Social Security Benefits Up-rating Order 2003

– in the House of Lords at 8:12 pm on 4th March 2003.

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Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, I beg to move that the draft order be approved. I shall also speak to the Guaranteed Minimum Pensions Increase Order 2003. I am satisfied that both instruments are compatible with the European Convention on Human Rights.

As your Lordships are aware, these draft orders are a routine annual event but they are, none the less, an important part of DWP business. The uprating order will increase most benefits from April in the normal way in line with the retail prices index for national insurance benefits and the Rossi index for income-related benefits. For the 12 months ending in September, the RPI increased by 1.7 per cent and, in the same period, the Rossi index increased by 1.3 per cent. The second order will increase the guaranteed minimum pension by 1.7 per cent in line with RPI so that it holds its value. However, as usual, we want to increase some benefits by more than inflation.

We are continuing to do more to help families to balance their work and home lives. We are again raising the standard rate of maternity allowance and statutory maternity pay by substantially more than inflation, from £75 to £100 a week. Around 350,000 families a year will benefit from these increases and other improvements to maternity allowance and statutory maternity pay. Additionally, we are introducing statutory paternity pay and statutory adoption pay at the same standard rate.

We are further helping the poorest families by aligning the child allowances in income support and jobseeker's allowance with child tax credit rates so that those families will be able to benefit from the increased generosity in those tax credits. For example, the disabled child premium will increase substantially from £35.50 to £41.30 and the enhanced disability premium for a child will increase from £11.25 to £16.60. We know it is particularly hard for families on low incomes who are bringing up children with disabilities, so we believe it is right that they, in particular, should see a substantial rise. Indeed, all the child allowances will be increased by more than inflation, which will benefit around 1.3 million families.

We continue to show our commitment to tackling pensioner poverty. In this order, we are again doing more for pensioners and giving significant help to the elderly. As in every year since introducing the minimum income guarantee, we will increase it in line with earnings. In April it will rise to £102.10 for a single person and to £155.80 for a couple. As a direct result of MIG, a single person will be at least £18 per week better off and a pensioner couple £28 per week better off than they were in 1997. In conjunction with winter fuel payments and free TV licences for older pensioners, we see that a single pensioner is at least £22 per week better off and a pensioner couple will have gained more than £31 per week.

The pension credit, which will be introduced in October, will guarantee a minimum income at these basic rates. In addition, it will directly reward the savings and second pensions of pensioners on low and modest incomes. Those who have worked hard and saved hard will get the benefit of their labours. The average gain will be around £400 a year. In addition, the introduction of pension credit will mark the end of the intrusive weekly means test and the rules that have excluded people with £12,000 or more in savings from any help. We will continue to make sure that those on low and modest incomes can also share in our growing prosperity. As we promised last year, we will increase the basic state pension by £100 a year for a single pensioner and £160 for a couple. That is to £77.45 a week for single pensioners and to £123.80 for couples. We will uprate by at least 2.5 per cent in future years during the lifetime of this Parliament. These measures help all pensioners, with most help going to the poorest.

I have outlined the main issues in the uprating statement. I commend the order to the House.

Moved, That the draft order laid before the House on 5th February be approved [10th Report from the Joint Committee].—(Baroness Hollis of Heigham.)

Photo of Lord Higgins Lord Higgins Conservative

My Lords, this is an annual event. Customarily, it tends to be wide-ranging in your Lordships' House, whereas in another place it tends to be fairly restricted. In view of the fact that we have a general debate on pensions tomorrow, I propose to deal with the matter rather more specifically than we have done in the past. Over several years, the select group of people here this evening have had a number of debates on these issues.

I thought that the noble Baroness was going to deal with both orders together, but I did not recall her saying anything on the second one.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, I spoke to both orders. I explained that the second one increased GMP by the rise in inflation, which is 1.7 per cent.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, that is absolutely right, but a little brief. I intend to raise some points on that with the noble Baroness.

