§ 4.20 p.m.
§ The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)
My Lords, I beg to move that this Bill be now read a second time.
Noble Lords will no doubt have followed the progress of this modernising legislation in another place. Reforming the welfare state to meet the needs of the 21st century is one of the biggest challenges facing this Government.
Beveridge's welfare state assumed that men would be in 40-hour, 40-year jobs, which in turn could fund insurance against the risk (not the likelihood) of old age and sickness, while women, their wives, worked at home, depended on and derived their benefits through their husbands. That world has gone for ever. The position of women, employment patterns, family structures, life expectancy have all changed radically. To take just one example. Only one married woman in eight worked in Beveridge's day; now around three-quarters do, earning their own entitlements with 1562 dramatic implications for employment benefits, widows' and disability benefits, for pensions as well as the more traditional role of carers.
We must rebuild the welfare state to reflect today's world, applying the ethics of Beveridge to today's very different society. The Prime Minister recently described the key principles underpinning our modernisation plans. First, our commitment to tackle social exclusion. It is scandalous that one in five children live in households without a parent at work and therefore the face of poverty in this country is the face of the child. One in three children now live in poverty.
Secondly, the Prime Minister said that we are determined to encourage a relationship of mutual responsibility between the individual and the state. The third principle he enunciated was that our reforms will ensure that security is provided for those in greatest need through a mixture of universal and targeted help. He committed us also to building a system secure from fraud; then, to develop effective and innovative delivery mechanisms, not just to rely on the traditional methods of government.
Finally, we must remember that there is more to the welfare system than just social security benefits. Active welfare is about services too—schools, hospitals, the whole infrastructure of community support. It is about rebuilding employment around the New Deals, the working families' tax credit and the national minimum wage. It is about tackling child poverty, by offering work to workless households, increasing child benefit and reforming the child support system. All of that is part of our society's welfare and well being.
In this Bill we are modernising the benefits, pensions and national insurance system to deliver essential changes in five key areas. First, we are introducing a radical package of measures to keep people in touch with the labour market, including the one service.. which is the work-focused interview pilots in the new employment zones. We believe that the only way out of poverty is access to the labour market.
Secondly, we are modernising disability benefits so that they provide more help for disabled people in greatest need, as well as providing help and opportunities for disabled people who want to work. Thirdly, we are modernising and extending entitlement to bereavement benefits to help families with children who need it most. Fourthly, we are starting the process of pension reform to ensure the system provides security in retirement for future pensioners, including people who divorce, through pension sharing. Fifthly, we are modernising the benefits of the national insurance system, extending maternity allowance to low paid expectant mothers and aligning the NICs and tax earnings thresholds.
I should like, if I may, to take your Lordships through the measures in the Bill in greater detail. It seems appropriate to start with the one service—the new single, work-focused gateway to benefit; a radical change in both approach and culture in the benefits system. This change had all-party support when it was discussed in another place.
1563 For years too many people have been written off, or written themselves off, and been resigned to a lifetime on benefit; and too many children growing up in workless households have come to expect nothing better for themselves. Frank Field once told the story at a meeting I was attending of a school he visited where he said to a 10-year old boy, "What do you want to do when you grow up?". He thought the child might reply, "Drive a train" or "Fly a plane". The 10-year old boy said, "When I grow up I want to claim my giro payment".
The Government are determined to break the cycle of disadvantage by tackling that poverty of expectation. That is why we have focused resources on providing £4 billion of help through a range of New Deal programmes. The one service builds on the New Deal by providing everyone of working age with advice on their options, on work, training and childcare, together with help in claiming the benefits to which they are entitled. Everyone of working age entering the benefit system will, for the first time, get the help that they need and have a right to expect; and they will get it in one place, at a one-stop shop.
In turn, we believe they have a responsibility to take up that help. So they will be required, as a condition of benefit, to take part in an interview to find out about the opportunities open to them. We want these interviews to open windows for people since, as we all accept, people do not know what they do not know. The Government have a responsibility to help them to find out and to empower them with that knowledge.
We will of course be sensitive to people facing specific difficulties. We know that for some people with severe disabilities work will never be an option. So such individuals will not be required to take part in an interview. I must stress that these requirements stop at interviews; it is about empowering with information and choices. Nothing in this Bill will force anyone to take a job or follow a particular course of action. What is important is that they discuss the help available.
The one service is part of a wider strategy to ensure that people have the opportunity to work and to ensure, through the working families' tax credit, for example, that work pays. The Bill provides for two further measures to help people into work. The Bill requires joint claims to jobseeker's allowance from, initially, young couples who do not have children so that both of them get access to support and advice from the Employment Service, and if they have been unemployed for six months, to the New Deal for young people. All our research shows that that will be welcomed.
The Bill provides for the new £112 million programme of employment zones to cut through red tape and focus resources on areas that suffer from persistently high unemployment. By pioneering a different approach, we are doing more to help people get into work. But that is just one part of our reform programme. We are also determined to help people who cannot work.
1564 So the Bill also reforms and modernises support for disabled people. The Government have made absolutely clear their commitment to improve the opportunity and support available to disabled people; and we have wasted no time delivering on that commitment by investing £195 million in the New Deal for disabled people; by introducing the disabled person's tax credit which, from October, will provide a guaranteed minimum income of at least £150 a week for a single disabled person moving from benefit to full-time work, earning the national minimum wage; by doubling, as those of your Lordships who took part in the WFTC Bill will know, the child premium in working families' tax credit for a disabled child, worth £25 million to 27,000 families: £1,000 a year extra for every low-earning family with a disabled child; by creating the new disability income guarantee, worth at least £128 a week for most severely disabled people under 60 getting income support; by spending £2 billion more by the end of this Parliament on benefits for disabled people—more help for more people who need it; and, of course, by building on our commitment, shared round this House, to comprehensive civil rights with the Disability Rights Commission.
All those reforms are an essential part of our approach. We want to do more to help people into work, and we know that disabled people want to work. Two million already do so and 1 million more have told us that they would like to. We want to provide opportunity where once there was none.
The new personal capability assessment ends the incapacity benefit all-work test, ending the assumption that everyone on incapacity benefit is not able to work. After all, everyone on incapacity benefit was once in work. This new assessment will look at what they can do; not whether they cannot lift a sack of potatoes, but whether they can use a keyboard, for example, or a telephone. I repeat, no disabled person will be forced into work but if they want to work, as they tell us they do, we will do all that we can to help make that possible for them.
If we want to do more for the people who need help most, we have to ask how best to use our resources. There are two further changes to incapacity benefit in this Bill, neither of which will affect people currently getting benefit. Incapacity benefit was and is intended to be an earnings replacement benefit when illness or disability unfortunately forces people to stop work. Over the past 20 years, however, it has become for many an unemployment benefit. Four in 10 of those who receive incapacity benefit were previously unemployed—not in work and becoming disabled while in work, but unemployed. Indeed, someone who worked for only six months over 20 years ago and who has been unemployed ever since would qualify for incapacity benefit now. We do not believe that is right.
Our changes to the contribution conditions make quite clear that entitlement to incapacity benefit is based, as was its intention, on recent work. The new rules will not create onerous requirements. They can be satisfied if someone has done some work in either one of the previous two years. That means only four weeks' work within two years for someone on average earnings, or 1565 as little as 12 weeks' full-time work for someone on the minimum wage over the two years. That two years may very well—given the difference between social security years and tax years—be more like three and a half years.
The Government are determined to do more for carers. We are therefore making special provision for those getting ICA, to ensure that they can still qualify for IB. We will also protect people who have been off IB for a short spell and have not had the chance to rebuild their national insurance contributions. We will make sure that they do not lose out.
The second change to incapacity benefit introduces a fairer partnership by changing the way that occupational or personal pensions are treated in IB. Fifty years ago very few people had occupational pensions. Today, 86 per cent of men and 77 per cent of women working full-time have an occupational pension. Even so, these changes will not affect four people in five on incapacity benefit in future; but of the one-fifth who will be affected nearly half have occupational pensions which take them into the top 40 per cent of income distribution. Around 100,000 of those who get a pension get one of more than £230 a week, with IB of £66 a week paid on top. Is it reasonable that the state should be paying incapacity benefit to people who already have high pensions?
We are determined to reward thrift and saving. People should see reward from making their own pension provision. There will therefore be a partnership. People will keep the first £50 a week of any early retirement pension paid, but their IB will be reduced by 50p for every additional £1 received.
May I also remind your Lordships that my right honourable friend the Secretary of State for Social Security has made it absolutely clear, both at Second Reading and again at Report stage in the other place, that the £50 threshold will be reviewed to ensure that it is set at a fair and reasonable level? The Secretary of State has emphasised that the principles are right but that the details are not set in stone: they can be reviewed.
We are also increasing help for those disabled people who need it most—those young people 'who are disabled from birth or early in life who have never had the opportunity to work and save. Currently, the help available to them through severe disablement allowance, SDA, is paid at the rate of £54 a week. It is simply not enough. Seventy per cent of people on SDA have to claim income support because SDA is so low. The changes in the Bill will mean that young disabled people who claim before they are 20—in other words, who have not had the opportunity to build up a contribution record by being in work—will be given a new entitlement to incapacity benefit without requiring them to meet the usual contribution conditions. After a year this will boost their weekly income by over £26 to over £80; for many, floating them off income-related benefits and providing real help to those young disabled people who need it most.
The Government received representations that it would be wrong to penalise disabled young people who stay on after school to go into higher education or 1566 training. We have therefore amended the Bill to raise the age limit to 25 for claiming incapacity benefit for young disabled people who begin training or higher education before they are 20.
This Bill also extends the higher rate mobility payment in DLA to severely disabled children aged three and four—a measure which I know your Lordships will welcome. It is worth £37 a week in extra support and also gives these children, and importantly their families, access to the Motability scheme, to allow them the vehicles to carry the heavy equipment that some children may require, such as oxygen cylinders and the like.
The Bill also modernises bereavement benefits to focus help on those who need it most. None of these changes will affect existing widows, widows over pension age, or war widows. The current system must be reformed, however. It is out of date. If your Lordships started afresh, we would not devise the present system.
When widows' benefit was introduced 50 years ago most women, certainly married women, did not work. The system now helps many women on good incomes, who have no children to care for and who have no financial need. Yet it does nothing for bereaved husbands struggling to bring up young children. It spends most on those who need it least. Seventy-five per cent of widows' benefit goes to women without dependent children. Forty per cent of women getting this benefit are in the top half of the income bracket. Yet at the same time the 35,000 poorest widows see nothing, because their widows' benefit is deducted pound for pound from their income support.
For the first time, therefore, we will help bereaved husbands and their children on the same basis as bereaved women, through a weekly, non-means tested benefit worth an average of £75 to £80 a week. Because we believe that the current system does not provide enough help with immediate costs, we are doubling the initial lump sum to £2,000. We also recognise the need to provide transitional help to those without children in the period immediately following bereavement. This Bill therefore provides non-means-tested help for widowers and widows alike without children for the six months following bereavement. So it provides an initial lump sum, a six months' bereavement allowance, and a payment to men and women alike if they have dependent children when they are widowed.
We will ensure that older widows, over 55, without dependent children, without income and without the prospect of work—a group I am sure your Lordships are concerned about—are no worse off as a result of these changes by providing extra help through income support.
We will also ensure that the system does more to help the poorest widows and widowers and their children, who, up to now, lose their benefit pound for pound. We will therefore change the regulations, in a move which I very much hope your Lordships will welcome. to give additional help to the poorest bereaved parents worth up to an extra £10 a week—effectively a £10 disregard on their income support for their widows' benefit. These 1567 reforms look to the long term and to the needs that we know we will face in the future. It is because we are looking to the long term that we are also reforming the pension system.
In December we published proposals for far-reaching reform of the pensions scheme; and this is our first Bill on it. It delivers the commitment made by all of us in this House to enable pension-sharing. I am delighted more than I can say to be here today on behalf of your Lordships to bring forward proposals which I hope and trust will be warmly welcomed. However, my only regret is that the much loved Lady Seear is not here to celebrate with us. She fought so doughtily for us shoulder to shoulder, to coin a phrase.
For the first time, pension rights can be shared like other assets at the time of divorce, providing greater flexibility and choice for divorcing couples and courts. It offers fairness at last to older women who have helped to build their husbands' careers and then have been "traded in", in the phrase used by the noble Baroness, Lady Young, who, along with the noble Baroness, Lady O'Cathain, so powerfully argued the case. It will also help younger women make a fresh start.
We are setting out the framework for the new stakeholder pension schemes, which are central to ensuring that those who can save for their pension do so. We believe that they have a responsibility in that respect and that we ought to offer them the opportunity. For the one-third of employees who do not have the opportunity of joining an occupational pension scheme, a personal pension is currently the only option. However, only about half of the 10.75 million people earning between £9,000 and £20,000 a year—after that, they tend to look after themselves rather better—are in occupational schemes. Personal pensions are not suitable for many, such as low earners or contract workers. So millions of people today do not save towards their pension.
Through the new stakeholder pension schemes this Bill will give millions of people without a second funded pension a better opportunity to save. Up to 5 million people could benefit from these proposals. We are ensuring that they are run in ways that will put the rights and interests of members first, meeting specified standards. Stakeholder pensions will be cheaper with lower charges; they will he safer because of our trust arrangements; and they will be more flexible, thereby ensuring that they are suitable for those who need to take breaks from work, particularly women; those who change jobs frequently, such as the self-employed; or those who are on short-term contracts. We will also ensure that stakeholder pensions are transparent as well as being easy to understand and compare.
Through our radical, structural reform of the pension system and measures to ensure that more people take out a funded second pension, we will ensure that people get better pensions, a better retirement and a better future. We will subsequently be bringing forward measures to ensure that those earning below £9,000 a year have access to the new state second pension in due course.
1568 The Bill also contains measures to modernise the structure of national insurance, building on the improvements already made in this House, such as the transfer of the responsibility for national insurance from the Contributions Agency to the Inland Revenue. The changes we propose to make to the national insurance threshold will ensure that it is fully aligned with a single person's tax allowance. More importantly, we will be taking about a million people out of national insurance altogether. Seventy per cent of the working population (16½ million people) will see a cut in their contributions. However, at the same time, we are ensuring that entitlement to contributory benefits is protected for people with low earnings. We are also closing a loophole in the current legislation to ensure that people disguising their employment through the use of service companies pay the same tax and NICs as those people employed directly.
Finally, as well as helping women by introducing pensions sharing, stakeholder pensions, providing extra help and support in finding work and modernising bereavement benefits, the Bill delivers on the Budget commitment of the Chancellor of the Exchequer to provide better help for working mothers. We are extending entitlement to state maternity allowance to pregnant women on low earnings who currently find themselves in the ridiculous position that they have the right to take time off work to have their baby but do not get any financial support to do so. Indeed, 14,000 low-paid women will be provided with this money for the first time—a major and much-welcomed step forward.
We are ending the second-class status of the self-employed. Self-employed women will now receive the full rate of benefit—£59.55 instead of £51.70. We are also helping self-employed women with low earnings. If they hold a certificate exempting them from paying national insurance contributions, they will be treated as having notional earnings of £30 a week and will receive maternity allowance.
Taken together, the measures in this Bill represent substantial modernisation of the welfare system. We believe that we are planning for the long term, meeting the needs of our society, which have changed over the past 50 years, and seeking to anticipate the changes of the next 50 years. As a result, we believe that we are contributing towards a popular and modern welfare state, modernising universal, contributory and means-tested support to deliver effective help where and when it is needed most. We believe that this will help people to help themselves and that it will provide them with opportunities for independence. But, above all, and equally importantly, it will provide greater security for children and the elderly and, indeed, for those who need it most. I commend the Bill to the House.
§ Moved, That the Bill be now read a second time.—(Baroness Hollis of Heigham.)
§ 4.44 p.m.
§ Lord Higgins
My Lords, before I respond to the elegant speech of the noble Baroness, I must immediately declare an interest as I am chairman of a 1569 company pension scheme which may, to some extent, be affected by the provisions of this Bill. At all events, the Bill now before us is in may ways typical of other legislation because it tends to disregard to a significant extent the question of parliamentary scrutiny and the way in which the legislative process ought to work.
The Bill is not, in reality, a single Bill. It could certainly be represented as being two or three Bills, wrapped up in a single Bill. Indeed, one could argue that it is five or six Bills, each of which would deserve a Second Reading, a Committee stage, a Report stage and a Third Reading of its own, if it were to be properly scrutinised. That will create considerable problems for your Lordships' House because the extent of the measures in the Bill is very wide. First, we have some major provisions, which the Minister outlined, as far as concerns the stakeholder pension. This raises a whole series of issues on which there have been many representations from outside bodies.
Secondly, there are the provisions for pension splitting and pensions as regards divorced people. That is a provision which we have welcomed in many respects, although the more the proceedings went on in the House of Commons the more doubt we had about some of the measures. Thirdly, there is the whole structure for the single work-focused welfare gateway, on which the noble Baroness put such considerable stress. Then there are a number of measures which gave rise to great controversy in another place and which will penalise those who are bereaved, on incapacity benefit or. indeed, severely disabled. Again, those provisions will require very careful examination, which I am sure noble Lords in all parts of the House will wish to give them. In addition, extensive changes are proposed to the whole question of national insurance contributions.
Finally, there is a provision to which I believe the Minister devoted only one sentence—namely, that contained in Clauses 70 and 71—which was introduced in the most extraordinary way in another place. If noble Lords were to peruse the House of Commons Official Report of 17th May, they would see that it is quite clear that the reason for the provision suddenly appearing at the very latest stage was that the Government were anxious to change the timing of the proceedings in order to ensure that an embarrassing vote on some of these other controversial matters did not take place at a time when the matter was likely to receive maximum attention. In the event, that attempt failed. However, it seems to me quite extraordinary. We are in a era where spin-doctors are now so pervasive that whether a clause is introduced in this Bill rather than in some other way—and at the very latest stage in a Bill—appears to be a matter of presentation rather than content.
I shall refer to this matter a little more than the noble Baroness did later because it has given rise to a considerable degree of protest in the past few days from myself and many of my noble friends, who no doubt will be joined by those on both sides of the House, as regards the way in which the provision has been put forward. I believe that the Government will live to regret putting through this amount of legislation in the form in which it appears before the House. If the legislation is 1570 not properly scrutinised, the reality is that sometimes such measures may cause considerable problems later on.
Today we are concerned with the principles of the Bill. Those principles are clear, but not those which were put forward by the noble Baroness. After half a Parliament of this Government, we are familiar with the general way in which they work. The Government have tended to transfer power and responsibility in many matters away from the Department of Social Security to the Treasury. In that context one cannot but note the way in which the Government have failed to achieve the objectives which were clearly set out by the Prime Minister before and immediately after the election when he said that the intention was to reduce welfare bills and spend 'the money that was saved on education and health. The Government have clearly failed in that objective. The noble Baroness shakes her head. But instead of cutting expenditure on welfare, the Government now propose an increase of some £38 billion over the next three years. While there are some increases in expenditure contained in this Bill which we welcome, it also includes measures—for example, on the disabled—where small sums of money by national standards are to be saved to the considerable disadvantage of people who are ill able to cope with the consequences of the legislation, and in particular the consequences of Clauses 58 and 59, to which I shall return in a moment.
As I say, the first objective of this Government is a shift of power to the Treasury. The second is the undermining of the contributory principle. We have stressed this on a number of occasions. I refer in this connection to the transfer of responsibility for the Contributions Agency from the DSS to the Treasury. As the noble Lord, Lord Goodhart, has frequently reminded us, although the national insurance scheme is not an insurance scheme in the normal sense, the fact that one receives benefits because one has paid contributions has had considerable importance since the time of Beveridge. I believe it is still an important principle.
This Bill further attacks the contributory principle from both ends. On the one hand there are proposals to deny contributory benefits to those who have contributed. I refer in particular to the measures on pensions and incapacity benefit. On the other hand, the Bill will enable people who have not contributed to receive contributory benefits. The principle is being eroded from both ends. There is wide concern, I believe, about the way in which the contributory principle is being undermined. That is seen as dangerous. There are obvious implications for the national insurance pension. The noble Baroness, Lady Castle, is not present at the moment but I know that she will be concerned about its status. As a contributions benefit, it has, of course, already been eroded to a considerable extent by the extension of the so-called minimum pension guarantee.
That brings me to the third objective; namely, that the Government are extending the principle of means testing with regard to a number of different provisions in the Bill. I refer to incapacity benefit, widows' benefit and so on. Fourthly, the Government are increasing dependency. We discussed this at length earlier in the week in relation to the working families' tax credit. The 1571 Bill not only increases dependency but it penalises the prudent and deters people from saving. We shall need to examine the matter carefully in the later stages of the Bill. As I say, the Bill is based on the principles of shifting power to the Treasury; undermining the contributory principle; means testing, increasing dependency and deterring prudence. The Bill, I repeat, comprises a number of individual Bills.
I turn to pensions. The stakeholder pension constitutes a major proposal on the part of the Government. We waited and waited for the Green Paper. Eventually it emerged. But we are still not much further forward. Consultation papers are still appearing. We shall need to probe this matter carefully. Certainly, people outside who are involved are deeply concerned about the Government's proposals.
The Green Paper states that occupational pension schemes are the great welfare success story of this country. I stress the words "this country"—as the Green Paper does—because I believe that the total amount of funded pensions in this country is greater than the total of the funded pension funds in the rest of the European Union. The noble Baroness indicates assent. However, in their first Budget the Government altered the situation with regard to advance corporation tax, penalising such occupational pensions by some £5 billion a year.
I refer to the stakeholder pension and the rather vague proposals for a government second pension to replace SERPS and the lifelong individual savings accounts (LISAs) which the Government seem to talk about even less. There are considerable problems with these proposals. I shall outline one or two of them. There is grave concern among the business community with regard to the ability of individual small firms—many small firms will be affected by stakeholder pensions—to select a suitable stakeholder pension provider and to take responsibility for saying to employees, "You ought to choose this one rather than another".
There is also grave concern with regard to advice on pensions. The Government have blown hot and cold on this matter. Successive Answers to Parliamentary Questions, the Green Paper and statements in another place reveal that the Government appear to be fluctuating widely as to whether advice is essential or whether it should be paid for by the individual who is taking it and so on. When we look at the range of pension provision which now exists and the additional provisions which the Government are introducing, it is absolutely clear that good advice will be essential if we are not to have further mis-selling in the future. We all deplore the mis-selling that occurred in the past. The situation is not in the least clear. Therefore, even at this early stage, I ask what is the Government's position with regard to people obtaining advice on pensions.
Some people are particularly concerned about the Government's uncertainty—they switch back and forth and we do not know where they will end up—with regard to whether people who take out stakeholder pensions will also be able to take out other pensions such as personal pensions or occupational pensions. Again, it can be seen in Parliamentary Answers and statements by the Government that one week they say 1572 one thing but another week they say another. I again ask the noble Baroness whether the Government are now in favour of people who have stakeholder pensions also taking out other pensions.
There is considerable doubt as to where the Government stand on the issue of compulsion. On the issue of trustees the Government have switched back and forth. Should stakeholder pensions have trustees or should they not? This is a serious matter. However, it will be difficult to find effective trustees. As I know from my own experience, the responsibilities of trustees are considerable and indeed not without dangers in some respects. I believe that even at the moment a criminal case is being pursued against the trustees of a charity who are alleged to have breached existing regulations. One cannot say that it is easy to appoint trustees. Having said that, perhaps the noble Baroness will tell us whether the situation now is that stakeholder pensions are to have trustees or are not to have them.
All these are matters which we will need to examine very carefully. But the real problem is the danger that because of the provisions the Government are making for means-tested benefits people may subscribe to a stakeholder or other pension and then find at the end of the day that they have really gained nothing because the pension they will get will be offset in such a way that they receive no more than someone who has never contributed.
That is a very real danger which I think we need to examine further. Those who say, "That is no danger at all because of course the Government would not dream' of doing such a thing", have only to look at Clause 58 where we find that those who are in receipt of incapacity benefit are to be penalised because they have made provision for their pensions. These are major issues which we will need to examine very carefully so far as pensions provision is concerned. This is the first big opportunity we have had for doing so. Certainly we on this side of the House will do everything we can to ensure that the legislation is properly scrutinised.
The noble Baroness referred to pension sharing. I have already done so, and my noble friend Lord Astor of Hever will hope, during our debates on the Bill, to cover this and other points. There is a real problem, given the scope of the Bill, as to what one should focus upon. I think that the noble Baroness recognises that.
Similarly, the single-focus gateway is something we shall need to examine in considerable detail. It raises particularly the question of compulsion. The noble Baroness will know only too well that many outside bodies are gravely concerned, particularly as regards the disabled, that there will be a degree of compulsion concerning the interviews. There may be too much emphasis on the possibility of obtaining work or the ability to take work. Again, we will need to look at that carefully.
I am conscious of time, but I want to say a word or two more about Clauses 70 and 71, of which the noble Baroness made only passing mention. It is really quite extraordinary that the Government should have introduced this matter at the very last moment in the other place for the reasons that I have mentioned: 1573 namely, a tactical question of presentation and whipping. It would have been far more appropriate for it to he included, since it reflects the Chancellor of the Exchequer's own proposals in his Budget, in financial legislation rather than in legislation here. We shall nonetheless have to examine it very carefully.
It is a classic example of the Government again, contemptuous, I think, of the proceedings, taking powers to deal with a great deal of matter through Henry VIII clauses, statutory instruments and so on rather than spelling out the detail. The representations that one is already receiving express grave concern about the repercussions which these clauses may have, not on those against whom they are apparently directed but on many other people who have small limited companies and so on.
