§ 4.22 p.m.
§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)
My Lords, with the leave of the House, I shall now repeat a Statement on the up-rating of social security benefits being made in another place by my right honourable friend the Secretary of State for Social Security. The Statement is as follows:
"With permission, Mr. Speaker, I wish to make a Statement about the up-rating of social security benefits. This will take place for most benefits in the first full week of the tax year—that is to say, the week beginning 8th April. The necessary statutory instruments applying both to Great Britain and Northern Ireland will in due course be laid before both Houses for debate.
"As is customary, I will deal first with the main national insurance benefits, including most notably the retirement pension which now goes to some 10 million people. The basis for the up-rating is the latest available figure for the increase in the Retail Price Index: the 10.9 per cent. rise recorded for the year to September 1990.
"The retirement pension will accordingly rise by £5.10 a week for a single person, from £46.90 to £5200, and by £8.15 a week for a couple, from £75.10 to £83.25. This increase alone will cost some £2.3 billion, underlining once again our clear and continuing commitment to maintaining the pension's value
"Unemployment benefit will rise from £37–35 to £41.40 for a single person and from £60–40 to £66.95 for a couple; and sickness benefit from £35.70 to £39.60 for a single person and from £5780 to £64.10 for a couple.
"National insurance invalidity benefit will go up in line with the retirement pension. There will also be a 10.9 per cent. increase in all other non-income-related benefits for disabled people or those who are sick for a long period—severe disablement allowance, industrial injuries benefits, war disablement pensions, invalid care allowance, mobility allowance and attendance allowance. The 615,000 people now receiving mobility allowance will see it rise by nearly £3 a week to £29.10. For the three-quarters of a million people now receiving attendance allowance, there will be an increase of £2.75, to £27.80, in the lower rate, and of over £4, to £41.65, in the higher rate.
"The age-related additions known as invalidity allowances, currently confined to those receiving invalidity benefit but being extended in December to give up to £10 a week extra to some 100,000 people receiving the non-contributory severe disablement allowance, will rise further in April to a maximum of £11.10.
"Similarly, 10.9 per cent. increases will take place in widows pensions including widowed mothers allowance, war pensions, and all public service pensions, together with the special Ministry 1361 of Defence payment to the pre-1973 war widows, which my right honourable friend the Secretary of State for Defence will raise from £40 to £44.36 per week.
"For the income-related benefits—income support, housing benefit, community charge benefit and family credit—the up-rating will be based, again as usual, on the RPI less housing costs. This is because, for those receiving these benefits, help with rent is available through housing benefit or help with mortgage interest through income support itself.
"This index rose by 8.1 per cent. in the year to September 1990, and the relevant benefit rates, with one exception to which I will come later, will go up accordingly. Thus income support for a single person under 25 will go from £28.80 to £31.15; the rate for an older single person from £36.70 to £39.65; and the higher pensioner premium from £17.05 to £18.45. For a family on income support with two children aged 10 and 12, benefit will rise by £7.75 a week to £103.30, plus full mortgage interest if they have been on benefit for more than 16 weeks, or full rent if they are tenants, and eighty per cent. of their community charge.
"I turn next to Statutory Sick Pay and Statutory Maternity Pay, which as the House is aware, are both paid through employers. The link between the two schemes is frankly somewhat artificial resting more on considerations of administrative convenience than of consistency in structure or purpose. I have concluded that the sensible development of policy of both fields would now be better served by treating them separately.
"So far as SSP is concerned, I propose to build on the re-structuring undertaken last year, taking account of the considerations I outlined to the House at that time. Occupational sick pay schemes have grown to such an extent that over 90 per cent. of the work-force now work for employers providing this cover, reflecting what is in my view a proper acceptance by employers of a much greater responsibility to cover short-term sickness amongst their employees. This in turn means that, for the great majority of those in work, the rates of SSP bear little or no relation to the amount they actually receive when sick. In these circumstances it is better for additional resources from the taxpayer to be concentrated more clearly on those least likely to have occupational provision, or in other areas of social security for which employers cannot be expected to provide.
"I therefore propose to up-rate fully, from £39.25 to £43.50, the lower of the two SSP rates, which goes to the lower-paid employees who are generally less likely to be covered by occupational schemes; to extend the coverage of this rate across the whole range of earnings bands within which employers pay lower rates of contributions, which currently covers employees earning less than £175 a week; and to leave the higher rate of SSP unchanged at £52.50. These changes will reduce 1362 expenditure by about £100 million in 1991–92, while fully protecting the lower-paid and with little or no effect for the great majority of others.
"I intend also to adjust the arrangements under which employers are fully reimbursed, by deduction from their remittance of National Insurance contributions, for the whole of their expenditure on SSP plus an amount to cover payments of such contributions on SSP itself. I propose instead to move to 80 per cent. reimbursement. This will reduce public expenditure in this area by about £180 million in 1991–92 in addition to the £100 million to which I have just referred. At the same time however, I propose to make some offsetting reductions in the rates of employers' National Insurance contributions. Full details will be given in the normal Statement about contributions which is made at the time of the Chancellor's Autumn Statement. But I can indicate now that my intention is to reduce each of the lower rates—those which currently apply in respect of employees earning up to £175—by at least one quarter of a per cent. and to reduce the standard rate by 0.05 per cent. These changes will reduce employers' contributions by something over £200 million, and take account also of the compensation employers currently receive for contributions paid on SSP itself. These go a considerable way in helping employers, particularly smaller employers who tend to have lower paid employees, to meet any extra costs which might otherwise arise from the new arrangements. Legislation will be required.