We welcome the proposed changes to disability benefit and child disability benefit. They are clearly appropriate improvements in present circumstances.

It is appropriate to look at the history of recent increases in the state pension. For simplicity's sake, I shall take merely the figures for the single state pension rather than going into all the detail. In successive years we have had increases of—notoriously—only 75p, followed by £5, followed by £3 and now followed by £1.95. That is an erratic sequence, with significant variation, which may have been the result of an impending election at an appropriate stage in that sequence of events. Basically, as the noble Baroness pointed out, the state pension is being uprated in line with the RPI. We understand, therefore, why the figure is as it is in this year's uprating.

I should like to pursue a couple of points that arose in our debates last year about which we are still not clear. The Government said that they hoped to move from a situation in which 40 per cent of benefits for pensioners were funded privately and 60 per cent by the state to the reverse ratio; namely, 60 per cent private sector and 40 per cent state sector. Although I have tried on several occasions to elicit an answer from the noble Baroness, I am still not clear whether that is still the Government's intention. Perhaps she can clarify the situation on this occasion.

Hospital downrating, and particularly the timing of it, was the other issue that preoccupied us a good deal last year. Can the noble Baroness confirm that the extension of the period came into operation on the due date? While I think that it is common ground in all parts of the House that there should not be duplication of benefits, the amount that is actually deducted seems to us to have been the same for a very long time. Unless I have missed something, there is a case for reviewing that. I hope that the Minister will say that that is so.

Generally speaking, what we get here is continuation of the Government's policy on means testing—which is I think the right expression; not simply, as the noble Baroness would suggest, "targeting". There is an ever-widening gap as a result of this order and the ones that preceded it between the basic state pension and the minimum income guarantee. In 1996, the difference was only £5.90. In 1999, it increased to £8.25; in 2000, to £10.95; in 2001, to £19.65; in 2002, to £22.65; and in 2003, to £24.65. So we do have an ever widening gap between the provision of the state pension and the provision of the minimum income guarantee. I think that there is concern about that because of the ever higher percentage of those who are on the minimum income guarantee and are likely to be so in future.

In a recent study, the Pensions Policy Institute suggested that something like three-quarters of today's workers are likely to end up on means-tested benefits when they retire. Will the noble Baroness confirm whether that is the Government's view? If it is, at some stage we will have to ask ourselves who will have to pay for that amount of means-tested benefits. It appears that it will be a very considerable problem.

The noble Baroness has put some stress on the improvement of the position of pensioners, but here again the study to which I referred suggests that, in 1979, the income of the bottom fifth of pensioners was 23 per cent of average earnings, whereas by 2000–01 it had fallen to just 21 per cent. I think that that is somewhat inconsistent with the general policy that the noble Baroness says the Government are pursuing.

I turn to the other point on which I have repeatedly tried to get an answer from the noble Baroness. I hope that we can have an answer. I am trying to establish how large a fund it will be necessary to build up in future to take one above the minimum income guarantee. The increases in means-tested benefits are clearly having a serious impact on the incentive to provide for one's own pension. If one can quantify that, one can get some idea of how much people have to build up in a fund to get anything back in return.

The other main issue with which we have been concerned over the years is take-up. What is particularly worrying is the lack of statistics. Generally speaking, figures for take-up have emerged—that is an appropriate way to put it—from the government statistical office about 18 months after the end of the year to which they relate. For 1999–2000, the figures were issued on 27th September 2001. It was also suggested at that time that the level of take-up had declined. Since then, there have been added complexities so far as the benefits are concerned.

Those are the last figures that we have had. The later figures have still not been published. Even if they were published tonight, the delay would have been something like two years. I do not understand why the figures take so long to produce. It is important that we have up-to-date figures on take-up, not least because the added complexity of the government proposals is likely to mean that the take-up figures decline. Help the Aged suggests that one in three pensioners does not claim all the income support to which they are entitled. Do the Government agree with that figure?

