HL Deb 16 January 2001 vol 620 cc1103-11

7.12 p.m.

Baroness Hollis of Heigham

rose to move, That the draft order laid before the House on 30th November be approved [2nd Report from the Joint Committee].

The noble Baroness said: My Lords, I can blame only the Opposition Benches for insisting that we deal with a long series of social security measures. Obviously, the Government do their best to accommodate the wishes of the Opposition. That all of these matters should be dealt with in one day, which requires that we move from one topic to another, was, as I understand it, the wish of the Opposition rather than the Government. I apologise to the House for moving to yet another subject.

As noble Lords are aware, this annual order and the other standing in my name on the Order Paper are a routine but vital part of DSS business. The original uprating order contained a minor drafting error which has been corrected in the measure before the House today. The order will increase most income-related benefits by the Rossi Index, which is 1.6 per cent. Most national insurance benefits will rise in the usual way in line with the Retail Prices Index, which is 3.3 per cent. As usual, the increases are based on changes to the relevant price indicators over the 12 months ending in September.

But there are areas of social security where we want to provide more than price protection. For families with children, people with disabilities, carers and pensioners we want to provide more help. First, we want to do more to help children. As your Lordships know, when we came into office we were faced with the unacceptable situation in which one in three children in this country lived in very poor households. We are determined to right that wrong. As a result of our Budget measures, thus far 1 million children will be lifted out of poverty. As part of our programme to eliminate the scourge of child poverty from this country, we shall introduce further measures from April of this year. The increase in child benefit, the new children's tax credit and increases in WFTC mean that a single earner family with two children on half average earnings (£12,500) will see their standard of living rise by 20 per cent this year, which is the biggest annual rise for 25 years.

By the end of the Parliament we shall be spending almost £6 billion extra a year on support for families with children. Most of that help will be directed at the poorest families. These cash measures, initiatives to tackle social exclusion, such as Sure Start, and improvements in education standards will ensure that all of our children get the start in life that they deserve.

The second area where we want to do more is to provide help to people with disabilities and carers. From April we shall for the first time extend benefits to severely disabled three and four year-olds. Some 6,000 disabled children and their families will be better off by over £38 a week. We are also raising the disabled child premium by £7.40 a week above inflation. Around 80,000 children will see a rise in the disabled child premium from £22.25 to £30 a week which is a real increase for some of the neediest families in the country.

We also want to do more for adults with severe disabilities. In April the new disability income guarantee will be introduced, but not at the original rate of £128. The guarantee will be £142, which is an extra £14 a week. For couples, the guarantee will he £186.80. In addition, young adults disabled early in life will, as a result of the changes we made two years ago, benefit from an extra £27.60 a week.

We are also doing more to recognise the enormous contribution made by carers. The carer's prernium will be increased by £10 a week on top of the normal uprating. That means the premium will rise in April from £14.15 to £24.40. This measure will help over 200,000 carers on low incomes. We are also increasing the earnings threshold for invalid carer's allowance from £50 to £72, which is the rate of the lower earnings limit in national insurance. That will allow carers realistically to retain contact with the world of work and bring them within the contributory benefits system of the national insurance scheme. This package of measures will ensure that nearly £200 million extra will be spent annually on helping people with disabilities and carers.

The third area where we want to do more is pensioners. The order introduces measures to tackle pensioner poverty, ensure that every pensioner shares in the rising prosperity of our country and. reward pensioners for their saving. Our first priority for pensioners was to get more help quickly to the poorest. That was why we introduced the minimum income guarantee and made a commitment to increase it by the level of earnings for the rest of this Parliament. But in this order we shall raise the minimum income guarantee to £92.15, not just for those pensioners on the highest rate but all pensioners on the guarantee.

The second priority is that as we move towards the pension credit from 2003 we shall increase the basic state pension. We believe that that should be the foundation of pension provision as part of the partnership between state and funded pensions, and it is essential if people are to retire on a decent incorne in the future. This order will increase the basic state pension by £5 for single pensioners and £8 for married couples. Widow's and bereavement benefits will rise by the same amounts.