The difficulty with this Bill will be to get the right balance between the various controversial points that it contains. I am conscious of that situation. We are concerned about the question of widows' benefits and the bereavement allowance. The noble Baroness did not refer to what had prompted some of the changes; namely, the question of the human rights decision with regard to widowers. Perhaps it might have been appropriate to mention that in passing. At all events, we are concerned about the way in which the Government, instead of facing that particular challenge, have decided to curtail the amount of money spent by cutting widows' benefits rather than dealing with the matter in the way that perhaps the court might originally have envisaged.
I turn finally to the question of disability benefits, and in particular Clauses 57, 58, 60 and also 61 and 62. These matters caused great distress to honourable Members in the other place and indeed resulted in a considerable rebellion. I am sure it is right that this House should scrutinise the clauses very closely. Indeed the noble Baroness held out some hope of change in her remarks, I noticed, as far as—
§ Baroness Hollis of Heigham
My Lords, I had hoped to avoid interrupting the noble Lord in the same way that he was courteous enough not to interrupt me. I did not hold out hope. Let me make it very clear. I said that the Secretary of State had made it clear that while he firmly supported the principles he was open to discussion about the details. It was the Secretary of State.
§ Lord Higgins
My Lords, I do not doubt, after the rebellion which took place, that the Secretary of State was well advised to say something of that sort, but I think we ought to make it absolutely clear—
§ Baroness Hollis of Heigham
My Lords, this was at Second Reading, well before any discussions or, as the noble Lord prefers to describe it, a revolt in the other place.
§ Lord Higgins
My Lords, he may have been a little prescient in feeling that perhaps the proposal would not go through quite as easily as he might have supposed, even when he introduced it at Second Reading. Be that as it may, in our view the principle involved here is 1574 wrong. We are very concerned indeed at the way in which the question of entitlement to incapacity benefit is to be reduced because people have been prudent enough to provide for a pension. It seems to us a most extraordinary provision. It is sad that the Government, having failed to introduce radical reforms to curtail public expenditure on welfare, are resorting to this sort of change. It is a matter of broad concern on all sides of the House. We take the view that it is wrong in principle and changing the actual numbers here or there does not alter that point.
Similarly, as regards the restriction on incapacity benefit and the length of time during which people have made contributions, we are withdrawing here something to which people have previously been entitled but which is now to be restricted because benefits will only be available if contributions have been made in the immediately previous period. Again we believe that is wrong.
The abolition of severe disablement allowances is a matter on which outside bodies have expressed some dismay. When Mr. Frank Field was asked to look at some of these issues he was told to think the unthinkable. There are those who say that he did so and that that has been the problem as far as Mr. Field is concerned. I would have thought that the abolition of the severe disablement allowance might well have been something which the noble Baroness might also have regarded as unthinkable. She has sought to justify it today, but I think we need to probe the matter very carefully.
All the issues I have mentioned represent a change in attitude on the part of the Government which we cannot support. I believe it is right that we should deal very carefully with them during the later stages of the Bill. As I said at the beginning, this is not one Bill but several Bills rolled into one. We will need adequate time made available to deal with all these matters, to examine them in detail, and to improve the Bill. If need be, as has been much stressed in recent months, we ought to take the opportunity to ask the House of Commons to think again. There is much in this Bill on which the House of Commons will need to think again, and we shall do everything we can to ensure that matters are scrutinised properly and that good sense prevails.
A very difficult task lies ahead of us because of the complexity, scope and extension of the Bill into so many different areas. I believe it is right that we should give every attention to the legislation. Although the noble Baroness sounded very plausible in many respects, we believe—and it is quite clear from outside representations—that there are serious problems with the Bill which need to be put right.
§ 5.10 p.m.
§ Earl Russell
My Lords, wearing my other hat, one of the skills I have tried to acquire is that of going through a large, unsorted box of loose papers stretching through several centuries and, at a glance, plucking out those which may relate to the few years on which I happen at that moment to be working. Were I try to apply that skill to a few loose leaves torn out of the Bill, 1575 I should be unable to date it with any precision. I think that I would be able to place it as emanating from the Department of Social Security, probably in the 1990s. I do not think that I would be able to tell from anything in the contents of the Bill from which government in the 1990s it had originated. It does not bear on the face of it any clear philosophical mark of its political origin.
The noble Lord, Lord Higgins, hit the nail absolutely on the head when he said that this is not a single Bill. It is not even really a collection of small Bills; it is a collection of miscellaneous clauses. So when I set about the task of trying to identify the general principles of the Bill for Second Reading, I could not do so. Even quite late last night I had not succeeded in planning the general outline of a speech. I finally came to the conclusion that the general principle of the Bill is that general principles are not there.
I know that we have had a great many general principles stated. The Minister has stated some about changes in the status of women since Beveridge wrote. She is right about that. I do not see that that bears particularly clearly on the contents of the Bill—except in the case of widows, where I am moving increasingly to the suspicion that the Government, although they have made a good attempt, have nevertheless got it wrong.
I know that the Prime Minister has plenty of principles. But the Prime Minister's principles, like the proverbial flowers that bloom in the spring, are nothing to do with the case. I looked at the Prime Minister's Beveridge Lecture delivered on 1 8th March last for a guide to the principles which the Prime Minister is trying to apply to this subject. He said first that he was trying to take up,a great challenge: how we make the welfare state popular again".
The Prime Minister was tilting at a windmill. Mr. Peter Lilley knew perfectly well that the welfare state was popular. That was why, although he made various damaging pinpricks at small outlying parts of it, he left the heart of it severely alone. In making that statement the Prime Minister has fallen victim to his own propaganda about Thatcherism.
He has also fallen victim to the first-past-the-post illusion that 43 per cent is a majority. It is not. We should be very careful indeed about forming assessments of political opinion based on the supposition that 43 per cent is a majority. So that is one area where the Prime Minister is tilting at a windmill.
More generally, the Prime Minister has suffered quite badly because either he or, more likely, someone in his office rather a long time ago, had the misfortune to read Charles Murray. Again in the Beveridge Lecture, he said:a welfare state that is just about 'social security' is inadequate. It is passive where we now need it to be active. It encourages dependency where we need to encourage independence, initiative, enterprise for all".The sentiments are unexceptionable but they are absolutely in the wrong place. That is why I said that they have nothing to do with the case.
1576 The Minister spoke about people who have written themselves off and have poverty of expectation. I agree that that needs changing, but one does not change it by changing the benefit system. The Prime Minister is barking up the wrong tree. I shall not soon forget listening to the single-parent debate in another place at the end of 1997 and to the Members for the north-east, one after another, listing the number of unemployed in their constituencies and the number of listed vacancies. Even if one assumed that the listed vacancies were only one-tenth of the actual vacancies, their point still stood.
Moreover, there is sense in the free market principle that if there is a job it should be incumbent on an employer to make it sufficiently attractive for people to take. The Prime Minister said also that we must have a situation of people having an obligation to take jobs or risk losing benefit. If one sees that as simply a matter of the morals of benefit, I can understand why he said it. But we should think also about the distorting effect on the market of supplying employers with, in effect, a conscripted force of labour which, within the very small limit set by the minimum wage, is bound to take a job whether or not it is sufficiently attractive. That is a particular problem.
The Prime Minister said that,any citizen of our society should be able to meet their needs for income, housing, health and education".That sits a little uneasily with a Prime Minister who has perhaps a greater addiction to disentitlement than any other I can remember. He did not even refer to those who had met his contract but to "any citizen". I do not think that he meant it. So the Prime Minister's principles are really nothing to do with the case.
We have instead a departmental agenda. Whitehall departments are like tankers; they have considerable momentum and a very slow turning circle. They respond—and will always respond—to a very clear signal of change of direction. They do not get that from the sentiments of the Prime Minister, which are nothing to do with the case, and so they continue along the agenda we have been along before.
That is most clear in what the Minister said about incapacity benefit being used as a form of unemployment benefit and a form of retirement. My noble kinsman Lord Henley and the noble Viscount, Lord Astor, are not at present in the Chamber. During the passage of the 1994 incapacity Bill, I am sure that they remember churning out almost exactly identical phrases. Those phrases are pure hypothesis. We do not know that that is the reason for the increase in incapacity benefit. If the Minister is to pursue that point, I should like to hear some evidence to justify the hypothesis.
Perhaps I may suggest at least one other hypothesis. The Acheson Report—it repays study—draws attention to the fact that there has been a considerable decrease in mortality but no corresponding decrease in morbidity. Twenty years ago, a great many people who are now receiving incapacity benefit would not have been in work. They would have been dead. It is also a well-known fact that unemployment has a serious effect on health, especially on mental health. If people who 1577 have been unemployed for more than two years are suffering illness, they may be ill because they have been unemployed.
The Acheson Report also stresses that benefits are by no means always adequate to maintain health. I shall return to that point in Committee. Many of these people may be ill because they are on benefits which are insufficient to give them adequate nourishment. To use that as evidence that people are trying to fiddle their way out of the labour market—which is the innuendo, even if the Minister did not intend it, left in people's minds when those words are heard—is entirely misleading. Fortunately my noble friend Lord Goodhart and I are able to enjoy a division of labour. My noble friend will be dealing with the pension-splitting section of the Bill. I join in the warm congratulations to the Minister on her part in that. I thank her for her kind words about Lady Seear. We are delighted that the provision is included. If we give it careful scrutiny, it is merely for the purposes of making it work. I am sure that the Minister would expect no less.
I am interested in the provision relating to widows. I agree with the noble Lord, Lord Higgins. It stems from provisions in the European Convention on Human Rights. It is a move towards gender equality, and one must welcome that. One must also welcome the increase in the immediate lump sum bereavement payment. However, there is a question as to whether this is going at too breakneck a speed, and whether it too greatly whittles down the area of choice within marriage.
The widow's parent's allowance will continue only until a child who continues in education is 19. That is very hard on those children with widowed parents attempting to enter higher education. I know painfully well that people cannot usually complete their higher education without a vast amount of help from their parents, or an unacceptable amount of paid work during term time, which interferes with their studies. Therefore, in Committee I shall examine that limitation to age 19 to see whether there is any give for those in higher education.
I am more concerned with the six-months' limitation on the bereavement allowance. This is purely a provision of gender equality. I respect the principle behind it; namely, that if the two sexes claim equality, in the case of bereavement both must be prepared actively to seek work. But the provision contemplates a very big cultural change. That change has already taken place in some households; in others it is nowhere near beginning. We on these Benches feel strongly that it is a vital principle that couples should have a choice as to whether they both go out to work or whether one of them is the specialist carer—and not necessarily the woman.
There is a tendency to restrict choice. Also, if such a change is to be brought in, it must be done in such a way that those people who begin their pension provision reasonably early in life should do so knowing that this is the position that their widow or widower will he in. There is a real problem in regard to what lawyers term "legitimate expectation". So if the Minister intended to introduce such change. it should have been 1578 introduced with a very much longer time lag before its commencement. If it were to come into force in 2020, then it would be theoretically justifiable. As it is, the provision appears draconian and a cultural imposition.
On the question of the single gateway, 'there is a compulsory interview—I agree with the Minister that it is merely an interview—for all those who move on to benefit, with provision for loss of benefit if they do not attend. Here there are two conflicting, valid principles. On the one hand, it is a good principle that people should not be paid benefit for doing nothing. We on these Benches accept that. But it is also a valid principle that, in the words of the Prime Minister in his Beveridge Lecture, anyone has an entitlement to basic physical support. Here, those principles clearly conflict. We on these Benches will not vote against the principle of the single gateway. However, we have severe misgivings about its practicalities. We have misgivings about who will be exempted from the interview; the travel requirements; such people as illiterates, who may not know that they have been summoned to attend; and the qualities of those who will conduct the interview.
I am sure that the Minister will never forget the BIP—a story from which she emerges with so much credit. I must rely on her to ensure that those who conduct the gateway interviews do not include unqualified people who may make the kinds of mistakes that were made in the course of the BIP. I am sure I need say no more.
The Minister will need to think about how far all these extra requirements are compatible with the requirements of the change programme, by which the running costs of the Department of Social Security were to be reduced by 25 per cent. Mr. Peter Lilley said that that filled him with despair. The more I look back on that statement, the more I think how right he was. I hope that the Government may see grounds for agreeing with him.
Turning to Clause 56, I am in sympathy with the changes to the all-work test that the Government propose. But I wonder whether the Government have appreciated quite what a bad test it is. That was the worst element of the 1994 Act. I am sure that the Minister is familiar with the CAB report, An Unfit Test. Perhaps I may take one example from the report and use it as a proxy. It is the example of someone who had a severed tendon in his hand, with nerve damage as well. He was found to be fully capable of work because no descriptor takes into account the length of time needed to complete tasks needing the use of both hands. It is not an objective test. It is objective only in those matters that the compilers of the test happen to have thought of. Being human beings, they are subjective.
The Minister will also be familiar with DSS Research Report No. 86, the study tracking those who had left incapacity benefit, both voluntarily and involuntarily. It found absolutely no correlation between their test scores and their prospects of future employment. That is a worrying finding. I should like to hear. From the Minister, in replying, that she is prepared to do a great deal more to change the all-work test than merely he points that she has set out. There cannot really be an all-work test, because there is no single activity known as work.
1579 Clause 57 deals with the restriction of incapacity benefit to those who have paid recent contributions. I have said a little on that already. There is more wrong with it. It is geographically discriminatory. In certain areas of the country people have no reasonable prospect as they get older of having been able to do work within the two years prior to a claim. The ward next door to my own is a case in point; and there are plenty of such areas in the north-east. So this clause will penalise people for where they live. That is unfair. It will penalise women extremely severely, mainly through an interaction with the exclusion of those who are working but who are cut off by the lower earnings limit for national insurance; or people who are doing several part-time jobs, each of them below the lower earnings limit. Many people who are in that position have made serious attempts to work and should not be penalised for not trying. The provision will also work extremely harshly for carers, as the noble Baroness, Lady Pitkeathley, may be about to tell us. I shall listen carefully to her remarks.
Clause 58 deals with pension payments. I understand the theory of what the Government are trying to do. But the road to hell is paved with good intentions. I have heard the Minister complain many times about the number of perverse incentives in the benefits system. She is here creating another. She is creating an incentive not to save. However good the theory, it will not do. If the practical effect of introducing the clause is damaging, even if the theory is perfect, it still should not be done.
There is a great deal more that needs to be looked at: for example, Clause 64, on compulsory production of national insurance numbers for obtaining child benefit. I have spoken to the Minister before about the difficulty many people have in getting national insurance numbers. I shall come back to that.
My final point is on Clause 77 which allows authorisation of forward expenditure by statutory instrument. Because of the revolutionary tendencies of those who manage business in another place, this fell victim to the guillotine, so it received less scrutiny than many people would otherwise have wished. It concerns a number of the committee chairmen in another place, not least my honourable friend Mr Kirkwood, chairman of the Social Security Select Committee. I understand what the Government are trying to do and why they are trying to do it, but we shall want to examine that carefully in Committee, and a great deal else.
§ 5.30 p.m.
§ The Lord Bishop of Bradford
My Lords, I wish to make a modest contribution to the debate which, as one would expect, will be of a different order. I am not competent to discuss the details of the Bill and I have no party political flag to fly. I wish to speak on behalf of quite a number of clergy and others who spend a great deal of their time living among people who are poor and for whom we hope the provisions of the Bill will provide some relief.
1580 I was greatly interested to hear the Minister talk about the ethics of Beveridge. I believe I quote her correctly. People are concerned to know what are the ethics and principles behind the Bill and what is the vision of the society which the Bill seeks to help to create. People are frequently bemused by the mass, the torrent of words which are written and pour out in debate. But a vision is something which many more people can come to terms with. What are we designing the Bill for? What do we hope to achieve? How can the people who need it most understand and respond to it?
Christians are called to pay particular attention to the needs and circumstances of the poorest people in society. That is a view shared by people of other faiths and no faith at all. It means a great deal more than helping individuals in their need. It means a great deal more than creating charitable organisations. It means providing a fair and accessible system for the delivery of state provision of welfare.
I underline the word "accessible". The comment that is made time and time again to those of us who are not expert in these matters but who talk to people most affected is: "We simply do not understand. How do we find out how we can get help?" It is not merely clergy, not merely people of that order. I think I am right in saying that in 1997–98 the citizens' advice bureaux had something like 6.2 million problems referred to them, 2 million of which concerned the social security system. It is a strange community in which poor people who are frequently disadvantaged and unable to speak for themselves have to go to volunteer experts in order to understand the provision which is designed to help them most.
I hope we shall have a vision and that in the vision and principles we will have something that will give us encouragement in that direction. It may be a foolish thing to ask, but perhaps a bishop is the best person to ask foolish things in your Lordships' House—a fool for Christ's sake. One of the great learning processes we have been through in the diocese of Bradford was called "powerful whispers". We went to four of the most deprived areas in Bradford and Keighley, took the so-called great and the good of the area in politics and public life, including the bishop, and made them sit down for two hours without speaking a word, in order to listen to people who lived in those deprived areas saying: "This is what it's like to live here". Those people needed a lot of help to do that; they are not used to standing up and speaking for themselves. I ask the Minister this: who has sat down and listened to such people when creating a vision and seeking to construct the Bill? It is a foolish thing to ask, but we are dealing not with statistics and concepts such as the poor and the unemployed; we are dealing with human beings.
I may not understand a lot of what happens in this debate, but I understand a little about the human beings who will be affected. It is easy to do good for other people. I ask: at what stage has there been a real listening to people who are most affected? I hope it has been good and I shall be greatly encouraged if so.
Speaking of the stakeholder pension, the Minister said, "It will be simpler, easy to understand and to compare". I cannot comment about stakeholder 1581 pensions, but if that statement proves to be true of the Bill and the welfare provision in this country for ordinary people, perhaps I may be the first through the Lobby to exercise my vote as "Content".
I hope that in this vision we shall have a strong word about mutuality. I wish to quote briefly from a superb report produced by the Roman Catholic Bishops' Conference. It is called The Common Good:The common good … implies that every individual, no matter how high or low, has a duty to share in promoting the welfare of the community as well as the right to benefit from that welfare".One way of understanding social inclusion, though it may not be the technical way, is to enable the people who are the poorest and most deprived to feel that they have something to contribute and to say to the rest of us: "We have something to contribute". We live in a community which is mutually supportive. That is why, when the noble Lord, Lord Higgins, spoke about the undermining of the contributory principle and the problems with means testing, I began to nod. People to whom I have spoken may not have used precisely those terms, but they said: "We are very concerned about what we think is the disappearance of the contributory principle and what we perceive, rightly or wrongly, to be the increase in means testing". That view is not only expressed here, it is expressed in other words elsewhere.
I hope that in this Bill we shall seek to support human dignity. Perhaps I may explain what I mean with a simple example. In the 1960s I became the vicar of two country parishes in Northumberland As vicar, I was chairman of the trustees for the charitable fund for the poor of the chapelry of Hebron, of which your Lordships will no doubt be aware. We could not give away a penny because no one wished to be known as "the poor of the chapelry of Hebron". "What right have you got to know what I earn and what are my circumstances?" We had to go to the Charity Commissioners and say: "May we take the over-60s out to the theatre? Otherwise we'll never get rid of the money". People wish to have their dignity and privacy. Those are precious human virtues which I hope will not be undermined in the course of the development of the Bill.
It is quite clear that modifications have to take place. Fifty years or more is a long time. I hope that the Government will be kind enough to paint a vision which people can understand, even if words are not their normal currency. I hope that there will be clearly underlined principles, not financial principles but the moral and ethical principles to which the Minister referred. I hope that in that vision we shall have at least one or two of those elements: a society where members feel and take responsibility for each other, from the poorest to the richest, and in which all feel they have something to contribute. I refer to a system that is based on the contributory principle in which the dignity of each human being is preserved and enhanced; a system with clear and easily applicable rules that are generally felt to be fair; and a system devised by those who have genuinely listened to the poorest and most vulnerable members of society which can be understood by those people.
1582 It is foolish to pretend—I do not do so for one moment—that the detailed provisions of the Bill can be dispensed with; they are essential, but unless we have a vision that fires us, wins our confidence and encourages us as we deal with the derailed provisions of the Bill, I fear that we shall finish up with a bonfire of clauses to which no doubt the noble Earl, Lord Russell, will be glad to add the flames.
§ 5.41 p.m.
§ Baroness Pitkeathley
My Lords, in preparing for today's debate I have been much struck by the similarities in attitude towards this Bill and the House of Lords reform Bill which has just completed its Committee stage in your Lordships' House. In the short time that I have been here I have never met anyone inside or outside this House who does not agree that reform is necessary. On this there appears to be universal agreement. The problems appear to arise only when we go on to talk about the form that it should take. Similarly, in all my years as a campaigner I have never met anyone who says that the benefits system does not need reform. Usually, we can even agree the reasons for the reform, which would include: that the welfare state is not delivering enough to those in greatest need, and that the benefits system has not kept pace with the changes in society since the system was introduced.
The example that I know best is that of carers, who were not even recognised in the benefits system until the mid-1970s, and married women were granted invalid care allowance only as recently as 1986. When, however, we try to agree the shape of the reform we run into problems. Too frequently opposition to reform concentrates only on defending the status quo. Again, the similarities between this Bill and that relating to reform of your Lordships' House are quite striking.
I declare at the outset my belief that we must take the same line on welfare reform as the Government have taken on reform of this House. A start must be made, but we must bear in mind that this Bill represents just that, a start. This is a key building block in the development of a welfare system which will meet the needs of our society, especially those who are most disadvantaged, for the next 50 years or so. We cannot make those changes overnight or even—as is also the case with reform of your Lordships' House—agree the final shape of those changes. But if we wait until we achieve consensus on those matters we shall never agree the reforms which everyone accepts are necessary. We shall be left with a welfare system that does not provide adequately for those most in need and continues to work on an outdated set of assumptions.
We know what those assumptions are: that some people work and some do not; that all those who work are engaged in the same job until they reach retirement age; that men die shortly after retirement age (one year after retirement in 1945); and that few people with disabilities live very long, never live independently and are rarely in paid employment. We must establish a new set of principles by which welfare benefits are provided; and, above all, we must make a start.
1583 I turn now to the Bill itself and will comment only on some parts of it. The first part of the Bill is concerned with pensions. I must record my delight that the proposals for second state pensions are to be extended to carers. The recognition that caring affects families not only practically and emotionally but also financially is welcome and long overdue. Taken together with the other proposals contained in the national carers strategy, it will give carers not only increased financial security but also what they most deserve: recognition by society of the contribution that they make willingly and with love.
I also welcome the proposals for a single gateway. Too many benefit recipients have to deal with a confusing array of different agencies with little attention paid to them as individuals. A single gateway will enable them to be treated as individuals to ensure that the benefit they claim is the right one and, drawing on the evidence of the New Deal, give them information about job opportunities. But there must be a word of warning here. A single gateway will work well for disabled people and carers only if it is tailored to individual needs and takes account of individual variations. To try to push people into a pre-set mould because that suits someone's convenience—assuming that everybody can work because the majority wish to do so—will cause distress and result in injustice. Those who administer a single gateway must be selected for their sensitivity and properly trained so that they are aware, for example, of the special problems of those with mental health difficulties and so on. This must be a priority if the single gateway together with the individual interviews on offer are to be seen as a helping hand to the individual—I am sure that the Government wish them to be helpful and not negative—and not as a barrier to be overcome.
Much has been said on the subject of disability benefits. It is vital that we take note of those who are closely concerned and in touch with disabled people. My colleagues in the disability movement are united in agreeing that there are many good things in the Bill. It is very important to remember that rather than to concentrate on the very few issues which divide us. The Bill puts £2 billion more into the system in the lifetime of this Parliament. That includes more money for low income disabled people with severe care needs and up to £26 a week more for those severely disabled early in life.
My colleagues in Contact a Family who represent parent carers are naturally delighted that DLA will be extended to three and four year-olds so that they will be able to receive up to £37 a week more. This group of carers has frequently been ignored in the past and this proposal is particularly welcome. The Government may wish further to recognise the needs of this particular group by reviewing how the exceptional mobility costs of children can be met, for example when they need to visit hospitals and health clinics and cannot use public transport. More help is also to be made available to those with disabilities who are in paid employment. This, too, has been welcomed by campaigning groups.
1584 As to the proposed changes to incapacity benefit, we shall no doubt have many opportunities to explore these in detail at later stages of the Bill. For the moment, I simply remind your Lordships of the original purpose of invalidity benefit, which all campaigners welcomed when it was introduced. It was to be a benefit which compensated those who gave up work because of long-term illness. We all know that that is not what it is now. Although no doubt we will disagree as to the reasons for it, we know that IB has become an alternative to long-term employment or early retirement. There has been a threefold increase in the numbers who claim IB over the past 20 years which cannot be explained simply by the increase in the number of people with disabilities living longer.
There is absolutely no question of fraud in these cases, as I am sure your Lordships will acknowledge. Disabled people do not defraud the system, as the benefit integrity project very clearly demonstrated. It is simply that the benefit is now being used for a purpose for which it was never intended. I understand the view of the Government that this cannot be ignored and must be addressed. We must remember that absolutely no existing claimants will be affected. Any changes which the Bill introduces will apply to new claimants only. There will be time before the Act comes into operation for expectations to be changed and for a major information campaign to be mounted. I hope that the Minister will be able to commit the Government to such a campaign and also help disability groups with their own information campaigns, which have always proved so vital and effective. Moreover, we must learn from this experience of IB about the kind of benefit which is effective for people with long-term illnesses and ensure that that learning is fed into the next stages of welfare reform.
