HL Deb 03 February 1992 vol 535 cc8-9

2.57 p.m.

Lord Beaumont of Whitley asked Her Majesty's Government:

What progress has been made on the examination of the economic and administrative feasibility of a basic income scheme that was recommended in 1982 by a sub-committee of the House of Commons Treasury Select Committee.

Lord Brabazon of Tara

My Lords, the Government have considered a number of such proposals and concluded that to pay a substantial benefit to everyone irrespective of their financial circumstances would involve an unacceptable increase in public expenditure and in the level and burden of taxation on earnings.

Lord Beaumont of Whitley

My Lords, is the noble Lord aware that other people have considered the matter and that, for example, the Basic Income Research Group has concluded that: Basic Income would enhance individual freedom, and would help to prevent poverty, end the poverty and unemployment traps, reduce unemployment and create a less divided society". Such a scheme could be introduced by degrees, avoiding excessive expenditure at the beginning. That being so, will the Government consider the matter again?

Lord Brabazon of Tara

My Lords, to a great extent the points raised by the noble Lord were addressed by the Government's 1986 Green Paper on the reform of personal taxation and in the reforms which have taken place subsequently. The worst aspect of the poverty trap was removed by the 1988 social security reforms in conjunction with subsequent reforms in the tax and national insurance systems. In 1985 70,000 people faced deductions of more than £1 for each extra £1 earned. Projections for 1991–92 show that nobody is now in that position. The unemployment trap was also minimised by the 1988 reforms. In 1985 about 60,000 people were better off on benefits than in work. Projections for 1991–92 show only about 5,000 people now in that position.

Lord Stallard

My Lords, will the noble Lord tell us when the examination took place of a basic income scheme? Where can we find the results?

Lord Brabazon of Tara

My Lords, as I have said, the Government's responses to the recommendations are to be found in the 1986 Green Paper on the reform of personal taxation.

Lord Peston

My Lords, is not the problem with the basic income scheme that the level is so low that it does not reduce poverty or so high that it is simply too expensive to finance out of taxation? I believe that that is what the noble Lord said.

Does the noble Lord agree that the present benefit system is so complex that virtually no one understands it? The great advantage of a basic income scheme is that it simplifies matters. If the Government survive, will they consider simplifying social security so that at least some of the people involved understand the system? Alternatively, would they support a new government's thinking along those lines?

Lord Brabazon of Tara

My Lords, I do not agree with the noble Lord. The Government have done much to simplify the whole taxation and social security system since 1979. The two examples that I have already outlined on the poverty trap and the unemployment trap are good. When the Government are re-elected at the next election we shall no doubt continue to pursue our aim of simplification and enhancement.

Lord Marlesford

My Lords, does my noble friend agree that these proposals, originally put forward by the late Sir Brandon Rhys Williams —a good friend, much missed by many in your Lordships' House—had the merit of attempting to help those in greatest need? It must be right to move towards the taxation of all social security benefit payments so that the tax on benefit to those who are better off can be used to give greater benefits to those in greater need.

Lord Brabazon of Tara

My Lords, I am sure my noble friend is right. However, to go down the road proposed in the Question—to give everyone a basic income high enough to eliminate the need for income support—would be very expensive. In order to finance such a scheme marginal income tax rates would have to be much higher than they are now and that would be bad for work incentives.

Lord Stoddart of Swindon

My Lords, does the noble Lord agree that there is a real problem for very poor people? As from December 1991 about 50,000 people on social benefits will be paying a marginal rate of tax of 90 per cent. Does he agree that that is entirely wrong? Will the Government re-examine the position, with a view to helping that class of people who are at the bottom of the income scale?

Lord Brabazon of Tara

My Lords, I believe that the social security system should be aimed at helping exactly the people to whom the noble Lord refers. In an earlier answer I stated that with regard to the poverty trap in 1985 70,000 people faced deductions of more than £1 for each extra pound they earned. Projections for the current year show that no one is now in that position.

Lord Desai

My Lords, does the noble Lord agree that although the basic income guarantee scheme may be expensive, the problem of low take-up which currently exists would be much helped if everyone was entitled to an income without having to prove their status?

Lord Brabazon of Tara

My Lords, with the criticisms of the scheme that I have put forward, I have answered that question.

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