The complexity is building up more and more. In the report of the Public Accounts Committee on such matters so far as the new tax credits are concerned, the suggestion is that the administrative costs and so on are likely to be more than £1 billion. Witnesses from the Revenue in front of the PAC suggested that the complexity of the computer required was something like eight times greater than that of the computer needed for the collection of self-assessed income tax. While the increases are welcome, if that is so we should have growing concern about the degree to which people entitled to benefits understand them, and the problems so far as the administration of the benefits is concerned.

The noble Baroness dealt with the Guaranteed Minimum Pensions Increase Order 2003 in a single sentence, simply describing precisely what is to be done. However, a number of issues arise from that sentence, and I shall deal with only one or two. The guaranteed minimum is what operating company schemes that have contracted out have to make sure is paid. It is obviously very important that the position of such pensioners should be protected. However, in the light of some recent cases—the Maersk case was one particularly difficult example, but I do not expect the Minister to reply on it unless she feels able to do so—what happens when a company winds up its scheme when the resources available to meet its commitments appear inadequate? Can the Minister tell us whether the guaranteed minimum pension, which was due under that scheme, will still be paid? If so, from what funds and to what extent? That payment has priority over other payments that may be due. This is an important issue because, alas, in the situation in which we now find ourselves with regard to company schemes—that is for a variety of reasons, which we shall no doubt debate in greater detail tomorrow—the position of pensioners may well be seriously undermined.

My second point on the second order is that the actual calculation of the rebate paid with regard to those in company schemes seems to have a somewhat doubtful statistical basis. There was reference to that in another place, particularly with regard to the assumptions that the Government Actuary made, which appears to assume that the return on index-linked bonds, on which the calculation rests, will increase from 2 per cent to 3.5 per cent. I refer to the return on index-linked gilts. The Minister in another place did not give a satisfactory answer on that matter. It is difficult to understand why the Government Actuary made such an assumption; perhaps the Minister could explain that. The Government doubtless considered the advice of the Government Actuary before accepting it.

The Government Actuary's report was interesting in a number of respects, not least with regard to the lack of data. He said that although he believes that different levels or patterns of contracting out could have a material—that word is used in the technical sense—effect on the cash flow of the national insurance fund, the reduction of NIRS2 led to a lack of data that means that we do not have satisfactory data on contracting out. I understand from the report that that is likely to be improved but the data is still being analysed and validated. When is that process likely to be completed?

In some ways, this is a very traditional set of orders: they involve the usual up-rating in relation to the RPI, the Rossi index and so on. However, it must be considered carefully in the overall context of pensions provision, about which there is great concern. If we can have answers on the technical points this evening, that will help to clarify the situation.

Photo of Earl Russell Earl Russell Liberal Democrat 8:33 pm, 4th March 2003

My Lords, by long tradition, this order is taken as an occasion on which to have a general debate on the state of the social security system. I do not wish to take issue with any specific points in the order but I will examine some of the general principles underlying the Government's approach to social security, which may give rise to debate.

The Minister is, I am sure, all too familiar with my views that, first, the New Deal is carrying too great a weight in the Government's strategy to relieve poverty; and, secondly, that too much credit is being given to the New Deal in proportion to the state of the global economy.

It is just possible—but, I believe, improbable—that the noble Baroness remembers me advising her in a debate on the humble Address in 2001 to give some of the credit to the global economy before she has to give some of the discredit to the global economy in the next downturn. It is not the responsibility of Opposition spokesmen to talk the economy into downturn but it would be a rash person who said that the economy was never again going to have a downturn. I do not intend to be that rash person. I agree that other people are prepared to be that rash person, but I do not want to take the responsibility; I am no expert in the subject.

Since the publication of the report by the National Audit Office a year ago there is even more question than before about the Government's argument that there is no element of substitution in the people who got jobs after going through the New Deal. The Government claim 250,000 for the New Deal for young people. The National Audit Office states 35,000 after allowing for substitution. That is a significant difference.