There has been much discussion of the contributory principle in relation to IB. Some have even suggested that this is the first time that the contributory principle has been breached. One wonders whether they have given thought to the question of contributions to the fees required for residential and nursing home care for the elderly. They may have paid their national insurance contributions but they certainly do not have a right to free care. Your Lordships will remember that those changes were made by stealth, not brought to this House in a Bill. It took this Government to set up a Royal Commission to redress that problem. We still await the Government's response to the Royal Commission. I very much hope that it will be soon and I very much hope that they will take the needs of older people in that regard firmly into account.
The use of IB for a purpose for which it was never intended makes the case for re-establishing the link between recent work and benefit. I am aware that claimants would have to have made contributions for only 12 weeks during the past two tax years, but I very much hope that the particular case of carers can be taken into account during interviews since they are a group of people who often have difficulty in maintaining regular work simply because of their caring responsibilities. I believe that I understood the Minister to say that the claiming of ICA in the previous two years could be seen 1585 as a substitute for contributions, certainly for some groups. Perhaps she will clarify that. I hope that the Government will be able to take that line where clearly the claimant has been kept out of work because of caring duties.
I agree with the noble Earl, Lord Russell, that we must be concerned about people who work part time and are below the lower earnings limit and those who have several part-time jobs, but each is below the lower earnings limit. These people can never build up a contributory record and therefore can never get on to IB. At present, if they are 80 per cent disabled they can claim the severe disablement allowance. However, what will happen when SDA is abolished? I hope that the Government may find a way to bring such workers, the majority of them women and many of them carers, into the national insurance fold.
Currently, IB disregards the fact that more than half of all claimants now have an occupational pension. This is one of the major changes in our welfare system since it was introduced and the effects of such pensions on income have to be taken into account, however opposed many of us are to means testing. I speak as one who was brought up on the terrible stories my grandmother told me of how the means test operated in the Depression and who as a young social worker in Moss Side, in Manchester, saw the way in which means testing disadvantaged those who needed help most.
I stated clearly that I am emotionally opposed to means testing, but I am beginning to wonder whether in our current society and in some cases the redistribution of income rather than universal provision may better meet the needs of those who, for whatever reason, cannot achieve independence or provide for themselves.
However hard some of us find it—and I do—maybe we have to look at whether it is right that someone who is receiving £10,000 a year in occupational pension receives the same IB as someone with only the state pension. Redistribution of income would surely enable us, as the reform of the system proceeds, to raise the inadequate level of the retirement pensions, which I know would find favour with many of your Lordships.
I very much hope that the Government will be able to make concessions both as regards the threshold at which this happens and the level of pension one may keep before the taper kicks in. The last thing we need is for saving habits to be discouraged. It was encouraging to hear that the Secretary of State is willing to think carefully about this.
In conclusion, we must remember that most of our welfare system has its roots in Beveridge. Time for radical reform is overdue, but radical reform is difficult, as your Lordships know perhaps better than any other group. I hope that we can use the debate and discussion here to address the problems with the Bill, as well as to acknowledge its attributes. Above all, I hope that we shall bear in mind that these proposals are a start, and a start only, at giving us a welfare system which at last reflects not the needs of some society in the past, but the needs of our current society.
§ 5.53 p.m.
§ Lord Freeman
My Lords, since Beveridge there have been a number of important landmarks in the provision of supplementary pensions. As the Minister said, the enormous growth in occupational pension schemes, particularly in the nationalised industries immediately after the Second World War, was a landmark development. Indeed, the degree of provision now made by the occupational pension schemes rivals that of any industrialised nation in the world. In considering any legislation, we must be careful to ensure that the great advantages of occupational pension schemes are not endangered.
The supplementary earnings-related pension scheme is soon to be replaced and renamed, which is another landmark. Some 10 years ago, we saw the introduction of private pensions, sadly tarnished by mis-selling as a result of incentives placed before the salesmen who sought to persuade people to leave occupational pension schemes. Nevertheless, that was a landmark.
Now we have the stakeholder pension, which is a regulated private pension. It is more flexible and I welcome it. Indeed, there are a number of features in the Bill which should be welcomed. I agreed with the noble Baroness, Lady Pitkeathley, when she spoke of the extension of the second pension to carers. That is right, as is also splitting pensions on divorce. Some three years ago, on behalf of the previous administration in the other place, I welcomed that change and gave a commitment in principle to accept it. I am delighted to see it in the Bill after detailed preparation.
Furthermore, I am sure that your Lordships welcome the annual pension statement—I believe that the right reverend Prelate the Bishop of Bradford will welcome it—providing people who are not familiar with the complexities of pensions with a simple annual statement of their state and private pension entitlements. Although that is a modest measure according to some, in my judgment that is a landmark improvement.
As regards stakeholder pensions, the Bill contains a number of welcome provisions. First, there is a greater proportion of pensions made from private provision. That must be welcome. According to the Green Paper, up to 60 per cent of total pension provision comes from non-state sources. That must be right. Secondly, there is an encouragement for those on modest incomes—that is, from about £9,000 to £20,000 a year—to provide for themselves an additional, supplementary pension. That, too, must be right.
I share with the Minister the belief that there should be no compulsion either on employers or employees in the making of supplementary pension provision. I welcome that. Finally, I welcome the excellent innovation that contributions can be made to a personal pension scheme when one is out of work for up to five years. Again, that is a very important and welcome development.
However, there are a number of general concerns to which I shall wish to return in Committee. I am sure that to some degree they are shared on both sides of the House. First, we must be careful about encouraging, perhaps unwittingly, any unnecessary move from the 1587 benefits provided by what are technically called "defined benefit" schemes but are occupational pension schemes which guarantee a pension related to one's salary—in other words, what the company can afford—to schemes which are technically called "defined contribution", money schemes where one gets out what one puts in. Secondly, during the past 10 years many people unwittingly moved from the protection of generous occupational pension schemes into perhaps the harsher world of money purchase schemes when that was unnecessary. In my concluding remarks, I shall suggest a solution to that problem to which I shall wish to return in Committee.
A second general concern is the level and clarity of advice provided to those who are not normally familiar with pension details. I refer to the level of advice available to those who may be inclined to make a contribution to a stakeholder pension. I do not believe that the Government's present proposal, which I understand to be that the operational costs of the stakeholder pension scheme shall be limited to 1 per cent of the value, is acceptable. One per cent of the modest minimum payment of £10 a month, £120 a year, will not buy much advice. We must return to that issue in Committee.
Perhaps I may flag up one major concern, and a possible solution, to which I shall wish to return in Committee. I believe that this is a problem which faces up to 100,000 of those who are employed by small companies in this country. I refer to the situation where small companies which have an occupational pension scheme, perhaps not very generous, may be inclined to consider closing it in the face of the advent of stakeholder pensions. According to the Bill it is compulsory for companies to facilitate their employees to provide a stakeholder pension; it is not a matter of compulsion that the employer should make a contribution.
Sadly, therefore, as I think history shows over the past 50 years, I believe that small companies under pressure, particularly those not necessarily in a very competitive position, might seek to close their occupational pension scheme, cease their contribution, and rely on their employees to provide for their supplementary pension through stakeholder pensions. My calculations indicate that up to 100,000 people might be affected out of the 5 million or so to whom the Minister referred as benefiting potentially from stakeholder pensions.
As the Minister will know, the Association of Consulting Actuaries conducted a survey of 572 smaller companies, employing up to 250 staff. The survey revealed that 12 per cent of those companies indicated that they would close down their occupational pension schemes, and therefore the employees would be worse off. It may seem a matter of detail but it will affect provision for pensions for employees in those smaller companies. I should like to return to that at Committee stage. I believe that there is a solution.
I understand that in a newspaper interview a number of weeks ago the Secretary of State at least held himself open to a favourable consideration of dual membership. Dual membership is a mechanism which would require the agreement of the Inland Revenue. Dual membership 1588 is a provision whereby, if one is employed by a company, one can stay in its occupational pension scheme and top up one's pension provision through stakeholder pensions. I believe that this is an important principle. The reality of life today is that in one's working life one can move from one employment to another. The facility to come in and out of an occupational pension scheme leaving behind the accrued benefit, rather than suffering the penalty of an inadequate transfer value, and having one's own stakeholder pension which is consistent and runs through one's working life—and one can use it as the main provision to top up pension provision when one is in work or self-employed—is a sensible way forward.
It requires the co-operation of the Inland Revenue. In retrospect, I should say that the inability of the Inland Revenue to concede dual membership when the last administration of which I was a member introduced personal pensions inevitably led to problems. Mis-selling, of course, was a separate issue, and compensation has been provided. However, I think that if we had been wise before the event a decade ago and had required the Revenue to be more flexible and to provide a more generous tax regime, we would not have experienced some of the problems that we have had. It is easy to be wise after the event. I think that we should be wise before the event in the introduction of stakeholder pensions.
§ 6.3 p.m.
§ Lord Ashley of Stoke
My Lords, I welcome the Government's welfare reform programme in general and this Bill in particular, albeit with some important reservations. I welcome particularly the proposals to extend the higher rate mobility component of the disability living allowance to three and four year-olds; to provide for young, disabled people to receive incapacity benefit, with its higher rate, rather than the severe disability allowance; to launch employment initiatives for disabled people; and to provide the disability income guarantee.
These proposals are important and are not given the credit they deserve. The emphasis on helping disabled people to obtain work is excellent. In that respect, I warmly congratulate my noble friend Lady Hollis for her superb presentation. She is a fine advocate for the Government.
I turn now to my reservations. My concern is in relation to disabled people who are unable to work. That is why I wish to concentrate on the proposed changes to incapacity benefit which restrict it and means test it. The Government are proposing fundamental changes to well established principles. If the proposed changes are accepted, they will, without a shadow of a doubt, cause great and undeserved hardship to thousands of disabled people. That is my main objection.
Another concern of supporters of the Government is that a generous Government have become widely perceived to be a mean one as a result of these proposals. Why have they been put forward? Why have the Government suddenly added these lamentable proposals to sensible policies? We now have a Bill 1589 which precisely proposes to reduce benefit entitlement for 170,000 people. Clause 57 would disqualify disabled people from receiving incapacity benefit if they had not paid national insurance contributions in the past two years. The Government do not seem to understand the basic insurance principle or have deliberately decided to flout it.
Claimants may have been paying contributions for 20 or 30 years, may have been medically certified by an eagle-eyed Benefits Agency doctor, not a sympathetic general practitioner, to be too incapacitated to work, and yet by Clause 57 could be denied incapacity benefit. I do not understand it. This irredeemably outrageous tearing up of a moral contract between the state and the people rests on the flimsy basis of wanting to relate incapacity benefit to recent work.
Regardless of the fact that the public has unquestionably accepted that national insurance contributions guarantee them incapacity benefit if they become incapacitated, just as they guarantee a retirement pension in old age, and regardless of how severely disabled they may be, the blind, the deaf, the sufferers of multiple sclerosis, the paralysed, will all receive the answer that no incapacity benefit is payable if they have not worked and paid contributions for the previous two years, irrespective of how long they have paid contributions. Such a policy defies understanding, logic, morality and compassion. However, I am far less concerned in this debate with compassion than with understanding, logic and morality.
Perhaps Ministers have been thrown off balance by assertions that the previous government encouraged unemployed people to claim incapacity benefit in order to reduce the embarrassingly high unemployment figure. I think they probably were. However, the question of whether that may have happened in the past is totally irrelevant to the future. The demarcation is clear, especially as the Government's Bill proposes no action against those who are allegedly on incapacity benefit without justification. It deals solely with future claimants.
Ministers talk about the past but intend to do nothing about it. They use the past as an excuse to hit disabled people in the future, even though they are medically certified to be incapacitated and pass the necessary medical tests. This must be one of the most remarkable political non sequiturs in parliamentary history. Ministers and other members of this House talk of the growth of benefit claims as a justification for action, but they act on a totally separate and unrelated matter, that of future benefits for entirely different people. They are using the classic diversionary tactic of all magicians and spin doctors, and I regret it. If they want to ensure that the gateway to the benefit is appropriate, I would strongly support them. But their present policy is inexplicable, inappropriate and incomprehensible.
The second major blemish is the proposal in Clause 58 to means test incapacity benefit. Anyone with an occupational pension of more than £50 a week starts to lose 50p of their incapacity benefit for every extra £1 of occupational pension. Perhaps Ministers are under the illusion that many incapacity benefit claimants with 1590 occupational pensions are millionaires. How else can we explain their constant repetition that 44 per cent of incapacity benefit claimants are in the top 40 per cent of the income distribution band? We have heard that from my noble friend and from other Ministers time and time again. What impression are they trying to create? We have heard talk today of the 100,000 people having around £234. What is 100,000 out of 1.7 million people? The vast majority are nothing like wealthy or well off. The Government should acknowledge that people with average incomes—these people are not well off—are also in the top 40 per cent of income distribution.
The propaganda about "wealthy" disabled people on incapacity benefit is unacceptable. The Government have included the disability living allowance as part of the income of invalidity benefit claimants. Everyone knows that that is inappropriate because the DLA is solely for the extra costs of disability. Furthermore, many recipients are receiving the old, higher invalidity benefit rate, which is £20 higher and inflates tine income figures. Future claimants, to whom the Bill refers, will not get that higher rate so their income will be lower. Therefore, the figures given for those people are in a real sense misleading.
Again, Ministers point their finger at one group but take action which includes another. They assert that 44 per cent are in the so-called higher income brackets but go on to clobber some of the other 56 per cent who are in the lower income brackets. Although the £50 limit is not in the Bill, it was in the consultative document. Why on earth are a Labour Government proposing to penalise disabled people because they have an occupational pension starting with an amount as low as £50 a week? Those people have £6,000 a year. Compared with average incomes of some £15,000 a year and average earnings of some £20,000 a year, people on £6,000 a year are far from well off. Those are the people who will be hit by the proposals in the Bill if the House accepts them. That is what is wrong with the proposals.
Ministers say that one can have a pension of approximately £10,000 a year before losing all benefit with the tone of those who believe that. £10,000 a year is a king's ransom. In fact, it is well below the average income. To take the whole incapacity benefit away from people receiving this, and who are incapable of work, is genuinely shocking. Are Ministers really surprised at the outrage expressed by disability organisations? In fact, the numbers on incapacity benefit are now 5 per cent lower than when it was introduced in 1995 and the expenditure has fallen in the same period from nearly £9 billion to £7.4 billion. Compared with Europe, our expenditure is low.
I hope that the Government will reconsider in the light of the reservations and criticisms expressed in this House. After the debate I shall be tabling amendments to get rid of Clauses 57 and 58. I understand that those amendments will have support from noble Lords on all sides of the House. We will debate them in Committee in great detail. I hope that the Government will be able to proceed without damaging many thousands of disabled people in the future, as these proposals will damage them. I hope that the Government will honour their moral contract to people who have paid 1591 contributions in good faith. I hope that they will reject the notion of poor disabled people subsidising very poor disabled people. I hope that they will withdraw Clauses 57 and 58 and think again so that we can offer them warm and unreserved support.
§ 6.16 p.m.
Lord Campbell of Croy
My Lords, I thank the noble Baroness, Lady Hollis, for so clearly introducing the Bill. It will be no surprise that I intend to confine my remarks to the parts of the Bill affecting disablement. At this first stage of the Bill, I declare again an interest as having received a war disability pension since World War II. It is relevant if I now add some background information. I have passed through various stages of immobility and disablement, from being strapped down to a hospital bed in body length plaster, through months of being bed-bound in hospital, then in wheelchairs, then on crutches, and, about two years after being wounded, on my pins again with calliper help, which I have needed ever since. I mention that because I have experienced those various aspects of disablement and I think that I understand them. I am now partially disabled, a credit to St. Bartholomew's Hospital where the damage and paralysis caused by a bullet passing through my middle were expertly treated, operated on and reduced.
As I have previously made clear, I consider that reform is necessary and I favour it. My objections to some of the clauses are that the Government are proceeding in the wrong way. That is also the view of the 12 leading disability organisations which resigned from the Government's Disability Benefits Forum. They resigned for a second reason also. The impression was being given by the Government that they had agreed with the proposals in the Bill. In fact, their complaint was that there had been little consultation after the Green Paper, consisting mostly of platitudes with which few could disagree, of March last year, and that little attention was given to their views when they were consulted. By good chance of the ballot in this House I was able to initiate a debate on reform immediately afterwards—early in April last year—and I publicly encouraged the author of the Green Paper, the then Minister for Welfare Reform, Mr Frank Field, in his endeavours. Soon afterwards, he dropped out of the Government.
Reform in the area of disablement cannot be carried out sensibly by rough, draconian measures. Careful pruning and adjustment are needed if glaring anomalies and considerable distress among disabled people and their families are not to be created. I accept some blame for the present complex system of benefits and the need for rationalisation and simplification. Forty years ago, when I entered Parliament in the other place, state benefits for disability were virtually limited to war disability and industrial injury. I was conscious of that and became involved in finding remedies. The noble Lords, Lord Morris and Lord Ashley, entered Parliament a few years after me and in the Parliamentary 1592 Disablement Group, along with other parliamentarians, we drew attention to the particular needs of disabled people.
The Beveridge report led to the national insurance scheme starting in 1948. It did not contain provisions for disablement. Understandably, in 1948, it was principally concerned with unemployment and with situations causing lack or loss of work. Disablement qualified only for national assistance, the then basic safety net.
The big change occurred in the 1970s. The pressure came from an organisation called the Disablement Income Group (DIG), which I helped to start in the mid-1960s. Some noble Lords will remember the founder, the late Megan Du Boisson, a housewife in a wheelchair. They may also recall the special arrangements made to give access to the first wheelchair in the Public Gallery of the other place when she attended a debate on disablement, which I initiated in the late 1960s.
The new benefits for the disabled were introduced in the 1970s. The attendance allowance came into existence in 1971 when I was a member of the Cabinet and the mobility allowance in 1976 when the noble Lord, Lord Morris, was the Minister for Disabled People. Of course, there were others. I hope that the House will note that at those times both Conservative and Labour governments were in office.
In that connection, I was puzzled by a reply from the noble Baroness, Lady Hollis, to a supplementary question that I asked on Wednesday 26th May. I drew the attention of her private office to her reply on Monday, but I have not heard any more. The noble Baroness said:Disability benefits were introduced immediately after the Second World War".—[Official Report, 26/5/99; col. 924.]Was she referring to war disability payments? As I said, I am not aware of any disablement provisions applicable to the public in general in the first 25 years after the war. That was the main reason for the founding of DIG.
Earlier I confessed to being partly responsible for the need for rationalisation and simplification. The system became complicated as more special benefits and allowances were introduced to meet particular disability situations. In past years, I drew attention to the need for them and I supported their creation, so I accept some blame for the present complex system.
Turning to the Bill, the main effects on disabled people are that someone who has worked and paid national insurance contributions for 10 or many more years and who has become so disabled that the Benefits Agency's doctors assess him or her as unfit for work will not be eligible for incapacity benefit however severe the disablement if they have not paid national insurance in the last two years. As the Government are abolishing the severe disablement allowance for new claimants, the same person—who has perhaps been out of the labour market for two years looking after children will not have access to the lower level benefit either.
At present SDA is the replacement benefit available to those who do not have enough national insurance credits to claim incapacity benefit. If a new claimant 1593 is eligible for incapacity benefit—meeting the Benefits Agency's medical test—and has paid national insurance in the past two years, that claimant would face a means test as soon as the pension income reached £2,652 a year. For every pound over £50 a week in pension income, the Government would withdraw 50p of incapacity benefit, which is already taxable. By the time the pension income reached £9,542 for a single person, all the incapacity benefit would have been withdrawn.
Changes were made in 1995 by the previous government who carried out a reform of incapacity benefit. It does not seem necessary to do all this now. The present Government propose to transform the situation by the two-year provision and by means testing. Since he left the Government, Mr Frank Field has stated his opposition to means testing on the grounds that it is a disincentive to saving and to earning through work.
It has also been pointed out that disabled people who have been saving to supplement their benefits, especially those who know that their disabilities are likely to worsen and force them later to give up work, will feel totally let down by the introduction of a means test as, in the past, they have been encouraged to save to supplement the benefit.
It has been pointed out by the Disability Benefits Consortium that the proposals in the Bill, especially those in Clause 60 abolishing the severe disablement allowance, will have a greater impact on disabled women than on disabled men. That appears to conflict with the Government's pronouncements and with the presence of a Minister for Women in the Cabinet who is also the Leader of this House and the observations on women made by the noble Baroness, Lady Hollis, in her opening speech.
In due course, I look forward to a clearer explanation of the new gateway, or gateways, and I shall defer inquiry and comment about the compulsory interviews until later stages of the Bill. However, what is proposed for the existing "all work test?" I detect a certain ambivalence, indeed an apparent contradiction, within the Government. The parliamentary statement that accompanied the Green Paper in March last year stated that the test writes off too many, but before the general election, over two years ago, Labour opposition spokesmen were complaining that the test was too severe and did not write off enough people as a result. That raises the question whether a test should be of what a disabled person cannot do, or what a disabled person can do. I am in favour of a positive attitude to helping disabled people to find out what jobs they can do. However, I draw attention to a strong recommendation by the National Association of Citizen Advice Bureaux which recommends that,any test which is to determine whether a person is entitled to benefits on the basis of being unfit to work should be divorced from questions about the person's future capacity for work".I hope that the Government will take that recommendation into account.
I must also emphasise that the scope for moving disabled people from welfare to work is strictly limited. Although what can be done is very welcome, the Green 1594 Paper confirmed that at least two-thirds of disabled people in this country are over working age. Recent censuses confirm that of those who are of working age, a sizeable proportion are already in full or part-time work. That is good news. But others are too severely disabled to do any work or can do only very specialised and rare jobs. So the Government will find, if they have not realised it already, that they have little scope where disabled people are concerned of moving them from welfare to work. They should be concentrating on areas where they have much more scope; that is, on able-bodied people of working age now unemployed, especially those in their 30s or 40s.
The noble Baroness is no doubt anticipating lively debates at later stages on particular matters affecting disablement. I am sure that they will take place, and I intend to take part.
§ 6.30 p.m.
§ Baroness Castle of Blackburn
It is a common device of Ministers of all governments, when introducing legislation about whose reception they are a little uneasy, to begin with a stream of social statistics with which nobody can disagree. The Minister did that brilliantly this afternoon; she is very good at it. I share the admiration of my noble friend Lord Ashley for her Front Bench skills, but I felt the hungry sheep looked up and were not fed.
I was waiting, and I suspect the right reverend Prelate the Bishop of Bradford was waiting, for a drawing-together of that picture; an analysis of the elements and new security we could introduce into people's lives and how we could best help them to close the gaps in the security which our people seek. When the Minister spoke I was reminded of the nursery rhyme:Little Jack Horner sat in a corner Eating a something-or-other pie. He put in his thumb and pulled out a plum And said, 'What a good boy am I'".
The Minister was able to pull out all sorts of plums—this person will get so much and that person will get something or other. But it is not really the way to draw up a social policy. Everything, we know, in this harsh life has to be paid for. The question is: who is paying for whom? If we analyse the whole picture—which we have not been given this afternoon—we will find that the extra extras given to the poorest are being paid for by those people who are only just a little less poor.
This Government have a slogan: "We are not going to go back to tax and spend". Of course, we cannot spend unless we tax or we cut. What the Government mean is that they are not going to have any sort of radical distribution of wealth by, for example, restoring the 50 per cent income tax rate for the richest 80,000—I got the figure from the Library the other day. No, we must not do that. Rather, when we want to help the widowers, we must take it from the widow. So the broad distribution of income throughout society remains the same.
The best speech so far this afternoon came from the right reverend Prelate the Bishop of Bradford when he asked: where is the vision? I ask: where is the concept? 1595 Where is the analysis? The Minister will reply, "Of course we have vision. Have not the Government in their briefing on this Bill started with 'Our central principle is that those who can, work; and those who cannot get security'?" I entirely agree with that, though I do not know why it is flaunted under the banner of new Labour. That was propounded by Beveridge 50 years ago when I was a stripling, comparatively speaking, and campaigning at street corners for the implementation of the Beveridge Report.
Beveridge had a work ethic. He said, "If you can work, when you work you will be compelled to contribute for your own security for the days when you cannot work". But he had machinery for it—a contributory, compulsory national insurance scheme covering everyone. So that everybody, when they were working, was compelled to put into the fund, and when they could not work they drew out as of right. How right the right reverend Prelate is to emphasise above all the burning need for people to have dignity.
What shocks me about this debate is that there has been a theme running through it—particularly in speeches from the Benches opposite but also from some on this side—that we cannot give benefits as of right to people who have saved and acquired a good occupational pension. No; they must be means tested. I have two comments to make about that. First, I have never heard a greater disincentive to save and earn than the propositions that have come from many spokespersons this afternoon. Anybody who saves above their national contribution rate should receive what they produce by savings as of right, and it should not affect any other income they have. Otherwise, why save?
I receive lots of letters from pensioners and they are great eye-openers. It is like going among a crowd of those who are struggling, and listening to their stories. One I received recently was from a woman who said she was on a basic pension of £68 a week. She was saying that because she had certain savings, she was not entitled to income support. But, she added,My friend, who is on income support, will receive £78 a week and rises in line with earnings".That is because she is on income support. Because the writer of the letter receives a contributory pension the Government say they cannot afford the earnings link; they can only afford to keep people in indignity. Incidentally, means-tested benefits are much more expensive to administer. It costs £5 a week more to administer a means-tested benefit than to administer the basic pension scheme.
