend can confirm this —that the DSS does not like the current methods of defining surplus and will want to go for a more favourable or a less conservative basis. In this area I should like to remind the House that surpluses are a feature of the 1980s. In the 1970s deficits were more in the mind of employing companies. As we start off in 1990 with horrendous markets I am not entirely sure how we view the 1990s at the moment. There is a considerable debate about what types of markets, we are in.

The surplus will increase the pension cost liabilities of companies which have to be reflected through the balance sheet, particularly under SSAP 24. Company profitability will be adversely affected. The funding assumptions which the independent actuary is likely to recommend on a long-term basis for these funds will be weakened. Companies will seek the lowest costs on a long-term basis, which may well be in conflict with the definitions that will be used for the calculation of surpluses. More importantly, although there are within the Bill strengthening proposals on the wind-up provisions, if one goes for a weaker long-term basis calculated by actuaries one will weaken the security of members' rights. They are linked to the assets within the scheme

The spreading of the surplus over a large number of employees could lead to minuscule benefits being distributed over the membership of the scheme. Membership of schemes can range from 100 to several thousands, whatever are the numbers in the employing company. There are other ways of protecting the rights of pensioners than by using what is the fairly sledgehammer approach of dealing with surpluses, which, as I have said before, have other intentions. One can divide up quite properly within the fund the assets that are linked to pensioners or deferred pensioners. One can then say that those people will have x amount of assets allocated to them and they will participate in the rate of return that those assets earn on their benefits. There are other ways to do it.

We know that in this country we are looking at equal retirement ages for men and women. I am curious to know whether the DSS is considering what impact the proposals of the Bill will have on equality of pension ages. That is also likely to be an additional cost factor, depending which way the department goes.

I find pensions a stimulating and interesting topic for discussion. It is not always a shared interest. But it is a highly technical area and gives rise to much misunderstanding. It is possibly why we need an ombudsman or someone to come along to help individual menbers sort out their pension problems. I have already said that I believe that the Government's proposals are well intentioned but I fear that they have not fully explored—and, if I am not being impertintent, I do not think they fully understand—the implications of the actions they propose. What may well happen is the total opposite of what they intend. One may find a lower coverage of pensioners or a lower coverage of new employers starting pension schemes. We may see a lower level of benefits coming through in the future. We may see a lower level of security of funding. All these factors may well fall within what the Government want. I doubt it, but they may well do if one takes a Treasury view of life. The problems I have mentioned could result from these well-intentioned proposals.

Another area we need to have some regard to is to keep our units costs of labour under control. I believe that in some way there is a degree of interference in the benefits that are agreed between an employer and an employee within these proposals. That is something which is slightly worrying to me personally.

1 p.m.

Baroness Turner of Camden

My Lords, the Social Security Bill which is before the House this afternoon is, as other noble Lords have said, a mixture of provisions dealing with social security benefits and occupational pensions. I should like to thank the Minister for the way in which he has presented the Bill, which is quite complicated. I should also like to thank him for his very kind references to me. Incidentally, I am a member of the Occupational Pensions Board, but I am one of the lay members and would not claim to have any great area of professional expertise, unlike the noble Earl who has just spoken.

My noble friend Lord Carter has dealt with the provisions relating to the disabled, and I propose in the time available to me to refer specially to occupational pensions, with two exceptions to which I shall make reference now. In the last Social Security Bill there was a highly controversial provision to the effect that benefits paid out under social security provisions could be clawed back from common law compensation payments. The net result of this could be that an individual receiving an industrial injury benefit could well end up with no compensation at all for pain and suffering, despite the fact that his injury might have been caused by employer negligence. A number of noble Lords at the time opposed that concept, but unfortunately we were not successful.

In this Bill, buried in Schedule 1, we have a carry-over of this idea to motor accidents and, in particular, to accidents where compensation is paid by the Motor Insurer's Bureau under the MIB scheme: for example, payments made to people who are injured in an accident caused by a hit-and-run driver. As I said on the last occasion, I entirely disagree with the concept of clawing back social security benefits in such a case. That is very unfair. I understand that in this instance the Motor Insurer's Bureau pleaded that its scheme could be treated on the same basis as the Criminial Injuries Board scheme. Unfortunately, that plea has not been successful and I think that is something we shall have to explore further in Committee.

