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Payment and Recovery of Family Credit

Orders of the Day — Clause 19 – in the House of Commons at 9:45 pm on 19th May 1986.

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Photo of Mr Robin Squire Mr Robin Squire , Hornchurch 9:45 pm, 19th May 1986

I beg to move amendment No. 68, in page 34, line 4, leave from beginning to `by' in line 5.

Mr. Deputy Speaker:

With this, it will be convenient to consider the following amendments: No. 69, in page 34, line 4, after `employer', insert 'at the request of the claimant and, if he is a member of a married or unmarried couple, the other member'. No. 70, in page 34, line 7. leave out paragraph (b).

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

The effect of these amendments is to return to the existing principle relating to those on family income supplement, namely that support for low income families is paid by the DHSS to the stay-at-home parent, who is usually the mother.

I have read about the Herculean labours of my hon. Friend the Member for Kensington (Sir B. Rhys Williams) in Committee—

Photo of Jeremy Corbyn Jeremy Corbyn , Islington North

What about the rest of us?

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

I take the hon. Gentleman's point. Other hon. Members also played their part. However, I am sure that the hon. Gentleman will readily concede that the labours of my hon. Friend the Member for Kensington of which I speak were indeed prodigious. They were well directed and my hon. Friend made his case in Committee. Unfortunately, he lost the amendment concerned by a single vote. I am grateful for the opportunity this evening further to put the case and I trust that this time we shall be more successful. I am urging the status quo upon my right hon. and hon. Friends. I can hardly think of a more Conservative principle than that.

To summarise my three main bones of contention, they are these. First, I believe that the Government's proposals, as drafted, will place a considerable administrative burden upon employers in general, particularly small employers. Secondly, as a direct consequence, particularly for small employers, there will be a reduced take-up, because some employers will not wish to become involved in benefit matters with their employers. Thirdly, I believe it to be a retrograde step to cease payments to the mother or caring parent. If we had had our expected debate on child benefit earlier this evening, I should have expected my hon. Friend the Minister forcefully defend the right for benefit to be paid to the caring parent. There is a more than strong argument that family credit should be treated in exactly the same way.

Let me illustrate first the effect on employers by quoting some of the many submissions which my right hon. Friend the Secretary of State has received. The Confederation of British Industry was clear. It said: The CBI does not consider that it is essential or appropriate for the proposed family credit to be paid by employers. Members do not believe the 'pay packet' is the proper vehicle for social security benefits; it is more appropriate for social security benefits be paid separately to wages and identified as money paid by the Government … Under this proposal there would be no great administrative saving to the Government as the DHSS would undertake assessment of entitlement. Indeed, there would therefore be a duplication of effort. The Institute of Directors said simply: Our one concern with the proposal for family credit to be paid through the employee's pay packet is the additional administrative burden this may place on employers. The National Farmers Union said that it runs entirely contrary to initiatives from other Government departments to reduce the legislative and administrative burden imposed on business by the Government. The proposed family credit scheme will especially affect employers with small workforces, such as farmers, who do not have the time or personnel to spare to devote to such administrative tasks. The National Federation of Self-Employed and Small Businesses said: From the employer's point of view, the fact that women do not receive the benefit and that child benefit may decrease will do nothing to increase the harmony of employee employer relationships when employers are responsible for meeting part of the needs of the family. In view of the above, we therefore see the proposed family credit benefit as a retrograde step for both employees and employers alike … it will just complicate the employment relationship. Those are hardly ringing tones of endorsement.

As it happens, large employers will probably be able to handle the scheme, although I question whether they should be required to do so. More interesting comments, dealing with the effectiveness of the DHSS, have come from the National Association of Citizens Advice Bureaux which said: The proposal to involve both the DHSS and the employer in the payment of family credit will simply serve to exacerbate the very worst elements of the FIS scheme and of means-tested benefits generally. For example, employees will still be required to apply to the DHSS who will be responsible for the assessment of entitlement to family credit. The DHSS will then have to liaise with the employer over payment. The extra administration required will increase the burden on already overworked local DHSS office staff. There can be few hon. Members who do not recall the problems in recent years—housing benefit being one obvious example—where a benefit or payment has been required to be linked up to two or more points of contact prior to payment. It was an interesting time. That is the fairest way that I can put it. I dread that we may be setting up here a repeat performance and I urge my hon. Friends to think carefully before they support it.

