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Orders Of The Day

Volume 13: debated on Monday 23 November 1981

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Social Security And Housing Benefits Bill

Order for Second Reading read.

4.53 pm

I beg to move, That the Bill be now read a Second time.

Within the Bill there are two major social reforms. The first is the proposal on sick pay. There will be a minimum level of sick pay, which employers will pay to their staff during the early weeks of sickness and which they will recover from the Government. Secondly, there is a proposal on housing benefit which means that there will be one system of providing help for those who need assistance with their housing costs, rather than the dual provision provided by local and the central Government, which causes confusion for both claimants and staff.

Those are separate and distinct proposals, but they have a number of common objectives. Both proposals substantially avoid duplication of effort. There is no point in having two systems of sick pay and two systems of housing benefit running side by side unless there is an overwhelming reason for it.

We believe that the schemes that the Government have developed will not only end duplication of administrative effort, but will simplify the system for claimants. We estimate that, taken together, the reforms plus the other changes made in the Bill will save about 6,200 jobs in the Civil Service by taking away unnecessary functions and will lead to a net saving of public sector staff of about 4,700.

I am sorry to interrupt the right hon. Gentleman so early in his speech, but as we shall have many debates on the Bill it would be useful if he would straighten out his language. He talks about saving 6,000 jobs, but he means losing 6,000 jobs. I wish that he would be honest and say so.

That is a reasonably pathetic point at such an early stage. There are public sector jobs being done which do not need to be done. That costs the taxpayers money. If the hon. Gentleman will wait, he will find that some of the efficiency savings, which I thought were a matter of agreement between both sides of the House, will be ploughed into extra benefits.

There is a mass of important detail in the Bill. No reform of social security or housing is simple. Before I come to the details, I should like to deal with the general approach that the Government are taking and the broad principles behind the changes.

The sickness benefit scheme run by the State dates back to the National Insurance Act 1946. There were other sickness provision schemes at the time, but, as the late Jim Griffiths said in 1946, they were far from covering everybody. His proposals had the aim of lifting
"the sick and their dependants out of the pauperism in which they have been left too long."—[Official Report, 6 February 1946; Vol. 418, c. 1743.]
That position has changed, not just because of the level of benefit payable, but because there has been a steady growth in sickness schemes run by companies. The latest available estimate is that almost 90 per cent. of full-time employees are in some sort of occupational sick pay scheme.

Given that the position has changed, the question arises for both sides of the House whether it is necessary to have a Government scheme, with its present scope and carrying out its present burden of work. My Department is still processing 8 million claims for State sickness benefit each year, though only a small proportion of those who qualify for the benefit need to draw it for any length of time.

However, that is not the only defect of the present system. The State sickness benefit is not taxed, although it has long been an objective of Governments of both parties to tax it The only period during which the benefit was taxed was briefly under the Labour Government from July 1948 to April 1949. That attempt was abandoned because of administrative difficulties, basically in taxing two incomes from separate sources.

The change proposed in the Bill will mean that sick pay will be taxed, and with that will come a number of advantages. The advantages of taking the course set out in the Bill were perhaps best put in one of the policy papers which have led to the change. That said:
"One possibility which the Government have carefully investigated is the transfer of responsibility for payments for the early weeks of sickness from the social insurance scheme to employers. The case for this transfer is that it would avoid the considerable waste which can occur where employers' sick pay schemes and sickness benefit overlap. Often, the result of all the administrative work undertaken by the Department in awarding sickness benefit, and by employers in awarding sick pay, is to provide the worker with his normal pay or something close to it. Indeed if his pay is fully made up by his employer, he may receive more when sick than at work, because sickness benefit is not taxed."
The paper goes on to say that
"the number of workers covered by voluntary sick pay schemes is likely to grow, and the Government will later on explore further the possibility of introducing a statutory scheme which would provide a minimum of sick pay for all employees."
That sounds remarkably like the argument that this Government have been advancing for the last 18 months. However, it cones not from a policy document of this Government but from a White Paper on social insurance published by the Labour Government in 1969, when the late Richard Crossman was Secretary of State for Social Services. As that White Paper suggests, there is, when it comes to sickness benefit, a balance which has to be held. Benefits must be high enough for the risk of sickness to be faced without anxiety or hardship. On the other hand,
"Benefits must not be so high that people have no incentive to return to work".
That means that in many cases an employee receives full pay, less the amount paid to him by the State, and the combination of those continuing wages and non-taxable sickness benefit means that he is financially better off sick than he would be if he were at work. Clearly this is an unsatisfactory position. It has been recognised as unsatisfactory by successive Governments, and the Government are tackling it in the Bill.

Does the right hon. Gentleman agree that the position is unsatisfactory because individual firms have introduced individual sick pay schemes? How many firms have said to the Minister that as a result of the introduction of generous sick pay schemes absenteeism because of sickness had increased? The information I have is that there is no evidence to suggest that where good sick pay conditions have been offered the incidence of sickness has increased.

The hon. Gentleman is misunderstanding the purpose not only of this Bill but also of the 1969 White Paper published by the Labour Government.

That is part of the background which helps to explain our proposals on sick pay. I shall come to the detail of them in a moment.

I now deal with one of the general points concerning housing benefit. As with sick pay, the position here is in principle clear enough. There are at present basically two systems for assisting with housing costs. One is administered by the Government for people who are dependent on supplementary benefit, and the other is administered by local authorities for those on low incomes who need help with the payment of rent or rates. Therefore, we have just under 3 million people receiving help with rent and rates payments from the supplementary benefits system and another 3½ million getting rent or rates rebates and allowances.

Again, the argument for change has often been put. In 1978 the Supplementary Benefits Commission attacked this dual system as being intolerable, and pointed out that it caused major problems and dilemmas for those people, mainly retirement pensioners, who can claim either supplementary benefit or the rebates and allowances and who frequently find it difficult to judge which benefit would make them better off.

What was worse, it said, was that frequently even the experts are unable to reach a firm conclusion. In an article in The Three Banks Review in September this year Professor Donnison described the consultative paper issued by the Department of the Environment on assistance with housing costs as the most radical proposals for reforming housing benefit for poor people made by any Government for many years.

I understand Professor Donnison's further point and it is fair to refer to it. He said that more resources need to be directed to this area. That is his case. I shall deal with it later. There is a difference between saying that we are discussing a scheme which in principle makes sense and could be made even better, and saying, as the Opposition appear to be saying, that they are opposed in principle to radical reforms in sickness and housing benefit. The Opposition have a three-line Whip tonight and that is what they are saying if they vote against the Bill. The burden on the Opposition is to justify that position. Theirs is opposition in principle. They should set out their alternative case, if they have one.

My right hon. Friend will be aware that a pensioner in receipt of a rent or rate rebate is not entitled to supplementary benefit. However, a pensioner in receipt of help towards rent from supplementary benefit is entitled to other benefits such as the heating allowance.

If the handling of the benefits is to be handed over to the local authorities, may I have an assurance that there is no question of such pensioners being ineligible for supplementary benefit?

I am delighted that my right hon. Friend nods his head and confirms that they will be able to receive such benefit. However, they will now have to go to two offices to collect their benefits. Is not that undesirable?

I shall come later to the details. I can assure my hon. Friend about supplementary benefit. Nobody on supplementary benefit will be worse off as a result of the Bill. He makes an important point.

I shall make one comment in relation to sick pay with which perhaps even the Opposition will agree. Governments are often criticised for embarking on legislation without consulting those who are affected by it. That accusation cannot be levelled at us in respect of sick pay. My right hon. Friend the previous Secretary of State for Social Services issued a Green Paper in April 1980. In the following six months my Department received over 1,000 representations. Ministers and officials held discussions with the CBI, the TUC and small business organisations.

The reaction might come as a surprise to the hon. Member for Birmingham, Perry Barr (Mr. Rooker) who is, perhaps, only just catching up with the game.

The discussions centred on the important issue of compensation for employers. It was clear that that could not be resolved satisfactorily on the basis of the original proposals. In June this year my right hon. Friend therefore issued a second consultation document on methods of compensating employers. That led to further representations and discussions.

I entered the discussions at a relatively late stage. I pay tribute to the way in which organisations representing industry and small businesses put their case. Their argument was that the most equitable way to compensate was by the 100 per cent. self-deduction method. In other words, for every £1 of statutory sick pay that an employer pays out he will be allowed to take off El from his monthly national insurance payments. That method was the choice of the overwhelming number of employers and it was recommended by the Select Committee.

The method ensures fairness. It ensures that industries which have a high sickness rate will not be penalised by above-average costs. What they pay they will get back. This also meets one of the concerns of small businesses. I announced in October that I would accept the case that industry and small business had so eloquently put on this point. I am glad to tell the House that the reaction from those organisations representing industry has been overwhelmingly in favour of the change that I announced.

This point is worth emphasising, given one or two reactions by Opposition Members. I shall come to the specific point raised by the hon. Member for Perry Barr. I should like first to give the reaction of one or two organisations that we have consulted following my October announcement. The CBI wrote to say that it was delighted with the decision. The Union of Independent Companies wrote to express its appreciation of the decision to go for a 100 per cent. self-deduction and paid tribute to the consultation process. The British Institute of Management wrote to say that its members would be delighted to know the decision and that it would be using its publications to ensure that all members were fully aware of the situation and of the Government's willingness to enter into genuine consultation with those who will be affected by proposed legislation. Other letters make the same point.

Will my right hon. Friend add to that formidable list the fact that the Select Committee which agreed upon the general principle of an employer's statutory sick pay scheme specifically asked the right hon. Gentleman and the Department to reconsider it and to opt for the CBI full deduction method? As a result, the Government have removed any objection of the Select Committee members, so far as I can see. Only child benefit remains open for discussion. There is no issue that I can see between the parties. I say that happily, because it is important.

I am grateful to my hon. and learned Friend, whose presence on the Select Committee I acknowledge.

I see the Chairman of the Select Committee rising. I shall give way but perhaps for the last time for some time if the debate is to make progress.

There is still a problem for small businesses that was put before the Select Committee. The small firms that have never had to operate this kind of scheme will face difficulties if they have to engage additional staff. It was put to us that this could be a make-or-break situation for a small firm. What is the right hon. Gentleman's answer?

I understand the concern. What the hon. Lady says will have to be considered by the House. The reaction that the Government have received from small business is that the concession that I have announced—an important concession that comes directly as a result of pressure from small businesses, industry and, indeed, the Select Committee—seems to have substantially satisfied both small business and big industry. There appears to be approval of the decision and praise for the consultation process that the Department has gone through.

We shall continue to work closely with industry and small business in the early stages of the scheme. I give that guarantee. Regrettably, however, the hon. Member for Perry Barr regards the Government announcement as yet another example of the conspiracies that he claims to find with rather monotonous regularity. The hon. Gentleman says that clause 22 of the Bill creates a liability for national insurance contributions on sick pay. That is true. However, for the hon. Gentleman to go on to say, as he did apparently to The Times last week, that this was something that was hidden from industry depends on one crucial assumption. The only way it can be regarded as hidden is if the person in question has failed to read the Bill or the original Green Paper published in April 1980.

The Green Paper stated specifically that the employer would deduct and remit tax and national insurance contributions from sick pay. It may come as a great surprise to the hon. Gentleman, but industry understood the point that he makes 18 months ago.

I give way to the hon. Gentleman because I mentioned him, but this must be the last time.

I am grateful to the right hon. Gentleman, who has spent some time answering the point I made last week. It came as no surprise to those who have read the Bill to whom I spoke. Is it not true, however, that small businesses, particularly the National Federation of Self Employed and Small Businesses, have met the Minister of State since the publication of the Bill, probably on one day last week, and have also met one of the Under-Secretaries of State for Industry to complain about the imposition in clause 22?

The National Federation of Self Employed and Small Businesses informed me last week—this was reported in The Times, which shows that I was not the only person to whom the organisation spoke—that, although the 100 per cent. reimbursement was a major concession, it was unhappy about the spin-off effect on small firms which have never had a sick pay scheme, resulting in a national insurance contribution of £5 a week extra, over and above the reimbursement. I talked last week to the Alliance of Small Firms and the National Federation of Self Employed and Small Businesses which assured me—one has since done so in writing—that they are unhappy about this aspect although grateful for the 100 per cent. reimbursement. The big boys, the CBI and so forth, are not worried. Most already have such a scheme. If the National Federation of Self Employed and Small Businesses did not see the Minister of State, I shall find out the name of the Minister. His name was mentioned. I shall also find out the name of the Under-Secretary of State for Industry who was seen.

I think I had better leave the Minister of State to deal with that point. The hon. Gentleman is now putting what is a valid point considerably more moderately than he put it to The Times, According to The Times, the Government were accused of inflicting a hidden tax of up to £58 million. The hon. Gentleman has his figures totally wrong, and there can be no question that it is a hidden imposition. The hon. Gentleman, I am sure, will know that it was contained in the original Green Paper in 1980 and that the £5 is the maximum loss that could arise. I shall ask my hon. Friend the Minister of State to reply exactly to the point that the hon. Gentleman makes about the visit of the National Federation of Self Employed and Small Businesses to a Minister in the Department. That would be the most satisfactory way of dealing with the matter.

I shall not give way again. The hon. Member for Perry Barr is quite old and big enough to look after himself without help from his hon. Friend.

I shall deal briefly with the detailed provisions of the scheme. They will be discussed at length in Committee. The first four clauses, together with schedule 1, explain when an employer is liable to pay statutory sick pay and when an employee is entitled to it. This follows broadly the proposals set out in the Green Paper but there is one exception. The list of groups excluded from the scheme does not contain women who have opted to pay reduced contributions. We had originally decided that it would be wrong to ask employers to take on a sick pay responsibility in respect of these women. Under the compensation proposals then being considered, the whole cost would have fallen on employers.

However, the compensation method now proposed largely removes that objection, and by including these women in the scheme, it will be simpler to operate both for employers and my Department. That is in keeping with the majority of existing sick pay provisions, which make no distinction between people depending on the rate of contributions. It will meet the spirit also of the European Community's equal treatment provisions. It was also, again, a recommendation of the Select Committee on Social Services when it studied the Green Paper. So contributions from these women will be decided in next year's contribution review. They will have to pay extra, but probably about ¾ per cent. to 1 per cent.

Clauses 7 and 8 deal with the rate of statutory sick pay and other provisions relating to payment.

Clause 9 takes us to the other side of the equation—the compensation for employers' additional costs.

Clauses 11 to 17 set out the administrative provisions and the rights of employees and employers. This is an important part of the Bill. Claims have been made that employers will be slow to pay. Those who make that allegation are clearly unaware how well existing sick pay provision works. Where genuine doubt arises about entitlement, including those cases in which the employer has not paid because he doubts the employee's incapacity, the national insurance adjudicating authorities will be able to consider the question.

To claim, as some Opposition Members have done, that the scheme is a step in dismantling the Welfare State reveals an extremely strange view. We are replacing a right to sickness benefit by one to statutory sick pay. I do not think that any reasonable person would continue to claim, in the 1980s, that all welfare provision should come from the State. We must realise that conditions have changed, and the Bill recognises that fact.

Turning to housing benefits——

On a point of order, Mr. Deputy Speaker. If we are turning to the subject of housing benefit, would it not be a necessary courtesy to the House for the Government at least to provide on the Front Bench some spokesman from the Department of the Environment, since this matter clearly has widespread repercussions for the whole of local government?

The hon. Gentleman knows that that is not a point of order.

Further to that non-point of order, Mr. Deputy Speaker. I should like to point out that whilst the Minister may have taken——

On another point of order, Mr. Deputy Speaker. The Minister has said that he will take note. Perhaps I may assure you, Mr. Deputy Speaker, that the Chief Whip is already on his way to take a note from the Minister.

We respond rapidly.

Turning to housing benefit, I do not see how the dual system that we have in this country can be justified either from the point of view of the claimant or from the point of view of administration.

From the point of view of the claimant, there are two separate systems. No one can permanently qualify for both at once, but many people can qualify for either. That causes confusion and difficulties for claimants, as anyone who has had to advise constituents about their position will know. Claimants face difficult calculations in deciding which scheme gives them the most help. Many make the wrong choice and lose benefit.

From the point of view of administration, two schemes lead to duplication of effort in several areas. Local authorities and local officers of my Department have to deal with the affairs of claimants transferring to and fro between the two schemes. One effect is that my Department puts a great deal of staff effort each year into uprating benefit entitlement to take account of increases in rents and rates. What happens is that the local authorities then have to collect rent and rates from the very same tenants.

I would hope, again, that there will be some general support for the prospect of simplifying this system. When we published our consultative document, in March 1981, we made clear that there was a number of criteria against which the proposals should be judged. We said that the reform should be easier for the beneficiaries to understand; that it should be fair for recipients; that it should minimise loss to individuals; that it should be easier to operate; that it should be uniform throughout Great Britain; that any additional administrative cost falling on local authorities should be met by the Government; and that the reform should be accommodated without any increase of expenditure on housing assistance.

I understand the argument that more resources should be devoted to housing assistance. For instance, the Supplementary Benefits Commission called for a system providing help to people with low incomes for all their housing costs, including mortgage interest. But since such changes obviously would involve substantial extra expenditure—that is, if there is not to be a large number of dramatic losses—in the present economic climate I do not believe that it is realistic to think in terms of proposals which require a substantial injection of more public funds.

My belief is that our proposals are in themselves a very substantial step forward and an important reform. When we published the consultation document, we proposed that local authorities should basically become responsible for providing all assistance with rent and rates. Most supplementary benefit recipients would be entitled to full rent and rate rebates or cash allowances in the case of private tenants. No existing supplementary benefit recipient would be worse off. We also proposed adjustments to the rebate tapers so that the poorest pensioners would receive substantially higher rebates—in other words, we would try to direct resources to those most in need. But it meant that the resources to pay for this would have to come from reductions in the rebates for others if the reform was to be carried out on a nil-cost basis.

Although local authorities would be able to make savings from the elimination of rent and rate collection from supplementary benefit recipients, we also recognised that there would be an increased administrative task for them, and we undertook to reimburse the cost.

Our proposals were broadly welcomed by the local authority interests, as well as by the Social Security Advisory Committee and the Advisory Committee on Rent Rebates and Rent Allowances which advises my right hon. Friend the Secretary of State for the Environment. But they expressed concern about two particular areas—first, the number and scale of losses; secondly, the position of future losers. We intend to seek to modify our proposals to meet at least some of that concern.

We shall ensure that, generally, no one with an income below the needs allowance will lose—in other words, the interests of the poorest rebate recipients will be protected—and we shall also ensure, generally, that no one with an income above the needs allowance will lose more than 75p a week.

There are about 6¼ million households currently receiving rebates or supplementary benefit assistance with rent and rates, which will be covered by this new legislation. About half will receive the same level of assistance under housing benefit. Almost 1 million will gain benefit by an average of just under £1 a week. These are among the poorest beneficiaries. Some will gain as much as £3 a week. In the main, those will be pensioners. About 2 million will lose under these proposals, but nearly half of these will be losing 25p a week or less. I repeat that none of the poorest recipients, the people with an income below the needs allowance, will lose at all. We shall also ensure that future losers are protected against loss. These are people who will receive less housing benefit than they would have received from supplementary benefit under existing rules. These people will receive topping-up payments of supplementary benefit.

A further point that I should emphasise is that the cost of protecting claimants in the ways that I have set out will mean that total expenditure on benefits will not reduce but will increase by £10 million in a full year. That will be paid for from the savings in the number of civil servants that will now be freed—in other words, as I have said, efficiency savings will be passed directly into the improvement of benefits.

What are the wages of the civil servants? Will the wages that are saved be a lot more than the unemployment benefit that will have to be paid to some people?

I cannot give that figure. What I was saying—it is a point to which the hon. Gentleman should address himself at some stage—is that the efficiency savings that we are making within the Civil Service—surely no hon. Member believes that we should sustain jobs in the Civil Service when there are no jobs to be done—will be ploughed into the scheme. I should have thought that hon. Members on both sides of the House would agree on that matter, but clearly that is not so.

