§ The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)
My Lords, with the leave of the House, I shall now repeat a Statement given in another place by my right honourable friend the Secretary of State for Social Security. The Statement reads as follows:
"I would like to make a Statement on the next stage of our welfare reform programme.
"We have already launched the New Deal—the biggest ever investment by government in jobs and training. We have begun to tackle child poverty—with the biggest ever rise in child benefit. We have introduced a national childcare strategy. We are modernising our tax and benefit system to make work pay, with a new working families tax credit that will benefit up to 1.5 million people, underpinned by the national minimum wage. And, three weeks ago I set out wide-ranging reforms to disability benefits, giving more help for severely disabled people and those disabled early in life and modernising the system to ensure that benefits go to those for whom they were intended. All those reforms are driven by our central objective—work for those who can and security for those who cannot.
"Today I am publishing a consultation paper on our proposals for the reform of bereavement benefits paid to people of working age. Copies of the consultation paper are available in the Vote Office. These reforms apply only to people of working age who lose their husband or wife. Women now widowed, widows over state pension age and war widows will continue to get the support we give them now. They will not be affected by the reforms I set out today.
"My announcement today is one in a series of long-term reforms that will form the basis of legislation at the earliest opportunity. My proposals today will not be introduced before April 2001, so as to allow time for implementation.
"The system of bereavement benefits we have inherited is out of date. When it was introduced 50 years ago, most women did not work—certainly not after marriage. Today, seven out of 10 married women work—almost as many as the eight out of 10 married men who work.
"Today, 1.5 million women benefit from their late husbands' pensions, compared to only 100,000 some 50 years ago. Indeed, about 40 per cent. of the women currently getting widows benefit are in the top half of the income bracket.
"The world has changed—and the benefits system needs to reflect those changes. The system also fails on four specific counts. First, it is unfair to men. 1290 Some 15,000 husbands bereaved each year—many with small children—get no help at all. That unfairness cannot continue. And it is an unfairness that is already being challenged in the European Court of Human Rights. So, doing nothing, as some urge, is not an option.
"Secondly, it does not provide enough help with the immediate costs of bereavement—such as unpaid bills or funeral costs. Thirdly, money often goes to those who have least need of it. Widows, without children, who have substantial incomes can get benefits for years. But a man, who may have growing children and modest means, gets nothing at all.
"Finally, the present system fails to help the poorest mothers on income support. Those widows, who have children to care for, lose their benefit pound for pound and so get no financial gain from their widows benefit.
"The reforms I am announcing today will change all that. Our reforms will, for the first time, get help to men who lose their wives, and on an equal footing with widows. They will provide extra financial help with immediate needs such as funeral expenses.
"We will continue to help those older people without children during the period immediately after bereavement. And, as with our other reforms, our priority is to provide security for families with children and to get the greatest help to the poorest. Our proposals will ensure the security of families with children, and we will do more for the poorest families and their children.
"First, I can today announce that men who lose their wives will get help on the same basis as women who lose their husbands. We will go further. Once those reforms are introduced they will apply not only to newly bereaved widowers but also to those husbands, with children, already widowed—for the first time, providing security for around 20,000 men and their children.
"Secondly, immediate help on bereavement: the loss of a husband or wife is traumatic and is a time of great need and anxiety. And we recognise the need for immediate financial help. Indeed, it is one of the strengths of the current system that on bereavement a widow gets a £1,000 lump-sum within four days. But, in my view, that payment is no longer high enough—the amount has not changed in 10 years.
"So today I can announce that we are doubling the lump-sum cash payment to £2,000 to give more help with a range of costs, such as bills, or the cost of a funeral.
"Thirdly, we want to ensure that we get help to those who need it most. But today long-term widows benefits may go to many who do not need them because they do not have the extra costs of bringing up children or because they have good incomes from jobs, pensions or insurance. Some argue that that is grounds for abolishing the benefit completely, but we do not believe that that would be right because we recognise that financial support is needed in the period immediately after bereavement.
1291 "So we will continue to provide a financial breathing space for bereaved spouses aged 45 and over who do not have dependent children, by paying a weekly benefit worth up to £64.70. That new bereavement allowance will be paid for only six months, providing transitional support at a time of particular need.