"The arrangements for statutory maternity pay, where occupational cover is very much less extensive, will be left entirely unchanged, except for any minor modifications needed in consequence of the separation from SSP. That separation, however, enables me to go further on the standard rate of SMP than I have proposed for SSP. I intend not only to increase it by the RPI, which would take it from £39.25 to £43.50, but a further £1 a week to £44.50. An additional £1 will also be added to the National Insurance maternity allowance, taking it from £35.70 to £40.60 instead of the £39.60 which an RPI up-rating alone would have indicated. There will thus be a real increase in benefit for some 315,000 mothers-to-be in the course of a year, at a cost of about £5 million.
"Apart from this increase in maternity pay, my proposals on SSP, which I believe strike a sensible new balance in the partnership between the state and employers which has developed in this field, open the way to a number of other important improvements, both small and large.
"In turning to those improvements, I should make one point clearly to the House. This is that support for families does not relate only to families with children, important though that is. It must acknowledge responsibilities towards the old as well as the young, and not least the particular pressures families can face arising from disability, 1363 or the need for special care. In framing my proposals I have sought to take account of all those strands.
"I come first to the needs of disabled people and their carers, where we are already carrying through the major programme described in my up-rating Statement last year. Last April we made real increases in the disability premiums in income support, housing benefit and community charge benefit, including in particular those for children; extended mobility allowance to the deaf-blind; and extended attendance allowance to disabled babies under two. This month we have introduced a carers' premium in the income-related benefits, and extended attendance allowance to meet the special needs of the terminally ill. In December we shall make the increase in severe disablement allowance to which I have already referred. And we are preparing new benefits for introduction in 1992 to help those disabled people who wish to work and further extend help with disability costs.
"Against that background, I cannot of course propose further measures on the same scale. But what I can and will do is to make five more specific improvements particularly directed at the needs of some of the most severely disabled people and their carers.
"The independent living fund, now providing extra help—averaging £74 a week but in some cases several hundred pounds a week—to some 6,000 severely disabled people in the community, will have its resources nearly doubled to £62 million next year. It will thus have risen twelvefold, from an initial £5 million in only three years.
"We shall make an additional grant to Motability of £1 million a year to enhance the assistance it can give with the expensive adaptation of cars which severely disabled people often need.
"I intend too to modify the mobility allowance regulations to help those particularly unfortunate people who suffer the amputation of both legs. The House will be aware of two recent cases—Mrs. Sandra Stones in Durham and Sergeant Andy Mudd in Colchester—where either mobility allowance was withdrawn or doubt cast on continuing entitlement. While cases in doubt may be resolved by review or appeal—as I am glad to say has indeed already happened in the case of Sergeant Mudd—it seems to me that we ought to do everything possible to avoid this sort of uncertainty and the distress it can cause. I therefore propose an amendment to put the payment of mobility allowance in such cases beyond doubt.
"I propose also two further useful improvements for carers. The amount which can be earned without affecting entitlement to invalid care allowance, increased last year from £12 to £20 a week, will in April go up by a further 50 per cent. to £30 a week. And I intend to provide that the carers' premium just introduced in income support, 1364 which as things stand would cease immediately on the death of the person being cared for, can continue to be paid for up to eight weeks thereafter.
"Next, pensioners. As I have said on a number of occasions in the House and elsewhere, in welcoming the rise in pensioners' real average net incomes which has taken place as a result of the spread of occupational and personal pensions and the growth of savings, we must not overlook those who have not yet gained from those trends.
"I therefore propose to make this year a real increase in the basic pensioner premium for those aged 60–74 in income support, housing benefit and community charge benefit, which will go up by £1 a week more for a single pensioner, and £1.50 more for a couple, than in a straightforward up-rating. It will thus rise by £1–95 from £11.80 to £13.75 for a single pensioner and by £2.95 from £17.95 to £20.90 for a couple, contributing to total increases of £4.90 and £7.60 respectively in their income support.
"This will cost nearly £80 million, and will assist some 400,000 pensioners directly through income support, and well over 1.5 million through housing benefit and community charge benefit. Taken together with the premium increases for the older and more disabled pensioners which took place in October 1989, it means that over 18 months there will have been a real increase in every one of the premiums applying to around 6 million less well-off pensioners, at a total cost of about £300 million.
"Thirdly, I am making a major upward adjustment in income support in a field which brings together the interests of both elderly and disabled people and the families to which they belong: the limits relating to residential care and nursing homes.
"The survey of costs we commissioned from Price Waterhouse to give us additional information in this field is being placed in the Library today. In brief, it shows that, while the limits for residential care are reasonably close to median costs across the country, those for nursing homes are significantly too low; but it does not provide evidence of a sufficiently clear pattern of geographical variation, except for Greater London, to justify the introduction of further such variations at this stage.
"What I now propose takes account both of the Price Waterhouse results and of the many other representations to us by voluntary and charitable bodies and organisations of home owners, as well as by many honourable Members on behalf of their constituents.
"For residential care, the basic limit will rise by £5 a week to £160. There will be larger increases of £15 to £185 for the category covering the very dependent and blind elderly, which includes, for example, Alzheimer's Disease cases; and for those covering mentally handicapped, mentally ill and physically disabled people.
"For nursing homes, the increases will be much larger: £45 a week, to £255 a week, for the main category catering for the elderly, and also for the 1365 mentally ill; £35, to £260 a week, for the mentally handicapped; and £35, to £290 a week, for the physically disabled. The increase for terminal illness homes will be somewhat smaller, at £15, to £275 a week, taking account of the fact that this type of home received the largest increases last year, that the distinction between these homes and others is becoming increasingly artificial, and that voluntary hospices—many of which do not seek to make use of income support anyway—are now receiving extra financial help specially geared to their needs under the arrangements introduced this year by my right honourable and learned friend the Secretary of State for Health.