We shall of course need the support of local authorities to get the scheme successfully launched. The Bill simply provides enabling powers. I am anxious to ensure that the local authority point of view is fully considered before the regulations are finalised and laid before Parliament. I shall discuss with local authorities the details of the scheme during the coming weeks.

I said at the outset that our proposals are aimed in part at reducing complexity and in part at reducing bureaucracy. The result will be that claimants will no longer have to decide which of the two schemes provides the best assistance. The Department will save about 2,000 staff, and, although local authorities will need extra staff, they too will be able to make some savings in rent and rates collection and in chasing up rent arrears.

As part of the rationalisation of the existing system, we have also been considering—this may in part answer the original point of order; I concede that it will not do so entirely—which is the most appropriate Department to take responsibility for housing benefit. My right hon. Friends and I agreed that it is more appropriate for that responsibility to be placed with my Department. Housing benefit will be a form of income support, and it seems much better that future policies should be considered in the context of the social security benefit structure and developments as a whole. It is also important to the interests of supplementary benefit recipients that effective liaison arrangements for the handling of claims should be developed between my Department and local authorities.

I have given way on a number of occasions. I shall not do so again.

For both those reasons, I shall take responsibility for benefit paid under this part of the Bill, although my right hon. Friend the Secretary of State for the Environment will continue to have responsibility for the existing rent and rates rebates schemes until they end.

There is a number of other important items in the Bill, and my hon. Friend will deal with some of them when he replies. However, there is a particular item that I want to mention. Clause 36 is the first step in the restructuring of the industrial injuries scheme. Injury benefit, as the House will know, is the initial benefit in that scheme. It provides for those who cannot work as the result of an industrial accident or disease, and can last for up to 28 weeks. Its weekly rate is £2·75 higher than the sickness benefit rate.

The provision of preferential benefits for the industrially injured has been the subject of recent public consultations and proposals for reforming the industrial injuries scheme. These were recently published in a White Paper.

Broadly speaking, the reform is designed to avoid duplication between the main national insurance scheme and the preferential industrial injuries scheme and to redirect resource, to more seriously disabled people. The changes will require separate legislation, which we hope to introduce as soon as possible. However, it seems sensible to include one of them, the abolition of injury benefit, in the Bill so that from the introduction of statutory sick pay we shall normally have just one benefit for short-term incapacity. That will help to simplify administration for employers and for our local offices and will also lead to further savings.

The Bill therefore enables sickness benefit to be paid to the industrially injured who do not qualify for statutory sick pay or for sickness benefit under the normal rules, and we are currently considering how we might use the money saved by the abolition of injury benefit to bring forward improvements elsewhere in the scheme, as proposed in the White Paper.

The Bill contains some of the most important changes in social security provision that have been introduced in the past few years. The statutory sick pay scheme will avoid duplication of bureaucracy between the State and employers, and will lead to a substantial reduction in Civil Service posts. It also realises the ambition of Governments over the past 30 years to bring sick pay into taxation. The housing benefit scheme also simplifies administration and ends the present confused system. In other words, the reforms bring benefits both to the public as taxpayers and to the public as claimants. It is on that basis that I commend the Bill to the House.

5.36 pm

We have listened with interest to the Secretary of State's apologia for the Bill. He was right to avoid any reference to too many matters of principle, because we do not regard the Bill as being a particularly principled one.

I am sorry that the right hon. Gentleman did not deal with some of the background to the Bill. It is extraordinary that in this week of all weeks he should not have mentioned the history of his Department during the past two years in social security. It is insensitive, because this week we see the uprating in pensions and other benefits, an uprating that has already been savaged by the Government in relation to the percentage that is due.

I shall say a few words in that connection, because we must put the Bill, which makes another invasion into social security matters, into its proper context. The Bill is yet another invasion into the structure of the Welfare State, affecting as it does its two main planks, the National Health Service and social security, which both come under attack. It is essential for us to point that out.

This week the old-age pensioner is to receive an uprating of 9 per cent. Hon. Members may remember the reasons for that 9 per cent.

On a point of order, Mr. Deputy Speaker. Is the hon. Member for Renfrewshire, West (Mr. Buchan) right to discuss this issue, as the Bill contains no reference to old-age pensions?

On the Second Reading of the Bill hon. Gentlemen may discuss what ought to be in the Bill and why it is not in the Bill. They need not refer to any specific clause.

Over the past year, instead of the predicted 10 per cent. increase that old-age pensioners should have received, 1p in the pound was deducted from every old-age pensioner by a specific Bill. It is the first time that legislation has been introduced to reduce by a penny in the pound the pension of the 9 million pensioners in this country. Even there the Goverment got it wrong, because inflation is now 11·7 per cent. and next month it will be seen to be 12 per cent. So there will be a 3 per cent. shortfall.

I want to put two questions to the Secretary of State. First, will he show the same urgency in rectifying that 3 per cent. shortfall as the Government did in trying to claw back the 1p in the pound from pensioners during the past year? Secondly, the Bill involves the levels of social security. What about the tax-related index that the Government brought in to deal with that? The level of inflation in that index is now running at 14·9 per cent. So beneficiaries now receive 70p a week less for a single person and £1·20 a week less for a married couple.

That is the background to the Bill, along with 5 per cent. cuts in unemployment and invalidity benefits, in a society where there are 3 million unemployed, against whom these measures have been aimed. That is the background against which we shall judge these measures.

I heard with interest the figure's and analysis presented by the right hon. Gentleman on the unified housing benefits. He said that 6¼ million are receiving either rent or rate rebates or supplementary benefit. He told us that of these about 3 million will receive the same level of benefit, 1 million will gain and 2 million will lose. It is true that 1 million will lose only 25p a week, but the Government saw fit to introduce a Bill to take 1p in the pound from old-age pensioners. Against that background 25p must be recognised as a significant loss.

The right hon. Gentleman justified the results of this measure by saying that it had to be introduced as a nil-cost scheme. When the Government introduce what they regard as administrative reforms, why do they do so by penalising groups that are poor? They seem to insist that it is the poor who must pay for the poor. The right hon. Gentleman avoided the principle that is involved by use of the term "nil-cost". The poor, who are penalised in every other direction by the Government, will bear the cost of the shift. The Opposition see no justification for that.

The Bill does not tell us what it will do finally. The right hon. Gentleman accepts that the Bill merely introduces enabling powers. We have not yet been acquainted with the details of the scheme that has been outlined by the right hon. Gentleman. Before we debate the Bill in Committee the Government had better bring forward the regulations. I have no intention of discussing only the enabling legislation in Committee in the absence of any clue about the specific scheme.

The right hon. Gentleman said that we are talking about 6 million people and that some will gain and some will lose. We and they are entitled to know the details. I ask the right hon. Gentleman to ensure that the details are brought forward before we discuss the Bill in Committee. If he does not, either he or his unfortunate colleague the Minister for Social Security will find it difficult to proceed very far with the Bill. That difficulty will be experienced until the details of the scheme are made available.

The figures that the right hon. Gentleman presented are not dissimilar to the ones that appeared in The Guardian, in which we were told about the costs that would arise on the housing front. It was claimed in The Guardian that 2,170,000 households that are receiving rent or rate rebates would lose up to 75p a week. That is the figure that the right hon. Gentleman concealed when he said that only 1 million would lose up to 25p a week. According to The Guardian, the unpublished figures of the DHSS reveal that 2,170,000 households will lose up to 75p a week under the unified housing benefit scheme. The right hon. Gentleman should let us know whether he agrees with those figures. They tell us that many more families than expected will remain in the losers' category. We are right to regard the right hon. Gentleman's optimism with some scepticism.

It is not optimism. I am merely seeking to be truthful and frank with the House. If the hon. Gentleman had been listening, he would know that I said that 2 million would lose and that the maximum that they would lose would generally be up to 75p a week, as I think The Guardian reports. I said also that about 1 million of the 2 million would lose 25p a week or less. I hope that that makes it clear.

I think that the right hon. Gentleman is saying that he accepts The Guardian's breakdown. That is very different from waving the figures of 1 million and 25p a week.

Of course they are the same figures. The only difference is that now the right hon. Gentleman is saying so, whereas previously he did not.

The hon. Gentleman is being extremely stupid. As I have said, the 1 million come within the 2 million. I am not sure whether I can make it any clearer. We are breaking down the figures for the hon. Gentleman. We are doing so to help the House, and the breakdown may also help The Guardian.

There is an old-fashioned term for that. There is a more complicated academic term, which is "obfuscating". That is what the right hon. Gentleman is doing. No one doubts that what he has said is correct. It seems that he is now agreeing with the figures that appeared in The Guardian, which reverse the presentation and make the truth much clearer. The figures highlight the enormity of the Government's policy of making the poor pay for the poor. They make that a great deal clearer.

The hon. Member for Brighton, Kemptown (Mr. Bowden) talked about passport benefits which may be lost to those who cease to receive the appropriate supplementary benefit payments. An example is a disabled householder with an invalidity benefit of £26. She has to pay £14 a week in rent and rates. She receives supplementary benefit of £13·50. That sum pays all but 50p of her rent and rates. She could have claimed rent and rates rebates, but those rebates would have left her paying an additional £1·23 a week.

Under the proposed housing benefit she would have no alternative but to pay the £2·39, which would make her considerably worse off. In fact, she would lose £1·89. More important would be the fact that she would no longer be in receipt of supplementary benefit. She would be unable to claim single payments or additional payments. She would not be exempt from prescription charges or from charges for optical or dental treatment. Nor would she be able to receive the long-term supplementary benefit rate, which would provide an extra £5·35. There is much more in this simple administrative change than the right hon. Gentleman has told us.

It is my clear understanding from reading the Bill that someone in the circumstances outlined by the hon. Gentleman would be entitled to the topping-up payment.

We shall see. There is one major difference, because there will be no automatic benefit, and we find from experience that the Government are not allowing very much discretion. I shall leave other matters that arise from housing benefit to be dealt with by my hon. Friends. I merely say that enough damage has been done to the Government's case by the answers that the right hon. Gentleman has provided. I remind him that we shall not accept the Bill in Committee until the details of the scheme come forward.

It means that the right hon. Gentleman's Front Bench colleagues will have a hell of a time in Committee if he does not bring forward the scheme in Committee so that the Bill in its entirety can be properly discussed in the light of the scheme.

Clause 35 was largely passed over by the right hon. Gentleman. It removes the need for registration of the unemployed. The clause has been attacked as a provision for concealing unemployment figures. I do not charge the right hon. Gentleman with that. However, the clause, when enacted, will distort unemployment figures. The real tragedy is that it will remove from registration many unemployed who should be keeping in close contact with their Jobcentres. Those who are becoming progressively more depressed because of unemployment and of whom we should be taking the most care will lose contact. They will become an isolated and forgotten group.

The clause has been attacked by the trade unions that are involved and by the trade union movement generally. It has been attacked by the Child Poverty Action Group and by the Federation of Claimants Unions. It is an objectionable clause, and we hope that the right hon. Gentleman will remove it.

The right hon. Gentleman moved quickly over the industrial injury benefit provisions and the costings of them. When the Government try to bring various benefits into harmony, I wish that for once they would do so by increasing other benefits instead of creating reduced benefits.

The part of the Bill that concerns me most is the changes that are to be made in sick pay. The Secretary of State said that there had been a great deal of consultation and that it had been listened to. With respect, the consultations and discussions that were listened to were the comments from the CBI—from the representatives of big business. The Bill does not show that the points made by any other sources were listened to. It does not show that the trade union movement was listened to or that the self-employed or small firms were listened to. The Secretary of State claimed that he was satisfying them—[Interruption.] Democratic pressure works. We welcome the hon. Member for Ealing, Acton (Sir G. Young) to the Front Bench and hope that he will give the guidance that some of us have missed during his absence.

It is not true to say that the small firms are happy about the Bill. I am talking about what they say, and about the Alliance of Small Firms and Self-Employed People Ltd. I shall compare their words with what the Secretary of State said about the happiness of the consultations. The Alliance of Small Firms and Self-Employed People says:
"The small firm sector is still bitterly opposed to the Sick Pay proposals in common with the Trade Unions, the Low Pay Unit and the Disability Alliance. If this bill becomes law it will be a black day for small firms, a black day for employment prospects and a black day for the Government whose chances of re-election will be affected when the Act is implemented in the run-up to the next General Election."
I could not have said it better myself. So much for the success of the consultations

We oppose the measure in principle. It is a move away from the comprehensive and unified welfare structure that we have known sinced Beveridge. Hon. Members will recall that Beveridge sought a scheme of social insurance against interruption and destruction of earning power. One of the basic principles of Beveridge was the unification of responsibility—a single insurance fund and a single Ministry. That is now being disrupted by the measures. We object to them in principle and in detail.

The Bill is highly discriminatory and, as always with this Government, discriminatory in the wrong direction. The Prime Minister when talking to the Women's Royal Voluntary Service on 19 January 1981 said:
"It all starts in the family. Not only is the family the most important means through which we show our care for others; it is the place where each generation learns its responsibilities towards the rest of society."
However, when we look at the details in the Bill, we see that it is precisely the family that is being discriminated against. It discriminates against people with dependants when they are sick.

The sick pay rates are calculated by reference to the 1981–82 sickness benefit figures. Flat rate sickness benefit in 1981–82 is worth £22·50 for a single person. However, there is an additional £13·90 for an adult dependant and 80p for each dependent child. On top of that, national insurance contributions are not deducted from sickness benefit, but they will be from sick pay. If all that is taken into account, the curious fact is that the single person earning enough to receive £37 sick pay will have £11·63 a week more than flat-rate sickness benefit under the new scheme. However, a childless couple with one dependent partner will have £2·27 less and a similar couple with two children will receive £3·87 less. Therefore, the single person is doing better, but the family with two children is almost £4 worse off. So much for the Prime Minister's devotion to the family.

In any case, the real value of child benefit has been cut since the Government took office. At the same time they have cut the real value of child support by the administrative change in the percentage allocation. That cut amounts to £1·20 a week per child on child benefit, let alone what is happening in the Bill.

If the Government can find the resources to compensate employers in full, they have a moral duty to do the same for sick families who will lose under the new scheme. Instead of making such statements to the WRVS, the Prime Minister should give permission to the Secretary of State for Social Services to carry out a few more compassionate and thoughtful actions towards the family.

I understand from The Guardian of today that the "Star Chamber Court" has been resurrected. In that court people go in front of the Prime Minister and tell her what they want to spend in doing good.

"With Mrs. Thatcher in the chair, Ministers wheeled before it have calculated that they face a three-to-one majority against them."
Perhaps that is the reason why the Ministers were not able to fulfil her fine words.

The Bill discriminates against not only the family, but the low paid. The various phases through which it has gone are startlingly clear. The original Green Paper suggested that the low paid should receive 75 per cent. of normal earnings. The Green Paper was replaced by an orange paper—it sounds like a Northern Ireland situation—which proposed the two rates in the Bill—£37 and £25 for the low paid—but the cut-off point was to be £45. In fact, in the Bill the cut-off point is £60. That means that all those earning between £34 and £44 a week are worse off than under the original proposal. The cut-off at £60 has made the situation worse.

About 850,000 people are receiving less than £60 a week. They will become the new second-class sick. The Secretary of State praised the CBI, and agreed with it, because of the valuable consultations. However, even the CBI agreed that the sick pay should equal normal earnings when those earnings were lower than the standard sick pay rate. That has been completely ignored. Therefore, the proposals are also harsh and discriminatory towards the low paid.

There is a strong link between low pay and the chronically sick and between low pay and the disabled. The chronically or recurrent sick or the disabled, by and large, will suffer not only in actuality, but in comparison with others under the Bill.

The Secretary of State referred to the Social Services Committee. In its second report it said:
"To enforce a lower benefit for the low paid would save employers very little money … but would add a relatively large burden to the difficulties of the low paid. Unless the scheme as a whole is to be earnings-related, it is unreasonable to single out the low paid for treatment which would be unfavourable to them."
However, the Government have done exactly that. It is amazing that they have even succeeded in discriminating against the low-paid earner.

The Government's proposal is for those that are least able to cope with a drop in income during sickness. Sick pay for a low wage earner with a dependent wife and two children will be £13 a week less than the sickness benefit payable if he were unemployed. I hope that the Government will take that point on board and remove that anomaly during the passage of the Bill. I cannot see what incentive there is to work when a man will be £13 a week better off unemployed than when he is employed on low pay and has the proposed sick pay that is related to that.

There is no guarantee in the Bill on uprating. In this week of all weeks we might have had it. We are told that it can be reviewed, but there has been no automatic change written in. We shall expect that change to be written into the Bill.

There has been another change in the linking period. There was a change in the linking of sickness spells, first from 13 weeks to eight weeks and now it has been cut from eight weeks to two weeks. As there is no link-up over more than a two-week period, the recurrent sick will never achieve sick pay. That is monstrous and should be changed.

Finally, I wish to deal with the brief sent to hon. Members from the Legal Action Group. It points out that many safeguards are written into the Bill for the employer but far fewer for the employee who may have to deal with a difficult employer. Instead of claiming sickness benefit from the Department, employees will have to claim their statutory sick pay from their employer. At least 30 per cent. of employers will be paying sick pay for the first time and are unlikely to welcome the obligation. If employees do not get their problems solved immediately, they will have to enter into disputes and risk losing their jobs. We are dealing on the whole with smaller employers and not always the best ones. Many will be outside the normal employment protection legislation. If an employer fails to pay the statutory sick pay, the only way that an employee can enforce his rights is to sue in the county court and we all know the inadequacies of that procedure.

Presumably, the Government will increase the number of DHSS inspectors to enforce the employers' duty through criminal prosecution. However, we have sad experience of such inspectors. In 1979–80, about 7,000 firms went against low wages legislation and only 12 were prosecuted. We need changes from the Government in Committee to make it easier for an employee to enforce his rights.

The Secretary of State stressed that one aim of the proposals is to bring benefits into taxation. The Government were elected on a pledge to cut taxation, but I have never met a crew so willing to introduce new forms of taxation. With the unemployment that they have created, there is now a shortfall of £500 million on the national insurance fund. There are arguments about how to pay for that. The "Star Chamber Court" appeared to favour increased national insurance contributions, which again will be a tax on both employer and employee.

We do not object in principle to making benefits taxable, but that should not be done until their value has been restored and tax thresholds raised so that those entirely dependent on benefits do not pay tax. This Government have become a Government of high taxation.

The Government have introduced the tax and price index, which is 4 per cent. above the RPI, which in turn is considerably higher than under the previous Government. If we use the new index, the uprating should be even higher.

That is absolutely right. In September, the Government's new and improved index stood at 14·9 per cent. and not at the estimated 10 per cent. It is 3 per cent. higher than the RPI.

The employers' 100 per cent. self-deduction, which everyone agreed with, including the Select Committee on Social Services, was savaged in the Government's own document because of the number of inspectors needed to prevent fraud. The document said:
"In effect, a 100 per cent. self-deduction scheme could end up with the honest, efficient employer subsidising the dishonest, inefficient one. For these reasons the Government remain strongly opposed to this approach."
However, lo and behold, the CBI snaps its fingers and there is this provision in the Bill.

However, the consultative paper also states:
"100 per cent. self-deduction would not have this built-in control. Even if the number of visits to employers by DHSS inspectors were increased substantially beyond the level envisaged … thereby reducing still further the Civil Service staff savings".
When the right hon. Gentleman mentioned the savings, did he mean the estimated savings in the previous orange paper, which mentioned a similar figure, or is this a new situation? How many new inspectors does he propose to enlist to police the 100 per cent. self-deduction? Surely the savings will not be great.

