§ 6.19 p.m.
§ The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)My Lords, with the leave of the House, I shall now repeat a Statement on the uprating of social security benefits and re-rating of national insurance contributions which has been made in another place by Mr. Keith Bradley, the Parliamentary Under-Secretary of State for Social Security. The Statement is as follows:
"With permission, I should like to make a Statement on the uprating of social security benefits and the re-rating of national insurance contributions for 1998–99. I should also like to report to the House on our objectives for reforming social security.
"This is the first benefits uprating announced by this Administration and unlike those of previous years it will not be marked by a long list of cuts to the welfare programme. Not that we are content with the size of the Budget. We cannot be complacent when despite growing prosperity, spending on social security has continued to grow. It now consumes one-third of government expenditure and is set to break through the £100 billion barrier before the end of the century. That is more than is collected in income tax, twice what is spent on the NHS and nearly three times what is spent on education.
"As importantly, we are not content with the way the money is spent. The huge cost that is our legacy has done so little to reduce the amount of poverty. The inability to harness social policy, to use it as a tool for change, has not only been the main driver of welfare spending, it has resulted in the greatest social division we have seen for generations.
"We are committed to breaking with the past. We are undertaking a systematic review of the welfare programme. This review is both necessary and timely. We need a modern welfare system to reflect modern circumstances.
"Our welfare to work programme will provide people with a route out of benefit dependency. And our comprehensive spending review will lead to the modernised system that we need. I will say more about this later.
"First, we have immediate business. The House knows we are required to review the rates of benefits and national insurance annually. Our intention for the year 1998–99 is to uprate most national insurance benefits, child benefit, benefits for disabled people and carers by 3.6 per cent. This is the increase in RPI in the year to September. War pensions will also be uprated by RPI.
"As in previous years, jobseekers' allowance and the main income-related benefits, will be uprated by the Rossi index, which at September had a year on year increase of 2.4 per cent. The Rossi index, as 1299 Members will know, is RPI less those elements for housing costs. It is a more appropriate index to use for the income-related benefits where housing costs are, in the main, met separately. Most rates of deductions in respect of non-dependants have been increased over and above inflation. This will reduce the benefit paid in respect of housing costs to claimants who have non-dependants living with them.
"Taking forward this measure allows us to reverse the previous Government's planned measure to extend the single room rent restriction. The withdrawal of the extension, which would have restricted housing benefit to those aged over 25, has been welcomed both inside and outside the House.
"This was a hard choice in maintaining our commitment to live within existing spending ceilings. It is important to remember that the mandate we so recently received was based on a manifesto which committed us to controlling public expenditure.
"Moving now to national insurance, we do not propose to increase the rates of Class 1 contributions paid by employees and their employers or the earnings brackets for the three lower rates of employers' contributions. The rates of Class 4 profits-related contributions paid by self-employed people will also remain unchanged. The lower earnings limit for Class 1 contributions will increase broadly in line with the basic rate of retirement pension, as will the upper earnings limit which applies to employees' contributions only. Similar increases apply to the lower and upper profits limits for Class 4 contributions. The weekly Class 2 contribution paid by self-employed people and the voluntary Class 3 contribution also increase in line with this formula.
"The cost of the uprating will be £2.45 billion. The maximum available Treasury grant for the National Insurance Fund will be set at £800 million. Most new rates of benefit and the changes made to national insurance contributions come into effect from 6th April next year. Schedules showing the new rates of benefit and the new rates of national insurance have been sent to all Members today.
"The most pressing need is to develop our approach to people of working age. They are responsible for the support of their children. Their actions while in work will determine how adequate their income will be in retirement. The best we can do for people of working age is to give them the opportunity to work. This is our first objective for welfare reform.
"The wage motivation to work is for most people compelling—with the best will in the world benefits can never be a substitute for earnings. Equally, there are also very strong non-wage motivations for working which in total reflect and influence the shape of society. Work enables people to be in the mainstream of society, to make their own contribution, to develop their potential, and to offer a positive role model for their children. Work also provides access to social networks, and access to new opportunities for advancement.
1300 "None of this is new. It could be argued that making work the best form of welfare has always been an objective of social policy. But the facts show that the current social security system fails actively to promote a return to work.
"The fact is that an indifference to social policy, and an assumption that unemployment is a price worth paying for economic success, have meant that millions of people have been set aside from the labour market and condemned to a life of dependency.