"Additionally, I propose to introduce a special further nursing home supplement in Greater London to take it from £23 to £33 a week. Thus for an ordinary nursing home in Greater London the overall increase will be £55 a week.
"The total cost of the increases will be some £225 million. Together with those made in April and August this year, income support expenditure on those in homes will have risen by over £400 million a year in quite a short period—over and above the more than £1 billion it had already reached by the end of March this year.
"As the House knows, pending the changes now planned for 1993, the income support limits in this field are, and always have been, designed to help towards not only income maintenance but also housing and care costs. It has never been the intention, nor is it sensible, that in the generality of cases housing benefit itself should be available as an alternative to income support. An anomaly exists in the regulations, which has enabled such claims to be made; and in the light of the large increases in limits which I have announced I intend to consult on amendments to re-establish the policy intention more clearly.
"Last but not least, I intend to make an increase in child benefit, which is and will remain a strong element in our policies for family support. It will not, however, surprise the House that, in view of what I said earlier about considering the needs of families more broadly and of the major improvements I have just announced, I am not able simply to up-rate it across the board, which would have a gross cost of some £500 million and a net cost of some £380 million.
"In fulfilling my statutory duty of review, I have therefore looked not only at whether there should be an increase but at what form it should take to make the most effective use of the resources I am able to make available. I have concluded that the right course this year is to make an increase which gives a worthwhile amount to all mothers and which will be particularly welcome to new mothers because it recognises that for the great majority of parents it is the arrival of the first child which has much the largest impact on their finances. This is not only because of the initial costs they incur but because, in a world where the great majority of 1366 women work while they are childless but most feel it necessary or right to give up work, or work less, for some considerable time thereafter it is frequently associated with a sharp reduction in the family income.
"I therefore propose this year an increase which acknowledges that fact by making an additional payment for the first or eldest eligible child. It will be of £1 a week, payable of course normally to the mother, and in addition to the continued payment of £7.25 a week for each child. Since it will go to every family, and will be larger than an RPI increase in one-parent benefit—itself indeed defined as a payment for the first or eldest child—would have been, I do not propose on this occasion to increase that benefit as well.
"The measure will complement what we have already done in recent years to steer some £350 million of real extra help to low-income families through income support and family credit. It will give an extra £1 a week in child benefit to every mother in nearly 7 million families, at a gross cost of over £350 million and a net cost of £260 million.
"By choosing what I believe to be sensible priorities, I have been able to make a number of important improvements in social security, especially for families, without adding overall to what is in any case the very large cost this year of maintaining our up-rating commitments. What I have announced helps families with children, and families-to-be. It helps large numbers of less well off pensioners. It will ease the anxieties of families concerned with the care of elderly or disabled relatives, and of those relatives themselves. And it builds on what we are already doing to give greater help to disabled people. In short, it carries forward the reshaping of our social security system, conceived in the 1940s, to meet the needs of the 1990s."
My Lords, that concludes the Statement.
§ 4.46 p.m.
§ Lord Carter
My Lords, the House will be grateful to the Minister for giving us that long, complicated Statement. There are certain points in the Statement which we obviously welcome but there are some that need further probing. It would help if the Minister could say how many, if any, benefits have been increased by less than the 10.9 per cent. inflation figure which has been used for the statutory up-ratings, and how many benefits have not been increased. I picked up the higher rate of statutory sick pay and the one-parent benefit as being frozen. It would be helpful if we could be given that information.
I turn first to the last matter in the Statement, which was the increase in child benefit. We did not have to wait for the Statement for that information. It was on the television news last night and it was trailed in the press yesterday and today. It all results from the extraordinary spectacle of the one-woman Star Chamber at No. 10. Last week it was education, this week it is child benefit, and I understand that either today or tomorrow it will be dog registration.
1367 We are obviously glad to welcome any increase in child benefit, but whatever happened to all those arguments about benefits being targeted according to need? What we are seeing is a £1 per week increase for all families on child benefit irrespective of the size of the family. That means that the weekly increase in the income through child benefit of a wife of a millionaire with one child will be the same as that of the poor family. just above the family credit level, with three or four children.
Does anyone believe that we would have had that announcement if the Prime Minister felt secure and the Government were riding high in the polls? It is an increase, however welcome, which has all the hallmarks of a last minute, halfhearted electoral fix. The Minister can be assured that if a social security Bill is produced next Session we shall do our utmost to amend it to ensure that that halfhearted and reluctant conversion will be turned into full-scale enlightenment.
The reason that we shall do that is simple. We are all aware that if child benefit had been indexed for inflation since 1987 it would now be worth £9.50 per week for every child. That is a measure of the cost to families of the freezing of child benefit. We know that 94 percent. of child benefit goes to families paying the standard rate of tax and below. It is by far the most efficient and effective way of helping families with children which are just above the poverty line and those families which are eligible for family credit but do not claim it.
One does not have to be a senior wrangler to work out the increase. If one has one child it is 12 per cent. If one has two children, it is 6 per cent.; with three children it is 4 per cent.; and with four children it is 3 per cent. As the intention of child benefit is to help with the costs of the upkeep of children, that seems to be a curious way to deal with the problem. However, as I have said, we welcome the increase.
I now wish to discuss the points in the Statement on statutory sick pay. The Statement asserts correctly that 90 per cent. of employees are covered by employer schemes. That is why the increases have only been proposed for the lower rates of statutory sick pay. However, as we know, many employer schemes are time-limited in that they allow for a certain number of weeks of sick leave to be covered at full pay and a certain number to be covered at half pay and other such provisions. What will happen to employees on the higher rates in time-limited schemes who are not to receive any increases at all? It would appear that they could be severely disadvantaged.