In a sense, an even worse comment came from the same quarter. The NACAB said: The scheme is open to substantial abuse by some unscrupulous employers who may be unwilling to administer it. It gave an example from its Prescot office and I urge hon. Members to bear this in mind. That office approached a local shopkeeper to test his reactions to the family credit proposals and the following conversation was reported: I said employers would be asked to pay family credit to those entitled although the DHSS would work out the amounts to be paid. If that was the case, he said, without any prompting from me, he would enquire how old the children were if he was taking on new staff, and favour either young girls or older women to avoid the problem as he felt he had quite enough paperwork already and had no desire to probe into his employees' private lives. I discussed with him the possibility of discrimination against people with school-age children being illegal and he gave me an inscrutable look and said it would be difficult to prove if you worded your advert fairly broadly". Thus, rather than helping to alleviate unemployment amongst people with family responsibilities, family credit could aggravate their employment problems. The last quote on this subject is from the same source, the National Association of Citizens Advice Bureaux, and it touches on the question of the confidentiality of employers and employees. The association said: The lack of confidentiality implied by the involvement of the employer in the payment of benefit, the additional strain which this would place on a sometimes tenuous employee/employer relationship, the stigma associated with being on benefit and everyone knowing about it, as well as a reluctance by loyal employees to place an additional burden on hard-pressed employers, will undoubtedly serve to limit the take up of the new family credit. I now turn to the matter of the cessation of the payment of benefit to the mother which, in most cases, would flow from the proposals. This breaks virtually a 10-year cross party agreement on the payment of benefit. I regret that break. It also breaks what I see as the natural link with child benefit that we have rightfully confirmed and which my right hon. Friend regularly affirms will remain payable to the mother. On this issue equally hostile comments have come in. The National Council of Women of Great Britain said: We take great exception to the statement that a disincentive to work and self-help has been 'exacerbated by the way that child benefit and FIS are paid, normally to the wife, so that wage earners may not be fully aware of total income which their family is receiving.' We stress that in many cases it is the wives who are not aware of total income the family is receiving. The National Federation of Women's Institutes said: The strongest feeling in this area was over the proposal to enclose family credit in the pay packet of the main wage-earner, usually the husband. A very large majority of members were adamant that family credit should be paid to the mother, either in her pay packet or through the Post Office if she is not working.This issue brought almost unanimous protest from our members. It is vital that family credit should be paid to the mother, as happens now with family income supplement. Finally, the National Association of Citizens Advice Bureaux said: The payment of family credit through the wage packet to the chief breadwinner rather than by order book to the principal carer (usually the mother) has been greeted with shock by the bureaux. This move will mean the transfer of essential income from the woman to the man, and in many cases, the loss of benefit to the children. This will have dangerous consequences.

Photo of Nicholas Winterton Nicholas Winterton , Macclesfield

I know that my hon. Friend has done a great deal of research into this and allied subjects. In order to present a balance in his argument, could he tell us if any body or organisation has made representations to him in support of the proposal contained in the Bill?

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

My hon. Friend the Member for Macclesfield (Mr. Winterton) has asked a revealing question. I am led to believe that the one submission that unreservedly supports the Government on the subject is the Monday Club. That is a grouping which I can best describe as not always identified with a caring approach to social matters of this ilk. The important point that my hon. Friend rightly makes is that a wide range of organisations, many of which are traditionally seen as supporters or at least friendly to our party, are hostile to this proposal. Only last week nine of these organisations, including the CBI and the National Farmers Union and others consisting of what I would term our Government's traditional supporters, wrote to my right hon. Friend expressing their deep anxiety. Also last week, even the Scottish Conservative party conference passed a motion congratulating the Government on the social security proposals but asking them to reconsider those for the family credit scheme. From all sides comes the cry, "Think again." I move the amendments in the fervent hope that the Government, my Government, will react to the red warning lights ahead before it is too late.

11 pm

Photo of Michael Meacher Michael Meacher Shadow Secretary of State, Member, Labour Party National Executive Committee

I support the hon. Member for Hornchurch (Mr. Squire), but I intend to widen the argument beyond the restrictive dimension of the impact on employers.

I endorse the argument so strongly and effectively put in Committee on an amendment that was lost by only one vote. I pay tribute to the general work done in Committee by the hon. Member for Kensington (Sir B. Rhys Williams) and to his support for the case.

First, there is a case against payment through the pay packet. That is a deviation from the principle that has been widely supported throughout the country and accepted within the Conservative party that benefits for children should be paid directly to the parent who has regular, day-to-day responsibility for looking after the child. In most cases where there are two-parent families, the change will mean payments being made to the father, which will undoubtedly lead to greater hidden porverty among children and mothers in families where the income is not shared fairly. We know that, regrettably, there are many such families. The change will also deprive women at home of an important source of independent income, as many surveys have repeatedly shown.

The Government's proposal is also likely to reduce take-up, because, contrary to what the Government have said, workers do not like their employers being involved in claims for means-tested benefits. Ministers tried to contest that argument in Committee, but it was widely felt by other members of the Committee that they were not convincing when they said that confidentiality should not be a problem.

Although employers will not receive personal information about their employees, they will inevitably know who is receiving the benefit and the amount that he is receiving. Even if the employees' fears are irrational, they are certainly real enough and could influence their willingness to claim.

The change will also create an administrative burden for employers, especially small employers.

Photo of Mr Michael Stern Mr Michael Stern , Bristol North West

Will the hon. Gentleman comment on a matter that was not raised in Committee? Every employer receives a PAYE code number for each employee and, following the simplification of PAYE in the past few years, it is not too difficult for an experienced employer to work out the make-up of any code number and ascertain, for example, how much maintenance an employee is paying his ex-wife.

Photo of Michael Meacher Michael Meacher Shadow Secretary of State, Member, Labour Party National Executive Committee

That is a very Jesuitical argument. I do not think that many employers will spend time and energy going through code numbers to detect payments that might be made for maintenance of a spouse or for any other similar purpose. If the hon. Gentleman is trying to suggest that because that can be done for other purposes there will be no disadvantage if family credit is paid through the pay packet, his argument does not succeed.

The CBI said in March that it could not see that any improvement in take-up was likely to result from the Govenment's proposals. We believe that they will certainly result in a lower take-up.