The letter writer concludes, rather sweetly,I don't begrudge my friend what she gets".Because she is on income support her friend is getting this extra and that extra. She even gets free treatment for her pets at the PDSA, which the letter writer is denied. However, she says,I feel very bitter that I have worked all my life, saved, brought up a family and bought my own home when I would have been better off staying at home and having a good time".
1596 I urge the Government, in all solemnity, to brood on that letter, because it has echoes in hundreds more. We are making it disadvantageous for people to scrape and save for their old age because, when they get there, many millions of them are no better off, and it does create bitterness.
If I am allowed a slight digression, I am reminded of a lovely cartoon in the Daily Telegraph recently which amused me. Two old boys sitting in wheelchairs, with rugs over their knees, in an old peoples' home. One said gloomily to the other, "To think we gave up smoking for this!". I am a smoker myself and so it struck a chord. People are saying, "To think I gave up a good time for this. I would have had more fun. If I had been a bit more of a ne'er-do-well, I would be getting all sorts of benefits".
The great challenge that anyone who wants to give us a modern welfare system has to face is how to build up satisfactorily benefits as of right, on top of which—and Beveridge always said this—those who wanted extra could save for it. That was the principle when some of us in the 1974 Labour Government genuinely sought to modernise Beveridge. We did not confuse modernising with reducing. What we said was, "We can't do everything; it is not right we should try. But we want to secure for everybody a basic income which will be adequate to lift them above the indignity and the disincentives of means-testing, and on top of which they can build any further improvement for which they may wish to save". So we had the compulsory second-tier state pension—SERPS.
I will now touch briefly on the pensions aspect of this Bill. It grieves me that this Government, and my own Government I am afraid, set out with an exactly opposite intention—as far as I can make out. That was, first, to allow the basic state pension to wither on the vine by refusing to operate it in line with average earnings and, secondly, to destroy SERPS.
They talk about partnership. You can imagine how the pensions industry watched this rebellious redhead when she was put in charge of drawing up a new pensions scheme. I remember that we ended by hugging each other. Lord Byers, who was then representing the pensions industry, threw us a party to celebrate the passing of our legislation. Only the other day I had somebody to tea in the House dining room—I will not reveal the name of the firm, a private insurance company—who said "Yes, we welcomed your scheme. We thought it had consensus. We thought we had taken the politics out of pensions and at last had a real partnership, which was not undermining our industry but dealing with the people we know private pensions cannot deal with. We do not want the responsibility for dealing with them. Let the state take them off our hands and then we are free to go ahead and entice them to save a bit more".
It breaks my heart when I think of all the hours we spent considering the logistics of this new scheme—and of course the costs. I will just say this about SERPS. This Government have turned their back on it—it is too expensive. In the pensions review, on which some of us have wasted the last three years—I was going to say the 1597 best years of my life—because nobody took any notice of what we said, of course, the Eagle Star Life Assurance Company in its evidence to the Government said of SERPS:it presents enormous benefits in terms of absolute portability. extremely low costs and an efficient system of distribution, but",it adds, dismissing it,it is poorly understood".Of course it was poorly understood because, a year after we introduced it, the noble Baroness, Lady Thatcher, came into office and she made darned sure that nobody understood it because she wanted to destroy it. She only succeeded in halving its value. It was too popular.
It is tragic that nowhere in their pensions review have my own Government sat down and said, "Let us weigh them all in the balance". Of course contributions will have to go up if we continue with SERPS and the state pension; but so does the national wealth. Let us look at what the alternatives are. If people do not have this, what are they to have? What do they want? Give them choice. That is all I plead for.
In any sane analysis of this new type of society in which we live and its needs we shall find there is a place for state insurance, strongly reinforced as we sought to reinforce it, modernised as we modernised it, and the private insurers for those who are wealthy enough to take advantage of them. So, yes, as far as I have any influence, this House will be asking the Government to think again.
§ 6.47 p.m.
§ Lord Rix
My Lords, one of the great dreads of my early days in the theatre was the possibility of having to earn a living by taking part in twice-nightly weekly rep. Happily, I managed to avoid that theatrical hard labour but I fear I may be accused of giving a second house performance this evening, following on the brilliantly delivered prologue voiced by the noble Baroness, Lady Hollis, and the equally wide-ranging first house performances given by the opening eight speakers. If, therefore, your Lordships believe that you have heard all my lines earlier, I apologise, but I hope that you will listen all the same. After all, my inflections may be slightly different, for they underline some of the worries so many of us feel about a number of sections of the Bill.
I will not have been alone in following with interest the debate in another place and in the press about welfare reform. It strikes me that there are certain objectives shared by supporters and opponents of the Bill. When the welfare reform project kicked off last year it was clearly stated that the Government intended to establish a new contract for welfare—a transparent system in which people build up entitlements on which they can rely and be rewarded for so doing. All those are laudable aims which are widely accepted. The Welfare Reform and Pensions Bill must be considered in the light of those promises. I must confess that I have difficulty in reconciling such aims with the package of measures on disability benefits and widows' entitlements now before us.
1598 It will not surprise your Lordships that while I make common cause with those who speak for disabled people in general, as president of Mencap I have particular concerns for the effects of the Bill on adults and children with learning disabilities, and on their families and their carers. The word "reform" is being used fairly extensively as if it had intrinsic value. Reform is being heralded as the ultimate political achievement. Indeed, the media have challenged those who oppose certain aspects of the Bill as though they are reactionaries, standing in the way of progress. I hope that your Lordships will not construe my criticisms of the current proposals as veiled criticism of inventiveness or progress.
We are told that people are wise to ways of abusing the system—most notably men in their early fillies and sixties who are nearing retirement age. We are told that what is needed is a greater link between incapacity benefit and work, and consequently that the plan is to restrict incapacity benefit to those who built up sufficient national insurance contributions through work in one of the last two years.
I am afraid that I am not impressed by the argument that if someone has had a spell of unemployment, has been seeking work, and then presents himself as incapable of work with medical evidence to back that claim, that constitutes abuse. It is not inherent in the human condition that unemployment cannot be succeeded by genuine incapacity. It seems quite straightforward that people are more likely to become incapacitated as they grow older. Indeed, one ought to look sympathetically upon those who continue their job search for as long as they can and only gradually reconcile themselves to the limitations of their disability.
It is worth taking a moment to illustrate the possibly unintended consequences of such a policy. Mary has a severe disability. After school, she went into further education, followed by two years' paid work in which she paid full national insurance contributiors. At this time her disability increasingly limited her ability to do the job. She was forced to give up and look for a different position. For two years she has been trying hard to get a job and failing. Mary will be aged 24 when the Bill arrangements begin. She has paid no contributions in the past two years. She is not at college and her past contributions count for nothing. She will get no incapacity benefit because it is more than two years since she paid any contributions; and, of course, she will not be able to fall back on severe disablement allowance because it will have been abolished.
I would not view Mary's claim to incapacity benefit as abuse. I do not see Mary's loss of benefit under the Bill as constituting anything I could call "welfare reform." There are many Marys in this country. That is why the Government expect to save £700 million on this measure. In the first year, 45,000 disabled people who cannot work will be worse off, rising to 335,000 people over 10 years. Gone is the promise made a year ago that the savings would come as people with disabilities were helped back into work.
1599 I hope the Government will explain the basis for excluding a person from incapacity benefit when that person will have passed the stringent all-work test. There is nothing in this measure which will actually help disabled people get back to work. In fact, one could argue that the onus will be on the individual to get out of work as soon as possible to ensure eligibility for incapacity benefit. This clearly runs counter to the Government's philosophy "work for those who can" and—if anything—compounds what the Government call "debilitating welfareism."
The general view that the Government want to target more help on the most severely disabled has been used to legitimise the abolition of severe disablement allowance and the payment instead of incapacity benefit to sick or disabled people under the age of 20. Here again, we have a broad brush policy which, when you scratch the surface, reveals specific anomalies and injustices.
Let us take, for example, the case of Colin. He attends a school for children with severe learning disabilities. He is likely to be recognised as eligible for incapacity benefit when he reaches the age of 16. That is his right and very welcome. His elder brother David has the same diagnosis and the same degree of disability. He receives severe disablement allowance now and is already aged 20 and attending a day centre. He will, under the Government's current proposals, continue to get his severe disablement allowance but will never convert to the higher rate of benefit which is paid out to his brother. It seems nonsense that with the same severity of disability and a similar lifespan, all things being equal, one youngster is entitled to more support than the other. In monetary terms the difference is £27.70 a week.
The abolition of severe disablement allowance will also have a profound impact on women who are assuming a caring role or whose wages bring them below the national insurance lower earnings limit. A relative of one of my colleagues at Mencap, Gill, who is a qualified physiotherapist, is a good case in point. The heavy lifting involved in her work inevitably took its toll on her back. Following the loss of her mother, Gill assumed sole caring responsibilities for her elderly father. Forced to give up physiotherapy, Gill took a part-time job in a local chemist payable at the minimum wage, under the lower earnings limit for national insurance. When the degeneration of her back eventually forces her to give up all work, as it will, she will not be able to receive severe disablement allowance because it will have been abolished. She will not have sufficient national insurance contributions to qualify for incapacity benefit and will not receive any income support because her husband's modest savings will be taken into account.
Ironically, if Gill had given up work earlier, she would have been entitled to incapacity benefit; or, if she had asked the state for invalid care allowance, she would have some protection. But because she chose to be financially independent for as long as possible, she will be penalised. That cannot be what the Government intended. The notion of a contract between state and 1600 citizen is totally absent from these reforms. There are at least half a million people with disabilities earning well below the lower earnings limit who could be affected in this way. Can we rely on the new disability income guarantee to protect them? The answer, unfortunately, is no, as only a narrow group is eligible for the "guarantee"—and that is before the means test is applied.
Under "the help for those who need it most" banner, the Government have also introduced an extension of higher rate disability living allowance mobility component to a younger group of children. I am delighted that the Government have acknowledged in the Bill that they can support the families of disabled children in this way. The Government's changes only cover the higher rate component down to the age of three and exclude the lower rate. The Government argue that all children need some help. However, the issue is not whether most young children need some help or supervision; it is whether some, because of disability, need much more help. No one is asking for an automatic entitlement. I merely ask for recognition of the fact that very young children who can only be moved with a respirator or a suction tube, or other kinds of equipment, are certainly less mobile than other young children—and that is possibly from birth. I urge the Government to consider some further change and I return confidently to the assurance that the Bill was not designed with the objective of saving money. Given the level of overall savings, more moneys could well be invested in disability living allowance for disabled children under the age of four.
Another general assertion with which your Lordships may be familiar is the view that a million people on incapacity benefit say they would like to work. The single gateway has become a rallying point for those with reformist zeal. The incentive of the scheme is the prospect of dedicated advice and support on employment opportunities and the range of benefits available. The sanction is the policy of depriving people of benefits for not attending an interview. The single gateway scheme does indeed sound convincing. However, I am still waiting to hear a firm assurance that reality and compassion will be factored into the design of the scheme, and that staff will be trained to assist a wide range of carers and disabled people in a wide range of circumstances—including those with learning disabilities.
Take, for example, the circumstances of Janet who cares for her 11 year-old son with severe learning disabilities. She claims invalid care allowance and is called for a work-focused interview. On the day of the interview Janet is up with her son at 1.30 a.m. He has wet three lots of bed clothes, the carpet and the bedding. By the time she arrives for the interview, Janet has changed the beds, cleaned the mattress and carpets, and done a pile of washing. The following day is a school day but the class is going on an outing and the teacher does not have sufficient support to enable Janet's son to attend, so he will be back at home tomorrow. I wonder whether the adviser understands work as well as Janet understands it, and I wonder whether a compulsory interview is really appropriate. It was the noble Lord, 1601 Lord Morris of Manchester, who said that a disabled child makes a disabled family. There may be positives, too, but it would be foolish to ignore the difficulties and the realities.
We have heard from the Government that,Me most severely disabled will not be required to attend an interview".I urge the Government to learn the lessons of the disastrous benefit integrity project, to look again at specifics, and to consider using the stages of this Bill as it passes through your Lordships' House to bring forward amendments to make this measure explicit on the face of the Bill.
My final comments at this stage in our consideration of the Bill concern widows, many of whom are also carers. I am at a loss to understand what led to the Government targeting widows to the tune of £500 million a year by the year 2020. The good things, such as extending a bereavement allowance to widowers and doubling the bereavement payment to £2,000, camouflage the abolition of the widow's pension, a benefit to which many have contributed in the expectation that their widow would receive it. Widows seem to be something of an easy target. They do not know when they will be bereaved and they probably will not know what they could have expected under the old dispensation. Widows are also hit by measures contained in this Bill which re-enact the intentions of the previous administration in halving the entitlement of those widowed after April 2000 to inherit their husbands' state earnings related pension, as referred to so effectively by the noble Baroness, Lady Castle of Blackburn.
In all seriousness the current situation clearly breaches the contributory principle and, as I have suggested on earlier occasions, may also breach the Human Rights Act. The Minister has still not adequately answered that point, despite three opportunities so to do. I shall, when occasion offers, suggest some possibility of a compromise. At this stage I simply note that compensation could be formulated according to loss with the use of a simple formula. I am sure that the noble Baroness will be amenable to constructive suggestions which attempt to minimise the damaging effects on vulnerable widows.
I return to where I started. There is a case for welfare reform; it is the case for breaking the link between welfare and poverty, and for better protecting the dignity of people receiving benefits, not least those benefits which are theirs by right of disability or contribution. Reform requires principles, but principles with clear effects, not principles which result in complicated ambiguities, disincentives and hardship. The only clear effect of this Bill is the effect on the Treasury. What is on offer is a raft of obstacles to work, penalties for saving and lower incomes. I do not believe these reforms bear out the Government's original intentions in any way and therefore I urge the Minister to read tomorrow's Hansard and reflect carefully upon the examples given in my speech and those of other noble Lords. According to my dictionary, reform means the,removal of abuses, especially in politics; improvements made or suggested".1602 I regret that the very title of this Bill is in itself an aberration, as are many of its contents
§ 7.4 p.m.
§ Lord Blackwell
My Lords, like the noble Lord, Lord Rix, the noble Baroness, Lady Castle, the right reverend Prelate and many other speakers in this House, on reading this Bill I, too, was struck by the lack of any sense of strategy or vision—at least any strategy that bore out the claim to be a radical reform of welfare. The problem in this area is that when one strings together a whole set of individual measures—however well-intentioned—without a clear strategy, one ends up increasing the complexity of the social security legislation. That increased complexity compounds the problem of social deprivation because people cannot understand or implement such complex measures.
There are some measures in the Bill which I can support on a stand-alone basis, but many cause me concern. I can support the notion of a gateway for benefits and a gateway interview because that fits my belief that people have an obligation to support themselves if they can. I think it is right that they should be presented with opportunities to find work if suitable work is available. I suspect that that process will have been made more difficult by the minimum wage legislation which has reduced the number of those jobs which might have been the first step into work. Like many speakers tonight I have doubts about the reforms of incapacity benefit and removing the right to incapacity benefit through means testing. I have no doubt that we shall return to that matter.
I wish to spend a little time discussing the pensions part of the Bill. I declare an interest as an officer of a financial services company that is a provider of pensions, although I speak in a personal capacity this evening. It seems to me that this is the one area where the Bill fails lamentably to address the issue that in set out to address; namely, that we have a pensions funding problem in this country. The problem is less severe here than in some other countries but, as has been well explained, there is the problem of the increasing cost of pensions in the future if they are to be funded by future taxpayers rather than funded as we go.
Of course many people in this country already fund their future pensions through occupational schemes, personal pensions and other private provision. Therefore the problem concerns those people—particularly those on lower incomes—who are not in a funded scheme arid who do not have either the cash or the incentive to put those savings aside at the moment, or have reached a point in their career where they are unable to save up enough to provide for themselves in future. One route of dealing with this that has been mentioned is compulsory schemes. The Government have decided against compulsory schemes and on the whole I tend to agree with that.
However, I do not believe that the stakeholder pension as set out in the Bill provides a solution for the majority of people who are not able or who do not have the incentive to fund their own pension at the moment. This legislation increases the guaranteed minimum 1603 income for people who do not have adequate pension cover but reduces the incentive to save. I believe that these stakeholder proposals do nothing to give people an incentive to save if they are not already doing so. The stakeholder pension is merely a substitute, or rather an additional option, for people who are already saving. I do not think that on the whole it is a good alternative to the options which already exist. It is not obviously better to have a stakeholder pension than one that is provided through current private schemes, particularly if one requirement of the stakeholder pension is that it has limited investment options.
The very fact of introducing a new stakeholder pension alongside the other schemes adds to the complexity of choice and as such will tend to discourage more people from trying to "get their head around" pension provision. As the noble Lord, Lord Freeman, said earlier, the attempt to impose a maximum commission of 1 per cent or thereabouts on a stakeholder scheme—while it might appear populist—is unlikely to be sufficient to fund adequate schemes and adequate management, particularly if the Government seek to impose on these schemes what I think is the unnecessary overhead of trustees. It certainly is not sufficient, I suspect, to fund the kind of advice that people need if they are to be faced with such a complexity of choices. I await with interest the Government's clarification of the importance they attach to the advice in the pensions debate. I wonder whether they are prepared, on the other hand, for people to opt for a stakeholder pension without advice, with the risk that they may in fact opt for a form of saving which ties up their capital in a way which may not be appropriate for an individual.
The scheme that does nothing to solve the basic problem. Add to that the complexity of it, and I can only believe that it is largely driven, like LISAs before it, by a desire to create something with a more politically correct name but with substantially more complexity in order to leave behind a legacy under the Government's manifesto.
What is the answer? The noble Baroness, Lady Castle, said that it was SERPS and probably pre-funded pensions. However, that does not address the basic issue of being able to fund pensions from savings. In future the system will rely on people funding pensions as they go. I think there is a better solution. It was worked on by the Department of Social Security and the Treasury before the last election. Many of your Lordships, whose memories go back before 1997, may remember the scheme that was announced at that time. It focused on new people entering the workforce, on the ground that these were people who had time to build up funds, if funds were put aside regularly. It gave them a big incentive to have a pension fund of their own by putting a large part of their national insurance contributions into a fund that was invested and accumulated over their lifetime. If, as expected, that fund accumulated sufficiently to provide them with a pension that exceeded the state pension provision, then it would replace that state pension provision. If, for whatever reason, the fund did not accumulate to the level where 1604 it exceeded that of the state pension then the Government would have guaranteed that at least the minimum state pension would be provided.
That scheme provided people with their own pension and gave them the incentive by providing funds with which to do it. Part of the proposal worked out by the Treasury at the time was that to avoid the cost falling too heavily on the Treasury in the early years it would be offset by moving tax relief on pensions from the beginning of the pension to the end. In that way there was a shift in tax relief which would offset initial funding costs. That scheme not only met the test of dealing with the funding problem in the future; it met the test that a number of speakers have mentioned this evening: it gave people dignity. It gave people, of right, a fund of their own with their own name on it which they would accumulate over their lifetime.
It was an imaginative scheme, initially welcomed by the Opposition at the time. It was then rapidly disparaged by them, I can only believe because they saw some electoral advantage by making it out to be a pensions scare, a privatisation. I think that pensions are too important an issue to be the object of party political dispute. The futures of too many people are affected by the matter. I challenge the Government, even at this 11th hour, to look back with an open mind at the fundamentals of that scheme and in considering some of the benefits it might have brought see whether it does not offer a better way forward than a stakeholder scheme which fails to deal with any of the fundamental problems. The Government are fond of committees. If necessary, they could form a committee of pension specialists to look at this side by side with the stakeholder scheme and report back to the House.
If the Government do not get pension reform right this time round, within a few years a future government will come back to this House and another place with a scheme that addresses the matter. The only scheme I have seen which does address the issue is the system that I have just explained. I would rather that it were introduced now than have to wait another few years before another government brings back the scheme. I ask the Government to look at the issue again.
§ 7.14 p.m.
§ Lord Morris of Manchester
My Lords, as my noble friend is aware, I welcomed many of the measures this Bill provides for when she unveiled them last October. I did so as Labour's first Minister for Disabled People, architect of the basic disability benefits and author of the Civil Rights (Disabled Persons) Bill.
Most of all I welcomed the decision to give more help to disabled children. I also thanked my noble friend for her explicit assurance of no cuts in benefit levels, and warmly acknowledged her role in scrapping the benefit integrity project, BIP. My noble friend clearly shared the concern felt in all parts of this House about the inhumanities of that disastrous project, which humiliated disabled people and brought some to the brink of suicide.
1605 BIP's relevance now is the striking testimony it provided to the honesty of disabled people in relation to the benefits system. My right honourable friend the Prime Minister, in an article for The Times on 15th January 1998, wrote:We spend more on disability and incapacity benefits than we do on the entire school system in the UK. Benefit fraud, estimated at £4 billion a year, is enough to build 100 new hospitals".But the figure of £4 billion, used also in a report from the National Audit Office, was quickly shown to be entirely bogus. Indeed, on the same day, 15th January 1998, replying to an oral intervention, my noble friend, speaking for the DSS, told me:My Lords, I am happy to take my noble friend's intervention … The report of the National Audit Office … is based on old information from the benefit project inaugurated by the previous government. I repeat what 1 said to my noble friend on Tuesday; namely, that in the benefit integrity project … we have, so far, in the 35 per cent of cases that we have examined, not found a single case of confirmed fraud".—[Official Report, 15/1/98; col. 1142.]After that date many thousands more disabled people had their cases investigated by DSS officials visiting their homes, but again not a single case of proven fraud was found. Yet the demonstrably bogus figure of £4 billion is still quoted as one of indisputable truth. As recently as 19th May, in an article prompted by the Commons vote on the Bill's proposals on incapacity benefit, Simon Jenkins wrote in The Times:Benefit fraud still runs at £4 billion a year. Benefit abuse must be many times that sum.But as with fraud, so with abuse, the truth will out. And again it came from my noble friend Lady Hollis who, replying to the debate here on my unstarred Question about the take-up of social security benefits on 29th April, revealed that if take-up of disability living allowance and attendance allowance increased, not to 100 per cent but even 90 per cent, spending on these benefits alone would rise from some £8 billion to over £13 billion a year.Therefore",she said,there is an under-claim of £5 to £6 billion by disabled people whose needs entitle them to that level of benefit".With her customary candour and decency, my noble friend, notwithstanding the effect on her department's budget, also said that she personally:would be cheering if that happened".—[Official Report, 29/4/98; col. 513.]So the real story is not that disabled people are abusing the system, but that the system is abusing them. For although a cruise missile can now be targeted at a phone booth in another country, we seem unable to deliver statutory entitlements to disabled people in this country. Yet without them disabled people are doubly disabled and left to live in double despair.
What is also very disturbing is that the reason frequently given by disabled people for not claiming their entitlements is fear of being branded as what some in the media call "something for nothing merchants". The same reason is often given by frail elderly people,
1606 more especially single women living alone, for riot claiming income support. Shame on any or all of us here if, by commission or default, we condone or allow to go unchallenged those who inflict unmerited distress on such vulnerable people.
My right honourable friend Frank Field, then Minister for Welfare Reform, emphasising in another place the Government's top priorities in welfare reform on 26th March 1998, said in a ringing declaration:Our commitment to the vulnerable is not negotiable".—[Official Report, Commons, 26/3/98; col. 686.]More recently, in an interview with The Times on 4th March 1999, my right honourable friend Alistair Darling's emphasis was on fraud.
The prevention of fraud",he said,has to be at the top of everything we do at the DSS".In response, while granting the importance of preventing fraud, the noble Earl, Lord Russell, said in our debate on the take-up of benefits on 29th April that.Surely the top priority for the DSS is the delivery of benefits to keep people alive; and nothing else should allow a Secretary of State to forget that".—[0fficial Report, 29/4/99; col. 508.]Knowing my right honourable friend, whose appointment as Secretary of State for Social Security came after the Green Paper was published, I feel sure that his concern to stamp out fraud will be matched by a determination to ensure that the benefits Parliament has legislated for reach everyone entitled to them. If that is so, he will be as concerned as I am that the Green Paper—which paved the way for this Bill—made no reference to take-up despite the enormous scale of under-claiming. He will recognise too that failure to tackle low take-up frustrates the will of Parliament and that it is not only disabled people who under-claim. Over £2 billion a year in income support goes unclaimed by the most vulnerable elderly people.
Of course, higher take-up means spending more, and I shall come to affordability as I proceed. But first I want briefly to look at how disabled people have fared in relation to others over recent years. Much media comment assumes that they were years of joy unconfined for people dependent on disability benefits. In fact their incomes were frozen for 18 years after 1979,when the link forged by the previous Labour government—more particularly by my noble friend Lady Castle—between benefits and average earnings was broken by our successors.
Had the link been kept incapacity benefit would now be £24.15p a week higher. By breaking the link, the Treasury saved £18 billion on that benefit between 1980 and 1997, a brutal switch of resources to more fortunate groups in society. Now it is proposed to deny the benefit in future to large numbers of people who today would qualify. They would include severely disabled people who, having contributed by their national insurance contributions for a contributory benefit in good faith over many years, will feel cheated to the extent that they would take legal action if an insurance company treated them in the same way.