The second issue—which is not a pensions issue—to which I wish to draw attention also relates to the Industrial Injuries Scheme. It seems fairly clear to me that the Government do not particularly like this scheme and there have been repeated provisions in previous legislation which are designed to undermine it. Yet it is the only "no-fault" system of compensation that we have in this country. I say again, as I have said before, that there are working environments which are inherently dangerous, no matter what steps are taken to improve them. That is why we need an industrial injuries scheme. Under this Bill the reduced earnings allowance, which is currently payable when an industrial injury has resulted in an inability to maintain pre-accident earnings, is to disappear altogether. The savings are very small: according to the Bill they will be something like £10 million. I see it as yet another attack by the Government on a scheme they do not like. Of course it will be said that other benefits, such as invalidity benefit, for example, are available but that is hardly the point. The special nature of the Industrial Injuries Scheme is that it is meant to provide some form of additional compensation for earnings loss and personal injury to persons who are injured in a working environment. We shall of course need to return to this in Committee.

In turning to the provisions relating to occupational pensions, I must say that many of the proposals are a considerable improvement and are to be welcomed. As has already been said, many of them are based on recommendations made by the Occupational Pensions Board. I do not really think that some of these proposals go far enough and I will say precisely why that is so in a moment. Nevertheless, I am pleased that the Secretary of State has taken on board many of the OPB's recommendations, particularly since the Government's record in the whole area of pension provision is scarcely one that can be commended. My noble friend Lord Stallard has already pointed out that flat-rate state pensions still account for a very large number of pensioners' incomes: I believe that about 60 per cent. of present pensioners are dependent mainly on the basic state pension. However, these have not been increased in line with the wages index, as was originally intended, but only with the retail prices index, thus resulting in substantially lower increases.

There has been the encouragement given by the Government to money-purchase schemes and to personal private pensions, utilising money from the National Insurance Fund to bribe people into taking out private personal pensions and risking a deficit to that fund. In the background, of course, has been the attitude to SERPS-the state earnings-related scheme—which for the first time held out the prospect to low earners and to people with a chequered work pattern, including of course many women, of a reasonable earnings-related pension in retirement.

I do not believe the argument that we could not afford the full SERFS, because we have to meet the costs of supporting the elderly in one way or another: how much better to do it with the dignity of a pension for which contributions have been made rather than through means-tested social security benefits. I have to say unequivocally this morning that our party is committed to restoring SERFS to its full value.

Turning to the proposals on occupational pension schemes, some of these were added at a very late stage in the Bill's progress through the other place. Even though I think the proposal that occupational schemes must in future uprate pensions in payment by up to 5 per cent. per annum or the level of the RPI, whichever is the lower, is very much to be welcomed, it is the view on this side of the House that the proposal does not go far enough and we have already stated that we believe there should be full indexation. I think that perhaps in 20 or more year' time it will seem fantastic to those who are then politically active that we could ever have considered making pension provision that was not fully inflation-proofed. Even so, pensioners are likely not to be so well off as those in work, since for the greater part of the 20th century the earnings index has outstripped the RPI; and that tendency looks as though it will continue.

Furthermore, I welcome what the Secretary of State is proposing about pension fund surpluses. Nothing has given rise to so much controversy among trade unionists and those concerned with pensions negotiations as the questions: "Who owns the surplus?" and "Has the employer a right to take a contribution holiday because after all it's our money?" I have heard such remarks time and time again. The Secretary of State has now virtually settled the argument at least to some degree, by saying in this Bill that the employer cannot simply dip into the surplus or give himself a contribution holiday without increasing pensions in payment up to the 5 per cent. limit. Again, the issue of that limit raises itself, but it is in any event a considerable improvement and very much to be welcomed. However, I understand that all this will only come about as from the "appointed day". There is also a case for ensuring that past social security benefits accruing before the appointed day should be increased, so far as surpluses permit.

I am aware, of course, that it will be said that employers may be frightened off providing pension schemes because of the cost of provisions enabling pensions to be increased on a regular basis in line with inflation or with the provisions in the Bill. However, good schemes already do this and, as has already been indicated, many schemes are now in substantial surplus and could afford to make these payments. Also it is in the interests of employers, particularly those who want to retain skilled labour, to offer a good and reasonable pension scheme. People now live a great deal longer—perhaps 20 years longer on average than they did at the beginning of this century—and provision has to be made for them. In very many cases the money is already available. I support the proposition that, on wind-up, statutory revaluation should apply and any deficiency in a scheme's assets would become a deficit on the employer—although here too I should like to see the revaluation done on an RPI basis.