We were originally told that about 5,000 Civil Service posts would be saved. The figure is now 6,000. The second objective was to save £400 million. We argued about that figure in the House, and I eventually received an apologetic letter from the Minister of State, who said that the total saving was only about £25 million. In his letter of July 1981 he stated:
"It has never been claimed that the change is being made in order to reduce the size of the public sector borrowing requirement, and it manifestly does not do so in any significant way."
Why, if there is to be little, if any, saving, does the Secretary of State intend to scrap a scheme that is part of our basic welfare structure?

The White Paper on industrial injuries benefit, published only last week, states:
"the abolition of the industrial preference will yield a net saving of about £5 million a year."
The Government will consider how to use that sum for other beneficiaries. When the Minister says that the money saved by abolishing benefit will be used to help the disabled in other ways, he is talking of only £5 million.

However, the White Paper also states:
"This will produce further annual savings of about £25 million for which allowance has been made in the estimating of the financial effects of the sick-pay scheme."
That is exactly the figure that the Government claim that they will save in the Bill. The entire sum comes from abolishing the industrial injuries benefit. It is ideological nonsense that even the sick are to be handed over to the private sector. It is bad enough flogging off our oil assets, but the Government are now disrupting and destroying the NHS. That is mean, tawdry and an attack on people's rights in the Welfare State. Oh, for my Butler and Gaitskell long ago. The Government are deserting even a noble Conservative tradition.

We shall oppose and reverse that part of the legislation, and bring back an even better scheme to repair what the Government have damaged and are trying hard further to damage.

6.7 pm

I agree with the hon. Member for Renfrewshire, West (Mr. Buchan) on one point. This is very much a Committee Bill. A great deal will depend on the details and how they will affect individuals and families.

I then part company with the hon. Gentleman. The principles in the Bill should be warmly welcomed. My right hon. Friend the Secretary of State said that it was a Bill of great significance. It could prove to be one of the most significant social security Bills for many years, not only for what it does but for the new pattern that it sets to meet modern conditions—particularly the sick pay scheme, the replacement of injury benefit in the industrial injuries scheme and the proposals on housing benefits.

The sick pay scheme is a good idea that was nearly wrecked because of the understandable fears that employers had about the cost and the paperwork involved. However, by going for the deduction of the full cost of sick pay to employers as they make their monthly payments of national insurance contributions, my right hon. Friend has dealt with most of those justifiable fears. I pay tribute to him and to my right hon. and hon. Friends for the careful way in which they have listened to the representations that have been made both inside the House and outside during the scheme's progress from mark I to mark V.

I am also glad that my right hon. Friend the Secretary of State has been able to concede the 110 per cent. deduction, because it is particularly important for the disabled. I am glad that the Disability Alliance welcomes that aspect, although it is critical of many of the Bill's details. Despite my right hon. Friend's concessions, the State will still make a big saving in Civil Service manpower. In addition, the arrangements will still be brought within the taxation system and that is an objective that both sides of the House long since agreed was desirable and only fair to those on long-term benefits who pay tax on them.

Perhaps most significantly, the new proposals will cut out the wasteful duplication between State sickness benefit and employers' sick pay schemes. That duplication has sometimes meant that people are better off when sick than at work. The State is withdrawing from an area in which employers' schemes are sufficiently widespread to justify the State placing the obligation on all employers and laying down minimum standards. That is the long-term significance of the proposal and I am sorry that the Opposition cannot see the practical good sense involved.

In the context of today's increases in pensions and other social security benefits—which add no less than £2,000 million to the Bill for social security benefits—it is surely essential to look for areas that the State can withdraw from in order to meet the rapidly escalating cost of benefits for pensioners and others who must necessarily largely rely on the State scheme.

I turn to the level of benefit within the sick pay scheme. I am surprised that the Opposition have missed the fact that that will be a matter for negotiation between employers and trade unions. Many employers already provide, in their sick pay schemes, standards that are higher than the minimum standards that are being laid down. I should have thought that the hon. Member for Renfrewshire, West would welcome the prospect of another area for negotiation. Apparently, he does not.

I wish to draw to my right hon. Friend's attention two points that have been made by the Child Poverty Action Group and by the Disability Alliance. The first of those points was referred to by the hon. Member for Renfrewshire, West. I refer to the position of families with children. There is little doubt that, as a result of the arrangements, they will tend to be disadvanted. That is not a criticism of the scheme, because the scheme must be simple if it is to work effectively. However, it reinforces the point that has been made time and again from both sides of the House about the critical importance of child benefit. My right hon. Friend now has an additional obligation to ensure that child benefit maintains its real value in the annual uprating. The second point concerns the lower rate for the lower paid. There is some substance in the criticisms put forward by the CPAG. I hope that my right hon. Friend will look carefully at the figure in the Bill and consider whether it is lower than it should be. Perhaps he will consider whether it might be possible to concede the CPAG point—with which I think that the CBI agrees—which would only marginally increase the cost of the scheme to employers. It would be of considerable help to those on low pay.

Sickness certificates are a difficult issue and doctors have been unhappy about the situation for many years. I know that my right hon. Friend is considering the possibility of not having any sickness certificates for the first week. The doctor would come into the picture only after that week. Among others, the Engineering Employers Federation has argued that there must be agreement about certification before the sick pay scheme is introduced. It in argued that if the sick pay scheme is to be introduced in April 1983 it would be tidier and would allow more time for the details to be worked out if self-certification were introduced at the same time. There is substance in that point and I hope that the Government will consider it seriously.

Another point was made by the Engineering Employers Federation and by the CBI. I refer to the importance of definitions, such as the definition of a day, of employees on shift and rota systems and of casual and temporary workers. Given the employers' understandable concern about the extra administrative costs involved—particularly for those who face an extra national insurance liability as they do not have sick pay schemes at present—we must keep the scheme as simple as possible. I recognise that all those points can be explored later, but I hope that they are of sufficient significance for the Minister to comment on them at the conclusion of the debate.

Another significant point is involved in the proposals on injury benefits, which follow logically from the proposals on sick pay. It makes good sense to merge the injury benefit with the new sick pay scheme. That will enable resources to be concentrated on the more severely disabled within the industrial injuries scheme—those with long term disabilities and those who face the biggest loss of earnings. Therefore, I welcome the White Paper. I shall quote a sentence from the White Paper, "Reform of the Industrial Injuries Scheme", in which reference is made to the war pension scheme. It states:
"War pensions and industrial injuries provisions are aligned in many ways, but there are significant differences in the range and level of benefits, as well as in the age distribution of beneficiaries, and it by no means necessarily follows that an alteration made in one scheme should be made in the other."
I was glad to read that sentence. Although the industrial injuries scheme may well be due for a thorough inspection, I am not sure that this is the right time for a similarly thorough look at the war pensions scheme.

I declare an interest as a former Minister with responsibility for war pensions and as a war pensioner. Many of those who receive war pensions or services under the scheme have either reached retirement age—having received their wounds during the Second World War—or are approaching that age. They are reaching the time when their calls on the scheme are likely to increase rather than decrease. The scheme has its familiar landmarks for many of them. Were we to embark on major changes at this stage, we could create anxieties and insecurity to an unnecessary degree. I therefore hope that the Minister will say something about that. I hope that he will also be able to assure the House and war pensioners that, whatever changes may be made, the preferences that exist within the war pensions scheme—that special debt of honour that our country owes to these people—will in no way be diminished.

I now turn to the housing benefits scheme. I welcome the principle enshrined in the Bill. Indeed, for many years there has been widespread agreement that we want to move in this direction. The concept was welcomed in principle by the former Supplementary Benefits Commission. We are dealing here with people in need for whom housing costs are one of the main worries and commitments, however those commitments are met.

At present, there is duplication between what the State provides in cash benefits and what the local authorities provide. As a result, a significant number of people are suffering because they have made the wrong choice. They have been unable, because of the complexities of the system, to identify what will benefit them most. It is, therefore, good that we are now moving forward towards one scheme administered by one authority rather than the duplication that exists at present. It is refreshing to see that although the scheme will be introduced at nil cost, the overall administrative savings of about £10 million a year will release an additional £10 million to be spent on benefits. That is highly desirable.

Many detailed points must be considered. I still do not have a sufficiently clear picture in my mind about those who will lose by up to 75p a week. I am sure that the Government will recognise that to the sort of people about whom we are talking 75p a week is significant. We must look at this carefully.

I am not too happy with what I know so far about the proposed topping-up arrangements for those who might otherwise be worse off as a result of the new scheme. Topping-up arrangements introduce additional complications. Here again, the House needs further information before it can judge. The idea is good in principle, but we require more information to convince us that it is also likely to be good in practice.

The Bill shows once more the Government's resolve to preserve the essential fabric of our social services and to adapt that fabric to changing needs. The cost of maintaining the State's obligation to pensioners and others on long-term benefits is growing rapidly at a time when our national wealth is static. I only wish that in the debates on these subjects the Opposition were prepared to recognise, and address their minds to, this central dilemma.

We owe this obligation to those now retired who have built up the wealth that we now enjoy. I am delighted that the Government are firmly committed to honouring that obligation. If we are to do so, we must look for economies in short-term benefits. We must get rid of wasteful duplication and simplify an otherwise complicated system. It is because the Bill does just that that I shall support it in the Lobby tonight.

6.25 pm

I am glad that the hon. Member for Somerset, North (Mr. Dean) indicated some of his concerns about the Bill. Opposition Members are certainly concerned about the effect of the sick pay scheme on families with children, the lower paid and the losers in the housing benefits scheme.

My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) was right to put the Bill into perspective. If the hon. Member for Somerset, North was delivering a lecture about what the Opposition ought to be thinking, I remind him that year after year the Labour Government came forward with measures to expand, improve and increase the rights of those most in need of help, whether they were pensioners, the disabled, those caring for sick people or families with children. All of them saw an improvement in their entitlement.

At the time, none of the improvements was opposed by Conservative Members. Their line was to say "Not enough, and not quickly enough", but since the Conservative Government came into power exactly the opposite has occurred. Each year, sometimes twice a year, they have come forward with measures that have decreased the entitlement of the poorest in our society. We have seen further cuts in benefit entitlement. Apart from the growing hardship that that has caused to all sections of the most needy in our society, Labour Members are fed up with successive social security legislation that has squeezed the living standards of the poorest. The Bill is just the latest in a long line, but I do not need to remind the House about that.

My hon. Friend the Member for Renfrewshire, West was right to remark that it was strange to introduce the Bill at a time when the new benefit uprating was coming into effect. Last Wednesday I asked the Secretary of State
"to what extent he expects the November 9 per cent. uprating of long-term benefits to be below the year-on-year rate of inflation?"
He replied:
"The actual movement of prices over this period is now expected to be rather higher than 10 per cent."—[Official Report, 18 November 1981; Vol. 13, c. 177.]
The right hon. Gentleman could have said "Rather higher than 11 per cent., probably about 12 per cent.", but he did not. I asked whether he proposed a supplementary payment during the next 12 months to prevent hardship to those involved. He told me that he would do nothing about it until a year from now.

That is an unsatisfactory response, bearing in mind that in the next 12 months people will see their standard of living steadily fall. In addition, when we take into account the 1 per cent. cut that people have suffered because they have been overpaid this year, it is sickening to think what will happen to those who have suffered. That shows a shameful lack of concern for the human dignity of our people., at a time when a report published today reveals that people are paying more for less food.

The Association of Directors of Social Services has carried out a survey on what is happening in that sector. It points to the Increasing burdens placed on the social services by the increasing number of unemployed, the greater proportion of the community existing on or below the poverty line and a rising proportion of elderly people in our society.

The Government are saving in many ways as a result of the various pieces of legislation that they have brought before us. No wonder the Secretary of State experienced some difficulty at the social services conference last week. Many people told him in no uncertain terms about the intolerable burdens now placed on the social services as a result of the squeezing of the benefit entitlements of many of our poorest people.

I shall comment only on the Government's proposals for sick pay. I want to be brief, because I appreciate that many of my hon. Friends wish to speak.

As I am sure my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) will point out, when the Government's original plans were considered the Select Committee on Social Services made criticisms of them. We rightly recommended that the Government should reconsider their proposals with regard to compensation for employers, as the hon. and learned Member for Thanet, West (Mr. Rees-Davies) mentioned in an intervention. The Government certainly took note of that part of our report, but in relation to the recipients they seemed not to listen to us at all. We are as much concerned with the recipients as with the employers.

The Select Committee report shows that we opposed the idea of a statutory flat-rate payment to sick employees without variations to take account of family responsibilities. To pay flat-rate benefits without additions for dependants is guaranteed to ensure inadequate provision where there is neither a home responsibility allowance nor adequate child benefit.

It was in fact almost immediately after the Select Committee reported that the Government withdrew for reconsideration the Bill that was then proposed. It was delayed for some months to allow them to consider all the matters arising both out of the report and out of further consultations. Clearly, therefore, the Government have given the matter very careful consideration.

The Government may have given serious consideration to the report, but they took no damned notice of it. They took notice of the representations made by the CBI as well as by the Select Committee with regard to employers, but for the beneficiaries they actually worsened the situation. Unless the new scheme is amended—and the support of the hon. Member for Somerset, North may be very encouraging in Committee—it will be worse for sick people than the present arrangements, in a number of ways.

First, many people will receive a lower income during sickness than they do at present. Secondly, the scheme will take no account of family circumstances. Thus, a man with a dependent wife and children will lose by the change, while single people will gain. That cannot be fair. Thirdly, low earners will receive a lower rate of sickness pay than others. At present they qualify for flat-rate sickness benefit on the same basis as everyone else. It cannot be right to introduce a system that does less for low-paid workers and means that they will be worse off than they are under the existing scheme. Fourthly, there is to be no requirement that the level of statutory sick pay should be uprated annually in line with inflation. The Secretary of State is obliged to consider the matter. He may make a study of it, but he is not required to take any action based upon that study.

There are therefore many ways in which the recipients—and it is the recipients with whom we are here concerned—will be very much worse off as a result of the Government's proposals than they are under the present system. We must therefore consider very seriously how to ensure that this is not a further step away from the rights and entitlements created over the years, not just with regard to disability and old age, but with regard also to sickness. It is wrong that a scheme should be put before us which, if accepted, will have that effect. The scheme will produce very little financial saving.

The hon. Member for Somerset, North was very pleased about the number of civil servants who would he saved—or sacked, to put it another way—but he did not consider the additional work that which will fall upon employers and upon local authorities, which are already excessively burdened by pressures from the Government. I see far more difficulties in this scheme than in the present scheme.

It is therefore right that we should reject the scheme. No doubt it will be carried through, due to the Government's majority. One does not know what will happen as by-elections continue, but at present they still have a large majority. I therefore hope that some of those Conservative hon. Members who care about the recipients will use their voting power in Committee to see that we do not end up with yet another scheme that takes away the rights and entitlements of the poorest members of our society.

6.35 pm

I wish briefly to try to put these matters into a more appropriate perspective. I find it difficult to sit in the Chamber and to hear my colleagues on the Select Committee delivering the kind of views that have been expressed this afternoon. I do not see how they can justify voting against the Second Reading of at least part of the Bill. I refer to the part dealing with health matters. They entirely accepted the principle of a statutory scheme for employers. There is no doubt about that. The Select Committee report shows that we succeeded in agreeing on that. I shall deal later with the points of criticism that they rightly raised. Indeed, drawing from his own experience, my hon. Friend the Member for Somerset, North (Mr. Dean) put his finger on the problem when he said that it turns upon ensuring that child benefit is uniform and adequate, so that those with dependants are not worse off than single people. In fairness to the right hon. Member for Norwich, North (Mr. Ennals), I acknowledge that he also made that point.

The Opposition Front Bench speech was, however, intolerable in that it contained the suggestion that somehow the main principles in this matter were to be set at naught. Second Reading, after all, concerns matters of principle. Even given the views held by the Opposition, I believe that with a receptive Government it would be possible to amend the Bill to achieve their purposes. There is no real objection in principle that calls for opposition to Second Reading.

Certainly no objection in principle could arise with regard to the clauses dealing with the war disabled. In that regard, I should say in passing how much I welcome the remarks of my hon. Friend the Member for Somerset, North. I speak, of course, as one who is not only a disabled person but a member of the appeals committee of the British Limbless Ex-Servicemen's Association. We have always felt—I say "we", as I have an obvious interest in this—that it is right to keep the war disabled, who are the few remaining from the First World War but mainly those from the Second World War, in a special category not only with regard to taxation but in a number of other ways. I would not wish that to be changed in any way, and I see nothing in the Bill that in any way inhibits that. Indeed, the Bill clarifies the position in a number of ways that may well achieve an improvement.

The essence of the matter is this. Almost every European nation has a satisfactory system for the payment of sick pay by the employer. The question of principle that arises is whether it is better for the employer to pay the sick pay to his own employees or for the State to take over and to hand it out as a State benefit. I greatly favour the principle of good relations between employer and worker. I believe that it is infinitely better for it to be the task of the employer to look after his employees. Returning to the origins of this, therefore, I would always strongly support the view that it is the task of the employer to guarantee to make the payments to his employees.

By 1974, more than 80 per cent. of employees in this country—I exclude the self-employed—were in occupational schemes. The proportion must by now be nearly 90 per cent. Therefore, we are dealing with a very small number of people who are not so paid. My second principle, therefore, is that I beleive that it is right to do that, as far as possible, by occupational pension schemes and other schemes that are beneficial to the worker in the factory or in industry. That is sound.

In Germany, the first six weeks of sickness are paid for at 100 per cent. of a person's wage. But the State makes no further payments later. When the report came before the Select Committee, after careful consideration and on the advice of consultants, we came to the conclusion that this scheme should be introduced not only for the initial period proposed, but that if it were carried out it should continue for a period of 28 weeks. We recognise that after 28 weeks a person who is sick then receives invalidity benefit and is regarded as being permanently sick.

The Government have not accepted that recommendation, which was supported by the CBI and which at first sight has a great deal to commend it because it would remove a further gradient of the administrative burden. At present, about 90 per cent. of all workers who go sick are back at work within eight weeks and about 97 per cent. to 98 per cent. are back within the 28 week period. Therefore, only about 2 per cent. of the population are sick for the longer period. In Committee, I should like to investigate carefully—I am sure that my right hon. Friend will have considered the matter—whether we should not extend the scheme to 28 weeks and save more money.

I imagine that one of the reasons why the scheme has not yet received approval from the Government is that there may be other costs to be considered, one of which would probably be the question of dependants. If, after eight weeks, a person is drawing a mere £37 a week and has many dependants, the scheme might not work. The period of 28 weeks is a long one. No other European country pays sickness benefit for that length of time. But we have a different system of benefits and an invaliditiy benefit that comes into play after 28 weeks. Also, in due course, we may deal with the question of what I call permanent unemployment benefit, which in turn may also cover a period of 28 weeks. Many of us are anxious to see the various benefits aligned.

My third principle that supports the introduction of the measure is that all the benefits will be taxable. Happily, at long last, we are moving towards the proper approach that all benefits should be taxable. At present, we have a ludicrous system whereby it pays to be sick. I am not suggesting that that applies to many people in this country. The great majority of people would rather work, even if they draw a little less. Others would not, but we could not have a more ludicrous system than one that encourages people to be sick rather than to get back to work.

It is important for employers to recognise that we must have a sensible system of certification. There are problems, which are not necessarily easy to overcome, as to whether the certification should be carried out at the end of three days or at the end of the end of the first week. That may have to be considered in Committee.

The Government are right to have introduced the measure. I bitterly regret that the Opposition have not had the generosity to point out that it is a classic example of the best form of open government that I have seen. In April 1980, the Government produced a Green Paper and they put down all their ideas, even though it must have been plain to them that some of the suggestions would require careful' vetting. The Select Committee realised that it was a controversial matter, not only to industry generally, but to small businesses, because the very small firms do not have schemes for paying their employees when they are sick. But the employees of companies with fewer than 10 workers do not go sick very often and when they do they are looked after, not only financially but with home visits and so on because of the close personal relationships in those firms. Very often they are family concerns with the cousin, mum and three or four other family members working. The occupational pension schemes are in existence only in the bigger firms. Because small firms do not have the scheme, they do not like it and they fear the possibility of additional paperwork. I do not believe that it will be considerable.