I now turn to the proposals to deal with elderly people in nursing and residential care. The proposals are welcome, but we all know that there is a crisis in this arm. I use that term advisedly. The situation of many elderly people in nursing homes and residential care is at crisis point. Those people are having to cope with a substantial and increasing shortfall in their levels of income support compared with the cost of their care. That is placing a huge burden on them, their relatives and the organisations which supply the care. There are reports of many organisations getting 1368 into serious financial trouble. The situation is, of course, made much worse by the decision to postpone the implementation of the community care plans. Unless these problems are addressed now there will be a huge shortage of nursing and residential care places when the community care plans are fully implemented. We are told that the shortfall now is well in excess of £500 million and that 100,000 elderly people in care are now dependent on income support.
The Independent Health Care Association estimates that the shortfall is something in excess of £100 a week for a nursing home and £40 a week for a residential home. The Statement appears to propose increases of £5 to £15 a week for residential care against the shortfall which has been reported of £40 per week and increases of £35 to £45 a week against a shortfall of £100 a week for nursing homes. The report from Price Waterhouse has not yet been placed in the Library. It would be helpful if we could be told whether we shall receive the full report or only the findings of the report. Obviously further analysis will have to await a sight of that report. I should be grateful if the Minister would comment on the shortfall which appears to exist between the increases proposed in the Statement and the figures that we have received from the Independent Health Care Association.
We welcome the increase in pensions that will occur next spring as a result of the recent inflation figures and the September RPI. It seems certain that the increased pensions will be paid next spring when the headline inflation rate is falling. I emphasise the headline inflation rate as opposed to the underlying inflation rate. There was an ominous hint in the press last week that, if this were the case, the Government might try to find some excuse to delay the increase or somehow to reduce it. I cannot believe that that could be possible. I am sure those comments were wild speculation. However, it will be helpful and indeed reassuring if the Minister will confirm that there is no possibility that the Government will attempt such a manoeuvre.
We know that pensioners will always lag behind the increase in the earnings of the population as a whole if the increase in their pensions is linked to the RPI and not to the increase in average earnings. I should be grateful if the Minister could confirm some figures which do not appear in the Statement. Does he agree that breaking the link with earnings has been worth a cumulative sum of some £22 billion to the Exchequer compared with the £26 billion that was handed back in the same period to higher rate taxpayers?
I now turn to disability. All the up-ratings in the disability benefits are welcome. However, as far as I can judge, there is nothing to help those many disabled people who are losing out substantially under the poll tax. A recent survey by the Royal Association for Disability and Rehabilitation has revealed that the 54 per cent. of disabled households who responded to the survey were between £200 to £500 a year worse off under the poll tax as compared with rates. We know that many disabled people are having to use their disability benefits or their savings to offset the burden 1369 of the poll tax. As nothing in the Statement deals with this problem, will the Minister give an undertaking that there will be a rapid review of the effect of the poll tax on disabled people? I know that a number of representations have been made to his department.
There appears to be nothing in the Statement either to help the 130,000 claimants who have been on transitional protection since the spring of 1988. In April 1991 they will commence the fourth consecutive year in which they have received no increase at all in benefit. I shall be interested to hear whether the Minister or his department have any proposals to deal with that problem. We know that there are still considerable problems with the 20 per cent. of poll tax which has to be paid by those on benefit. Does the department have any plans to deal with that? It was mentioned in passing in the Statement, but as far as I am aware there are no plans to put right the very real anomalies which have now come to light with the operation of the poll tax.
The Statement also refers to the extension of the mobility allowance to the deaf blind. We welcome that measure as we supported it in this House in our amendments to the social security legislation. Can the Minister estimate how many of the 3,000 deaf blind people in this country are likely to benefit from that extension of the mobility allowance? As I have said, we welcome many of the proposals and the increases in the Statement. The proposals for the independent living fund are very welcome, as are the proposals for carers and the improvements in the mobility allowance. It is fair to say that the Government have tried in some areas to begin to deal with some of the underlying problems. However, there are other important areas where we shall continue to harry the Government because there is still much to be done in the field of social security. I am sure that most of that will have to wait for the return of a Labour Government.
§ Earl Russell
My Lords, I wish to thank my noble kinsman for repeating the Statement. I wish to congratulate him, and through him his right honourable friend the Secretary of State, on their success in running to stand still without apparently, except for one moment over the past couple of days, any great breathlessness. I am glad to note that the Secretary of State has argued a case to the Treasury for meeting the costs of inflation. Inflation is, of course, the dominant theme of the Statement. Inflation is very expensive indeed from the Government's point of view. One begins to wonder, after this passage of time, how far the Government have ideas about how to bring inflation down. One is tempted to wonder whether 10 Downing Street has lost a monetarist and not yet found a role.
Although these benefits are obviously expensive for the Government, the benefits that claimants will receive are in real terms nugatory because the pound in their pocket is purchasing less than it did before. Here we have to consider an effect of using the formula of percentage increases. A percentage increase in a small sum is a great deal lower than a 1370 percentage increase in a large sum. I have tried very quickly measuring the increase in benefits against a constant purchasing unit. In this case I have picked a journey into town from fare zone 2. I did so as it was ready to hand. The increase in the pension for a married couple will buy two journeys into town from fare zone 2. However, the increase in income support for the under-25s, which is a smaller sum from the beginning, will only buy one journey into town from fare zone 2. We have here an effect by which the use of percentage increases on small sums is widening the gap between those on benefit and the rest of the population. However pleased the Secretary of State is about his success in the public spending round —he is entitled to be pleased—those on benefit will not feel particularly well off.