1607 Sir Peter Large, than whom no one, as the late Dr Margaret Blackwood used to tell me, is more deserving of the ear of any Minister, said in a recent letter:It means redistribution of resources from the less well-off to the least well-off, from those in need to those in greater need.When disability is the true cause of inability to work, even if the inability to work follows a period of unemployment, it is cruelly unjust not to pay incapacity benefit in order to save money by reducing the number of beneficiaries by 170,000.The proposal to reduce the benefit by 50 per cent of any occupational or personal pension above £50 is another strange example of fairness. What justice is there in penalising people who forego pleasure today in order to pay for safeguarding their future?".I speak as former chairman for 18 years of the Parliamentary Contributory Pension Scheme and, therefore, as guardian of the pensions of almost all present Cabinet Ministers—not to mention that of the noble Lord, Lord Higgins—in judging it wrong in principle to means test a contributory benefit in this way. It confuses reform with retreat and it is not too late to think again.
I turn now to affordability. Commending the Green Paper in another place, Frank Field spoke, in relation to spending on pensions, of his concern that,the costs of the system will become unsustainable".—[0fficial Report, Commons, 26/3/98: col. 682]But Britain is today near the bottom—indeed in the relegation zone—of the league of 21 OECD member states for the proportion of GDP spent on "social protection" —that is, social security, health and education.
Again, although huge media emphasis is placed on the fact that social security costs more in Britain than education, health and law and order combined, the same is true in most developed countries. To balance all the hype about social spending being out of control, why cannot Ministers publicise—or even mention—the Government Actuary's highly expert advice to them that, due to relatively low benefits here:Future costs of social security in the UK look more manageable than in other European countries".Such countries, he goes on authoritatively to say:also have a more significant problem of ageing than the UK since we have already made significant changes which will keep future costs down".Let that be made more widely known and let Ministers, no less than everyone else, now recognise that to link unemployment among disabled people solely to the benefits system is to bark not just up the wrong tree but in the wrong forest. The surest way to improve their job opportunities is to expedite access to public transport and tackle the many thousands of employers who refuse even to interview disabled job applicants.
Whitehall departments are among the biggest employers in western Europe. Their attitude to employing disabled people is thus fundamental to the Government's moral authority in confronting other discriminatory employers. Yet the Treasury, even with men of the social awareness of Gordon Brown and Alistair Darling at the helm, employed only 1 per cent 1608 of disabled people at the latest date for which figures are available. And how do we justify the still further job losses now at REMPLOY?
Most disabled people want the Government to be tough on fraud and tough on the causes of fraud, not least where it arises from administrative incompetence. They are not resistant to change, since there are many reforms disabled people want to see. There has been much talk in this debate of the need for vision. All the disability benefits I introduced in the previous Labour government, not least the mobility allowance, were about empowerment and social inclusion for disabled people. They were commended to the taxpayer, as acts not of compassion but of enlightened self-interest and moral right. Our preoccupation was with value as well as cost. We saw disabled people as givers, not receivers, and demonstrated that there are marked cost savings in assisting disabled people achieve their potential as full and fully participating members of British society. That was our vision.
§ 7.27 p.m.
The Earl of Buckinghamshire
My Lords, at Second Reading on the Tax Credits Bill I promised the Minister some revenge for the constant use of initials by retaliating with PUPs, PILs and EPBs when we reached the Welfare Reform and Pensions Bill. However, on reading the Bill, I have to concede that the noble Baroness will probably have the last word. The Bill is a weighty document. It is rivalled in weight only by the Explanatory Notes. No doubt we shall have some fun as this important Bill passes through your Lordships' House.
In my speech I shall be concentrating on some specific issues relating to pensions and on one matter relating to national insurance. Before dealing with the specifics, I should declare an interest. I am a partner in Watson Wyatt, the leading actuarial and human resource consulting firm. However, the views I express here are mine and do not necessarily reflect the views of my colleagues at Watson Wyatt.
I have probably reached the stage in my career when I can indulge in some reminiscing. When I look back over the years, and particularly those that I have spent in this House, I come to the uncomfortable conclusion that the political process over 25 to 30 years has in many ways failed to deliver to one or more generations of pensioners the benefits to which they feel entitled. Looking at the Bill, I fear that we may be in danger of failing the next generation of pensioners.
I pay tribute to the noble Baroness, Lady Castle of Blackburn, who is no longer in her place, for all the work that she did between 1974 and 1978. It is true, as she said, that consensus was reached at that stage, and everyone in the industry felt pleased to have reached that position, however much it may change over the next 20 years. I shall not dwell on the reasons for that, but no doubt Members on the opposite Benches may like to remind me.
There has been constant meddling with pensions provision over the past 20 years. This may also not cast much credit on my colleagues on these Benches. The 1609 last change, the major one introduced by the Labour Party shortly after coming to power—namely, to deprive pension funds of income by removing tax dividend credits—has certainly not helped in the process.
It is not too difficult to sympathise with the sentiments of the Government as expressed in the Bill. They are all ones to which we can subscribe: the targeting of limited resources on those who are most in need; provision of a pensions vehicle for lower and middle income employees; support for occupational pension schemes as the most appropriate pensions for the majority of employees; and the promotion of better information on pension arrangements.
Yet I cannot help but think that confusion still exists in the mind of the Government on how to deliver all of this,. I fear that no amount of consultation will help them. As the noble Earl, Lord Russell, indicated, the first big problem with the Bill is that while it may be large in sentiment it is lacking in principle. I also fear, as I said, that the next generation may well suffer from the results of the Bill. The small amounts that they will be invited to contribute could amount to zero, as they may not have sufficient moneys to put away.
I believe that there is general agreement that funded pensions through occupational pension schemes have been a success over the post-war period. The conditions attaching to these final salary schemes have gradually improved over the period, sometimes in the face of antagonism from the pensions industry. We are now moving, or have moved, into a period of growth in defined contribution schemes—or money purchase schemes as they are known. But it will be highly ironic if lower inflation in the late 1990s has the same destructive impact on defined contribution schemes because of poor annuity rates as high inflation had on such schemes in the 1970s. It is important to accept a change in our mindset. Low interest rates and low annuity rates are a direct result of the policies of successive UK governments and policies of other mature western economies. I do not believe that that is a temporary phenomenon; it is a feature of all such economies. It has significant implications, not only for the annuity market, but for the whole underlying concept of investment strategies and the valuation of liabilities in our funded pension plans, to say nothing about the long-term implications for the mature economies.
Tinkering around the edges with annuity products may not be sufficient. I welcome, as I understand it, the Treasury's investigation into this important area. I have no doubt that it will examine the experience of the United States, where retirement practice is different.
I raise the issue of annuity rates because I have been unable to find any indication in the documentation on the stakeholder pension that it will be other than a defined contribution plan, and that an annuity or pension will be taken from that. It is therefore extremely important to pay attention to annuities. Otherwise, the expectations of future pensioners will be severely dented, and that may well be the next scandal in the field of pensions.
1610 It must be recognised that changing policy every 10 years or so is not a feature of good planning. The noble Baroness, Lady Pitkeathley, said that we are at the start of a new series of social reforms and that building blocks are important. Many pensioners may well come through our doors hurling those particular building blocks at us unless we get on with the work that is in process.
From the employers' point of view, the great danger is that, faced with yet another piece of legislation, they will simply say, "Enough is enough", and will stop providing good benefits for employees by contracting out and offer money purchase schemes of relatively lower quality. We shall then end up once again with future generations of pensioners on income support—one of the elements that SERPS was introduced to deal with. I hope that, despite the complexities of the Bill, the Government will produce a user friendly method for the co-existence of stakeholder pensions arid occupational pension schemes.
I now turn to four specific areas of the Bill. I should like to deal first with Clause 3, under whose terms considerable onus is placed on the employer, after consultation, to "designate" a stakeholder pension scheme. That places an onerous duty on an employer which in many instances the employer is not able to fulfil. Nor am I sure how such a responsibility would tie in with the regulations covering the provision of financial advice.
My second point relates to the 1 per cent charge that can be levied on stakeholder pensions, the minimum contributions being as low as £10 per month. One of my clients, who I am sure will recognise himself from this comment, would say, "Come on, Buckinghamshire. do a reality check". I urge the same reality check on the Government and ask whether they have thought through the interaction of the new personal savings plans, ISAs, with the stakeholder pension.
My third point relates to the impact on occupational pension schemes. It was touched on earlier by my noble friend Lord Freeman. There is a tremendous need for "concurrent membership". Some newspapers have carried reports that the Government are willing to accept that. I urge them to do so. Many of the problems with the mis-selling of personal pensions earlier in the decade were linked to the inability to be in both an occupational scheme and a private personal pension scheme at the same time. Thus employees were forced to make a choice.
My fourth point relates to the early retirement offset covered under Clause 58. A number of noble Lords have spoken strongly about this aspect of the Bill. I strongly urge the Government not to means-test early retirement or long-term permanent health benefits to which an individual is entitled. I find particularly objectionable the fact that incapacity benefit will be reduced by the notional amount of the pension that an individual would receive if he elected to take early retirement. Here the matter becomes even more convoluted. Account would then be taken of the actual entitlement when the pension came into payment at an actuarially higher figure (those dearly beloved words) which would not have been 1611 payable had the pension in payment been the notional pension. Gunn's law of fog surrounds that phraseology. If it seems convoluted to noble Lords, I ask them to think about the poor individual who is coming up to early retirement and invalidity benefits and is trying to sort it out.
In addition, I am sure noble Lords will agree with me that it is a particularly mean-spirited piece of legislation, doing nothing to strengthen the position of funded occupational pension schemes in this country—one of the stated objectives of this Government. The noble Lord, Lord Ashley of Stoke, spoke clearly on the issue, as did the noble Baroness, Lady Castle of Blackburn. If we use the logic used by the Minister tonight, it is only a short time before this kind of means-testing is extended to the future basic state pension in this country. I am sure that the savings we could make by means-testing would be far greater than anything we could do with invalidity benefit means-testing.
Now, just to show my versatility, I turn to the issue of national insurance contributions. It was touched on by my noble friend Lord Higgins in his opening remarks and relates to Clause 70 of the Bill. It covers in particular national insurance contributions due in respect of engagements through personal service companies. For example, suppose that I set up Bucks Ltd, owned entirely by myself. Bucks Ltd then contracts with another company to supply my services. At the moment, the only money subject to national insurance is what I take out of my company as salary. As I understand it, the Government want to collect national insurance on everything that the contractor pays for the service as if I were its direct employee. We need to return to that at a later stage.
Another objection I have is that, as drafted, the Bill simply gives powers to make regulations to achieve all that. The really objectionable part is that if the regulation-making powers are not big enough, the Government can make a regulation to enable them to have those powers under Clause 70(9). The ominous words are:If, on any modification of the statutory provisions relating to income tax, it appears to the Treasury to be expedient to modify any of the preceding provisions".it can do so with the concurrence of the Secretary of State. Welcome back Henry VIII! I ask the Government to re-think that part of the Bill.
In conclusion, this is an important Bill. Other Members of your Lordships' House have already commented on the fact that it is more than one Bill covering more than one subject in one piece of legislation. I am sure it will be thoroughly scrutinised by all Members of your Lordships' House. I have had the opportunity tonight to reminisce and raise some of the issues which I think are important. There are many more which will come to the fore as the Bill progresses through your Lordships' House.
§ 7.43 p.m.
§ Lord Addington
My Lords, when you speak this far down the batting order, it is almost inevitable that 1612 virtually everything you wanted to say has at least been touched on, if it has not been dealt with entirely, so I shall not detain your Lordships long tonight.
I wish to confine my remarks to Part V, Chapter I, which will come as no surprise to anyone in the field. The title alone shows what we are dealing with: Part V, Chapter I, volume 3, book 6—it goes on and on. The noble Baroness's opening speech was a masterpiece of parliamentary fencing, when all is said and done. It threw more in: yes, things will be happening here, there and everywhere. But I shall concentrate on one fairly small part of the Bill.
The disability benefits, the playing around with benefits and the effect of the insurance type of benefit have attracted virtually everyone's attention. The noble Lords, Lord Morris and Lord Ashley, are still in their places. They summed up my feelings about Clauses 57 to 63 when they said that Clauses 61 and 62 are good. Clause 63 is very good, making sure that no one is prosecuted for over-claiming benefits unless they have committed some fraudulent act, if I read it correctly. That may be the only good thing to come out of the benefit integrity project. The name "BIP" sums it up better than its full title, in my opinion. It was a disaster and proved that under-claiming of benefits is probably a much more widespread problem than over-claiming. I hope we have banged a nail into the coffin of the idea that the social security system is run totally for scroungers and that is where it has been left. We have looked at the evidence and it was not so. I hope that every politician involved in the subject will take that on board and pay attention.
Much of my attitude towards the matter was summed up when my party looked at the entire social security system and said: "It is not about to bankrupt the country". When we gave contributory benefits to people we said, "With these you are insuring", giving the idea of insurance. Even if it is a misnomer, it is one that has been sold to the public. The idea of insurance should be there; but if you contribute for 30 years to get one benefit and think it is guaranteed but may be unemployed for three and not get it, it is an absurdity. The parts of the Bill which state that that will happen are absurd.
The noble Lord, Lord Rix, gave examples of where something goes wrong and does not fit into the system. Someone may work for a few years but because they are not young enough to claim lifelong benefits for a deteriorating illness, they lose out. I looked at that situation and believe that around the edges there are further absurdities. When the Government talked about targeting, it was inevitable that this would happen. What they mean by "targeting" is "focusing". You focus on one area, your vision is good there but it becomes blurred around the edges. We always know, when dealing with disabilities, that it is not the most severe cases who have the most problems, it is those at the edges who do not fit into the categories. It is those who do not fit the label, the rubber stamp, who are the ones who suffer.
People with hidden disabilities have had a rough deal for a long time. I speak with full knowledge; I should now declare that I am a dyslexic. We are in that group 1613 of people who have had terrible trouble with the welfare system simply because it means filling in forms. That is one area where we will have trouble. Remember, those people at the edges, who have deteriorating conditions, may well be able to soldier on till the last possible minute and then call for help, whether or not the disability is physical. Those people are the ones who will he hit hardest. I should have thought the Government would focus on them when they were targeting the disabled.
We must look at one part of the Bill with an open mind: the single gateway. My noble friend has disappeared because he decided that the Bill was too demanding to sit through the whole of the debate without eating. I have sympathy with the noble Baroness the Minister on that score. If the single gateway is too narrow it will lead to a logjam. If that gateway does not have the right type of support service to get the information out of the applicants, there is the potential for disaster. I referred to hidden disabilities, and I have received briefing from many mental health charities and others. The people concerned may well find an interview incredibly stressful. They may well give the wrong answers.
It has already been acknowledged by almost everyone that we have a problem with under-claiming. If we have the single gateway without the correct back-up services and training, it will go wrong and give a false impression. If we have the forms phrased in a certain way, we will get answers that allow the form to decide. We must build flexibility into the whole approach and train those who carry out the interviews. They cannot know the answers to everything and must have the opportunity to go away and think again and call in experts. If we try to put an expert in every single office we shall find that one place has all the expertise for one problem and another place has all the expertise for another and some people will fall down the middle. If we can extend the process and make sure that every person who attends an interview receives the correct help it may prove to be a tremendous benefit. That is undoubtedly correct.
We must also ensure that we gel: people to these interviews and that we are not overly draconian about it. There has already been some movement. We must consider people with a literacy problem, which does not just mean dyslexia. Those who do not have English as their first language are another huge group. If people do not understand the letters that they receive, how on earth can they turn up for the interview on the date specified? These people are also the least likely to be on the phone. In the case of those who do not speak English it would not be much help anyway.
We must work at getting people to these interviews and making sure that they are beneficial to them in all ways. We must not merely say that there is a job out there or that he or she can get into a job. We must accept that some will need help in the process of getting into society and receiving the full benefits of our social security system. I very much hope that that is still what we are about, not merely fending off the hands of the Treasury when it says, "We shall make savings".
§ 7.51 p.m.
§ Lord Swinfen
My Lords, my noble friend Lord Higgins said that this Bill was three to six pieces of legislation all rolled together. I think that he is quite right. The noble Lord, Lord Addington, said that he would concentrate on Part V, Chapter 1. He also said that, as far down the list as he was, what he intended to say had probably already been said by someone else. He has just spoken to the single gateway, which is what I had intended to deal with. However. t shall still do so, in the hope that, although I shall not speak as well as he has, I can at least emphasise the facts to which he drew attention.
I welcome with the single gateway work-focused interview the emphasis on the practicability of work and work requirements and the applicant's abilities rather than disabilities. However, the interviews should be forward-looking. Emphasis should be placed on the idea that the individual is of value to his family and of use to the community. It must also be constructive for those whose disabilities are so handicapping that they make the idea of paid work remote. These people too should be pointed in the direction of help that is available to make their lives interesting and constructive.
Where a carer who, because of his caring commitments, is unable to work is interviewed, the caring position should be examined to see what help is needed. Information at interview will be given on in-work benefits. However, will advice on out-of-work benefits be given to those who cannot 'work?
The provisions of the Bill as I read them mean that an applicant has no right of advocacy. Will the interviewing officer have special training, as the noble Lord, Lord Addington, said, in the problems associated with the disability, physical, sensory or mental? Will there be any training at all in disability? Most people with a disability will be able to communicate but a number will have problems, some severe. In particular, what about those with a mental disability?
The summons to interview may cause them considerable stress, which may result in a relapse in their condition. Some may behave irrationally or be frightened and ignore the summons to interview and, consequently, risk loss of benefit. Some may well give misleading information through delusion; others may mislead through a desire to return to work. resulting in inappropriate advice being given. There should be a right of advocacy for those with disabilities. Interviewing officers must be properly trained, particularly in all types of disability.
The Government have said that interviews at home will be available. Who decides where the interview will be held? If it is at a DSS office, will travelling expenses be paid? Will out-of-pocket expenses be paid for a carer or advocate? Will a carer be able to recoup the cost of paid cover when he or she leaves the person cared for to attend an interview? Will the pilot interviews promised by the Government be properly evaluated before the scheme is put fully into effect, or is it to be a case of learning on the job and letting some suffer due to inadequate knowledge or mistakes? In this case it is likely that those who suffer most will be those with disabilities.
§ 7.56 p.m.
§ Baroness Crawley
My Lords, the Welfare Reform and Pensions Bill reflects a recognition by government that the world of work and home at the beginning of the 21st century cannot be compared with that of the 1970s or the 1940s, when Labour's great reforming government implemented the Beveridge Report and created the welfare state. The 1940s Labour government, as my noble friend Lady Castle reminded us tonight, was in turn modernising and updating the ad hoc set of welfare reforms that had taken place since the early years of the century.
My starting point tonight is that it is the duty and responsibility of democratic governments regularly to revisit both the practices and principles of welfare provision and to ensure that the management of that provision meets the realistic needs of the times in which we live. By "realistic" I mean: does welfare provision measure up to the fight against poverty, the need for equality, the level of economic aspiration and the need for access to work that our age reflects?
The way that we live in Britain in terms of working patterns, women's lives, medical advance, the scale of government intervention, rates of private insurance provision and occupational pensions has changed out of all recognition since the 1940s, with the clear exception of women's pay, which still drags behind that of men. Yet we know as we celebrate National Carers' Week that the benefits system has not kept pace with modern society and that the welfare state is not delivering enough to those who are in greatest need. Two-thirds of current spending on benefits has its roots in decisions taken even before Beveridge.
This Bill is a first step in a fairly radical change in the culture of the benefits system and represents a new relationship between rights and responsibilities and between the state and the individual. It is summed up in a phrase that we have heard many times tonight: "Work for those who can; security for those who cannot". In the context of life and work in 1999 and the desperate need for access to be opened up to all who can and who wish to work, the phrase becomes less a slogan and more a sign of the times.
Despite certain controversies surrounding this Bill in another place and, from what we hear tonight, in this place, too, the desire of the Conservative Party to re-invent itself as a party which opposes means-testing and supports the contributory principle, much of the Bill's provisions have been welcomed and found support in its first drafting among welfare organisations. But I am acutely aware that among noble Lords taking part in the debate are some of the great social welfare reformers, thinkers and activists of the past 50 years from all Benches in this House. Because of their great eminence and experience, when any one of them raises concerns about aspects of the Bill—be it IB or widow's benefit—it would be wise, if they are reasonable concerns, for the Government to listen, as I am sure they will.
However, to those who simply dismiss the entire Bill as a crude cost-cutting measure, I say that they are wrong. For example, in the short term, the improvement 1616 to benefits for the poorest and most severely disabled people in this country will cost more than the savings from the changes to IB. In National Carers' Week we know that an extra £140 million will be made available to support carers. In the long term, extending the state second pension to carers and disabled people with broken work records will cost in excess of a £2 billion.
The Labour Party watched for too long in 18 years in opposition while the various Conservative governments blundered their way through the welfare state for it to have no more vision on taking office than crudely to cut costs.
There are five main measures in the Bill. They are: a single gateway to the benefits system for those of working age; the introduction of the new stakeholder pension schemes; pension sharing for divorcing couples; modernised benefit for widows and widowers; and, finally, modernising the benefits structure for people with disabilities or long-term illnesses. I, too, want to concentrate for a moment or two on the single gateway, as did the noble Lords, Lord Swinfen and Lord Addington. Mr Malcolm Wicks in another place said that at its best the single gateway could become an Arc de Triomphe in terms of inclusion if the training of staff and the quality of service offered to people at that gateway is of the high standard.
The strength of the single gateway will be the provision of a single access point to the entire benefits system. When people are at their most vulnerable, that cannot be underestimated. And, although an obligation will be placed on the claimant to attend the interview, the single gateway will treat people as individuals or as people around the edges, as the noble Lord, Lord Addington, put it so well, rather than categorising them and stereotyping them as unemployed, a lone parent or disabled. That individual attention will mean that everyone will have access to a personal adviser, who should help them assess their option with assistance and information on work, benefits and services.
The gateway will be a radical departure from the present system, which does not actively encourage or help people to find work; which pays benefits passively; and which is fragmented, with claimants having to deal with an array of different agencies, leading to duplication and confusion.
There has been some fierce criticism of the compulsory element in being called for interview. I do not believe that such compulsion is unreasonable, so long as it is sensitively applied to people in different circumstances. After all, no one would be forced into work. All that is being asked is that people take part in an interview to discuss the range of help available. Many of my former constituents in Birmingham will welcome the single gateway as a vast improvement on a system which makes them feel powerless and confused.
In conclusion, there is one section of the Bill which has not been as loudly debated as others, which may be as a result of its late entry. But it has a resonance for me in the work I did in the European Parliament; that is, the extension of entitlement to state maternity allowance. In 1992, as chair of the European Parliament's Women's Rights Committee, I piloted 1617 through the Maternity Leave Directive in the teeth of trenchant opposition from the British Conservative Government of the time. That directive opened up maternity leave to thousands of British women who hitherto had no access, or very little, to it. And so it is with great satisfaction that I see the Government in this Bill taking forward further measures to build on that directive and addressing a number of serious flaws still present in the current maternity leave and pay arrangements. For instance, low-paid. pregnant working women earning less than £66 a week now have the right to take time off work, thanks to the directive, but receive no financial help to do so. And 20 per cent of working women are potentially excluded from maternity benefits because they do not earn enough to qualify.
Reform in this area of benefit is long overdue. At a difficult, demanding and vulnerable time in their lives for them and their families, pregnant women should not have to struggle against outmoded benefit priorities and it is extremely heartening to see the Government institute these reforms, which, as my noble friend the Minister said, will benefit 14,000 low-paid women.
This is a complex, omnibus Bill which has set out to change the priorities and culture of the benefits system. While acknowledging the need for the Government to listen carefully to the serious critics of the Bill, I wish it well in its twin aims of opening up greater economic independence for those who can and who wish to work, while at the same time increasing help towards a proper, civilised and sustainable quality of life for those who are the most vulnerable in our society.
§ 8.7 p.m.
§ Baroness Anelay of St. Johns
My Lords, one of the few issues with which I can agree with the noble Baroness, Lady Crawley, is that this is a complex and omnibus Bill. However, I believe that it is seriously flawed in several areas. I shall confine my remarks today to just three of the welfare provisions in Part V.
I am aware that I am further down the batting order than the noble Lord, Lord Addington, and my noble friend Lord Swinfen, but I feel so strongly about several aspects of the Bill that I believe some things are worth repeating in the hope that the Government may listen. I assure the noble Baroness, Lady Crawley, that my remarks are not based on new beliefs, newly discovered for short-term political advantage. They are based on work in the social security field for 30 years. I believe that my noble friends contributing to the debate have the same conviction.
The Government say that they wish to get the sick and disabled back to work where possible both for their own good and for that of the Exchequer, while boosting aid for those who really need it. However, the Bill as it stands penalises thousands of people who are genuinely unable to work and it fails to tackle the real problems of welfare dependency. There is here no developed welfare strategy for those people who are unable to work because of their caring responsibilities, old age illness or disability. There is no vision, as the right reverend Prelate was the first to remind us. The real message of this welfare Bill is simply that the Treasury has seized 1618 control of social security policy. It is a point which the Minister rejected, but I look forward to the Committee stage when I shall rebut in detail the erroneous arguments put forward by the Government over the past few months. I certainly shall not test the House by trying to do so at Second Reading.
These proposals will hurt people who are genuinely disabled. Surely the way to deal with any misuse or adaptation of policy intention is to ensure that eligibility criteria are effectively applied. We should not simply be reducing benefits indiscriminately.
Worse still, the proposal to means test incapacity benefit undermines the national insurance principle. In doing so, it attacks personal responsibility and prudence, a word which was very much on the lips of the Chancellor of the Exchequer and the very virtues that the Government claim to be promoting, and cuts people off from the contractual bargain into which they thought they had entered.