As a further part of the transition to the pension credit, the order will double the lower capital limit for the minimum income guarantee from £3,000 to £6,000 and increase the higher capital limit from £8,000 to £12,000 in April. That will benefit half a million pensioners who will find that modest savings no longer exclude them from entitlement to MIG.

In total, we are spending more than £8.5 billion extra on pensioners this Parliament. As I mentioned earlier, we are spending £6 billion on children. We can do this only because we are delivering stable economic growth and reforming social security. We now see the results of our reforms. By moving people from benefits into jobs we are spending £4 billion less this year. Social security spending would be falling in real terms if we had not deliberately chosen to target more money on families with children, people with disabilities and pensioners; in other words, we are spending it on those who need it, not on propping up economic failure. By cutting the bills for economic and social failure we can provide help where it is most needed, giving greater security to pensioners and people who cannot work. The orders that we shall debate tonight deliver that additional spending, and I commend them to the House.

Moved, That the draft order laid before the House on 30th November be approved [2nd Report from the Joint Committee].—(Baroness Hollis of Heigham.)

Lord Higgins

My Lords, we are debating a considerable number of social security matters on the same day. Without going into the mysterious workings of the usual channels, there is perhaps some convenience in proceeding in this way. This particular order uprates a large number of benefits, and I am sure that the recipients appreciate that. In a more general sense, it is rather worrying that government policy has been erratic. For example, there has been an increase of 75 pence in the basic pension in one year followed by a £5 increase in the next. Who knows what will happen next year? Having for many years represented a constituency which has more pensioners than any other, I believe that that kind of erratic measure will be viewed with considerable concern. People are still worried that the RPI used for pensions is not the same as that used for fuel and so on. But I do not think it is appropriate at this stage in the proceedings to make a large number of partisan points in response to what the Minister has said.

However, I make one particular point. We appear to be in a situation where debates on these matters divorce the increase in benefits from the increase in contributions. That is a reflection of the structural changes introduced by the Government. When I raised the issue of contributions on an earlier matter, the Minister replied that it was a matter for the Treasury. But, as she well knows, she and other Ministers in this House answer for all departments and the Government as a whole, not just their own department. Therefore, it is legitimate to say that here are these increases which take place, but what is the effect on contributions? Considerable concern was expressed at the way in which the Government, in announcing these changes—more particularly the Chancellor of the Exchequer—sought to take much credit for the increase in the benefits, but they did not point out that the contribution increase was something like three times the rate of inflation for a substantial number of people. Perhaps I may restrict my question on this occasion to asking the Minister to tell us what are the implications in terms of the contributions which are necessary to finance the increase in benefit to which she has referred.

Earl Russell

My Lords, by convention this debate is used for a review of the general feel of social security. I shall use it to that effect as briefly as I can at this time of night. I appreciate that we are coming to the end of a marathon debate. But we are also coming to the end of a Parliament. In those circumstances, it is legitimate to review what has and has not been achieved.

Perhaps I may say to the Minister that she is a trooper and an old hand. She will not take anything that I may say personally. She has been a distinguished and excellent Minister. Unless what I say refers directly to her words or actions, I do not intend to imply any criticism of her personally.

The Government's overall record on social security is probably worse than their record in any other field except possibly the Home Office. I shall not say that I am disappointed about that. I read the Prime Minister's Amsterdam speech of February 1997 very carefully indeed. I expected nothing else.

First, I came into this Parliament with a long shopping list of things which I hoped to see reversed by the Government. I shall not rattle through that list. I am sure the Minister knows perfectly well what is on it. Most of them have not been touched. The single parent case is worse. The CSA case is worse in many ways. I remember everything that the Minister said when the legislation relating to the JSA was before the House. As Lord Henderson of Brompton put the issue at the time, it was the introduction of measures designed for the policing of the unemployed. No change there.

