Social Security Bill

HL Deb 07 May 1998 vol 589 cc737-75

3.36 p.m.

Read a third time.

Clause 9 [Revision of decisions]:

The Lord Advocate (Lord Hardie)

moved Amendment No. 1: Page 6, line 5, leave out ("decision") and insert ("revision"). The noble and learned Lord said: My Lords, in moving this amendment, I should like to speak also to Amendments Nos. 3 and 14 to 23. This group of amendments is wholly minor and consequential and has been brought forward in order to improve, or correct, minor errors in the drafting of the Bill. Subject to the agreement of your Lordships, I do not intend to discuss the details of each amendment but will of course explain any of the changes should noble Lords wish me to do so. I beg to move.

On Question, amendment agreed to.

Clause 12 [Appeal to appeal tribunal]:

Lord Goodhart

moved Amendment No. 2: Page 8, line 5, at end insert ("save that the time within which an appeal shall be brought shall not be less than two months from the notification of the decision in question."). The noble Lord said: My Lords, this amendment is coming up for air for a third time. I hope that the Government will accept it and save it from drowning. The Government have said that they intend to impose a one-month limit on the time for appeal by regulations which are to be made under Clause 12(7). The present time limit for making appeals is three months from the date of the decision being appealed against. Obviously, therefore, a reduction in time from three months to one month is a very big one. There has been strong criticism of this proposal from the Child Poverty Action Group, from the National Association of Citizens Advice Bureaux, as well as from other organisations dealing with social security problems. Those organisations take the view that one month is a wholly inadequate period of time.

Most appeals are brought within one month but the Government's decision to shorten the period from three months to one is not, so far as I am aware, based on any research as to the reasons why appeals brought between the end of the first month and the end of the third month were not brought earlier. It seems inherently likely that the later appeals are those which are brought by the most vulnerable and disadvantaged; for example, those in poor physical or mental health, the disabled, the elderly, those with heavy caring responsibilities and those who have problems with literacy or the English language. These people need help to prepare an appeal. They may not know where to go to obtain help and it takes them time to find out. When they contact the CAB or some other organisation they may need a home visit. The heavy caseload may mean that the CAB cannot visit them for two or three weeks.

The amendments which I moved at the Committee and Report stages sought to retain the three-month period, which is what I would prefer. However, this amendment proposes that the period should be not three months but two. It does so because of the Government's response at Report stage. The Government's reply to the amendment appears at cols. 977 to 980 of Hansard of 20th April. The noble and learned Lord, Lord Hardie, said that the appeal period would be two months de facto because the time would run only from the end of the dispute period. I then asked him what the dispute period comprised as no such expression appears on the face of the Bill. The noble and learned Lord, Lord Hardie, replied, in answer to a further question from the noble Lord, Lord Higgins, the two-month period is a combination of two separate months. The first month is a dispute period within which a claimant may raise concerns about the decision with the department. At the end of that month a letter will be issued confirming the decision or stating the final decision. So the claimant will receive a letter indicating what the decision is. If the claimant is unhappy with it he goes back to the department. If the department accepts there is a mistake it will issue a corrected decision. If it does not accept there is a mistake it will issue a letter confirming the original decision. At the end of that period of a month, the appeal period will commence. There is a period of one month after that within which one has to lodge an appeal".—[Official Report, 20/4/98; cols. 978–79.] Since then the noble and learned Lord has clarified those comments in a letter, a copy of which has been placed in the Library. That letter makes clear, as I had assumed, that there is not an automatic one-month dispute period. It states, it is only if a claimant disputes the original decision (within one month) that extra time will be allowed. In these circumstances the Agency will look again at the issues and notify the claimant of the outcome (either that the original decision has been upheld or revised). The claimant will then have one month to lodge an appeal from the date of that notification. If the claimant does not contact the Agency about the decision within one month—either to dispute it or to lodge an appeal—any subsequent application to have the decision revised will be considered under the provisions for a late appeal". It is therefore plainly correct that if no challenge is made in month one, there is no dispute period and the time for the appeal expires at the end of month one.

The people who are most in need of help are those who are least likely to raise a dispute in month one. Why not therefore simply say that there will be at least a two-month appeal period for everyone, whether or not they have raised the dispute in month one? This seems to me to be a sensible compromise. I ask the Government to accept it, or at least to undertake to include a two-month period for appeal in the regulations. I beg to move.

Lord Milverton

My Lords, I support the noble Lord, Lord Goodhart. If I remember correctly, I have supported the Liberal Party on some previous amendments of this kind to the Bill. We in the Conservative Party are being left to decide these matters for ourselves. That is a good thing but I would have supported this amendment even if that were not the case as I consider it is only right and proper to do so. I shall support my party as regards the amendment of the noble Lord, Lord Higgins, but as regards the amendment we are discussing I shall support the Liberal Party. That is becoming rather a habit for me lately. I might even find myself walking across to their Benches or even to the Benches opposite. As I have said, I support this amendment as I consider it is right, proper and sensible.

3.45 p.m.

Lord Hardie

My Lords, I assure the noble Lord, Lord Milverton, that if he wishes to cross the Floor of the House he will be most welcome.

I am grateful to the noble Lord, Lord Goodhart, for tabling this amendment. It gives me the opportunity to set out in some detail how the disputes and appeals process will work under the new arrangements. However—this is more important for the House—it also allows me to clarify an issue about the handling of disputes and appeals on which I have already written to noble Lords. As the noble Lord, Lord Goodhart, explained, there is a copy of the letter in the Library.

Clause 12 deals with rights of appeal to the new unified independent tribunal, and includes regulation making provisions on the manner and time limits for lodging appeals. The amendment tabled by the noble Lord, Lord Goodhart, would make it a requirement on the face of the Bill, for there to be a minimum period of at least two months, from the date of notification of a decision, for an appeal against that decision to be lodged. Regulations on time limits for lodging appeals could extend that period of two months, but could not shorten it.

If the amendment were to be accepted, it would limit our flexibility to set time limits for lodging appeals, in regulations. The amendment would give claimants a lengthy period of time within which to lodge an appeal. This would reduce the incentive for clients to act quickly, to ensure decisions are re-visited while the facts are still fresh.

We are all committed to improving the quality of decisions and ensuring that claimants can play an active part. We want claimants to understand the reasons why decisions are taken and to be able to seek redress within agencies in addition to a statutory right of appeal. This is why agencies will be setting up a new informal disputes process to allow claimants to seek additional explanations of a decision or to present new facts. Within this context, it is the overall time limit for claimants to lodge disputes which is important, rather than simply the time limit for lodging an appeal.

It may help your Lordships if I explain how the new arrangements will operate. Claimants will normally have a period of one month, from the date on which they are notified of a decision, to lodge a dispute or appeal. For decisions made by the Contributions Agency, the time limit will be 30 days, and for child support decisions it will be 28 days. A one-month limit will encourage claimants to exercise their rights promptly and will lead to a more rapid settlement of cases. I believe it offers a reasonable time within which the majority of clients can dispute their decision. Clients will be encouraged to seek explanations and to talk to the agencies in the first instance.

In practice, when a decision is made on an application, clients will be sent a notification inviting them to contact the agency if they are not satisfied with the decision or if they have a query. Therefore the letter notifying the claimant of the decision will encourage the claimant to approach the agency if he has any doubt or is dissatisfied. Claimants will be given an opportunity to discuss the decision with staff and to present any new relevant information that they consider appropriate. The intention is to ensure that where a decision is wrong it can be put right quickly and with the minimum of fuss and without the need for a time-consuming appeal. If a decision is disputed within the period and revised in a client's favour it will carry a fresh right of dispute and appeal. If, on the other hand, the original decision is confirmed, the claimant will be allowed a further month from the date that he is notified in which to lodge an appeal.

I believe that this will provide a real incentive for claimants to dispute decisions and talk to the agencies, rather than to appeal at the outset. The arrangements will offer a better and fairer service to clients and will give a means to resolve disputes speedily without in any way prejudicing appeal rights.

With the permission of the House, I wish to clarify one point concerning the disputes and appeals provisions which arose during our debate on Clause 12 at Report stage, and to which the noble Lord, Lord Goodhart, referred. On checking the Official Report I feel I may have given the House the impression that there was an automatic one-month dispute period built in, on top of the one-month period for appeal. However, for those clients who choose to appeal from the outset, the time limit will not be extended. There will be claimants who do not contact the agency about the decision within one month—either to dispute it or to lodge an appeal. Current legislation makes provision for late appeals in special circumstances and there will continue to be arrangements for accepting late appeals in the future. The current rules need to be reassessed. They may need to be more generous at taking on board the point that the noble Lord made: that often it is the more vulnerable members of society who fail to meet the time limits. We shall discuss the provisions of the new arrangements with interested parties, including claimants' representatives.

The Government's intention is to ensure there is no misunderstanding on these points. The new arrangements, when taken as a whole, provide claimants with a far more flexible and sophisticated system of redress than simply being able to appeal against a decision. I hope your Lordships will accept that the amendment is unnecessary. I hope that the noble Lord will feel able to withdraw it.

Lord Goodhart

My Lords, I am grateful to the noble and learned Lord, Lord Hardie, for his reply. It has helped to clarify the situation, which was not entirely clear at the end of debate at Report stage, as the noble and learned Lord admitted. I have still a sense of disappointment that there has not been a firmer commitment to extend the period for appeal. Nevertheless, I do not propose to test the opinion of the House. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 40 [Child support: revision of decisions]:

Lord Hardie

moved Amendment No. 3: Page 26, line 27, leave out ("decision") and insert ("revision"). The noble and learned Lord said: My Lords, this amendment was spoken to in the first group. I beg to move.

On Question, amendment agreed to.

4 p.m.

Clause 51 [Class 1 contributions]:

Lord Higgins

moved Amendment No. 4: Page 35, line 39, leave out ("subsection") and insert ("subsections"). The noble Lord said: It may be convenient to consider Amendment No. 5 with this amendment. Considering the shape in which the original Bill arrived from another place, there is no doubt that your Lordships' House has fulfilled its functions as a revising Chamber. Somewhat different considerations apply to Part II of the Bill. I shall speak to those in a moment. However, we have considered a large number of amendments.

At Committee stage the first Marshalled List had 58 government amendments. The figure rose to 107. At Report stage, there were 40 government amendments. Now, at Third Reading, there are another 15. The fact that the Bill had spent many weeks in Standing Committee in another place, quite apart from the Report stage, suggests that it was not well prepared. We have certainly fulfilled our function as a revising Chamber.

We have been given an unusual task as regards Part II. That is an important fact. The noble Baroness, Lady Hollis, said earlier that it is not unusual for new measures to be introduced in your Lordships' House as part of a Bill. But to introduce an entire Part II—what in effect constitutes a Bill within a Bill, forming moreover an important, perhaps essential, part of the Chancellor's Budget proposals—is probably without precedent. Therefore we need to consider the matter very carefully indeed.

