Michael Meacher – 1985 Speech on Child Benefit

Below is the text of the speech made by Michael Meacher, the then Labour MP for Oldham West, in the House of Commons on 27 June 1985.

I beg to move,

That this House strongly condemns the Government’s breach of their own repeated promises to increase Child Benefit in line with inflation which will result in mothers and children being deprived of £175 million in the current year as the first of the Green Paper cuts; notes that Child Benefit is uniquely effective in countering family poverty, reducing the poverty trap and ensuring that mothers are the recipients of monies needed for child care; and therefore calls upon the Government to restore the real value of Child Benefit both now and for the future.

Our case in this debate is very simple and very clear. It is that child benefit is uniquely effective in countering family poverty, in reducing the poverty trap and in ensuring that the person who receives the money necessary for caring for the children is the mother. It was a Labour Government who brought in child benefit and, for the reasons that I have just given, we believe strongly that it is a key benefit, central to our social security system, which should be built up and not cut back. It is a benefit which has attracted widespread endorsement.

I offer at the outset one or two quotations. My first is this:

“We would all, I suspect, like to see an increase in child benefit; I think that it is one of the most effective ways in which you can deal with the problem of poverty and the problem of bringing help to children.”

I am sure that we would all say “Heat, hear” to that. Those were the words not of a Labour Minister, but of the present Secretary of State for Social Services when speaking to the Treasury and Civil Service Sub-Committee on 28 July 1982. That was when he still believed in child benefit, just as, when he set up the pensions inquiry, he.still believed in the state earnings-related pension scheme.

If child benefit was, in the Secretary of State’s own words,

“one of the most effective ways”

of dealing with the problem of poverty, does the downgrading now of child benefit mean that the Government are repudiating that objective? The Secretary of State does not appear to want to reply now. No doubt he will do so later.

On 28 June 1983 the Prime Minister said that the Government’s real increase in child benefit then was

“evidence of our commitment to the family.”—[Official Report, 28 June 1983; Vol. 44, c. 49.]

Quite so, but does this latest princely increase of 15p—which is less than one third of the rate of inflation—now indicate that the Government’s commitment to the family is somewhat wilting? That is another question to which we would like an answer today.

I offer a third quotation:

“It plays a major part in easing the unemployment trap, and so in our strategy of improving incentives for everyone. It is important for families, and particularly for the low paid. Indeed, ​ it is the benefit which provides the greatest help to many of the poorest families in the country. I refer, of course, to child benefit.”—[Official Report, 15 March 1983; Vol. 39, c. 143.]

Again that is not some Child Poverty Action Group enthusiast, as one might think, but the right hon. and learned Member for Surrey, East (Sir G. Howe), the then Chancellor of the Exchequer, in 1983.

If child benefit is so effective in all these roles, according to Ministers, why is it being sidelined now? If all those unsolicited panegyrics applied in 1982 and 1983, why do they not apply now?

The Secretary of State’s justification for his backtracking on child benefit was stated by him in his answer to me a week ago, when he said:

“The first priority must be to give help to families in greatest need.”—[Official Report, 18 June 1985; Vol. 81, c. 177.]

It would indeed be a seductive argument if it were true, but it is not. It simply does not reflect what the Secretary of State has done, for three good reasons.
First, only a fraction—about 16 per cent.—of the £175 million saved from the child benefit cut is being used to improve benefits for low-income families.

The improvement in family income supplement will cost just £17 million, and the housing benefit child’s needs allowance £12 million — which had in any case originally been promised for April this year. So the Government are not transferring resources at all; they are cutting benefit to mothers by £150 million.

Secondly, cutting child benefit and spending more on FIS, which is the Government’s strategy, does not concentrate resources on the poorest families. It has the opposite effect. It cannot be stated too often that take-up of child benefit is virtually 100 per cent., while FIS, because it is means-tested, reaches only about half of all the low-paid families which are eligible. Housing benefit is little better—the take-up there is about two thirds. So the losers from the right hon. Gentleman’s package are clear. They are those entitled to FIS but not claiming it, and that is about 200,000 of the poorest families, those with incomes just above the FIS eligibility levels, and mothers and children in families with reasonable incomes, but where the income is not shared fairly. Far from being helped by what the Government have done, those families will be the hardest hit.