"Our objective is to root out worklessness, and to give all people of working age a chance of economic opportunity. That is why our New Deal programme extends beyond the unemployed. We also need to give lone parents and sick and disabled people a hand-up. And we need to make sure that where possible, work pays and that tax and benefit systems encourage and not deter work.
"That is why we have a Whitehall task force on tax and benefits to help deliver the Government's pledge to streamline and modernise the welfare system. It is why we are introducing a minimum wage. It is why we are looking carefully at every benefit to see whether it helps or hinders people in achieving their aspiration to be in work. We are seeking to recast totally the aim and operation of welfare, to make clear that work, rather than benefit payment, is the right solution both economically and socially, for people of working age. And we will continue to support those people who cannot work.
"The second group needing our attention are children. Our objective here is to ensure that all children are supported, wherever possible, by their working parents. Nearly 3 million children now live in workless households, a threefold increase since 1979. The best way to support these children is to ensure that their parents are working. They benefit from the lasting financial security that work ensures and from role models which help them to learn how they too can live independent lives when they grow up.
"Our new deal for lone parents is helping to tackle this problem by providing a comprehensive package of back-to-work help for lone parents. Effective childcare arrangements are vital as nine out of 10 lone mothers would work if they could afford childcare. This Government are committed to a national childcare strategy, which will help parents, especially women, to balance family and working life.
"Child support maintenance has a major part to play here. Receiving regular maintenance payments helps lone parents work, independently of all other powerful influences on their ability to work. And we must move to a point where an absent father's failure to provide proper financial support for his children is seen as socially unacceptable.
"Our ambitions do not stop at people of working age. It is also essential to help pensioners. On average, pensioners' incomes have grown over the last 20 years but the gap between the poorest pensioner and the richest has widened. And projections show that this gap will continue to widen unless urgent corrective action is taken.
1301 "Our objective is to promote financial security in retirement in a way which enables people to build up a stake in their own provision. It is clear that the difference between richer and poorer pensioners is a result of the extent to which the former have had access to second tier pension opportunities, and have taken advantage of the chance to save during their working lives. Secure income in retirement will be achieved when people of working age realise that the more they and their employers make contributions to their own pension, the greater will be the reward when they retire.
"Work, to fund savings, is the best form of pension provision. That is why we have launched the pensions review. That is why we are consulting on stakeholder pensions, and developing citizenship pensions. This will extend the opportunities for good value pensions to the 8 million people who are poorly serviced by the existing arrangements. It will also begin to address the current inequalities between the opportunities of women and men to have adequate pensions.
"We are also taking action to ensure fair treatment of pensions on divorce, giving greater rights to women who have contributed to the build-up of pension by supporting their husbands in the home. And we are determined to tackle the situation where nearly a million pensioners do not take up the income support to which they are entitled. We have already commissioned research to establish the reasons why they do not. And from April we will begin a number of pilot exercises to find out the best ways of delivering income support to older citizens.
"As the manifesto made clear, we believe pensioners should share fairly in the increasing wealth of the nation. This is not just a long-term aim. We have already reduced VAT on fuel and from next year will abolish the gas levy. This shows we will act quickly. And in his pre-Budget Statement the Chancellor announced the winter fuel payment, paying pensioners £20 and the poorest £50. These payments will be made in time for the winter fuel bills. They will be on top of the normal pensions payments which will be uprated next April, as I have already announced.
"We are a modernising government. We believe in bringing opportunities to all sections of the community equally, but also believe that these opportunities bring responsibilities. Our reforms will be guided by our objectives for the main groups we are seeking to help: welfare to work for those of working age; security for older citizens for now and in the future; and support for children.
"As the House knows, the orders introducing the new benefit rates and the main elements of national insurance require affirmative resolution. We look forward to the wide debate on our programme for social policy that occasion lends itself to. I commend this Statement to the House".
§ My Lords, that concludes the Statement.
1302§ 6.32 p.m.
§ Lord HigginsMy Lords, the House is grateful to the noble Baroness for repeating the Statement made earlier this afternoon in another place, not least because she does so, I understand, at some personal inconvenience.
The annual uprating Statement is an important Statement and, indeed, one of the few fixed points in the annual financial timetable. Before we had a unified Budget we had an Autumn Statement, the uprating Statement in the autumn, and the Budget in the spring. We then moved to having a Budget, an Autumn Statement and the uprating Statement in the autumn. This year, because of the election, we find that we have a Budget in the spring, an uprating Statement in the autumn and no Autumn Statement at all. We are grateful for that.