The Government have introduced a scheme that is found throughout Europe and the world, a scheme that is forward-looking and that will save about 10 million forms being processed every year through the DHSS. It will therefore reduce considerably the bureaucratic control that has existed and will give the good employer the opportunity to look after the people who work for him and to get back to the tradition in which that is done. Now with occupational and other schemes, that is a right that is deeply embedded. I should have thought that the trade unions would have welcomed it because they would be able to see that it is properly carried out in all the big firms. It will also be beneficial to the small firms.

The members of the Select Committee included the right hon. Member for Norwich, North, the hon. Member for Wolverhampton, North-East (Mrs. Short), as Chairman, who aid not always agree with me politically, my hon. Friend the Member for Belper (Mrs. Faith), myself, a fairly Tory Tory, and Opposition Members who are present today. We are all trying to do what we think is best for the country. We may not always agree on the details, but if we can agree on the broad principles we should at least cut out party political differences on the points about which we disagree and try to get together a scheme that is good for the country. I believe that in the main we have. We have had a great advantage in that the Government examined the matter and announced that they were prepared to accept the view of the CBI and the Select Committee on the repayment of all the contributions. The Secretary of State has not said whether in due course the Government will look at the benefits for children and dependants. Those problems can be considered.

The sums involved, which are reviewable annually, are about right. For 'hose earning over £60 a week, the lump sum is about right, though it is a matter of argument whether the smaller sum should be increased. However, for a new scheme it is soundly based and I am sorry that the Opposition have decided to vote against Second Reading. They will be wrong to do that and they should not give the public the idea that this is not a sound, broadly based scheme. It is a good principle that employers and employees should work together for the betterment of the nation.

6.50 pm

The Bill can be divided ir to two major parts. The first is the "flu spreaders" charter and the second is the housing benefit (confusification) Bill. I know that "confusification", which means to be more confusing, is an appalling word, but I suspect that it will be appropriate for the Bill.

The "flu spreaders" charter is the Government's sick pay scheme. When the Government put forward their proposals two years ago, hardly anyone could find a good word for them. The Government have tried fairly hard to buy off the employers, either by giving them direct concessions or, as my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) has suggested, by misleading them. The Secretary of State suggested that anyone who had read the Bill carefully would be aware that employers will have to pay an extra £5, but I suspect that few employers have read the Bill that carefully and that most were not aware of the £5 penalty. If the Government have managed to buy off the opposition of the employers, they have certainly not managed to meet criticisms of poverty groups, the disabled and others.

The Government claim they that will make considerable administrative savings, but I suspect that they have not considered in detail the cost of administering the scheme. For example, how many extra inspectors will have to be employed to check that employers do not over-deduct? There will be a temptation for firms to have one extra sick employee in their records so that they can recoup the £5 that they will lose on other sick workers.

What will the inspector do? Will he merely turn up to check that a person is off sick, or will he have to visit him to make sure that he is genuinely sick? There will be a temptation for some small employers to send people home, because they will be able to recoup 100 per cent. of the money that they pay. A small shopkeeper may feel after the January sales that he is over-staffed and he may say to some of his staff "You look a bit under the weather. Go home for a week or two." There will certainly have to be careful checking, and the Government will have to consider how many inspectors will be needed. My information from Stockport is that the Government are not employing anywhere near enough inspectors to check that national insurance contributions are being properly paid and administered.

Our existing scheme has one overriding benefit. The nation as a whole makes contributions for those who are sick. The burden is not pressed on to any one person or any individual firm. We seem to be in danger of losing that advantage, because, it is claimed, many changes have taken place since 1945. I accept that changes have taken place and that it is an advantage that many firms provide sickness schemes that are better than the State scheme. However, if that is the reason for the changes, why do we not push all firms into providing good schemes, instead of offering the second-rate system that the Government have in mind?

The Government also argue that it is important that we tax benefits. That is a marginal argument, and it would be helpful if the Government would give us some idea of the sums involved. We have not yet been given any figures.

If the Government want to change the system they should make it compulsory for all firms to pay full wages, and not a grossly reduced rate, when employees are off sick. The Secretary of State said that people could be better off when they were sick than when they were at work. I point out to the right hon. Gentleman that many people face extra costs when they are sick. For example, they have to pay prescription charges and heat their houses for much longer periods. The costs for individuals often rise substantially when they are sick and one could justify paying them a little more. We certainly cannot justify paying them a lot less.

The Government seem to believe that people are off sick unnecessarily. I challenged the Secretary of State to tell us how many firms that have introduced full pay sickness benefit have felt that workers have been off sick unnecessarily. All the information that I can find suggests that no firms feel aggrieved in that way. They believe that their employees have been fair. Indeed, I suspect that firms are often pleased that people stay at home rather than return to work unnecessarily early.

The proposed fixed sickness benefit is £37 a week. By the time the national insurance contribution ha; been deducted, the benefit will be reduced to £34·13. That will be a big incentive to people to get back to work quickly, but will it be an incentive for them to make sure that they have proper medical treatment and are not carrying germs or illnesses that they may pass on to others? I suspect that there is a grave danger that people will try to get back to work too quickly because they will be so much worse off under the new scheme. They may, therefore, pass on their ill health to other employees or to customers.

If life will be difficult for those who normally earn over £60 a week, and who will therefore receive the £37 a week sickness benefit, what about those who usually earn less than £60 a week? Living on £50 a week is pretty difficult, and a person on that wage will find it extremely difficult to manage on £25 a week that he will get if he is sick. That will hit hardest at the poor and workers with children.

What will happen to those who are expected to live on £25 a week? What will happen if their family income supplement runs out while they are off sick? What about their eligibility for supplementary benefit and the housing benefits contained in the second part of the Bill? Is the Secretary of State saying that the Government want those people to sort out all those benefit problems while they are sick? If so, that is particularly inhuman.

I am with the hon. Gentleman on the argument, but is he suggesting that there should be a higher basic sum, with FIS and other benefits excluded? That might be difficult to administer, because at present a person would be entitled to FIS in addition to the £25 a week.

I suggest that the simplest answer would be for all employers to pay normal wages when someone is sick. The system that applies in about 90 per cent. of firms should be extended to all firms, so that when a person is off sick he receives at least his basic rate of pay.

The Government must consider the fact that people will be encouraged to return to work too soon. I used to teach, and I found there were two groups of colleagues in the staff room. There were those who had the day off sick at a drop of the hat, and there were those who struggled through under any circumstances. The initial feeling among my colleagues was that they preferred those who struggled through. However, the effect of somebody who comes to work while he is ill or suffering from anything contagious is that for the extra two or three days that he manages to get in several of his colleagues are off for a week or more.

It is important that there should be as many incentives as possible to encourage people who are ill with contagious diseases, such as 'flu, to stay away from work. It is also important to encourage those who are seriously ill to receive the proper medical treatment. We often hear of people who have had heart attacks or who suffer from heart conditions who refuse to get proper treatment. The Bill will encourage people such as that to muddle through with bad health rather than get treatment.

The figures of £37 and £25 in the benefits are mean levels to start with, yet the Government are not prepared to give a guarantee for an automatic uprating that will take inflation into account. Furthermore, the Bill will discourage employers from taking on those with a poor sickness record or those who are disabled and therefore likely to have time off. The Government have already made a concession on the 100 per cent. refunding of the payment, but there is still the problem of the sum of £5, which was referred to by my hon. Friend the Member for Perry Barr, and its administration. Firms will be discouraged from giving a chance to people whose absence from work record is poor because of disability or a continued period of ill health.

The hon. Member for Somerset, North (Mr. Dean) referred to self-certification. It is a sad fact, certainly in my constituency, that there is far too much self-certification. Too many people can obtain a sick note without seeing the doctor. Some of them need proper medical help. As long as they are not encouraged to go to doctors, they will simply muddle through, which may lead to a worse medical problem that is not discovered until it is too late.

A major complaint about the housing benefit is that it will be extremely confusing. A second complaint is that this part of the Bill treats the House of Commons with contempt. There was much criticism of my right hon. Friend for Bristol, South-East (Mr. Benn) when he spoke of nationalising industries by statutory instruments. However, few of those industries involved anything like the number involved in this housing benefit, and yet all the details of the benefit are to be implemented by statutory instrument.

There is to be only one-and-a-half hours' debate on the scheme, which is not good enough. The Government are not allowing proper parliamentary scrutiny, especially as the Minister tells us that he is still discussing with local authorities how the scheme will be run. We will be well into our consideration of the Bill before any detailed information is available. The Government must be prepared to publish the regulations before the Committee stage starts, otherwise they will be treating Parliament with contempt and asking it for a blank cheque.

I accept that the present system of paying housing benefit is somewhat chaotic, and I should welcome a unified housing benefit if it were made simple to operate. Of the many existing problems, we must first work out whether a person is better off with supplementary benefit or with rebate. Every hon. Member has had to give advice to his constituents about this problem. Having done so, he often finds a couple of days later that something has changed, the calculations are wrong, and the constituent would be better off with the other benefit.

The passport effect of supplementary benefit often means that somebody is better off by drawing supplementary benefit than by receiving rebates. Because at some point he might obtain a passport for prescription charges, he is sometimes better off on supplementary benefit and at other times better off receiving a rebate. That is a major problem.

The unified housing benefit should ensure that the claimant receives it in one place. However, the more that I study the scheme, the less likely it seems that the claimant will receive it from one place. A person will have to go to the town hall for information from the housing department on the housing benefit, but for the topping-up and other provisions of the scheme he will have to return to the supplementary benefit offices. I challenge the Minister to describe the scheme in a foolscap page so that people will understand exactly how it works. That will be difficult, but it is what is required if the scheme is to be understood easily.

It is essential that it should be possible to adjust the scheme easily week by week. Many of my constituents who apply for benefits from the town hall say that it takes several weeks for adjustments to be made. They are told that rent arrears caused by that delay will be wiped out. However, many of my constituents do not like arrears being stamped on their rent cards. They know that if they are registered as being in arrears in Stockport they will be penalised if they want a transfer. They want the calculations to be made quickly. They also want to know where they are with their budgeting. They must know how much they have to pay. It is essential that the new scheme should be capable of being administered quickly. That could mean that town halls will have to take on extra staff. We need a clear commitment from the Government that they will make enough money available to the town halls so that they can do the administration in the sympathetic way required.

I am glad that the Under-Secretary of State for the Environment has been able to join us. It is sad that recently he was smoked out from the Department of Health and Social Security. A clear issue is involved. The Secretary of State said that he was pleased at taking over responsibility for the scheme. Is he taking over responsibility for putting up rents? Will the increases in rents coincide with upratings in the level of assistance? That has been the major anomaly so far.

I understand that the Department of the Environment is not abrogating its chance to put up rents, and that it will insist that rents go up and up. I ask for an undertaking that there will be co-ordination between the Departments so that when rents go up the benefit under the Bill will increase automatically. That will mean that people will not be faced with arrears on their rent cards.

It can take the Department of Health and Social Security between eight and nine weeks to complete upratings resulting from a rent rise. I hope that the Minister will explain how the town halls will be able, as if by magic, to do the administration without such problems. The Department seems to be saying "The problem defeated us. We cannot find a way of completing the job within eight or nine weeks, so we shall give it to the town halls, which in many instances are more efficient and will be able to solve the problem."

The Minister has not provided adequate information about topping up and the numbers involved. He has not told us how far the passport effect will be guaranteed. He has not explained how people who are in receipt of the housing benefit and who in the past received supplementary benefit on the passport to free prescriptions and other allowances will be able to obtain that passport effect. Will they simply have to prove that they are receiving housing benefit to receive all the other benefits, or will they have to go back to social security offices for a certificate?

Many people are worried about the manner in which some local authorities appear to segregate tenants with different life styles on to different estates. I cannot find at the moment any evidence that this happens in relation to the ability of tenants to pay their rent. It happens on all sorts of social grounds. It is fair to say, I believe, that some local authorities allow it to happen as a result of self-selection by the tenants.

I fear, however., that if some local authorities know how much rebate they are paying out they may be discouraged from allowing some of their tenants to go into the more expensive housing, and that will therefore encourage the segregation of council tenants into those living on the nice estates, where rents are sometimes high, and those not allowed on to the nice estates. This is a situation that may not develop for some time. It has, however, to be watched. If a local housing department is paying out the rebates, it may feel that it wants to discourage paying out large rebates and encourage people with the least ability to pay to go into the cheapest housing.

The Bill, if it receives a Second Reading, will require much scrutiny in Committee. In principle, some of its contents could be supported, but their implementation is proposed in such a mean and confusing manner that it would be far preferable for the Government to take away this measure, have another look at it and wait until extra money is available. Measures such as this can be introduced only if they will not cause hardship and confusion. There is a need for more money to make the whole system more generous.

7.11 pm

This important Bill foreshadows some significant and long overdue changes in the social security system. I welcome both the principles of the Bill and the administrative savings that it achieves. Unlike the hon. Member for Renfrewshire, West (Mr. Buchan)—I am glad to see the hon. Gentleman back in his place—I do not believe that the social security budget exists to sustain jobs at the expense of money that may be available for benefits. It is curious that this seemed to be what the hon. Gentleman was saying.

Opposition Members have criticised the fact that the Government have reduced jobs in the central Civil Service and also the fact that local government jobs will be created as a result of precisely the same measure. I do not believe that the Opposition can have the argument both ways. I am particularly pleased with the proposals to decentralise payment of sickness benefit and to implement the unified housing benefit, although I have some reservations about the method of implementation.

I wish to say a few words about the drafting of the Bill. I have found this the most clearly drafted and lucid Bill that I have read since I came to the House. I am pleased that Opposition Members find it equally lucid. I may have been scarred by service on the Housing Bill and the British Nationality Bill. I hope, however, that those who drafted the Bill will receive the congratulations that they deserve. It is phrased with admirable clarity. I hope that it sets a fashion for other legislation that may be laid before the House in the rest of the Session.

This is an evolutionary Bill. I say "evolutionary" because it continues a trend of decentralising welfare provision seen in the Welfare State over a period of years. It has been seen here in the United Kingdom. The trend has also been apparent throughout Western Europe. It is a healthy trend which I hope will be encouraged. It is a trend that has existed in all aspects of the Welfare State in its generality. The decision by Mrs. Barbara Castle, when Secretary of State, to permit employees to contract out of the State earnings-related second pension scheme illustrates the point I seek to make. The phenomenal growth in occupational pensions could not have occurred without the decision to decentralise pensions provision taken by Mrs. Castle.

The key provisions of the Bill are self evidently the employers' statutory sick pay scheme and the unified housing benefit. I turn, first, to the sick pay scheme. The proposals laid before the House today represent without doubt a very considerable improvement on the proposals first set out in the 1980 Green Paper. Those proposals aroused fairly widespread and understandable hostility and suspicion in the business community. Some of the subsequent amendments aroused slightly less hostility but certainly not widespread support. There was a strong feeling among employers that flat-rate reductions in the employers' national insurance contribution and the other expedients that were mentioned would not adequately reimburse companies for the costs that they would incur in accepting liability for the early weeks of sickness pay.

I am not sure about the extent to which those misgivings were justified, but they certainly existed among companies. My right hon. Friend is wise to have presented these alternative proposals allowing for 100 per cent. reimbursement to employers through a self-deduction scheme. This means that the scheme will be generally accepted. It will leave repayment ultimately in the hands of employers in a fashion that they can see, understand and implement rapidly.

There are also some subsidiary advantages in the scheme. It removes the absurdity recognised on both sides of the House of the Government sick pay scheme running in parallel with private schemes. It saves 3,000 Civil Service posts. The Government set themselves the target of reducing the central Civil Service to 630,000 by the end of this Parliament. The Government, I understand, are in advance of that target. If achieved at the end of this Parliament, there will be a smaller central Civil Service than at any time since the war notwithstanding the growth in population and responsibility. One side benefit, I hope, is that the Civil Service may receive some of the respect that it deserves but all too rarely receives.

Above all, this sick pay scheme replaces an illogical sickness benefit scheme with a logical one. That seems to me to be a significant advance. Few people doubt that the present system of national insurance sickness benefit is a cumbersome mess and full of a whole series of inequities. It is, at present, non-taxable although precisely the same sum of money, if earned rather than received in sickness benefit, would be taxable. The fact that sickness benefit is untaxable means that it provides the greatest benefit to those on the highest tax scales who presumably are in least need of assistance. I see no logic in that system. The equity of taxing sickness benefit is undeniable.

As retirement pensions and widows' pensions are already taxed and, as unemployment and supplementary benefit are to be taxed from next year, there is no justice in exempting sickness benefit. As my right hon. Friend has indicated, the taxation of sickness benefit is not a new principle. It was implemented briefly during the period of Labour Government between 1948 and 1949.

There is another important point that I believe that the hon. Member for Stockport, North (Mr. Bennett) had in mind. While the logic of taxing sick pay is, in my opinion, unanswerable, I hope that in the medium term the change in procedure will not be used to diminish the purchasing power of long-term benefits that many people receive. I hope that my right hon. and learned Friend the Chancellor of the Exchequer will bear this point in mind when framing his Budget in the early part of next year.

I have expressed to the House previously my belief that the casualties of the social changes through which we are passing should be protected by the State. I reiterate that view without any reservation. Long-term social benefits must, in our society, retain their purchasing power. The Government will have my full support for any measures that they take to ensure that this happens. However, I think that the new scheme is worth while. It is generally non-controversial, although one can nibble at the edges of its proposals. I hope that it will receive widespread support in Standing Committee.

The principle of the unified housing benefit is also very welcome, but there are some aspects of it upon which I would welcome guidance from my hon. Friend the Minister of State when he winds up the debate. I have never fully understood the rationale of the present system of two schemes of housing assistance—one through supplementary benefit payments, and one through rent and rate rebates or allowances. It has caused great confusion, in my experience both as an inner London housing chairman and subsequently as an East Anglian Member of Parliament. It causes confusion most notably among those who are entitled either to sickness benefit or to rent and rate rebates and who are uncertain which of the two it is most in their interests to claim. Many people may well have claimed the wrong benefit and lost a considerable sum in so doing. That is a chaotic system. The principle of a unified housing benefit, which will remove that chaos, is deserving of full support.

For these and other reasons, of which the House will be aware—I need not elaborate—successive Governments have long been urged to introduce a unified housing benefit scheme. I am pleased that the Bill moves in that direction. It is simply an enabling measure, and the details of the scheme are to be set out in regulations.

The hon. Member for Renfrewshire, West made a fair point when he asked that the regulations be laid before the House at the earliest possible date so that they can be fully considered by the Standing Committee. I hope that the Government will be able to meet that point and will give an undertaking to that effect in the days to come.

I should like to pursue several matters relating to the unified housing benefit. As I understand them, the enabling proposals would transfer the responsibility for means-tested housing support from the Supplementary Benefits Commission to a local authority rebate scheme. The preamble to the Bill provides us with some interesting figures in this respect. It shows us that, were this to be carried out, it would reduce the manpower of the Department of Health and Social Security by 2,300 but would increase local authority staff by between 1,500 and 1,600.

The net savings are very welcome, but a point of considerable interest arises from them. Who is to pay, and in what fashion, for the extra staffing within local authorities to administer this scheme? The House will understand that many local authorities—some overspenders, some fair spenders, some underspenders—are in difficulty with their expenditure budgets. I do not think that it would be appropriate, or equitable, to transfer a further manpower requirement from the Government to local authorities without some indication as to how that is to be paid for.

A subsidiary point follows. If 2·3 million people on supplementary benefit are likely to be transferred to a local authority rebate scheme, are the Government proposing to accept 100 per cent. liability for the costs of that scheme, or some smaller percentage, as I believe is the present circumstance?