The Bill continues the shift from national insurance to means testing to a significant extent. I agree with the National Association of Citizens Advice Bureaux—and I declare an interest as honorary president of my local branch—that the Government should now make a clear statement on what sort of social security system they are trying to build and how national insurance fits into their vision, if vision there can be, of work and security. Without that vision, we are being asked to take far too much on trust.
Last month, several charities resigned from the Government's Disability Benefits Consortium. That body was set up a year ago to enable the Government and aid organisations to talk to each other about changes to disablement benefits. The charities had already started to lose patience when over 300 submissions they had made in response to the Green Paper last autumn were effectively ignored. The Bill was published virtually unaltered. As Joe Corner of the RNIB said:There was a lot of anger when the Bill was published but the trigger for resignation was when the Government started to give the impression that our membership implied support for the Bill. which was not true.They were particularly angered by three proposals: first, the restriction of IB to recent national insurance contributors; secondly, the penalising of IB recipients who have occupational or personal pensions; and, thirdly, the SDA changes, which I shall leave for consideration at Committee stage.
As other noble Lords have explained, incapacity benefit will in respect of future claims be restricted to those who have been recent contributors to the national insurance fund. Ministers have said that there is a problem with disability benefits in that the original policy intention, the morality behind it and the ethics, to which the Minister referred in her opening speech, are not now being met because of changes in society. However, I argue now, as I shall in Committee. that the Government have not yet produced any evidence to prove that to us. Even if it were true, the problem would be among existing claimants and not among future claimants.
1619 The Minister said in this House on 26th May:We are saying that the contributory contract—the moral contract … is the contract which establishes the entitlement to benefit, based on recent work".—(Official Report, 26/5/99; col. 923.]In other words, the contract will now mean what the Government say it means today, not what it meant when the benefit was introduced. It is not good enough simply to say that. One has to look far more deeply at the reasons behind any change. As the noble Lord, Lord Rix, who, I notice, is momentarily not in his place, and the noble Lord, Lord Morris of Manchester, have stated in far more graphic detail, it could mean that people with 20 or 30 years' national insurance contributions would be punished if, for instance, they had been unable to find a job in the two years before they claimed. That must be wrong.
Many part-time workers are women, often combining caring for their children with one or two part-time jobs. They pay no national insurance contributions, but they may have worked full-time and paid those contributions for many years before their children were born. If Clause 57 is enforced, they will lack the necessary contribution record to protect their earnings through IB should they become disabled. Clause 60 makes matters even worse, because they will in future be unable to claim severe disablement allowance.
The second reason why the charities walked out of the Government's consortium is that those who do qualify for incapacity benefit but who have also contributed to an occupational or personal pension will in future lose 50p in every £1 of their weekly pension income over £50. I shall not go into detail. Other noble Lords have effectively exposed the problems behind the change and the way in which Clause 58 again weakens the contributory principle of social security benefits and penalises those who have taken steps to provide for their future.
My final remarks relate to another part of the Bill which is punitive but has received virtually no media attention. I am pleased that it has received considerable attention in your Lordships' House tonight. I refer to the part which attacks widows' benefits. There is no suggestion by anyone that widows are abusing state benefits. Yet, instead of the current guaranteed widows' pension, bereaved spouses will henceforth receive benefit for only six months, after which they will be expected to get a job. The Government are thus managing to attack vulnerable people, the contributory principle and marriage all at once.
These proposals mean, for example, that a woman of 50—I choose that age not merely because it is my own for a short while longer—who has not worked for many years will suddenly be forced to work in order to support herself a mere six months after the death of her husband when she still may be barely able to cope with getting through the day and sorting out papers for proving probate.
The Social Security Minister, Stephen Timms, in another place justified this measure by saying that these 1620 days most married women work, and we have today heard some statistics on work patterns. But he must know that most married women who work do so on a part-time basis and that they are low paid. As the noble Baroness, Lady Crawley, said, that is still wrong. Even where wives work to supplement the family income, they do not earn an income which could support them; it is secondary to the main family income.
By this Bill, therefore, widows will be punished for having stayed at home to look after their children. Men who have paid national insurance for decades in order to provide for their wives after their death now find that the Government are going to renege on that contract. It is not good enough for the Government to say that men should have taken out other provision and that many have done so. We should be worried about those who have not been able to take out other pension provision and those who did not do so because they genuinely believed that the government contract would not be cancelled.
In the debate in another place, Stephen Timms said that widows should not settle into a lifetime of dependency. I can tell him that they do not. They tend to be the first to seek work as soon as they are able but often find that their lack of skills and experience when they seek to re-enter, or indeed sometimes enter, the work market at a mature age means that they cannot find work which will support them, however hard they try.
I still believe at heart that this is not really about easing people away from dependence. I have a horrible feeling that it is simply about destroying the insurance system over a long term. As the Institute for Fiscal Studies pointed out, the Labour Government over the past two years have set out to systematically destroy the insurance system.
I agree with the National Association of Citizens Advice Bureaux that there should now be a full and open debate on the position of the contributory principle in social security in the 21st century before any further changes are made. Noble Lords and especially, I am sure, the noble Baroness, Lady Castle, who is for a few moments not in her place, will receive many letters from members of the public who are worried by this Bill.
One of them—I have her permission to mention the circumstances—is a lady who suffered a stroke in her late 40s. She had to leave the job she loved and retired on a National Health Service pension. As an existing claimant, she will not fall foul of the Bill. The measures simply will not apply to her. However, future claimants in her position will be damaged. She said, "Incapacity benefit has allowed me to stay in my own home and pay my own way". Her pension is not, as Mr Darling seems to think, about £230 per week. Nor is she in the top 40 per cent of earners. She added, "If the new rule applied to me, I would seriously have to think about selling my home. I am sure that there are thousands in similar positions to me who are frightened for their future". She hopes that the House of Lords will amend the Bill. I hope to help her dream come true.
§ 8.18 p.m.
§ The Earl of Longford
My Lords, we have listened to a series of notable speeches, including the last one. No one doubts that the Minister is a caring person. We know that if it were left to herself, she would not make exactly the same speech as she has made today, but that is true of so many of us who have been Ministers. We forgive her and continue to admire her and hope that the Prime Minister will have the sense to put her in the Cabinet. Unfortunately, however, politics is not like that. The ancestor of the noble Viscount, Lord Cranborne, when Prime Minister, said "Politics is a courtesy profession". As long as it keeps a Minister out of the Cabinet, I endorse that sentiment. That is by the way, but the Minister was doing her stuff. We all understand that.
Taking the Bill as it stands, we have to recognise that it is admired by experts. On balance, it is admired by experts like the noble Lords, Lord Morris and Lord Ashley. But there are some defects. So I make my contribution from a rather Rip Van Winkle point of view. People have referred to Beveridge as though he were a god. He was not exactly a god.
§ The Earl of Longford
My Lords, the noble Baroness, Lady Hollis, said that he thought he was. He did not exactly think that, but when a journalist said to him, "Sir William, are you the cleverest man in England?", he paused and then he said, "Well, inductively perhaps yes, but deductively Maynard has it". So he did not exactly think that he was God because he had limitations. Maynard Keynes was ahead of him. That was Beveridge. I was with him for three years and I have dragged him in only because he has been mentioned. He did wonderful work with the foundation of the welfare state. The morning after it was completed I went into a newsagent to try to buy a paper. The lady said, "It's no good trying to buy a paper here. That Sir William Beveridge is going to abolish want, so all the papers were sold out". Later that day or the next day I asked him to come to lunch. I was meeting with Evelyn Waugh, an old friend and famous writer. They did not get on at all well. Evelyn Waugh said to him at the end, "How do you get your main pleasure in life, Sir 'William?" He paused and said, "I get mine trying to leave the world a better place than I found it". Evelyn Waugh said, "I get mine spreading alarm and despondency"—this was in the height of the war—"and I get more satisfaction than you do". So he did not meet with universal acclamation, but nearly everyone admired Beveridge at that time. He was a wonderful man.
The right reverend Prelate, in a fine speech, referred to Beveridge and ethics. One of Beveridge's ethics was to leave the world a better place than he found it. But, on the other hand, was he a Christian? In all the years I was working with him, he was not. He said that he had been brought up without Christianity. But later in life he took part in a debate in your Lordships' House on Christian unity and made an eloquent speech in favour of it. I said to him at tea afterwards, "Sir William, you seem to be very Christian these days. What denomination do you belong to?" He paused, so I said, 1622 "When I was a boy at Eton, if someone could not get his son down for a house, he put him down on the general list". Beveridge said, "Put me down on the general list". So he finished up as a Christian. So, if anyone wants to know about his ethics, they were ultimately Christian. That was Beveridge.
In the field of disability the noble Lord, Lord Morris, is a Beveridge. He produced a great Bill which revolutionised the treatment of the disabled. He carried it through the Commons. I had the great honour of carrying it through this House. It was not that what I said mattered very much but we had these wonderful people here—the noble Baronesses, Lady Masham and Lady Darcy de Knayth, in wheelchairs. That Bill was carried. As far as I am concerned, my two instructors in social matters are Beveridge over the whole field and the noble Lord, Lord Morris, on disability.
What is the message? It is the same as that delivered by the noble Lord, Lord Ashley, whom I admire in a slightly different way. The way in which he has overcome his disability is an inspiration to the whole disabled world. I really think that is a terrific achievement.
I follow the noble Lord, Lord Morris, almost blindfolded. Clem Attlee was my hero but I did not agree with everything he said. Later in life, after he came here, he confided in me—I do not think that I am breaking a confidence—and said, "I have never liked the Germans". He had been Prime Minister dealing with the Germans and I had been Minister for Germany. He said, "Of course Vi and I"—that was his wife—"once had a German maid and were very fond of her. She was an exception". So he had his difficulties. I do not think that anyone is perfect, but in the particular area of the disabled I am not likely to disagree with the noble Lords, Lord Morris and Lord Ashley, Barbara Castle and the noble Baroness Lady Turner.
§ Lord Ashley of Stoke
My Lords, will the noble Earl allow me to intervene? He has been extraordinarily complimentary but I must tell the House that I have not only never had a German maid hut I have never had a maid in my life. He is possible confusing me with someone else, but I warmly appreciate—
§ The Earl of Longford
My Lords, if anyone complains, my articulation does not get any better as the years pass. When I was talking about Lord Attlee, the noble Lord, Lord Ashley, thought that I was talking about him. There you are. I admire the noble Lord, Lord Ashley, very much and I admired Lord Attlee very much but it was Lord Attlee who had the German maid. I hope that is clear.
Coming down to business, the noble Lords, Lord Morris and Lord Ashley, Barbara Castle and the noble Baroness, Lady Turner, and I are old Labour. There is now what we call new Labour. New wines you put in new bottles but they do say that when in a month's time there is the new wine the old one is better. I am not saying that that is necessarily true but I regard new Labour as the children of old Labour. It is rather a credit 1623 to us that they have different ideas. But it would be a betrayal of the principles of old Labour if the poorest and most vulnerable people in our society—the disabled, some 300,000 of them—were penalised at a time when this country is becoming richer and richer. So far as I am concerned, that is the issue. In the last analysis I shall fall back on support for the noble Lords, Lord Ashley and Lord Morris, but also on my own principles. If we are becoming richer and richer as a country and then we decide to penalise the most vulnerable members of our society, there is something wrong. It can be put right. It would be horrible if the Bill went through just as it is.
A poet called Crosland—it was not Tony Crosland but a Crosland—wrote:I trod the road to Hell, There were things I might have sold but did not sell".To sell the disabled would be a terrible betrayal, but I do not believe that this Government will do it.
§ 8.27 p.m.
§ Baroness Fookes
My Lords, it is a great privilege to take part in a debate in which there have been so many distinguished contributions, most notably by the Baroness, Lady Castle, whose analysis I thought was brilliant, although I am not sure "analysis" is the right word; it was more like "dismemberment" of the Government's policies. I agree with much of what she said.
I have been very disappointed by the Bill. Shortly after the general election we were told that the Government would carry out a radical overhaul of the welfare state. I therefore looked forward to such a radical overhaul. I expected to find that there would be a real explanation of the principles on which the new welfare state would be built. For example, how important would the contributory principle be? How much reliance would be placed on money that that brought in? How far was it to be financed out of general taxation? How far were people to be expected to make their own contribution, as it were, direct as through pension schemes? I expected that we should be given a coherent explanation of the relevant importance of those matters.
However, we have heard nothing of the kind. It seems to me that we have compounded what was already wrong with the welfare state. One worry was that costs may spiral out of control unless reined back. There was the worry about the complications of the system. I certainly came across that as a constituency MP. It is not simply the citizens advice bureaux that deal with the 2 million inquiries a year about social security benefits. I think that every person who has ever been, and is now, an MP will find that much of their correspondence and many of their advice bureaux are taken up with precisely those difficulties. Many people find it extremely intimidating.
Finally, we have the unfortunate darker side of the welfare state, usually called the "dependency culture". A vivid example was given tonight of the boy who, when asked what he wanted to do when he grew up, 1624 said that he wanted to receive his Giro cheque. I can recall some years ago being chastised by a young woman who was about to get married because she said that, "the social" had refused to pay for her wedding dress, and how could she be expected to pay for it on what she was getting. That is perhaps a rather light and flippant example.
There is a worry about dependency, so I hoped that the Bill would take a radical look at the whole situation. But that is not the case. As the noble Baroness, Lady Castle, pointed out, that is not to say that there are not some plums that are worth plucking out, but the consideration of over-arching principles on which we can go forward into the next century seem singularly lacking.
I shall deal with one or two issues that I have found particularly worrying. In principle, I thoroughly applaud pension splitting on divorce, but it seems that it is an extremely difficult matter to deal with in practice. So far I have heard nothing that suggests that there are some practical ways in which this will be tackled.
The memory of the Child Support Agency always haunts me. I still consider it a brilliant idea but, as always, the devil was in the detail and I can see that the devil may be in the detail of pension sharing as well. I hope that the Minister may give us some words of comfort on that when she sums up tonight.
I turn next to the gateway principle. I believe that it is a sound way of dealing with benefits; and it should certainly make it simpler for the individual. However, that will work only if the staff are fully trained to deal with it. I suspect that that will be a much harder task than appears to be the case at first sight. There will need to be considerable training and rethinking on the part of those who are asked to engage in that. Quite a different culture will be required from the one for which most of the staff will have been prepared.
Perhaps I may give an example of an analogous situation. I am associated with a charity called Tomorrow's People, whose aim in life is to help the long-term unemployed back into work. Such a scheme operates in the city of Plymouth, with which I was associated for a long time. Last week I visited some case workers in their respective offices. They were able to tell me a great deal about the difficulties that they find in seeking to help people who have been unemployed for a long time. They talked about need to spend several hours with an individual at a first session, and needing to work with them for a period of months not weeks. They had to raise their self-esteem and they had to get them into the habit of thinking in terms of obtaining work. Often they needed to supply them with suitable clothing so that they could attend an interview for a job looking the part. They also helped them with their CVs. Even after those individuals had managed to get a job, the case workers helped to ensure that they still had the habits of punctuality and reliability to which all employers look.
Dealing with the most difficult area of the population—the long-term unemployed—is a major undertaking. I am not sure whether government Ministers have appreciated the difficulties involved.
1625 I am, of course, in favour of any increase in the help that can be given in that way. However, I do not know whether the Government have addressed this—whether there are sufficient jobs for such people to undertake in any given area. It is no good saying that everybody who could work shall work and only those who cannot work should be given real help, if the jobs that they are able to do are not there. We appear to have no assessment of the number of jobs that there may be in any given area of the country.
I should like to make one suggestion. I remember the community programme with some affection. It gave fairly simple work to people who would otherwise be unemployed. It created work artificially. But if we want to establish the principle that people should work if they are able to, perhaps we should think in terms of a rehabilitation or reassessment of that kind of scheme, where the Government or a local authority provides fairly simple work that people can do. Otherwise, I can foresee a mismatch between the aspirations implicit in the Bill and the reality of being able to give people work. If we raise their hopes only for them to be dashed, that is a very worrying feature.
The hour is late and many people far more qualified than I am have dealt with the issue of disability benefits and the erosion of the contributory principle. However, I make this observation. I believe that the trend to erode the contributory principle, particularly where people have been reasonably led to expect that they could receive certain benefits in return for contributions already made, is a serious one. I suspect that if one entered into a contract or a policy with an insurance company and that company failed to deliver on the grounds that it had changed its arrangements, one would say that it was ratting on its obligations. The company may even be sued, with success, in the courts. I fail to see any distinction between a private organisation or company and the Government ratting on their obligations.
§ 8.37 p.m.
§ Baroness Strange
My Lords, I want to congratulate the Minister on her elegant and comprehensive speech. Having spent 10 days reading the Bill—or series of Bills as it appears to be—I am amazed that she could make it sound so coherent.
I also say to the noble Baroness, Lady Pitkeathley, who is not in her place, that I am someone who believes that your Lordships' House was perfect as it was, or as perfect as anything can be in this world, before all this unhappy hoo-hah.
It will not, I fear, come as a great surprise to your Lordships that I shall talk about pensions in regard to war widows. As your Lordships know, war widows are lovely, brave, self-sacrificing ladies who do not push forward their own interests.
Your Lordships will also know that my noble friend Lord Freyberg won a great victory for all war widows when he moved, and managed to win, the amendment by which all war widows, who would lose their pensions by remarrying, had those pensions reinstated at the end of the second marriage. That was a tremendous victory, 1626 and for that all war widows are immensely grateful. I still get letters from ladies who had lost their pensions and have had them restored at the end of a subsequent marriage.
The Minister was also battling on our side on this, and perhaps I may add without embarrassing the noble Baroness that she is a true friend to war widows, which they all very much appreciate. I know the noble Baroness says that this Bill does not affect war widows, but I believe there is a connection. We still have some unfinished business. There is a group of around 2,700 post-1973 war widows who have two sorts of pension. They have the ordinary war widow's pension and they also have an attributable pension to which their husbands contributed. Servicemen have been able to do this since 1973 and currently 7 per cent is docked from their pay as a pension contribution. That decreased from 11 per cent in 1973 to 10 per cent in 1986 and 9 per cent in 1991. I believe Members of another place contribute 6 per cent. to their occupational pension. Incidentally, the pension is calculated not on the gross pay, but on the net pay from which the contribution has already been deducted.
I am not going to go into this at the moment, but it is an interesting fact worth bearing in mind. These ladies, who are not very many when we consider how many people there are in this world, therefore have two different war widow's pensions; the ordinary one and what is called the attributable pension, to which their husbands contributed. If they remarry they lose both pensions, and they will not get reinstated at the end of a subsequent marriage.
In 1995, in his report of his team's independent review of the Armed Forces manpower, career and remuneration arrangements, Sir Michael Bett recommended that spouses' attributable pensions should be awarded for life and not withdrawn on remarriage, in line with what had become standard private sector occupation pension scheme practice. The Goode report had previously made the same recommendation. The Bett report is even more relevant today, when the award of spouses' pensions for life has since been introduced into a public service pension scheme—the Local Government Officers Scheme. Moreover, the present Government have acknowledged that,The Armed Forces are a unique group of workers because of the nature of the work that they do",and confirmed their support in the 1999 report of the Armed Forces Pay Review Body for the principle of comparability with the private sector as the basis of military salary rates.
Current events worldwide show, and sadly not just in the Balkans, that even as the new millennium approaches, man's capacity for inhumanity to man still knows no bounds. It follows that the lives of British servicemen and women will continue to be at risk in battle practice training and in actual operations for the foreseeable future. As the noble Lord, Lord Morris, said last July,Of all the duties it falls to Parliament to discharge none is of more compelling priority than our bounden duty … to men and women who were prepared to lay down their lives for this country and the dependants of those who did so".— [Official Report, 10/7/98; col. 1536.]
1627 Given the nomadic and uncertain nature of service life and overseas postings, many service wives are unable to work and build up stakeholder pensions of their own. I was reminded of this both in Cyprus and Northern Ireland when talking to wives there who were unable to find local employment. I ask the Minister to ensure that the safeguards and employee benefits of the stakeholder pension scheme as defined in this Bill are incorporated into the Armed Forces Pension Scheme currently under review.
It would also be helpful if the noble Baroness could give us clarification about pension sharing on divorce, which comes in Part IV of the Bill, Section 23(3). If a divorcee is entitled to her "earned" share of her husband's future pension, that share is hers by right and cannot be taken away even if she remarries or cohabits. The pension will be administered by the Treasury, which will then be paying a pension to a divorcee who will retain that pension whatever her subsequent marital status, but would not permit a war widow to receive her pension should she remarry. That does not seem to me to be right. War and service widows must have at least as good a deal as divorcees. I do not know what the moral of this is.
Many of the post-1973 war widows have hesitated about remarrying; at least 99 per cent of them have not remarried. Even if they have the opportunity of rebuilding stable family units and providing their young children with a father, they simply cannot afford to do so as they would then lose all their pensions. If the attributable pension were to remain for life, many of them might remarry. And because they no longer had to pay out the basic pension, the Government would be considerably better off.
Finally, in relation to the bereavement benefits, I do not believe that the 26-week period for which that allowance is paid before the widow is required to have a "work" interview is sufficient in many cases for many war widows. I thank the Minister especially for her sympathy and understanding of the particular and peculiar circumstances that can surround death and the lack of a body, which can be particularly relevant to death in action in the forces. It is not unusual for a body not to be retrieved immediately and this means that the grieving process is delayed. War widows also have to move house and re-establish their lives, and may, as I have said before, not have had the opportunity to be in work. I therefore ask that this period of entitlement be extended for those ladies.
Perhaps I can conclude by telling your Lordships a small story. It is something which my husband remembered the other day from his own wartime experiences, long buried in the layers of old memories and suddenly emerging like a pebble out of clay. He was with the 1st Commando Brigade in Germany and was walking up a slight hill when he suddenly found a soldier, alive but obviously in a very bad way. He stopped to hold and comfort him as best he could. There was clearly little else that could be done. And suddenly this unknown soldier opened his eyes and looked at him and said, "Tell her I love her", and then he died. That is what we must do.
§ 8.46 p.m.
§ Lord Pilkington of Oxenford
My Lords, the Minister has received many congratulations on her speech, but I thank her for her diligence in remaining here for so many hours to listen to all our speeches. I say that before I move into critical vein.
There have been many occasions in the past when I would have welcomed the elements in this Bill which reduce benefits to those whose need seems less or who have greater resources. But my mind was changed, as in the case of many in this country, by the writings and speeches of the Minister's former colleague, Frank Field, who in the past year or so—I have attended meetings and read his pamphlets—has had a profound effect on my thinking and altered it. I say without any insult to the Minister that had Mr. Field still been in office this would have been a more imaginative Bill. His theme seems to have been that of Beveridge; that universal compulsion demands universal benefit.
As many noble Lords have said, this Bill breaks that pattern. I do not want to dwell on the incapacity benefit; I merely underline what has been said. If one has an occupational pension, one loses one's incapacity benefit. There are two objections to that, already mentioned in the debate; nothing new can be said. The first is that incapacity benefit is a national insurance-funded benefit. People who have paid 30 years' contributions, as my noble friend Lady Fookes pointed out, have suddenly had the contract ripped up because, if they become incapacitated afterwards, that is what happens.
The second point is this. The measure clearly penalises those who work hard and save money in any pension scheme, as the noble Baroness, Lady Castle, pointed out with graphic evidence. This Bill will result in making someone who has saved for a pension little better off than someone who has not.
It is worth underlining what people will have to face. We are talking about a person who is totally incapacitated. As I see it, he could get his old age pension of £1,619.80 a year. Let us suppose he had a modest occupational pension of about £5,840. That is a total of somewhere between £8,000 and £9,000.
§ Baroness Hollis of Heigham
My Lords, I apologise for interrupting the noble Lord. Did he really mean an old age pension? No one on incapacity benefit would simultaneously receive an old age pension. Incapacity benefit ends at the point of the old age pension. I may have misunderstood the noble Lord.
§ Lord Pilkington of Oxenford
My Lords, I am sorry I did mean incapacity benefit. On a pension of about £6,000 to £7,000 he would lose his incapacity benefit. Incapacity means that your living costs you more. If we are to be honest, living on £6,000, £7,000 or £10,000 a year is now very near the poverty line. It is hard enough to live if you are healthy; if you are incapacitated, your having saved will result in your being disadvantaged. The Government ought to bear that in mind. There is a moral issue here.
I turn to another moral issue—the widows over 45 who lose their pension. It is true that they will be getting a £2,000 bereavement allowance, but that only 1629 fill s a gap for a short time. The noble Baroness presented a picture that ladies who do not work are in a minority in society. But the object of a caring society is to care for minorities. These ladies could include someone who has had a husband with a serious illness whom, for many years of her life, she has had to look after and has therefore been unable to work. It might be someone with children who have had difficulties and she has therefore had to remain at home. The husband dies when the woman is in her late forties or early fifties. She has not worked since her marriage. Under the Government's proposals she has to go on to the labour market and has to try to find a job. I do not think that the sociological picture presented by the noble Baroness—which was rightly criticised by the noble Baroness, Lady Castle—actually dealt with the reality of these people.
The Bill seems to penalise those who have saved money for their retirement. More than that, it penalises a devoted woman who has a sick husband. You may say it is a minority and that anecdotes do not make cases, but these people do exist and an Act of Parliament has an effect on them.
We all want to help the truly poor and deprived. The point of my speech tonight is this. I believe that the result of the Bill will in time produce a rebellion by people who earn between £20,000 and £30,000. They will refuse to pay the higher national insurance contributions or any kind of insurance contributions. They will put enormous pressure on political parties and, since we all want votes, they will have an effect.