I ask the noble Baroness one question which arose from her closing remarks with regard to the orders but relates also to an off-the-cuff remark made by the noble Lord, Lord McIntosh of Haringey, in response to a question from my noble friend Lady Hogg when he was commenting on the so-called "green" Budget. He cast some doubt on the future timing and also on whether there would continue to be a unified Budget. Can the noble Baroness confirm that the orders we are discussing will be debated in the spring and whether the Government have any further view as to how the timing of the Budget and these orders will be related?
In considering these matters one of the notable omissions of detail in the Statement is the question of the extra benefits which have been previously paid to lone parents. There was a reference to the welfare to work programme, as one might expect, and a strange categorical statement that,
nine out of 10 lone mothers would work if they could afford childcare".I was not clear what the source of that precise statement was.The noble Baroness has a history in relation to lone parents. For example, in November 1995 she commended the idea of the lone parent premium and the single parent benefit and condemned the then government saying that they would deliberately make those families poorer. She went on to describe this measure as,
vindictive, punitive and utterly wrong".—[Official Report, 29/11/95; col. 601.]Yet, as I understand it, that is what the Government are now proposing to do. The noble Baroness went further. In only February of this year, referring to those benefits, she said,
It is one of the very few benefits that do not trap a parent in dependency. So, lo and behold, the Government propose in future to remove it. Why? What on earth are the Government thinking of?"—[Official Report, 20/2/97; col. 850.]Perhaps the noble Baroness can now tell us what it is that the Government are thinking of, because this is very much a reversal. She went on yet further and said:
It is as simple as that, and the Government are removing one of the very few benefits that target help on lone parents without a means-testing penalty. It is batty".—[Col. 850.]1303 Whether "batty" is an expression normally used in your Lordships' House, I do not know. But we are entitled to know why the noble Baroness thought it was batty in February and does not think it is batty in November.
The implication in the Statement is that it is somehow due to the fact that the Government are under severe spending restraints which were imposed by the present Chancellor when in opposition. He said that he would stick to the then government's spending limits. But those limits were perfectly well known at the time the noble Baroness made those statements. Therefore, the argument that it was because of tight spending limits or the need to restrain public expenditure is not one which stands up to examination. We need an explanation as to why there has been this change of policy.
In relation to new recipients of the benefits, because the benefits will be abolished there is no question of uprating them. As I understand it, the Government propose to freeze the benefits of those who are already in receipt of them. Is it the Government's policy to allow those benefits to wither on the vine or is it a temporary situation which they hope later to reverse? I hope the Baroness can tell us.
Can the noble Baroness confirm also whether it is the case that, taking all the benefits that are now to be paid to lone parents, even after this Statement, the total amount being expended on lone parents is actually less than it was before the Budget and before this Statement? I say again—the noble Baroness may have been distracted—what is the total amount, including the welfare to work programme and everything else, which is now being spent on extra benefits for lone parents? Is that total amount less, greater than, or the same as that which was previously announced? My understanding is that the overall amount is in fact less rather than more. If so, that is something that many of the interest groups particularly concerned with lone parents would wish to hear. I am not disputing the basic underlying policy; it is the question of why the reversal has taken place which one needs to consider.
I turn next to the question of what is happening within the spending limits mentioned. I was particularly puzzled by a Question asked in another place on public funding:
what is [the] estimate of the additional expenditure by her Department, its agencies and other non-departmental bodies in (a) 1997–98 and (b) 1998–99 as a consequence of higher uprating for inflation than was assumed at the time of the November 1996 Budget".—[Official Report, Commons, 5/11/97; col. WA 247.]Mr. Field replied:
Higher inflation than expected in the 1996 Budget has no effect on 1997–98 benefit spending".That is straightforward enough. He continued,
1998–99 benefit rates will be announced shortly. Increases in line with prices would mean an increase in benefit spending of about £600 million above that assumed in the 1996 Budget. The Government are committed to staying within its overall spending plans".—[Col. WA247.]There is a puzzle here which has not been cleared up by the Statement we have just heard. If I understand it correctly, there is to be uprating in line with prices or, in the other cases, with the Rossi index. Is it the case, 1304 or is it not, that another £600 million has been allocated? I found the answer in another place rather puzzling. It seemed to imply either that there would not be uprating in the traditional way or that there would be an increase in the amount spent. It is not clear from that answer to the question in another place what the position is.