I shall not say that the view which happens to suit the case I am arguing is necessarily, therefore, right. I would listen with great interest to a reply from the noble Lord, Lord Layard, to that particular argument. I have not yet heard such a reply. When I hear it I shall listen to it and try to judge it on its merits. It does at least raise a considerable question.

Behind the New Deal, especially in the early years of this Government, there was for a while a strong tendency to assume that the problem was to make people want to work. The extent of the use of disentitlement implies that. It is less strongly threatened than it used to be. I do not think it has disappeared. I do not think that this is a particularly severe problem. For most people work is not only their remuneration; it is also their social life. It is their way of getting involved with the rest of the world; of having a community and of meeting with and talking to people. We do not need a policy which is based on the draconian attempt to press people into work.

When we consider what has happened, it is true that there is a good deal of work about. In some areas, for example Newbury, unemployment is remarkably low. However, the national, regional and even borough figures conceal what is happening in some of the very serious cases. It is only in the past hour that I have got my hands on the Indices of Deprivation published by the Office of the Deputy Prime Minister. I cannot claim to have analysed those figures properly in one hour and shall not do so. However, they show what I believe I had already observed: quite an alarming development of poverty on a ward level. Looking at areas which I happen to know because they are close to where I live, one thinks one sees what is painfully familiar to those who have lived in America; that is, the development of ghettos, not all of which are black.

The Minister must be familiar with the number of times I have cited the case of Carlton ward, Kilburn, which is the ward next door to mine. In 1992 37 per cent of the population of that ward were on means-tested benefits. It has come up a bit in the world since, but it is still a severely disadvantaged ward. There are a good many of those in London. There are quite large numbers in places such as Hackney and Tower Hamlets. There are two in Camden: Somerstown and St Pancras. We should not go away with the idea that severely deprived wards are all in the north of England; they are not. Poverty is just as poor in London as it is in the North.

Poverty next door to gross and ostentatious riches is probably even more painful than poverty when it is the norm of the community in which one lives. American crime figures clearly illustrate that. The worst are the poor areas on the very edge of the rich areas. I do not see why that should be different in London.

Whether the Government's strategy is suited to these new ghettos is a question worth serious thought. Overall, according to the New Policy Institute, there has been a fall of 1 million or 7 per cent in those living in poverty since 1996–97. That gets us back only to the level of 1995–96, which in the light of the peculiarly favourable state of the global economy is not a particularly remarkable achievement. It is an achievement and should be welcomed as such, but it is not stunning.

Are all those jobs really available to people in especially deprived wards? If they are available, they are not going to them. What is happening in those wards? We are seeing the development of multiple inequalities. For example, figures show that it is far harder to get insurance in those areas than in many others. It is often much harder to get transport, so it is much harder to get to work if it is available in the area. In addition, 20 per cent of households still have no bank account, which is a problem in deprived areas because banks do not particularly want to go there.

Schools tend to be a problem, too, as they tend to close in these areas. St. George's school, which has been much mentioned, is on the edge of Carlton ward, Kilburn, and draws most of its intake from it—or did. Before that school closed, it was obvious for quite some time that it was not a trouble-free environment. I am not surprised at that, because for a trouble-free environment, one needs hope, and for people coming out of those areas there is not much hope. The threat of withdrawal of benefits if they do not do what is wanted will not contribute to the hope that is needed.

The areas in London particularly afflicted seem to have one or both of two characteristics. First, they may have a high proportion of social housing—and Carlton ward, Kilburn, is almost entirely social housing. I remember the local paper becoming very much exercised when all the lifts were out of action for three weeks in the height of summer. The old age pensioners living on the 21st floor were in considerable difficulty when they needed to do their shopping, and no one did anything about it. Repair is another problem in that area.

Secondly, there is the problem of ethnic minorities. Harlesden, in Kilburn, is another of the affected wards; one needs only to drive through Harlesden to realise that it is predominantly an ethnic minority area. Stonebridge, in Kilburn, is a high scorer on both counts.

