Social Security Benefits Up-rating

HL Deb 21 October 1991 vol 531 cc1325-43

3.40 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 being made in another place by my right honourable friend the Secretary of State for Social Security on social security benefits up-rating. 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, as is now the normal practice, in the first full week of the tax year—that is, the week beginning 6th April. The statutory instruments to implement my proposals, applying to both Great Britain and Northern Ireland, will in due course be laid before both Houses for debate, and a full schedule of the new benefit rules is being placed in the Vote Office.

"I will as usual deal first with the main national insurance benefits, including in particular the retirement pension which now goes to some 10 million people. The basis for the up-rating will be the latest available information about the increase in the retail prices index over the past year; that is to say, the rise of 4.1 per cent. in the 12 months to September.

"Our firm and continuing commitment is to increase the pension fully in line with prices. Next April, therefore, the basic pension will go up by £2.15 a week for a single person—from £52.00 to £54.15—and by £3.45 a week for a couple—from £83.25 to £86.70. This will increase expenditure on retirement pensions by around a billion pounds.

"Public service pensions will also be increased across the board by 4.1 per cent., as will war widows' pensions and war disablement pensions. And I am glad to be able to tell the House on behalf of my right honourable friend the Secretary of State for Defence that the special Ministry of Defence payment to the pre-1973 war widows will similarly go up from £44.36 to £46.18 a week. This special payment will of course remain tax-free and continue to be disregarded in calculating entitlement to income-related benefits.

"All other national insurance benefits will be increased by 4.1 per cent.; for example, taking unemployment benefit for a single person from £41.40 to £43.10, and from £66.95 to £69.70 for a couple. Maternity allowance and lower rate statutory maternity pay, both of which were increased in real terms in the last up-rating, will be increased from £40.60 to £42.25 and £44.50 to £46.30 respectively.

"National insurance sickness benefit will go from £39.60 to £41.20 for a single person and from £64.10 to £66.70 for a couple. As the House knows, however, most short-term sickness is of course now covered by statutory sick pay administered by employers, in which a number of changes were made last year. The new arrangements, including the special provisions for small employers, appear to be working well, and I do not propose to disturb them except to increase the lower rate of SSP, which goes to employees currently earning between £52 and £185 per week. This will be increased by the RPI, from £43.50 to £45.30. The higher rate, which goes to the better paid employees of whom the great majority are in any case covered by occupational sick pay schemes, will remain at £52.50, since I judge that the cash required to increase it can more sensibly be used to improve the position of sick and disabled people in other ways.

"I turn next to the income-related benefits—income support, housing benefit and community charge benefit. By convention, since the main housing costs of income support claimants are met separately and directly, these benefits have been up-rated by an index which seeks to exclude such costs.

"As the House is aware, since these benefits were up-rated last year there has been a £140 reduction in the community charge, which in turn has meant a reduction of £28—over 50 pence a week—in the amount which those on income support are expected to meet from what was included in their benefit for this purpose. There is therefore a strong case for adjusting benefit rates accordingly to produce an expenditure saving of £200 million. I do not propose to do that.

"I have, however, concluded that it would be right in these circumstances to align the calculation of what is called the Rossi index more exactly than at present with the items whose costs people are expected to meet from their benefit. This entails including within it not only 20 per cent. of community charge but also certain miscellaneous housing costs, and water rates, which have not previously been covered in the calculation. This will put the index on a more logical basis for the future—and indeed the inclusion of water rates responds directly to a number of representations that we have received from welfare rights bodies and others.

"The result is to produce an up-rating index of 7 per cent.; nearly 3 per cent. higher than the full RPI. Other things being equal, that would entail a small reduction in the cost of the up-rating, by comparison with the use of the previous less comprehensive calculation. But that will not in fact happen because I propose to devote rather more than the sum involved to an additional increase in the income support premiums for pensioners who are disabled or who are over 80.

"These premiums will be increased, over and above the 7 per cent., by £1 a week for a single pensioner and £1.50 for a couple, contributing to overall increases in income support for this group of £5.10 a week, from £58.10 to £63.20 for the single person and of £7.70 a week, from £88.45 to £96.15 for the couple. The cost will be £60 million.

''Nearly 600,000 pensioners will gain to the full extent through income support, and over 400,000 through increases in housing benefit and community charge benefit. It will thus build further on the series of measures we have taken in recent years to give extra help to the less well-off pensioners, and especially those who are older, which have already increased the pensioner premiums by some £300 million in real terms in the past two years.

"All other income support rates will go up by 7 per cent. Thus, benefit for a single person over 25 will go from £39.65 to £42.45; for a couple with two children aged 10 and 12 from £104.55 to £111.85; and for a pensioner couple aged under 74 years from £83.15 to £88.95.

"Before leaving the income-related benefits, there are three further issues to which I should refer. The first concerns what are called the non-dependant deductions in housing benefit and income support for housing costs—that is to say, the contribution expected from the income of a non-dependant, living in the household of a claimant, in calculating the householder's benefit. Here I have received representations that these deductions, however reasonable in concept, are at too high a level for those on lower incomes.