My view, which I expressed at earlier stages, is that the measure should either have been included in the Finance Bill or, if that were not possible, there should have been a separate social security Bill. The House, and I believe Parliament, have been treated with contempt so far as concerns the normal legislative processes. Another place has had no opportunity to discuss the measures in Part II in Standing Committee, on Report or at Third Reading. The first it will hear of them will be when the Bill comes from this House with the amendments that the Government moved at Report stage.

It is an unusual situation and it is not the way in which Parliament should be treated. I feel bound to say that not only is it wrong; it is also unwise. We know only too well that when legislation does not go through the necessary detailed scrutiny, the government of the day often repent at leisure.

Against that background, I turn to the specific amendment which stands in my name. Part II of the Bill effectively implements proposals which the Chancellor put forward in his Budget speech, but with one important omission. The amendment seeks to implement what the Chancellor said in his Budget speech and to give the other place an opportunity to debate the matter. That is the point I stress. If we do not pass the amendment, the reality is that the proposals will have been passed and another place will have had no opportunity to discuss the crucial issue that I wish to raise on the amendment.

I refer to the remarks of the Chancellor of the Exchequer on 17th March in his Budget speech. He said: I am abolishing the perverse entry fee that every employee pays to be part of the national insurance system and, in doing so, I am cutting national insurance for every employee in the country". The Chancellor continued: Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings. All employees earning between £64 and £81 will have their rights to benefit protected".—[Official Report, Commons, 17/3/98; col. 1106.] There is no doubt that the impression created by both those remarks and more specifically perhaps by spin doctors and others outside was that the Chancellor was going to make those two important changes. As regards abolition of the entry fee, that was so. Reports in, for example, the Daily Telegraph, under the heading, "Brown spares middle classes", and on radio and television, gave the impression that the lower limit was to be raised to £81.

However, while there was provision financially in the Red Book for the first of those proposals, there was no provision for the second. I believe therefore that the Chancellor's proposals have not been implemented; and it is right and appropriate—and I stress this strongly—that another place should be given an opportunity to debate the issue. It will not have that opportunity if we do not pass this amendment. It can discuss other amendments, but we believe that this specific omission from the amendments that the noble Baroness moved at earlier stages should be debated in another place, and, if necessary, voted upon.

That said, I turn briefly to the second sentence that I just quoted which relates to the contributory principle. The Chancellor said: All employees earning between £64 and £81 will have their right to benefits protected".—[Official Report, Commons, 17/3/98; col. 1106.] But we have not received the slightest indication as to how the Chancellor of the Exchequer proposes that that should be so. Indeed, the measures as a whole tend to undermine the contributory principle, which has in many ways been the bedrock of the social security system ever since Beveridge; namely, one receives certain benefits only if one has contributed towards them.

The Government now seem to be saying that, for a certain level of income, people will be entitled to contributory benefits even though they have not contributed towards them. That is very mysterious. We have no idea at all what the Government propose to put in the place of the contributory principle. Yet, as I say, it is a matter of the greatest importance and must cast some doubt on the Government's position as regards the future of the national insurance pension. It is a matter on which there is increasing concern.

However, I know only too well from my own experience as a Member of Parliament in another place the way in which the contributory principle is regarded as being of great importance. There are those who say: "We have contributed and therefore we are entitled to certain benefits". The Government have stated that the position will be protected, but it has not been made in the least bit clear how that is to be done.

Finally, I wish to turn to another related point which gives me considerable cause for concern. It may seem on the face of it to be a detailed, even pedantic point. Nonetheless, it is important, because in many ways it casts doubt on the whole position taken on this issue by the Chancellor.

Let me remind the House that the Chancellor said: Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings".—[Official Report, Commons, 17/3/98; col. 1106.] That is what he said. It clearly created the impression that that is what would happen. That is why we believe it appropriate to move this amendment so that the matter can be given further consideration.

Although there has been no discussion of the Bill in Standing Committee—it is in fact a Bill within a Bill—or at Report stage or Third Reading in the other place, the matter was raised when the Treasury Select Committee took evidence from the Chancellor of the Exchequer on 31st March. I refer to page 71 of the Treasury Select Committee's report. Mr. Quentin Davies raised this issue in relation to the statement made by the Chancellor.

Perhaps I may stress this point. The words used in the Chancellor's Budget Statement were: Further reforms will also ensure that no one pays national insurance", and so on. It is inconceivable that that was not a correct record. Had it been said in an ordinary debate, it may have been that Hansard was "not quite there", that the Minister's PPS did not go up to the office in time to correct the report, and one way or another the Chancellor's remarks were not correctly reported. But many Members of this House, certainly those who have been at the Treasury, will know perfectly well that the report of the Budget Speech is most certainly what the Chancellor actually said. The text goes to the Hansard office and is accurately reported; those were indeed the words that he used.

The extraordinary thing is this. When the Chancellor came to give evidence to the Treasury Select Committee on 31st March, he was questioned by Mr. Quentin Davies, who had some difficulty pinning him down on the point about the £81 limit rather than the question of the abolition of the entry fee. Mr. Davies pressed the Chancellor, who replied that the Budget Speech had stated: I am abolishing the perverse entry fee every employee pays to be part of the National Insurance system". It is true, as stated, that that is a relief, and we welcome it. The Chancellor of the Exchequer then went on to say: We are agreed that is what the Budget did. Then I said: 'Future reforms will also ensure that no-one pays National Insurance for the first £81.' The word is 'future'. These are reforms we want to make". The Chancellor did not say "future"; the Chancellor said "further". The statement in the Budget Speech is clearly correctly reported. There is a clear distinction between the impression given to the national press and so on by using the word "further", particularly in the context into which I have correctly put it, and that given by the word "future". Had the Chancellor used the word "future", we should not for one moment suggest that this matter ought to be debated in this House this afternoon and that amendments ought to be made in relation to it.

What gives me cause for grave concern is that the Chancellor, when appearing before the Select Committee in another place, sought in effect to rewrite history. He must have known what he had said. He had only to look at Hansard. Yet he sought to get off the hook by going before the Treasury Select Committee and making a statement which is clearly and deliberately untrue. He is now saying that this is something the Government will do in the future, that it will depend on the contributory principle, and so on.

The reality is that the Budget Speech stated quite clearly what was the Chancellor's proposal. We therefore believe it right that, at the very least, this amendment should be passed, so that it can be discussed by Members of another place—it may well be appropriate for the matter to be discussed by your Lordships, but we have not had the option. This part of the Bill has been introduced not in any revising sense but ahead of any consideration by the Commons of the detail. We believe it right that that should be so. It is in no way inappropriate that your Lordships should do this, given the way in which the matter has been brought before this House and the way in which Parliament has been treated by the Government. We ought to pass this amendment, so that further discussion on a detailed basis can appropriately be undertaken. The Chancellor's Statement on Budget Day should be one to which he is held and for which he rightly ought to stand accountable. I beg to move.

Lord Goodhart

My Lords, this group of amendments concerns Clause 51, which introduces what is probably the most important restructuring of national insurance contributions for a decade. It will affect virtually every employer and employee in the country. It is, of course, a move towards the integration of national insurance contributions and tax. We have already gone a long way in that direction. We have collection of national insurance contributions through the PAYE system. The link between the amount of contributions and the amount of benefits has largely been broken. For employees who are contracted in, the amount of their contributions affects only their right to the state earnings related pension supplement (SERPS). For those who are contracted out of SERPS, the amount of their contributions affects the size of their benefits not at all. It is true that the making of contributions is still the trigger for the right to receive benefits. But even there the link has been diluted by the credits given to the unemployed and disabled people, and by home responsibility protection. Those all confer benefits without the payment of contributions.

There are statements made in the Budget that the Contributions Agency is to be transferred to the Inland Revenue, that the starting-point for employers' contributions is to be the same as the single personal allowance, and the start for employees' contributions is to be brought to the same level as soon as the Government work out a mechanism for preserving the rights of those earning between £64 and £81 a week. That will mean that for the first time someone in employment who is paying no contributions will qualify for benefits. Employers' contributions have no upper earnings limit. Earnings above the upper limit do not even qualify an employee for SERPS. The integration of national insurance contributions and tax has therefore gone at least half-way and indeed rather more.

That development is not in itself unwelcome. The time has come to realise that national insurance contributions are effectively a charade. Many people think that contributions pay for the national health service or go into a fund to pay for their pensions, which, of course, they do not. As I said on a previous occasion, the national insurance fund is not a reservoir but a pipe. If we recognise national insurance contributions as a tax, as indeed they are, we could abolish the complex record-keeping which the contribution system still requires; we could base retirement pensions on residence in the United Kingdom; and we could base jobseekers' allowance on having an employment record. That would be both simpler and more honest. However, that is a matter for the future.

I return to Clause 51. It is an extremely important restructuring of national insurance contributions. I share the regret of the noble Lord, Lord Higgins, that it was introduced at Report stage in this House after the Bill had completed its passage through the other place. There was therefore no opportunity to test the clause in Committee in either House. It had a perforce limited discussion at Report stage in this House. It is for that reason that I believe it right to bring amendments to the clause on Third Reading to allow further discussion. The House of Commons will have an opportunity to discuss the issue on the debate on the Lords' amendments, but I believe that that is not a satisfactory substitute for a proper debate in Standing Committee in that House.

While I share the view of the noble Lord, Lord Higgins, that this is a thoroughly unsatisfactory way of introducing these extremely important changes to national insurance, I am unable to support the text of his amendment. I believe that it was a useful peg on which to hang a speech criticising the procedural way in which the Government have dealt with the matter. The noble Lord's textual analysis of the Chancellor of the Exchequer's Budget speech was perhaps pressing the point too far. While the Government will no doubt be in a better position than I am to refer to chapter and verse, it was my understanding at the time—certainly within a day or two afterwards—that it was no part of the Budget undertakings by the Chancellor to raise the lower earnings limit at the same time as he raised the threshold for employers' national insurance contributions in line with the threshold for tax.

Secondly, I believe that it is improper for this House to knock a hole in the Government's taxation plans by effectively cutting tax by raising the starting point for employees' national insurance contributions from £64 to £81 a week.

Thirdly, and most importantly, the amendment will cut out those earning between £64 and £81 a week from the duty to make contributions and will therefore deprive them of the contribution record to which they would otherwise have been entitled. It is clear that the amendment cannot be supported unless there is at the same time an amendment to preserve the rights of those earning between £64 and £81 a week.

Therefore, while I support the objections to the procedural way in which this has been handled, I am unable to support the amendment as it stands.

4.15 p.m.

Lord Newton of Braintree

My Lords, I rise briefly to refer to my Amendment No. 6, if only to dispel any impression that it is a rival to my noble friend's amendment or that there is any dispute between us. I have every sympathy with the arguments he advanced.

My amendment arises from doubt as to precisely what the Government mean by the £81 figure. If it is intended to be a substitute for the current lower earnings limit, admittedly at some uncertain time in the future, presumably it will, like the lower earnings limit, normally be reviewed and usually increased year by year.

I should like to know, first, whether the £81 figure is what the new lower earnings limit would be if it were introduced now or whether it is what the figure will be at some unknown time in the future when it is introduced. If, as I understand it, it is loosely related to the single person's allowance, in the same way as the current lower earnings limit is, that, of course, is index-linked and will rise each year. Therefore, when the Government finally get round to doing this, £81 will not be the right figure, in which case my amendment is more closely directed to achieving what the Government intend.