"We also recognise that for the generation of older widows and widowers aged 55 or over at the time when these changes are introduced special arrangements are needed because it could be difficult for them to make new plans. I can announce today that anyone from this generation who qualifies for income support and who is widowed in the five years after these changes are introduced will get support worth the same amount as the current widows pension.
"Fourthly, we are determined to ensure that the greatest help goes to those with greatest needs. So our reforms will continue to provide long-term, financial help to bereaved parents with children. I can confirm that bereaved husbands and wives will continue to get a weekly benefit currently worth on average £85, payable until their youngest dependent child leaves full-time further education.
"As with our other proposals, this help goes to both men and women who lose their spouse. But we will go further. Because we are determined to do more to help the people who need help most, we will ensure that the system helps the poorest widows and widowers and their children. Today I can announce that the poorest bereaved parents on income-related benefits and getting bereavement benefits will gain additional cash help worth up to an extra £10 a week, providing the greatest help to those with greatest needs.
"These reforms modernise this benefit; treat men and women equally; give immediate help when it is needed; and give more help to the poorest. And existing widows will not be affected.
"As with the reforms I announced three weeks ago, the structural changes will deliver significant savings; around £500 million in the long run. But we will do so by ensuring that greatest help goes to those with greatest needs. And in the short-term we are spending £140 million more to meet real need.
"As society gets wealthier, the amount that we spend on the most vulnerable should increase; but benefits must go to those who need them most. We must give more help to those in greatest need. We are planning now for the needs of the future to ensure that the system is affordable, fair and effective.
"Some will urge us to do nothing. And, yes, turning our backs on the failure of the current system would have been the easy option. But the real scandal would be for a government committed to social justice to ignore the unfairness—to ignore the needs of 1292 children—and to do nothing to help those in greatest need.
"These are fair reforms, providing real security, providing real help at a time of real need, for bereaved husbands and wives and their children. I commend the proposals to the House".
My Lords that concludes the Statement.
§ 4.13 p.m.
§ Lord Higgins
My Lords, the House will be grateful to the noble Baroness for repeating the Statement which was made in another place. As is frequently the case with Statements from the Department of Social Security, it is not as simple as one might have hoped. However, it clearly bears the hallmark of all New Labour's approach to the problems—which is more means testing and a consistent policy of undermining the contributory principle on which hitherto the welfare system has been based. Of course we welcome the increase in the lump sum paid to those who are bereaved. Funeral expenses have escalated. Will the Minister confirm that the increased lump sum will not be means tested or taxable?
There are significant downsides in what the noble Baroness has said. The annunciator, no doubt as a result of government information, announced that there would be a support in bereavement, and that is the case. However, it should have mentioned the considerable cut in contributory rights which previously existed.
The Minister referred to the fact that the European Court of Human Rights—not a European Union body—has before it a case with regard to the equal treatment of men and women in the context of the benefits to which she referred today. I do not imagine that those bringing the case before the court originally envisaged that the equal rights would bring changes in the level of benefits. Presumably, those taking the case to court expected that, if the court ruled in their favour, the men and women would receive equal benefit at the level which then existed. That is not the case. There has been a considerable moving of the goalposts in that respect.
In a preamble to the Statement the Minister also referred to the working families tax credit. The Statement stressed that benefits will accrue more to those on lower incomes. There is an intrinsic inconsistency in the Government's policy on this matter. The working families tax credit will provide an increase to some people earning as much as £30,000 a year. On the other hand, the benefits to widows and widowers who may have incomes significantly less than that will be restricted. Therefore, the consistent attitude of the Government is in jeopardy as regards the overall treatment of the two issues.
The main objection is that the Statement clearly undermines the contributory principle. We have already had a number of examples—the noble Baroness previously announced them to the House—where people will receive benefits to which they have not contributed. However, the Statement declares that some benefits to which people have contributed will no longer be paid to the widows or widowers affected. Perhaps the Minister will confirm that. Men who during their working lives contributed to the national insurance scheme expected 1293 that when they died their widows would receive a certain level of benefit. Many will now find that that is not the case because significant restrictions are imposed. Will the Minister make clear exactly who loses under this operation? Some people will gain, particularly those on a very low income, and we welcome that, but others just above the income support level will find that having contributed all their lives they will suffer under this change. Am I right in believing that widows and widowers without children will suffer under the proposals?