I did not find in the Statement any information about the total cost of the social security budget next year. I should be interested to know that as soon as possible. My noble kinsman is aware that I am concerned about the subject. I believe that he knows some of my ideas for bringing the cost down but this is not the right occasion to develop them.
There are good things in the Statement. I welcome particularly some of the five measures on disability. I am particularly pleased by what is being done for carers. I believe that the words of my noble friend Lady Seear have been heard, and I am very glad. I am pleased by the increase in the motability allowance. I should be interested in any more detail that my noble kinsmen can give about how that is to be done. I warmly welcome the increase in the independent living fund. I am very glad about the increase in funds available for residential care, which was urgent and desperate. The question that the noble Lord, Lord Carter, raised as to whether it is enough is one about which we shall have to think further.
In passing I should like to ask when we can expect to hear how much money is to be allocated to the social fund for next year. I have no intention of opening up the general argument about the principles of the social fund, but if the Government are to make a success of the principles on which they wish to run that fund they must up-rate the sums available for the fund in line both with inflation and with the state of the economy. They should also consider the case for having a rapidly increased contingency fund available. They can only combine their principles of meeting need and operating within a budget if a contingency fund is available ready to meet the demands on the social fund that might be created by such a case, for example, as the closure of Cammell Laird. Such a case would demand an increase in an area budget. I hope that that issue is receiving thought and I should be glad to know when we can expect to hear something about it.
In relation to income support nothing has been said about the child care disregard. We have been led to believe that some discussion on that subject is going on in government circles and I have read some remarks by a Minister with which I am in full agreement. We are told that consultations are in progress. Of course I do not believe everything that I 1371 read in the newspapers, but I should be very glad if my noble kinsman could confirm that such consultations are in progress and that we might hope to hear something about them.
I regret very much that the Secretary of State has not taken the opportunity to narrow the gap between the income support limits for younger and older people I shall not bore the House by repeating myself on that subject, but it seems to me that the amount available for the young is becoming more inadequate due to the principle that a percentage increase on a small sum is smaller than a percentage increase on a large sum.
Regarding statutory sick pay, I am extremely sorry that the noble Lord, Lord Mottistone, is not present in the House. I recall vividly the remarks that he made on the statutory instrument on statutory sick pay; we on the Liberal Democrat Benches are in full agreement. The Secretary of State claims in paragraph 15 that he is achieving proper principles for the partnership between government and industry. I am not convinced that that is the case. He is shifting the costs of statutory sick pay on to industry and thereby putting a tax on our industrial costs. When we need exports so desperately I am not certain that that is wise. I follow the reasoning by which the Secretary of State has chosen to increase the lower rate rather than the higher, but if the Secretary of State considers some of the arguments in the NACAB report Hard Labour he may wonder whether he will achieve his target. There are a good many cases in which employers—particularly of part-time labour —are not paying national insurance, the employee is not paying income tax and the job is not known to the Department of Social Security. In those cases the increases will fail to meet their target. The Government are losing revenue; it is an issue to which I hope they will pay attention.
That brings me finally to child benefit. Anyone who denies that half a loaf is better than no bread does not belong on the Opposition Benches; they belong on the barricades. We welcome the increase so far as it goes. We are also very pleased that the Secretary of State has drawn attention to his statutory duty to review the benefit each year. I should like to remind the House that that is a duty which my noble friend Lord Banks is responsible for introducing. I am also particularly pleased to have an announcement on that front since I remember the statement of the noble Lord the Lord Privy Seal when the Social Security Bill was in Committee last summer that the issue had been settled another place had made up its mind and we should not be discussing it further. We are now further discussing it, the Government are further discussing it, and I am delighted by the recognition that it is an open issue.
I was also very interested by a report in today's Independent which said that it had been told by a number of Conservative Members that the up-rating was being brought in because of the Government's defeat in the Eastbourne by-election. I have no idea whether that is true but I admit that I found it an interesting report.
1372 The increase is only £1. That does not go very far. I suppose that if one is selecting one aspect within child benefit one could have done worse. I remember an incident when I was a boy and too young to know any better—
§ Lord Belstead
My Lords, will the noble Earl forgive me for intervening? There is just one rule about the taking of Statements and that is that the taking of Statements should not be turned into a debate. The noble Earl is always very interesting and easy to listen to, but I beg him to bear that in mind.
§ Earl Russell
My Lords, I must offer my apologies to the noble Lord the Lord Privy Seal and to the House. We have here an increase of £1. The question is: how far will it go? I once made the mistake, when too young to know any better, of offering one lira to an Italian beggar; he spat in my face. I hope that that will not be the reaction of the electorate. It should not be. However, I ask my noble kinsman to consider that he may not receive as much gratitude for the Statement as he thinks he deserves. I ask him also to pay attention to the widening gap between what child benefit would be if it had been regularly up-rated and what it is now—I understand that this morning it was £1 billion and rising. I feel very sorry indeed for the first post-Thatcherite Chancellor. I do not expect my noble kinsman to share that sympathy but I expect him to understand it.
§ Lord Henley
My Lords, I am grateful for the partial welcome that the up-rating has received from both noble Lords opposite, but I understand that we shall never be able to satisfy their demands for further and greater expenditure in all fields. As both noble Lords know perfectly well, my right honourable friend has a statutory duty to review a great many benefits in accordance with the appropriate priorities and what he can afford. That my right honourable friend has done and he has come up with a package that I should have thought would be welcomed on all sides of the House.