From the body language of the Minister—if I may call it that—I believe I am right in my interpretation that that is not the figure at which it will be introduced, but perhaps she could confirm that. I mean that I should like to have it on the face of Hansard.

My noble friend on the Front Bench and the noble Lord, Lord Goodhart, raised a point as to what the alleged protection means. At present, on current-year figures people earning over £64 a week and paying contributions would acquire pension rights and rights to unemployment benefit, and so on, in certain circumstances. It is clear that at some future stage those earning over £81, or whatever the figure is, will do the same. We are told that people earning between those two figures will be protected. What does that mean? Does it mean that the rights that they have already built up to pensions, for example, will be protected; does it mean that for a period, until they run out of them, their rights to unemployment benefit will be protected, those rights only ranking for two tax years in relation to national insurance contributions; does it mean simply that the rights that those people already have will be protected but that they will not go on acquiring new rights to pensions, and the like, on contributions which they are not paying; or are we to have a new form of contribution credit? That question must be answered if we are to be sure that we are not blowing a complete hole in the national insurance system or seriously damaging rights in a way which purports to be improving people's position. We need a clearer idea of the answer to that question before we can acquiesce to the way the Government are proceeding.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)

My Lords, I urge the House to reject these amendments. I am sure the House will be relieved to hear that I shall not make a Second Reading speech on Part II of the Bill; nor do I intend to joust with the noble Lord, Lord Higgins, about the difference between "further" and "future", when my understanding is that both lie in the future. Instead, I shall try to address the amendments.

In putting forward the amendments, the noble Lords, Lord Higgins and Lord Newton, appear to be trying to introduce into the Bill a change heralded by my right honourable friend the Chancellor in his Budget. The Chancellor announced future reforms that would raise the lower earnings limit to the level of a single person's tax allowance. As I was invited to do by the noble Lord, Lord Newton, I confirm that that is indeed the case. The alignment will in future be with the single person's tax allowance. In that sense, he is right to correct the possible technical flaws in his noble friend's amendment.

I am pleased to see that the Opposition support the Chancellor's proposals to such an extent that they want to expedite their introduction. Unfortunately, neither the amendment of the noble Lord, Lord Higgins, nor that of the noble Lord, Lord Newton, addressed the major implications, touched on by the noble Lord, Lord Goodhart, that they would have for the pension and benefit position of millions of employees. The amendments would take up to 1 million low-paid people—four-fifths of them women—out of reach of certain contributory benefits. They would reduce the future state earnings-related pensions and contracted-out pensions of millions of others. And they would reduce national insurance contribution revenue by approaching £1.5 billion a year.

The Government have introduced into this Bill a number of changes to the structure of national insurance contributions as announced by the Chancellor in the Budget. Those measures brought forward at Report stage are intended to come into force in April 1999. They will abolish the 2 per cent. entry fee paid by employees on their earnings below the lower earnings limit. That will increase by £1.28 a week the take-home pay of every employee who pays contributions. The measures will enable us to increase the point at which employers start to pay contributions from the current level of £64 a week to the level of the single person's tax allowance—£81 a week this year. They will abolish the contribution that employers pay on earnings below this new higher threshold. And they will greatly simplify the structure of employer contributions by cutting the number of rates from four to one.

This radical package of reforms will help to make work pay. It will build on the many other measures the Government are introducing to help people move from welfare into work, including the working families tax credit, the childcare credit and the new deals. And it will align the national insurance system more closely with income tax, cutting red tape for business and reducing the cost of administration.

The Chancellor also announced his intention to build on these changes. He said that, crucially, once measures were in place to protect people against benefit losses he would be increasing the lower earnings limit for employees to align with the new higher threshold for employers; that is, to the level of the single person's tax allowance.

The proposed increase in the lower earnings limit will have many advantages. It will build upon other measures the Government are introducing to make work pay. And it will continue the progress made by this Government to cut the cost of administration for employers. We wish to do this as soon as possible. That is why the Chancellor announced his intention to introduce the measure in the future, and one imagines that is why noble Lords opposite tabled the amendments.

But without corresponding changes to the benefit rules, an increase in the lower earnings limit would remove access to certain contributory benefits from up to 1 million men and women earning between £64 and £81 a week. Those people—four-fifths of them women—would cease to build up rights to jobseekers' allowance, to incapacity benefit and to maternity allowance. They would no longer be eligible for statutory sick pay and statutory maternity pay. And many would cease to build up rights to the basic state pension.

In addition to these effects on the low-paid, the amendments would reduce the pensions being built up by millions of people right across the earnings spectrum. They would cut the portion of earnings that count for the state earnings-related pensions scheme—SERPS—thus reducing future SERPS pensions and many occupational and personal pensions. Is that what noble Lords want from the amendment?

The noble Lord's amendments do not provide people with any protection against those benefit and pension effects. They make no effort to prevent losses. That cannot be either right or decent. If the noble Lords, Lord Higgins and Lord Newton, were truly concerned about the level of benefit, they would do as the Chancellor proposes and await the brigading of both sides of the equation—the benefit side with the tax side—and not seek to bring forward today a one-handed, one-sided amendment which would strip people of the earnings and the entitlement to those earnings that they built up through the insurance system. The noble Lord's amendment does precisely what he says he does not want it to do. I hope that as a result he will change his mind.

The Government believe that those effects are unacceptable, indecent and wrong. We will not increase the lower earnings limit at the expense of people's access to contributory benefits and pensions. Instead, we will wait until we have completed both sides of the equation. As the Chancellor announced, we will take the steps necessary in the future and at the same time to ensure that these low-paid men and women do not lose benefit as a result of the change.

Of course, all aspects of the present system are not cast in stone forever. We need to modernise the national insurance system; we need to simplify its administration and to examine the link between contributions and benefits. That is precisely why we will be coming forward with proposals in due course. But they will be proposals that do not strip away benefits from lower paid men and women as the amendment, in isolation, does.

That is my first criticism of the amendment; that is, that it strips away the rights that people are entitled to claim by virtue of their insurance. It is no use the noble Lord shaking his head; that is precisely what the amendment does. He may not wish it, but it does. I have a second criticism which is that the amendment is financially reckless. It is reckless with people's benefit entitlements and reckless with public funds. It would leave a gaping hole in the Government's finances. It would reduce national insurance contribution revenue, as the noble Lord, Lord Higgins, admitted, by £1.5 billion a year. I note that neither the noble Lord, Lord Higgins, nor the noble Lord, Lord Newton, were anxious to tell us where they will find that £1.5 billion or by what cuts in expenditure they will seek to do it. Will they take it from pensions, from education or health?

Changing the lower earnings limit has major financial implications and noble Lords are ducking the issue today by not addressing how they will compensate for that shortfall. It is for the Chancellor to decide when it is appropriate to make such a change. The financial effects will appear in the Red Book at that time as part of his Budget proposals and matters will be properly discussed by the Commons in that Budget debate. The change will not be made in April 1999. It will be made when the Chancellor feels that the time is right and the financial effects will then appear properly in the Red Book at that time. I urge your Lordships therefore not to support the amendment.

The third point raised by the noble Lord is that if the amendment is not about financial prudence—it is not; it is reckless—and if it is not about considering the policy in the relationship between contributory benefits—it cannot be because it failed to do so—then why press it? The noble Lord, Lord Higgins, said that it was to allow the other place adequate scrutiny of the Chancellor's Budget intent. The other House has already had a debate on the Budget.

Raising the LEL is not part of the Bill; I must emphasise that. Because it is not part of the Bill, we are not denying the House the proper scrutiny it should have. If we were trying to introduce LEL into the Bill, the point would be well taken. We are not. The noble Lord, Lord Higgins, is not aiding the House of Commons by initiating a debate today and asking Members to debate in due course something that is not even in the Bill.

In due course this measure will be formally brought forward by the Chancellor of the Exchequer, probably in a Budget but possibly not. In either case it will need to come forward as primary legislation. At that point the raising of the lower earnings limit will be discussed, scrutinised and debated by the Commons in four stages of its procedure and five stages of this procedure. Is the noble Lord going to tell us that, as a result of that, any such change will not have been properly scrutinised? The noble Lord, Lord Higgins, cannot hide behind the need of the Commons to debate when there will be ample opportunity in due course, when we have the full information, to debate this when primary legislation is introduced.

I urge your Lordships therefore not to support the amendment which, I promise, is extremely ill-judged. It is financially reckless. I repeat: it leaves a gaping hole of £1.5 billion in public finances without any suggestion of how that hole should be plugged. Is it now Tory policy not to tax and spend, but to spend and not to tax?

The amendment is also indecent. It leaves those struggling in low-wage jobs without the protection of insurance benefit which they thought they had earned. This amendment will strip away their rights. That is quite wrong and it is not decent to do so. Is it now Tory policy not to favour the brigading of work with insurance rights, but to insist on work without those rights? Is that fair to those struggling on low wages, because that is what this amendment does? Is it also the case that if we do not introduce a lower earnings limit clause into a Bill which has nothing to do with it, that we are going to deny the Commons the opportunity to debate it when it is introduced as primary legislation? Of course not. Any proposals will be properly scrutinised in both Houses in due course when both the tax and the benefit sides are brought together. In that regard, the Government have made clear in their Red Book how the loss of national insurance contributions is to be properly funded. To do anything other than that is reckless, imprudent and wrong.

This amendment would be perfectly proper as a probing amendment, but it is not a probing amendment. To push it to a vote would be reckless and imprudent. I hope that your Lordships will value the judgment of this House and not do so.

In the course of the Committee and Report stages, as I am sure the Tory Opposition will accept, many amendments were moved and most of them were accepted by the Government. We all believed—and the voice of the House indicated—that to do so was good public policy. I can list the amendments if noble Lords wish. About 10 amendments have been tabled by us which arose from Opposition amendments to improve the Bill. That was in the nature of good public policy. This amendment is not; it will not make it a better Bill and it is not relevant to it. Noble Lords have the numbers. They can push these amendments through if they choose, but on the grounds of financial prudence and of respecting the right of the lower paid to the insurance benefits that they have built up; and also respecting the role of the Commons to debate this issue when proper legislation is introduced in due course, I urge noble Lords not to support these amendments, but to press the noble Lord to withdraw them instead.

4.30 p.m.

Lord Higgins

My Lords, I think that the noble Baroness doth protest too much and, in a large measure, has been hoist with her own petard. Part II of the Bill has been introduced by the Government, totally bypassing the House of Commons up to this point. The purpose of this amendment is to give the other place an opportunity to discuss a specific point which was explicitly referred to in the Chancellor of the Exchequer's Budget speech, which undeniably gave the impression that he was going to do this. That is what this amendment seeks to do.

Baroness Hollis of Heigham

My Lords, the noble Lord will, of course, wish to remind his friends behind him that because the Bill contains new clauses on national insurance it will be debated by the Commons anyway. This amendment is not needed in order to provide a peg to enable the other place to discuss the national insurance clauses in this Bill.