I turn to some of the complexities of the system. Am I right in believing that people between 45 and 55 will receive only transitional relief? Am I also right in believing that that transitional relief will be taxable? If so, that is a significant innovation in our welfare arrangements. Perhaps the noble Baroness will confirm that people between 45 and 55 will receive transitional relief and that that relief will not be taxable?
I turn now to the issue of people aged 55 and over. Am I right in believing that there appears to be a strange gap in the proposal? Apparently, people aged 55 will continue to receive their benefits for the next five years. However, the pension age for widows and widowers is to be harmonised at the level of 65 years. Is there a gap in between? If so, it is an extraordinary arrangement. Before people become entitled to their national insurance pension they will suddenly lose their widows' or widowers' pension too. Could the Minister clarify the position?
And then there are those who are receiving—I think the exact expression is—a weekly benefit of £85 per week on average but, presumably, not if they do not have children. Indeed, that is the position, although those whose husbands who have contributed throughout their lives may have expected that to be so. Certainly if one compares the national insurance scheme and the obligation which governments have previously had to pay benefits in relation to contributions with the private sector, that certainly would not apply. If private pension schemes were suddenly to declare that they were altering benefits in that way, they would face an absolute public outcry.
The fact is that this proposal is Treasury driven—£500 million saving. Perhaps the Minister will tell us how that £500 million is broken down between the various groups which will lose as a result of the proposals. Clearly a number of people gain and that is to be welcomed. We appreciate the needs of those particular groups. But we believe also that it is important to recognise the entitlement of those who have contributed to the scheme and who had reasonable expectations that when they retired, they would find that their benefit was at the level which they had expected during the course of their working life.
§ 4.20 p.m.
§ Earl Russell
My Lords, I thank the Minister for repeating the Statement. I begin by paying tribute to David Thomas, a former solicitor of the Child Poverty Action Group since it is he who is responsible for the case before the European Court of Human Rights which has led to this Statement.
1294 On these Benches, we warmly welcome the principle of equal treatment for widows and widowers. I have addressed this House several times recently on the need for equal treatment for men in the area of care of children. Those two principles are closely related. Apart from being required under the European convention, we believe that it is positively good.
I have one or two questions about how it is being carried out. Does it apply to those who are already widowers while bringing up young children or does it apply only to those who are to become widowers hereafter? What is to be done for those who are widowed over 55? At the end of receiving their pensions, are they to be required to return to the labour market or are they to be protected from the rigours of the actively seeking work rules under the jobseekers regulations? I am relieved to see the Minister nodding her head.
For the widows' benefit, we believe that six months is rather short. It takes quite a lot of adjustment to rearrange a life, especially with children. We wonder whether a slightly more generous statement might have been possible.
We are rather inclined to share also the concerns of the noble Lord, Lord Higgins, about how far that may undermine the contributory principle. One cannot have the contributory principle everywhere and yet it is an important part of maintaining consent for the social security system. Whittling it down too far could tend to produce the feeling that the social security system was just for them over there and therefore was not to be worried about. That could be a pity. While each individual case may be perfectly well justified, we might begin to become concerned if there were too many of those cases and they were to become a general trend.
The question of funeral costs is something which needed addressing very badly. However, I should have preferred the Minister to address them rather more constructively by bringing back and amending the funeral costs social fund regulations which my noble friend Lord Falkland, on my behalf, addressed shortly after this Government came into office. We have there a problem of a cap on funeral costs and, as my honourable friend Mr. Chidgey has argued several times, funeral costs are escalating well beyond that cap. It is always a problem when caps are imposed.
There are a number of other problems about those regulations into which I shall not go now. However, I should be grateful for the Minister's assurance that she will look again at the working of those regulations to see whether she thinks that all is well.
I take the point made by the noble Lord, Lord Higgins, about the saving of £500 million. It is quite a large saving to be achieved from a very limited area. I too look forward to hearing the breakdown of how that saving is arrived at. It is another reason for wondering whether the changeover to means-testing in that area is entirely justified. It is really quite a feat of spin to present a saving of £500 million as being an act of warm generosity to claimants. In fact, I am interested in how much skill was put into the performing of the trick. I rather admire it as an exercise.