These seem to be questions deserving of consideration. I hope that they are points to which my hon. Friend the Minister of State will give some attention tonight. They are critical, because local authorities need to know how they will be reimbursed—be it in a single payment, through the rate support system, in some other fashion, or not at all. In order for them to plan their budgets they need to know the answers to those questions without undue delay.

Pursuing the point about unified housing benefit, I am concerned about those claimants for benefit who are claimants from the private sector of housing. By virtue of the fact that they are now on supplementary benefit and are likely to be claimants of rent and rate rebates, it is overwhelmingly likely that many of them will be without employment. Therefore, as I understand it—I am open to correction if I am wrong—they are likely to receive unemployment benefit from the unemployment benefits office, housing assistance from the local authority, and supplementary benefit from the DHSS. It seems a fairly onerous task for them to collect these separate benefits. If, as may well be the case, they fall among those 74,000 people who may be slightly worse off under the rent rebate scheme, they may also be entitled to some measure of "topping up" in addition to the three separate benefits that I have mentioned.

Therefore, it would be of great interest to the House if my hon. Friend elaborated in a little more detail precisely how these three sets of benefits are to be paid and how the topping up process is to be administered. It seems at first sight, before one has seen the regulations, to be complex and confusing. I trust, therefore, that my hon. Friend, who understands housing matters perhaps better than almost anyone else within the Palace of Westminster, can shed light where none now exists on the matters that I have raised. None the less, I believe that they are matters of detail which the regulations will clear up, and upon which the debates in Standing Committee will also dwell. But all of the principles of the Bill—of the sickness benefit scheme and the unified housing benefit scheme—are principles that deserve the support of the House. I shall have no reservation in giving my hon. Friend such support this evening.

7.26 pm

I share the confusion of my parliamentary neighbour, the hon. Member for Huntingdonshire (Mr. Major), about the unified housing benefit part of the Bill. It is fair to say, as some hon. Members have said, that Second Reading debates deal with matters of principle. Because my right hon. and hon. Friends do not oppose for the sake of opposition, I should explain why, on this instance, we shall be voting against Second Reading. In principle, we would approve of unified housing benefit, but we do not feel that the statutory sickness pay by employers does anything for those who would benefit thereby.

The hon. and learned Member for Thanet, West (Mr. Rees-Davies) spoke about the fact that 90 per cent. of our work force—which is perhaps 19 million or 20 million people—are already covered by occupational sickness schemes. It is simply because that leaves that 10 per cent. of the work force least able to look after themselves most deserving of the support of Parliament that we shall vote against that part of the Bill and oppose what it is trying to do.

Very briefly, putting the onus of paying those not in occupational schemes on to employers imposes a very severe administrative burden on small businesses. It does what the die-hard enemies of this Government always accuse them of, which is to take from those who have least—only in this case it also puts an administrative burden on those least able to cope with it. It leaves the small employer out of pocket immediately, if not eventually. It introduces an uneven system because some firms will administer it well and others, as has been properly said, will administer it less well and those employees unrepresented by unions, as the hon. Member for Somerset, North (Mr. Dean) rightly said, are those who will suffer most.

I think that the scheme will raise doubts as to whether claimants are getting their proper entitlement; it will lead to discrimination against the disabled, and that is perhaps my main complaint. I realise that 100 per cent. will be recouped by the employers eventually, if not immediately, but the £4·99, added to the administrative burden of filling in the forms, will still jeopardise the employment chances of the disabled and the handicapped. No employer wants to buy trouble, and I fear that this legislation will harm those who most need understanding.

I shall say a few brief words about the unified housing benefits, but I want to concentrate on the first part of the Bill. In my view, the scheme is infinitely open to abuse by employers. I am not at all sure that, however many inspectors the Government appoint, any of them will be able, in the time that they have, to get the full details of how much money has been deducted, in respect of whom, and how much that beneficiary has been paid. That is the job of the inspector, and it will be an intensely time-consuming job. Such money that the Government may save by whatever figure they pluck out of a hat, be it 4,700 jobs saved—the Secretary of State's figure—or about 3,000 given by the hon. Member for Huntingdonshire, or the total Front Bench silence, when the hon. Member for Renfrewshire, West (Mr. Buchan) said that there was no difference at all.

The scheme is widely open to abuse, and that is another reason why I am against it. By increasing the responsibility and the cost, it will be a disincentive to small firms to expand, which is what this Government have always encouraged them to do. I have no faith in a principle whereby the Government are saved money at the expense of small businesses, which are less able to cope, and which probably use their time less efficiently than the Civil Service, which is practised in this work.

The absence of a sliding scale for sick pay has been mentioned; to give each person the same, irrespective of dependants, is something that must be re-examined.

On this day of all days, the fact that the scheme is not index-linked is quite extraordinary. That an Army general who retired 10 years ago on £7,000 now gets in excess of £20,000 because his pension is index-linked appears to be all right. So why does the man on sickness benefit receive £37 or £25 and remain on £37 or £25? I accept that the Government may change their mind; they could easily put the fears of those people at rest.

Then there is the matter of certification. In the fourth hour of debate it is always difficult to find something that has not been touched on by other speakers, although that has never stopped us in this Chamber from mentioning it again. The Bill says:
"Any employee who claims to be entitled to statutory sick pay from his employer shall, if so required by his employer, provide such information as may reasonably be required".
I am concerned about the lack of privacy of medical information, and I know that many doctors are equally concerned. I am well aware that a sympathetic practitioner will not give the full details of an embarassing or terminal disease to an employer, but not all doctors are necessarily sympathetic. The point will come when an employer will have a perfect right to ask for a medical certificate, when I maintain that he has no right to know the nature of the sickness from which the employee suffers.

Finally, in respect of the first half of the Bill, I am concerned about the chronically sick, the disabled and the handicapped—particularly the handicapped. People seem not to realise that handicapped people need not just the work and the concern of their employers; they need the dignity that goes with work. The least disincentive to an employer to give work to someone who is handicapped—and by "handicapped" I do not mean the monstrous people whom some people conjure up, but simply, as in golf, someone who needs a little start so as to be on par with other people—anything that is put in the way of an employer to help such people would not be approved of by me or by my right hon. and hon. Friends.

The second part of the Bill, the unified housing aspect, is something of which we approve in principle. It has been called a scheme in this debate. If one looks at it carefully, it is more of a wheeze. It contains little of substance. It is confusing to all those who read it. I welcome the Secretary of State's promise that local authorities will be consulted more, because I know that there is concern that the outline details place even more power in the hands of the Secretary of State. Some 130,000 householders will lose the "passport benefits" which go with receiving purely housing assistance on supplementary benefit. They will lose financially as well, because the supplementary benefit scheme pays rent in full, while the rate rebate starts from the premise that people should pay 40 per cent. Local government's major worry concerns where and at what level the contributions of the benefit scheme reaches, and whether increased costs will land on the rate fund, the council. Local government is worried, and, in my view, insufficient has been written into the Bill to satisfy its concern.

Finally, I want to draw the Minister's attention to the omission of pitch rents for those people who live in caravans. The Bill makes no provision for owners of mobile homes who rent the land and pay pitch rents. These people have no rebate provision, because the Bill refers only to dwellings. In Committee we shall seek to table an amendment, though we should prefer the Government to table their own amendment.

7.38 pm

May I start by referring to the speech of the hon. Member for Renfrewshire, West (Mr. Buchan), who, I am sorry to see is not in his place. He devoted his first five minutes or so to matters that were not directly related to the Bill. That suggests that he could not find much wrong, and that he was carrying out the exercise of opposition for opposition's sake. The point was well made by my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies), who called upon the Opposition to be generous enough tonight to accept the Bill and not to vote against it.

I should like to contrast some of the remarks of the hon. Member for Stockport, North (Mr. Bennett)—I am sorry that he, too, is not in his place; he said that employers would be adversely affected, and I was pleased to hear him express concern about employers—with those of the right hon. Member for Norwich, North (Mr. Ennals), who said that the CBI had only to snap its fingers for the Government to agree with it. The Opposition may not be two-faced, but that is a good example of their facing both ways.

The Bill can properly be described as both important and far-reaching. It covers a wide spectrum. However, I shall confine my remarks to its two main provisions. Part I refers to statutory sick pay, and part II deals with unified housing benefit, which replaces the existing provisions for rate and rent rebates. The Bill does a great deal to remove some of the anomalies and the confusion that have grown up during the past few years. Department of Health and Social Security legislation is extremely complicated, and right hon. and hon. Members on both sides have said that anything that can be done to clear away some of the confusion should be applauded.

Anything that can be done to increase the take-up of benefit by those who are properly entitled should equally be applauded and I think that the Bill will do a great deal to assist that. I pay tribute to my right hon. and hon. Friends for the work that they have done over the past two years in seeking to draw people's attention to the benefits to which they are properly entitled. It is clear that they are doing their utmost to ensure that more and more take up the benefits that are their due. My hon. Friend the Member for Somerset, North (Mr. Dean) was right to say the Bill will enable many more to draw benefit. Equally, there are many who should be drawing benefit who are perhaps not as articulate or as educated as others and it seems that help is not reaching them. That should be rectified.

I turn to the statutory sick pay provisions. I welcome the new initiative that places responsibility for paying sickness benefit on the employer and removes it from the State. The State's method is expensive and unwieldy. The new system will save substantial sums of public money. It will be a great deal more responsive to the requirements of the ordinary individual. The settlement of claims will be a great deal less impersonal, for the new system will ensure that both sides actually know each other.

The original proposals in the Green Paper were clearly unacceptable to industry. I am delighted that the Government have seen fit to accept the employers' organisations' criticisms and to introduce a scheme which accepts a 100 per cent. deduction. That is clearly common sense. Employers will not be out of pocket as they would have been under the original proposals. At the same time, there will be a substantial saving in public funds, amounting to an estimated £380 million. It is also thought that the Bill will reduce the number of civil servants by about 3,000.

The Bill is one of those rare measures that will save money and improve the quality of the service. This improved legislation will help to strengthen the relationship between employer and employee. It will result in a reduction in officialdom, bureaucracy and red tape.

I trust that my right hon. Friend is satisfied that sufficient provision has been made effectively to monitor the scheme. Unless the scheme is controlled effectively, unscrupulous employers might be tempted to claim more from the Inland Revenue than was paid to employees in sick pay. I do not wish to imply that all employers seek to defraud the State. However, there is always a minority that may seek to abuse any system. I hope that my hon. Friend the Minister for Social Security will be able to provide the House with the necessary assurance that no abuse of the scheme will be tolerated.

I am aware that a great deal of anxiety is felt by doctors about the provision of sickness notes, and certainly for a long time they have been less than enthusiastic about the sick note system. An arrangement must be reached with doctors that will ensure effectively their co-operation. For it seems that under the new system sickness notes will become more and not less important. It appears that unless authentic sickness notes are produced there is a risk that some employers will seek to defraud the Revenue by making excessive or irresponsible claims.

It might be thought that I am being unduly pessimistic. However, I am aware that other EEC countries operate a system of self-certification for the first few days of sickness. Presumably what operates successfully in the rest of Europe could be successfully operated in the United Kingdom. I hope that my hon. Friend will respond to this issue when he replies.

The Bill proposes a minimum level of sick pay of about £37 a week for an employee currently earning £60 a week or more. Sick pay for those earning less than £60 a week will be £25 a week. Both those payments will be made irrespective of national insurance contribution credits. The Secretary of State will have the duty to review those amounts annually, and that is important. The right hon. Member for Norwich, North was being less than his usual generous self when he cast doubt upon the way in which that provision might be interpreted by Secretaries of State.

Currently a single person receives £22·50 a week for flat rate sickness benefit. The Bill will increase that provision to £37 a week. The benefit that a married man receives will be almost precisely the same. The present scheme provides an additional 80p a week per child and that provision will disappear under the new system. I am aware that that may cause some hardship to those with large families and perhaps the House will feel that I am unduly concerned about large families. However, the House will recall that I have six sons. And I think that certainly puts me into the large-family bracket. I trust that low-income families will be eligible to improve their statutory sick pay by supplementary benefit and that a safety net will exist providing that the claims are made.

That brings me back to my original contention that there is a need to ensure that claimants realise that they are entitled to benefit. I hope that this problem will be resolved by the House on behalf of potential claimants.

Other teething troubles might appear. For example, sickness notes are not always the last word. They do not constitute an automatic entitlement to benefit. The DHSS has very some experienced local insurance officers who are able to assess and test the validity of claims. That degree of expertise will not be available to all employers. That factor should be offset by the increased knowledge that employers are likely to have about their employees, and we must hope that the principle of swings and roundabouts will effectively apply.

Part II refers to the new provisions for rent and rate rebates, rent allowance schemes, and new enabling provisions. About 1,200,000 council house tenants receive rent rebates. About 200,000 private tenants receive rent allowances. About 3,100,000 householders receive rate rebates. in October 1980 the average rent rebate amounted to about £4·55. The proposed changes underline to some extent the basic difficulties and the anomalies that are inherent in the rating system. The fact that so many rate and rent rebates are needed to iron out existing discrepancies underlines as nothing else can the paramount need to reorganise the system of financing local government. The present system of rating is outdated. It should be replaced within the lifetime of the present Parliament.

I am confident that all my right hon. and hon. Friends believe that the new proposals represent a substantial advance. I was a councillor for about 20 years and I served on a housing committee for about 10 years. I therefore appreciate some of the problems that occur in local authority housing. There are currently two systems that are separately administered. One system is under the auspices of the DHSS, and the other under local authorities. The existence of those two separate systems creates many pitfalls and undoubtedly results in claimants not always receiving their correct entitlement.

Claimants are often shunted from the DHSS to the local authority and back again. We know that frequently claimants lose heart and do not continue with their applications, which would be approved if only they could find the right person and the right department to whom they should refer those claims. In addition, when claimants eventually find their way through the labyrinth of red tape, they so often make the wrong claim. They are claiming from the DHSS when it would have been better if they had claimed from the local authority, and vice versa. A unified system must be a great advantage.

It is right that the whole area should be consolidated and that one authority should be responsible for the organisation and provision of benefit. It is right that that provision should be the responsibility of the local authority, able to provide real advice. The new system, at least as far as it relates to council house rents, may be described as one of negative payment or benefit. It means that the local authority will be able to deduct effectively at source the gross rent to which claimants are entitled.

That system has many advantages. It means that there should be a substantial reduction in the amount of local authority housing account arrears. If the housing authority is in a sense paying itself, arrears will not accrue. That contrasts with the present method whereby in some cases the DHSS makes provision for the rent in the benefit paid to a claimant. In many cases that provision is not always passed on to the local authority. Some people are better housekeepers than others and some are more responsible than others. Unfortunately, in some cases, money provided for rent does not always find its way to the local authority.

Therefore, the new system will ensure that rent arrears are reduced. It is worth recalling that the rent arrears of one local authority—Lambeth—are over £3 million. That is a not insignificant sum in anyone's language. Anything that reduces the size of rent arrears should be applauded. A corollary of that is that there should be a reduction in the amount of borrowing needed by local authorities.

The new system will also bring fewer evictions and reduce the attendant hardship that eviction brings in its train. it means that tenants will enjoy greater security of tenure because they will not be faced with the risk of eviction for rent arrears. My hon. Friends may remind me that the Housing (Homeless Persons) Act 1977 ensures that people will always have a roof over their heads, but eviction is a traumatic experience. I am delighted that the provision should ensure a substantial reduction in the number of evictions.

There is an additional and, perhaps, minor spin-off, for the new system will also reduce officers' time in giving evidence in court and in trying to obtain outstanding rent arrears. It will reduce the amount of court fees and the backlog in the courts. However, those advantages will be purchased at a cost. In transferring responsibility from the DHSS to the local authority, there will be a clear saving at the DHSS, but—and it is a big "but"—much of the work load will be transferred to the local authority. It is a pious hope that local authorities will manage with their existing staffs and that they will take the new work load entirely in their stride. I do not believe that. Local authorities will have to recruit additional staff. I trust that my right hon. Friend the Secretary of State for the Environment will bear that in mind when he reviews the level of local authority staffing.

There is one omission in the Bill, although I welcome it as a whole. I should have liked to see a reference to a partial invalidity benefit. My hon. Friend the Minister knows my views about that particular benefit. I should like to think that within the life of this Parliament we shall see a helpful reference to introducing partial invalidity benefit.

I give the Bill my wholehearted support. I shall support the Government in the Lobby.

7.55 pm

I am glad to have the opportunity to speak tonight on the Government's new proposals for sickness pay. I am conscious of the fact that many of my hon. Friends are anxious to speak, so I shall try to be brief.

When a Second Reading debate has gone this far there are few new things to be said about the Bill. However, there are certain points which, in the light of one's own experience and area, are worth mentioning. Sadly, I believe that the measure will further divide the haves from the have-nots. It will further reinforce that division in our community.

In my constituency, there is a good example of what I mean. The biggest single employer is the University of Glasgow and the second biggest is the Western infirmary. Even within those organisations there is a big contrast in the sick pay schemes in operation. Hon. Members have referred to the fact that 90 per cent. of the population are on sick pay schemes. Even if that figure is true, it is important to examine the quality of those schemes. Even within large organisations with different grades and types of staff the schemes are different.

The Bill is discriminatory. The hon. Member for Somerset, North (Mr. Dean) was a Minister in the Department and is knowledgeable on the subject. He is disappointed that the Bill discriminates against the low-paid. The decision to pay a lower rate of sickness pay to those on £60 or less means that three quarters of a million people—according to the 1981 new earnings survey—plus many part-timers who pay national insurance contributions will receive precisely £25 per week in sickness pay. What justification can there be for such a proposal?

Will the Secretary of State explain why, provided that those people have paid sufficient contributions, they will not be entitled to a full rate of sickness pay as at present? No doubt the Government will continue to seek to justify their decision on the ground that to pay the higher rate would encourage malingering and absenteeism. Far too much is made of that. There are malingerers and other such people in all walks of life.

According to the Green Paper, a large number of those covered by good occupational schemes are at first better off sick than at work. There is no evidence that that has encouraged absenteeism. Groups as far apart as the Child Poverty Action Group and the CBI have argued that, if there has to be a wage stop, sickness pay should be paid at the rate of the normal earnings of the worker if these are lower than the sick pay rate. However, the Government seem unwilling to listen to any representations other than those to compensate employers.

The hon. Member for Somerset, North and others raised the question of discrimination against sick people. The hon. Member for Isle of Ely (Mr. Freud), the Liberal Party spokesman, made a valid point when he said how important having a job is to invalids or disabled people. The income is important, and so is the job.

One of the scheme's major flaws is that it fails to provide adequate cover for those with children, which will force large numbers of people on to supplementary benefit. That is alien to the original concept of the national insurance scheme, which was that adequate benefits should be paid as of right to protect those who have fallen on hard times from the need to resort to means-tested allowances. This is a fundamental shift in policy in entirely the wrong direction.

I remind the House that although much emphasis has been laid on the fact that the Government have promised to reimburse employers pound for pound for sickness payments, that does not include the deduction of £5 per week for national insurance employers' contributions.

Hitherto, when an employee not covered by an occupational pension scheme went on to sickness benefit his employer may have suspended the payment of national insurance contributions. Therefore, the small employer may be more disadvantaged under the new scheme. He will be doubly penalised. In addition, a person with a disability or with a bad sickness record may have greater difficulty in getting a job. I would welcome the Minister's comments.

The scheme is unfavourable to everyone. It is worth repeating that there will be no statutory duty on the Government to uprate sickness pay in line with inflation. The Secretary of State will have a duty only to review the rates, so it will be the Financial Secretary or the Chancellor of the Exchequer who will make the decision. That is far too great a risk to take.

The duty on the Secretary of State to uprate sickness benefit should continue, even though people in receipt of sickness benefit and pensions have been robbed on this occasion. The real value of sickness benefit has been cut by 5 per cent. this year in lieu of taxation benefits, and it is by reference to that reduced level that sickness pay will be determined.