That suggests a fairly considerable problem. I can cite figures published by the Child Poverty Action Group about average equivalent income for households with at least one earner. For white households, it is £225 a week; for Caribbean, £184; for Indian and African Asian, £167 to £172; and for Pakistani and Bangladeshi, £94. It is no wonder that we need to worry about our relations with the Islamic community. Those figures are in themselves enough cause for worry.

Purely on the spur of the moment, I ventured the opinion in the debate last Friday on the Equality Bill introduced by my noble friend Lord Lester that the cases of discrimination that we were discussing might account for more inequality than class does. It is a difficult question to tackle as a subject for research, because the categories have a built-in tendency to develop an overlap. I am not sure how the question should be answered, but the mere fact that I am not sure is in itself a significant step.

We need to think much more about access to work in terms of removing discrimination. That applies also to age discrimination. The figures for those over 50 who want to work and are unable to do so are far higher than the figures of recorded unemployment. That matter needs serious attention. Two-thirds of heads of households living in social housing lack paid work. Housing is clearly one of the failures in this area. I do not for one minute pretend to have the solution, but I do think that between us we should be looking for one.

There is a whole series of serious problems. The Government may be relieved to hear that one cheerful statistic in these areas is that the level of burglaries is falling sharply. One would never guess that from reading the papers. It is typical of them to pick up the one thing that is going right and say that it is the one thing that is going wrong.

There is a great deal that is going wrong. The development of ghettos does not encourage hope. We need some fairly significant rethinking of policy in order to prevent that development from going any further. I do not think that the New Deal is the answer to it. I do not pretend to know what is, but I am sure that the Minister and her colleagues—suitably encouraged—are perfectly ready to join in constructive thinking about that themselves. I very much hope that they will do so.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions) 8:45 pm, 4th March 2003

My Lords, I apologise for the slight delay. I was taking a lot of notes and nearly read notes on Humberside and Yorkshire.

I thank noble Lords for their contributions. I always find the quality of comments and questions in this House impressive. The noble Lord, Lord Higgins, to some extent was seeking to acquire bullets to fire for tomorrow afternoon's debate. Let me see if I can help him. He still has to place them on target, but that is a secondary and subsidiary issue.

The noble Lord's first point was about the 60:40/40:60 issue. I repeat—as I have said on several occasions—that that is an aspiration that we are working towards. Obviously issues such as the pension credit and so on may affect those figures. We expect pension expenditure by the Government in GDP terms to remain roughly consistent at around 5 per cent of GDP over the next 30 to 50 years. That breaks down into basic state pension of about 3 per cent, SERPS S2P of about 1 per cent and MIG, pension credit and other pension-related benefits of about 1 per cent. They vary somewhat between each other, but together they represent about 5 per cent.

Expenditure on pensions represented by the private sector will depend to some extent—as we shall no doubt explore tomorrow—on the degree to which voluntary contributions and savings continue to grow, despite what is happening to the stock market.

Secondly, the noble Lord asked me about hospital downrating. The "more generous terms"—in other words, the fact that it will kick in later—will come into effect in October 2003. The main reason for that is to coincide with the introduction of pension credit; otherwise, the complexities of entering one system and then untangling it would be substantial. So it will be introduced from October 2003.

I shall deal with Maersk before I turn to the noble Lord's main push about means testing, targeting and so on. He was kind enough to inform me that he wanted to ask this question. I have done what I can in the time since we spoke. If there is additional information that I can give, I shall write to him.