The OPB report was much concerned with the threat to pensions through mergers and takeovers. There had long been a fear that over-large pension fund surpluses acted as a bait to tempt predators. A number of the board's recommendations clearly had in mind preventing this so far as possible. Hence the recommendation that in company takeovers, bulk transfers should be permitted only if rights and expectations of members were guaranteed as the result of an actuarial certificate.

This is important because in a number of cases considered by the board it appeared that following a merger there had been instances in which discretionary increases which had formerly been paid to pensioners and which they had come to expect had been discontinued. The expectations referred to would be protected by the Bill and it is right and proper that that should be so. That will also be a further deterrent to predators.

The Secretary of State has recognised, as has the board, that there is a need for a speedier and cheaper way of resolving pensions problems than by reference to the courts, although that option should still remain. The board proposed the establishment of a pensions tribunal with a legally qualified chair, supported by two sides-persons with specialist knowledge. The Government instead propose an ombudsman. This is of course an improvement on the present situation and is to be welcomed in that context. However, I should have preferred a tribunal. Many of the issues about pensions are directly linked to employment. A tripartite body would be the best way of resolving such issues as industrial tribunals are now for resolving general employment issues.

Then there is a whole matter of conciliation and the need for some kind of sifting mechanism. I refer particularly to OPAS—the Occupational Pensions Advisory Service—an organisation with which, as the noble Lord has said, I am connected. This body has done excellent work on an entirely voluntary basis. It is run virtually on a shoe-string. OPAS is not mentioned on the face of the Bill but I believe that it has been told that it may expect some financial support. I should be grateful to hear more from the Minister on this subject. I also welcome the introduction of a registry and a tracing service.

Finally, we come to two inter-related issues, one of which has already been referred to by the noble Earl, Lord Buckinghamshire. There is the unresolved issue of unequal state retirement ages and the accompanying problem of bridging pensions introduced by some employers to try to bridge the gap between the ages of 60 and 65 for men where schemes have been introduced equalising the pension age at 60. This was debated when the last Social Security Bill was before us and I think that the Government must grasp this nettle. So many anomalies arise from differential retirement ages. There have been two reports by Select Committees of this House—one quite recently.

The problem about bridging pensions remains. It is a problem which we were told arises because of EC directives. In my view it is absolutely absurd that this should be regarded as non-acceptable on the basis of equality provisions. Will the Minister say something about these issues? When may we expect legislation equalising state pension ages as between men and women? We shall of course return to a number of the points raised by this side of the House when the Bill is in Committee and we have the opportunity of debating the more detailed provisions, some of which are extremely complex.

1.13 p.m.

Lord Henley

My Lords, I think that we have had a useful and wide-ranging debate on the Social Security Bill. In time I wish to cover various points. Because of time limits, I intend to keep largely to Clause 1, the Social Fund, income support limits for residential nursing homes, some of the occupational pension issues and wider pension issues. For example, the points raised by my noble kinsman Lord Russell on Clause 5 are probably best left to the Committee stage. I look forward to explaining to the noble Earl the details of Clause 5.

Perhaps I may briefly answer two short questions from my noble friend Lord Boyd-Carpenter. He asked who would be the authorised complainant to the pensions ombudsman. I can assure him that this is defined on page 37 of the Bill in Schedule 3, new section 59C(6). Briefly, an authorised complainant would be a member of the pension scheme or the widow or widower of a member or a person claiming to be a member of the scheme.

My noble friend also asked what Clause 16 is about. It is purely to strengthen the link between the national insurance contribution and expenditure on contributory social security benefits. In other words, we are removing from the National Insurance Fund those benefits which are not contributory benefits.

Perhaps I may touch on one point made by the noble Lord, Lord Carter. He seems to be of the view that the social security system is designed to reduce the gap between the rich and the poor. Both he and I have already discussed this in the debate on the growing gap between the rich and the poor some weeks ago. I wish to reiterate what I said then: I simply do not agree with him. The social security system in this country is designed to relieve poverty and ease hardship. It is not designed for social engineering.

Perhaps I may turn to Clause 1 and the definitions of what a progressive disease is and which people will qualify as terminally ill. That point was raised both by the noble Lord, Lord Carter, and my noble kinsman. We feel that the removal of the qualifying period is intended to help people with any progressive disease—I shall come back to that later—such as cancer, motorneurone disease and the advanced stages of HIV infection, where the timespan between diagnosis and death is very short.