Lord Higgins

My Lords, of course that is true, but the point is that the Commons need to do so on a specific amendment which is designed to do what the Chancellor of the Exchequer clearly gave the impression it was his intention to do. It is right and proper that we should do that.

Baroness Hollis of Heigham

My Lords, I believe the noble Lord misunderstands. The point is that this House, as a result of supporting government amendments, has put new amendments into the Bill which the Commons have to consider. Therefore, there will be consideration of these issues without the need for this amendment to be the peg on which to do so.

Lord Higgins

My Lords, but clearly it is better that the specific point is made to implement clearly what the Chancellor intended, according to the words I have quoted.

Earl Russell

My Lords, simply for clarification, will the noble Lord, Lord Higgins, accept the Minister's contention that the lower earnings limit is not being altered by this Bill?

Lord Higgins

My Lords, I am suggesting that we should incorporate in this Bill—as I say, the Government have been hoist with their own petard—a specific remark made by the Chancellor of the Exchequer. The new clauses are in effect a Bill within the Bill. Therefore, we can have a Bill which not only implements everything said by the Chancellor that the Government have incorporated, but also what he said but the Government have failed to implement. That is the purpose that we have in mind in moving this amendment. The noble Lord, Lord Goodhart, said that it is a peg on which to hang a debate and to permit a vote and for the other place also to have the chance to vote on it. It is very important indeed that that should be so.

As regards the points about introducing the provision into the Bill, the noble Baroness keeps saying that that has to be done in primary legislation. This is primary legislation. Of course, it should have been primary legislation introduced in the other place so that the matter could be properly debated.

Baroness Hollis of Heigham

My Lords, the point I made is that this particular amendment needs to be introduced in primary legislation so that it is brigaded with the issue of contributory benefits. Otherwise the House would be stripping away people's rights if it were to pass this amendment tonight.

Lord Higgins

My Lords, perhaps, in reply to what the noble Baroness has just said, I may quote what the Chancellor said quite clearly. He said, Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings. All employees earning between £64 and £81 will have their right to benefits protected".—[Official Report, Commons, 17/3/98; col. 1106.] We presume that that is what the Government will do, because they have clearly given an undertaking that when the limit is raised those employees will be protected. If it is the case that the Government have not the remotest idea how they are going to do that, then why on earth did the Chancellor put that in his Budget speech? It would have been totally inappropriate to do so. He should have said, "If we can find some way of doing this while protecting the contributory principle, then of course we shall go ahead". That is not the impression that he gave in his speech on Budget Day, that was reported on radio, in the press and introduced by spin doctors. The Chancellor clearly said that he would do both. Certainly, we shall support him in doing the second and we look forward to seeing what will happen.

Incidentally, perhaps I may stress the dates in the amendment, which are "1999–2000". So the Government have ample time. It may be that they have introduced this matter in a totally foolhardy way, and simply wanted to get a few cheap cheers on Budget Day—"cheap cheers" is a rather inaccurate description. If that is what they propose, it should not have been done in the Budget.

Perhaps I may return to the point that I make. The noble Lord, Lord Goodhart, said that I was carrying textual analysis too far. That was not quite the point I was making. I was saying that the Chancellor's Budget Statement, which no one would dispute was correctly reported, states, Further reforms will also ensure that no one pays national insurance for the first £81 of their income".—[col. 1106.] However, what he said in evidence to the Select Committee at page 70 was this, Then I said— there he is referring to his Budget speech— Future reforms will also ensure that no-one pays National Insurance for the first £81". He did not say "further" but "future". There is a distinction. The use of the word "further" in the Budget speech clearly gave the impression that he was going to do it whereas "future" would have been quite different.

What worries me is that the Chancellor went before the Select Committee and said that he had used the word "future". He had only to look at Hansard, knowing that it was correctly reported, to see that that was not true. That gives me grave cause for concern. The Chancellor of the Exchequer should have said, "I am very sorry that what I said in my Budget speech was not right. I gave a false impression and I should have said 'future' and not 'further"'. It is not textual criticism, but a question of whether the Chancellor deliberately said one thing to the Select Committee when he knew he had said another.

I do not want to detain the House too long. I say quite specifically—and it is very important—that I believe that this whole matter of introducing the Chancellor's budget proposals into the House at a late stage without going through the Commons is completely wrong. I believe that we ought to hold the Chancellor to what he said. In the amendment, we give him ample time to sort out the problem, which he said he would undertake, of ensuring that employees earning between £64 and £81 have their rights to benefits protected. If the Government have no idea how that is to be done the noble Baroness had better say so and we will be absolutely clear on where we stand on it. But they have ample time to do so and we certainly expect them to do something. We are not opposing this measure. We are deeply opposed to the way in which it has been done. We believe that the Chancellor should be held to the situation which he stated in his Budget speech and which was clearly intended.

Let them, of course, consider this in another place. We are only looking at this now because of the strange way in which it has been introduced. It has been introduced here and we are right to deal with this matter so that the other place can give it due consideration. We are in no way, let me stress—

Baroness Hollis of Heigham

My Lords, perhaps I may—

Lord Higgins

My Lords, I shall give way in just a moment. Let me stress that we are in no way usurping the position of the other House. If the other House does not like what is in this amendment it will not take the appropriate action as far as concerns financial resolutions and it will oppose the amendment. That will be entirely a matter for it. It ought to have been a matter for the other House long since but it is right that this House should give the opportunity which would otherwise be denied it to look at this specifically.

Baroness Hollis of Heigham

My Lords, I shall ask the noble Lord two questions and I should be grateful if he would give a yes or no answer. Does the noble Lord agree that the House of Commons will have the opportunity to discuss the national insurance changes, as they have been inserted by amendment into this Bill? Does he agree that there will be a debate on them? Secondly, does he agree, in answer to the noble Earl, Lord Russell, that the lower earnings limit is no part of this Bill and should not be introduced into this Bill?

Lord Higgins

My Lords, as far as the second question is concerned, it is a matter of what view the House takes this afternoon. If the House takes the view that the amendment should be supported, the amendment will be in the Bill. As for going back to the Commons, the crucial point is this. It will be an appalling stage in the Commons. I understand it is proposed to have only one day on Lords' amendments when there are 160 or so government amendments which they will have to consider.

Earl Russell

My Lords, before the noble Lord asks the opinion of the House, I wonder whether I could ask him to read once again the passage from the Chancellor's Budget speech to which he has drawn our attention. I accept that it does not include the specific word "future". I should like to hear if it includes the specific word "present".

Lord Higgins

My Lords, the noble Earl's colleague on the Front Bench has accused me of "textual analysis". No, I have read out the quotation several times already and I shall do so again: Further reforms will also ensure that no one pays national insurance for the first £81 of … earnings. All employees earning between £64 and £81 will have their right to benefits protected".— [Official Report, Commons, 17/3/98; col. 1106] But it is in the context of the previous paragraph as far as abolishing the entry fee is concerned and the two were clearly intended to be taken together.

The first question to which the noble Baroness requested a "yes" or "no" answer was, if I recall correctly, in relation to whether the other House would have an opportunity to discuss the Social Security Bill—

Lord Ashley of Stoke

My Lords, I wish to—

Lord Higgins

My Lords, perhaps the noble Lord will allow me to continue for a moment. I am coming to the end of my remarks and I have been much longer than I intended. The noble Baroness asked whether the other House would have an opportunity to discuss the proposals in Part II of the Bill. Yes, of course it will. But the crucial question is whether it will have an opportunity to vote on the specific amendment we are discussing this afternoon. If we do not pass the amendment, clearly it will not. If we do, it may be that the Government will resist it and there can be a specific debate and, if necessary in the Government resisting it, a vote on that matter. Given what the Chancellor said in his Budget, I believe it is right that the other place should have an opportunity to look at the specific issue. That is what this amendment seeks to do.

4.44 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordship divided: contents, 146; Not-Contents, 115.

Division No. 1
CONTENTS
Aberdare, L.	Gainford, L.
Addison, V.	Garel-Jones, L.
Ailsa, M.	Gisborough, L.
Aldington, L.	Glentoran, L.
Alexander of Tunis, E.	Hamilton of Dalzell, L.
Alexander of Weedon, L.	Harding of Petherton, L.
Ampthill, L.	Hemphill, L.
Anelay of St. Johns, B.	Henley, L.
Annaly, L.	Higgins, L.
Archer of Weston-Super-Mare, L.	HolmPatrick, L.
Ashboume, L.	Hood, V.
Attlee, E.	Hooper, B.
Balfour, E.	Ilchester, E.
Banbury of Southam, L.	James of Holland Park, B.
Barber, L.	Jopling, L.
Belhaven and Stenton, L.	Kenyon, L.
Belstead, L.	Kimball, L.
Bemers, B.	Knollys, V.
Blaker, L.	Lane of Horsell, L.
Blatch, B.	Lauderdale, E.
Bowness, L.	Leigh, L.
Brabazon of Tara, L.	Lindsey and Abingdon, E.
Broadbridge, L.	Long, V.
Brougham and Vaux, L.	Lucas of Chilworth, L.
Burnham, L. [Teller]	Luke, L.
Butterworth, L.	McColl of Dulwich, L.
Byford, B.	Mackay of Ardbrecknish, L.
Cadman, L.	Mackay of Drumadoon, L.
Campbell of Alloway, L.	Macleod of Borve, B.
Campbell of Croy, L.	Marlesford, L.
Camock, L.	Mayhew of Twysden, L.
Chelmsford, V.	Mersey, V.
Chesham, L.	Middleton, L.
Clanwilliam, E.	Miller of Hendon, B.
Coleridge, L.	Milverton, L.
Cope of Berkeley, L.	Molyneaux of Killead, L.
Courtown, E.	Monk Bretton, L.
Cranbome, V.	Monro of Langholm, L.
Crathome, L.	Mountevans, L.
Crickhowell, L.	Mowbray and Stourton, L.
Cross, V.	Munster, E.
Cuckney, L.	Murton of Lindisfarne, L.
Cumberlege, B.	Naseby, L.
Davidson, V.	Nelson, E.
Dean of Harptree, L.	Newall, L.
Denham, L.	Newton of Braintree, L.
Dixon-Smith, L.	Northesk, E.
Downshire, M.	O'Cathain, B.
Eden of Winton, L.	Onslow, E.
Effingham, E.	Oppenheim-Bames, B.
Ellenborough, L.	Orr-Ewing, L.
Elles, B.	Parkinson, L.
Elliott of Morpeth, L.	Pearson of Rannoch, L.
Eme, E.	Pender, L.
Ferrers, E.	Pilkington of Oxenford, L.
Flather, B.	Platt of Writtle, B.
Fraser of Carmyllie, L.	Plummer of St. Marylebone, L
Gage, V.	Prior, L.