It should not be forgotten that earnings-related supplement will disappear in January, regardless of the fact that because benefits are assessed on a previous-year basis—which means that they have already been paid for in the previous 18 months—large numbers of people will be swindled out of their rightful dues. If an insurance company did such a thing it would be taken to court and undoubtedly found guilty of fraud.

Many criticisms have been made of the proposals and I imagine that a great many more will be made in Committee. I wish to put to the Minister one further question that has been suggested to me by people in the trade union movement and others who suspect that there may be no control to make the employer pay the sickness benefit. I understand that it will be open to an employee to complain to the insurance officer at the DHSS, and that if the decision is in his favour the matter can be treated as a county court judgment and the bailiffs sent in. However, will that really happen? I believe that the man will find it very difficult to get the support that he needs against his employer.

If it is proved that the employer has not paid, the DHSS should pay the man and take on the job of recovering the money from the employer. It is disappointing that the Government do not include the possibility of a criminal penalty for employers who refuse to pay, and I hope that the Minister will reconsider that in Committee.

A major objective of the Bill is to save 3,000 Civil Service jobs. We shall find out more about that later. However, the hon. Member for Rugby (Mr. Pawsey) said that there would be a considerable increase in jobs because of the housing provisions. When the Secretary of State was at the Department of Transport he got rid of Civil Service jobs by selling them to private employers, and the nation was no better off. The same number of workers were doing the job, with no great increase in efficiency.

If the main objective of the scheme is ultimately to make it possible to tax sickness benefits—which we do not totally object to—the great misery that the Bill will create is not worth the candle. I hope that the House will vote against it.

8.5 pm

I wish to concentrate on two points in my brief speech, as the bulk of what I intended to say was dealt with eloquently by my hon. Friends the Members for Huntingdonshire (Mr. Major) and Rugby (Mr. Pawsey).

The first point concerns the proposal to withdraw responsibility for housing from the supplementary benefit system and place it, instead, on the shoulders of local authorities, which already administer their own system of rent and rate rebates and allowances. As has been said, there is already tremendous uncertainty among local authorities about the responsibilities that they have to undertake on behalf of society and the amount of money available to meet the administrative costs of dispensing those obligations. They are understandably suspicious that the Government will put further duties on their shoulders without specifying at the earliest possible date where the cash will come from. I hope that the Minister will take the earliest possible opportunity to spell out in detail what local authorities are expected to do and precisely how they are to raise the money. It is not in the interests of the Conservative Party or of the House further to strain our relations with local authorities.

My second point concerns the proposal to make employers liable for the first eight weeks of an employee's income during sickness. There is no easy way to find savings in the administrative system. It is extremely difficult. When the Government come up with ideas to save money there are many lobbies to say that they are ill-thought-out and will cause more problems than the benefits that the cash savings will provide for society. However, it would be wrong for any hon. Member on the Government Benches not to support enthusiastically the Government's attempts to streamline the systems, to make them less complicated for recipients and to make savings on behalf of society. Therefore, I commend the Government's attempts to do just that. I do not believe that the historic step that the Government have taken will be reversed by a future Government.

About £385 million will be saved in a full year. I hope that the money will find its way to the worst off in society and that the Government will carefully monitor the scheme to make sure that those people do not suffer more than they have suffered in recent years.

Hon. Members all have pet shopping lists for spending money for the worst off. Let me make some suggestions. Professor Peter Townsend, chairman of the Child Poverty Action Group, has recently made some telling speeches. He stated:
"since 1977, the numbers of people below the … poverty line has more than doubled—from 2 million"—
which is the official estimate—
"to more than 5 million. If you include those with incomes in the margin of the poverty line, you soon reach a figure of one in every four living in what any civilised society would describe as poverty."
I am also sure that the Minister will realise that the uprated benefits today are 3 per cent. less than inflation and represent a real cut of 2 per cent. over the last two years.

Child benefit has been eroded by about 8 per cent. in real terms and unemployment benefit has been derated by about 5 per cent. since 1980. Cuts in unemployment benefit relative to previous earnings will go altogether in January. There are many people with special needs who will no longer have those met by exceptional needs payments. I am confident that the Chancellor of the Exchequer will take the earliest opportunity to state that any rumours that have abounded to the effect that he may not consider uprating unemployment benefit and supplementary benefit fully in line with inflation are unfounded and——

I am sorry to interrupt the hon. Member. He must relate his remarks to this Bill and not to what the Chancellor may do in some other Bill.

I am grateful, Mr. Deputy Speaker. I hope that I was sticking religiously to the brief in explaining how I hope the Chancellor will spend the £385 million that will be saved on administration. May I say, with your indulgence Mr. Deputy Speaker, that I hope that the Chancellor will include in his shopping list full provision for providing further benefits for the disabled unemployed.

One point has been dealt with very successfully in the Bill. It was a potential problem for the disabled. I refer to the fact that people were extremely alarmed by the possibility that firms that thought they would have to carry the full burden of sickness benefit without full compensation might discriminate against the disabled. We must consider that, with 3 million people unemployed in this country, the disabled unemployed will receive least consideration. Their chances of getting work are bad enough without further obstacles being placed in front of them. I welcome the Government's considerable success in ensuring that the objections of disabled people have been overcome, and that small firms have full provision rather than part provision.

One remaining problem area relates to small firms whose monthly contribution liability might be substantially less than the sick pay costs incurred when an employee is sick for a substantial length of time, although the costs might be recoverable eventually through deductions from contribution payments over a number of months. Cash flow problems could arise that would deter such an employer from taking on a person whose health prospects looked uncertain. Clause 9 makes provision for payment to employers who are unable to recover some or all of their statutory sick pay costs. I would welcome clarification of the circumstances in which such payments will be made, and whether small firms that incur unusually heavy sick pay costs will be included.

Another matter that gives rise to doubts in my mind is that the introduction of the statutory sick pay scheme might increase the likelihood of employees being dismissed while off sick. A 100 per cent. reimbursement would reduce this danger very considerably.

We also welcome the provision made in clause 3(7) relating to employers' liability for paying statutory sick pay if he dismisses an employee in an attempt to avoid this liability. We hope the clause can be amended to read
"Regulations shall make provision".
rather than
"Regulations may make provision".
I congratulate the Government on a significant step forward in the simplification of the legislation. I hope that they will monitor it carefully to ensure that the position of the worst-off in society will not be adversely affected by its introduction.

8.14 pm

The hon. Member for Rugby (Mr. Pawsey) asked why the Opposition opposed the Bill. We are suspicious of the Government's intentions in social security Bills because in the last couple of years we have seen many such measures. In addition, the Government are the only Administration since the war to have cut and abolished social security benefits. Therefore, we are right, because of their track record, to be suspicious of the Government's intentions. That track record is deplorable. In addition, the Bill has many major defects and is worthy of our opposition.

In this morning's national newspapers it was reported that the Chancellor of the Exchequer and the Secretary of State had had discussions about the future level of unemployment benefit. I refer to that, because I do not want a further clause to be added to the Bill later to provide that the Government will cut unemployment benefit during this financial year. However the Government may want to rely on legislation that has already been enacted in this Parliament. I refer to orders that can be placed before the House as a result of the Social Security Act. However, I hope that they do not do that either. I should not like to see any substantial changes in the Bill that would make it even worthier of our opposition. In Committee, I hope that we shall be able to concentrate on the Bill's present contents and not on additional proposals that are brought in to solve the Chancellor of the Exchequer's problems.

The Opposition would like to know when an announcement will be made about the problem of unemployment benefit and the rise in national insurance contributions. As the Bill stands, the major point concerns sickness benefit schemes. If we are to discuss the matter sensibly, we must return to first principles. My hon. Friend the Member for Glasgow, Kelvingrove (Mr. Carmichael) rightly pointed out the arguments that Beveridge put forward when establishing the national insurance scheme. Beveridge clearly stated:
"A permanent scale of [insurance] benefit below subsistence assuming supplementation by a means test as a normal feature cannot be defended."
That is still true and is now even more important because the number of those dependent on supplementary benefits has substantially increased. The Bill will increase yet further the numbers of those dependent on supplementary benefits. It is wrong for the Secretary of State to come before us with sickness benefit proposals that will cause many people—particularly those with children or other dependants—to rely on supplementary benefit to eke out an existence. For that reason alone, we should not accept the Bill.

There are other substantial reasons why we should not accept the Bill. The guiding principle of the Labour Party's policy—set out in the new document that the Labour Party has produced on social security—is that we should minimise poverty and the extent of dependence on means-tested benefits. The Bill does not meet that objective.

We are also concerned about the way in which employers will operate the sickness benefit scheme. I do not envisage many problems with large employers, such as British Leyland, ICI, the local authorities and the National Health Service. However, there may be substantial problems with small employers who have a few employees with whom they have an appalling relationship. The hon. and learned Member for Thanet, West (Mr. Rees-Davies) painted a picture of patriarchal bliss between employers and employees in small firms. However, my experience of my borough—which the Minister also represents—is different. Many small employers have shocking relationships with their employees. Not many of them will tell their employees that they are entitled to sickness benefit. Small employers may commit frauds by claiming national insurance contributions back from the State while not paying their employees sickness benefit. I can think of nothing worse than someone who has not been employed for 12 months, who does not have protection under employment protection legislation, who falls sick for a short period and who is not told by his employer that he is eligible for sickness benefit, having to go through the national insurance adjudication machinery to the county court in order to get a judgment against that employer.

All hon. Members know that that will not be done. They also know that the Government will not put on the ground the number of inspectors required to police the system. If the system is to work effectively, it will require a substantial number of inspectors, but I cannot see the Government providing them.

We must judge the Government on their track record. They have reduced the number of inspectors in the wages councils and factories sectors. The number of health and safety inspectors is also grossly inadequate. The Government have a deplorable record in overseeing the malpractices of individual employers. I believe that we shall see a large increase in the injustice meted out to employees when they fall sick, particularly those employed in small firms.

My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) explained why the sickness benefits scheme is objectionable. It is an attack on the low paid. As it discriminates against people employed in small firms, there is no question but that it will discriminate against women because they are disproportionately employed in small firms. The scheme is also an attack on people employed in industries where the level of trade union organisation is low.

Reference was made earlier to the fact that the trade unions ought to be pleased that sickness pay can now be discussed in collective negotiations with employers. However, many millions of employees, such as those in the wages councils sector and elsewhere, are not represented by trade unions. In addition, many millions of employees do not have enforceable national agreements.

It is absurd for the House of Commons to say that somehow the trade unions will step into the breach immediately and obtain recognition agreements with employers, especially when the Secretary of State for Employment has only today announced another anti-trade union measure. It is absurd to believe that the trade unions will improve sickness benefits through their negotiations with employers.

We shall not achieve that. We shall probably get some improvement in the coverage of sickness benefits schemes in places where national agreements are in force and in large industries. But that will not be achieved in industries such as the clothing and textile industries. Those two industries feature prominently in my constituency. They have experienced substantial problems with employers who pay less than agreed wages councils rates of pay.

Voluntary registration has been referred to only marginally so far. This is a retrograde step for a number of reasons. First, I believe that it is an attempt to cook the unemployment figures. Secondly, and perhaps more important, it will cause great problems for hon. Members who want to discover from Ministers the incidence of unemployment in particular industries, as well as the problems that those industries face.

It will also mean a decline in the acceptability and usefulness of jobcentres in placing people in employment. They will be used less and less by employers to fill vacancies if people register voluntarily rather than as a matter of compulsion. For those reasons alone, I believe that clause 35 should be struck out in Committee, as it substantially undermines the work of the Manpower Services Commission and the jobcentres.

The case against the sickness benefit proposals is, therefore, that it will increase reliance on means-tested benefits. It will discriminate against those employed in small firms. It will discriminate against those who are in areas not organised by trade unions. It will also discriminate against those who do not have national agreements and those who have bad relations with individual employers. For all those reasons, the sickness benefit scheme will be a charter for the bad employer.

I believe, as a matter of principle, that it is right that the State should provide sickness benefit, reap national insurance contributions from employers and employees and pay out substantial benefits to people when they are sick. I believe that this major departure is an extremely retrograde step. I hope that the House will reject the Bill.

8.26 pm

Having sat through the debate, I have constantly wondered whether it was indeed a Second Reading debate. So far, no hon. Member has put forward any reason why the Bill should not be given a Second Reading. A good deal of concern has been expressed about the details of the Bill. I share some of those worries, which I shall adumbrate later. Nevertheless, having heard the Opposition speeches, I look forward to the Bill receiving an unopposed Second Reading.

Even the hon. Member for Wood Green (Mr. Race), although he expressed serious reservations, did not put forward any reason why the Bill should not be given a Second Reading. He expressed grave doubts with regard to small firms. Certainly these matters must be looked at carefully, but I do not believe, as the hon. Gentleman does, that large numbers of employees in small firms will be unaware that they are entitled to sickness benefit. If there are any such persons, I know only too well that the hon. Member for Wood Green will be in the forefront, as will I and indeed all hon. Members, to ensure that people are made aware of their entitlements.

The question of regulations concerns us all. Increasingly, Bills come before the House, the details of which are not immediately before us but are to be worked out later in regulations. That must make all of us have considerable misgivings. I served on the Standing Committee that considered the first social security Bill introduced in this Parliament. On that occasion a considerable amount of detail went through in regulations. I think that it is fair to say—and I think that my hon. Friend the Under-Secretary of State will acknowledge this—that some of those regulations turned out quite differently from the way in which we had expected them to turn out when we first heard about them. It was helpful to have the red book of notes on clauses, which gave us some guidance, but I still believe that in general the House should always consider the matter very critically when a Bill is introduced that will achieve most of its objects through regulations.

Even the hon. Member for Renfrewshire, West (Mr. Buchan) was so barren of argument against the Bill that he had to indulge in a tirade of criticism from the Dispatch Box, criticising the Government on more general lines about the uprating of benefits. As he knows, those fears and concerns are expressed and shared by hon. Members on both sides——

The general level of provision to offset poverty is an essential element of the Bill. If the general level were generous we could overlook some of the blemishes of the measure, but since the level is so abysmally low a saving of 25p here or 75p there is crucial to those caught in the poverty trap.

I am sorry that I gave way to the hon. Gentleman, because I was coming to that point. Of course it is relevent when looking at any social welfare matter to consider what is being done overall.

The point that I was making was that the comments of the hon. Member for Renfrewshire, West were peripheral to the Bill. The hon. Member for Stockport, North (Mr. Bennett) will share with me the deep concern that will be felt this coming January when the earnings-related supplement is discontinued. We shall then begin to see the true measure of the shortfall, which all hon. Members will have to examine carefully.

The concept of the Bill is right. I am surprised that the Opposition are not in favour of it conceptually. Surely they believe, as we do, that there should be a perception of less involvement in or reliance upon the State and a closer relationship between employers and employees. That is what the Bill seeks to achieve. It puts the State one further stage back. Although the employers will ultimately be compensated by the State, the relationship will be an enhanced one between employers and employees. That should be welcomed.

Overall, we must be the guardians of the achievement of greater fairness in society. I am sure that the hon. Member for Renfrewshire, West will not shout "Rubbish" at that proposal—or I hope that he will not.

I come briefly to the two main elements in the Bill. Regarding sick pay, it has already been mentioned that adult dependants will be about £2·27 less well off as a result of national insurance contributions. Again, it has been expressed forcefully by hon. Members of both sides of the House—I share those expressions—that there is a danger that those with children will be left worse off. That puts a greater burden on the Government to ensure that the cohesion of the family is not endangered in a particularly difficult period when that cohesion is endangered by other factors. I hope that at some stage the Government will reiterate their commitment to the concept of the family in society, and particularly to the question of child benefit, which has gained all-party support in the debate.

With regard to the housing benefit, I should be grateful if my hon. Friend would deal with the question of topping up. Who will administer it and what are the staffing implications? We have heard of the Government's hope for a reduction in the level of staff. I shall not use emotive terms about whether it is a loss, a reduction in staff or a saving, but have the Government taken full account of the staffing levels that will be necessary to administer the topping up?

Another matter that is critical is whether future and present claimants who go on to housing benefit from supplementary benefit will lose their entitlement to single payments. It should be fairly easy to answer that question and I hope that I shall be given an answer tonight.

The hon. Gentleman asks whether someone who ceases to be on supplementary benefit will still be entitled to receive an exceptional needs payment. The answer is that the right of someone on supplementary benefit to receive an ENP was removed by an earlier piece of legislation for which the hon. Gentleman voted.

The hon. Gentleman misunderstands me, and I am sure that he does not do so deliberately. I am concerned that those who have their housing benefits looked after as a result of the passage of the Bill should still be entitled to receive single payments. The House is entitled to an answer on that point.

As a result of clause 35, those entitled to supplementary benefit will no longer have to register. I remind the hon. Member for Wood Green that there is no specific statutory requirement for those receiving unemployment benefit to register. Therefore, we are not considering a novel departure. However, we need to consider whether those who will no longer need to register will lose support that they might otherwise receive. That is the gravamen of the opposition to the clause. That begs the question whether that level of support is forthcoming now or should go in that direction anyway.

I hope that after consultations the Government will bring forward a more comprehensive idea on how to give assistance, largely in terms of training, to those seeking further employment. I should like to see support being concentrated in that way.

The whole House should be able to welcome the Second Reading, because the concept of the Bill is right.

Unless the hon. Member for Renfrewshire, West believes that the way to individual liberty is through greater State involvement and interference, he should be able to vote for the Second Reading. I believe that he agrees that a better method is to create a closer working relationship between employers and employees, and therefore I hope that I shall see him in the Lobby with me.

There are details that need to be spelt out more clearly, and they will be spelt out in Committee. That will be the time for the fears that have been expressed to be properly adduced and dealt with. I suspect that the majority of hon. Members will support the Bill because, conceptually, it is right.

8.39 pm

The hon. Member for Anglesey (Mr. Best) has a nerve. We must give him that. He missed a large part of the debate, but he came in and criticised the Opposition for not addressing themselves to the content of the Bill.

The hon. Gentleman has spoken enough, considering the time that he has spent in the Chamber.

As the hon. Gentleman did not hear many of the contributions of my hon. Friends, I will spend a few minutes summarising the arguments that make an effective case for dividing against the Second Reading.

There seem to be five powerful reasons why the Bill should not gain a Second Reading. My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) tried to relate this Bill to the other measures that we have considered during this Parliament. This is not an isolated attack on the benefits paid by the Welfare State.

The Government have made the first real cuts in benefits since 1945—the first real cuts even in old age pensions, the first real cuts in unemployment pay since the 1920s and, in this year of all years, have, to their "credit", made real cuts in the benefits paid to disabled people. This measure is yet another that will result in real cuts in benefits to poor people.

The second reason why we oppose the measure is that the real reason for bringing it forward has collapsed. Earlier, the Secretary of State read out some of the many letters that he had received from organisations which now support the measure. One organisation was missing from the list—the Treasury. The real advantage of the measure to it would be if it could shift to employers some of the cost of paying national insurance sickness benefit. To a great extent, that has failed and therefore the £400 million that the Government hope to obtain has disappeared. No wonder the Secretary of State had a difficult job trying to justify a Bill that was prepared long ago and for which the main reason has since disappeared.

Although that reason has disappeared, some low-paid workers will be adversely affected by the Bill. That is the third reason for opposing it. There is no dispute about the need to tax all forms of income but if the Government wanted to do that and wanted leeway in the next Budget they would look at other non-taxable income.

This year 50 per cent. of personal income will not be taxed as a result of the allocation of tax allowances. The taxing of sicknes benefit has made a minor contribution in bringing all income into the tax bracket. If that is the Government's aim, it would be possible, even tonight, to devise a scheme whereby sickness benefit was brought into the tax system in a different way from that advocated by their scheme, and which did not have the scheme's disadvantages.