My understanding of the case is that the scheme has 196 deferred members. It would appear that there are no current members, so GMPs are not in payment yet. The scheme is solvent. There is about £6.4 million currently in the fund. It is marginally funded over the MFR. GMPs rank high in the priority order above other pension commitments. They are ring-fenced. That should mean that GMPs may represent—if someone has a pension of say £10,000—about 20 per cent of the pension. My understanding is that that should mean that they are secure. But if in any respect I have misled the noble Lord, I will make sure that he has a clear statement from us when I can get one. The issue is quite technical, but I understand that GMPs are secure and ring-fenced. There is no reason to think that they cannot be paid fully and properly. There is more of a dispute about the rest of the pension.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, I am grateful to the noble Baroness for having made those inquiries, but I am concerned with the general point rather than the specific one. What happens if a scheme is wound up so that there are insufficient resources to pay the GMP? Is the company concerned still liable?

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, presumably we are talking about a DB scheme and one where the company has enjoyed the benefit of the contracted-out national insurance rebate. Given that I understand that GMPs might, on a £10,000 pension, represent about 20 per cent of that pension, it would seem to me actuarially a major issue of trustee responsibility and the like if any scheme being wound up could not meet at least the GMP element. I understand that it is ring-fenced and secure.

I accept that this is an important issue, but it is quite technical. If I can give the noble Lord any further information, I shall do my best to let him have it before tomorrow. I understand that it is ring-fenced, secure and comes high on the list of priorities. The scheme would have to be about 80 per cent plus under-funded for there to be any question mark about the ability to pay GMP. That is my understanding, but if I can add to it any way, I am happy to do so.

I am not sure whether the question about GAD concerned the data or the reliability of the GAD forecasts. All that I can say is that in all my years in opposition and in government I have never yet heard of an occasion of up-rating when companies outside have not wanted more generous rebates to help to fund their liabilities. I understand that GAD forecasts are based on his or her best assumptions. It is entirely independent of government and the Department for Work and Pensions can in no way influence it. I have no evidence to suggest that GAD's forecasts have been erroneous in the past.

However, if the noble Lord wants to press me on that or ask further questions, it may be more helpful if I write to him with the details.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, I did not propose to raise either this point or my previous one tomorrow, so there is no rush for the answer that the noble Baroness has kindly offered. But in simple terms, why should the Government Actuary—or anyone—suppose that the rate of return on index gilts should rise, as he is apparently assuming? From first principles, why should that be so?

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, I cannot say why he has made the assumptions that he has. I understand that the current level of rebates was proposed in the August 2000 consultation document. GAD is of the view that it would not recommend moving away from those rates if a review were being carried out now. That is because recent changes in economic conditions would not have altered the long-term economic assumptions on which the rebates are based.

As I said, that is a source of advice independent of what may be conflicting commercial interests. There may be dispute about GAD forecasts, but I have no evidence that they have been erroneous or wildly off the mark in the past. As I said, based on the consultation document, I have never known a period when companies have not argued for more generous terms, but we would expect them to say that, would we not?

I do not think that I can help the noble Lord much beyond that. If he wants to press further about GAD's assumptions, I can try to dig up a more informed briefing about what GAD takes into account when making calculations, but I suspect that that is in the public domain in the consultation document, which the noble Lord could consult as well as I. That is not a matter specifically for my department. We rely on that independent source of advice.

I turn to the substantive issue, which concerns the interlocking of means-testing, as the noble Lord calls it. Behind it is something very simple. This aspect relates to points that the noble Earl, Lord Russell, made. I suspect that the noble Earl would share our belief on this side of the House that services—what might have been called the social wage in the old days—must be universal at the point of provision if we are to ensure that services for the poor are not poor services. However, without targeted finances in the form of MIG, pension credit, and so on, there is no redistribution of income to ensure equal access in the labour market and equal access in the market to purchase other items.

Why do we need to target finances? For two basic reasons. The first relates to poverty and the second to inequality. I remind the noble Earl that in 1979 I would have assumed that the answer to pensioner poverty was simply to increase the basic state pension. I no longer believe that. I shall tell the noble Earl why. First, the coverage of the basic state pension is a problem. At present, 51 per cent of female pensioners do not have a complete NI pension in their own right. So, without targeted help, they cannot even reach the state pension level. They must have that help. Therefore, the pension cannot be universal; otherwise money is given to people already over the RP level as well as to those below it.