Rankeillour, L.	Teynham, L.
Rathcavan, L.	Thomas of Gwydir, L.
Rennell, L.	Trefgame, L.
Renton of Mount Harry, L.	Trumpington, B.
Renwick, L.	Vivian, L.
Roberts of Conwy, L.	Waddington, L.
Rotherwick, L.	Wade of Chorlton, L.
Rowallan, L.	Weatherill, L.
Seccombe, B.	Westbury, L.
Skelmersdale, L.	Wilcox, B.
Skidelsky, L.	Willoughby de Broke, L.
Stanley of Alderley, L.	Wise, L.
Strathclyde, L, [Teller.]	Young, B.
Strathcona and Mount Royal, L.	Younger of Leckie, V.
Sudeley, L.
Taylor of Warwick, L.
NOT-CONTENTS
Acton, L.	Hardy of Wath, L.
Alderdice, L.	Harris of Greenwich, L.
Allenby of Megiddo, V.	Haskel, L.[Teller.]
Amos, B.	Hayman, B.
Annan, L.	Hilton of Eggardon, B.
Archer of Sandwell, L.	Hollis of Heigham, B.
Ashley of Stoke, L.	Hooson, L.
Avebury, L.	Howie of Troon, L.
Bassam of Brighton, L.	Hoyle, L.
Beaumont of Whitley, L.	Hughes, L.
Berkeley, L.	Hughes of Woodside, L,
Blackstone, B.	Jay of Paddington, B.
Bledisloe, V.	Jenkins of Putney, L.
Blyth, L.	Judd, L.
Brooke of Alverthorpe, L.	Kennedy of The Shaws, B.
Bruce of Donington, L.	Kennet, L.
Burlison, L.	Kilbracken, L.
Callaghan of Cardiff, L.	Kintore, E.
Carlisle, E.	Kirkhill, L.
Carter, L.[Teller]	Levy, L.
Castle of Blackburn, B.	Linklater of Butterstone, B.
Charteris of Amisfield, L	Longford, E.
Clancarty, E.	Lovell-Davis, L.
Cledwyn of Penrhos, L.	Mackie of Benshie, L.
Clinton-Davis, L.	McNair, L.
Cocks of Hartcliffe, L.	Mallalieu, B.
Currie of Marylebone, L.	Merlyn-Rees, L.
David, B.	Milner of Leeds, L.
Davies of Coity, L.	Mishcon, L.
Davies of Oldham, L.	Monkswell, L.
Desai, L.	Montague of Oxford, L.
Dholakia, L.	Morris of Manchester, L.
Donoughue, L.	Nicholson of Winterbourne, B
Dormand of Easington, L.	Nicol, B.
Dubs, L.	Orme, L.
Elis-Thomas, L.	Palmer, L.
Evans of Parkside, L.	Peston, L.
Exeter, Bp.	Ponsonby of Shulbrede, L.
Ezra, L.	Prys-Davies, L.
Falconer of Thoroton, L.	Randall of St. Budeaux, L.
Farrington of Ribbleton, B.	Rendell of Babergh, B.
Fitt, L.	Richard, L. [Lord Privy Seal.]
Freyberg, L.	Rodgers of Quarry Bank, L.
Gallacher, L.	Russell, E.
Gilbert, L.	St John of Bletso, L.
Gladwin of Clee, L.	Serota, B.
Goodhart, L.	Sewel, L.
Gould of Pottemewton, B.	Shepherd, L.
Graham of Edmonton, L.	Simon, V.
Hardie, L.	Simon of Highbury, L.

Stallard, L.	Walker of Doncaster, L.
Stoddart of Swindon L.	Watson of Invergowrie, L
Strabolgi, L.	Whitty. L.
Taveme, L	Williams of Crosby, B.
	Williams of Elvel, L.
Thomas of Macclesfield, L.	Williams of Mostyn, L.
Tordoff, L.	Winston, L.
Turner of Camden, B.	Young of Old Scone, B.

Resolved in the affirmative, and amendment agreed to accordingly.

4.54 p.m.

Lord Higgins

moved Amendment No. 5: Page 35, line 44, leave out from beginning to ("specified") and insert— ("(1A) For the tax year 1999–2000, the lower earnings limit (for primary Class 1 contributions) shall be £81. (1B) For the tax year 2000–2001 and each subsequent tax year, the limits and threshold referred to in subsection (1) above shall be"). On Question, amendment agreed to.

[Amendment No. 6 not moved.]

Lord Goodhart

moved Amendment No. 7: Page 36, line 41, at end insert ("together with the additional percentage of so much of such earnings as exceeds the current upper earnings limit (or the prescribed equivalent)"). The noble Lord said: My Lords, in moving our amendment to Clause 51, I cannot refrain from starting by expressing the view that the Conservative Party in this House has done its cause both in this House and in the country no good by moving and winning the vote on the previous amendment.

The changes to employees' national insurance contributions, which are contained in this Bill following the government amendment, are changes which we undoubtedly welcome because they simplify and make fairer the system of employees' national insurance contributions. The justification for the changes to employers' national insurance contributions is not quite so clear. I suggested on Report that there were possible drawbacks to the changes. It would be simpler to have employers' contributions as a straight payroll tax at a flat rate. That would also avoid—perhaps this is more important—the incentive for an employer to employ two part-time workers instead of one full-time worker. On that issue, however, I recognise that there are arguments for, as well as against, the changes.

We accept the Government's decision in going for the exemption of earnings up to the threshold of £81 per week. We recognise that that provides an incentive to employ more lower paid workers. However, if the Government are going for a progressive system of employers' national insurance contributions, why not make it properly progressive?

The Government propose that in return for the removal of contributions up to the threshold, contributions above the threshold will go up from 10 per cent. to 12.2 per cent.—that being, as I understand it, something which is intended to produce a revenue-neutral result. Doing that will reduce the burden on low-wage businesses and increase the burden on high-wage employers. That is fine if one thinks of high-wage employers as stockbrokers and city banks. I should add that it will not affect barristers, who are self-employed. However, the changes will increase the burden on some bodies that are financed by public funds. The universities currently estimate the net cost to them of the changes at £20 million per year. That is not an enormous amount, but it is significant.

The proposals in my amendment are simple. The rate between the threshold and the upper earnings limit will be reduced, as compared with the Government's proposals, from 12.2 per cent. to 12 per cent. The rate above the upper earnings limit will be increased from 12.2 per cent. to 15 per cent. The upper earnings limit is now £485 per week or about £25,300 per year. Under the Government's proposals in Clause 51, the crossover point—that is, the point at which employers will pay more national insurance contributions than now—is about £23,200 for non-contracted-out employees.

My amendment means that the crossover point will be approximately the same as the upper earnings limit—that is, about £2,000 per employee above the present crossover point. Basically, that means that no employee earning less than the upper earnings limit will become more expensive to employ. That reduction will be made up by significantly higher contributions on earnings above the upper earnings limit. I believe that it is right that progressive income tax should be matched by progressive employers' contributions. At present, it is an anomaly that the aggregate national insurance contribution (adding together the employer's and the employee's contributions) falls when the upper earnings limit is reached because the employees stop paying contributions on their further earnings. At present—it will be the same under Clause 51, if enacted in its present form—the aggregate contributions by both sides fall by 10 per cent. when the upper earnings limit is exceeded. Under my amendment the fall will be only 7 per cent.

Furthermore, I believe that this amendment will eliminate the net cost to universities and should increase the advantage to other public sector organisations such as schools and hospitals. I have to say that the amendment is raised essentially for discussion. It is, in nature, a probing amendment and is being raised on Third Reading only because of the Government's introduction of Clause 51 at Report stage. So this is the only occasion on which it is possible to raise such an amendment. In the circumstances I make it clear immediately that it is not my intention to press it to a vote.

There is a great deal to be said for the principle that employers' national insurance contributions should, as against the Government's current proposals, be reduced on earnings up to the upper earnings limit and should be increased on earnings above that limit. I hope that the Government will look favourably on that idea and give themselves the power to impose a higher rate of employers' national insurance contributions on earnings above the upper limit. I beg to move.

5 p.m.

Lord Haskel

My Lords, the Government cannot support the amendment. This is because the progressive structures suggested by the amendment seek to introduce something which would be far from revenue-neutral when compared to the structure of employers' contributions that the Government propose to bring into operation from April 1999. First, it would be more complex than the Government's proposals and, as my noble friend Lady Hollis explained with some considerable force, the Government's measures will increase the point at which an employer starts to pay contributions from the current level of £64 per week to the level of a single person's tax allowance at £81 this year. However, the Government's measures will abolish the contribution that employers currently pay on earnings below this new higher threshold.

As I explained on Report, these changes make 12.5 million employees earning up to £440 a week cheaper to employ. This is of benefit to two-thirds of workers and their employers. It is clear that the changes will give job creation incentives for employers across the full range of pay rates and not just those under the new earnings threshold. This includes, of course, the universities, which the noble Lord particularly mentioned.

We believe that our clause as drafted has several advantages which the noble Lord's amendment would destroy. Our broadly revenue-neutral package of reforms of employers' contributions will encourage employers to create jobs for people who want to move from welfare to work. It will align the national insurance system more closely with income tax, cutting red tape for business and reducing the cost of administration. The noble Lord's amendment would to a large extent negate these positive effects.

The objectives of the Government's radical restructuring of employers' national insurance contributions are clear and have been broadly welcomed—welcomed in consultation and also by Mr. Martin Taylor's review committee. The reforms cut red tape for business, simplify administration and support the Government's welfare-to-work programme. One has to contrast that with the amendment put forward by the noble Lord, Lord Goodhart, and the noble Earl, Lord Russell. Their proposal would increase administrative complexity for business and would cost employers hundreds of millions of pounds a year. There is no comparison. I urge the noble Lord to withdraw his amendment.

Lord Goodhart

My Lords, I find some difficulty understanding whether the noble Lord, Lord Haskel, has really appreciated the purpose of the amendment. He says that it would negate the positive effects of the Government's amendments. But, far from doing that, it would strengthen them. It would mean that any employee below the upper earnings limit would be even cheaper to employ than under the Government's present proposals. I acknowledge that there would be a small element of additional complexity but I believe that is a price worth paying for ensuring that the Government's provisions are even more favourable to those on relatively low incomes, including incomes up to the upper earnings limit, and that the higher burden on employers falls only, but in this case rather more sharply, on those with earnings above the upper earnings limit.

The noble Lord, Lord Haskel, says that my amendment is not revenue-neutral. However, he gave no indication of the extent to which it is not revenue-neutral nor indeed of the direction in which it is not. I find the answer distinctly unsatisfactory. Nevertheless, as I made clear, the amendment is introduced for the purposes of discussion and I do not intend to press it. I hope, however, that the Government will take it away and examine it rather more thoroughly than appears to have been the case up to now. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 8 not moved.]

Clause 64 [Liability of directors etc. for company's contributions]:

Lord Haskel

moved Amendment No. 9: Page 47, line 32, at end insert ("and () where that sum is given by paragraph (b) of subsection (3) below, specifying the proportion applied by the Secretary of State for the purposes of that paragraph."). The noble Lord said: My Lords, in moving the amendment I wish to speak also to Amendments Nos. 10 and 11. We discussed Clause 64 during the Committee and Report stages. I am pleased that there was general support for the principles behind it: that where national insurance contributions are owed and directors are found to be fraudulent or neglectful they should be held personally liable for the debts. However, the noble Lord, Lord Goodhart, had some concerns about the appeal rights of those found to be culpable, and I promised that we would reconsider the proposals in the light of our discussions. We have now done so, and this group of amendments is the result.

