Below is the text of the speech made by Norman Fowler, the then Secretary of State for Social Security and Education, in the House of Commons on 11 November 1985.
The immediate context of the debate on social security is that in two weeks’ time we will be uprating social security benefits. That will add another £2 billion to spending on social security. It will bring total spending on social security to well over £40 billion a year—almost a third of all public expenditure.
Uprating pensions and other linked long-term benefits by 7 per cent. will raise the single person’s pension by £2·50 a week and the married couple’s pension by £4 a week. That will mean that between November 1978 and November 1985 pensions will have gone up by over 96 per cent.—some 10 percentage points ahead of the rise in prices. Thus we have more than fulfilled our pledge to protect the value of the retirement pension, and that is a pledge that we stand by as firmly today.
This month’s uprating means that since 1979 this Government have increased the social security budget by 30 per cent. in real terms. Some of that increase has been due to unemployment. I make no apology for the fact that we have given that substantial support to those in need of it, but it is important to recognise that the major part of that real increase in spending is due to real increases in the value of benefits, and in particular to the increased number of pensioners. Since 1979 the total number of pensioners has increased by over 750,000. The result is that we are now paying higher value pensions to more pensioners than ever before in history.
This Government have done even more. We have more than doubled the mobility allowance and taken it out of tax. We have abolished the invalidity trap and taken war widows’ pensions out of tax. We have cut national insurance contributions for the lower paid. Therefore, let us be clear. The debate is about the policy of a Government, who, by any measure, have already committed vast resources to social security and, as the Chancellor of the Exchequer’s statement tomorrow will show, are planning to maintain that commitment.
There is a further fundamental point. Since 1979 we have also cut inflation to a fraction of the 27 per cent. peak that it reached in the mid-1970s. It is now below 6 per cent., and falling. The reduction of inflation is of crucial importance to all those on low incomes and to pensioners in particular.
The hon. Member for Oldham, West (Mr. Meacher) tends to have a short memory on this matter, but when we look back to 1976, when inflation was running at 20 per cent., and more for a whole year on end, we see that it was the hon. Gentleman who, according to The Times, was shouted down at a pensions rally. The report stated:
“Old age pensioners shouted down Mr. Meacher, Under-Secretary of State at the DHSS yesterday as he tried to explain the Government’s record on pensions”.
In fact, those pensioners had learnt from bitter experience a fact that we should all face—that one cannot separate economic policy from social policy. High spending and the high inflation that follows will always undermine a Government’s social objectives, however worthy they may be. Inflation is a social evil as well as an economic one. It attacks the poor hardest and destroys the security of the pensioners first. It must therefore be a first social priority to drive inflation down and to keep it down. We must never return to the days of hyper inflation of the mid-1970s.
There is another aspect of the debate that goes beyond comparisons of past performance, and that is the case for reform for the future. The fact is that the present system cannot be sustained. Social security has become a creaking structure in danger of collapse, and parts of the system are simply indefensible.
We cannot defend a system whose rules are frequently contradictory and which can leave so many people trapped in a position where it is not worth saving, not worth bothering to earn more and where a man can actually lose money when he takes a job. We cannot defend a system that is so complex that it creates major difficulties, both for those who operate the system and for those whom it is supposed to help.
We cannot defend a system that fails to deliver adequate support to many of those who are in the greatest need. For example, the evidence accumulated during the course of the social security review pointed to a clear need to provide help to working families on low incomes, which the present system fails to meet. We cannot defend a system that makes promises for the future that are clearly beyond the capacity of this generation to command and of the next to fulfil.
Presented with those challenges, it is simply no good to proclaim that every existing benefit must be preserved, or to come out with a stream of worthless promises to raise public spending more and more. The question is not whether social security should be reformed but how it should be reformed. That is a challenge from which no party can stand aside.
That is why the Government have carried out their review of social security with the aim—for the first time since the 1940s—of looking at social security overall rather than in a piecemeal way. In developing our approach, we believe that the system should meet three main objectives.