The second reason for needing to target finances is the inequality that has resulted mainly from, and is the downside of, occupational pensions. I remind the noble Earl that between 1979 and 1997 the real earnings of the working-age population grew on average by 36 per cent. Pensioners' income grew by 64 per cent. Relative to the growing wealth of the country, pensioners, deservedly, improved their position. But the top fifth's income grew by 80 per cent, courtesy of occupational pension savings, and the bottom third's grew by 30 per cent. Sixty-four per cent was merely the average figure. In other words, between 1979–80 and 1996–97, pensioner inequality widened. As a result, some pensions—mainly those of older women without complete national insurance records—fell severely behind the growth in real incomes for the rest of the population. If everyone were given the same help, such pensioners would receive £4 or £5. But if finances were targeted, that category of pensioners could receive £19, thus enabling them to begin to share the living standards of the others.

That is basically why we target finances. I would not have argued in favour of the approach in 1979. But inequality within each household type—whether lone parents, children, disabled people, those of working age or pensioners—has grown dramatically between 1979 and 1996–97. It has grown to the extent that, unless nearly half of the expenditure is targeted, it will go to those who do not need it—the ugly phrase "dead weight" was used—and those who need it, will not get enough. I, for one, have changed my views since the late 1970s as a result of what we experienced during the 1980s and 1990s.

The noble Earl asked how large a fund would be required to take the income above the MIG—I assume that he means minimum income guarantee as opposed to the pension credit. The best estimate that I have is that, on the assumption that someone has a full national insurance pension, we are talking about £15,000 for men and £19,000 for women.

The take-up statistics for 2000–01 are due to be published on 27th March. The noble Earl also asked what take-up we were assuming. Our planning assumption has been one in three because of build up. But, one should make a distinction between clients and cash. It may sound perverse, but one of the reasons why the planning assumption, particularly of clients but not cash, is not higher is that we rightly expanded considerably the generosity and decency of MIG in 1999. As a result, many more pensioners became eligible, but for quite small amounts. Most did not bother to claim their payment. But the increase in eligibility was the result of augmenting the generosity on the income scale. I will be disappointed if, in cash terms but not necessarily in client terms, we have not reached 75 per cent by the time that pension credit and MIG have been properly bedded in.

The final point was about targeting. The noble Lord keeps talking about means-testing. I hope that he will not do so. The word carries a lot of baggage. It harks back to the 1930s and the household means test, and all the snooping and iniquitous inquiries that went on. There is a real issue about how we get value for money in ways that are decent, without spending a lot of money on giving financial support to people who are already adequately provided for. Given the inequality statistics, the answer must be targeting.

How do we ensure that those who are entitled to the money receive it? That is a take-up issue, which is why, as noble Lords know, we have simplified the forms, increased the information available and are going for a timetable of once every five years. There is analysis of incomes, and we are trying to get support through telephony and the like. That is a long way away from the old weekly means test and from accounting for every penny in a building society account.

All of us—the noble Lord, Lord Higgins, the noble Earl, Lord Russell, and the noble Baroness, Lady Barker, who is in her place—worked on the Pension Credit Bill. The noble Lord knows perfectly well that, with the help of voluntary organisations such as Age Concern and Help the Aged, we have tried to construct a way of targeting resources on those who most need help in ways that make it most likely that they will claim and enjoy the money that they are entitled to receive. Calling something like that "means-testing" discourages those who are most entitled and have greatest need for the money from claiming it. If we move the language on, we can move the agenda on.

I agreed with quite a lot of what the noble Earl, Lord Russell, said. I did not agree that we were asking the New Deal to carry too much. Obviously, there is always an issue about dead weight, but the most reliable statistics that I have seen suggest that 750,000 people have been helped into work by the New Deal. The National Institute of Economic and Social Research has said that, without the New Deal, long-term youth unemployment would be twice the current level.