1295 The uprating of the lump sum is a consequence of the fact that it had not been uprated for the past 10 years. Almost every year I address the failure to uprate capital lump sums. We see here what happens. You move like a mountain ridge in a series of unpredictable first and second steps which makes some rather awkward climbing. Would it not have been better simply to uprate that by the usual little bit each year and then the lurch to the Treasury would have been rather less intense when it came?
I ask the Minister one precise, specific question. If you take that lump sum over the 10 years in which it has not been uprated and compare what it is now with what it was 10 years ago, is it now bigger or smaller than it was then? That is an interesting question and may demonstrate how generous this Statement really is. I shall be very interested in the answer.
§ Baroness Hollis of Heigham
My Lords, I thank your Lordships for those comments. Perhaps one should just recall the present position. At present, women receive a widow's pension. That woman may have no financial need because she receives from her husband a generous occupational pension. She may not be unemployed. She may be in well or adequately paid work. She may have no dependent children. Therefore, she is not in financial need; she is not unemployed; she has no dependants; she has a generous income; and yet she is currently receiving a widow's pension until her retirement age.
I suggest to your Lordships that that cannot be sensible when at the same time a man who may have come out of work in order to support his children and look after them receives nothing at all. As we see, something like 40 per cent. of all widows' benefit expenditure is going on the top 50 per cent. of women's incomes. Therefore, as a result, we are spending rather a lot of money on women who no longer have the same financial need as they did when the scheme was first developed.
Back in 1946, only one married woman in eight worked. Now, something like 70 per cent. of married women work, almost as many as married men. In addition, back in 1946–48, a very few women—only 100,000—would have had access to an occupational pension. Now 1.5 million do so. Therefore, the old world in which the widows' benefit scheme was constructed—a world where a woman was not in work but at home without any access to an occupational pension—has gone. Therefore, it is right to review the benefit to see whether it is right that money should be going to support those who have generous alternative incomes of their own while at the same time men, whose need may be financially much greater, receive nothing at all. Therefore, we are seeking to target money on those in greatest need and to do so in ways which are fair equally to men and women.
The noble Lord and the noble Earl asked whether that represented a dilution or a thinning of the contributory principle. Yes and no. On the one hand, it is certainly the case that the contributory principle will no longer 1296 extend to widows who do not have dependent children and who are over the age of 45—a benefit for life—irrespective of their means. That is certainly true. However, it does extend to men for the first time a benefit based on the contributions of their former spouses. Therefore, men are enjoying a contributory principle which, so far, they have not been able to do.
In terms of the particular points which have been raised, I should like to deal, first, with the one raised by the noble Lord, Lord Higgins. I can confirm that the £2,000 lump sum is neither means tested nor taxable. We will write to the noble Earl with the exact figures involved, but we calculate that the doubling from £1,000 to £2,000 certainly is well above the price increases. My officials have not been able to do the necessary calculations in the time available, so we will write to the noble Earl with the precise figures.
The noble Lord, Lord Higgins, made a comparison with the working families tax credit and asked why we were concerned about the better-off widow when we were apparently going to throw away this benefit at families with £35,000 a year. Such families with five children, which is the example beloved of both the noble Lord, Lord Higgins, and the right honourable Member in the other place Mr. Lain Duncan Smith, represent precisely 1 per cent. of all parents. I suggest that that is a reductio ad absurdum. The noble Lord's party seems to stand for scrapping the working families tax credit, scrapping the new deal and scrapping the minimum wage; indeed, scrapping all the things which will lift women and men equally off poverty pay into work which is well paid enough to begin to float them off a dependency on benefits. We are making work rewarding. All the noble Lord can say is that he does not want it because someone on £35,000 a year with five children—that is, 1 per cent. of parents—may be affected. I believe the noble Lord's position in that respect is indefensible. He would consign such people to a life either out of work or, as currently, on a dependent hand out.
The noble Lord asked me to name the winners and losers as regards the new proposals. Among the gainers will be 40,000 new widows per year. They will gain the extra lump sum which will go up from £1,000 to £2,000. For the first time, some 15,000 widowers per year will gain the lump sum of £2,000. Approximately 5,000 new widowers will gain the widowed parents' allowance in the first full year rising to £20,000 as the scheme matures. Moreover, 20,000 existing widowers will gain on its implementation. On the other hand, among the losers, around 20,000 widows in the first full year will receive a weekly benefit for the shorter period of six months. They are the losers.