The change is not designed to cope with frequent job changes, which, unfortunately, are a characteristic of thelow-paid, or with frequently changing employment patterns. I am delighted that the hon. Member for Macclesfield (Mr. Winterton) asked about the responses to the Green Paper. An analysis undertaken by the Child Poverty Action Group revealed that only one organisation — the Monday Club — unequivocally supported the Government's proposal.

Employers are, I think, universally against the proposal. The Association of Independent Businesses called it an unwelcome development … Increasing the burden to an employer should not be the tool through which integration is achieved". The National Federation of Self-Employed and Small Businesses—an organisation dear to the hearts of many Conservative Members — has dubbed it madness and argued that from the employer's point of view, the fact that women do not receive the benefit and that child benefit may decrease will do nothing to increase the harmony of employee-employer relationships when employers are responsible for meeting part of the needs of the family … We therefore see the proposed family credit benefit as a retrograde step for both employees and employers alike. I shall take up briefly some of the arguments advanced by Ministers in Committee. I do not know whether the Secretary of State will repeat them, but I want to make it clear that we have not so far found any of the Ministers' arguments convincing. First, they said that family credit should be compared with supplementary benefit and that no one would suggest that children's supplementary benefit rates should be paid to the mother. Family credit and child benefit are alternative ways of assisting working families with children, and that is the relevant comparison. Even if comparison is made with supplementary benefit, family credit, unlike supplementary benefit, is confined to families with children. Surely it is valid to suppose that all of it is intended to meet children's needs. That is the distinction and that is why the comparison with supplementary benefit is not correct.

Secondly, Ministers have said that payment to the mother is patronising and denies that parenthood is a shared responsibility. The Opposition agree that parenthood is a shared responsibility, but the reality is still that primarily mothers take the main responsibility, and in two-parent families the family income supplement is essentially a benefit for families where the mother stays at home. It is no more patronising for the law to encourage payment to be made direct to the caring parent than for it to decree that payment must be made through the pay packet to help low-paid workers to be more aware of the total family income, which is the main motive behind the Government's move.

Thirdly, Ministers have said that mothers who work 24 hours or more a week will be able to receive the credit. That is so, but it will affect only about one in 10 of mothers in two-parent families. It is precisely in those families where the mother does not have a wage of her own that direct payment of benefit to her is most important

Fourthly, Ministers argued that the Government's proposal is a step on the road towards integration of the tax and benefit system. The Green Paper on the reform of personal taxation makes it clear that there is no intention of wider integration of the tax and benefit systems. But even if tax and benefit were integrated, that would not be incompatible with direct payment of family credit to the mother. That argument was accepted by the Select Committee that considered tax credit and by the 1970 Conservative Government. Even if it were the intention eventually to pay family credit automatically through PAYE, there is no reason why payment through the pay packet should start now, with all the attendant disadvantages and none of the advantages of an integrated scheme. In so far as there will be an illusion of integration as family credit appears as an offset against national insurance and PAYE on the wage slip, it will reduce the likelihood of the money being earmarked for the children.

I turn to the real motive behind the Government's proposal, to which Ministers referred obliquely when they said that it would increase low-paid workers' awareness of total family income and therefore help tackle the unemployment trap. That is what it is all about. It is not a DHSS motive at all: it is a Treasury motive which the Government seek to impose for Treasury reasons. The aim is to make people accept work for low wages. It is nothing to do with family poverty and nothing to do with a policy of remedying the difficulties of low-paid workers. It has everything to do with pushing down wages even lower. That is why we oppose the proposal, why I hope that Government Members will support the hon. Member for Hornchurch—I give him credit for his amendment—and why we reject this retrograde step.

Photo of Mr Andrew Rowe Mr Andrew Rowe , Kent Mid

Every time I think that I shall be persuaded by the Opposition, I have only to listen to the hon. Member for Oldham, West (Mr. Meacher) to find my faith in what I was about to say rudely shaken. However, I must say again that the small businesses and the people who do not have the time or cash to join the relevant organisations are distressed by the thought that yet another function formerly discharged by central bureaucracy is to be discharged at their own hand. It is ironic that the Government have rightly paraded as one of the great triumphs of policy the creation of hundreds of thousands of small companies in the last two years. Every 100 firms which began on the enterprise alliance created 99 new jobs.

Companies of that size not only do not want the additional paper work which would result from such schemes, but their perception is tharge if they make a mistake in the administration of the scheme they will lay themselves open not only to inspection but to the law. There are quite enough perceived and real impediments to setting up a small business for that to be an additional disincentive.

Many small firms are teetering on the brink each day. They might have to go in the end. They might employ two or three people and many in charge are at an age when it is not easy to adapt to change and they are frightened of additional burdens. They might decide to bring forward by three or four years the day when they put up the shutters with the consequent loss of employment which we cannot afford at this time.

I am practical enough to know that it is improbable that at this late state the Government will be able to reverse all that they said in Committee, although I hope that they will. At least may we have an assurance that the Government will look at the matter carefully and, if events turn out as I fear, that they will reverse the policy?

Photo of Mr Archy Kirkwood Mr Archy Kirkwood , Roxburgh and Berwickshire

I agree with the tone adopted by the hon. Member for Mid-Kent (Mr. Rowe) because I think that hon. Members should pause and consider exactly what is happening to small business men. In Committee the Government relied heavily on the argument that statutory sick pay was a useful model, as was statutory maternity pay. They argued that businesses could cope. with no difficulty.