"I shall therefore shortly be consulting the Social Security Advisory Committee and the local authority associations on a proposed restructuring of the deductions from next April. Its effect would be to reduce the contribution expected from anyone whose income is below £130 a week—including a reduction of over a quarter, from £5.70 to £4, in that applying to a non-dependant who is not in full-time work or whose income is below £65—but to expect a somewhat larger contribution than at present—£18 instead of £13.50—from those in full-time work with incomes above £130 a week.

"While giving what I believe will be widely seen as a fairer and more sensible structure, and once again helping the least well-off, these proposals would reduce benefit expenditure by about £50 million. This, however, helps me to make much more substantial increases than would otherwise have been possible in the second area on which I need to touch—the income support limits for residential care and nursing homes.

"Unlike other income support rates, these do include provision for housing costs. But I intend to make increases significantly greater than inflation, raising support in this field by nearly £200 million, or some £80 million more than would come from simply up-rating the limits in line with the retail prices index.

"After the very large increases made last year in the limits for nursing homes I have concluded, in the light of the available evidence and the representations made to me, that the right course is a general increase in virtually all the limits of £15 a week, thus giving a proportionately larger increase this year to people in residential care homes. And for the residential care limits in two categories—those for the very dependent elderly and for the mentally-handicapped—who between them cover almost 40 per cent. of all residential care home cases I propose an increase of £20.

"In only one case do I propose an increase below £15, which is in respect of the limit sometimes known as the terminal illness limit for nursing homes. Originally intended principally to give additional help to hospices, it has not proved very effective for that purpose, since many hospices do not make charges and there is therefore no basis on which their patients can claim the special rates of income support. As a basis for distinguishing between nursing homes it has become increasingly artificial and difficult to operate. I therefore think it right to make only a £5 increase in this limit, thus narrowing the gap between it and other nursing home limits, and to steer additional help to hospices in two other ways.

"One is to make changes in the rules for attendance allowance, and from next April also the new disability living allowance, which will give over £2 million of additional benefit to people in voluntary hospices. The other is to make available from the social security budget a further £1 million towards the direct funding of hospices as part of the Government's commitment to increase their contribution to the movement. This sum will be made available through the Department of Health. I believe these moves will be widely welcomed.

"With the one exception to which I have referred, all limits will increase by over 5 per cent., with the limit for the very dependent elderly in residential care homes going up by around 10 per cent., making a total increase in this important category, covering around a third of all elderly people in residential care homes, of 32 per cent. in three years. The Greater London additions for both residential and nursing homes will also be increased to £25 and £35 a week respectively.

"Finally, in relation to the income-related benefits, I should tell the House that the additional resources for the Social Fund which my right honourable friend the Minister of State announced in August, increasing this year's grants budget by some £10 million and the loans budget by some £30 million, will be fully carried through into provision for 1992–93, when the budget for the two elements together will be almost £300 million—30 per cent. higher than the budget initially made available in 1991–92. This is of course in addition to the greatly improved arrangements for cold weather payments, which are outside the budget and where, should the need arise, payments will now be made automatically and some 400,000 more people than previously would be eligible for payments.

"I turn now to families with children. As I said in my Statement this time last year, child benefit is and will remain a strong element in our policies for family support. That has been underlined by the further increase which has taken place this month, announced by my right honourable friend the Chancellor in his Budget, together with the undertaking that the benefit would in future be increased in line with prices.

"Having reviewed the benefit levels in accordance with my statutory duty, I have decided that the right course for next April is to increase each of the rates which have just come into payment by the full 4.1 per cent. RPI increase for the whole year to September, even though they will have been at their present level for only six months. This will raise the payment for the eldest eligible child by 40p. to £9.65 and the rate for other children by 30p. to £7.80. One-parent benefit will also rise, by 25p. to £5.85 per week.

"At the same time we shall continue with our policies to give greater help to low-income families with children, including not least those in work whose earnings are modest. This too has been underlined by the increases in income support and family credit made in parallel with this month's child benefit increase. The relevant benefit rates, including the family premium and the age-related amounts for children, will all be increased in April by 7 per cent.

"On the latest figures, family credit is now going to a record 356,000 families, 30,000 more than a year earlier, at an average level of over £30 a week. This gathering success will be further reinforced next April by reducing from 24 to 16 the number of hours of work needed to qualify, which we expect to enable another 30,000 families to benefit immediately and a further 35,000 in due course. I shall shortly be consulting the Social Security Advisory Committee on proposals designed to ensure a smooth transition to these new arrangements and more generally to improve the speed and accuracy with which claims are processed.

"While these changes will help families of all kinds, they are likely to be of particular help to lone parents who wish to work, who already account for over one third of those helped by family credit. We have already improved the earnings disregard in housing benefit and community charge benefit; and the introduction of the £15 maintenance disregard in these benefits next April will mean that lone parents receiving maintenance will still be better off in work on family credit with earnings up to £50 below what they would need at present.

"The changes in family credit, together with this new maintenance disregard, will increase expenditure next year by some £70 million. This will mean that since 1988 we have made available some £600 million extra in real terms through the income related benefits to improving the position of less well off families with children.