My noble kinsman also asked about people who qualify but who live longer than six months. We recognise that some terminally ill people live for longer than expected. We have no intention of subjecting them to review or reassessment after six months. As the Bill makes clear, anyone who qualifies as a terminally ill person will be entitled to the higher rate of allowance for life, whether this is a matter of weeks, six months or more. That said, we must recognise that diagnosis is not an exact science. The nature of a person's illness or life expectancy can change. Where there has been such a change, we think it right that the claimant's entitlement should be reviewed and reassessed in the light of new evidence.

Turning to the Social Fund, perhaps I may first refer to the newspaper article which the noble Lord, Lord Carter, mentioned. It concerned an applicant who was homeless and who was offered money from the fund to buy a tent. We are very concerned and are making inquiries about the case. The reason why I feel it is important, as has been mentioned, is that the case appeared in the press this morning and this is the first opportunity for a Minister from my department to make some mention of it. We are in touch with the local authority and the local social services department to see what can be done to help the family. I understand that a meeting of the relevant local agencies—that is, local authority housing, the local development corporation, since the applicant comes from Milton Keynes, and the social services —has been arranged for this afternoon to see what can be done urgently in order to resolve the family's housing problems.

Responsibility for housing homeless families rests with the local authority. Housing benefit paid by local authorities is available to meet housing costs. It is not the function of the Social Fund to meet housing costs, although rent in advance may be available to help people secure accommodation. The local office made the payment which the applicant had requested on the understanding that there would be no help from other local agencies.

Further, the noble Lord, Lord Carter, mentioned capping the Social Fund and the removal of flexibility. He claimed that there was no flexibility or discretion in a cash-limited scheme. As we have always said, most organisations have to operate within a budget. We feel that there is no reason why the Social Fund should be any different. A firm budgetary framework ensures that the available resources go to those who are in the greatest need. Lord Justice Woolf said that, although Parliament intended individual applications to be handled with flexibility, it clearly intended that the scheme should be subject to strict monetary limits, and the Secretary of State needs to be able to give directions to achieve financial control. Operating within a budget is not inconsistent with flexibility. Within the budget. Social Fund officers have the discretion with which to meet a wider variety of needs than was possible under the previous system, and funds can be focused when and where they are most needed.

I shall now turn to the question of residential care and nursing homes which appear in Clause 9. I shall start with the remarks of my noble kinsman Lord Russell, who said that something needs to be done in this area. I can assure him that the National Health Service and Community Care Bill is currently in this House. We had the first day of the Committee stage yesterday and there will be further days in Committee. That Bill is designed to achieve just those objectives that concern the noble Earl. I am sure that he will attend on occasions when the Bill is in Committee and make his contributions.

The noble Lord, Lord Carter, wanted to know what Her Majesty's Government are doing now about people who are unable to meet fees and are being evicted from homes. He also wanted to know at what stage after 1991 the Government will begin to use the powers in the new clause. I wish to make two points. In response to the question about the levels of support that we provide now, I must say that we have to reach a judgment about the level of support that we can provide at public expense. The upratings that have just taken effect and those that will come into effect in August amount to an extra £145 million. We meet the full cost of places for a majority of those on benefit. On the question of the implementation of the new clause, I must tell the noble Lord that that depends crucially on the quantity and quality of information that we can obtain from local authorities as they undertake their new responsibilities. Officials will be talking to local authority associations about that matter.

I shall now turn to some of the pension issues. I wish to start with the whole question of equalisation of pensionable age. The noble Baroness raised that matter, as did my noble friend Lord Buckinghamshire. The noble Baroness will recall that over a year ago we had a debate on this subject and on the report produced by a Select Committee of this House chaired by the noble Lord, Lord Allen. I should start with an apology to the House in that in responding to that debate I said at the time that we expected to produce our response by the end of the year. I am afraid that we failed in that but we have produced our response by Easter of this year. The noble Baroness will know that we published it just before Easter as Cmnd. 1038.

I should make it clear that we fully support the principle of equal treatment and we recognise the force of the argument for the equalisation of state retirement pension age. However, as I am sure noble Lords will realise, there is a great deal to consider before deciding what the common pension age for men and women should be and when that should come into operation. We need to look at how the numbers of men and women will change over the years to come, the costs of changing the pension age and the effect on the labour market. We also need to take account of the expectations that men and women have now about the age at which they will receive state pension and the retirement plans they have made. Noble Lords will be aware that the requirement to provide for equal treatment in social security is set out in the directives of the European Community. However, those directives currently include specific derogations which permit pension age and some other matters to be excepted from the general rule of equal treatment for men and women.