In my experience, that is wrong. My constituency contains a high proportion of small businesses. There is a fear and misgiving about the administrative burden that the proposal will impose upon their daily lives. Government Members should think carefully before they support the Government on this matter.

I have some sympathy with some of the family credit changes in other directions, but is irrelevant and unneccessary to pay it in the proposed fashion. It is not beyond the wit of man to retain the Government's family credit scheme—if that is what they are minded to do— without this method of payment. That point should be borne in mind by hon. Members opposite when they vote. They are inflicting agony and additional adminstrative burdens on many traditional supporters of the Conservative party, but they are not necessarily striking at the Government's main intention to introduce a family credit system.

My additional fear about the system that the Government propose is that it will necessarily, de facto and in principle, affect the take-up provisions. We were told by the Government that there is a 50 per cent. take-up of family income supplement. Hon. Members on both sides of the House agree that the level of take-up is too low. The Government estimate that family credit will have a take-up rate of 60 per cent. I think that that figure is still too low. The figure of 60 per cent. is an optimistic one.

I endorse what the hon. Member for Oldham, West (Mr. Meacher) has said thus far about the problems of the employee-employer relationship—an employee and an employer discussing intimately the details of family credit —and confidentiality. In my part of the world—I do not know about other Members' areas; the position may be different in their part of the world—it is a anathema for many employees to discuss such details with their employer. Because of their pride they would rather do without. That may be wrong, but it is a fact. We are not talking about substantial sums of money. Often, family credit payments will be only £2·50 or thereabouts.

I ask hon. Members opposite to put themselves in the position of an employee having to approach his employer every 26 weeks and saying, "My assessment unit is so many people and my income is so much," and so on. I do not believe for one moment that take-up will not be affected. History will prove either me or the Government right. The Government will be lucky to achieve their target of 60 per cent. If they do not achieve it, the whole basis of their argument about family credit will be vitiated. Any benefit that the Government wish to accrue from the proposal will go straight out of the window. That is an important argument.

I served on the Standing Committee. I was deeply impressed by the number of organisations which responded to the proposal. The organisations, which included the Salvation Army where not those normally associated with political lobbying. The organisations represented an unholy coalition of all sorts of people— from political lobbyists down, or up, depending on how one looks at it.

If the Conservative party intends to go down that road in the face of such opposition from people who are not necessarily involved in the day-to-day political process, it is making a sad mistake. For those reasons, I think that the Government should be forced to change their position— not that it will result in the Government losing the proposal, because that is not necessary. The Government could change the detail of implementing the proposal in a way that would satisfy everybody by accepting the amendment moved by the hon. Member for Hornchurch (Mr. Squire).

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

I am very happy to support my hon. Friend the Member for Hornchurch (Mr. Squire).

I am the more uneasy about the proposals on family credit, because we were prevented earlier this evening from discussing the proposals for child benefit. We cannot therefore be sure that child benefit will not shrink. If it does, it will be all the more important for family credit to be paid to the mother or normally caring parent. The overwhelming majority — about 90 per cent. — of families that would receive the benefit depend on the single income of the father.

The Lancashire Federation of Women's Institute— down-to-earth women, sensible and exceedingly well informed—say firmly: at best, giving family credit to the father will be an inconvenience for mothers; at worst, it may mean she will not receive the money at all. It would be tragic if women were deprived of an independent source of income.

Some years ago, when discussing a rather different system of taxation, we were astounded at the number of women in all walks of life, from professors' wives to the lowest income families, who had no independent income except family allowance, as it then was. It would be deeply regrettable if we degenerated to that again. I therefore hope that the House will consider carefully and support the amendment.

Photo of Mrs Renée Short Mrs Renée Short , Wolverhampton North East

The House will know that the Social Services Select Committee examined the Green Paper, the White Paper and then the Bill when it was published, and that we published our report in time for the work of the Standing Committee. It is a matter of great regret that so little attention was apparently paid to our recommendations.

The Select Committee supported an integrated system of tax and child credits, but said that there was no reason why family credit, which replaces family income supplement for low-income families, should not be paid direct to the caring parent. We also drew attention to the complexities inherent in payment through the employer. An employee might change jobs, be laid off because of a shortage of work, become redundant or be on strike. All of that was discussed, as was the potential effect on the level of wages of paying family credit through the employer.

I was pleased to see the hon. Member for Kensington (Sir B. Rhys Williams) propose an amendment in Committee to enable family credit to be paid direct to the person normally entitled to claim child benefit. That really means preserving the status quo. The amendment was defeated. I regret that that defeat was brought about by the defection of a member of the Standing Committee who is a member of the Select Committee and by a member of the Standing Committee who is a former member of the Select Committee. The Opposition would have carried the amendment if those two hon. Members who, needless to say they are Conservative Members, had remained constant and true to the decisions of the Select Committee, to which their names were attached.

In Standing Committee the Minister gave no indication that the Government would change their proposal to pay family credit through employers, but I understand that he gave an undertaking to look at the details, although I do not know how far that will take us. The Government's present proposal is deplorable. It is against women, against mothers and dismally retrograde in every respect. I hope that the House will throw it out and see that the Select Committee's proposal is supported.