The noble Lord, Lord Carter, asked how many benefits had been up-rated by less than the RPI figure of 10.9 per cent. I stress that not all benefits are up-rated by that amount. As I repeated in the Statement, some are up-rated by a lower figure, which is the RPI less housing costs. All benefits covered by a statutory requirement have been fully up-rated in line with the relevant prices index. Those include the retirement pension, widows' pensions and all related long-term pensions. Before I move away from that subject I can give a reassurance to the noble Lord—I am sure that he would like to have it as would all pensioners—that the Government will continue to honour their pledge to pensioners to increase their pensions next April as we have done every year fully in line with the increase in prices that was recorded in the previous 12 months up to September. The Government will continue to honour that pledge.
Starting with child benefit, I am grateful that both noble Lords welcomed the increase that my right honourable friend was able to announce. The noble Lord, Lord Carter, proceeded to get rather confused at that point. He asked what had happened to 1373 targeting. The noble Lord cannot have it both ways. He has been pressing for years for increases in child benefit. Now he wants to return to a system where child benefit is purely targeted on the less well off.
§ Lord Carter
My Lords, perhaps the noble Lord will give way. It is the government side of the House that has been arguing about targeting all the way through. I simply asked what had happened to their argument.
§ Lord Henley
My Lords, from what the noble Lord said about the rich man receiving this benefit as well as the poor man my impression was that the noble Lord had changed his views. The Government have not changed their views at all. We know that the acquisition of the first child is more expensive than are subsequent children. The noble Lord will know perfectly well that clothes can be passed down and so on. It is the first child, when the mother leaves the labour force, that is the most expensive. That is why my right honourable friend, in reviewing the situation and taking account of his legal requirement (as mentioned by my noble kinsman), came up with the solution of increasing child benefit by £1 a week for the first child.
With regard to statutory sick pay and time limits, the noble Earl, Lord Russell, raised various queries and doubted whether it was fair that we should shift further costs on to industry. The noble Earl must have missed the point that we made in the Statement; namely, that we shall be reducing the employer's contribution. I mentioned the figures in the up-rating. So the total cost of the package is broadly cost neutral. We feel that that is the better way to deal with statutory sick pay.
The noble Lord, Lord Carter, also queried the time limits for sick pay. He knows perfectly well that statutory sick pay is only paid for 28 weeks. He seemed to be of the view that a great many of the occupational pensions had exclusion clauses. I am advised that the average spell on statutory pay is only three weeks. Some 90 per cent. of cases are over in eight weeks. The other key point is that some 90 per cent. of employees are covered by occupational schemes. We are fully protecting the less well off, as I made quite clear in the Statement.
I turn to income support in residential homes. I quite understand that many noble Lords will feel that we have not gone far enough. But we have gone a very long way. Noble Lords will remember that last year we increased the budget available for this provision by some £100 million. We then increased it by a further £45 million mid-year with a full year cost of some £70 million, which makes a total increase of £170 million for the full year. There is a further £235 million announced today. That makes over £400 million going to income support for residential homes.
The noble Lord, Lord Carter, claimed that there was still a shortfall and quoted from a report, the name of which I did not quite catch. We always have to balance the interests of both those in the homes and the taxpayer. The Government's policy has never been 1374 and never could be to cover all the fees, however high they are. The package that we announced is a fair and reasonable way in which to meet the average costs of most people in residential homes. As I said, we took advice from Price Waterhouse. That is why we saw the need to increase the fees for nursing homes far more than those for residential care homes, where there did not seem to be quite such a gap between what we were paying and what was being asked for in the homes. The noble Lord asked about the Price Waterhouse report. I can assure him that the full report will be found in the Library. He is welcome to read it.
With regard to pensions, which I touched on at the beginning of my reply, predictably as always noble Lords demanded the restoration of the link with earnings. I am the first to accept that pensions would be higher if we had continued with the old principle of up-rating by either prices or earnings, whichever was the higher. But that is not the point. We have seen pensioners' average total incomes increasing by over 31 per cent. in real terms during our first eight years in office. By contrast, between 1974 and 1979, when the party of the noble Lord was in power and attempted to increase pensions by whichever was higher, prices or earnings, due to the effect that that and its policies had on the economy, we saw pensioners' average total net income increasing by a mere 3 per cent. We feel that we have the right balance. We shall continue to uprate pensions in line with the RPI but we shall pursue policies that will see a growth in pensioners' average income from all other sources.
On the subject of mobility allowance, the noble Lord, Lord Carter, asked for an estimate of how many of the 3,000 deaf-blind people would gain from the mobility allowance. As a result of the extension to deaf-blind people all will gain. As the mobility allowance is not taken into account in assessing other benefits, all those deaf-blind people who have been awarded the allowance will gain £26.25 a week in the current year. That will increase to £29.10 a week from April next year.
My noble kinsman Lord Russell asked how we would make changes in the mobility allowance to meet the group that I specified, i.e., double amputees. I mentioned the Sandra Stones case and that of Sergeant Mudd. At this stage I cannot answer the noble Earl's query. We certainly aim to deal with that problem. At the moment there is some doubt about how to extend the provision in the wording of the mobility allowance, which is only granted to those who are virtually unable to walk. We shall be coming forward with proposals in due course.
I accept the point made by the noble Earl that inflation is expensive. The Government are committed to bringing down inflation. We have made that very clear. I can assure him that our battle to bring down inflation will continue. However, while there is inflation we shall continue to upgrade those benefits which we have a statutory duty to upgrade and will continue to protect the less well off in society.
The noble Lord asked for the total cost of the entire social security budget. I cannot answer that question.
1375 It will have to wait for the Autumn Statement. I can tell him that the total cost of this package is £4.852 billion, so it is just under £5 billion.