We must recall that most people—75 to 80 per cent—on jobseeker's allowance get a job within six months. That has improved dramatically over the past four or five years. Ten to 20 per cent—perhaps one in four—of the people on JSA are functionally illiterate. Many of them are members of ethnic minorities—I shall come back to this issue—and may suffer multiple deprivation and disadvantage. Some of them are drug and substance abusers; some of them have come from fractured homes; and some have come from the care system. If they are to get a chance of work, they may have to enter the labour market and go through the New Deal not once but twice or three times, before they can hang on in an unfamiliar work situation. With its emphasis on personal advice, the New Deal has been particularly helpful to those who are most disadvantaged. Without that help, they would find it difficult even now not only to get a job but to keep that job for at least four or five months.

The noble Earl, Lord Russell, asked about substitution. There is much debate about that, but I shall refer him to one striking statistic: since 1997, there has been a fall in the claimant count of 500,000 and an increase of over 1,500,000 people in work. The difference between those figures shows that we are bringing into the labour market people who were hitherto economically inactive, including sick and disabled people, lone parents and partners. That suggests that substitution is not going on. If it were, we would see a closer match between the claimant count and the job figures.

The noble Earl made a point about regional disparities. He is right that it is not a North/South issue. There are some striking statistics. The figures for 1992 showed a regional variation in unemployment figures from 6 per cent in the South East to 16 per cent in Northern Ireland. Ten years ago, there was a 10 per cent variation in unemployment figures. Now, the variation is 3 per cent: the figures are 1.7 per cent and 4.7 per cent. Unemployment is down to a third of what it was in 1992 in virtually every region. I think that we have done remarkably well.

However, I absolutely agree with the noble Earl over the area in which we still face major problems, though not so much as regards social housing where obviously there is an issue of how much investment we can continue to press, although it is an important and major priority for the Government. As I have said, whereas in virtually every region unemployment has fallen to one-third of the levels recorded a decade ago, for ethnic minorities in more than half the regions of the country, unemployment has increased over the same period. The disparity between those two statistics is extremely striking.

The noble Lord may not recall this, but when I scratched away at the statistics after the Bradford riots during the summer of 2001, I found that 65 per cent of all people in that community were in work. At the time 40 per cent of ethnic minorities nationally were in work, but only 31 per cent of young Pakistanis and Bangladeshis aged between 16 and 24 were in work. The figures provide further evidence of the point made by the noble Earl.

Photo of Earl Russell Earl Russell Liberal Democrat

My Lords, I recall that very well and I congratulate the noble Baroness on the figures.

Photo of Baroness Hollis of Heigham Baroness Hollis of Heigham Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, I thank the noble Earl. Some of the New Deal programmes are tailored to tackle this, such as step-up and outreach programmes, along with action teams. All of those work extensively with ethnic minority communities and voluntary organisations to try to overcome the effects of multiple deprivation. However, I have to agree that, when considering the statistics, young people and some older people in the ethnic minority communities are facing not only disadvantage but also discrimination. Some of that may be related to language issues, poor health or underdeveloped social skills, while some may be associated with lack of access to anyone in the local knowledge community or with connections in the job market.

It is clear that we have to do far more. Such deprivation is found in the heart of almost every great city and certainly does not reflect the North-South divide. Indeed, unemployment among ethnic minorities has fallen more appropriately in Yorkshire, Humberside and the North, while it has become worse in London. The noble Earl is absolutely right: whereas for the rest of us unemployment has fallen to one-third of the 1993 levels, in more than half the regions of the UK it has actually increased for ethnic minorities. I was quite shocked by the figures.

We have gone wide of the orders before us, but I hope that we have had an opportunity to address and explore issues that otherwise we might not have done. I hope too that I have answered as best I can questions raised by noble Lords. If I have not done so, I am sure that they will lobby me and I shall come back to them. With that, I hope that noble Lords will agree to the order.

On Question, Motion agreed to.