Amendment No. 9 ensures that the personal liability notice will now stipulate not only the total unpaid debt and the amount which is being transferred to that individual, but also the proportion of the debt for which the recipient is held liable. This will enable him to check the calculation used to arrive at the total debt and to make it crystal clear what degree of culpability has been found to fall on him.

Amendment No.10 adds the right of directors to appeal on the grounds that the total amount of national insurance was not actually due from the company. This can be exercised in cases where the company has not already exhausted this appeal right.

I also undertook to consider the noble Lord's request that it should be made explicit on the face of the Bill that the onus of proof in any appeal under these provisions falls on the Secretary of State rather than on the appellant. I shall therefore be happy to move Amendment No. 11 in due course, which does precisely this. I hope that your Lordships will agree that we have made a very good measure even better and I thank the noble Lord, Lord Goodhart, for his constructive concern. I beg to move.

Lord Goodhart

My Lords, these amendments are certainly welcomed by me. I raised these points, both at Committee stage when Clause 64 was first introduced, and at Report stage, when I myself put forward some amendments to it. There are two serious problems which I saw with the original draft. One was that the original version of Clause 64—that is, Clause 64 as it stands without these amendments—makes the Secretary of State the creditor in a claim against the defaulting directors as well as being the investigator and the judge. I believe that that caused very serious problems about compliance with Article 6 of the European Convention on Human Rights. Secondly, I believed that unnecessary complications were created by the Secretary of State saddling herself with the obligation to allot the responsibility between defaulting directors by determining their respective contributions rather than simply imposing joint and several liability.

The second of these problems has not in any sense been dealt with, but it is the less important of the two. As to the first, I remain less than convinced that Clause 64, even as amended, will necessarily be proof against Article 6, but it makes it much more probable. It means that there will be an appeal stage at which the burden of proof will rest on the Secretary of State to prove her case before a tribunal which is probably sufficiently independent to come within the bounds of Article 6.

I therefore welcome the amendment. While we are not entirely happy with the result we on these Benches are most grateful to the Government for having listened to the case and at least accepted an important part of it, as they have on a number of other occasions in dealing with this Bill.

On Question, amendment agreed to.

Lord Haskel

moved Amendments Nos. 10 and 11: Page 49, line 2, leave out from beginning to ("was") in line 3 and insert ("the whole or part of the amount specified under subsection (2)(a) of section 121C above (or the amount so specified as reduced under subsection (7) of that section) does not represent contributions to which that section applies; () the failure to pay that amount"). Page 49, line 15, at end insert— ("() On an appeal under this section, the burden of proof as to any matter raised by a ground of appeal shall be on the Secretary of State."). On Question, amendments agreed to.

5.15 p.m.

Clause 72 [Power to reduce child benefit for lone parents]:

Earl Russell

moved Amendment No. 12: Page 52, line 44, at end insert— ("() Regulations under this section may not be made until there is evidence from a systematic independent study of relative costs, incomes and expenditures of lone parent and two parent families on benefit and in work which conclusively demonstrates that one and two parent families should be treated equally by the tax and benefit system."). The noble Earl said: My Lords, this amendment deals with something that is a great deal more important than the amendment recently moved by the noble Lord, Lord Higgins, but I undertake not to spend quite as long in debating it. This is our last chance to look at the issue of lone parents, which has been a contentious matter since the very beginning of this Bill.

The purpose of this amendment is to defer the cut in child benefit introduced by this Bill until research has been conducted which conclusively demonstrates that one and two-parent families should be treated equally by the tax and benefits system. The purpose of this amendment is to address the fundamental issue of whether there should be a separate element of benefit attributable to lone parenthood. We are aware that both the other Front Benches do not agree with the view that there should, but in the world at large I believe that it is the other two Front Benches that are isolated.

This amendment defers the issue to the results of research and places the burden of proof in that research on the Government. The Minister may say—she would probably be mistaken if she did, but the view would be a defensible one—that the burden "conclusively demonstrates" is too heavy to shoulder. Were that to prove to be the case I would not particularly regret it. However, it gives the Government the opportunity to shoulder that burden if they wish. The Minister has said that the jury is still out on the question of whether there is an extra degree of financial hardship attributable to being a lone parent.

The Minister's office has very kindly sent me a considerable body of research on which the Minister has relied in reaching that finding. I have read all of it. I have also read the report What happens to lone parents? by Reuben Ford and others published since Report stage. I thank the Minister and, through her, her officials most warmly for their co-operation in that. One must set against that research the words of the noble Lord, Lord Ashley of Stoke, at Report stage. His was the voice of experience, and research must always be tested against the voice of experience.

I accept that there is a division within the research. I believe that it tilts on one side, but I shall not make an issue of it. I have tried to see whether I can distinguish anything in research methods or other approaches to the subject which makes people come down on one side or the other. I do not believe that this is just a question of bias; it is a question of how one sets about an academic research method.

The first aspect that is undoubtedly clear from the research is that in dealing with all parents on benefit one starts from a very low base. The research by Oldfield and Yu, for example, stated that income support failed to provide for the most basic needs of children. Professor Jonathan Bradshaw, who has worked out a minimum standard low-cost budget, says that the cost of meeting that budget is 30 per cent. above income support levels. Clearly, "a degree of hardship" is pretty generous. In deciding what to do with lone parents there is no great margin of error.

The conclusion I have come to is that the result depends on the particular research method that is used. There are basically two types of approach, one of them along the lines used by the retail prices index. It is known as the budget standard method. One takes a basket of goods which one believes to represent basic minimum needs and prices them. The other method starts from the other end. Like the family expenditure survey, it comes from the expenditure end of the equation. It looks at what lone parents can afford and what couple parents can afford.

I believe that the conclusion of the research into whether lone parents experience special hardship depends on which of those methods is adopted. It is fairly clear when one thinks about it which of those research exercises is the right one. If one adopts the budget standard method, like the retail prices index, most of the time one simply assesses the costs of the children, but the extra costs of single parenthood are very largely the costs of the parent. Essentially, those costs are concerned with time and the difficulty of being in two places at once, with diseconomies of scale in housing and heating. Some of the studies leave out housing, which must materially distort the resultant findings. No one has actually said that the children of single parents need to eat more than the children of couple parents. Therefore, if one proceeds simply on the basis of the standard method one will arrive at a basket of basic needs which one agrees are the same. The difference between single parent households and couple households is the difficulty in meeting those needs.

There has been a lot of criticism of attempts to assess financial standing by what people can afford. If one goes higher up the income scale, among the more prosperous expenditure measures tend to look at taste rather than poverty. For example, in some of these surveys I have appeared as poor because I do not possess a video recorder. (I did not possess a colour television until I found that I was unable to buy a black and white one on the market.) But if one goes rather lower down and considers such matters as three meals a day, one pair of waterproof shoes and one warm coat, those are not matters of taste but are widely agreed to be matters of necessity. If one finds a very wide variation in those articles one identifies a very real difference.

I know that the Minister is familiar with the Rowntree study, Small Fortunes, which uses the expenditure method. It concentrates heavily on basic physical needs. I have figures showing the number of children who are going without one of the basic items of food. They indicate 24 per cent. of children of lone parents not working, against 8 per cent. of children of couple parents neither of whom work. That is a considerable discrepancy. Furthermore, 42 per cent. of children of single parents not working are going without one basic item of necessary clothing. The equivalent figure for the children of two parents neither of whom work is 25 per cent. which is just above half the figure for single parents. Such figures must have an explanation.

I also draw the Minister's attention to Focus on the Family, published by the Office for National Statistics. It is not on all fours because it is a comparison of all couple parents with all single parents and it leaves out the benefit element. It shows that 51 per cent. of couple parents possess a car, but only 9 per cent. of single parents. When one considers economy shopping or access to work, that makes a considerable difference to the cost of living. If one shops in a good, cheap supermarket the cost of living is a good deal less than if one is confined to walking to the shops. Such factors of time must be taken into account. If the differentials in spending indicated in the Small Fortunes study do not show that it is more expensive to be a lone parent, what do they show? I beg to move.

Lord Newton of Braintree

My Lords, I do not wish to follow the noble Earl, Lord Russell, down all the wide and winding paths that he sought to take us. I wish to raise only one specific point and I should like to hear what the Minister has to say. As regards housing benefit for those who are working, how far can it be right to treat lone parents and two-parent families in the way the Government care to believe would be right in all respects? I emphasise that I am talking only about lone parents who are in work. None of my questions applies to people who are out of work and receiving income support because in most circumstances all their rent is paid. I emphasise that I am talking about the group which everyone is determined to help if they can; they are the lone parents who are in work, possibly with some difficulty, or who would like to return to work.

A basic feature of the 1986 to 1988 reforms, with which I had a modest involvement, was that the starting point for calculating housing benefit in circumstances where it was not being paid 100 per cent. was the income support rate which the person or persons in question would receive. I am convinced that strategically that was right. It was the only way in which we could get rid of one of the world's greater complexities, even in the complex field of social security. I shall not weary your Lordships with the details, but a benefit which existed until that time was called "housing benefit supplement", which nobody, but nobody, understood or could make work.

The structure of 1986 to 1988 enabled that to be got rid of. But I wish to press the Minister on a point relating to the meaning of that in the context of the noble Earl's comments. I can best illustrate the point by giving a possibly oversimplified but not impossible example. Its simplicity enables the point to be clearly revealed. Let us suppose that we have a two-parent family with only one earning and two children. The modest income from the one earner means that the family is entitled to help with the rent. Let us suppose that the non-earner leaves. In that situation the house is the same; the housing need is the same (namely, three bedrooms unless the children are small); the income is the same because the non-earner has left; the rent is the same because the income support entitlement of the lone parent is less than that of two parents; the starting point for calculating housing benefit will fall; and therefore the amount of housing benefit will fall but the amount of rent that must be paid will rise.

I ought honestly to acknowledge that that was a slightly uncomfortable feature of the 1986 to 1988 reforms in the interest of the greater good of getting rid of housing benefit supplement. As has been acknowledged by welfare rights groups such as CPAG, a specific part of the thinking was that the lone parent premium, which was also introduced at that time, would cushion the effect. It was a countervailing increase in income support entitlement and therefore in the starting point for calculating housing benefit.

What was an uneasy situation has been revealed more starkly because the lone parent premium is to disappear. Whatever the strategic advantage of the structure introduced in 1986 to 1988, it is difficult to see how it is easy to defend the position that I have described. I accept that I have illustrated a simple case and that in most cases the position will be a little muddier. But if that simple case can exist in any number, I do not understand what the Government will now say to someone suddenly becoming a lone parent in that situation.

Lord Ashley of Stoke

My Lords, I support Amendment No. 12 so admirably moved by the noble Earl, Lord Russell. My noble friend Lady Hollis has won all the arguments today, even though she lost one vote, but, despite her great skills, I wonder whether she will win the argument on this amendment. I am by no means certain because it seeks to tackle the problems created by the Government when they suddenly decided—suddenly decided—that lone parents do not need any extra help.