I believe that the noble Lord asked about a gap when a widowed mother would lose benefit before she might be entitled to a transitional payment. At present, the widows' pension, which does not go with having children, only kicks in at the age of 45. So we are not changing the situation in that respect. The noble Lord asked where the £85 figure came from. I can tell him that this is a compound of the average situation; namely, the widows' or widowers' benefit, with either one or two children, together with a SERPS accrual. I also 1297 believe that the noble Lord asked whether people would get the SERPS accrual for the bereavement allowance as regards the six-month period. The answer is no.
The noble Lord asked how the latter would coincide or how it calibrates with the equalisation of the state pension age. The harmonisation starts in 2010 and finishes in 2020. Therefore, I do not see why there should be a problem. The noble Lord also said that, if this had been done in the private sector, there would be an outcry at a default on a contributory benefit principle. That comes a bit rich when the previous government halved the benefit of SERPS in their period of office. That was indeed a commitment by government to a contributory principle. The noble Lord should be careful. He was halving SERPS, which was a benefit targeted at those men and women who were not eligible for occupational pensions; in other words, the poorer men and women in work. He halved the value of that benefit. What we are doing in terms of our reforms is ensuring that more benefit goes to those who are more lowly paid—that is, the poorer paid men and women equally.
The noble Earl, Lord Russell, asked about the situation for current widowers. As I understand it, when this legislation is passed by both Houses in its present form, current widowers with dependent children will be entitled to the widowed parents' allowance. However, they will not be entitled to the lump sum if they are already widowed. The noble Earl was worried that the six-month period for bereavement allowance was too short, especially if there were dependent children. He is entirely right. If someone is bereaved with dependent children, he or she will continue to receive the allowance until the youngest child leaves full-time education at 16 or 19. Perhaps there was a misunderstanding in that respect. Finally, the noble Earl asked whether it was consistent with social fund regulations. The answer is yes. I checked the position earlier this morning and I can tell the noble Earl that it is indeed. However, if there is any aspect of this upon which he wants further elaboration, I shall be very happy to write to the noble Earl.
I can tell the House that, roughly speaking, virtually all of the money—that is, £600 million in time—will come from the loss of the widows' pension being for life where there are no dependent children. Netted off against that £600 million is the additional cost of the extra money going in the lump sum and to additional widowers.
§ 4.36 p.m.
§ Baroness Turner of Camden
My Lords, I thank my noble friend the Minister for repeating the Statement. This is a very complex matter and it will take some time to examine it in order to realise precisely what is involved. Of course, I applaud the proposal to make a bereavement allowance to widowers as well as to widows and, similarly, I also applaud the intention to ensure that children who are dependent are properly cared for.
As I am sure my noble friend the Minister probably understands, because she knows that I am a trustee of the Widows Advisory Trust, my concerns relate to the 1298 position of older widows, especially those aged over 45. As I understand the situation, the latter perhaps will be expected to attempt to join the labour market even though they may have spent their lives looking after their families. Of course, by that time, the children will not be dependent because they will have grown up. I am sure that such widows will find it difficult to secure appropriate employment. Moreover, as the noble Lord, Lord Higgins, said, the benefit is a contributory one for which their husbands will have made contributions during their working lives.
My noble friend the Minister said that many women now benefit from what she described as generous occupational pension provision. Many such schemes have provision for widows' benefit. However, that is by no means always very generous. Many pension schemes are predicated on the assumption that the resultant benefit will also take into account the fact that the recipient is entitled to the ordinary flat rate pension or, in the case of a widow, a widow's pension. So the whole assumption of that family, even in relation to an occupational pension, may have been that that would be built up by the addition of a widow's pension because the pension itself would not be sufficient by itself to keep the widow out of poverty.