"I come now to benefits for sick and disabled people, to whose needs we have consistently sought to give special attention both in promoting and improving existing benefits and in developing new ones. All the main disability benefits will go up by the 4.1 per cent. increase in the RPI, thus raising invalidity benefit in line with the retirement pension and both severe disablement allowance and invalid care allowance from £31.25 to £32.55. The invalidity allowances payable with invalidity benefit, and since December 1990 the similar additions payable with severe disablement allowance, will also be appropriately increased.

"The main disability premiums in income support, including the greatly enhanced premium for disabled children introduced 18 months ago, will of course rise by 7 per cent., so that, for example, the benefit for a family with a disabled child of 12 will increase from £107.60 to £115.10 a week.

"Apart from the strategic improvement in benefits for disabled people, to which I shall come in a moment, I have a number of detailed changes to make which will be of significant benefit to those affected. The residence qualifications for severe disablement allowance will be brought into line with those for comparable benefits, making it easier for people coming or returning to this country to qualify. Families with children under 16 who receive social security help with care costs will when the child has to go into hospital keep that help for up to 12 weeks instead of four. Also the earnings limit for invalid care allowance will be further increased from £30 to £40.

"A number of possibilities for simplification of the war pensions scheme are currently under discussion with representative bodies in a joint effort to improve the working of the scheme. While I do not intend to make decisions on most of the issues involved until those discussions have been concluded, I have decided to add the war pensioners dependency allowance into the basic war pension for all war disablement pensioners, which is not only a helpful simplification but will give small gains to some 50,000 people. This group of small improvements involves a total additional cost of about £4.5 million.

"I am also able to inform the House of our plans for further substantial increases in resources for the independent living fund which is providing assistance to over 10,000 severely disabled people. The provision for next year will rise by some 40 per cent., adding more than £20 million to this year's level of £54 million. This will ensure that the fund continues to play an important role in helping people with disabilities to live independently in the community in the run-up to the full implementation of community care.

"Although not strictly an up-rating matter, I should also take this opportunity to tell the House, following consultation with the Social Security Advisory Committee, that I am today laying a revised regulation to re-establish the original policy intention underlying the income support severe disability premium, whose purpose is to give extra help to severely disabled people living independently of their families but which has in some cases been extended well beyond that by the creation of artificial tenancy arrangements within one household. While accepting that the regulation re-establishes the clear policy intention when the premium was introduced, the committee has asked that steps should be taken to ensure that no disabled person should lose an already established entitlement. I gladly accept that. Appropriate protection will be provided in those cases at an additional cost of £5 million compared with the proposal originally referred to the committee.

"From next April, mobility allowance and attendance allowance for those under 65 will be replaced by the new single extra costs benefit—disability living allowance (DLA). Those entitled will be automatically transferred to the new benefit and the relevant rates will be set at 4.1 per cent. above those of the existing allowances. Thus, the higher mobility component of DLA will be £30.30 —£1.20 above the current mobility allowance—and the two upper rates of the care component will be set at £43.35 and £28.98—£1.70 and £1.15 respectively above the current attendance allowance rates. Attendance allowance itself will be similarly increased for those over 65, for whom it continues.

"At the same time two new tiers of DLA will be introduced, giving extra help with care or mobility costs—or both—for the first time to some 300,000 people for whom the existing benefits do not cater. Among the gainers will be 10,000 severely mentally handicapped people with serious behavioural problems, who cannot at present get help with their mobility costs—and who will qualify for the top rate of the mobility component.

"These new DLA lower rates will be set not at the £10 per week on which discussion of the new structure was based, but at £11.55—in effect, applying both this year's up-rating and last year's to the original figure. And of course for those on the lowest incomes receipt of even one of the lower rates of DLA will bring entitlement to the disability premium in the income related benefits—so those on income support will be nearly £30 a week better off.

"We shall also in April introduce the new disability working allowance, helping up to 50,000 disabled people who wish to work, but have limited earning capacity, by enabling them to top up those earnings with benefit. The rates governing its assessment are set out in the schedule to my Statement. They will mean, for example, that a single person would be able to earn as much as nearly £100 a week, while still being entitled to some disability working allowance—and with it the disability premium in housing and community charge benefit—together with the reassurance which disabled people have been seeking of a much extended linking period back to their old incapacity benefit should they be unable to continue working.

"These new disability benefits mark a further important stage in a programme which, in the past two years, has already included real increases in the disability premiums, both for adults and children, the introduction of a carer's premium and of additional payments with severe disablement allowance, the extension of mobility allowance to the deaf-blind, and the extension of attendance allowance both to severely disabled babies and to the terminally ill.

"Overall, by 1993–94, the better part of a million disabled people will be gaining from this programme, either through real increases in existing benefits or entitlement to new ones, to a total of some £300 million. With earlier changes and the massive expansion which has taken place in the coverage of mobility allowance, attendance allowance and invalid care allowance, it will mean that next year expenditure on benefits for disabled people and carers will be no less than two and a half times greater than in 1979.