The Bill hits at the very roots of the welfare system. Our ability to help the poor—it is what Beveridge realised, what has been built on over the years, and what Frank Field has convinced me of—depends on the good will of the better-off to pay their national insurance. But the good will of the better-off depends on their getting some reward for their contributions. Certainly, those who are modest savers will be very angered by the Bill, which places them in a worse position than others.
It may take five years, it may take 10 years, but I prophesy that there will be pressure—pressure encouraged by some political parties—for people to contribute to private schemes rather than to national insurance and, in the end, to make the very poor depend on the taxation system. To some extent that is the situation in the United States and we are going the same way.
Of course we are all for reducing benefit fraud in order to save money. But, in the end, what we are all concerned about—and there is no political point in this, because for the last 60 years all parties have recognised the necessity for a welfare system—is to see that this system prevails. Frank Field is absolutely right. It can only prevail if there are benefits for all. If you want to alter it and get more money, then, I agree with the noble Baroness, Lady Castle, there are many other ways of doing it. To proceed with this Bill will in the end produce a disaster which will be very destructive of our community.
1630 I hope that the Government will think again. Certainly, when any amendment is proposed, I will vote against the proposals regarding incapacity benefit and in relation to widows. I do that in the interests of the welfare system.
§ 8.55 p.m.
§ Baroness Turner of Camden
My Lords, I thank my noble friend the Minister for the very detailed and comprehensive way in which she introduced what is a very difficult and quite complex Bill. There are many good things in it, as she and other noble Lords have emphasised. I am not, however, very comfortable with the underlying philosophy, which is very different from that of past Labour governments, as the Minister herself acknowledged.
Basically, what we have here is a continuation of the policy of public withdrawal in favour of private provision, markedly so in that part of the Bill dealing with pension provision. It is clear that the aim is to confine the role of the state as far as possible to the provision of minimum incomes to those for whom the private market cannot cater and those whose working lives have been interrupted by caring responsibilities or by long periods of incapacity. Incidentally, I welcome the new provisions in regard to carers. The Bill itself represents a radical departure from the concept of social insurance with which we have lived since Beveridge.
Dealing first with pensions, there is to be a minimum income guarantee. That is to be welcomed. On the other hand, it still falls short of what would have been available to pensioners had the basic pension link with the wages index not been broken by previous Tory governments. I gather that the single person pension would now have been around £90 compared with the MIG of £75. Moreover, this guarantee presumably involves means-testing, which would not have been the case had the basic pension been increased in line with the intentions of the last Labour government.
SERPS is to go, despite a manifesto commitment that it would remain. The reason given for its discontinuance is that, being earnings-related, it does not help the least well-off. Had the plan originally introduced by my noble friend Lady Castle been maintained instead of being undermined by the previous government, that aim would have been achieved. Three key elements in the Castle plan have all gone: the commitment to pay pensions based on the best 20 years' earnings, so favourable to women; the original accrual rate; and the commitment to increase the basic pension in line with wages rather than prices.
As it is, we are to have a new state second pension. It seems that the Government intend this as some kind of transitional scheme until the stakeholder provision gets off the ground and everyone who can be catered for by it, or by personal or occupational schemes, is being provided for in that way. Then the SSP will simply exist as a flat rate top-up for very poor people in receipt of a basic state pension which will be drastically declining in value.
Those moderately remunerated on £9,000 to £20,000 a year will be expected to be covered by private provision of one sort or another.
1631 The stakeholder concept has been welcomed by sections of the financial services industry for obvious reasons, although many of them have said they believe that the second tier pension—the stakeholder pension, if that is what it is—should be compulsory. Clearly, the Government intend that safeguards should be built in which did not exist with personal pensions and which were such a disaster. The expenses incurred in administration are expected to be lower than for personal pensions. The products will have to be simple and easily understood. Standards will apply, which it is felt will reduce the need for expensive advice, although I have some doubts about that.
Trade unions and other representative bodies will be able to act as providers and must be given access to workforces by employers. But there will be no obligation upon employers to pay into such schemes on behalf of employees. Further, it is doubtful whether individual employees will have the remotest idea of the amount they will have to put away if they are to provide adequately for themselves, without any employer contribution.
The latter leads to another concern. It is clear that we are in for a period of low interest rates. Pressure is now on in the UK for them to come down even further. They are still much higher here than in the rest of the EU. That may he fine for manufacturing industry, and one hopes that it will check the growth in unemployment. But it is no good for savers. All those people with money-purchase schemes are likely to find that the return they expected on their investment may not materialise. The Government want people to save, and, of course, putting money aside for a pension is a major form of saving, perhaps the biggest investment most people will make apart from taking out a mortgage to pay for a house. The argument that low inflation will protect savings may not appeal greatly to older people who look to savings to provide a small additional income. Moreover, it has been estimated that in order to secure a very modest pension of about £10,000 a year, a young person taking out a pension contract would need to be thinking in terms of an ultimate nest-egg of around £200,000, which is an incredibly high sum for most people.
Therefore, there seems no doubt that the best route for most people aiming for security in old age is to seek a job carrying a final salary pension. In that way, the employer bears the risk and the employee has some idea of what his or her eventual entitlement will be. For people not fortunate enough to belong to such a scheme, what is on offer does not seem to me to be as good a deal as the former SERPS. This did not have problems in regard to transferability and provided defined benefits.
I am glad to learn that the Government support occupational pensions. I hope that they will continue to urge employers to set them up where they do not already exist. They have played a major role in the past 20 years, as many noble Lords said, in ensuring that a whole generation of pensioners is a great deal better off than its predecessors. I note that the Government propose that stakeholder schemes should be established under trust 1632 law. Clearly, the intention is to ensure a greater degree of security and, presumably, to involve lay member trustees in scheme governance. That I welcome, but more will need to be done to ensure that trustees are well versed in the requirements of such responsibilities so as to ensure that the rights and interests of scheme members are adequately protected.
Much more could be said about the pensions aspects of this important Bill, but no doubt further opportunities will arise when we reach the Committee stage. I am sure that a great deal more needs to be explored before the Bill leaves this House. In the time available to me this evening, there is just one other aspect of the Bill to which I should like to refer. Much could be said about the provisions with regard to disability. Many of my noble friends who have spoken know more than I do about that aspect. Indeed, I believe that it has been very adequately dealt with in previous debates.
My noble friend the Minister will not be surprised to learn that I want to talk about bereavement benefits. As she knows, I am a trustee of the Widows' Advisory Trust. I welcome the proposal that both widows and widowers will be entitled to a tax-free lump sum bereavement payment of £2,000. Of course, it has been frozen since 1988 at £1,000, so the increase is above the inflation rate for that period. It will make a significant contribution to meeting the expenses faced by bereaved people at a time when they are least able to take financial pressures. I also welcome the fact that widowers will benefit for the first time.
However, I am less happy about other proposals. I am glad that the Government have said that those currently receiving widow's benefits will continue to do so. But this will not apply to future widows or widowers. At present, the most important benefit in this category is the widow's benefit, with more than four times as many claimants as for the widowed mother's allowance. Essentially, the widow's benefit will be abolished. Widows or widowers over 45 years of age with no children will instead receive a weekly age-related benefit (with no SERPS component) for six months only. This represents a transfer of benefit support from women to men. Childless men will gain, but childless women will lose. Widows with children whose widowed mother's allowance ceases after they are 45 will lose up to 19½ years' benefit and all the additional pension their husbands paid for through national insurance contributions.
A widow whose children are no longer in education may find it difficult to rejoin the labour market, as other noble Lords have said, after perhaps 20 years spent looking after a family. She will have to sign on for jobseeker's allowance at an age when other women are preparing for retirement. I am particularly concerned about the loss of SERPS rights. The husbands of these widows will have been paying their national insurance contributions to build up entitlement to a benefit which is to be abolished.
It has been said that the benefit is outdated and that most women now work or else benefit from their late husband's occupational benefit scheme. But, as many speakers have said, this is abolition of a contributory 1633 benefit. I find that unacceptable; it is a breach of a contract. Moreover, most occupational schemes—unless they are expensive ones of the so-called "top-hat" variety—are based on the assumption that there will be some addition of state benefit. This is true of survivors' benefits in most occupational schemes.
I sometimes think that there is a possibility that those who draft policies believe that things have changed rather more than they have. The type of work available to a woman who has spent much of her time bringing up a family is not likely to be very remunerative, even supposing that jobs are available in her locality. The abolition of this benefit is likely to benefit the Treasury to the extent of £600 million a year. I really do not think that that is fair. I hope to return to this subject when the Bill is in Committee. In the meantime, I once again thank my noble friend the Minister for the way in which she presented this complex and, I think, really rather controversial Bill.
§ 9.7 p.m.
§ Lord McNair
My Lords, I shall be brief, having omitted to put my name down to speak in this debate. I apologise to the House that I was not able to be present for the first two speeches.
It is not appropriate, speaking in "the gap", to launch into great detail about what I want to say. In any case I have described the Resource Economics UNITAX approach to reform of the tax and benefit system in previous contributions in your Lordships' House and the Minister has had the opportunity to study the relevant papers. The problem I always have in mentioning this is that it is a cross-departmental idea and therefore each department can only really consider a part of it.
There are two aspects of this proposal, however, that have a bearing on what this Bill could have been. First—I have referred to this previously—the total government spend on benefit is much higher than it should he because of the job shedding effects of value added tax. I know that this is a Treasury matter but I think that it is still worth saying in a social security debate. This is indicated by mathematical proof and starkly demonstrated by statistics from Eurostat. Unemployment in European Union countries soared from the day they adopted VAT, in contrast to Japan and the United States which did not.
Secondly, there is an issue with which this Government, or some future government, will have to grapple; and that is the matter of whether individuals are looked upon as individuals or as part of a couple. This was highlighted in an interesting debate between my noble friend Lord Russell and Frank Field at a Centre for Reform seminar a few months ago. Mr Field described how the cohabitation rule was honoured more in the breach than in the observance. The basic income element of the resource economics proposition would treat each individual person as an individual so that a couple who were, say, not married but considering living together because they had a child would be able to aggregate their basic income—which we calculate is around £117 a week on present calculations—rather than, as at present happens, being forced to live a kind 1634 of hole-in-the-corner existence dodging the social security inspectors. This would give the couple a greater chance of "making it" as a couple and a family. The cohabitation law should he looked at.
Can the Minister tell me under which aspect of the benefit system parents may receive £35 a week if their children are diagnosed as having what I and many others consider to be the spurious condition of attention deficit hyperactivity disorder? I see two problems with this arrangement. First, it invites parents to have their children labelled in order to obtain w hat is a considerable extra payment for poor families. Secondly, it enrols the drug companies that supply the Ritalin which inevitably follows the labelling as co-conspirators in this further drain on the social security budget.
§ 9.11 p.m.
§ Lord Goodhart
My Lords, I agree with what the noble Lord, Lord Higgins, said in opening his speech; namely, that this Bill comprises more than one Bill. My noble friend Lord Russell and I have divided our responsibilities. My noble friend spoke mainly to one of those Bills, the welfare reform Bill—or perhaps in view of many of the speeches we have heard today it would be better to describe it as the welfare reduction Bill, at least as regards Chapter I of Part V. That is the shortest but most important part of the Bill and it is certainly the most controversial part of the entire Bill.
I shall speak mainly to what I might call the pensions Bill—that is, Parts Ito IV and Chapter II of Part V. In terms of quantity of legislation that is, of course, much the greater part of the Bill, but it is less controversial arid indeed we are happy to give it a considerable measure of support. However, there are many issues in the pensions Bill which need to be probed and some of the provisions will need to be challenged.
I start with Part I and stakeholder pensions. This is something to which we give strong support in principle. It will provide access to effective, low-cost pension schemes for employees who are on broadly average incomes or somewhat lower. I am not minded to accept that a 1 per cent charge for costs is inadequate. I believe that excessively high costs are incurred by many pension funds at present because of the amount that is spent on advertising and marketing. One potentially good result of stakeholder pensions which has been forecast in some newspaper reports is that they may bring down the charges of some non-stakeholder pension funds.
There is, we believe, certainly a need for stakeholder pensions, and the main problem with Part I is not what is in that part but what is not. Stakeholder pensions were originally visualised as part of a wider reform of the pension system, involving a state second-tier pension, replacing SERPS, together with stakeholder pensions as an alternative to the second-tier pension targeted on those earning rather more than £9,000 up to about £20,000.
The Government now say that, subject to the availability of parliamentary time, they will legislate for this in the future. I am afraid I find this depressing. The trouble with the Bill is that it therefore leaves the reform at the halfway stage. It leaves SERPS to continue for 1635 the indefinite future and provides stakeholder pensions as no more than voluntary alternatives to personal pensions. It does not provide for the second-tier state pension.
It therefore does not achieve the result, for example, of providing carers with adequate pensions—a proposal which was warmly and rightly but prematurely welcomed by the noble Baroness, Lady Pitkeathley. I wonder therefore whether the Minister can give us any indication of the firmness of the Government's intention to proceed to introduce the second tier state pension together with a possible date for that introduction.
However, that is not the end of it, because we Liberal Democrats have long argued for a system which combined a basic state pension with a compulsorily funded second-tier pension. In fact there was a problem with that idea in its simplest form, which was that low earners have little to gain from a funded pension because it would not take them very much above the income support level or, as it now is, the minimum pensions guarantee.
The second-tier state pension is in fact an ingenious and effective way of getting round that particular problem, and so we are very happy with the idea of a basic and a second-tier state pension, with stakeholder pensions for earners in, say, the £10,000 to £20,000 bracket in place of a second-tier pension. The stakeholder pension in our view, to be effective, must be compulsory both for employees and employers. Without compulsion, stakeholder pensions will simply not be adequate. At present employers are required to pay only 3 per cent of earnings towards SERPS or contracted-out personal pensions, and employees pay only 1.6 per cent.
This is inadequate to build up a proper personal pension for those who choose them. Aggregate contributions may be built up over time—we are not suggesting that it should be done all at once—to at least 10 per cent of wages up to the upper earnings limit, to be provided by both employer and employee. I would add that compulsory stakeholder pensions would also deal with the problem of closure of small schemes, which was also mentioned by the noble Lord, Lord Freeman, and which is, I believe, a potential problem.
The noble Baroness asks "why?". It is because the idea is at present that the small companies would often see the stakeholder pension as a way of getting out of the provision of pension schemes at effectively a reduced cost to themselves. We would therefore like to see stage two of the reform contain not only a second-tier state pension but compulsory membership for stakeholder or other approved pension schemes for those earning more than, say, £12,000 or something significantly above the £9,000 level, with a requirement of adequate contributions from both employers and employees.
Meanwhile, with the proposals as they stand in the Bill the National Association of Pension Funds has raised a number of issues, mostly of a probing kind rather than objections. I certainly hope to take these up during the later stages of this Bill. In particular I would 1636 want to look at issues such as whether stakeholder pensions could also provide personal pensions so that someone whose contributions are rising above the stakeholder limit does not have to transfer to a different scheme. Again I think we should look at the question of dual membership, as the noble Lord, Lord Freeman, suggested.
So far as it goes then, I believe that Part I of the Bill is broadly satisfactory but must be regarded as being only stage one of the reforms which are needed to ensure proper pensions for those in the vital target area of earnings between £9,000 and the upper earnings limit.
Part II of the Bill on bankruptcy is pretty technical and fairly straightforward, although some of the details may need to be looked at in more detail at Committee stage. Turning to Parts III and IV, pension sharing on divorce is plainly an idea whose time has come. It has been discussed for many years. The earmarking of pensions is plainly an inadequate alternative and we therefore strongly welcome the introduction of pension sharing.
Again there are some aspects which will have to be looked at in more detail, in particular the proposal that pension sharing should only apply to divorce proceedings commenced after the Act came into force. I think this will create problems. It may lead to wives—and I presume it is mostly wives who will be seeking pension sharing—deferring divorce actions until after this part comes into force, which is something that does not appear to me to be in the public interest. It might also lead to husbands bringing petitions of their own before this part comes into force in order to forestall their wives' rights to claim a share of the pension.
The alternative may be to defer financial arrangements beyond the date when they would normally be decided or agreed and to allow them to be dealt with in cases where the divorce petition is launched before the Act comes into force. I recognise that a long period of deferment is also unsatisfactory. In order to avoid a complete blockage of divorce proceedings, should not the pension-sharing powers apply at least to divorce proceedings commenced after the Bill has received the Royal Assent even though it is not yet in force?
That is a fairly limited point and there may be a number of other points that we will need to look at in more detail; some are certainly discussed in the Select Committee's report. I envisage that we will have a significant debate on the pension-sharing arrangements. However, that does not prevent us from regarding them as absolutely right in principle. We will give the Government every assistance to ensure that they pass through the various stages in the best form that can be achieved.
Perhaps I may now move on to Chapter II of Part V and, in particular, to Clause 70. The Government will be aware by now that that is a highly controversial provision. It requires that those whose services are provided by contract with their employers are for tax purposes to be treated as employees of those for whom the services are provided. I have already received many representations on this subject; no doubt the Government have received many more.
1637 I recognise that there is a tax abuse which needs to be stopped. A one-man company, where a shareholder simply hires out his or her own services and takes payment by way of dividend from the company rather than by way of salary is undoubtedly serious tax avoidance. It needs to be blocked. However, there are a considerable number of bona fide operations that should not he caught and which, if the regulations do not take the correct form, could be caught by Clause 70. That is especially true in the information technology world where contracting arrangements are very widespread.
In the representations I have received, some of the arguments put forward against Clause 70 are undoubtedly self-serving and should be rejected. However, that is by no means true of all of them. I will not go into the reasons, but this clause did not get anything like adequate debate in the other place, where it was introduced at a very late stage. We need to look at it extremely carefully in your Lordships' House to ensure that Clause 70 does not have potentially unfair and damaging effects. In particular, we shall need something in the nature of a specific purpose clause which will exclude cases where tax and contribution avoidance are not a purpose of the arrangements.
In winding up for these Benches, I cannot ignore the welfare reform part of the Bill, even if I have concentrated mainly on pensions. There are indeed many aspects which raise concern and we have heard many eloquent speeches about them from all sides of the House. The question of the widow's pension causes concern, as to some extent does the single gateway. But I refer above all to the changes in incapacity benefit in Clauses 57 and 58.
There may be a case for saying that incapacity benefit should depend on a contributions record that indicates a commitment to work on the part of the contributor. But I simply cannot imagine how anyone could have come up with a set of rules that ignores 30 years of unbroken contributions and takes into account only the contributions record in the last two years. How does that deal with the problem of the miners or shipbuilders whose jobs have simply disappeared and who live in communities where work is simply not available for untrained 50 year-old men? How do those rules deal with people who find it difficult to get work at a late stage because of a slow deterioration in their condition which has not yet been diagnosed but is sufficiently serious to damage their capacity to work to the satisfaction of their employers?
Turning to Clause 58, I can see, although I do not agree with it, an intellectual case for saying that incapacity benefit should be converted into a means-tested benefit. But the Bill does not make incapacity benefit a fully means-tested benefit. It simply sets off incapacity benefit against one type of income, and one only; that is income from pensions or disability insurance. Why should someone who has taken out an insurance policy to pay mortgage instalments on his or her house and to provide for the security of a young family lose the right to incapacity benefit when, if the same person had been fortunate enough to have inherited wealth, he or she would receive incapacity benefit in full? I ask the Government to listen to the 1638 arguments that have been so powerfully expressed by the noble Lords, Lord Ashley, Lord Rix, and many others, and to drop Clauses 57 and 58 from the Bill. If that is not done, when the noble Lord, Lord Ashley, moves his amendments we on these Benches will give them our unconditional support.
§ 9.27 p.m.
§ Lord Astor of Hever
My Lords, I begin by declaring an interest as an unpaid director of the Officer's Pension Society Investment Company. I also have a daughter who is autistic and dispraxic, and who therefore needs full-time care. In declaring that interest, I feel that I have hands-on knowledge of the frustrations experienced by the parents of disabled children.
This has been a full and thorough debate. I agree with my noble friend Lady Fookes that it has been an honour to take part with so many distinguished speakers. I also echo the admiration expressed by the noble Baroness, Lady Castle, for the Minister's presentation skills at the Dispatch Box. I thought that the noble Baroness's own presentation skills were also pretty good. I was particularly interested in her comments on means-testing.
I feel a certain sympathy for the noble Baroness the Minister, who has had to listen to some critical and very effective speeches from her own Benches. I suspect that her natural inclinations are to sympathise with such principled views, which show great concern for the less fortunate in society, and in particular the disabled.
I remember the noble Baroness's powerful speech on the amendment introduced by my noble friend Lord Swinfen to the Disability Discrimination Bill in 1995. It is worth pointing out, in the light of the problems that she may experience at later stages of the Bill that her primary tactic on that amendment was to encourage my noble friends to take a principled stand on the issue and vote against their own side. After much personal lobbying, the noble Baroness even persuaded me to vote with her.
The Government's approach to the Bill is clearly dictated by a need for sound bites rather than a desire for genuine reform. It is clear that behind slick presentation and loud fanfare, there is considerable panic and confusion in the Government about how to deliver on their promises. The Bill is a further example of confused thinking. My noble friend Lord Blackwell pointed out that the Government have no clear strategy.
Employers have voiced strong opposition to the proposals that will require those firms without occupational schemes to nominate a stakeholder pension. My noble friend Lord Buckinghamshire touched on the point. Many employers without schemes lack the resources and experience to judge which one is most likely to be in the best interests of their employees. A small manufacturing company making, for example, bin liners, will hardly be expert in the field of pensions. After all, actuaries get paid large sums of money for pension scheme selection precisely because the area requires such expert advice. Furthermore, small businesses will have to take regular financial advice to ensure that a nominated scheme continues to buy good value. It is yet another example of costs that this Government are forcing onto small businesses.
1639 If employers have to select a scheme, their employees will inevitably associate them with the nominated scheme and look to them if things go wrong. The problems around personal pensions have made employers particularly sensitive to the dangers inherent in recommending a particular product. The Government have not thought this through.
My noble friends Lord Buckinghamshire and Lord Freeman raised the issue of concurrent membership of a stakeholder and occupational pension scheme. I agree that, if a future mis-buying or mis-selling scandal is to be avoided, it is essential that membership of a stakeholder pension scheme should not preclude concurrent membership of an occupational one in relation to the same period of employment. I strongly urge the Government to reconsider the issue.
I turn now to pension sharing. The Opposition welcome the relaxation announced during the Committee stage in the other place to allow scheme members who, at the time of their divorce, earn less than a quarter of the earnings cap to rebuild pension rights lost as a result of a pension-sharing order. However, we are concerned that in practice this relaxation will be of little real value. Those individuals who are entitled to will often not be able to afford to do so; and those who can afford to do so will not be allowed to. We urge the Government to extend this relaxation to all individuals who become subject to a pension-sharing order following a divorce.
We are concerned that the proposed arrangements will mean that the beneficiaries under a pension-sharing order will be able to take their share of the pension and add as much as they want up to Inland Revenue approved limits. The scheme member, conversely, will be constrained and unable further to build up his pension. Does the Minister agree that this doubly penalises the divorcing scheme member who has built up the pension fund?
The Government have stated that they expect that pension-sharing will be optional and not used in all cases. Is it not likely that that is precisely what will happen, since pensions are often the most significant element of financial planning that a working spouse makes? I should be grateful if the Minister will indicate whether the Government have any estimated figures as to the proportion of divorce cases in which they expect a pension-sharing order to be made. The noble Baroness states that it is 50,000.
I turn now to the aspect of this supposedly "fair and reasonable" Bill which attacks widows' benefits. There is no widespread suggestion that widows are cheating the state. Yet instead of the current guaranteed widow's pension, bereaved spouses will henceforth receive benefit for only six months, after which they will be expected to get a job. My noble friend Lady Anelay hit the nail on the head when she said that the Government had managed to attack vulnerable people, the contributory principle and the institution of marriage in one fell swoop.
1640 Several noble Lords have referred to the restrictions on entitlement to incapacity benefit. They include the noble Lord, Lord Rix, who has devoted himself to helping the disabled, and the noble Lord, Lord Morris, the guru of the noble Earl, Lord Longford. The noble Lord, Lord Morris, made some very powerful points—as one would expect from the first Minister for the Disabled and someone who has had such an outstanding record of service to disabled people—as did the noble Lord, Lord Ashley, who said that these measures defied understanding, logic and morality. His words carry especial authority, not least because he is chairman of the All-Party Disablement Group which he set up with a Tory MP, my uncle, the then Member for Newbury.
The Government have made mention of their manifesto over and over again when debating House of Lords reform. I have searched high and low through their manifesto without success to find anything on proposed cuts in incapacity benefit. I was intrigued to note that Tom Clarke, the shadow Minister for disabled people's rights in the previous Parliament—with whom the noble Baroness worked so closely in opposition—voted for Amendment No. 12 at Report stage in the other place. I shall not tonight ask the Minister whether she agrees with her colleague who said that the Government's policy was logically flawed and morally without justification.
The Government's proposals penalise those disabled people who have attempted to save for their retirement. The Government claim to encourage people to save and yet in practice they penalise those who do so. Those with degenerative diseases will be particularly discouraged from working. Disabled people make a valuable contribution to our society and these changes are a huge step in the wrong direction.
My noble friend Lady Anelay referred to the Disability Benefits Forum set up by the Government to give the disabled a pivotal role in shaping policy and to ensure a proper dialogue between the Government and disability organisations. What was the result of that dialogue? As my noble friend Lord Campbell said, 12 charities resigned from the forum, claiming that consultation was a sham and that the Government had no intention of listening to them. My noble friend Lord Pilkington referred to Frank Field. The Government's commitment to welfare reform really died the moment that Mr Field was forced from government last July. I am sure that this Bill would be very different if he were still a Minister.