The low paid already have a bad deal when it comes to the Wages Council. My hon. Friend the Member for Wood Green (Mr. Race) refrained from quoting a parliamentary reply from the Secretary of State on Friday in which he said that by checking the wage slips of employees in the clothing industry it was found that one-third of them were under-paid. It is many of these low paid workers who will not get their sick pay.

The fourth reason—and here I agree with the hon. Member for Anglesey—is that this Bill, as with previous measures has weakened the link between signing on for unemployment benefit and finding work. No one is pretending that, with 3 million unemployed, signing on guarantees a job but it is important for the claimant and the taxpayer that we should not continue to split the function of drawing benefit and seeking work. We should strengthen that link. It is good for the claimant and for the taxpayer.

My fifth reason for opposing the Bill is that families will be worse off. My hon. Friend the Member for Renfrewshire, West quoted from one of the many statements that the Prime Minister has made about the importance of the family.

In terms of benefits and increased tax burdens levied by the Government families have lost most. Families will lose yet again from the Bill. In the Government's first Budget, taxation was cut by £4·6 billion. If a fair share of the tax cuts had been given to taxpayers with children in the form of child benefits an extra £1·70 per week would have been available for each child benefit. In that event, the Government would not have had to try to justify a measure that will make families worse off because under the present scheme the child addition, paid to people drawing sickness benefit, is higher than child benefit. If the right hand of the Government makes a wrong move it is difficult for the left hand to put it right.

I have described several reasons, based on principle, why we have decided to divide the House. But I have some questions to ask. What will happen to the right of appeal under the new housing benefit scheme? We are told that all that will happen is that the new system will be simpler. However, if one receives housing benefit from the Supplementary Benefits Commission one can appeal if one feels that a fair deal has not been made. Will an appeal be possible under the new system?

I assume that the Government accept breaking the link between contributions and the payment of benefits. That is a good move and a move that will allow us to make many more reforms. But what will happen to claimants who are sick for the second time in a tax year when they have already exhausted their rights to the employers' sick pay scheme and when their second period of sickness in a tax year comes after the linking period allowed for in the Bill? Will they immediately go on to the State sickness scheme? There is no clear answer to that in the Bill.

I wish to be fair and give one reason for welcoming the measure. It will free us next time that we are in power. It breaks the link between the contributions that we pay in national insurance and the benefits that we pick up. There is no mention in the Bill of a person claiming sick pay from an employer only if his contribution record is correct. Indeed, if that were not so, the paper savings in terms of Civil Service jobs would be more illusory than most hon. Members believe.

8.47 pm

I wish to raise one or two matters and I shall leave comments on the detailed remarks by the hon. Member for Birkenhead (Mr. Field) to the Minister. However, I thought that the hon. Gentleman's comments about my hon. Friend the Member for Anglesey (Mr. Best) were unfortunate, because we must all leave the Chamber from time to time. It is impossible to remain here throughout a debate and it was unfair of the hon. Gentleman not to allow my hon. Friend to explain.

I am grateful to my hon. Friend for giving way, as the hon. Member for Birkenhead (Mr. Field) did not grant me that courtesy. I was out of the Chamber for one hour because I had to attend a meeting. I attended the entire debate apart from that.

Hon. Members should allow other hon. Members to give a personal explanation in such cases. I hope that we shall continue to abide by that practice.

I confine my remarks to the sickness benefit aspects of the Bill. I welcome the proposals because of their fairness to employers, especially to the small business employer. However, I am also anxious about the effect of the scheme on the employee. The Welfare State was founded on the basis of the State providing benefits to the population on a comprehensive national scale with Government organising and receiving contributions. The State determined the exact level of benefits and paid them out. However, in recent years the role of the State has begun to change and the overwhelming concentration of power in the State has, I am pleased to say, begun to wane.

We are moving much closer to the forms of social security to be found in most other European Community countries where the responsibility for benefit falls to a large extent on freely negotiated rates between employers and employees with the State exercising a general supervising role and laying down certain minimum standards. It is, I believe, the intention of the Bill that the State lays down minimum levels of income that must be provided but leaves the actual level for negotiation between employers and employees. I hope that, in time, employees will normally look to their employers not only for their sick pay but for their occupational pensions and their group medical insurance instead of the State, thereby providing a net at a much higher level than before. That is the long term benefit and advantage of the Bill. However, I should like to know about the intervening period and its effect on existing employment contracts.

I cannot see specific provision to cover any gaps that might be created. For example, where a contract of employment provides for only three days' sick pay each financial year with a subsequent requirement for a doctor's certificate, what can be done to ensure that the employee is treated by the employer in the same way as the employer is to be treated by the Government? This is especially important at present when doctors ought to be relieved of much of the work involved in giving sick notes. It is also of considerable importance to employees in situations where a person who loses the first three days' pay is only protected against a reoccurrence within two weeks instead of eight. This could have a disastrous effect upon his income and ability to meet his obligations where the employment contract is based on the existing system of eight weeks.

I would also be grateful for clarification on another matter, namely, where contracts of employment stipulate that pay during sickness will have benefit deducted from the pay agreed. Presumably that deduction will not continue to be made when it is the employer rather than the employee who receives the money from the Government.

I believe that the Bill is intended to bring current employment practice up to date. I cannot understand, therefore, why the Bill still talks in terms of a six-day week instead of a five day week. It seems that a 40 hour, five day week is now normal employment practice. If so, why is this figure not used in the Bill? These points will I hope have effect only in the short term, but are nevertheless very important to employees now. I therefore welcome the general provisions of the Bill as a further step to cutting bureaucracy and encouraging both employers and employees to rely more on their own negotiations and initiative and less on the State.

8.52 pm

I shall do my best, Mr. Deputy Speaker, to keep within the five minutes allotted to me.

The Secretary of State suggested that the Opposition should welcome the Bill because it brought about much needed change in the method of dealing with housing benefit. That would be to welcome change for change's sake. The initial response of the Child Poverty Action Group to the consultative document shows the difficulty of supporting even the principle as laid out in the Bill. The group said that these were the wrong reforms and the Government should go back to the drawing board, and that the proposals
"will result in claimants falling below the safety net of supplementary benefit or make it necessary to create an administrative system of nightmarish complexity."
The Secretary of State also complained that the Bill had been greeted with suspicion by the Opposition. That is hardly surprising since between May 1979 and March 1981 10 measures, including social security Bills, resulted in a reduction of social security benefits to the tune of £1·5 billion. We can only be suspicious that this Bill, through the regulations, will lead to reductions in the amount paid out.

I want to concentrate my remarks on housing benefit and to raise a series of problems.

It has already been pointed out that those who, through housing need, can claim supplementary benefit as a means of paying or assisting to pay their rent have a passport to other benefits. The Government have suggested that they are considering safeguarding the position of those who would lose entitlement to the passport, but they have limited this to free school meals. We need to know two things from the Government. Exactly how will they safeguard the position of those who lose the right to free school meals? After all, for a two-child family, that could mean the loss of £5 a week. Will the Government safeguard the passport rights to other benefits from which pensioners and families may benefit?

Secondly, I want to raise some questions about the topping up payments. We are glad to note that the Government have already made some concessions along these lines. The problem arises partly with the point at which the transfer is to take place. How will those who require topping up be indentified? The serious problem, however, is with future losers. How will they be identified? Where is the administrative simplicity? Presumably these people will have to be advised, first, by local authorities, and then sent back to the DHSS, and the DHSS will check the correctness of the local authority advice. That would surely also tend to put off those who may lose and who should be going back to the DHSS in order to have their entitlement topped up. Perhaps that will achieve one of the Government's objects of covertly saving on social security payments.

The point that I have just mentioned shows how the Bill will increase the burden on local authorities. Some Conservative Members, particularly the hon. Member for Huntingdonshire (Mr. Major), have fully spelt out the difficulties for local authorities. I do not propose to cover that ground again, except to make two points. Many local authorities already find the administration of rebates burdensome and time-consuming. Will they be fast enough to help, in particular, those with a fluctuating income who are now helped by social security? The DHSS has a statutory obligation to deal with those claims within 14 days. Will a similar duty be laid on local authorities? Such groups and others will obviously need that sort of statutory protection. That being so, how will local authorities be able to provide that efficiency of service?

Another group in potential difficulties is private tenants. Will the local authority be able to help them quickly enough? After all, they are likely to face eviction if their rent is not paid regularly.

May we have the Government's assurance on another matter? In today's newspapers we are told that rents may rise, on average, by £3 a week next spring. Will there be enough money in the kitty to deal with that matter?

Secondly, is there enough money to deal with the extent of the present problem? Shelter has pointed out that the Government's calculations, which were set out in the consultative document and are contained in the Bill, are based on calculations taken from the family expenditure survey based on 1979 data and a small sample. These were updated to 1980–81 prices. Have they been updated adequately to reflect present rents? Will they be updated adequately to take account of the sharp rise in rents that is likely to occur next spring?

Those are the gaps in the Bill as regards the administration of housing benefit. Those are the causes of our anxieties. Reform is necessary, but not this one.

9 pm

In the short time that is available I shall direct my comments to part II of the Bill, which deals with housing benefits. Everyone agrees that housing finance needs urgent and radical reform. In March 1981 the Government published their consultative document, which gave the seven criteria by which assistance with housing costs should be judged. I shall not go through them, except to say that the crucial failure among those seven criteria was the one that said that there was to be no increase in expenditure on housing assistance. By including that criterion the Government ruined any chance of producing a decent system in a decent Bill. If the hon. Member for Anglesey (Mr. Best) wonders why the Opposition are upset about the Bill, I can tell him that that is one of the reasons. It is spoiling the ship for a ha'porth of tar.

Government policies have led to increases in rents and rates, so more people will need assistance. Council rents went up by an average of 48 per cent. last year, and private rents, as judged by reregistration with rent officers, by an average of 62 per cent. in England and Wales in the last half of 1980. The rate support grant antics of the Secretary of State for the Environment have led to rate rises around the country, much as he would like to disguise that fact.

The Sunday Times last week gave an example of a family living in West London with a weekly income of £72 and a weekly expenditure of £72·52, of which rent and rates equalled £31·29. The article pointed out forcefully and accurately that the position of the poor is getting worse and that their numbers are increasing. That is something else to add to this Government's abysmal record of rising inflation, increasing taxes and so on.

It is essential to have a better, simpler and unified housing benefits system. Let us consider some of the criteria. The system is supposed to be easier for beneficiaries to understand. People on supplementary benefit will have to get their benefit from two offices instead of one. That might be all right for council tenants who get a nil rent demand, but private tenants, especially those who are unemployed, will go from the unemployment office to the Department of Health and Social Security, to the local authority, and possibly back to the DHSS for topping up. If that is supposed to be simplification, I cannot imagine what would happpen if the Government sought to make it more difficult

I note that local authorities are not obliged to deal with claims in 14 days, as is the DHSS. That is crucial for private tenants, who can he evicted if they do not pay their rent regularly and on the date that it is due. The take-up for rebates is notoriously low, and this scheme is not easier to understand.

There will be three separate tapers for calculating the amount of benefit to be paid to rebate or allowance recipients. The first will be 21p in the pound for those with incomes above the needs allowance. The second will be 50p in the pound for pensioners with incomes below the needs allowance. The third will be 25p in the pound for non-pensioners with incomes below the needs allowance. Again, that does not make for simplicity or ease of understanding. As my hon. Friend the Member for Stockport, North (Mr. Bennett) said, one could not fit a description of that on one side of a foolscap page.

The topping-up arrangements seem to be almost the least clear of all. It seems to have suddenly occurred to the Government that certain areas needed dealing with and that something had to be put in at the last minute, and they called it topping-up. The topping-up principle is far from clearly spelt out, and could involve a person going back and forwards between the DHSS and the local authority to find out what was due to him.

The scheme is supposed to be fair to all recipients. However, as has already been pointed out, pensioners may gain, while families, the unemployed, and people below pension age and sick—to which I would add people living in hostels—will be much more at risk. People who come into the category of single homeless living in hostels represent a group that has not received much attention in the Bill.

The scheme is supposed to minimise losses to the individual. By any standards that I know, and by a number of estimates that have been done outside, about 2 million households will be worse off. No doubt the Government will say "That is only 25p", but for the family described in The Sunday Times that 25p will matter a great deal. That sum is almost the exact difference between that family breaking even and exceeding its budget. That alone is an indication of the abysmal standard on which it has to exist. In addition, it has to face redundancy and continued unemployment. The problems with which we are dealing will not be made easier by the Bill, especially by the fatal clause that will not allow increased expenditure on housing.

That could have been prevented by the provision of an extra £40 million. A limitation of tax relief, for example, on mortgage interest payments at the standard rate only would raise about five times that amount. We could have solved the problems that my right hon. and hon. Friends have been discussing by enacting a meaure to achieve that purpose, which would benefit the much lower paid

I was a member of the Committee that considered the Finance Bill earlier this year. One of the provisions of the Bill abolished capital transfer tax. Two parents can give £50,000 to their children every 10 years—£100,000 a child—and we know that that sort of handout is being given to the rich, while we are quibbling about 25p for those who were described by The Sunday Times as the very poorest. The Government have something sadly wrong with their moral standards.

It is said that the Bill's provisions will be easier to operate than those contained in current legislation. That will possibly be the result for the Department of Health and Social Security, but local authorities will gain 130,000 individual rebate claims to assess. The Government set great store by their claim that the Bill will not create extra expenditure. I note that it contains no appeal rights. I think of the appeal rights that are embodied in income tax legislation, and I wonder why the Government have not sought to incorporate them in the Bill.

My hon. Friend the Member for Stockport, North reminded us that the Secretary of State's regulatory powers have not been published and that we cannot scrutinise them. The Bill will be introduced by 1982. The sheer rush of introducing it will end with a shambles and the Bill should be withdrawn for that reason.

When the Minister for Social Security replies to the debate I hope that he will tell us whether the Government will impose a statutory duty on local authorities, similar to that imposed on the DHSS, to make them deal with claims within 14 days. I hope that he will tell us also whether they will clarify the topping-up procedure and whether those in receipt of supplementary benefit will be issued with a certificate of entitlement to full rebate to minimise any opportunity for mistakes or delays that might occur when claimants go to their local authorities.

Finally, as my hon. Friend the Member for Stockport, North said, I hope that the Minister will publish the regulations that will affect claimants as a schedule to the Bill before it goes into Committee.

9.8 pm

My first comment may enjoy the agreement of the representatives of the parties that have been present during the debate and have shown an interest in the Bill. I regret that the Social Democratic Party, which claims to be the third largest party in the House, has not chosen to participate in the debate. It seems to have no policy, no interest and no principles on social security and housing benefit.

In all fairness, it should be said that the hon. Member for Woolwich, East (Mr. Cartwright) was in his place for some hours trying to catch the eye of the Chair.

The hon. Gentleman, who spoke on behalf of the Liberal Party and not for the alliance, seems to have different eyesight from the rest of us. We caught a glimpse of one SDP Member, but none of them has shown a serious interest in the Bill. That is a bad sign from the SDP's point of view.

The Government are asking us to give a Second Reading to a Bill that they have tried to present to the House as one that merely simplifies administrative procedures, saves public expenditure by reducing jobs in the Civil Service and rationalises existing provisions. They claim that there will be minimal disruption for those in receipt of benefits.

I listened carefully to what the Secretary of State said earlier and also to what subsequent speakers have said. However, none of them has adequately covered the important point that the measures in the Bill, both on the social security side and on the housing benefits side, mean that many vulnerable and poor people will be worse off as a result of the Bill than they are now. No one in the Opposition would be against simplifying or streamlining existing systems. However, that is not what the Government are doing. Instead, under the guise of making simple administrative changes, they have attacked the concept of the Welfare State and in so doing will leave many families worse off, especially the families of those who are sick and in need of extra assistance.

The Government said today that we should not be too worried about the people who will lose under the new system. They said that no one will lose very much, so we should not be at all concerned. However, that is not much consolation to all those who do not have a substantial income to start with because it is the poorest people in this country that the Bill is about. Anything that leads to 2 million of them losing must be wrong. Even the Minister had to agree that that was the figure.

As my hon. Friend the Member for Renfrewshire, West (Mr. Buchan) said earlier and as the hon. Member for Abingdon (Mr. Benyon) mentioned, the people who are losing under the Bill are those who have already lost considerably as a result of the Government's actions. They have lost even today because the latest uprating of benefits is only 9 per cent. compared to an inflation rate of 11·7 per cent. That is not the first time that those people have been cheated by the Government.

I shall concentrate most of my remarks on the proposals concerning housing benefit. However, there are some outstanding points on the earlier part of the Bill that I hope the Minister will answer. The Secretary of State did not convince us that his proposals were reasonable. He gave the impression that he and the Government did not care or think it important that so many individuals and their families would be worse off, nor did he seem to think it important that his measures were attacking the fundamental principle of the Welfare State, the system that he as Secretary of State, more than anyone else, should be protecting and not undermining.

My hon. Friend the Member for Renfrewshire, West raised many important matters. The Secretary of State did not choose to intervene to clarify and give the necessary assurances for which my hon. Friend asked. I do not wish to repeat all those points, but I stress to the Government how strongly the Opposition feel about those matters. There are several important points relating to the new proposals for sickness benefit that we feel must be altered later in our discussions on the Bill.

It is wrong to introduce such a system with its consequences. It is wrong to introduce a system whereby the low paid are to be treated as second-class citizens and are to receive a lower flat rate of sickness payment. We have not heard from the Minister why he increased to £60 the earnings qualification for the higher rate of sickness benefit. It is also wrong that the Government should propose to change the linking rule, so that many people will have to go without benefit more frequently.

We also feel strongly that it should be written into the Bill that there should be a duty on the part of the Government to index-link those payments. Although experience of this Government suggests that even index-linking written into a Bill is not a sufficient safeguard, we believe that that is the minimum that we should be asking for at this stage from the Government.

However, I should also like the Government to think again about the effect on poor families of their proposals for sickness benefit. The Secretary of State played down the number who will lose under the new provisions, but even he must admit that families with an adult dependant and children will be much worse off. In the majority of cases it will be where the man works and the wife and children are dependent. It should be a problem that particularly concerns the Government and the Secretary of State, as his predecessor advocated that women should stay at home and not work. He stated:
"Quite frankly I do not think that mothers have the same right to work as fathers. If the Good Lord had intended equal rights he would not have created men and women."
If it is the policy of the DHSS that women should be discouraged from going out to work, it is strange that that Department should decide on a sickness pay scheme that especially penalises families with non-working mothers.

Whatever the hon. Lady feels about my predecessor, will she concede that I, at least, am married to a working mother?

I am, therefore, surprised that the right hon. Gentleman does not show more concern for others who are married and have dependants and who, under the proposals, if they are on the highest rate of sickness payment, will be worse off by £4 a week and, if they are already low paid, by £13 a week. Such action does not show concern for other married people, particularly those who do not have working wives. I hope that, in winding up, the Minister will show that the Government appreciate the difficulties that will be created by the changes.

However, I wish to comment on the Government's proposals on housing benefits. The details are important, but they are either a closely guarded secret or the Government do not yet know them. Either position is unsatisfactory. On Second Reading we are being asked to approve in principle a measure the eventual form of which we know little about. All the details and even the guidelines are to be determined by regulations. This evening the Government are merely asking the House to give them a blank cheque to use their power at a later stage to introduce any scheme that they wish.

We have six meaningless clauses that do not even provide the basic framework for a scheme of housing benefits. The Government may have a good reason for adopting that approach. The Minister reminded us that earlier this year the Government introduced a consultative document on the scheme. From his point of view it might be right not to include the details. The response to the suggestions in the document reveals widespread concern among local authorities, advisory committees on social services and rate and rent rebates and all the voluntary organisations which work closely with poor people and are concerned with housing. It is significant that the Minister did not mention the voluntary organisations, which have such strong opinions on the matter, mainly because he knows that they have proved that many poor people will suffer and that the scheme neither unifies nor simplifies housing benefits.