"Mr. Speaker, despite the difficult circumstances, we have been able to commit ourselves to the up-rating I have outlined today, at a cost of over £3 billion. We have honoured and confirmed our pledge to retirement pensioners. We are doing more for those who are older and least well off, more for families with children, and more for disabled people. Those are our priorities, and I believe they will be widely endorsed".

My Lords, that concludes the Statement.

4.3 p.m.

Lord Carter

My Lords, the House will be grateful to the Minister for repeating the Statement made in another place. It is a complicated Statement containing a mass of figures. There should be a better way of dealing with it than responding with about 30 minutes' notice. I received the Statement at, I think, 20 minutes past three. That is surprising since the press and television were clearly briefed for Sunday's and Monday's newspapers and television bulletins. We welcome the increases in benefits laid out in the Statement. I am sure that those who depend on social security benefits will wish that there were an election every year.

On a general note, a number of increases are correctly quoted as being in line with inflation. That should be the appropriate level of inflation for the claimant group concerned. As we all know, if we continue to increase benefits in line with inflation rather than in line with average earnings, it means that the incomes of social security claimants will automatically fall further behind the incomes of those in work. That is demonstrated by the fact that income support is now worth less in relation to average wages than at any time since 1948.

To increase retirement pensions in line with an RPI of 4.1 per cent. is not good news for pensioners. The headline RPI has fallen because of the welcome fall in mortgage rates but very few pensioners benefit from that. The increase for pensioners' RPI should be about 5.7 per cent. The increase in the poorest pensioners' RPI is of the order of 7.2 per cent. rather than 4.1 per cent. Is the increase over and above the RPI—the 7 per cent.—restricted to disabled pensioners and those over 80? Perhaps the Minister will answer that question when he responds.

If the Government had not broken the link with earnings, as they did, the single person's pension would now be £64.85 instead of £52 and a couple would receive £103.75 instead of £83.25. As we know, the Labour Party is pledged to increase both the single person's and married couple's pensions and to restore the link between pensions and earnings.

The increase in child benefit is welcome. There is a genuine difference of opinion between the Government and the Labour Party on this. We still believe that it is wrong to target the bulk of the increase on the first child, as the Government have done. The freezing of child benefit for four years means that with regard to the second and subsequent child parents are still receiving about £2 a week less than they would have received if child benefit had not been frozen.

I refer again to the increase in benefit for the over 80s. That is welcome but puzzling. Only this year the Prime Minister, Mr. Major, said that that was a badly targeted benefit. I presume that the Government have been able to overcome their earlier reluctance to increase benefits. Perhaps the Minister will explain the reason for that change of heart in this last Session of Parliament.

The increase in the lower rate of the DLA to £11.55 from the original figure of £10 a week that was first mooted is welcomed by all sides. We were expecting the Government to do that and we are not disappointed. However, as the Minister knows, there is a real problem with the new disability working allowance. It is hard in the time available to tease out the answer from the Statement. Thresholds for earnings have been set in such a way, and the benefit so heavily means tested, that some recipients could have an effective marginal tax rate of 96p in the pound. Does the Minister agree with that calculation, or do the figures in the Statement alter that alarming state of affairs?

The increase of £15 in the residential care grant is also welcome. However, we know that it still leaves many elderly people with a large gap to fill. The Minister will be aware that only last week Price Waterhouse—the Government's advisers in the matter—calculated that the shortfall was still about £37 to £72 a week depending on the nature of the care. How are elderly people who face such a shortfall supposed to manage with an increase of £15 a week?

Perhaps I may refer to specific points raised in the Statement. I shall refer to the paragraph numbers as there are no page numbers. Paragraph 6 refers to the changes in the statutory sick pay and the freezing of the higher rate of SSP. That seems to be a version of the two-card trick. Last year a large number of people were removed from the higher rate. This year those who have left have had the rate frozen. Does the Minister agree that that is correct?

I have already asked the question on paragraph 11. Will the Minister confirm that the increase in pensions over and above the 7 per cent. is for disabled pensioners and the over-80s only? I believe that that is what the Statement provides.

With regard to the latter part of paragraph 16, what is the effect of the larger contribution for the non-dependants from £18 instead of £13.50 from those in full-time work with incomes above £130 a week? I ask that because in the next paragraph the Government state that such proposals will reduce benefit expenditure by about £50 million.

Paragraph 21 relates to the £5 increase in residential and care grants for the terminally ill. How does that saving compare with the increased funding of £3 million referred to in paragraph 22? Is there a net saving or a net increase?

Lord Henley

My Lords, perhaps I may intervene. Will the noble Lord indicate which paragraph he refers to?

Lord Carter

My Lords, I refer to paragraphs 21 and 22. I have to do so because there are no page numbers. Paragraphs 21 and 22 relate to the increase in the residential care grant. Those in hospices have been limited to an increase of £5 a week. There is obviously a saving. How does the saving compare with the £3 million extra funding for hospices which is referred to in the next paragraph?

We know that the Government have done nothing to deal with the problems of the Social Fund which we discussed only last week. How does the total increase of £40 million in grants and the loans budget compare with the inflation effect on the total budget of the Social Fund? Will the total budget increase during the year be more, or less, than the rate of inflation?

