HL Deb 25 April 1991 vol 528 cc431-6

Earl Russell rose to move, That an humble Address be presented to Her Majesty praying that the order (S.I. 1991/547) be annulled.

The noble Earl said: My Lords, it's that man again! This is another consequence of the chaos in which the government programme has been thrown by the election for Eastbourne of my honourable friend Mr. Bellotti.

The concession extending child benefit—the extra pound for the first child—was extremely welcome. It cost £360 million gross. I believe that that is the correct figure although I shall be happy to be corrected if I am wrong. Before my noble kinsman says it for me, I accept that that must be paid for.

However, it seems to me that it is being paid for several times over. In the Budget, the Chancellor of the Exchequer saved £360 million—the same sum—by freezing the married couple's allowance. In our opinion, that is the right way to do it. However, I must confess to some regret that the freeze on child benefit lasted throughout the time that I had teenage children and the freeze on the married couple's allowance is introduced as soon as I had no dependent children. However, if my married couple's allowance is frozen to subsidise the costs of bringing up my noble kinsman's daughters, that is entirely proper and is right in any country which cares about its posterity.

Also, there is the saving on statutory sick pay. That was £100 million reduced to £98 million because of the concession on small businesses. In this order there is a claw back of the £1 increase from any families claiming guardians' allowance, child special allowance, invalidity benefit, widows' benefit, retirement pension, severe disablement allowance and invalid care allowance. I believe that affects something over 200,000 families. I have heard no figure for the amount of savings resulting from these regulations. I should like to hear such a figure from the Minister. However, I cannot believe that the savings from these regulations are sufficiently significant to justify such a conspicuous piece of meanness.

However, we have not yet finished with the savings. There is also the freezing of one-parent benefit covering 1.5 million families. I believe that amounts to £6.8 million gross although it is difficult to calculate the net figure. Therefore I believe that the Government have overdone it. They do not need these regulations for the stated purpose because the cost of child benefit increase has already been met.

In addition, I cannot follow the logic of my noble kinsman and the Government. I do not see why, on the ground that they are overlapping, people should not receive both benefits. They overlap only in the sense that they are given to the same people. They are paid for different reasons. If people have two different and entirely logically separate reasons for receiving benefit, there may be a case for them receiving both. Child benefit is paid in respect of the child. As the Secretary of State repeated when he increased it, it is paid because of the cost of children. Invalidity benefit is paid in respect of illness; severe disablement allowance is paid in respect of the disability, and so forth.

I cannot see why, because the child costs the family more, it follows that the disability does not cost the family more. If the Government are saying that all families with children therefore should not receive disability benefits, that is a more far-reaching argument than I believe they are yet prepared to come forward to justify.

I cannot understand the logic by which, if one has two claims for benefit, one may receive only one of them. It does not make sense to me. I beg to move.

Moved, That an humble Address be presented to Her Majesty praying that the order (S.I.1991/547) be annulled.—(Earl Russell.)

7.41 p.m.

Lord Carter

My Lords, I am grateful to the noble Earl for his Motion against the regulations. He began by saying, "It's that man again". I presume he was referring to the programme "ITMA". I believe both he and I are old enough to remember it, though I am not sure that the Minister is. However, I remind both the noble Earl and the Minister that there was a character in it called Mona Lott. Perhaps the Minister may wish to apply it to his noble kinsman.

I do not wish to add a great deal to what the noble Earl has already said. From time to time in the past we have discussed the increase of £1 a week in child benefit for the eldest child. I have made the point a number of times, and I do not apologise for repeating it. It produces a situation where the rich family with one child receives exactly the same increase in its total weekly income as the poor family just above benefit level with three or four children. To add to that injustice we now have this group, in excess of 200,000 families, who do not even see the increase in their weekly income because of this unfair and what I can only describe as miserly clawback. We read that the party opposite describes itself as "The party of the family" and speaks of a caring society; I wonder how it squares that with this kind of action.

The point regarding one-parent benefit which was frozen was well made by the noble Earl. The Secretary of State, Mr. Newton, justified the £1 extra benefit by saying: As the extra £l … will go to every family and will indeed be larger than the retail prices increase would have been in one-parent benefit—which is itself defined as an increase for the eldest eligible child—I decided that, on this occasion, it would not be right to make a separate increase in that benefit as well".—[Official Report, Commons, 27/2/91; col. 987–8.] The freezing of the one-parent benefit is particularly unfair to those families who would also lose out from the clawing back of the extra £1. I am sure when the Minister replies he will say that it has always been done that way; the £1 has always been deducted from dependency allowances. But the increase due in October will not be subject to a clawback. The £1 will not be clawed back from the child dependency increase and other benefits, and the rates of income-related benefits will also be adjusted to enable all families to benefit in full from the rise in child benefit. If that can be done in October, why not in April? What is the justification for the difference in treatment on each occasion? I shall he interested to hear the Minister's reply.

7.45 p.m.

Lord Henley

My Lords, before I explain the purpose of the regulations that we are discussing, I should point out that they do not establish new principles or indeed do anything to break with the approach adopted by all governments since 1948 in relation to child dependency increases and child-related benefits. I stress that it is only child dependency increases and not child-related benefits. My noble kinsman seemed to take them on to invalidity benefits, but it is only if there are child dependency increases in those that they would be affected.