At all events, as I understand it, it is the Government's intention, as set out in the Statement, to uprate the benefits in the way in which the noble Baroness has described; namely, in line with the RPI or, in other appropriate cases, in line with the Rossi index. The answer may be that some benefits are not to be uprated. Indeed, the noble Baroness's opening remarks referred to uprating "most" of the national insurance benefits. Perhaps she will specify precisely which ones are not to be uprated.
Perhaps I may make a more general point. The implication of the Statement seems to be that the Government are now committed to controlling public expenditure. That is not the formula which has normally been used. What the Government have done up to now is to say that they will stick to the spending limits which were produced by the previous government. These nuances are sometimes rather important. We ought to be clear. Has the noble Baroness just announced a change in the policy? Is the Government's commitment simply to controlling public expenditure; or are the Government still maintaining the position that they will stick to the spending limits imposed by the previous government? If there is a change, it is a matter of considerable interest to your Lordships.
I should like to turn now to some points about pensions. There is a rather odd change really. The implication of what the noble Baroness said was that better off pensioners seemed to be getting a better deal than those on lower pensions. It is worthwhile looking at the department's press release of only a few days ago. As part of the overall survey of those in the lower income groups, the department said:
There were far fewer pensioners in the bottom quintile (20 per cent.) of the income distribution in 1994/95 than in 1979: on … conventions for adjusting household incomes for household size, pensioners accounted for 24 per cent … of the bottom quintile in 1994/95 compared with 41 per cent … in 1979".In other words, the position of pensioners has significantly improved in relation to the population as a whole. Perhaps I have misunderstood it, but that seems to be what is being said. Where they stand in relation to other pensioners is another matter. However, it seems to be an unfortunate policy if the Government are to argue that the differential between one group of pensioners and another is what is important rather than seeking to raise the level of those at the bottom without affecting the position of the pensioners who are better off. There is no doubt at all—I do not want to labour this point because it has been made many times—that the position of many pensioners will be significantly affected by the measures taken in the Budget. That seems wholly inconsistent with the Statement that has just been made.
The noble Baroness will know that many people have been advised to invest in PEPs rather than in personal pensions. Indeed, a number of people have felt that PEPs are a better long-term investment than going in for 1305 an ordinary pension scheme. The PEP arrangement is good in that respect. However, if I understand correctly the press statement which was issued by the Treasury this afternoon, it is proposed that the amount that can be invested in a PEP is now to be limited to £50,000. There may be many people who by now have accumulated a greater amount than that and will be relying in their retirement on the fact that they will be able to use that amount to invest in an annuity.
It is not clear from the press statement but it is important to know—this will no doubt be taken up in the newspapers in the next few days—whether or not those who have invested more than £50,000 in a PEP in anticipation of their retirement rather than invested it in some other form of pension will be "grandfathered"; that is to say, whether, if they have more than £50,000 in a PEP now, they will be allowed to leave it in a PEP. Otherwise, they may well find—this may apply to someone who is just about to retire—that, as a result of the changes announced this afternoon by the Treasury, the sum available for buying an annuity is less than they expected: and at very short notice. Perhaps they will be retiring in just a few months' time. It is important that the noble Baroness should clarify that point before we go any further into the matter. The press release was not as clear as it might have been.
I have one final point. Is it not the case that, despite the upratings which were announced by the noble Baroness this afternoon, the overall changes in government spending plans and their proposals for a new tax credit scheme, which were announced in the "green" Budget by the noble Lord, Lord McIntosh of Haringey, only a few days ago, will penalise women and favour men? The Institute of Fiscal Studies has been looking at this issue and thinks it is a basic trend—and, for all I know, a basic policy—of the Government to introduce changes, the overall effect of which is to penalise women and to favour men.
I well recall many years ago, when we were looking at the benefits system, that we were extremely anxious that the amounts should be paid to the wife rather than to the husband. There are real problems when families are faced with a situation where money is paid to one spouse rather than to the other. Therefore, against the background of the Statement, it would be helpful to know whether it is the Government's intention to do this or whether it is simply an accidental effect.
In her closing remarks the noble Baroness said that we shall have further opportunities to go into these matters in greater detail. I hope that that will be so. We should be grateful also if she will clarify when these further debates are likely to take place.