We must be careful before we start to interfere with contributory benefits. Indeed, if we are not careful, this set of proposals may well prove to be a bonanza for life insurance salesmen. But, on the other hand, there may well be families who simply cannot afford to make private provision. It is people for whom private provision is simply not a possibility that I have concern. As we on this side of the House have always agreed, it is the job of government to care for the vulnerable. In this connection, I believe that widows in the age group to which I referred could rightly be regarded as the vulnerable—that is, those whose husbands may have felt that they were making provision for them through their contributions to the national insurance scheme.
§ Baroness Hollis of Heigham
My Lords, I am most grateful that my noble friend Lady Turner who knows so much about social security, and especially about widows benefits, has welcomed much of what I have said today. I believe that her concerns focus on the older widow aged over 45. I think she would agree that, to some degree, the problem is a generational one. Back in 1946, only one married woman in eight went to work, but today seven in 10 women do so. If we look at the statistics, it is interesting to note that of the women aged over 45 to retirement age—the group that my noble friend identified—50 per cent. are in work at present. However, as regards men who are over the age of 45 up to retirement age, only 57 per cent. are currently in work. In other words, the profile of women's and men's needs is increasingly converging. Virtually as many women are now in work as men. That is why it is right to seek fairness as between men and women in similar situations.
Further, if women—this is largely a generational phenomenon—have worked as married women, continue to work when they have unfortunately lost their husbands and do not also have dependent children, it is 1299 right to help them with a lump sum to meet some of the immediate costs. It is right to give them a bereavement allowance to deal with the difficult first six months when perhaps their lives are awry, but then to expect them—as men do—to remain in the labour market, as indeed they already do. I hope my noble friend will accept that that is right. Over half of all widows now have an income of over £150 a week, much of which comes from occupational pensions. That number will continue to grow. Those widows who do not have access to that and who are under the age of 55 will have access to JSA. If they are over the age of 55, as a result of the transitional arrangements we are making they will have access to income support without being required—I think this was a point raised by the noble Earl which I overlooked—to make themselves available for, or be actively seeking, work.
§ The Lord Bishop of Bradford
My Lords, I am sure that the Statement will be of considerable interest to ministers of religion. I seek the Minister's help on two points. I agree strongly with the noble Lord, Lord Higgins, and the noble Earl, Lord Russell, that there is considerable unease about the escalating costs of funerals and the commercialisation of them, as many would see it. I know the Minister fully understands that bereavement is a traumatic occasion. It is a time when people find it extremely difficult to make decisions. There is a sense of shock and of denial. According to a programme on Radio 4 this morning such people are offered a chipboard coffin for £350 or a proper wooden coffin for £950. This is the moment when their dignity feels most threatened. Making such a decision on a commercial basis at that moment is extremely difficult. Can the Minister give us some advice as to whether the provision to be made for people who have been bereaved, not least younger people who do not have a great income, will enable them to make provision for a dignified funeral and will not make them feel that they are choosing the cheapest option because that is all they can afford?
The second point on which I should be grateful for some help is the following. It is a common experience for ministers of religion nowadays to conduct the funeral of a person who has died unmarried but who was in what is called a stable or fairly permanent relationship. The widow or the widower—if you can use that term—may still be in a state of shock and may be badly off and will have to make precisely the same choices. Is there any provision under this Statement to provide help for people in those circumstances for whom the experience of bereavement is equally awful?
§ Baroness Hollis of Heigham
My Lords, the right reverend Prelate speaks compassionately and wisely about the problems faced when making decisions on funerals within a day or so of the death of a husband. The £2,000 lump sum is not, as such, a payment to cover funeral costs. It is often spent on funeral costs, but it is not so designated. The £2,000 can be used to cover the cost of a decent and dignified funeral without someone 1300 feeling obliged to buy the cheapest coffin and to do without flowers and other such things with which one may wish to mark the occasion.
The right reverend Prelate asked whether the provision extended to someone in a long-standing partnership who is not married. The lump sum payment and all the benefits we have been talking about today apply only where the people concerned have been married. It does not extend to co-habitees or to those in more casual relationships. That is because we recognise the special status of marriage in this situation. However, the social fund is available to some of the poorest people that the right reverend Prelate mentioned. The social fund does not discriminate between marriage and co-habitation. In other words, it will give financial support to the person who is accepted as having the most appropriate responsibility for arranging a funeral, whether that is a daughter, a son, a brother, a sister or a partner. In those circumstances people would receive appropriate support from the social fund subject to their income.