Photo of Nicholas Winterton Nicholas Winterton , Macclesfield

I am grateful to the hon. Lady, who is a distinguished member of the Social Services Select Committee, of which I also happen to be a member, for giving way. Perhaps she should emphasise the fact that the thoughts, considerations, recommendations and conclusions of the Select Committee were representative of all parties in the House. Perhaps she agrees that it would be better if Governments allowed Select Committees to put their conclusions and recommendations on major legislation such as this to the Government before they reach fixed conclusions which are widely opposed throughout the country, even by people who traditionally support the Conservative party.

Photo of Mrs Renée Short Mrs Renée Short , Wolverhampton North East

I agree with the distinguished co-member of the Committee. All the members supported the Select Committee's recommendations. The House surely knows that there is a majority of Conservative Members on the Committee, and several parties are represented, but we were unanimous.

It is a matter of great regret that the Secretary of State and Ministers do not pay more attention to united and unanimous reports from Select Committees, especially when, as I say, there is a majority of Conservative Members on the Committee. It is nonsense that so much time and effort are wasted in this way, when Secretaries of State could make their jobs much easier if they would follow our proposals.

Photo of Mr Keith Best Mr Keith Best , Ynys Môn

It sadly looks as though my right hon. Friend the Secretary of State will be standing all alone against the barrage of opposition from both sides of the House. I wondered whether I should rise to support him, but then I thought again. I thought again because, although I am always much persuaded by what my right hon. Friend has to say—I await with eager anticipation the words that I know that he will utter from the Dispatch Box in order to turn the barrage of dissension into a victory —I looked at the degree of opposition to this measure. My grave concern is that the good idea of family credit is likely to be hoisted on the petard of that opposition.

I can live with the opposition of the catholic bishop's conference. That does not bother me very much. I can even live with the opposition of the Commission for Racial Equality. I can certainly live with the opposition of the Equal Opportunities Commission. I find it a little more difficult to live with the opposition of the National Association of Citizens Advice Bureaux. One may say that that is a constituency point because I have a citizens advice bureau in my constituency. I wonder how many hon. Member do not have such a bureau in their constituency. I can live with the opposition of the Church of Scotland as that does not apply to me particularly. The Confederation of British Industry is not always regarded as the staunchest supporter of the Government in a somewhat confused way so perhaps one can discount that and I can certainly live with the opposition of the Institute of Directors.

However, I am in grave difficulty with the National Farmers Union because of all the farmers in my constituency and I am in grave difficulty with the opposition of the National Federation of Self-employed and Small Businesses Ltd and with the National Federation of Women's Institutes. [Interruption.] My hon. Friend the Member for Harlow (Mr. Hayes) obviously has knowledge of that institution. Finally, I speak as a member of the Bar. How could I possibly rail against the opposition of the Law Society, my very bread and butter in an alternative profession?

I am troubled by the sheer administrative burden that this is likely to bring about more than by all the opposition and all the points that have validly been made by hon. Members from both sides of the House. I shall put my right hon. Friend the Secretary of State out of his misery soon because I shall be sitting down so that he can rise. I hope that he will address his mind to that administrative burden when he comes to the Dispatch Box.

To have to employ a lot of extra civil servants to check whether the DHSS is assessing the matter correctly, to pass it on to the employers, and then check on the employers to see whether they are making the right calculations and see that the recalcitrant employers are brought to book, apart from all the burdens that are being placed on the employers, seems to be contrary to the concept that the Government have courageously entertained throughout the past seven years. That concept is to cut the administrative burden, particularly in areas of social welfare, to ensure that the benefits go to the recipient rather than being spent on the administration. The proposal will create a bureaucratic mess of unparalleled proportions, by creating two bodies responsible for the administration of one benefit rather than one.

I await my right hon. Friend the Secretary of State rising at the Dispatch Box and persuading me otherwise. He is a most persuasive speaker, but in the event of him not being able to do so, the general opposition of the bodies that I have mentioned, together with the views expressed by hon. Members on both sides of the House, must be persuasive in a way that defies all opposition.

Photo of Jeremy Corbyn Jeremy Corbyn , Islington North 11:30 pm, 19th May 1986

It is surprising to find Conservative Members working themselves up into a lather in defence of small businesses, when they are not prepared to criticise the fundamental nature of the family credit proposals and the poverty that they will bring with them. They seem to be trying to cash in on a bit of compassion on the issue without being prepared to attack the basis of the proposals. My hon. Friend the Member for Oldham, West (Mr. Meacher) was correct when he said that the proposals are, in effect, masking low wages. That is the issue that should be addressed.

It is important that the amendment be accepted, because if the proposals go through in their present form, there will be interference by employers in the social benefits that their employees get, which is serious. Much more serious is the proposal that the benefit should in most cases be paid to the man who is likely to be earning the money. Therefore, it is unlikely to get to the woman, and it is even less likely to get to the children at the end of the day—[Interruption.] If the hon. Member for Gillingham (Mr. Couchman) wishes to speak, I am sure that he has a tongue in his head. There is no need to mumble. It is clear that the losers will be the children.

Photo of Mrs Jill Knight Mrs Jill Knight , Birmingham, Edgbaston

I want to press the hon. Gentleman on one point. Does he really think that it is unlikely that the fathers would pass on the money? I can imagine that it would happen in some cases, but I am concerned that he feels that it is unlikely.