§ Earl RussellMy Lords, I thank the Minister for repeating the Statement. I am sorry to learn that she has had to do so at personal inconvenience. I hope it is not too great.
The Minister has invited a wide-ranging debate. I shall respond to that invitation in a moment but, first, I must welcome the basic fact of the uprating, though like the noble Lord, Lord Higgins, I have a suspicious mind. I, too, would like to know what is meant by the 1306 words "most benefits". No doubt an answer will be forthcoming. I should particularly like to give a warm welcome to the news that the shared residence requirement on housing benefit for the over-25s is not going forward. I should like to repeat the thanks I have already given to the Minister personally for her part in that story, by which I am delighted. I should like to know, though, why nothing has been done towards closing the gap, on which the Minister and I have both detained the House in the past, between the rates of income support for over and under-25s.
I know that this point is not technically part of the Statement, but it relates so closely to it that I believe I am entitled to ask. Has there been any uprating of the youth training allowance and the youth training bridging allowance? The noble Baroness may perhaps remember that I ask this question every year. I hope that this Government are better at knowing the answer than the last one, as I have never before found a Minister who had an answer to that question when the time came.
There have been rumours in the press recently about possible changes to the national insurance lower earnings limit due to the effects of the poverty trap. I see nothing of that in the Statement. That may possibly be because it is being left for the Taylor review, which prompts the question of whether we have any indication when that review is likely to report. Most of the Statement is a report on the Government's objectives, and I listened to it with considerable interest. However, what we know is limited because it has been said that this Government have hit the ground reviewing, and while the reviews are still revolving we do not exactly know what the outcome will be. I am glad to say that I can agree with a considerable amount of the general framework of the objectives that have been set out.
I share the concern about the social security budget. We must all hope that we can find reasonable ways to reduce it. I agree with the factual observation about the failure to reduce poverty. I say to the Minister that the department should not be too self-abasing in taking responsibility for that failure to reduce poverty. That failure is essentially a failure of the amount of work in the economy and of the excessive flexibility, from the department's point of view, of that work. As I understand it, it is not a failure of the welfare system. It would be an improper act of self-abasement if the department were to take responsibility for it.
I am a little concerned about the straitjacket set by spending limits. I listened with interest to the questions of the noble Lord, Lord Higgins, on that aspect. I gave notice that I would ask why the Government have committed themselves to the previous government's spending limits and have done so with links of iron tougher than the previous government ever used.
The Statement refers to a mandate, but I remind the Minister of the opinion poll which appeared in the middle of the election campaign showing that 56 per cent. of those intending to vote Labour simply did not believe that it intended to observe these restraints. They believed, in the memorable words of 1307 Polly Toynbee, "Trust them—they are liars". I have never been one of those people, but when we talk about mandates we should not forget their existence.
I agree entirely with all that is said about the need for the opportunity to work. That is an analysis that I have been putting forward on this Bench ever since 1989. I am glad to see a government in place which shares it. But that again is not primarily a welfare issue. I do not believe, in any straightforward sense, that it is a fault of the welfare system that there is so little work. It has much more to do with the fashion for downsizing in industry. In a way, downsizing is freeloading on the public purse in just the same way as it would be if the public purse was asked to bear the cost of warehousing industry's unused raw materials. So, again, I do not believe that the department should be too self-abasing.
I agree about the importance of the principle that work should pay. I welcome the publication of the minimum wage Bill. I am extremely glad that it contains fewer exceptions than was feared at one stage. But I want to know why it is being argued that there should be a lower minimum wage for the under-25s. For reasons with which I am sure the Minister is familiar, I am not at all happy about that.
I become a little more worried when the Statement moves on from opportunities for work, with which I agree, to the desire to root out worklessness. That is a very curious phrase. It is at one and the same time utopian and draconian. It is remarkable how frequently those two concepts go together. We all want to reduce worklessness. If they were to root it out they would be the first government in recorded history to have done so. Indeed, I am reminded of the passage in 1066 And All That about the abolition of villains. Richard II was petitioned to abolish villains. He agreed and then put them all to death on the ground that they were villains. If one roots out worklessness it is going to take something like that to do it.
In fact, we have here something very like the language of Tudor economic policy—the distinction between the able-bodied poor who are to be whipped back to their parish and the aged and impotent poor for whom relief may be provided. The Minister knows as well as I do that that was a very difficult distinction to apply. It did not work very well.