There was the third draft directive and, as the noble Baroness will know, a report was also produced by a Select Committee of this House. As I have just stated, the Government responded to that report just before Easter. In that response we restated our view that the draft directive covers issues of fundamental importance; that we have strong reservations about a number of aspects of the draft directive; that we do not wish to be rushed into a judgment and that we do not desire to conclude negotiations until we are completely satisfied with the legal soundness of the provisions. As I have said on more than one occasior, we simply cannot make premature decisions on such an important, complex and potentially far-reaching issue as the equalisation of pensionable age. There are major considerations involved and they indicate that any change will need to be implemented over a period of time.

The noble Lord, Lord Stallard, as he has done on many occasions before, attacked the Government for the break in the link between earnings and prices in regard to pensions. In 1980 the link with earnings was broken because the Government felt at the time that to retain it would be to throw an ever heavier burden on the working population. The Government felt that that was not sustainable over a prolonged period. Since that date the Government have met their pledge to maintain the level of pensions in relation to increased prices. As a result pensioners' average total net incomes have increased by over 31 per cent. in real terms during our first eight years in office. That compares more than favourably with the real term increase of only 3 per cent. between 1974 and 1979.

My noble friend Lord Buckinghamshire asked about the cost of pension increases to various occupational pension schemes. Many schemes already give increases. Some 80 per cent. of private sector scheme pensioners get increases. Where schemes do not give increases now it will be open to the employers and employees to review the level of pension provided for future service. We are allowing time for that to take place. My noble friend also asked about surpluses in pension schemes. I readily acknowhidge that this is a highly technical and complex area. However, our officials in the Department of Social Security are already engaged in discussions with the actuarial profession and we have no doubt that a sensible and practical definition of surpluses will be developed. But I do not by any means underestimate the difficulties in doing so.

My noble friend also felt that coverage of pension schemes might decline as a result of this Bill. Our proposals will make occupational schemes more attractive to members. In the light of the ever-increasing difficulties that some employers will have in finding employees over the coming years due to the so-called demographic time bomb, it will certainly be in the interests of a great many employers to offer a good package in the form of a good occupational pension scheme to their employees. We believe that occupational schemes will continue to flourish and give their members an even better deal in the future.

The noble Baroness, Lady Turner, asked about a grant to OPAS. We have agreed with OPAS that we shall make it an immediate grant to cover its committed expenditure to the end of the year. That includes accommodation expenses, staff salaries, production of its annual report and other expenses. We are also seconding to it a senior executive officer from the department to act as the office manager and administrator. We are committed to the support of OPAS and will discuss with it arrangements for the longer term. The noble Baroness also felt that pensions should be fully indexed and not just indexed up to 5 per cent. We feel that requiring increases without a limit would place an open-ended commitment on schemes and would possibly deter the further development of schemes. However, as I have already said, I am sure that there are a great many schemes that already meet that target. Nevertheless we do not feel the time is right to impose such an open-ended commitment on all schemes.

Turning to the question of the noble Lord, Lord Stallard, on the Consumer Associations' concern about the pensions ombudsman, we have to ensure a balance between the interests of pension scheme members and of the schemes themselves. I believe that a general right to appeal against the ombudsman's decisions would not be in the interests of scheme members. Appeal to the courts would be more easily afforded by the schemes themselves than by their members. It might therefore impose an unfair bias against the members in favour of some of the schemes.

In winding up I wish to emphasise that the changes in this Bill represent only one chapter in our continuing development of the social security system. As I said in my opening remarks, next year—and I make no apologies to my noble kinsman Earl Russell for this—we shall spend over £1 billion each and every week on social security. That is a total of over £56 billion, which is more than one-third higher in real terms than expenditure in 1979.

To take that point a little further, social security help for the long-term sick and disabled has already increased by almost £4 billion in real terms since 1978-79. On current best estimates it is now projected to rise still further by the year 2001 to over £12 billion. As the Bill is largely concerned with disability benefits it is worth stressing that over the last 10 years we have doubled our expenditure on the long-term sick and disabled. Perhaps I may give just one example. Since 1979 the numbers receiving help with extra costs through mobility allowance has increased sixfold and through attendance allowance, threefold.

I emphasise again that the total package of measures for the disabled is not designed to save money; far from it. The total net effect by 1993-94, even allowing for savings, will be to add some £300 million to the total cost of benefits we pay to the disabled and their carers. As I said earlier, that is over and above the money that we shall pay on account of inflation and the money paid as a result of increased demand.

The Bill is part of our measured and deliberate strategy to prepare the social security system to meet the needs of the new decade. We are primed, ready to debate detailed provisions in Committee. I commend the Bill to the House.

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