Photo of Jeremy Corbyn Jeremy Corbyn , Islington North

All the evidence in the past has been that when benefit is paid to the male parent, it is not passed on through the family network. I am saying not that all those men are particularly evil or greedy, but that all the other pressures of paying rent, rates and other bills will tend to take first place, and the children will lose out at the end of the day. If the hon. Lady looks at past evidence and representations that have been made by a wide range of organisations, she will be forced to agree that the Secretary of State's proposals in that respect are extremely bad.

There is a further area that I hope the Secretary of State will be prepared to consider, because he did not give a satisfactory answer in Committee. I refer to the administration of the system. As has been said, many small companies strongly object to having this piece of administration thrust upon them. I object because it is wrong that it should be done through the employer; it should be done by the Secretary of State. I object also because the sheer inefficiency of many small companies will mean that benefit is unlikely to be paid.

There is another serious aspect. Small businesses, particularly in industries such as the clothing industry, go out of business with monotonous regularity in areas such as mine. If the business goes bust on a Friday afternoon, and no wages can be paid to the workers, what happens to the family credit, which may not be paid until several weeks afterwards, when all the liquidation has been sorted out? That might seem a small point to some Conservative Members, but it is very important to people in my constituency. I hope that the Secretary of State will understand that the massive opposition to this proposal comes from those who are concerned about the cost of administration in this rather cock-eyed way and from those who are more fundamentally concerned that the benefit will not get through.

When the benefits were originally paid via women, to ensure that they reached the children, that was an important step forward. We are turning our backs on the past 20 years of social service legislation with this proposal, as with so much else in this particularly nasty Bill.

Photo of Mr Geoffrey Dickens Mr Geoffrey Dickens , Littleborough and Saddleworth

I am sure that every sensible and reasonable person outside the House of Commons would believe that the best way of getting a benefit that is intended to help children is through the mother. Whether we like it or not, the majority of fathers would try to ensure that the benefit reached the children. However, there are some families —for example, fathers in disadvantaged areas—where the father's self-discipline is modest. Often, this has to be said and we should not mince words about this, that money would go to the betting office or to the pub and would not get to the mother or the child. We must think very deeply about the operation of the benefit.

We cannot dismiss the fact that we are putting a further burden on small businesses. I belong to a party that has boasted, year in, year out, that it would take the burdens off businesses, that it would water down the paper work and make it easier for people to run a business without having the Government on their backs. However, we are here again proposing to put a further burden on business which will prevent people from earning a living and from giving other people a living within their companies. The amendment proposes another burden that businesses could do without.

I am sure that hon. Members have not received such large post bags from companies and the confederation of British industry, which is so opposed to this form of legislation. I do not disagree with the reform of the welfare state system. We would all agree that the system should no longer be universal. We should make it selective so that the benefit goes to those in most need. That is right and correct and all hon. Members would support that.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

I hope that the hon. Gentleman will address himself to the amendment. He is going very wide of it in his speech.

Photo of Mr Geoffrey Dickens Mr Geoffrey Dickens , Littleborough and Saddleworth

If Beveridge had been sitting in the Chamber tonight, he would have agreed with my comments.

In conclusion, if we want to benefit the children, we should ensure that the money goes to the mother. By and large, the children will have more of a sporting chance of receiving that benefit if it goes through the mother than if it were paid through the father's pay packet where he has to tell the company all his business to achieve the benefit and where the company must do the paper work to ensure that the benefit at least starts from the right direction. That is my view of the matter.

Photo of Mr Bill Michie Mr Bill Michie , Sheffield, Heeley

I, too, shall be brief, because this is a controversial clause and amendment in a controversial Bill, which we have been fighting in Committee almost day and night.

Many Conservative Back Bench Members have spoken about small business men, and I notice that we are talking about the effects not on small businesses but on small business men. I understand that there may be problems of administration and additional cost, but what about the families? We are interested in the problems that the provison is likely to cause families. We are not necessarily criticising men and saying that they are irresponsible. Obviously, problems are likely to arise because of the pressures put on them.

The most crucial point is the transfer of child benefit from women to men. The child benefit scheme will not compensate for the lack of school meals, and charges for school meals vary greatly. That will cause problems. If I am a good lad today, Mr. Deputy Speaker, I shall no doubt be allowed to speak about school meals tomorrow.

Some individual employers but not all, are likely to pay low wages and top them up with benefits because of inducements. It will be difficult for some employees to work out whether their wages are as good as they should be compared with the national average because they must take those benefits into consideration. We need clarification. What happens to employees with two part-time jobs, to those who are laid off, to those whose marriages break up, and to those who have a succession of jobs? We need proper answers to those questions.

It has been said that the various circumstances which I have just described are a nightmare for administration, but we are worried that they will be a nightmare for many British families.

Photo of Charles Kennedy Charles Kennedy , Ross and Cromarty and Skye

I support the amendment proposed by the hon. Member for Hornchurch (Mr. Squire).

It is an anomaly for the Government to argue the need to lift the burden from small businesses while introducing a move such as this with all its consequences of bureaucracy, paperwork, overheads and time for small businesses. That must be obvious to the Secretary of State.

Both sides of the House have pointed to the sense of ensuring that payments earmarked for children go specifically to the caring parent, which nine times of out 10 is the mother. That is surely overwhelmingly self evident and something which the Government should support.