The Statement talks about the fact that opportunities bring responsibilities. I agree profoundly with that if we take it as a rule of personal moral conduct. If we take it as a rule whereby moral judgment is passed over to the state and it decides which opportunities it is our duty to undertake, for me that is a very different matter indeed. People are very different from each other: they cannot all be moulded like plasticine into a particular social form. If the state attempts to do that for us it will inflict much unconscious cruelty and achieve a great deal less than it intends.
As regards the issue of single parents, I have asked the Minister before whether she can give an undertaking that single parents will not be compelled to work. I know that the Minister said on 3rd June that she does not favour any such policy, but I am becoming 1308 increasingly suspicious that the reduction of benefits, together with that being used, as Mr. Darling put it on "The World This Weekend" on Sunday, as an encouragement to work, means that we are getting somewhere very close indeed to compulsion by the back door. "Thou shalt not kill, but needst not strive officiously to keep alive". That concerns me very deeply.
The Minister knows that I am strongly in favour of the opportunity for single parents to work if they want to and if they are satisfied with the childcare arrangements available. But the right of parents to stay at home, particularly with young children, is a human fundamental. I would view with very great gravity anything that appeared to me to threaten that. I believe that the adequacy of childcare for a particular child—it must be for a particular child and not abstract—is something that parents must be left to judge for themselves. So if I begin to suspect that the deprivation is being used as a back-door compulsion my opposition will become much deeper than it has been up till now.
I have similar anxieties about the review of disability benefits and I would be very glad to be told that they are misplaced, because they may be. I entirely agree that it is a good thing that disabled people should work when they can. I agree that far more of them are able to work than we can give the opportunity to do so. I shall not soon forget one Greek island where a person unable to walk had been given the monopoly of selling cigarettes on the island and made himself an extremely good living. That is an individual fit of opportunity to person. Where one can achieve that, I like it. However, turning the pressure to work into something which comes close to conscription worries me considerably.
When talking about rooting out worklessness, one should not forget the problems of transport. The Minister knows that I have touched on this point many times previously, but if she looks in today's Guardian she will find a report from the Rural Development Commission which states that three out of four rural parishes in England have no daily bus and that 99 per cent. have no jobcentre or benefit office. That makes rooting out worklessness rather difficult.
Where one is asking people to do what they want to do, that is a proper use of the power of the state. Where one is helping them to achieve their own self-respect, that is a proper use of the power of the state. However, where one is undertaking a scheme of social engineering to fit people into a particular mould, that, like Plato's republic, is a world that may be beautiful to read about, but in which one would not want to live.
§ 7 p.m.
§ Baroness Hollis of HeighamMy Lords, I welcome the comments of the two noble Lords who have spoken. I shall do my best to answer their questions. If, on checking the record, I find that I have inadvertently left any question unanswered—I hope that it will be inadvertence rather than any other reason—I shall write to them.
1309 Perhaps I may respond first to the noble Lord, Lord Higgins. The noble Lord asked first about the future timing, given the "green" Budget. This is a matter for the Chancellor, but I am told that we shall be debating the uprating order in February in the usual way.
Secondly, the noble Lord asked about the quoted statistic that nine out of 10 lone parents would work if only they had childcare. That information comes from research with which I am familiar, conducted by Bradshaw and Miller in 1990. The noble Lord has a point in suggesting that it has been slightly abbreviated, but it showed that lone parents wished to have the opportunity to enter work when their children were old enough or the childcare was in place. I repeat that that figure came from the 1990 research although later research subsequently reaffirmed it.
The noble Lord then referred to our debate in February 1997 in which I denounced the possibility of lone parents not being able to carry the higher rate of child benefit into work. The noble Lord asked whether there had been a U-turn. I am happy to assure him that there has been no U-turn because lone parents now on income support who enter work and go on to family credit will be able to take the higher rate of child benefit with them even if they are not currently claiming it because it has been subsumed within their income support level. If I may put it this way, they will be able to make a fresh claim after April 1998. Therefore, no such disincentive applies. Like the noble Lord, I should be worried if it did. I repeat that there has been no U-turn.