I am not sure of this judgment, but, with regard to asylum seekers, were I an asylum seeker I would rather try to run the gauntlet of Michael Howard's Bill of 1996 than penetrate the ring of steel set up by Jack Straw in 1999. I know what the Minister will say against that. It has substance; but so do the points on the other side—and the balance is difficult.

I shall not say "all is forgiven", but I do say to representatives of the previous government that we are not that much better off, if indeed we are at all. It is true that from the Government we do not have the hacking out of large slices from the safety net, like cutting a cake. Instead what we have through the use of benefit sanctions—I shall not repeat what I have just said—is pushing individuals out like pushing mashed vegetables through a sieve. The amount that goes out is probably about the same in both cases.

I know that there are remedies for poverty on offer. But what we find over and over again is that the Government always believe that they know best what is in the interest of the person who hopes to escape from poverty. They do not merely believe that their own judgment is better than that of the claimant but that they are entitled to enforce it by compulsion. Perhaps I may refer to the exchanges that we had a few moments ago on CSA reduced benefit penalties. The Minister was quite certain that she knew what was in the best interests of the child better than the child's mother. That is a question on which just a little doubt might well he becoming.

Baroness Hollis of Heigham

My Lords, that is a somewhat unfair summary. I was making the point that there are occasions when the interests of the mother seeking a clean-break divorce and the interests of the child, because they can never divorce their parents, do not coincide but diverge. When that happens, decisions need to be made, and in that situation, they are difficult. I believe that the Government's primary responsibility is to children because they are the dependent ones.

Earl Russell

My Lords, I thank the Minister for that explanation. I agree there are circumstances in which interests may diverge. What I am querying is the certainty the Minister feels that the interests diverge in this case. A little bit of hesitation about whether the mother's or the Minister's judgment is right is something I should be glad to hear.

We should remember that in dealing with the administration of the benefit system we have a gross inequality of power between the system and the claimant. Where we have that gross inequality, and that inequality is backed by the power to take benefits away altogether, we have a situation which may easily be perceived as oppressive on the receiving end.

We also have the constant repetition of the mantra, "Work for those who can; security for those who cannot". I previously suggested to the Minister that that has led to a denigration of benefits. Last night I looked at the use of the phrase "cash handouts" in the Green Paper on welfare reform. The Minister perfectly well remembers the passages to which I refer. That links up with the problem of uprating only by prices. That is not consignment of pensions. The Minister knows very well that I am not taking refuge behind the walls of the castle. I am not recommending a return to the earnings link. But, from time to time, as resources allow, it is necessary to uprate above prices.

The Acheson report pointed out that benefits were at a level inconsistent with preserving health. But on that point at least I am beginning to think that the Acheson report has gone the way of the Black report. No action on this point has followed. The problem is regularly perceived by the Government as one of getting people to want to work rather than of there not being any work. I have said this many times before, but it was clearly confirmed by an article by the Secretary of State for Education and Employment writing in the Observer as recently as last Sunday. He expressed the matter in these words: Jobs are there for the taking in most parts of the country". He is not particularly impressed by any shortage of jobs. He said: It used to be thought that the number ofjobs in the economy was finite … The more people available to work with the right skills, the more jobs that are created". If there is any research that sustains that proposition, I should be glad to see it.

As for jobs being there for the taking, I looked at last January's figures for unemployment by constituency. I admit that they are a year out of date, and if the Minister has the information to bring me up to date, I should welcome and listen to it. A year ago, 34 constituencies had unemployment above 10 per cent overall. Constituencies where male unemployment was above 10 per cent numbered 84 in England and 15 in Scotland, including a rate of male unemployment in Sheffield Brightside of 12.9 per cent.

