Orders of the Day — Social Security Bill

Part of the debate – in the House of Commons at 5:15 pm on 28th January 1986.

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Photo of Mr Norman Fowler Mr Norman Fowler Secretary of State for Health and Social Security 5:15 pm, 28th January 1986

That is an entirely fair point. The Government are seeking to provide further options With respect to pensions. We are not saying for one moment that money purchase is the only route. Clearly, there are many excellent final salary schemes. We are saying, however, that for small employers there are sometimes disadvantages in setting up an occupational pension scheme. We are providing extra options for occupational pensions and personal pensions. Of course, the good final salary scheme will remain. We shall support it.

The second part of the Bill covers the three income-related benefits — income support, which will replace supplementary benefit: family credit, replacing family income supplement; and housing benefit. Clauses 19 to 21 basically bring together all three income-related benefits and put them on a common basis. That is a move of major importance. Much of the inequity and complication of present arrangements lies in the different rules for different benefits. At present, for instance, allowances for children are provided at different levels and on different structures in each benefit. The Bill will seek to put that right. All three benefits will be assessed on the same basis. Because we envisage family credit rates keeping ahead of those for income support, we tackle the unemployment trap.

The common basis of assessment will be net income. People will be assessed on income after tax and national insurance contributions have been paid. That will end the position where a reduction in benefit as earnings rise can actually leave people worse off. The use of net income will therefore virtually eliminate the worst of the poverty trap, where marginal tax rates can be in excess of 100 per cent.

Income support will replace supplementary benefit and will be a significant improvement on it. In particular, it will tackle the complexity which bedevils the present system and which is one of the reasons why supplementary benefit requires 40,000 staff to administer it. Income support will be based on standard rates rather than the array of weekly additions and the system of single payments. But those rates must clearly reflect the general needs of particular groups.

Income support will seek to achieve that. It will consist of a personal allowance. In addition, there will be a family premium plus addition, as now, for each dependent child. Premiums will be added to the allowance for pensioners — with a higher premium for the over-80s — and disabled and lone parents. An extra family premium will be paid for each disabled child in a family.

We have recognised throughout that, however well designed a general scheme may be, there is no way of anticipating special or emergency needs. People will still face losses because of sudden or unexpected crises. A domestic crisis may mean large, unforeseen spending. There will still be people who find difficulty in budgeting.

My hon. Friend the Minister for Social Security, who chaired the inquiry on supplementary benefit, will say more on this matter and on income support when he replies; but it is to meet these needs that we are proposing the social fund, with which part III deals. The aim of the fund is that we should be able to respond to individual needs and circumstances. It seems to us that it is not possible to achieve that aim within the context of a detailed regulatory structure — like that for income support —which is linked to a formal adjudication system. Instead, local social fund officers will have the flexibility that a regulatory structure will deny.

These officers will be operating within the framework set out in clauses 32 and 33. As part of that framework, I shall issue directions and guidance to them, which will be published. I shall set up careful monitoring arrangements to ensure that the fund is operating properly. There will be a review procedure where a decision is challenged. This will be designed to ensure that the case has been handled properly and in accordance with my guidance.