Those are the points that I have been able to tease out in the short time available. As always, items which are left out of Statements provoke the most questions. There is still nothing to help with the problems of 16 to 17 year-olds that we have debated many times. There remains the requirement for 20 per cent. of the poll tax to be paid by people receiving benefit, although they will receive a 100 per cent. rebate for the council tax when it is introduced. Why is there that distinction? There is nothing in the Statement to help the homeless youngsters in Nottingham who were reported in yesterday's Observer as starving. Sometimes they have to live without food for several days and when they do eat they spend only £1 to £2 per day on food.

In the final paragraph of the Statement the Minister gave the global increase in the budget. As he often quotes the Government's total spending on social security can he say how much is due to the increased expenditure on unemployment benefit, how much is due to an increase in the number of claimants for all benefits and how much is due to an increase in benefits in real terms over and above inflation? In other words, how much true new money is there in the increases about which we have heard?

There is one welcome feature of this year's Statement. It is certainly the last in this Parliament and equally certainly the next Statement will be made by a Labour Government.

Earl Russell

My Lords, when one considers the Statement in the present circumstances it deserves the verdict of Sir Alan Herbert, Bishop of Ipswich: "Well, it could have been worse". In a larger context I cannot help Feeling that the Statement has fallen resoundedly between two stools. On the one hand, I do not believe that the Government are up-rating benefits by sufficient to meet real needs. On the other hand, they are spending too much money on social security to be able to exercise a proper control of public spending. My noble kinsman may feel that that is a paradoxical combination. I am sure that he has spotted the resolution. The combination of those two factors marks the failure of the economic policy of many successive Chancellors of the Exchequer.

It has been characteristic of this Government that even in boom years they have run unemployment at a much higher level than their predecessors of all parties. By "unemployment" I do not mean only registered unemployment: looking at income support figures the distinction shows. It means that social security as a percentage of government spending has continued to rise rapidly throughout this Government's period of power. The number of people dependent on social security makes it more difficult to pay adequate benefit levels to each of them. We need to be giving more money to fewer people and that means getting the country back to work.

I should like to draw my noble kinsman's attention to the recent report on benefit levels produced by the Family Welfare Association. It found, following a dietetic test carried out by the London Hospital, that 53 per cent. of the people receiving income support who visited it did not have the money to buy enough food. The association tried to work out the lowest benefit level at which such people could buy an adequate amount of food for the week. It said that the level did not square at all with what the applicants had to spend. The association also drew attention, as did the noble Baroness, Lady Faithfull, to problems of ill health among those receiving benefit. The same findings were shown in the survey carried out by the Nottingham Hostels Liaison Group referred to by the noble Lord, Lord Carter. It found problems of physical and mental ill health, epilepsy, diabetes, scurvy and chronic chest complaints.

As the noble Baroness, Lady Faithfull, said on Thursday, keeping benefits too low carries costs to other ministries. My noble kinsman rashly said that he would never be convinced by that argument. "Never" is not a political word. Benefit levels are too low, the number of people receiving benefit is too high, and more work is the only cure.

I do not believe that the Government's treatment of the pensioners is as generous as they like to make out.

The point about the different indexes has been made by the noble Lord, Lord Carter, and I shall not elaborate. It is perfectly fair; the indexes are not disputed. However, the way that the issue has been worked out on this occasion is unfortunate. Among pensioners there will be a real sense that it is inequitable. I do not envy the Government the task of explaining on the doorsteps why the situation is otherwise. The increases in pensions fall well short of those which the Liberal Democrats would have proposed; that is, £5 for single persons and £8 for married couples. Does my noble kinsman believe that the figures that he has given for the cost of these increases may be affected during the year by legislation to implement the Barber judgment, or does he believe that in that respect we are running before we can walk?

I deeply regret the failure to remove the 20 per cent. requirement for the community charge. I also regret, as does the noble Lord, Lord Carter, the failure to increase the higher rate of statutory sick pay. I am extremely unhappy about the arrangements reducing the part-time work definition from 24 hours to 16. The problems which arise when we are dealing with family credit where we are encouraging people to go to work, which I welcome, are different from those which arise when we are dealing with unemployment benefit where we risk discouraging people from going to work, which I do not welcome. I was delighted to hear that those problems were being referred to the Social Security Advisory Committee. Can my noble kinsman give me a hint of the timetable for that? It is a matter to which Members of this House ought to give their attention at some time and it would be easier with the Social Security Advisory Committee's report in front of us.

There are also a number of aspects of the Statement which I warmly welcome. In particular, I am pleased to see that many of them mirror changes that have been argued for by Members of this House, some of whom are in the Chamber today. In that context I thank my noble kinsman for being prepared to pass on arguments from Members of this House. It appears sometimes to be to good effect.