In his maiden speech in 1987 Mr Blunkett said he believed that he was the only Labour Member who woke up the day after the election looking on the "Brightside". Perhaps he should do it a little more often. It is because of the belief that jobs are there for the taking and that the number of jobs expands with the number of skilled people that we get addiction to compulsion and to thrusting people out of the safety net. I know that they may say that yesterday's announcement on neighbourhood renewal is getting away from the top-down approach, but I listened to the discussion of this issue on last night's "Newsnight". John Holman, who works in Glasgow Easterhouse, said: This is not really the case. The Government sets the targets and whatever power is devolved, it is still dominated by the targets. So in the end the Government makes the decisions". I am even more concerned by what the Secretary of State said at the end of his article. He said: Our intention now is to make full employment a reality too". That is fine if it is to be done by creating additional jobs. But if it is to be done by redefining the workless so that fewer of them are classified as unemployed, that could be a cause of very grave anxiety. When I look forward to the possibility of a Labour second term and I think of all that I have heard said in this Chamber and elsewhere on the theme of rights and responsibilities, I view a future Labour Government after the next election with dread.

Baroness Hollis of Heigham

Oh dear, my Lords! I shall try to respond to the specific point made by the noble Lord, Lord Higgins. He asked about Contributions Agency issues, which are a matter for the Inland Revenue and are not part of the regulations under discussion. However, I shall have a go, basing my remarks on the Government Actuary's report, which I just happen to have in my back pocket. Perhaps I may respond in two ways. I shall talk about the implications for the National Insurance Fund and then talk about the baseline figure for national insurance contributions. If the noble Lord wants additional information beyond what is in the Government Actuary's report, I shall have to write to him. He will understand that.

The surplus balance in the fund over the minimum recommended level is projected to remain at its current level of £11 billion until 2005 or 2006. Thereafter, it will fall. By 2009 or 2010 it will need either a Treasury grant or an increase in national insurance contributions to bring it back up again. That is under a prices uprating scenario, which is the one on which we are currently operating.

In terms of the baseline figures on national insurance contributions, the joint employer/employee national insurance rates are currently 20.25 per cent, excluding the 1.95 per cent in respect of the NHS. In 2001–02, that will fall to 19.95 per cent, because the employer rate is due to fall by 0.3 per cent. In 2002–03, it will be 19.85 per cent, because the employer contribution rate is due to fall by a further 0.1 per cent. With price upratings in 2010–11, the joint employer/employee rate would have to be approximately 21 per cent as opposed to the baseline rate of 19.85 per cent; that is with price upratings. I could go on into 2030 but that is too far ahead. I have not given our assumptions about earnings because we are not intending to earnings link benefits, but I can give that information if the noble Lord wishes. I hope the noble Lord thinks that I have met my point and that he can see the size of the fund, what the baseline figure would be, and therefore what the potential shortfall could be.

Lord Higgins

My Lords, I was really making a much simpler point. The effect of paying higher benefits is to lead to an increase in contributions. At the same time as the Chancellor announced an increase in benefits, he did not refer to the increase in contributions but left it to other people in a more obscure way. What happened this year is that the increase in contributions for a substantial number of people, as a result of the way in which the system works, was about three times the rate of inflation. I am still not clear why the Government did that. It is a cause for concern for those people. I have not yet heard any justification for it.

Baroness Hollis of Heigham

My Lords, is the noble Lord referring to the contributions of the self-employed?

Lord Higgins

My Lords, I am referring to employee contributions.

Baroness Hollis of Heigham

My Lords, it is no longer a DSS matter but I shall follow up the noble Lord's question and seek to answer it in writing. If he finds that unsatisfactory, perhaps he will put down a Question for Written Answer. The information I have is what I might call the global information because this matter is now one for the Treasury and the Inland Revenue.

I turn to the election speech of the noble Earl, Lord Russell. He said that after looking at the record of the existing Labour Government the prospect of a future Labour Government filled him with dread because the CSA was worse as a result of our reforms. I have to say that the noble Earl cuts me to the quick. When we took over, only about 65 per cent of parents received what they should have been receiving. The figure is now well over 70 per cent. As a result of these reforms I hope to push the figure beyond 85 per cent. There are 1 million kids out there not getting money basically because some fathers do not wish to pay, even though, by any test or formula, they can pay. I have been responsible for trying to change the system, as your Lordships have been kind enough to acknowledge, in order to ensure that children who are poor and needy are not denied the money. The noble Earl suggests that making any change to that system is somehow to worsen the CSA. I just think that we are living in different worlds.