There is a third important reason, if one follows through the logic of the right hon. Gentleman’s package, why the outcome contradicts his own claims. It is that even those families which get the family income supplement will find that the so-called extra help that the Government are providing by increasing the FIS prescribed amount by more than 7 per cent. will be swallowed up by the loss of child benefit and the consequential changes in housing benefit.

I shall give an example which effectively demolishes the Government’s case. In March of this year the average FIS payment for a two-child family was £12, which implied an average wage of around £76 a week. Assuming that their earnings increase in line with inflation, this family’s FIS award will increase by £1 in real terms as a result of the higher FIS levels announced by the Government a week ago. However, at the same time, no less than 70p of this £1 increase will be snatched back by the cut in child benefit.

Indeed, the result will be even worse because of the infernal logic of the interconnection between means tested benefits. Because increases in FIS are taken into account ​ for calculating housing benefit, many parents will find that the gain in housing benefit due to the increased child’s needs allowance will be outweighed by the downward adjustment to housing benefit resulting from the higher FIS levels. The Secretary of State looks puzzled, but I hope he realises the logic of his own proposals. That is exactly what will happen even to those who get the fullest benefit of his increases.

The result of all that was the boast by the Secretary of State a week ago:

“The first aim is to direct help to the poorest … That is precisely what we are doing”.—[Official Report, 18 June 1985; Vol. 81, c. 177.]

That is not borne out by the facts. Indeed, the truth is the reverse. Downgrading child benefit and upgrading the odds and ends of means tested benefits at the margin does not bring the greatest help to the poorest families, but traps them even more deeply in their own poverty.

We know the Government’s real motive behind this child benefit cut. It has next to nothing to do with targeting the needy, which is Fowlerspeak for more means-testing. It has everything to do with cutting expenditure on benefits to safeguard future tax cuts, which, as usual, will go mainly to the better off and the rich.

Mr. Jerry Hayes (Harlow) rose—

Mr. Meacher

If the hon. Gentleman was in his place at the start and heard my argument, he knows how compelling it is. If it has a fault, I should like to know what it is. It contains the compelling fact that even those who will benefit most by the increase in FIS levels will probably lose in net terms, leaving aside those who, because they do not claim FIS, do not get the benefit.

Far from concentrating resources on poorer families, which will not happen as a result of this package the proposal paves the way for concentrating resources on the richer sections of society — a redistribution which has become the characteristic hallmark of Thatcherite Toryism. That connection was made absolutely explicit yesterday by the Chancellor of the Exchequer when he made a ringing call to bankers and business men at the Carlton Club in favour of further tax cuts at the expense of further public expenditure cuts, and child benefit is the first victim of that renewed Treasury drive.

Mr. Hayes

How can the hon. Gentleman say, hand on heart, looking at the figures, that the Government’s proposals are not designed to help families most in need, when he has not mentioned that one-parent benefit has increased by 7 per cent., that the child’s needs allowance has gone up to £15.40 a week, and that there is a new higher prescribed amount for families with older children?

Mr. Meacher

I am not surprised that the hon. Gentleman ran away after a single day when he was setting up a new organisation in the Tory party, if those were the sorts of arguments that he had in mind. He obviously has not listened to my remarks. I mentioned the increases in housing benefit, in the child’s needs allowance and in the FIS prescribed amounts. I agree that for one-parent families the FIS increase is an improvement, but would the hon. Gentleman care to give the details of the increases and the number of families who will receive them? They are minuscule compared with the 12 million children who are losing 35p every week this year as a result of the cut in child benefit.

​This switch from public expenditure to taxation cuts has precious little justification. The Financial Times—scarcely a Left-wing publication—commented on 20 June, just after the Secretary of State announced his package:

“By looking for economies in the benefits but not in the tax allowances which form part of the welfare system, the Government is open to the charge of unfairness. The real value of child benefit, in reality a substitute for child tax allowances, is to be cut by nearly 5 per cent., yet the Chancellor recently raised the married man’s tax allowance, enjoyed by couples without children, by twice the rate of inflation.”

In truth, the married man’s tax allowance has been increased by about 17 per cent. — that is, if it was increased by the statutory price-linked formula which the Government use—whereas child benefit is 3 per cent. lower in real terms — that is, if it was pitched in accordance with that formula. That demonstrates how, long-term, the fiscal trend under Tory policies has worked against families.