Finally, the hon. Gentleman said that the only representation he was aware of in support of the Government's proposal was from the Monday Club, and that at the weekend the Scottish Tory party, a soon to be extinct species, had said in a debate on the social security reviews that while it welcomed the reviews, this was one point on which it would agree wih the hon. Gentleman.

Surely at this late hour Conservative Members can follow the advice of the Leader of the House and vote for a balanced ticket by supporting the hon. Gentleman.

Photo of Mr John Browne Mr John Browne , Winchester

I rise briefly to support the amendment in the name of my hon. Friend the Member for Hornchurch (Mr. Squire).

I understood a fundamental principle of Conservative thought on social security to be that child benefit should be paid directly to the parent with day-to-day care of the child, who more often than not is the mother. The proposal will mean that in two parent families, in particular, the payment will more often be paid to the father. That will result in considerable hidden poverty for children and mothers in families where the income is not shared fairly.

The other main reason why I object to the proposal relates to the additional administrative burden on employers. As chairman of the Conservative small business Back Bench committee, I am appalled at the proposal. I simply cannot support it. It is an administrative burden, which is a disincentive to the small business in particular. A recent study showed that the largest disincentive to new small businesses is not the lack of capital, or taxation but administrative burdens, particularly through Government legislation. The proposed change would be a classic example. Furthermore, it is a disincentive not just to smaller businesses but to all employers, and so a disincentive to employment in general.

I support my right hon. Friend the Secretary of State in nearly all his main aims in social security and its revamping. I beg him to make a commitment that he will re-examine the mechanics of this proposed arrangement.

Photo of Ms Jo Richardson Ms Jo Richardson , Barking 11:45 pm, 19th May 1986

The one thing that the Government did not do in our debates in Committee, and have not done throughout the argument that has been going on since the Green and White Papers were produced, is to say why payments should be made through the pay packet instead of the way that they are paid now. The Government's arguments in Committee focused more on countering our case, and that of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), than on making a case for the change. This is mystifying.

On Second Reading the Minister said that it was an astonishing fact that so many organisations were against the change. It is not astonishing. Everybody is against it, except the Secretary of State, but he will not explain why he is taking away this bit of support for women in the family and giving it to the men. It is all the more mystifying because the Government have so frequently confirmed that they will not change the system of paying child benefit, and that they support and praise the system of payment that puts money into the pocket of the mother rather than of the father. If it is good enough for child benefit, why is it not good enough for family income?

Most of the speeches that have been made tonight have concentrated on the disadvantages and the worries that will come to employers, and we all accept that that will happen. There is a missing element, and we have to point to the fact that, let alone the woman as the mother, the woman as a woman should be regarded as a person in her own right. One of the points about her collecting the family credit is that not only will she direct it to where it is of most use in the family, but she will have a bit of financial independence by helping to redistribute the income within the family.

Several hon. Members have referred to the problem for far too many women who not only do not get the money for the housekeeping from their husbands, but very often do not know what the husband earns. If all the family credit goes through the pay packet, women will be in a much worse position. My hon. Friend the Member for Sheffield, Heeley (Mr. Michie) said that it would be a nightmare, and that sums up what will happen to women if this proposal goes through. I urge Conservative right hon. and hon. Members—I know that I have no need to do that to those on this side of the House—to support the amendment.

Photo of Mr Norman Fowler Mr Norman Fowler Secretary of State for Health and Social Security

This has been an important debate, and I congratulate my hon. Friend the Member for Hornchurch (Mr. Squire) on the way in which he moved the amendment. I hope that what I say will meet his concerns and those expressed by my hon. Friends the Members for Mid-Kent (Mr. Rowe), for Lancaster (Mrs. Kellett-Bowman), for Littleborough and Saddleworth (Mr. Dickens) and for Winchester (Mr. Browne) and by the hon. Members for Ross, Cromarty and Skye (Mr. Kennedy) and for Barking (Ms. Richardson).

Photo of Mr Keith Best Mr Keith Best , Ynys Môn

What about Ynys Môn?

Photo of Mr Norman Fowler Mr Norman Fowler Secretary of State for Health and Social Security

And my hon. Friend the Member for Ynys Môn (Mr. Best). My diffidence about the pronunciation was the only reason for leaving it out.

I begin by mentioning the background to the family credit proposals and highlighting one point that has not been made in the debate — the important areas of agreement that exist. There is widespread agreement with the Government's central proposition that we should direct more help to low-income families with children. That analysis of need was set out in the Green Paper. The Green Paper proposals, which have been carried through into the Bill, were to meet the evidence of need through several strategies—by the continuation of child benefit, by a new family premium in income support and by a new expanded and improved family credit.

There are three points of agreement. The first is that greater priority should be given to providing help for low-income families. Family credit will provide extra help. We estimate that it will reach about twice as many families as did family income supplement. More than 400,000 families will benefit, compared with about 200,000 now, and expenditure will, broadly, double.