The noble Lord also asked about the social fund. We have no changes to announce in the social fund. That is why it was not mentioned. The budget will be announced later, but as the noble Lord was the first to say, this, is neither the time nor the place to discuss the merits of the social fund. One of the purposes of the social fund—it is one of its most attractive features —is its adaptability and flexibility so that it can meet needs that arise in particular localities. The noble Lord mentioned Cammell Laird. The noble Lord will remember that after floods in Wales last year we were able to make extra money available to the local offices in that area.
I do not know whether I have answered every question that noble Lords asked. However, I repeat what I said at the beginning. No Secretary of State will ever be able to satisfy all demands, especially those from noble Lords in opposition who do not have the responsibility of administering the large budget. I believe that my right honourable friend the Secretary of State has come forward with a very effective package which satisfies. It seeks a balance between the interest; of the taxpayer on the one hand and those who are less well off in society who are the recipients of benefit. I think that the Statement is to be welcomed. I am grateful for the partial welcome that it received from the two noble Lords.
§ 5.21 p.m.
§ Lord Boyd-Carpenter
My Lords, I thank my noble friend most sincerely for discharging the very considerable task of repeating this massive and detailed Statement. It is one of the most important Government Statements of the year.
I should like to ask him a number of questions. However, perhaps I may first be allowed to make this comment. Listening to the Statement, it appears that the Government have exercised a great deal of care and taken a great deal of trouble over what may be called targeting: attempting to concentrate additional benefits in the areas of greatest need. I shall not weary the Ho use by repeating those areas. However, the mobility allowance and the provision in respect of nursing homes are good examples of careful attention to the desirability of concentrating additional benefits where they are most needed.
The considerable length of the Statement owes much to the fact that a great deal of trouble and care obviously was taken by my noble friend's right honourable friend and his department in working out the areas of greatest need and what could be done about them. I should like to ask which of these changes will require legislation? Perhaps I may ask the noble Lord, Lord Henley, formally—I observe that the Leader of the House is present—whether it is intended to arrange a debate, no doubt in the new Session? It is a subject that is of greater importance to more of our fellow citizens than any other subject with which the Government deal. I urge a debate very strongly. It is very important both to the standing of 1376 the House and to the development of these matters that there should be a full day's debate on these matters. I hope that my noble friend will convey that suggestion to his right honourable friend over the narrow gap that separates them.
On a small point, I was sorry—if I understand the position aright—that the percentage increase for war widows will be the same for pre-1973 and post-1973 war widows. If that is right, that widens the gap in money terms between the pre-1973 and post-1973 war widows. After some urging, the Government took upon themselves to make some improvement for the pre-1973 war widows. But of course a straight percentage increase for both would widen the gap. I hope that that may be considered carefully when the time comes for changes.
I feel a good deal of sympathy with the noble Earl, Lord Russell, about the desirability of backing the social fund with a contingency fund. I have always had some doubts about the limitations of the social fund, in particular in view of the possibility of disastrous situations which may run it down. The existence of something similar to a contingency fund would be helpful in dealing with emergencies.
I was very interested in the announcement with regard to child benefit. It is not that one was surprised because, as the noble Lord will be well aware, there was a very serious leakage of this information. I suggest that that is very unfortunate. I believe that Parliament should be the first body to be informed of such important changes. It suggests a certain laxity in some government circles if the matter leaked out as fully as it did, including a full front-page article in The Times this morning, hours ahead of the Statement to follow. I hope that those responsible will consider the position to ensure that it does not happen again.
On the merits of the matter, it is the fact that the larger one's family the smaller the percentage increase given. It is noticeable, and certainly those noble Lords who were concerned with social security administration in the past will have noticed it, that the system is the exact opposite of the old system of family allowances. Indeed at one time there was no family allowance in respect of the first child. It began with the second child. That was based on the fact that the larger one's family the greater the expense of maintaining it. I fully take my noble friend's point that it is the first child who in general takes the mother away from work. However, perhaps he will recall that if one has a larger family the period during which the younger children are cared for extends the mother's period away from work for a considerable time.
I should like to express some hesitation in endorsing the proposal that only the first child should benefit. The case has often been argued in this House that child benefit, being a benefit that goes to people regardless of income, should not necessarily be very often or very much increased. But if it is to be increased, as the Government are deciding to do, I wonder whether giving the smallest percentage increase to the largest family is the right way to do that. Great experience is available in the noble Lord's department of the working of the family allowance 1377 system. That proceeded on exactly the opposite basis to this system. I express some doubt. It is one of the matters that could best be ventilated in a full debate.
Having said that, I congratulate the Government on a major improvement, in particular that of the non-statutory benefits, and for the care and thought which appear to have been given to dealing with the hardest cases. Some noble Lords will always feel that there are examples which could have benefited more. In human terms naturally we all have some prejudices or ideas as to which are the most important areas. However, I find it enormously encouraging that we have a Secretary of State for Social Security, and colleagues, who are prepared to take so much trouble and care to examine where the limited amount of help available can best be given.
§ Lord Henley
My Lords, I welcome my noble friend's remarks, in particular about targeting. We must concentrate resources on those whose need is greatest. We must recognise that the resources available to this Government, or for that matter any government, are not infinite. They are certainly finite.
Perhaps I may deal briefly with some points that my noble friend made. He asked which changes require legislation. The changes that my right honourable friend announced on statutory sick pay will require legislation. I cannot comment on when that legislation will be. My understanding is that the changes must be in place by April of next year.
The noble Lord raised the matter of a debate on a generality of social security matters. That is a matter for the usual channels. I note what he says, as I am sure does my noble friend the Leader of the House.
My noble friend asked about war widows and commented on what he claims is the growing gap between pre- and post-1973 war widows. All war widows receive the same war widow's pension from my department. There was a discrepancy because after 1973 an occupational scheme was introduced. It allowed those widows whose husbands had served post-1973 to receive more because they benefited from the occupational pension. There was no flat rate for the post-1973 widows.