Mr. John Butterfill (Bournemouth, West)

When does the hon. Gentleman intend to depart from the brief prepared by the Child Poverty Action Group? Is he aware that most of us have read it?

Mr. Meacher

I am pleased to hear that. I hope that many Conservative Members, including the Secretary of State, will read it, because it represents a devastating indictment of the Government’s social policies. If the Secretary of State read more documents such as that at bedtime, rather than the briefs from his Department, we might get better policies from him.

I quote again from the document, this time from the Conservative Women’s National Committee, the publications of which I do not normally read. In a passionate plea on behalf of child benefit, that organisation said:

“We recommend that as economic circumstances permit, child benefit is increased in line with increases in tax allowances, or at least protected against rising prices.”

Poor old Emma Nicholson. She really did her best among the upper echelons of Conservative women. Just her luck that the present Government are led by a women who happens to be more like a man. [HON. MEMBERS: “Sexist.”] I am sure that the Prime Minister will be delighted by that reaction from the Government Benches.

There is a further important reason why this attack on child benefit cannot be justified on the grounds of public expenditure costs, which is what I suspect the argument is really all about. Even if child benefit had been indexed fully in line with inflation—as we believe it should have been—expenditure on it would still be falling in real terms. That is because the number of children qualifying for it has been, and still is, falling. It fell by 1 million in the six years up to 1984, and that reduction saved about £300 million at present benefit rates. Moreover, the number will continue to decline in the immediate future because of the relatively low birth rates of the late 1960s.

All of that is in addition to the fact that the Conservatives have cut spending on child support since 1979 by allowing child benefit to fall below its 1979 level during the period up to the November 1983 uprating, and by the steady and continuing reduction in the real value of child support for national insurance beneficiaries. For those reasons, there is absolutely no excuse today, in expenditure terms, for chopping back child benefit even further.​

Mrs. Edwina Currie (Derbyshire, South)

The hon. Gentleman referred to the position in 1979 and then carefully spoke of the November 1983 uprating. Is he aware that in that uprating, and in the November 1984 uprating, the resulting real value of child benefit was higher than in any year under any Labour Government back to 1951?

Mr. Meacher

Quite, and we are approaching November 1985. It is true that at November 1984 prices the value of child benefit rose to £6·85, the level from which it is now being increased. That is marginally, by 15p, above the level in April 1979. However, at November 1984 prices, in the same real terms, it is now to be lowered to £6·57. That is precisely our objection. Child benefit is not being increased steadily in line with rising prosperity and increasing growth, as we are always being told, but is being lowered.

There is even less excuse for any cut in child benefit. The Government are mortgaged to the hilt in terms of promises about child benefit. The previous Secretary of State for Social Services, the right hon, Member for Wanstead and Woodford (Mr. Jenkin) said in 1980:

“We are committed to the child benefit system and it is our intention, subject to economic and other circumstances, to uprate child benefit each year to maintain its value.” — [Official Report, 28 July 1980. Vol. 989, c. 1063.]

Perhaps we should now ask: are the Government saying that the economy is in a worse shape than in 1980, so that the promise of the then Secretary of State no longer holds good? Otherwise, we should like to know how their actions are justified.

Equally important, I quote from the letter from the 38 organisations, including the National Federation of Women of Great Britain, to the Prime Minister in March this year. The letter reminded the Prime Minister of her pre-election assurance:

“there are no plans to make any changes to the basis on which child benefit is paid or calculated.”

Nothing could be more unequivocal than that. Moreover, the letter went on to say:

“In our view, the retention of child benefit, paid at a reduced level in real terms, alongside a restructured system of means-tested child support would mean a ‘change in the basis of that benefit’. The Government would be seen, we believe, to be paying lipservice only to the principle of a benefit for all children, and would be widely suspected of intending to allow the reduced universal benefit to decline in value until it withered away and was replaced entirely by means-tested provision.”

In a nutshell, that is exactly what is happening, despite all the Government’s solemn pledges which are churned out like confetti before an election and then disappear like snowflakes on a boiler after it.