First, I mention the noble Baroness, Lady Faithfull, in the context of child benefit. I should have liked to see further increases above the rate of inflation in family premium on income support and child credit in family credit. On that matter I speak for my party. I welcome the inclusion of water costs in the Rossi index. That is a small concession to representations in which I joined last Thursday when I spoke on behalf of my party. I welcome the concession to the over-eighties. I also welcome the proposal to review the system of non-dependent deductions which needs a great deal of thought. I hope that my noble kinsman and his right honourable friends will take the opportunity to look at the inclusion of prisoners in those for whom there are non-dependent deductions. The logic of that has not escaped the notice of this House. I hope that the department may take the opportunity to do something about that.

I welcome the concession on residential homes. In that regard I pay tribute to the noble Lord, Lord Carter. I welcome the concession on hospices and the small mercy which we have been offered as regards the Social Fund. Having asked for that as recently as last Thursday, I must offer my thanks when it comes. How much of that will be swallowed by rising unemployment, I do not know. However, I am glad that that concession is there.

I welcome the concession on residential qualification for severe disablement allowance, which we owe largely to the efforts of the noble Lord, Lord Swinfen. I am particularly delighted by the concession on the independent living fund, for which we owe thanks to the noble Lord, Lord Henderson of Brompton.

A lot, though by no means all, of the small matters in the Statement are satisfactory. The blame for what is not satisfactory in the Statement does not rest particularly with the Secretary of State. Any Secretary of State for Social Security inevitably has to clear up the mess which has been made elsewhere. The blame for what is wrong rests fairly and squarely on successive Conservative Chancellors of the Exchequer.

Lord Henley

My Lords, a large number of points have been made and I cannot guarantee that I shall be able to answer all of them in the time available. I begin by saying to my noble kinsman that I would rather not speculate on the Barber judgment at present. We are committed to achieving equal treatment as regards pensions and in particular to achieving equalisation of the state pension age. However, it would be wrong to make decisions in advance of Barber and in advance of the discussions which we intend to initiate, as my noble kinsman will know as a result of the Statement made by my right honourable friend the Secretary of State last summer.

My noble kinsman asked also about referrals to the Social Security Advisory Committee, items on family credit and the timetable. Referrals will be made as quickly as possible so that the committee has sufficient time to consider and, more importantly, to consult others if it is felt necessary.

The noble Lord, Lord Carter, objected to the fact that he received his copy of the Statement rather late. I apologise for that. However, I assure the noble Lord that there was no prior briefing to the press as to the contents of the Statement. The noble Lord knows that must be true because most of the press reports were somewhat inaccurate. If the noble Lord had based his remarks on reports he read in the press he would have been fairly wide of the mark. I suspect that one reason why the noble Lord was wide of the mark was because he asked me about the new £1/£1.50 increase for the enhanced rate of income support for pensioners—that is, for pensioners on income support—which does not abolish the 25p age addition for the over-eighties. As the noble Lord rightly said, my right honourable friend the Prime Minister said that was a badly targeted benefit. Where possible it is far better to add to the enhanced rate of income support for the older and disabled pensioner so that the benefit goes to those in need rather than adding to the 25p age addition.

The noble Lord suggested also that we are not using the right index when we base the uprating of the retirement pension on the RPI. It was difficult to understand what the noble Lord was asking but I believe he was suggesting that we should use either the pensions prices index or Rossi. Neither the noble Lord nor his party demanded that pensions should be uprated in line with Rossi last year when that index was less than RPI. One cannot ask for Rossi this year when it was not asked for last year. In the main, over the years RPI has given better increases to pensioners than the pensioners prices index or Rossi. We believe it is correct to use the RPI again this year. It maintains our commitment to up-rating the state retirement pension in line with prices.

The noble Lord also referred to his party's commitment to restoring the link between earnings and/or prices, whichever is the higher. That is not the key to improving basic pensioner income. As I have already said, we have consistently maintained the value of retirement pensions and at the same time—and this is more important—because of our economic policies we have seen a growth in their income from all sources (and it is income from all sources which the pensioner finds relevant) of some 33 per cent. in real terms in our first eight years in power. That is an increase in real terms of 3 per cent. per year. Under the last Labour Government the total increase was 3 per cent. in their entire period in office, which is an increase of less than 0.5 per cent. in real terms. At the same time during our years in office there has been an increase in occupational income pensions of almost 100 per cent. and we have seen an increase in pensioners' saving income of 110 per cent. Under the last Labour Government, pensioners' income from savings fell.

I now turn to the question of DWA and the allegations by the noble Lord, Lord Carter, that at its highest that could amount to a marginal tax rate of 96p in the pound. It is possible that one can suffer that marginal deduction rate but that only applies when a person claiming disability working allowance is receiving also housing and community charge benefits. Otherwise, the maximum rate is 70p in the pound. I am afraid that high deduction rates are inevitable if income related benefits are to be made widely available. DWA recipients will still be better off for every extra pound earned.

I turn now to the question of income support rates for registered care and nursing homes. The noble Lord cited a report by Price Waterhouse. I do not have as much faith in that report as I had in the study which we commissioned from Price Waterhouse over a year ago. The report mentioned by the noble Lord used a much smaller sample, with those included in the sample selected by the Registered Care Homes Association rather than by Price Waterhouse. I am not sure that as much credence can be placed on that report as can be placed on our report of last year.