However, where there has been a change since the script of the previous Government, if I may put it that way, is that for the first time lone parents now have the opportunity of a New Deal. They are getting opportunities presented by a major expansion of childcare facilities—not just through the New Deal but through the announcement in the "green" Budget of £300 million which will allow not just the 35,000 children to enjoy after-school clubs as at present, but 1 million children in future. Too often when we talk of childcare, we focus on the nought to fives, but I am sure that we all recognise that childcare is also a real issue for those with children between the ages of five and 12 or 13. This is a major expansion; and, importantly, the minimum wage is also to come. All of those changes will serve to benefit lone parents and make the move into work an attractive possibility for her—it is usually a "her". Those are the changes since the previous government's strategy.
The noble Lord also asked how the sums work. If 1 understood him correctly, my answer is this: there has been a reduction of £400 million over the three years proposed in lone parent benefits. So far, that is being offset by the £200 million in the New Deal and the one-off strategy, mainly funded by lottery money, of £300 million in childcare under the "green" Budget. If 1 have misunderstood the noble Lord's point, I shall return to him to amplify my answer.
The noble Lord also asked about the £600 million. Again if I understood him correctly, he was asking how we balance the extra cost of inflation against staying 1310 within the spending limits. Clearly, estimates of future government spending are always subject to assumptions about the rate of inflation for the forthcoming year. As I understand it, if that assumption is wildly wrong—I defer to the noble Lord on this because I suspect that he knows much more about it than I do—the reserve is designed specifically to address those circumstances where there is a shortfall between forecast and outturn. I have no reason to think that that would not apply here, as elsewhere.
Like the noble Earl, Lord Russell, the noble Lord, Lord Higgins, went on to ask which national insurance benefits were not being uprated because the word used was "most" rather than "all". One now expects suspicious minds on the Opposition Benches, unlike previously. We were far less suspicious and far less cynical of the government's words! As I understand it, all national insurance benefits have been uprated except the Christmas bonus. However, the Chancellor has announced extra payments this winter which go beyond simple uprating. I refer, for example, to the money for the heating proposals.
The noble Lord asked about control of public expenditure and whether we are still reasserting our previous statement that we propose to stay within the spending limits of the previous government. Yes, we do so intend.
The noble Lord then asked a series of questions about pensioners and said that their position collectively, if I may put it that way, has improved in relation to that of the population as a whole. We have seen inequality widening within the pensioner group, but it is true that pensioners have been displaced in the lowest two deciles of households with below-average incomes. The reason that they have been displaced is good news for pensioners, but bad news for others. Pensioners have been displaced by workless households and, to some extent, lone parents. That is one reason why pensioners, relative to the rest of the population, have improved their position not only absolutely but also relatively. That is because, as we know, workless households have fallen well behind in terms of the growth in prosperity of the rest of the country. The noble Lord will understand that that is why we are so determined to expand opportunities for work for lone parents, disabled people and workless households alike. We know that it is their only path into prosperity.
Pensioners in real poverty remain those who are either on income support or, more to the point, who are entitled to income support but do not claim it. That is why we insisted, as I explained in the Statement, on undertaking research to find out exactly why some pensioners do not claim the benefits to which they are entitled and which would passport them on to other benefits. We need to know the number involved.
I shall have to write to the noble Lord on his point about PEPs. As I understand it, existing PEP holders will not be affected, but I shall have to write to the noble Lord because this is a Treasury matter and I shall need to check the position.
The noble Lord referred finally to the "purse to wallet" transfer behind the working family tax credit. He asked whether women would be disadvantaged as a 1311 result. We believe that women, like men, want and are entitled to enjoy access to work. Increasingly, as the married women's stamp comes through, so married women are able to enjoy the same opportunities as working men. It is worth reminding ourselves that something like 60 per cent. of all lower income households in work—that is, those enjoying family credit—are headed by a woman. The basic structural question of how such tax credits may be devised has yet to be determined, should the Chancellor accept the recommendations. As I have said, most lower-income households in work are headed by a woman and she would therefore be the recipient of any such tax credit in the future.
Perhaps I may move now to the points raised by the noble Earl, Lord Russell. The noble Earl referred to the dividing line of the age of 25 for differing rates of benefit, as he has over many years and I well understand where he is coming from. It applies in relation to benefits such as housing benefit, JSA and income support. It is an existing line and I am sure that the noble Earl will continue to be unhappy about it. In the past criticisms have been made of it. The presumption is that it reflects in a rough and ready way the difference between the replacement earnings lost and the costs incurred by people over and beyond that line. That is the explanation for it. I am also sorry to disappoint the noble Earl in that, like all my predecessors at this Dispatch Box, I do not know whether youth training will be uprated. However, unlike my predecessors, I assure the noble Earl that he will receive a written answer. If in future I am in the same position dealing with an uprating Statement I promise him faithfully that I shall know the answer.