My noble friend Lord Higgins and the noble Lord, Lord Goodhart, referred to the Government's new Clauses 70 and 71. These target what the Chancellor sees as tax avoidance by one-man limited consultancies and have alarmed business lobby groups, accountants and professional bodies alike. Accountants know their business. They see the rules as little more than tax increases by stealth. This is all the greater since it appears that this legislation will apply far beyond the area in which the Inland Revenue perceives abuse, to the point where it will adversely affect many small companies engaged in the knowledge-based industries. Because of skill shortages in this area, it is likely that any increased tax or national insurance burden on such 1641 companies will be passed on to their clients. Therefore, the proposed legislation could produce severe price increases.
Alternatively, it may lead to many of the people who work for these companies going abroad to countries offering tax incentives, especially in computing, with a subsequent brain drain in the United Kingdom economy. The Institute of Chartered Accountants, in a scathing memorandum to the Inland Revenue, has attacked the proposals. It says that they would create a massive administrative burden, prevent small companies from growing and fail to generate the expected £450 million revenue.
The operation of the rules is extremely burdensome if not unworkable and indiscriminate in that they apply whether there is disguised employment or not. We have seen from the Tax Credits Bill that this Government, despite their claim of wanting to help small businesses, are intent on dumping on them more and more complicated rules, regulations and red tape.
I was particularly touched by the speech of my noble friend Lord Campbell. I have always admired him for the brave way he has withstood his long personal experience of disablement resulting from his war wounds. I agree with him entirely that the Government are proceeding the wrong way on this; Bill.
I opened my remarks with reference to the politics of principle. The Prime Minister himself has stated that,If this Government is to he judged by no other measure in its time in office, then it must he judged by its approach to welfare reform".
This Bill is far removed from the politics of principle and is more to do with the politics of deception. What has been introduced is not welfare reform; it is an attempt not to pay out, masquerading as reform, supported by new Labour's tales of mystery, imagination and spin. Many noble Lords on all sides of the House have raised powerful concerns on a number of key points related to the Bill. After it was debated in the other place, and when hostility was expressed by many of the Government's own Back Benchers, the Social Security Secretary was quoted as saying that constructive amendments by your Lordships' House would be considered. I therefore urge the Government most strongly to reconsider their approach to this Bill in the light of the many flaws that have been exposed. If they are serious about delivering on their manifesto commitment to reform the welfare state, they will have to do a great deal better than they have done so far.
§ 9.42 p.m.
§ Baroness Hollis of Heigham
My Lords, it is wonderful to have some exercise! We have had a powerful and eloquent debate. We have also had a debate of almost six hours. To answer all the points would take almost as long, and I am sure that your Lordships would not wish for that. Therefore, with permission, I shall write to noble Lords. Nothing would give me greater pleasure than to reply in writing in particular to some of the more detailed points on pensions, service contracts and so on. I hope that your 1642 Lordships will allow me to answer in writing not because I do not feel able to give an immediate response but simply because of the pressure of time tonight.
The noble Lord, Lord Higgins, and many others complained that the Bill lacked principles. I shall return to that issue at the end of my speech. The noble Lord then went on to say that we had failed to cut the budget. I was not sure whether he was arguing that we should spend more or less, but on both counts he did his best to damn us and said that we had failed to cut the budget. What we have said, which remains the case, is that we have cut the rate of growth to half that which was anticipated by the previous government, given the natural demographic trends of more elderly people living longer. The growth during the previous Parliament was 4 per cent and we have cut that to 2 per cent. We have been able to do so by cutting expenditure on economic failure—that is on unemployment—by encouraging more people into work with the New Deal and, in time, the working families' tax credit. At the same time it allows us to increase our costs on disabled people and pensioners and, of course, to invest £40 million in health and education. My noble friend Lord Morris said that the government social security bill and budget was manageable. He was right, if you compare it with other countries, primarily because at least half of the social security budget goes on benefits to those over 65 and, of course, that responsibility—I do not call it a burden—is properly shared in this country with private providers in a way that is not clone in Europe.
The noble Lord, Lord Higgins, then went on to say that we were undermining the contributory principle. I have to say that I thought that was a bit rich from a government that could cut contributory unemployment benefit, and various other contributory benefits, down to six months. But, as he will no doubt tell us, the job of opposition is to oppose and to hell with consistency. Throughout this, we have been trying to retain a link with the principle of contribution—
§ Lord Higgins
My Lords, if the noble Baroness will allow me, as I pointed out, it is being cut from both ends. Not only are people not getting benefits to which they have contributed but also, under some clauses of the Bill, people will now be getting benefits who have not contributed when there were previous contributed benefits.
§ Baroness Hollis of Heigham
My Lords, the noble Lord is therefore saying that he regrets the fact that people who are currently on SDA will in future be entitled to IB—the sort of constituency that the noble Lord, Lord Rix, represents. They are the people who are currently not on a contributory benefit, who will in future be entitled to IB. The noble Lord, Lord Higgins, has just been deploring that. That is what he said; that is what he means. I am sorry, my Lords, that is the group of people which will in the future enjoy a benefit equivalent to contributions, though they have not paid them, namely those who have, for example, severe learning difficulties and have therefore not been able to store up contributory benefits by virtue of being in work.
1643 The other group will be carers. If the noble Lord wishes to say that carers, too, should not have an entitlement to things like a state second pension or continuing entitlement to IB, he should take this opportunity to tell the House that he objects to our proposals to help severely disabled young people and carers. They are the two areas into which we are extending benefits that were formerly contribution based. I am sorry that he regrets both of those developments.
§ Lord Higgins
My Lords, the noble Baroness has totally misinterpreted what I said. I was referring to the clauses relating to national insurance contributions and so on. But we can go into this at Committee stage.
§ Baroness Hollis of Heigham
My Lords, so am I; precisely that. As I have said, it is not true that we are reducing the contributory principle or indeed that we are increasing means testing. It is certainly true that means testing increased under his government. Something like 16 per cent of social security expenditure was means tested back in 1979. When his government left office, it had risen to 34 per cent of the total social security budget. We expect that 34 per cent of the budget to be reduced to something like 32 per cent by 2002. His government were responsible for doubling the proportion that was means tested. Under this Government, that proportion has been reduced primarily because non-contributory, non-means-tested benefits, such as DLA, have grown in demand even though we have not done as we would have wished and been able to encourage all those entitled to it to claim it.
Nor do I like the kind of language which talks about increasing dependency. Traditionally, the dependents on the social security system were women. We are encouraging women to acquire their own entitlement through their own rather than their husbands' rights. The fact that three-quarters of all women are now in work and that the vast majority of them build up an entitlement because they are above the LEL means that those women will be able to enjoy benefits in their own right. They were traditionally the groups that we talked about in terms of benefit dependency.
Moving on to some of the detailed points raised on individual aspects of the Bill, the first set of contributions was about the issue of the single work focus gateway. I was delighted to hear my noble friend Lady Crawley welcome these proposals. The noble Lord, Lord Russell, as I would have expected, asked me a series of very detailed questions as to how they would work. He had misgivings, firstly, about exemptions from the requirement for interview. We are not introducing category exemptions. We are responding to people individually. What clearly matters is that all people, including those who may never work, should still have access to information about the benefits and support services to which they are entitled. If they cannot come into the office, we will visit them in their homes to ensure that they get the information to which they as individuals are entitled relating to their understanding of 1644 the benefits system and the opportunities available to them. The noble Lord, Lord Swinfen, also asked about travel requirements. If people have transport difficulties, we will contact them in their homes. We are also exploring in some locations a mobile phone service and telephone linkages. We want to be imaginative and I hope that your Lordships will help us to develop that point.
The noble Lord, Lord Swinfen, asked us whether, in terms of the interviews, people would be free to bring in an advocate. Yes, they will be. I had not considered the question of the travel costs of the advocate, but we will have a look at it and see what we think should be done about it. The noble Lord also asked about what would happen to those who are mentally ill. We recognise that for some people with mental illness it would be appropriate to waive or defer the requirement for an interview, but for others, even those with mental illness, it may be right to try to help them, possibly with the attendance of a friend, a family member or an advocate, to sort out the benefits that they are entitled to and ensure that their welfare needs are properly identified. We see this as an opportunity for help and not for harassment.
The noble Earl, Lord Russell, and the noble Lord, Lord Addington, asked what we could do to help people who are illiterate—not just people suffering from dyslexia but who are illiterate. If a person fails to attend for an interview because he does not understand the requirement—for example, on grounds of illiteracy—that would almost certainly constitute good cause and therefore questions of censure would not arise. Equally, we have made a commitment that where any such issues do arise, if we cannot make telephone contact with people who should be responding to us, we will go for home visits to try to make sure that we have not lost someone through the system—whether it be a woman who has left home in fear of violence, or someone who belongs to an ethnic community and is reluctant to come into a benefits office, or someone suffering from mental illness. We would seek to visit them, if appropriate, rather than expect them to visit us. We want this to be helpful.
Perhaps I may move on to the issues raised on pensions. Several noble Lords, including the noble Lord, Lord Higgins, the noble Earl, Lord Buckinghamshire, and the noble Lord, Lord Goodhart, asked whether the 1 per cent charges would be too low to offer advice. I was glad to have the support of the noble Lord, Lord Goodhart. It is clearly in the interests of the organisations to try to push that up on stakeholder pensions but many schemes can be provided with 1 per cent advice. We think that it will be a challenging but realistic target. We want information to be circulated to people. We are working with the Financial Services Authority to do so. We believe that a 1 per cent figure is realistic and challenging and will be our best way of ensuring good value.
I was asked whether stakeholder pensions will come under trustee law. Yes, but we are willing to look at other forms of governance provided that they offer similar or equal protection to that of trustee law. We will continue to discuss this issue with the organisations. 1645 The noble Lords, Lord Freeman and Lord Goodhart, asked whether it would be possible to run stakeholder pensions with other pensions. We are consulting on that and we are reflecting in the light of the responses to the Green Paper. The question is obviously tax treatment. It is a matter for quite complicated discussion with the Inland Revenue as well. But it is being reflected upon. The Government have not closed their mind to it.
I am not quite sure why, the noble Lord, Lord Freeman, thought that employers would close occupational pensions, unless it was for the reason advanced by the noble Lord, Lord Goodhart, that stakeholder pensions would now be so much more attractive that they would not bother. The employers I have met and talked to regard good occupational pensions as a way of attracting and keeping good quality staff. I am confident that they will continue to do so. I certainly do not expect them to close down a scheme on the grounds of stakeholder costs, because no costs are involved for the employer. It will be run not by the employer but by the trustees and appropriate organisations.
The noble Lord, Lord Goodhart, asked about compulsion. There is already considerable compulsion within the second tier system. One either has to have NICs rebated into a scheme or be in SERPS. Our difficulty is that those who do not pay tend to be those who for the most part cannot afford to pay, with the possible exception of the self-employed who tend to regard their business as their pension. So we are hoping that the attractiveness of the stakeholder pension will induce people to come within that scheme, particularly the self-employed. But it is precisely because those who are low paid cannot afford to pay to produce the kind of pot to which my noble friend Lady Turner referred that we will also be developing state second pensions.
§ Lord Goodhart
My Lords, I am most grateful to the Minister for giving way. Is it not the case that one of the big advantages of having compulsion would be that it would he possible to require employers to make a proper contribution towards the stakeholder pension and not merely the 3 per cent that they would have to pay on the present system?
§ Baroness Hollis of Heigham
My Lords, I suspect that is one of the reasons why many organisations are opposed to compulsion. However, it is certainly something that we have been considering. That is still an open question, particularly when it comes to some of the more detailed regulations. At the moment the consensus is that those with over £20,000 can look after themselves; those with between £9,000 and £20,000 will he offered the alternative to the SERPS scheme that currently exists; and we shall have to help those with below £9,000 through to a state second pension. That is the way in which our strategy is developing.
The noble Lord, Lord Blackwell praised the Tory basic pension plus. Rather like the privatisation of British Rail, it was a scheme which, as far as I can recall, sought to throw an awful lot of taxpayers' and Exchequer money at a scheme that was essentially a privatised pension to no great advantage to its recipients. Therefore, it is not one that I would want to recommend.
1646 The noble Earl, Lord Buckinghamshire, made many detailed points about pensions. I shall write to him as many are highly technical points.
Given the time, I want to move on to the issue of pension sharing. The noble Baroness. Lady Fookes, asked me whether it will work. I am confident that it will. We have consulted widely, and I think for the first time ever we published a draft Bill as the basis for that consultation, so we have the breadth of experience of consultation and the support of the industry. I am sure that there will be some teething problems that we have not anticipated, but we have put a huge amount of work into the consultation because we realise that we are breaking new ground.
The noble Lord, Lord Goodhart, asked whether we could arrange for such a provision to be retrospective. I believe that there are problems. His solution is an ingenious one and we shall have a look at it. However, I have to say that the broad position of the Government is that legislation should not be retrospective. Incidentally, that was the mistake made by the Child Support Agency. I think it unlikely that we shall be able to pursue his position, but we shall certainly have a look at it.
§ Lord Goodhart
My Lords, I am sorry to rise again, but is it not the position that this legislation will, in a sense, inevitably be retrospective because you are enabling pensions to be split which were bought at a time when pension sharing was not possible'? To that extent it will be retrospective. Compared to that, my suggestion seems to involve a small degree of retrospectivity.
§ Baroness Hollis of Heigham
My Lords, I think that is a bit of sophistry. Any change changes what currently exists. Therefore, to that extent it is retrospective in the sense that anything that exists was what you entered into. I am not sure that the noble Lord's argument is a valid one.
The noble Lord, Lord Astor, pressed me on the point about rebuilding. I take the point that he makes, that there is a concern that people, particularly men who divorce later on, should be able to rebuild their pensions and that the Government should encourage that. However, I would ask him to remember that most people have huge headroom in their pensions. My understanding is that only 5 to 10 per cent of people in both occupational and personal pensions contribute to the maximum. In other words, 90 per cent plus do not and, therefore, there is headroom.
Secondly, the average age of divorce is in the early 30s and, therefore, there is likely to be adequate time—I am not saying ample time—to rebuild the pension, given the amount of headroom, providing someone's income permits. The noble Baroness, Lady Strange, pressed me on Army spouses and their eligibility for pensions. We are hoping that the civilian wives of servicemen who have held jobs in the United Kingdom, who have perhaps gone to Germany, and who have contributed to a stakeholder pension, will be able to benefit from the five-year rule that allows them not to contribute during those five years, or to contribute if 1647 they wish during those five years, and to keep their pension going. We think that that should be particularly attractive to service families.
§ Baroness Hollis of Heigham
My Lords, I am in your Lordships' hands. I have a huge amount to get through.
§ Lord Swinfen
My Lords, I wanted to say that some servicemen who are married are in Germany for longer than five years. It is unusual, but it does happen and it is a point that needs to be taken on board.
§ Baroness Hollis of Heigham
My Lords, I take that point. I was trying to show that here uniquely we have a pension which will allow people to continue to pay over five years, possibly with the help of a partner, even though they are not in work. That might be particularly useful for service families. It does not exist in other forms of pension provision.
My noble friends Lady Castle and Lady Turner commented on the implications of the state second pension and the stakeholder pension replacing SERPS. Both my noble friends made the point, and I entirely agree with them, that the previous administration did a hatchet job on SERPS, both in 1986 when they went from the best 20 years to whole life; and then again in 1995 when we had the equalisation of state pension age for women, the 20 per cent rather than 25 per cent accrual rate and changing the accountancy rules which over time reduced the value of SERPS from £40 billion, first to £20 billion and then to £12 billion. To restore those cuts would produce expenditure of around £30 billion a year in 2050 and we do not now believe that to be the best way forward.
There was no manifesto commitment on SERPS; there was on citizenship pensions, which are now state second pensions. We are proposing, first, a SERPS without the earnings-related section. The state second pension is SERPS without ER. I hope that my noble friends welcome that because, unlike SERPS which gives more to those who earn most, the state second pension will ensure that anybody who earns between the lower earnings limit of £3,500 up to £9,000 will be credited with a pension as though they were earning £9,000. That will be a bigger redistribution of wealth to those, particularly women, particularly carers, including many disabled people, in their old age than anything so far conceived. It will be worth double what SERPS will be for those people on £6,000 to £9,000 a year, for example. That is far more generous than anything previously considered.
Unlike SERPS, the stakeholder pension is not in competition with occupational pensions; it is meant to be in competition with personal pensions, so we hope it will be safe under trustee governance, portable, flexible, inexpensive with the 1 per cent charges, but 1648 comprehensive in the sense that the self-employed will also be able to come in. We hope it will attract employer's contributions, but we believe it will offer for the first time a reliable, good, funded second pension.
I shall not go into some of the NICs points. If noble Lords will allow me, I will write. I want to go on to two other major areas before closing the debate. The first relates to widows and the last to disability. The noble Earl, Lord Russell, said that we were moving at breakneck speed. The noble Baroness, Lady Anelay, asked whether we were not being unfair to women who had been at home and had not worked and who were expected in their 40s and 50s to find a job. The noble Lord, Lord Rix, made a passionate speech on behalf of widows.
I simply ask whether it is right that a widow who is in no financial need because she has a generous occupational pension, is not unemployed because she is in a well-paid job, has no dependants because her children are grown up, should nonetheless receive a widow's pension until she retires even though she has no financial need and no dependants, whereas a man struggling to bring up young children and who may have to leave work receives no such benefit at all. I cannot believe that we should still perpetuate the myths of a woman's dependency and a man's independence.
Let me give your Lordships one statistic. I have talked about three-quarters of married women being in work. Most widows will be in work when they are widowed and will want to return to work as quickly as they can, obviously. But I remind your Lordships, if we look at the employment figure of widows compared to widowers, 53 per cent of widowers between 45 and retirement are in work; and 54 per cent of widows. We are talking about generations here. The generation of the widow who had stayed at home and never worked for money, that is—had brought up her children, had supported her husband, never went into the labour market, never earned an entitlement of her own for her own support, belongs to the generation of the 1970s or even of the 1950s. Now as many women are in work as men: as many widows are in work as widowers, and women have the right to be treated with the dignity of their own independence as they acquire those benefits.
The noble Lord, Lord Rix, says that we have not had a satisfactory reply to the ECHR question. May I gently suggest that it is a reply that may not satisfy him but does satisfy me. It may be simply that he disagrees with the reply.
§ Lord Rix
My Lords, I thank the noble Baroness for allowing me to interrupt. It is merely that no legal argument has been placed in her answers to date. I would appreciate it if it were possible to have a legal opinion as to the question of the human rights in relation to SERPS and the contributory pensions.
§ Baroness Hollis of Heigham
My Lords, I signed exactly that at the front of Section 19, and that could only be based on the best legal advice I had available to 1649 me within the department. I know that the noble Lord disagrees with our response but it was given to him on the basis of the legal advice I had. If he has other legal advice, I would he very happy to discuss it with him.
The noble Baroness, Lady Strange, raised the issue of war widows. They are not affected by this Bill. The issues she raised are a matter for the MoD, and they are conducting a review at the moment.
Finally, I turn to disability issues. I am sorry about the time but I have taken quite a lot of interventions and I have done my best to respond to them.
§ Baroness Hollis of Heigham
My Lords, this is a Second Reading on an important Bill and I am trying to be helpful to the House.
The points made on disability issues were, first, that the contributory principle was set in stone, even if only one contribution or six months'-worth of contributions had been made 20 or 30 years before. Almost like a down-payment, that entitled you to a national insurance benefit for the rest of your life. The second point made was that any calculation of any alternative income was inappropriate.
My Lords, as my noble friend Lady Pitkeathley has said. TB has increased not because of fraud but because it was used by the previous administration for early retirement. It continues to be the case that nearly half of all people going on to incapacity benefit are not currently in work; they are currently unemployed.
I was pressed as to whether none the less the changes that we proposed were not undermining the basic contributory principle, and the noble Baroness, Lady Fookes, said that if any private insurance company did this they would he in breach of contract. I do not know about her insurance company but over the years my insurance company has changed the rules about subsidence, about contact lenses, about my sons' bicycles when they lost them and, what is more, if in any one year I had failed to make the requisite payment for that insurance policy it would have been invalid and I would not have continued to have protection. It is perhaps worth recalling that, if we are speaking of a notion of insurance and a pay-as-you-go scheme, there exists a mutual responsibility.
We are not saying that anyone who fails to meet the contributory conditions should not have the appropriate benefits; what we are saying is that incapacity benefit is a benefit linked to recent work. If you have been unemployed for a long period of time, the appropriate benefit is likely to be income support with a disability premium. I remind your Lordships that income support with a disability premium is considerably more generous than incapacity benefit itself. No one is necessarily a loser by being on a different benefit but on the appropriate benefit.
The second point made was that it was unreasonable not to take into account pensions starting at £50 with a taper. My right honourable friend the Secretary of State 1650 has made it very clear that we are perfectly willing to consider discussing figures; that these were not set in stone and so on. However, if we take the example of a family with a disabled man who is on IB and who has a dependent wife and children, I should remind your Lordships that he would have to earn over £16,000—in other words, as my noble friend Lord Ashley said, above the average earnings of £15,000—before he lost all entitlement to that benefit. On top of that, he may well receive DLA, as we'll as having savings, given the level of occupational pension that he may have acquired during his work, which will remain unaffected.
My noble friend Lady Castle said that such a move was a disincentive to save. I disagree with her. I believe that people save for a pension not, I suggest, because they fear the risk of disability, but because they expect the certainty of many years of old age. That is why people save. I am sure that that will continue to be so and that people will continue to save to prepare for their old age.
I was asked about carers. Their position will indeed be protected as regards TB. I was asked by the noble Earl, Lord Russell, about the all-work test and its adequacy. I agree with him that scores do not reflect incapacity. Someone who is exempt and is registered blind may have more work capacity than someone with a relatively moderate mental health problem which none the less makes it very difficult for that person to hold down a job.
I agree with my noble friend Lord Morris. I am happy to reaffirm that within disability benefits we are not talking about fraud and we are not talking about abuse; but we are sometimes talking about people not being on the right levels of benefit.
There is one further point on SDA that I should like to deal with before I conclude the debate. The noble Lord, Lord Campbell of Croy, said that this affected women. That is true. However, as with our assumptions about widow's benefit, that comes from the view that women do not work and that women derive their protection only through their husbands or through an entitlement which has nothing to do with what they have earned. If a young girl, a woman or anyone becomes disabled before they are able to enter the world of work and they would normally have gone on to SDA, they will now go on to incapacity benefit, which is considerably more generous; indeed, some £25 to £30 more generous. If they are in work when they become disabled, they will be entitled to incapacity benefit. If they are of working age but not in work and become disabled while unemployed, they will be entitled to income support plus disability premium, which is £7 or £8 more generous than incapacity benefit.
I ask your Lordships: is it reasonable that, say. a woman—and that was the example given to us by the noble Lord, Lord Campbell—who has not worked, who has family income that floats her off income-related benefits, who has not contributed and whose disability 1651 costs are not sufficient to generate DLA, should automatically receive SDA irrespective of her income? I do not think that that is right.
At the very beginning of today's debate I was asked what principles lay behind the Bill. We outlined those principles in both our Green Paper and our White Paper. I tried to suggest earlier that what we have sought to do in the Bill is address the ethics of Beveridge to today's society of changing work and changing families. I was asked by the right reverend Prelate the Bishop of Bradford about those ethics, forged as they were in the years during the war; born perhaps out of a concept of Commonwealth, recognising the fact that people wanted the opportunities and self-esteem that come from being full members of a society, with a determination never to revisit the grim landscape of the 1930s.
Beveridge caught a public mood that my noble friend Lord Longford will recall. He caught a mood in which society was determined that its people would not be defeated by the giants which stalked the land: the giants of want, ignorance, idleness, squalor and disease. Beveridge sought to slay those giants: so do we. With idleness, or unemployment, we are seeking to bring people back into work through the New Deal and through the working families' tax credit. We are seeking to overcome ignorance, the second of Beveridge's giants, by investing in education at primary level by way of Sure Start and by widening the opportunities for higher education. We have a £40 billion investment in education, as we have in health, to tackle the third of Beveridge's giants, the giant of disease. As regards squalor, we are encouraging local authorities through our local authority legislation to develop leadership and entrepreneurship and to rebuild their communities.
The fifth and last of Beveridge's giants is the giant of want and of poverty for those who cannot work. I was asked what are the principles of Beveridge. The ethics of Beveridge are those that we are applying in this Bill. Those are the principles that lie behind our determination to reform the welfare state. However, Beveridge's means of tackling those giants, which was based on a contributory system, has broken down given family changes, labour changes, the changing position of women and the demography of our society. If we want to be true to the ethics of Beveridge, we must adapt and reshape the means by which we deliver the benefits, the security and the opportunities that Beveridge would want to see. That is what we propose to do in this Bill. I hope that your Lordships will accept it.
§ The Earl of Longford
My Lords, continual reference has been made to the ethics of Beveridge. I worked with that famous man for three years. If my noble friend quotes Beveridge to that extent, I am at least able to ask her whether she is aware that Beveridge would have liked most of these provisions but not all of them.
§ Baroness Hollis of Heigham
My Lords, having read the Beveridge Report, I agree with my noble friend.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.1652
§ Professions Supplementary to Medicine (Speech and Language Therapists Board) Order of Council 1999
§ Professions Supplementary to Medicine (Clinical Scientists Board) Order of Council 1999