What is most worrying is that this attack on child benefit is not a “blip”—to use a word which I believe is beloved of the Chancellor of the Exchequer—but part of a calculated long-term strategy on the part of the Government to run down child benefit. I quote from paragraph 4.49 of the Green Paper, which is a very important statement by the Government:

“The Government believe that it will be right to give greater priority to assistance for families in the income range covered by family credit than to the assistance given to families as a whole through child benefit. We will therefore have regard to the need to concentrate resources in this area … in determining the overall level of child benefit.”

That says it all. Today we are debating the beginning of the end of child benefit. All that I would add is that to embark on this strategy—​

The Secretary of State for Social Services (Mr. Norman Fowler)

As the hon. Gentleman is about to conclude, are we to understand that we shall have this debate without him informing us of his own policy in this area? Does the hon. Gentleman still stand by the pledge that he made only two months ago to abolish the married man’s tax allowance?

Mr. Meacher

I shall certainly outline not only our future policies but what we have done in the past. In April 1974 the Labour Government inherited child benefit at £5·14, at November 1984 prices. We increased that to £6·70. We shall not cut child benefit. We shall seek to increase it, not in line with prices as we did previously, but to do better than that. We stand on our record. If only the right hon. Gentleman could do the same. He inherited the level of £6·70, and it will fall this November to about £6·57.

Mr. Fowler

The hon. Gentleman said in a statement only two months ago that he would double child benefit and abolish the married man’s tax allowance. Are we to understand from what he has just said that that part of his policy has been abandoned?

Mr. Meacher

I think that the right hon. Gentleman is used to the terminology of Green Papers. I hope he believes that Green Papers are the subject of consultation. I made it clear that the document I released was not party policy, but a consultative paper. There should be serious consultation about whether we spend £4·5 billion on the married man’s tax allowance, which is in no way concentrated on those who need the money, instead of increasing child benefit, which is far and away the most cost-effective and direct way of assisting those in need. That is a serious question, and if the right hon. Gentleman seeks to make a mockery of it I think that his view will be taken into account by the people of this country.

It is a travesty of consultation that the Secretary of State, having issued a Green Paper, which we presume is for consultation, embarks on carrying out the policy with his first statement no less than two weeks after he issued the Green Paper. Is that his idea of a Green Paper and consultation? That is also a pointer to the shape of things to come from the Green Paper. So far we have been given no figures from the right hon. Gentleman’s policy document, after the most important review of the welfare state for 40 years, except for two. One is a £500 million cut in housing benefit, and now we have a £175 million cut in child benefit. It does not exactly fill us with a great deal of confidence as we await the rest.

It is our contention in this debate that the Government’s family policy—if I can dignify it with that title is fundamentally flawed and misconceived. In seeking to justify the cut, the Prime Minister argued on 20 June that the alternative to raising tax thresholds is

“of particular benefit to families”. [Official Report, 20 June 1985; Vol. 81, c. 433.]

It cannot be said too often and too strongly that that is absolutely wrong. An increase in tax thresholds gives most money to the highest paid and least to the low-paid lifted out of tax, while the half a million working families with children below the tax threshold gain absolutely nothing. An increase in child benefit, on the other hand, is pound for pound a far more discriminating way of assisting families and concentrating help on low-paid families in need.

Even the Government’s Green Paper accepts, at paragraph 4.44, that

“Child benefit is simple, well understood and popular.”

Yet, perversely, the Government now want to give higher priority to family income supplement, which is complicated, poorly understood and unpopular, and moreover, worsens the poverty trap. Not only that, but the problems associated with FIS will be compounded by the shift to the proposed family credit scheme. In particular, not only will payment through the pay packet be used. I suspect, to subsidise low-pay employers, but the benefit is less likely to be spent on the children, and the take-up could be reduced still further.

Last November the Government clawed back £1 a week from pensioners on supplementary benefit who were getting heating allowances. This June they are clawing back £1 a week from families with three children. That cut further threatens the diet and health of children, especially since the Government have already withdrawn school milk and run down school meals, when one third of all children in our society are in families living either at or only just above the Government’s own poverty line. It is not a policy for families; it is a policy for cutbacks at the expense of families. Because 7 million mothers and 12 million children will lose, I earnestly and unhesitatingly request every Member of the House who cares about families to vote for our motion.