The regulations amend the overlapping benefits regulations which provide for adjustments between benefits where an individual is entitled to more than one benefit serving the same purpose at the same time. The amendment concerns the benefits payable in respect of children, such as guardian's allowance, and the increases of benefits such as invalidity benefit or widow's benefit which are payable where a beneficiary is supporting a child. The amendment provides for an equivalent reduction of these child-related benefits where they are in payment for the only, elder or eldest child in respect of whom the £1 increase in child benefit has become payable since 8th April. The amendment secures the same result that would have been achieved by the operation of the normal formula used for the annual uprating of these increases and child-related benefits. The formula provides for any increase in child benefit to be taken into account when setting the new rates of child dependency increases and child-related benefits.

Since 1975 there has been a legislative requirement for an annual review of rates of benefit and provision has also been made for any increase in benefits for children to be adjusted to reflect any increase in child benefit.

In the course of reviewing the rates of benefits, my right honourable friend the Secretary of State is required to look at the rate of child dependency increases and also guardian's allowance and child's special allowance which are payable at the same rate as child dependency increases. He is also required to consider the rate of child benefit and if he decides that an increase in child benefit is appropriate, he is empowered to make a reduction in child dependency increases and child-related benefits.

The linkage between child benefit and benefits payable for children has been operated on the basis of formulae which enable an increase in child benefit to trigger a change in benefits payable for children. The current formula, which was first used by the last Labour Government in 1977, has applied continuously to the annual increases of benefit since 1980. It involves calculating what the child dependency increase would be if the general uprating percentage were applied and then deducting from that amount any cash increase in child benefit. The formula also applies to establishing the new rates of guardian's allowance and child's special allowance. It is therefore possible when setting these rates to reflect by the operation of the formula the combined effect of the uprating increase and any reduction considered to be appropriate.

The use of the formula has meant that in years which have seen no increase in child benefit, beneficiaries have had the full percentage rise in their child dependency increase. Equally, the formula achieves an intention which has been shared by all those responsible for the social security scheme since 1948. This common intention has been that increases of benefit to be paid to those supporting dependent children should take account of payments made for children on a universal basis whether such payments have been originally in the form of family allowances or subsequently child benefit. The formula makes it possible to adjust the constituent parts of overall child support.

The operation of the formula has been simple in practical terms up to now because, since 1978, there has been, on the one hand, a single rate of child benefit for all children and, on the other hand, one rate of long-term benefit increases for children and, until their abolition in 1984, one rate of short-term benefit increases for children. Since the legislation provides for a single rate for benefits applicable to children, it has been a straightforward matter to increase that rate by the general uprating percentage and then to take off the actual amount of any increase in child benefit.

However, the creation of two rates of child benefit has raised a problem in implementing the formula because of the fact that the main legislation is currently framed in terms of a single rate of child depencdency increase. The £1 per week increase in child benefit for the only, elder or eldest child in a family from April this year while the rate of child benefit payable for the other children in a family remains uncharged creates a higher and a standard rate of child benefit. The increased amount of child benefit does not apply to all children and application of the uprating formula to establish the new rates of increases and benefits for children would necessitate the creation of two different rates for those benefits. However, such a reintroduction of different rates would require the amendment of main legislation and it was rot possible to achieve this by the time the new rates of benefit would become payable. Therefore we have adopted a different means of taking the increase in child benefit into account and thereby to achieve what would normally be the result of using the uprating formula.

As I have explained, the overlapping benefits adjustment that we have introduced is designed to secure exactly the same result as would have been achieved by the operation of the child dependency increase uprating formula. We consider that it secures a fair level of support for each child and achieves the aim of recognising the natural interdependence between payments available in respect of children. The effect of the regulations is that a beneficiary receiving both child benefit and a child dependency increase or a child related benefit will receive the same total amount of £17.95 per week in child support for each child whichever of the two rates of child benefit is in payment for each particular child.

The noble Lord, Lord Carter, asked why there is an adjustment on account of the April increase in child benefit but there will not be as regards the October increase announced by my right honourable friend the Chancellor of the Exchequer in the Budget. The October increase in child benefit has been specifically designed to give extra help to all families regardless of whether they are receiving other benefits. In addition, the adjustments take account of the April increase in child benefit and were part of the uprating formula for child dependency increases of benefit, guardian's allowance and the child's special allowance. As these benefits are not being increased in October, they are not relevant to the October increase in child benefit. I repeat that there is nothing sinister in these regulations. They are doing nothing new other than continuing exactly the same approach as has been adopted by all governments of whatever persuasion in relation to child dependency increases since 1948. Therefore, I hope that the noble Earl will feel able to withdraw his Prayer.

Lord Carter

My Lords, the noble Lord said that a clawbacl; will not take place because that factor was not taken into account when the child dependency rates were last up-rated. Does that mean that it will not be taken into account when the benefits are up-rated next April?

Lord Henley

My Lords, when they are up-rated next April I believe that they will be considered in exactly the same way as they were this April. In other words, and as I have explained, the policy intention which has been in existence since 1948 will continue.

Earl Russell

My Lords, I apologise to my noble kinsman and the noble Lord, Lord Carter, for keeping them from their dinner. I thank my noble kinsman very warmly for that reply. It will need careful study. I shall go away and read it with great care. It seemed to add up to: "We have always done it this way". That is not really an answer. To these Benches the proposition that both Labour and Conservative Governments have both got it wrong is one that holds no terrors whatever. Nevertheless, I beg leave to withdraw my Motion.

Motion, by leave, withdrawn.

The Earl of Strathmore and Kinghorne

My Lords, I beg to move that the House do now adjourn during pleasure until 8.25 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 7.52 to 8.25 p.m.]