The noble Lord, Lord Carter, asked about the shortfall for people where the income support limits do not cover the cost of residential homes. No government can ever meet those costs in full, however high they may be set. It would be wrong to continually increase the fees, thereby encouraging homes to increase their charges. That would have a deleterious effect for those not on income support who have to pay fees led by our income support rates. Those rates have been increased dramatically over the past few years and I am glad that there was a partial welcome for those increases.

The noble Lord had doubts about changes to the terminally ill limit. There is no established convention for increasing those limits. I remind the noble Lord that the terminally ill limit is still to be increased, albeit by a lower figure than the others. An increase of £5 still involves a substantial increase in costs.

On non-dependant deductions and the increases for those with incomes over £130, a claimant with a single non-dependant with income over £130 will see a decrease in benefit of £4.50 per week from our increases in these rates. That will be mitigated by increases in the applicable amounts. For those on incomes below £65 the decrease will be only £4; for those with incomes between £65 to £99 the decrease will be £8; and for those with incomes of £100 to £129 it will, be £12. Therefore, there is certainly an increase for claimants with non-dependants living with them.

In passing, perhaps I may answer the question of my noble kinsman Lord Russell. It is intended that we shall be able to make adjustments for those who are non-dependants but who are temporarily absent in legal custody. The intention is that in hospital cases, where the absence is more than six weeks, the non-dependant deductions will not apply.

The noble Lord, Lord Carter, asked how much of the £3 billion quoted resulted from higher unemployment claimant numbers, and so on. That figure relates to the costs of giving benefit increases compared with retaining the existing rates. The noble Lord is right to draw attention to other factors which affect the total level of expenditure. But the noble Lord must wait for the Autumn Statement of my right honourable friend the Chancellor to hear of the new planning total for social security.

A considerable amount of new money is entering the benefit system in the proposals that I have been able to repeat on behalf of my right honourable friend; for example, £57 million for pensioners on the higher pensioner premium—the £1 and £1.50 I mentioned. There is £2.2 million for attendance allowances and hospices; the grant I mentioned of £1 million from the Department of Health; and the increase in the budgets for the Social Fund of £67 million. The cost of relaxation of the SDA residence test is £1.1 million. There are further changes in the increased budget of the independent living fund of over £20 million. SDP transitional protection is £5.4 million. The add-in costs of registered care and nursing homes—increases above RPI—are £80 million. On top of all that, various measures were announced in the past which will come into effect next year; for example, the introduction of disability living allowances (first year costs only) of £120 million, £15 maintenance disregard, which I mentioned, totalling £20 million and a reduction in the hours rule in family credit totalling £49 million.

Those are real increases and noble Lords should welcome the increases we have been able to announce that are specifically targeted at the elderly pensioner, the less well-off elderly pensioner, families and the disabled.

4.32 p.m.

Lord Boyd-Carpenter

My Lords, perhaps I may first thank my noble friend for reading a long and complex Statement to your Lordships. It is a Statement which is of more importance to more people in this country than any other Statement that is made in the course of the year. In that respect I am reminded that I should perhaps declare a modest interest.

I am glad that my noble friend and his right honourable friend stuck to the RPI as the guideline. There is always a temptation to follow other guidelines. However, there is a great deal to be said for continuing consistency in deciding the guideline to be adopted. The RPI is the best tried and all-round most sensible method of deciding what increases should be made generally across the board. I am glad that the Government stuck to that.

I was glad also to see that the Statement emphasised what is being done for the disabled in a number of ways. The needs of the disabled, taken as a whole, are probably more real and certainly more unpleasant than that for the great majority of beneficiaries under the scheme. The concentration by the Government, generally speaking, on the disabled appears to me to be a thoroughly humane and sensible way of administering the vast apparatus of the scheme.

I must express one small disappointment on which I ask my noble friend to comment. I was sorry that the opportunity was not taken to increase the pensions of the pre-1973 war widows to bring them into line with the pensions of the post-1973 war widows. In general, a pre-1973 war widow is likely to be older than a post-1973 war widow and therefore her needs likely to be the greater. In any event, to stick to an arbitrary date which derives simply from a decision of the Ministry of Defence to make improved provision for the services is a mistake. I had hoped that on this occasion, when the whole system was being reviewed, a decision would be taken to equalize—that is, to bring up to the post-1973 widow's standard—the payment made to the pre-1973 war widows. They are now a decreasing number and will of course decrease further over the years. In adopting that line the Government would be taking on not an increasing but a decreasing liability—a liability which would ease the conscience of many people in this country who feel strongly for those who lost their husbands in its service.

Lord Henley

My Lords, I thank my noble friend for his observations. I am grateful for his remarks on our use of the RPI as an index and particularly grateful for his comments on our policies for the long-term sick and disabled. As I said in the Statement, in real terms we are spending 2.5 times more on the long-term sick and disabled and their carers than was the case in 1979. On occasions the noble Lord, Lord Carter, has said that that was the result of more people being in receipt of benefits, but even the noble Lord would not descend to arguing that it was the result of 12 years of a Conservative Government. It is the result of our reaching far more people with our policies for the disabled.