That is contrary to the long held belief that lone parents need and deserve help. That is a common-sense belief and to deny it, as the Government have done, and to embody it in a Bill has resulted in a seriously flawed clause. My noble friend Lady Hollis said, among other gems in her speeches on Report, that research is inconclusive. She believes that we shall always have a "hung jury" on the question of the costs relating to one or two-parent families. We can argue for years about that and other famous topics such as how many angels can dance on the head of a pin. But behind this fine dispute lies reality; that one-parent families will feel hung unless the Government accept the amendment.

The basic idea behind the amendment was suggested by the Social Security Advisory Committee. That is the expert body which opposed such a drastic change by the Government unless and until conclusive research could show that the costs of one-parent families are basically no different to those of two-parent families. I agree with the committee, but the Government have acted in haste and without evidence. They stated in their response to the committee that such research depends heavily upon assumptions of how to distinguish needs from taste.

That leads me on to the splendid point mentioned by the noble Earl, Lord Russell. Many of us will remember my noble friend Lady Hollis speaking about assumptions and research and that clash we had in an earlier debate. I hope we have a further clash on this shortly.

I do not know what the Government mean when they talk about depending on assumptions and how we distinguish need from taste. Perhaps my noble friend will enlighten us when she replies to the debate. I assume that modern researchers look at poverty in the context of normal expectations in our society. Surely our Government cannot be hinting that if lone parents aim to do the things that other families do, it is because they have a "taste" for it. Is that really what the Government are saying? If it is, perhaps my noble friend can tell the House which "tastes" one-parent families have that the Government are rejecting as a need. I should like to know and I am sure that other noble Lords would too.

My noble friend Lady Hollis also said earlier that lone parents share with couples similar costs for housing, heating, lighting, cleaning and furniture. That is precisely the point. It is meeting those costs which represent the additional burden for lone parents, especially those who work. That point is so obvious that it should not need repeating. However, two-parent families have a male salary and a female salary, albeit that the female salary is usually lower. In most lone parent families, the sole salary is the low female one. I know that there is rent relief for some families. But there is no help with mortgage payments or other fixed costs such as heating bills. That alone must make lone parents deserving of a little extra money.

I believe that the Government have made a mistake, no doubt in good faith, by making that policy change which is so damaging to lone parents on an unproven basis. Nevertheless, for all my noble friend's reservations, including her comments about research and hung juries, she said also: Where research on, say, smoking and cancer, is coherent and scholarly, and is consistent with other research, that is the point at which the Government can take action". That is fine. I am more than happy with that. For my part, that will suffice. I accept my noble friend's proposition. Therefore, what we need now and what lone parents deserve is coherent and scholarly research on that subject.

It is unacceptable on a major issue of this nature to presume that because there is a risk of assumptions determining the result, we should not bother at all. I fear that that may be the course which the Government are taking. We need well-constructed research proposals exploring all aspects of the issues. Therefore, what are the Government planning to do? Perhaps my noble friend will spell that out in her response. Are the Government going to initiate a research programme or no research programme at all? The House should be told. I ask my noble friend what the Government intend. Do they intend to commission research or do they intend to defy the SSAC and the many thousands of lone parents who are so angry and upset about being deprived?

This Government have done a great deal for single parent families and under-privileged people. I warmly commend what they have done. However, on this specific issue, I believe that they are jumping the gun without the evidence that should be there and I believe will not be there, seeking, wrongly in my view, to prove that single parent families bear no greater costs than two parent families. If my noble friend can assure the House that there will be that independent research, despite her reservations about different kinds of research, that will go a long way towards reassuring many of us.

5.30 p.m.

Baroness Hollis of Heigham

My Lords, I am not sure whether I am more vulnerable to the arguments of the noble Earl, Lord Russell, the blandishments of my noble friend or the faintly mea culpa attitude of the noble Lord, Lord Newton.

The amendment seeks conclusive evidence of the relative needs of lone parents and coupled families. The Government—myself included—do not believe that further research can provide a definitive answer. There is already a wide body of research in this area. In the past 12 months or so, there have been eight major reports on the inter-relationship of lone parents, benefit, work and hardship. And yet despite that, we cannot achieve conclusive evidence on the relative needs of lone parents and coupled families. Yet another piece of research cannot answer in the way that the previous research has failed to do.

When I made the comparison with scientific research—the link between cancer and smoking—I referred to it being coherent, scholarly and consistent with other research; in other words, where going over the same material with similar groups of people, there could be a replication of the findings. That is the basis of scientific research—replication. The point about the research is that because of the presumptions, assumptions and perspectives, scholarly and coherent though they are, the research cannot be replicated in any way which suggests that such questions are analogous with the links between, for example, smoking and cancer.

The noble Earl, Lord Russell, suggested that there are several approaches and he is absolutely right. For example, I know that there are comparative expenditure surveys which make the distinction between "need" and "taste". My noble friend pressed me on that. The point is that that creates difficulty as regards research because families spend their income regardless of whether it is spent on what you or I may regard as "essential" or as "less essential". Smoking is an obvious example. Half of all lone parents smoke.

Earl Russell

My Lords, is the Minister aware that alcohol and tobacco are entirely excluded from Professor Bradshaw's low cost budget, which is the basis of much of the work done?

Baroness Hollis of Heigham

My Lords, yes, but that was in 1993 and if the noble Earl looks at the research of Reuben Ford on making work pay, he will see that he says that one of the largest influences which increases hardship is that of being a smoker. That is on page 65. Therefore, further research has clarified that point.

Do not misunderstand me. I do not say that because lone parents are smokers, therefore they are foolishly wasting their money. I am not saying that at all. I am saying that the distinction between what is essential and what is less than essential is often a question of genuine debate between the lone parent and how she spends her money and the researcher. That is why so many different studies come up with such different findings.

The Cost of Children and the Welfare State by Dickens, Fry and Pashardes suggests, for example, that, relatively, all families with children on income support are over-compensated for the cost of their children and that coupled families are under-compensated for the cost of a second adult. That means that any expenditure survey must guess which expenditure is on the basis of "need" and which on the basis of "taste". Without making a judgment about the propriety of that, that is what is built into the difficulty of assessing that research. It means that different approaches lead to different and therefore inconclusive results. That means that a second researcher asking the same questions of the same families would arrive at a different answer. That is why the research is not scholarly and cannot be scholarly in the same way as scientific research. It is not the less valuable for that but it cannot be conclusive in the way that we can, for example, establish links between cancer and smoking.

Secondly, there is the "budget standard" approach. As the noble Earl has said, that type of analysis depends crucially on questions of judgment as to what is to be included in a budget standard. We know that lone parents have the same costs as a couple in relation to housing and I shall return in a moment to the point made by the noble Lord, Lord Newton. Lone parents have higher costs as regards child care. However, there are areas where lone parents have lower costs. For example, a coupled family has an extra mouth to feed and an extra person to clothe.

The noble Lord, Lord Newton, pressed me on housing costs. He gave a perfectly fair example of a situation in which the man was in low-paid work and therefore receiving housing benefit; his wife left; and as a result, he was in the same house with the same number of children and paying the same rent but the amount of his housing benefit would fall. He asked whether that was reasonable. Yet it is. I say that because the difference is that there is one adult fewer in the household. In the noble Lord's example, where there is no wife, there is one adult fewer in the household. Therefore, the rest of that man's money is going on less expenditure. In other words, by having one adult fewer in the household, there is less expenditure on other items, including food and clothing, and that will therefore fall. So that man's applicable amount will be lower analogous to the income support rates being lower. However, the housing benefit taper and withdrawal will kick in in exactly the same way.

Lord Newton of Braintree

My Lords, I apologise for intervening at this point, but I am grateful to the Minister for allowing me to do so. I shall try not to make it too much of a habit. I do not see how that line of argument stands up, unless it is being argued, against all the theory of the whole system, that the income support rates include an amount which is available to meet housing costs. But the whole basis of the system, given that 100 per cent. of rent is met for people on income support, is that the income support rates contain no element for rent costs. The Minister has just argued that when there is one adult in the household in the circumstances that I described, somehow some part of the benefit which is not paid for housing costs, for rent, becomes available for it.

Baroness Hollis of Heigham

My Lords, the noble Lord has made my point for me. When on income support, a lone parent with one or two children receives less money in income support than two people with two children will get on JSA. That is the precise point. Indeed, the noble Lord has exactly made my point. In other words, you are carrying forward the equivalent of that lower figure on income support for a single adult, plus two children, compared to a couple with two children—the applicable amounts—into the structure of housing benefit. The reason that the lone parent with one child or two children receives a lower amount than a couple with two children is that that family has lower expenditure on food and clothing. That is why their income support is lower. Therefore, although they receive full housing benefit at the level of their income support, their applicable amount, which is their income support equivalent, is at a different level. That is then carried over into the work situation because, if there is only one adult in the household compared to two, there is lower expenditure—exactly analogous as in income support—and, therefore, lower applicable amounts apply, even though the structure of housing benefit remains the same in both situations. As I said, I believe that the noble Lord has made my point for me. Indeed, he has probably done so better than I could have done.

Research suggests in differing ways that lone parents may have higher costs than a couple. However, sometimes the reverse is the case. Perhaps I may take the obvious example, and this reflects the point made by the noble Earl about the Bradshaw Report. Let us suppose that a lone parent on income support re-partners. Therefore, we are now talking about a couple family which has to cover all the needs of an additional adult going into that family from just £28.65 a week—that is, £4 a day—for his or her food, clothing and transport. So we can begin to understand why much research concludes that lone parents are relatively better off than couples on benefit. Perhaps we should consider the lone parents quoted in the Graham study and requoted by Lister in the past month in her PSI report. Indeed, lone parents are quoted there as saying that they are better off being lone parents than when they were married because, when they were married, the men were relatively so expensive given the costs particularly of their food, and, to a lesser extent, their clothes and their transport. Therefore, they prefer to remain single and found themselves better off accordingly. That is the result of research which is only one month old.

Finally, there are the "deprivation studies". The noble Earl quoted from Small Fortunes which found that children in lone parent families are more deprived than in couple families. That is because a large proportion of lone parent families are on income support. It does not compare apples with apples; it compares apples with pears. It is also clear from the PSI and DSS reports produced during the past 12 months that lone parents on levels of income support vary quite widely in how much hardship they report to the researchers that they have experienced.

If the argument of the noble Earl and my noble friend was correct, all lone parents on the same level of income would actually experience a similar level of hardship. That would follow, would it not? But it does not. Why is that? It is because it depends on differing factors, such as the number of children, on their health and on whether the family has any access to savings. Moreover, given that half of all lone parents smoke, it also depends on whether they smoke and, in turn, whether that relates to any health problems. In other words, the disposition of income, together with capital—that is, the human capital and the financial capital—with which a lone parent goes into the situation of lone parenthood determine whether any individual lone parent experiences hardship.