By introducing the £40 we tried to solve the perceived unfairness in there being no occupational pension for the pre- and post-1973 widows. Post-1973 widows receive varying amounts according to the length of their husband's service and rank. There is no flat rate and therefore there will always be a gap between many post-1973s just as there is between pre-and post-1973s.
§ Lord Boyd-Carpenter
My Lords, will my noble friend deal with the point that if the post-1973 widows had a higher pension than the pre-1973 widows a flat percentage increase will give them a bigger increase than the pre-1973 widows and therefore the gap will be widened?
§ Lord Henley
My Lords, all the post-1973 widows will be in receipt of different pensions depending on the length of service. Obviously the gap will widen. We have increased the special payment by 10.9 per cent. in 1378 order to give the pre-1973 widows the increased value of that special payment. I do not see that as allowing the gap to widen.
As regards child benefit I cannot comment upon the press leakage; that is a matter for the press. My noble friend appeared to be worried about the fact that there is a smaller percentage increase for the larger families. I accept that a mother of a large family is potentially out of work for a longer period of time than the mother of a small family. However, the extra £1 that we have announced for the eldest child is also for the second child when he or she becomes the eldest after the first child achieves adult status. Therefore, the benefit continues for the extra years during which the mother is potentially removed from the workforce. I hope that answer will satisfy my noble friend.
§ Lord Seebohm
My Lords, I shall not delay the House but merely ask for one figure. I take into account the welcome increase in child benefit for the first child. It will be interesting to know how much less in real terms families as a whole will be able to spend on their children. I reckon that the figure is between £200 million and £300 million. I believe that in real terms we are now allowing families to spend far less on their children than last year. Can the Minister confirm that figure?
§ Lord Henley
My Lords, we have tried to make clear not only that there is an increase in benefit for the first child but that there has been a growth in other support benefits for families. For example, in April 1989 there was an extra 50 pence above the rate of inflation for the family premium in income-related benefits. From April 1990 there was an extra £1 per week above the rate of inflation in the pocket of a mother of a lower paid working family receiving family credit. I cannot comment on the specific figure mentioned by the noble Lord but I believe that the Government's position and their case is good. We have continued to support the family.
§ Lord Kilmarnock
My Lords, I too wish to thank the Minister for repeating the long and important Statement and wish to put forward one or two points. Employers will now receive only 80 per cent. of their SSP costs as against an undisclosed future benefit. Has the scheme been discussed with any employers' associations, particularly small employers' associations? Obviously the disregard in the care allowance rising to £30 is to be welcomed as is the pensions premium increase. However, I notice that the increases for residential care at only £5 and for terminal homes at only £15 are far less than the RPI. Will the Minister comment on that, particularly the latter case, and tell me why he believes it to be fair?
Rather coyly, the Statement reserves the main issue of child benefit to the end. The most crucial phrase in paragraph 35 is:I have concluded that the right course this year is to make an increase".That appears to smell a little of the Eastbourne factor; it is essentially an ad hoc measure. It leads one to ask what will happen next year. Furthermore, the £1 is at the expense of one parent benefit. The Minister has referred to 1379 the point raised by the noble Lord, Lord Boyd-Carpenter, about other children. Children graduate up to eldest child status and then receive £1. However, if in the mean time the Government do not take other measures the basic level will wither on the vine.
I wish to remind the Minister of the principle of the Fowler Review. It was to separate general child support from extra help for low income families. Are the Government moving away from that principle? All the taxing ideas are of little help. One can tax the higher taxpayers; one can means test which is expensive set against current administration costs; or one can revert to tax allowances which are of no help to non-taxpayers. When the SDP was in business as a political party we had many tax experts. We studied all those options but none worked out.
When all is said and done will the Government agree that it is better to return to the original principle of child benefit as a universal benefit? Obviously one cannot go back to 1987 because that would be too expensive. However, if this year the Government began at, say, 10 per cent., and can hope for a declining RPI in the following years, they would be back in business with a universal child benefit. Is that not a better road to go down?
§ Lord Henley
My Lords, statutory sick pay has not yet been discussed with the employers' organisations. The noble Lord expressed the view that increases for residential homes are not enough and are not in line with inflation. The Statement makes clear that following the Price Waterhouse Report the Government identified the gap as being greatest in the nursing homes and that is why their increases were so large. The need was not so great in the residential homes. Nevertheless, we are putting an extra £225 million into income support for residential and nursing homes together with last year's increase of £120 million. As we made clear in the Statement, that is an extra £400 million over and above £1 billion that is spent on income support for nursing and residential homes.
I was interested in the view of the former SDP about child benefit and I am sure that we shall all take note. Obviously I cannot comment on up-rating in future years. The Secretary of State will continue to review the level of child benefit in line with his statutory obligation to do so.
§ Lord Coleraine
My Lords, I have in the past chided the Government for their cavalier attitude to child benefit . However, I now congratulate my noble friend on his statement that the benefit will be increased this year. I also offer congratulations on the Secretary of State's assurance that child benefit is and will remain a strong element in family provision. However, I wish to comment on the universality of the increase which was not necessarily expected but which is most desirable. It is very desirable that child benefit should operate for families of all incomes. Can my noble friend assure the House that the Government are still appraised of the fact that child benefit reflects the fact that al all levels of income, the needs of the mothers with children are greater than those without and that adjustments at all levels of income are in order and should be made?
§ Lord Henley
My Lords, very briefly, I thank my noble friend for his support. Of course we recognise that the needs of a mother with children are greater than a mother without children. That is why my right honourable friend saw fit to up-rate child benefit this year by £1 for the eldest child.