On the question of war widows, also raised by my noble friend last year, I believe he forgets that two pensions are involved. One pension is paid by the Department of Social Security to all war widows irrespective of when the husband died. That is the same for all of them, though there are some age additions. In 1973 the Ministry of Defence introduced an attributable service scheme which, in a sense, is an occupational scheme and varies according to the rank and length of service of the individual soldier who died and whose wife is left a widow. When the problem arose we responded to the needs of pre-1973 war widows who were left out of the occupational scheme, but it was always realised that it would not be possible simply to copy that scheme retrospectively for all war widows.

The solution that we hit upon—I believe it to be the right one—was welcomed by most people at the time. It involved a special payment of £40 per year which would be disregarded in relation to income-related benefits and totally untaxed. We have continued to up-rate that payment in line with the RPI. However, it will not be possible to replicate the Armed Forces attributable service scheme in a retrospective manner for pre-1973 war widows.

Baroness Phillips

My Lords, perhaps I can ask the Minister why the over-eighties still receive only 25p extra? I had the privilege of introducing that figure 26 years ago. In 1965 25p meant a good deal more than it does today.

I am not in the least grateful to the Minister for giving that long Statement. It is a disgraceful habit that has been introduced in this House. How can one take in all those figures? There should be a proper debate and the subject should be properly introduced. I hope that the Government will not continue with that practice until the next general election.

Lord Henley

My Lords, I assure the noble Baroness that there will be an opportunity for proper debate when the various regulations and orders are placed before both Houses. The noble Baroness will be aware that in the past we have always had a debate on the up-rating regulations, of which there are a number.

The noble Baroness referred to the 25p age addition paid to all pensioners over 80. The noble Baroness is quite right to say that it was introduced a number of years ago and it has not been up-rated by any government since then. We have always taken the view that it is far better to try to add to the income-related benefits for the older and poorer pensioner rather than make a special addition across the board to all pensioners, which would not make the best use of available resources. It is far better to make an addition, as we have been able to, over and above the 7 per cent.—an addition of £1 or £1.50 depending upon marital status—to less well-off pensioners.

Baroness Faithfull

My Lords, I support my noble friend Lord Boyd-Carpenter in saying that the country will welcome this Statement. I shall not go into details but we welcome the change of attitude and mind of the Government in considering those in trouble and in need in this country.

Perhaps I may ask my noble friend three questions. I suggest that he does not answer them now but asks his right honourable friend the Minister to write to me. I refer, first, to the concession on residential homes. I realise that for the country to meet the full cost of nursing and residential homes would be very expensive. However, I think there are certain cases which need special consideration—the very elderly who are suffering from Alzheimer's disease, where there is no accommodation for them and where it is almost impossible for families to look after them. Perhaps my noble friend the Minister will ask his right honourable friend the Secretary of State whether concessions can be made in special cases, where a family has no money. Secondly, will my noble friend ask his right honourable friend to reconsider the question of housing benefits for students? Many students are now in great difficulties. I very much hope that he will reconsider that matter and write to me.

Thirdly, yet again I support the noble Earl, Lord Russell, on the question of 16 to 18 year-olds. I ask his right honourable friend the Minister to consider yet again those young people who need money, who are homeless and who are sleeping on the streets because they cannot find anywhere to live at a price they can afford. Because they have no address they cannot get a job and because they have no job they cannot get accommodation. I hope my noble friend will reconsider this matter, which has been put to him so many times.

On the question of child benefit, I thank the noble Earl, Lord Russell, for his comments. I should also like to add that the great fight that we have put up over child benefit was very much due to the late Lord Seebohm. I pay tribute to him for the help that he gave to me from the Cross-Benches. I do not ask my noble friend to answer those questions now but perhaps his right honourable friend will write to me.

Lord Henley

My Lords, I take note of what my noble friend said. As she requested, my right honourable friend will certainly write and answer her various questions. Perhaps I may make one or two points. As regards nursing care for the very dependent, elderly and mentally handicapped I must stress that we have increased that by some £20 this year, which is higher than the increases on the other limits.

My noble friend also asked whether we would consider a scheme whereby special cases were treated somewhat differently. I shall certainly ask my right honourable friend to look at that aspect. However, I must point out to my noble friend that expenditure in this field runs at a considerable rate. It has increased over the past 12 years from some £10 million, with just 12,000 payments, in 1979 to over £1.5 billion in February this year; that is, catering for some 210,000 people. I accept the fact that my noble friend might nevertheless argue that it is still not meeting all needs. However, I refer back to the point I made earlier that it is impossible to go on and on increasing the limit without having somewhat strange effects on the pricing of many of these homes.

I note the points made by my noble friend about housing benefits for students and I shall certainly pass those on. Again, I note what my noble friend had to say about income support for 16 and 17 year-olds. That is a matter we debated last July. I repeat what I said then, that we do not seek and never have sought to take the cheap option of taking income support away from 16 and 17 year-olds. There is, of course, the training option; the YT guarantee. We consider that it is far better that young people between the ages of 16 and 17 should take the opportunity to remain in full-time education or take up the YT guarantee rather than introduce themselves to income support and a permanent life of dependency.