What we accept—and I certainly would not dream of contesting it—is that a large number of lone parents are on low income and that a much greater proportion of lone parents experience low income than other family types. Indeed, that is absolutely undeniable. However, the response to that is to recall—and, again, all the research shows this and no one has contested it today—that the reason that lone parents proportionate to couples are on low income and why many of them experience hardship, which undoubtedly they do, is that they feel unable to work. They remain trapped for long periods on income support and, once on income support, they stay there longer and cannot get back into work. That is the problem: they remain trapped on income support, unable to go into work. All the research shows that when they go into work, even more than when they re-partner, that is when their standards of living begin to rise. It is when they cannot get into work and remain trapped on income support for long periods that their levels of income support become increasingly less adequate to meet their needs. That is why we are making such changes to the Social Fund.

That is why our strategy is to develop the New Deal for lone parents, to develop the national childcare strategy and to develop the working families tax credit and the childcare tax credit. That will allow lone parents an unprecedented opportunity to move into work, to improve their incomes through work and to improve the living standards of their families.

I am sorry, but I do not believe that we could accept the amendment because it presumes that there is a definitive answer which somehow or other inadequate research has so far failed to produce. We have received something like eight reports on lone parents in the past year. I have read them, as I am sure have many noble Lords. Judging by the assumptions which have been brought forward and what is being tested, we know that some answers will be found. That is not because they are not scholarly or because they are not reputable or coherent. Indeed, they come with different assumptions and ask different questions. You choose your questions and your findings.

Given that fact, the right answer is not to ask for more and more research but to accept, as we all do, that many lone parents suffer hardship because of the length of time that they spend on benefit. Therefore, the right way to respond to the situation is not to commission more research, which I am confident will continue to be inconclusive. The right response is to offer lone parents the opportunities that they themselves call for; namely, the opportunity to work, which is possible only with decent and affordable childcare. That is what we propose to do. In the light of that explanation, I hope that the noble Earl will feel able to withdraw his amendment.

5.45 p.m.

Earl Russell

My Lords, I should like, first, to thank those who have supported my amendment, especially the noble Lord, Lord Ashley of Stoke, who has supported me on this issue consistently from the beginning. I am most grateful to him. I am also most grateful to the noble Lord, Lord Newton of Braintree, for his extremely interesting and powerful contribution. Indeed, I thought that his reply to the Minister was conclusive. I hope that the noble Lord will continue to ask such questions as we approach the review of housing benefit. Mr. Field has suggested that people should meet an element of their rent out of their own funds, which must mean their income support. If there is any danger of that, I hope that the noble Lord, Lord Newton, will repeat the same questions.

On the virtue of work for those single parents who want it and on the great importance of childcare to help them get into it, I must say again to the Minister that there is nothing between us. There is no issue there, so I shall not pursue it. However, the noble Baroness accused me of believing that research can be conclusive. If she had listened very carefully to my opening remarks, she would know that I did say that she might argue that it could not be conclusive but that, in that case, she could not do what she proposes to do. If the burden of proof is too heavy for her to carry, she should not do what she is doing.

This is not just a matter of tastes. When we have dealt with needs I have been careful to restrict myself to two basic needs—enough food to preserve body and soul and, if possible, health, and enough clothing to keep out the cold. The indicators I mentioned in the example I gave were three meals in a day, one warm coat and one waterproof pair of shoes. I do not believe that in saying that people need those I am making an assumption which is a matter of taste. I believe those are genuine needs. One might possibly dispute the warm coat in the Sudan but one is hardly likely to do so here.

Study after study has found that single parents and their children find it much harder to get those things than other families. Before I decide what I shall do with the amendment I ask the Minister once more, with regard to the findings in Small Fortunes, if she does not explain them as a result of the disadvantages of single parents, how does she explain them? Before I leave this subject I should like to hear her answer.

Baroness Hollis of Heigham

My Lords, there are about eight different pieces of research which all contain different statements and assertions about lone parents. Earlier the noble Earl quoted the Bradshaw Report as key evidence of hardship. That shows that lone parents' income support levels are closer to lone parents' would-be expenditure than that for couples. It seems to me that the noble Earl is trying to have it both ways. He is selecting sections of different pieces of research that support parts of his argument and neglecting the rest. As regards the Small Fortunes findings, I can produce five or six other surveys which show pretty conclusively—I refer to the refined hardship index in the latest report by Ruben, Ford and Company—that the Small Fortunes study does not appear to be conclusive in this regard.

Lord Ashley of Stoke

My Lords, before my noble friend sits down, if she believes that research cannot prove the case that the noble Earl and others have put, why did the Government act in a contrary way without evidence to support that action?

Baroness Hollis of Heigham

My Lords, the Government—in my view correctly—have produced a package for lone parents which states that all children, whether in lone parent families or couple families, should be treated in the same way. However, we have also raised the benefits for all of those families in terms of child benefit and the benefit through income support for children under 11. As a result, a lone parent with two children will be £7.50 a week better off under the Government's proposals.

In addition to those Budget proposals—as my noble friend will know—the Government have mounted a major New Deal strategy which draws to the attention of lone parents the possibility of work—which they have asked for—supported obviously by childcare proposals. Although initially the benefits of lone parents were reduced to those of couples in the Budget, the Government have lifted the benefit levels for both couples and single-parent families. In that way we focus on the needs of children and not the family structure they are in. We have given lone parents the opportunity to work and to receive childcare. We know that opportunity will spring them out of hardship.

Earl Russell

My Lords, I have one last point to make. In invoking the research by Professor Bradshaw I believe the Minister has not followed my line of argument. The expenditure to which she referred was putative expenditure reached by the budget standard method. I think she understands why I am saying that that is not measuring the right thing; it is barking up the wrong tree. When Professor Bradshaw tried checking the Family Expenditure Survey he got a quite different answer. On page 29 of his research he states, According to the Family Expenditure Survey only about half of single pensioners and lone parents actually achieve this no-frills standard of living. It is reached by four out of five two-parent families". That is a more consistent finding than the Minister accepts. We shall need to return to this issue, but for the time being I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 13 not moved.]

Schedule 6 [Transitory provisions]:

Lord Hardie

moved Amendments Nos. 14 and 15: Page 70, line 20, after ("section"") insert (", in the first place where they occur,"). Page 70, line 22, after ("determination"") insert (", in the first place where it occurs,"). On Question, amendments agreed to.

Schedule 7 [Minor and consequential amendments]:

Lord Hardie

moved Amendments Nos. 16 to 21: Page 79, line 38, leave out ("that section") and insert ("section 17"). Page 80, line 10, leave out ("that section") and insert ("section 20"). Page 82, line 48, at end insert ("which""). Page 87, line 18, at end insert ("and (b) for the word "determination" there shall be substituted the word "decision"."). Page 98, line 48, at end insert— (" In paragraph 10(2) of Schedule 1 to that Act (supplementary provisions), for the words "section 5(1)(n) of the Administration Act" there shall be substituted the words "section 21(2) of the Social Security Act 1998"."). Page 99, leave out lines 15 to 17. On Question, amendments agreed to.

Schedule 8 [Repeals]:

Lord Hardie

moved Amendments Nos. 22 and 23: Page 105, line 46, column 3, leave out ("paragraph 25") and insert ("paragraphs 25, 33 and 34"). Page 106, line 14, column 3, at beginning insert— ("Section 137(2).") On Question, amendments agreed to.

Baroness Hollis of Heigham

My Lords, I beg to move, That the Bill do now pass.

We have come to the end of a long and intensive scrutiny of this Bill. This is our seventh full day in the House and we have considered nearly 350 amendments during that time. I shall speak briefly. I wish to thank in particular my noble and learned friend the Lord Advocate for ably taking through the measures in the first part of the Bill. His legal experience was invaluable, especially in a House with such strength in the legal profession. I also thank warmly my noble friend Lord Haskel for taking us through the complexities of national insurance. Many noble Lords have contributed to these debates and the wealth of experience and expertise found in this House has been amply demonstrated by their contributions.

I also thank the noble Lord, Lord Higgins, the noble Baroness, Lady Anelay, the noble Earl, Lord Russell, and the noble Lord, Lord Goodhart, for the extent to which they have pushed the Government and have forced us to scrutinise this legislation in detail while maintaining the impeccable courtesy for which all four of them are known. I appreciate that. At Second Reading I said that the Bill will allow us to create an active, secure and integrated system of welfare delivery".—[Official Report, 15/1/98; col. 1147.] It will streamline the decision-making process. We are putting into place new appeals procedures. We are reforming national insurance. We are delivering a welfare-to-work strategy for lone parents. I hope your Lordships will agree that, apart from the deplorable result of this afternoon's vote, the other amendments we have passed and the scrutiny on all sides of this House have meant that this Bill has been taken forward in a co-operative and positive way. Apart from today's lapse, which I am confident will soon be remedied in another place, I think the Bill is a better Bill. I thank noble Lords who have made it so.

Moved, That the Bill do now pass.—(Baroness Hollis of Heigham.)

Lord Higgins

My Lords, I had not intended to speak but I join the noble Baroness in expressing my appreciation to the noble Earl, Lord Russell, and to the noble Lord, Lord Goodhart. I also thank the noble Baroness, Lady Hollis of Heigham, the noble and learned Lord, Lord Hardie, and the noble Lord, Lord Haskel, for the courteous way in which they have had discussions behind the scenes on a number of the technical amendments. That has enabled us to improve the Bill. Most of all, I thank my noble friend Lady Anelay of St. Johns for the tremendous support she has given me. Until I arrived in this House I was not a particular specialist in this area. As to the events of this afternoon, it is important to stress that in our view it is right that the other place should be given an opportunity to debate the matters. However, it must be seen in the context of the whole of the Chancellor's speech and the paragraphs which I quoted which clearly stated that he would ensure that those no longer paying contributions would be protected.

Earl Russell

My Lords, I, too, wish to thank all concerned. I have enjoyed on this Bill the rare luxury of working with a team. I warmly thank all the members of that team. I refer to my noble friend Lady Ludford and her conspicuous success on backdating. My noble friend Lady Williams of Crosby made one of the best speeches on single parents that I have heard in this House. My noble friend Lord Goodhart has been a veritable Trojan beside me on the Bench, as your Lordships have observed. It has been a delight to work with them.

I thank the noble Lord, Lord Higgins, and the noble Baroness, Lady Anelay of St. Johns, with whom I have found it very easy and enjoyable to work, and with whom we have co-operated to some purpose over the composition of panels and many other issues. I shall not reprove the noble Lord, Lord Higgins, for today's events. In English law suicide is not a crime.

I thank the Minister, and through her her officials, for the highest standards of courtesy and co-operation and of provision of information all the way through the Bill. It has been much appreciated and has eased our work enormously. I wish to thank the Minister herself for engaging in the argument and endeavouring to understand it at every stage of our proceedings. I thank her for ensuring that the proceedings have been conducted in a way which I think is a model of how a revising Chamber should work.

We have had a number of changes in the Bill. Those have been brought in by agreement between the Benches. I believe that they have made the Bill much better than it was. I still think that it is a bad Bill. The House knows that; and I shall not elaborate on that further now.

On Question, Bill passed, and returned to the Commons with amendments.