Secondly, family credit will significantly help with another of the Government's objectives, which is to improve the poverty and unemployment traps. By calculating the entitlement on the basis of net income after tax and national insurance, we shall effectively end the absurd position where an increase in gross earnings can leave a family worse off overall. That cannot be justified. By closer structural alignment with income support, it tackles the unemployment trap and provides better incentives to take work. Those central objectives have been widely welcomed, and the Social Security Advisory Committee, in its response to the Green Paper, concluded: We agree with the Government's decision to concentrate extra help for children on low-income families, and in principle we welcome the attempt to expand the assistance given to people in work and to eliminate the worst of the poverty trap. Thirdly, there is widespread agreement on the inadequacies of the family income supplement. It was introduced about 15 years ago as a temporary stop-gap measure. It has served that purpose, and most people now agree that it should be replaced. The drawbacks of FIS are well established. There is poor take-up, its structure is not aligned with supplementary benefit, and it is assessed on gross rather than net income, which has created the more absurd examples of the poverty trap where families can be left worse off as a result of increased effort and higher pay.

Those are some of the deficiencies of the present system. Our broad aims and objectives have been widely welcomed. The disagreement that has been expressed in this debate relates to the mechanism of how we achieve those goals. My basic point is that this debate has been about the mechanism of achieving the goals. There is no dispute about the fact that we wish to achieve those goals.

One advantage that we wish to establish in proposing that family credit should be paid with wages is a link between the credit and work. Sometimes, it is too easy for someone considering taking a job, perhaps at relatively low wages, to consider simply the wages and the deductions from pay for tax and contributions.

Another advantage is that payment with wages represents a step towards a closer alignment of the tax and benefit systems, a step which I am urged constantly to take. One of the absurdities of family income supplement is that members of one and the same family can be paying tax and other contributions to the state with one hand, while receiving income-related help from the state with the other. By paying the credit with wages, this unnecessary roundabout can be ended. We estimate that in practice about 60 per cent. of family credit recipients would simply have their tax and contributions offset, in whole or in part. In about 40 per cent. of cases they would receive a net payment.

Two further criticisms have been levelled against this mechanism during the debate: that payment with wages means payment to the man, and that it will mean additional work for employers and that will be unacceptable. I recognise those concerns and the depth of feeling, and I have no desire to minimise or to belittle them. However, I should remind the House that, even with payment with wages, many of the recipients of family credit will be women. About a quarter of the total will be working wives in two-parent families. In most cases, however, the partner in full-time work will be the husband. I appreciate the concern about whether he will hand over sufficient of the extra income to provide for the child. My personal view is the same as that of the hon. Member for Oldham, West (Mr. Meacher), that parenthood is a joint responsibility and, in all but exceptional cases, a joint activity. Mothers will continue to receive child benefit. I repeat that point, because sometimes it has been misunderstood.

The Government will do everything that they can to avoid placing unnecessary burdens on employers, and we shall seek to change the system. Nevertheless, I appreciate the worries and the anxieties about how family credit should be paid. I take them even more seriously when they are expressed by my hon. Friend the Member for Hornchurch, who supports the family credit system. Therefore, I am prepared to reconsider the mechanism by which family credit is paid. I propose to invite to new discussions a number of organisations which are closely affected. They include the CBI, the National Federation of Self Employed and Small Businesses, the Equal Opportunities Commission and the Women's National Commission. My aim will be to examine whether we can agree a way forward. The discussions will take place speedily, so that time for amendment can be found in another place.

I am prepared to undertake to reconsider this question. I do so on the basis that the Government stand by the concept of giving extra help to the children of families on low incomes. That is the essential purpose of family credit. More money will be spent, and more families will be helped. That is essential, and I believe that it has the support of the House. I hope that my hon. Friend will accept my undertakings.

Photo of Mr Robin Squire Mr Robin Squire , Hornchurch

It would be churlish of me not to rise to thank my right hon. Friend for his comments and for the way in which he made them. I think that he will have carried with him virtually every right hon. and hon. Member. I was prepared to put the matter to a vote, but in the circumstances and in the interests of arriving at the right answer I believe that I ought to seek the leave of the House to withdraw the amendment.

Photo of Michael Meacher Michael Meacher Shadow Secretary of State, Member, Labour Party National Executive Committee

Before we complete the debate, will the Secretary of State clarify what he meant when he said that he proposed to review the matter? Will he review the fundamental point that we are all making, that family credit should be paid to the mother, or will he review whether it should be paid through the wage packet but in such a way as not to cause an administrative burden on the employer? Is it the first or the second?

Photo of Mr Norman Fowler Mr Norman Fowler Secretary of State for Health and Social Security

I am prepared to examine from the beginning the mechanism whereby family credit is paid. I understand and appreciate the point that it should be paid to the mother. There is also the point about whether there should be a choice, as the hon. Gentleman's amendment states, or whether no payment should be allowed through the wage packet at all—

It being Twelve midnight, MR. DEPUTY SPEAKER proceeded, pursuant to the Order [15 April] and the Resolution this day, to put forthwith the Question already proposed from the Chair.

Amendment negatived.

Amendment made: No. 71, in page 35, line 22, at end insert 'and "employer", in relation to any person, means a person who under section 4 of the Social Security Act 1975 (liability to pay Class 1 contributions) is, or but for subsection (2)(b) of that section (exclusion of liability where earnings are below lower earnings limit) would be, liable to pay secondary Class 1 contributions in relation to any earnings (within the meaning of that Act) of the first-mentioned person'. — [Mr. Fowler.]

Further consideration of the Bill adjourned. — [Mr. Boscawen.]

Bill, as amended (in the Standing Committee), to be further considered this day.