I am concerned about the wellbeing of the child and not about fathers who, in their anger, want their day in court. That may be the difference between the noble Earl and myself. We shall have to disagree on this issue, but the record of 1 million children denied on average £30 a week of the money they should be receiving, which would make all the difference in floating them out of quite severe hardship into a higher degree of comfort, is deplorable. I had hoped that the noble Earl would be joining us in fighting for the child against some fathers—some non-resident parents, including women—who have sought in the past to walk away from those responsibilities. We are making it easy for them to pay in future and therefore there should be no problems about the obscurity of the formula as a device or alibi by which to avoid responsibility.

The noble Earl's second charge was that the lone parent situation is worse. Again, I do not know where the noble Earl has been in terms of what we have been doing on the New Deal. Around 200,000 lone parents have joined the New Deal. One lone parent said to me the other day, "I am off to work and free at last". She now feels that no longer is life happening to her; she is running her life. The combination of the New Deal, the working families' tax credit, the childcare arrangements, the national childcare strategy and the training and skilling opportunities we are offering means that no longer will lone parents be given a giro cheque, be asked to endure on that amount for 16 years and then be kicked out into the labour market. We are seeking to work with their choices as to what they do. We are seeking to make those choices deliverable for them and on the terms they want.

The noble Earl said that the JSA is worse because of our policy of policing the unemployed. The number of jobs available is up and unemployment is at its lowest since the late 1970s. Youth unemployment has fallen by 75 per cent since 1997 and is at its lowest rate since 1974. I know that if youngsters have not had a job by the age of 21 they find it very difficult to enter the labour market. Long-term unemployment, particularly of older men, is down by 50 per cent. The noble Earl says that the situation of the Child Support Agency and of lone parents is worse. I say that we do not live in the same world—either the same mental world or the same practical world. I see people out there, going into work, increasing their income and taking control of their lives to the benefit of themselves and their families.

The noble Earl made a second major point and I understand his approach here. We need uprating above prices, not to deal only with poverty on benefits, but also to reduce inequality, a point which the noble Earl perhaps did not spell out in exactly those terms. I accept that argument. However, again, I would ask the noble Earl to look at the record. In practice, our increases for pensioners, our benefits increases for children, in particular younger children, our increases for disabled people who are entitled to the disability income guarantee and our increases for those with children who are in low paid work, receiving WFTC, have well exceeded even the increases that would have accrued from an earnings link. In practice, although we have had uprating by prices as the baseline, those groups which, in my view, are those most in need, have received increases in their real incomes not only well above prices but, in many cases, well above the levels that would have accrued had their benefits been earnings related. I dispute the noble Earl's assertion to the contrary.

The noble Earl went on to make the distinction—which I would accept—between those who are economically inactive as opposed to the claimant count. He is right to say that the problem facing all of us—including taxpayers—is not those people who are on benefit and seeking work and thus part of the claimant count, but those who have not been brought into the labour market. This comprises a large number of people—those with disabilities, in some cases lone parents and those on income support. These groups have been beached on to benefits which are low in comparison with wages in today's society. Obviously, people fare better in work. However, some are beached on benefits and can see no way of getting off that beach. What we are seeking to do is to provide the opportunities, support and skills for those who can and who wish to work to be able to do so. That includes disabled people, 1 million of whom say that they wish to work but are unable to do so. It applies also to lone parents, 90 per cent of whom have told us that they wish to work as and when they have child support arrangements in place.

I believe that, as a government, we are working with the grain of what people want. I refer not only to taxpayers, but those who are themselves the recipients of benefits. If I am wrong in that judgment, then the electorate will tell us as and when we come to the election. If the electorate believes instead the noble Lord's reading that the next Labour Government would fill them with dread, he will be vindicated at the ballot box. However, this is a record with which I am proud to be associated and one as regards which I hope to have the support and confidence of my department as well as my government in a forthcoming general election.

On Question, Motion agreed to.