First, social security must be capable of meeting genuine need. That means rather more than constructing an adequate income support scheme to replace supplementary benefit. It means recognising that needs change. In particular, it means today recognising that one of the groups which are by any definition in most need are low-income families with children—not just those where the head of the family is unemployed, but where the head of the family is in work. It is for that reason that we have set out proposals for a family premium with income support.
Mrs. Elaine Kellett-Bowman (Lancaster)
Although I very much appreciate my right hon. Friend’s sterling work and his sympathetic attitude towards the least well off in our community, I must ask whether he accepts the grave anxiety among women that child benefit may not continue to be paid direct to them? Many women, not only those in the lowest income group, have child benefit as their only source of independent income. If that is to be frozen, they will be very annoyed.
Indeed, I thought that my hon. Friend would go on to make a further point about how child benefit is paid. I cannot pre-empt the uprating statement that I shall make on child benefit, but clearly the whole intent of the Green Paper and the policy that we have set out is to continue child benefit as a basic support that is paid to women, but also to do something more.
I think my hon. Friend accepts that it is no good relying only on child benefit. The problem that has been highlighted in our inquiry into social security is that a whole range of low-income families with children need additional support. Family income supplement is not reaching those children. That is why I believe that although FIS rightly sought to tackle the issue and at the time was undoubtedly a major step forward, it suffers now from a number of defects, not least that it has not adequately tackled either the unemployment or the poverty trap. Our view is that it cannot be justified to have a system where a man can be worse off in work than out of work, or where his take home pay may actually fall even though his nominal pay rises. Our proposals for family credit—using net income—seek to tackle that problem and to bring increased help to some of our poorest families.
Mr. Frank Field (Birkenhead)
We welcome the Secretary of State’s statement that the working poor will be given substantial help. I should like to question the right hon. Gentleman about what he means by substantial and extra help. May we have a guarantee that when one takes account of the loss of family income supplement, the cuts in housing benefit and the freezing of child benefit, the new family credit will amount to more than the loss of income on those three fronts?
The purpose is to bring extra help to low-income families in work. We shall set out the objectives and the tables in the White Paper. By introducing family credit we mean extra support, not less support, in that area.
Mr. Tony Favell (Stockport)
Is it not also important to bear in mind the Government’s avowed intention to reduce the income tax burden on the poor? Are not many people in receipt of family income supplement paying tax?
The whole House will share the aspiration to raise tax thresholds. We all agree that many people on low incomes who are paying tax now should be taken out of tax. That is the Government’s aim. I am sure that there is widespread support throughout the country for that.
Mr. Frank Field
Poor families will not be reassured by the statement that more money will be available globally. People want a commitment that individually they will be better off. Will the right hon. Gentleman give that clear commitment?
I have tried to answer that precise point. These issues will be set out in the White Paper. Like everyone else, the hon. Gentleman, even with his expertise, will have to wait until the White Paper is published.
Our second objective is that the social security system must be simpler to understand and easier to administer. I do not see how anyone can be happy with a supplementary benefit organisation which requires almost 40,000 staff to administer, but which, through absolutely no fault of the staff, is not always able to provide the service which is needed.
I do not see how anyone can be happy with a system under which all the main income-related benefits—supplementary benefit, housing benefit and family income supplement—use different measures of income and capital. I do not see how anyone can be happy with a system where local offices simply lack the modern aids which are necessary to provide a modern service.
It is for all these reasons that we are proposing the reform of supplementary benefit, the introduction of a common basis for our systems of income support, housing benefit and family support, and that we are now embarking on the biggest computerisation programme in Europe so that offices will not depend on manual records in the same time-wasting and inefficient way as they do now.
Mr. Charles Kennedy (Ross, Cromarty and Skye)
DHSS staff are experiencing difficulty throughout the country. Will the Secretary of State comment on articles which appeared in the press last week about the confidential Ernst and Whinney report, which apparently advises that 10,000 extra civil servants will be needed to administer the complex new schemes which the right hon. Gentleman intends to introduce?
We are examining the staff implications of the new proposals. A reduction in DHSS permanent staff is expected, and we are examining the temporary, transitional implications. I do not advise the hon. Gentleman to rely on reports about that matter. A newspaper report should not be relied upon for an accurate opinion.