The noble Earl also asked about the date of the Taylor review. As I understand it, it will inform the Spring Budget. The noble Earl dealt with the wider point about the failure of the welfare system and questioned whether the growth in social security expenditure damned the welfare system as such. I share his concerns and I wish that we had time to debate it more fully. In 1979 one penny in five of government expenditure went on social security; today it is one penny in three—more than is collected in income tax. The figure is £72 billion. Yet, one household in five is workless and the benefit system is disliked not only by those who pay for it but by those who receive it.
It is clear that much of the growth in expenditure since 1979 has been due to the failure of economic and social policies, such that even when employment figures improve many people who have low educational qualifications, those who are long-term unemployed, the disabled, lone parents and so on, remain beached because the tide has not floated them off the rocks of worklessness. That is why we need to renew and reform the welfare state based on opportunities for those who can, should and wish to re-enter work.
That takes me to some of the questions raised by the noble Earl about those who would do so. For example, he asked whether there would be a lower minimum wage for those below 25 and, if so, he would deplore it. No decisions have been made on that. The Low Pay 1312 Commission will make recommendations which will inform the Government's thinking in the spring. Like him, I would deplore the Tudor as I deplore the 1834 Poor Law. I rather sympathise with Speenhamland and in-work benefits. The reform of the welfare state under this Government could be said to be revisiting the justices of Speenhamland and Berkshire in a "read-across" way for the nation as a whole.
The noble Earl asked why we remained committed to the previous government's spending limits. The simple answer is that it was a manifesto commitment. The noble Earl said that 56 per cent of those who voted Labour did not believe that it would keep its manifesto commitments in that regard. We hope to prove that 56 per cent. of the population wrong by keeping our manifesto commitments and, as a result, restoring faith in the democratic process and going some way to meet head on the cynicism that affects voters when they enter the polling booth. For example, people believe that politicians are all alike; that politicians say what they need to say to get elected but do not keep their promises. That is not the view of the Prime Minister. I believe that in future we shall see very different policies from this Government.
The noble Earl went on to ask about lone parents. He asked that I give an undertaking that they would not be compelled to work. Compulsion is not the issue. Like him, I believe that parenting, whatever the age of the children, is as worthwhile and important a social contribution as working for wages in any economic situation. He pressed me about disability benefits and was also concerned about compulsion. The problem faced by disabled people is not one of compulsion but the current denial of opportunities that they experience. We know, because they tell us, that about I million disabled people wish to work but cannot do so for three reasons. The first reason is in part their poor health. That means that they cannot work a steady 35 hours a week. However, I hope that the labour market with its demand for flexible labour will be on their side so that with help they can re-enter the labour market.
§ Earl RussellMy Lords, I am most grateful for the noble Baroness giving way. Perhaps I may narrow down the area of difference between us. I agree with most of what the noble Baroness said, but my question is this. Will the disabled person have a share in saying whether something is an actual opportunity or will the Government tell him?
§ Baroness Hollis of HeighamMy Lords, what we shall offer to disabled people is what they tell us they want; namely, opportunities to move into work. Secondly, at the moment, those opportunities are blocked, sometimes by their health but at least as often by employers' perceptions. In that regard the Disability Discrimination Act will be an important tool. The third aspect is the benefits system. We want to go with the grain of their wish, which is to help them to overcome the hurdles that stand in their way. I repeat that compulsion is not the issue.
I have responded as fully as I can at this stage to the points raised by the noble Earl. If he wishes, I am very happy at a later point to respond more fully on this 1313 matter, perhaps by way of an Unstarred Question. However, I assure the noble Earl that, having been involved over recent weeks in meetings with disabled people about our welfare-to-work opportunities, in respect of which the Chancellor has made available £195 million, the bidding process enabling disability organisations and disabled people to spend that money to assist disabled people into work, will probably overwhelm us. As with lone parents, we are working with the grain of what people themselves want. They know that only work, in so far as they can do it, given their caring responsibilities and their health, is the best form of welfare for them. That is the basis of our renewal.