Our third objective is that the social security system must be consistent with the Government’s overall objectives for the economy. The scope for sustaining social security provision depends on the performance of the economy and the creation of wealth. Equally, it means that social security itself should not place barriers in the way of economic development—barriers such as high national insurance rates, which can discourage jobs, or restrictions on pensions which can prevent job mobility.
The Government’s proposals for the reform of social security are set out with those objectives in mind. Clearly the final proposals will be set out in the Government’s White Paper shortly.
Mr. Patrick Cormack (Staffordshire, South)
In the next weeks. At this stage, there are two major points to make. The first, is on the current problems we face, and the second is on future policy. The first point is this. Inevitably, there must be a limit to the resources that any Government can devote to social security. The lesson of that is that resources cannot be wasted—that can only mean areas of undoubted need getting less. However difficult the problems may be, we must ensure that resources are properly directed at those who need them.
That is why we are seeking the control of board and lodging spending. Spending in this area has risen from around £200 million a year at the end of 1982 to £600 million a year by the end of 1984. For ordinary board and lodging it rose from £166 million to £380 million in those two years. There was evidence of abuse—both by landlords and claimants—and young people were being drawn into accommodation which they could not afford to pay for if they were in work. Our aim has been to ensure that proper help goes to those with a genuine need to be in board and lodging, while excluding those who do not.
One part of the regulations was called into question by a High Court judgment at the end of July, and as a result we have appealed to the Court of Appeal. The question of what to do in the interim obviously arises. There is a prospect of prolonged uncertainty, because, whatever the outcome in the Court of Appeal, it will be open to either side to consider an appeal to the House of Lords. So if we do nothing there is the risk of confusion—while at the same time calling into question the increase in benefit payable later this month to people in residential and nursing homes. That is an effect that no one wants.
So, for all the reasons that I set out in my statement at the end of last month, I am laying fresh regulations today which the House will have the opportunity of debating very shortly. They meet the Government’s immediate objectives, while at the same time responding to the Joint Committee’s concerns.
The revised regulations establish the framework of board and lodging areas, time limits and financial limits, without providing for any of the powers questioned in the High Court. They provide for the time limits to be reintroduced for new claimants as soon as regulations are made, but they will not be applied to existing boarders on benefit until 28 July 1986, coinciding with next year’s general uprating of benefits. The regulations also give statutory backing to the increase in the limits for residential care and nursing homes due to come into effect on 25 November.
A number of other provisions enable us to deal with difficult cases. I am taking powers to exempt from the time limits claimants who would otherwise suffer exceptional hardship. I am also taking discretionary powers to help in individual cases of genuine hardship. This will mainly help people in residential and nursing homes who before last April were meeting their own charges, but are unable to carry on doing so and are now entitled to supplementary benefit.
The House will have a very early opportunity of debating these regulations, but there is a further important point that I should make on action which is clearly now necessary to combat the emerging evidence of fraud in this area. The House will recall that a special investigation earlier this year in Euston showed that about half of those claiming to be residents in particular hotels were no longer there—about 600 cases out of 1,200. Following that, I asked for other checks to be carried out in all regions. They are not fully completed. When they are, I shall make the full results available to the House during, I hope, December.
Nevertheless, it is clear already that there is similar evidence of abuse in other parts of the country. The evidence that we have from other parts of London, parts of Manchester and Edinburgh, and from towns like Southend, show that an appreciable proportion of claimants were found not to be resident at the hotel named on their claim form. One address which had been given for 24 claimants proved on investigation to have not a single claimant in residence.
Such examples of abuse involve not only claimants but the proprietors of accommodation. This cannot be totally prevented by the passing of regulations alone, although the size of the abuse can be reduced. Clearly, what is needed is a further effort to reduce fraud and abuse, and I intend, therefore, to increase the scale of our effort in this area. I hope that, whatever else we may disagree on, there will be agreement that fraud, whether committed by claimants or landlords, or both in co-operation, should be combated as effectively as possible. I give notice now that this will be our intention in the coming months.