It is quite an achievement to create such hostility. Almost everyone concerned with housing and social security agreed that the existing system was wrong and that changes should be made. The hostility arose because the Government did not make suggestions on the needs of those who have a claim to the various types of housing benefit. Their needs were not the Government's first priority. The Government's first thought was to reduce the number of jobs in the Civil Service. Therefore, the consultative document's suggestions disappointed and dismayed all those who believed that the Government seriously intended to introduce a unified housing benefit. Perhaps it is in acknowledgement of the fact that the Government have even changed the title of their proposals. We no longer have a unified housing benefit. The Government are simply changing the system of housing benefit.

We have many worries about the number of losers, and the way in which the scheme will operate in practice. The Minister admitted that there would be 2 million losers under the scheme. That is 2 million households, not just 2 million individuals. Therefore, far more than 2 million people will lose. If 2 million, out of a total of 17 million households, lose, it means that more than 10 per cent. of households will be penalised because of the Government's proposals. Other estimates put the number of losers at a much higher figure.

The Government have already taken action to force up rents to astronomical heights and that means that more people will fall into the category of claimants and will, therefore, be potential losers under the scheme. By definition, those whom we are talking about are relatively poor. Therefore the Government are designing a scheme that will leave 2 million of our poorest people worse off than before. The Minister said that that did not matter because he would introduce protection, so that no one would lose more than 75 pence per week. If a person's income is low enough for him to qualify for such benefits or if a person is on supplementary benefit, 75 pence is lot of money to lose, especially when the person has already lost because the Government have cheated on social security benefits and carried out a fiddle in relation to those receiving rent rebates. The benefits that are now being received have not been fully uprated in line with inflation. For example, the latest increase in rent rebates and allowances averages only 7·5 per cent., although inflation has been nearer 12 per cent. Many of those on supplementary benefits and in receipt of rent rebates have lost once already and the Government will make them double losers.

We should like to ask the Government many questions about the topping-up scheme, the number of those losing, and about those who will lose on passported benefits. Time does not permit us to ask all of our questions. However, there are difficulties. We stress that the Government's proposals will not—as the Government suggest—simplify procedures for such claimants. Many claimants will have to go to the Department of Health and Social Security to ask for housing help. They will be referred to the local authority, which will assess their needs. They will then have to return to the DHSS to ask for a topping-up payment. Despite that, the Government claim that they are creating a simplified system.

Local authorities may have their own topping-up schemes. Therefore it will not be easier for claimants to find their way round the various parts of the new proposals. The provisions in clause 28 do not make the situation any easier. Clause 28 refers to local authorities granting rebates or allowances and states that they shall—
  • "(a) make copies of the scheme available for public inspection at their principal office at all reasonable hours without payment; and
  • (b) in the case of a local scheme, furnish a copy to any person on payment of such reasonable sum as the authority may determine."
  • The Government are suggesting that under the scheme people in need—the poorest—should have to pay for essential information about their entitlement.

    The Opposition were anxious that a Minister with responsibility for housing should reply to the debate. Earlier, we welcomed the fact that the Under-Secretary of State for the Environment, the hon. Member for Ealing, Acton (Sir G. Young), had been rushed from his Department into the Chamber to listen to the debate. We believe that the Government's general housing policies mean that more people now need housing benefit and support. Housing benefits are directly related to housing costs, and housing costs determine the level of benefits that are required. As the Government push up rents or rates by withdrawing subsidy, so the number of claimants will increase. That is precisely what is happening.

    In the context of the Bill, it is significant to look at what the Government have done with rents over the last few years. Since they came to power, they have deliberately followed a high rents policy. This year, they increased rents by £3·25 a week. Soon there will be an announcement that they are to go up even more, perhaps by a staggering £4 a week.

    In an answer to a parliamentary question last week, the Government admitted that they had increased rents by 78 per cent. since they came into office. But if council rents go up by another £3 a week, which is one suggestion, the increase in rents since they took office will be 118 per cent. If reports in the weekend newspapers are true, if the Treasury gets its way, and if the Government increase rents by £4 a week, the total increase in rents in three years will be 133 per cent. Yet, until we insisted, a Minister responsible for housing was not willing to come to the house to listen to the debate, and he is still unwilling to participate.

    We also believe that a Minister responsible for housing should participate in the debate because under the heading of "housing subsidies" we should not merely be debating rate and rent subsidies. That fits in with the impression that the Government like to give, namely, that only those living in rented accommodation are subsidised. The Bill is called the
    "Social Security and Housing Benefits Bill."
    We therefore believe that those who receive the greatest degree of housing subsidy, namely those receiving mortgage tax relief, should also be covered.

    How can the Government talk about housing benefits without once mentioning those who get the largest subsidy of all? During the last two years, the Government have done much to alter housing subsidies. They have shifted the balance so much that they have redistributed income from tenants, particularly council house tenants to owner occupiers.

    Not only are council house tenants as taxpayers subsidising those who buy their own homes, but council house tenants will shortly be subsidising general ratepayers through the profit that the Government are forcing local authorities to make out of housing revenue accounts. We can see exactly what the Government are doing. They are removing subsidies from tenants——

    The hon. Gentleman says that it is not true. Earlier, he said that this was a lucid Bill. His judgments on both counts match one another.

    We can see exactly what the Government are doing. They are removing subsidies to tenants who are the worst off and increasing expenditure on help for house buyers who are better off. It is typical Tory redistribution.

    All of these considerations are relevant to the Bill because the Government are proposing a new system of rent and rate rebates that will have 2 million losers while at the same time spending £2,000 million on tax relief for house buyers. They are prepared to spend that amount on mortgage interest relief. Yet they say that they cannot afford to bring in a no-loser scheme for the poorest families in receipt of rent rebate and supplementary benefit. Those people are to be the losers simply because the Government want to ditch 2,000 jobs in the DHSS so that Ministers can tell the Prime Minister that they have made the kind of cuts of which she will approve.

    Yet even within the Government's own public expenditure constraints there is no need for there to be any losers under the scheme. The Government's assurance about limiting the loss to 75p per week leads merely to further confusion and administrative complexities. If they made a very modest adjustment to mortgage relief and abolished relief at other than the standard rate of tax, they would save more than £150 million per year. A no-loser scheme under the Government's proposals would cost between £40 million and £60 million—indeed, only £40 million on the Government's own estimate. It is outrageous to continue a subsidy of £150 million to the very rich while 2 million poor families are forced to lose under the Bill. We are not simply saying that the Government should spend more money to achieve a fairer scheme. We are actually telling them where to get the money from.

    Perhaps we should not expect fairness in housing benefit from the Government. After all, the Prime Minister made the position clear at Question Time last week when she defended the Government's decision to raise council rents by 78 per cent.—soon, as I have said, to be 133 per cent. She said that it was time for them to rise and complained that at the time of the last general election council tenants were meeting only 47 per cent. of the cost of council housing. She made no mention of the fact that a high-rate taxpayer may receive tax relief on his mortgage at a rate of 60 per cent, amounting to more than £40 per week. The Government do not call that a subsidy. They talk only about sibsidies when referring to the poor. At the moment, they are interested only in making administrative changes. They are not worried about those who will lose, many of them severely.

    The Minister earlier presented the scheme as though many alternatives had been considered and this was the only one that the Government regarded as the right course of action. But, when the consultative document was presented, the Minister outlined only one possible type of change in the document, because the Government were working on the principle that it must be a no-cost scheme. Yet again, therefore, a whole scheme is being determined simply by the Government's anxiety not to give any more help to the worst off in society, although they continue to subsidise high-rate taxpayers through mortgage interest relief.

    The document that should have been produced ought to have contained costed alternatives to the Government scheme if the Government were serious about genuine consultation. Many simpler and fairer alternatives have been proposed. In Committee, we shall suggest ways in which the scheme can be improved, either by a single taper or by real unification. So far, however, the Government have not been interested in anything other than savings in expenditure and savings in jobs.

    We agree that changes in housing benefit are necessary, but the Government's proposals are adminstratively unacceptable. They will cause too many people to lose and, as they stand, they will do more harm than good. We condemn the Government's attitude to the proposals. The Government are continuing to help and subsidise the rich and are hitting the worst off yet again. In many respects, their attitude to the housing benefit is similar to their attitude on sickness benefit. They want to shed jobs in the Civil Service and they do not care who they hit in the process. We oppose the measure.

    9.35 pm

    As is usual in debates on social security Bills, the speeches that we have heard today have ranged from the thoughtful and illuminating to those based on the principle of "Oppose whatever the proposition".

    In the time that is available to me I cannot possibly deal with each and every one of the points that have been mentioned, so I shall try to deal with the major issues that have been brought to the attention of the House. However, I shall study the Official Report and write to those hon. Members whose questions I am unable to answer. In particular, I ask those hon. Members whose speeches I did not hear because I was absent from the Chamber for a short time to bear with me.

    The first matter that I must mention, because my right hon. Friend the Secretary of State said that I would deal with it, arises from an intervention from the hon. Member for Birmingham, Perry Barr (Mr. Rooker). He stated that since the Government announced the proposal to go ahead with a 100 per cent. reimbursement by self deduction scheme two associations representing small businesses had come to see me and told me that they were by no means happy with the scheme. The hon. Gentleman's information is incorrect. Since the period of consultation ended and the Government announced their decision on the nature of the scheme, all that we have received is a deluge of letters thanking us for having listened carefully to the views put forward and having accepted these views in the form and shape of the scheme.

    During the summer months, since the second consultation document was published, I saw representatives of 19 separate associations, of which 10 represented small business interests. They included the Small Business Bureau, the Union of Independent Companies, the Forum of Private Business, the National Federation of Self-Employed, the Association of Independent Business, the National Chamber of Trade, the Teesside Small Business Club, the National Association of Independent Businesses, the National Trade and Kindred Organisations Committee and the Association of Self-Employed. That is not the entire list, but all those associations and bodies accepted the principles underlying the Government's thinking—the bringing of sick pay to taxation, the reduction of the burden of the Civil Service, and simplification of the system. They were concerned about the method, but we have now met their representations on that.

    The hon. Member for Perry Barr mentioned in particular the National Federation of Self Employed and Small Businesses Ltd. seeing me and complaining about the final proposals announced by the Government. I should like to read to the hon. Gentleman a letter from that organisation to my right hon. Friend dated 23 October. It said:
    "Dear Mr. Fowler,
    In making the decision to introduce ESSP, we are pleased you and your Ministers have recognised the genuine concern expressed by the small business sector at the additional financial burden the original Green Paper proposals would have imposed. In my letter of 25 September 1981 I made the point that the Inland
    Revenue had no plans to tax sick pay after the first eight weeks. Now that the Government have decided to introduce a method of 100 per cent. self deduction there should be no need for the eight week cut-off period to obtain the full benefit of this method, it should run for the whole duration of any sickness.
    I take this opportunity to thank the Ministers and representatives from the Civil Service Departments for the courtesy afforded me and my colleagues throughout the many discussions that they held with our federation, aimed at avoiding any financial commitment on the hard-pressed small business sector.
    Yours sincerely
    Brian A. Prime, National Vice Chairman".

    I am grateful to the Minister for reading the letter. No one has complained about lack of courtesy by the Government in all the consultations over the past 18 months to two years. I know of no one who has complained about that.

    The Minister mentioned the Small Business Bureau. We would hardly expect that organisation to complain; its headquarters are Conservative Central Office in Smith Square.

    Mr. Blundell of the National Federation of Self-Employed and Small Businesses Ltd told me last week that he had been to a meeting the previous Wednesday with "MacGregor and Rossi". If he was wrong and I repeated the mistake I apologise.

    However, last Wednesday, one month after the letter quoted by the Minister was written, the national federation went on record as saying that it does not agree with the £5 imposition of national insurance contributions that the employer will have to pay, and will actively lobby against it. That is the point which I raised and the Minister has not answered it.

    The short point that the hon. Gentleman made earlier—I regret that he has made a longer point now and will force me to leave out many answers that I would have given to other hon. Members—was that since the Government had announced their proposal for 100 per cent. self deduction the National Federation of Self Employed and Small Businesses Ltd. had come to see me to complain. My answer is that, far from that, the federation has written a letter thanking us.

    I wish to deal with more serious matters. It was suggested by my hon. Friend the Member for Somerset, North (Mr. Dean), the hon. Member for Renfrewshire, West (Mr. Buchan) and others that flat-rate statutory sick pay would be unfair to employees with family responsibilities. We asked in the original Green Paper whether there should be a family premium. The overwhelming view of the representations made to us was that that would complicate the administration.

    The hon. Member for Isle of Ely (Mr. Freud) said that the scheme was complicated for small businesses, but in the next breath he urged us to make provision for additional payments for dependants and, possibly, a sliding scale. That would complicate the scheme beyond measure and it would be almost impossible for employers to operate. They would have to make inquiries into an employee's family circumstances to determine whether there should be an additional allowance for each child.

    There are many circumstances where employees might regard that as constituting——

    No, I cannot. If the hon. Lady's hon. Friend the Member for Perry Barr had not wasted so much time I would have given way to her.

    Order. The hon. Member for Wolverhampton, North-East (Mrs. Short) must sit down.

    The circumstances that I have outlined would constitute an unnecessary invasion of privacy.

    Statutory sick pay is essentially a continuation of earnings, and not a sickness benefit. The practice has never been for payment by employers to reflect an employee's family circumstances. However, if any families are disadvantaged and suffer hardship they can always rely for assistance upon the supplementary benefit provisions.

    Reference has been made to the earnings threshold. Originally the threshold was set at earnings of £45 a week. It was put to us strongly in the consultations that that threshold was too low. It would mean that somebody earning £45 a week would, when sick, obtain over 80 per cent. of wages as a statutory right. It seemed wrong to impose such a level statutorily. However, there is nothing to stop employers from paying a higher rate if they wish. They are free to go above the minimum.

    People earning under £60 a week are mainly young with no family responsibilities, or married women bringing a second income to the home. If there is hardship it is possible to claim supplementary benefit. The safety net always exists.

    Some hon. Members have questioned whether the proposals will disadvantage chronically sick and disabled people. Employers already seek to avoid employing people who are likely to have a poor attendance record. I do not believe that the minimum statutory sick pay requirements will aggravate that practice. By introducing the 100 per cent. self-deduction scheme we are improving the situation that would exist if we had followed the original Green Paper proposals. Organisations representing disabled people have already recognised that. There is no reason for any employer to discriminate against any employee because he will be compensated on a £1 for £1 basis for each sickness payment.

    Some hon. Members are worried about employers who might seek to avoid their obligations. Because of the 100 per cent. reimbursement by tax deductions from national insurance contributions and, ultimately, PAYE, there is no reason why an employer should wish to refuse to pay an employee sick pay, unless he is not satisfied that the employee's absence is due to sickness. That is another matter.

    An employer is concerned not only with money payments but with the disruption that might occur in the operation of his business if people suddenly, without legitimate reason, up sticks and do not turn up. If there is a legitimate reason of sickness the employer recoups 100 per cent. of the sick pay.

    If there is a dispute between an employer and an employee about whether an employee is away justifiably because of sickness, it can be resolved by the simple adjudicating procedure in the Bill.

    I cannot give way to the hon. Gentleman. He has not participated in the debate and has only recently come into the Chamber.

    Self-certification also relates to the problem of whether a sickness is genuine. A number of hon. Members have expressed anxiety.

    On a point of order, Mr. Deputy Speaker. Is it my understanding that the Minister refused to give way because I had not taken part in the debate? Will you confirm that I have been present since the start trying to catch your eye?

    I can confirm that. Whether the Minister gives way is entirely a matter for him.

    I need to wear glasses occasionally, but I did not see the hon. Gentleman present all that time.

    Discussions are continuing between my Department, representatives of the medical profession and both sides of industry. No decision has yet been taken, but I hope that my right hon. Friend the Secretary of State will shortly be in a position to make an announcement. This will enable the Committee to take account of any implications that the decision may have for the sick pay scheme.

    Reference has been made by hon. Members to the imposition of costs on employers. I should like to put into perspective the potential cost to employers. If an employer has no occupational sick pay scheme, he may have to pay an extra £5·7 on each £37 of sick pay disbursed. That is an upper limit.

    The exact amount will depend upon how the sickness falls and also on whether the employer is contracted in or contracted out for pension purposes. I must stress that the average sickness absence per employee per year is just over one week. Taking account of waiting days, the average annual uncompensated cost will be less than £5 per employee. This will fall only on firms with little or no occupational sick pay. The 100 per cent. provision of self-deduction welcomed by employers reduces this additional cost to an absolute minimum. It has been overlooked sometimes that the extra paid by employers in this way is tax deductible for all purposes relating to their business.

    I should like to pass now to matters raised under the second part of the Bill. We are taking significant strides towards simplification. We are solving the better-off problem, which for years has bedevilled the overlap between supplementary benefit and local authority schemes for housing. That is a major simplification for claimants. It is a step that the Opposition wanted to take but could never find a way of doing it. We have found a way and it will work.

    In future, assistance with rent and rates will generally come from one source—the local authority. That is simplification. The Department of Health and Social Security will no longer have to pay benefit in respect of the rents of local authority tenants and rates of all claimants, tenants or owner-occupiers. Nor will local authorities have to collect these sums. Instead, the claimant will have the charges rebated and the local authority will be paid in bulk through the subsidy system. That is simplification. Fewer staff will be required to run the scheme. That is simplification. It will free up to £10 million, which will be used henceforth for benefit and not for administration.

    I have been asked whether the draft regulations putting the scheme into effect will be ready for the Committee stage. We shall not be able to have the regulations ready for the start of the Committee stage, because we have to consult local authorities on the details. It is only right that we should do so. Until we have agreed the administrative details to be incorporated in regulations, we shall not be able to produce the draft to the Committee. However, I hope that we shall make sufficient progress between now and the time we reach this part of the Bill in Committee to enable us to consider those regulations.

    I am grateful for what the Minister has told us, but it is a perfectly simple matter. If he has not managed to gel the regulations ready, we can adjourn the Committee until he has done that.

    We shall cross that bridge when we come to it.

    Hon. Members must not express surprise at the way that we are approaching this matter, dealing with this by way of art enabling Bill and filling in the administrative details by legislation. What we are doing follows entirely the legislative framework of the rate rebate scheme under the Local Government Act 1974. It also follows the legislative framework of the supplementary benefits scheme in the Supplementary Benefits Act 1976. So this procedure is nothing new. II has been used by the Labour Party when it has been in Government. It is a little hypocritical of Labour Members now to question this way of proceeding in a technical, difficult, detailed administrative matter.

    I have been asked about the position of local authorities financially. The Government have undertaken to local authorities to reimburse to them 100 per cent. of any additional costs that they incur under housing benefit. The method of reimbursement will be the subject of discussion with the local authority associations and will take into account the authorities' need to maintain an adequate cash flow. There will be no additional burden on the rates in consequence of the introduction of this scheme.

    When I talk of the costs, I am talking of the 100 per cent. rebate on rents and rates that will be granted to people on supplementary benefit who have no non-dependants living with them, and they will receive from the local authority a note to the effect that they have nil rent and nil rates to pay. The cash then flows, on a basis to be agreed, direct from the DHSS to the local authorities. That is simplicity itself.

    Another matter that preoccupied right hon. and hon. Members was the question of losers. We must get this into perspective. Such losers as there are—I accept the figure of 2·17 million losers—will all be rebated recipients. No supplementary benefit claimants or future supplementary benefit claimants will lose any weekly benefit. The very poor—that is, those people with incomes beneath the needs allowance—will not lose at all, because of the changes in the tapers that are being made. Those with incomes less than £10 above the rebate needs allowance will not lose more than 50p. The great majority of those losing over 50p will have incomes of at least £75 a week if they are a pensioner couple or £110 if they are a working couple with two children.

    We have never sought to disguise the fact that there are bound to be losers, but it is a travesty of the facts to suggest that we are bent on harming the poor. On the contrary, we are passing on the administrative savings of £10 million by way of extra rebates. In speaking of losers, we must not overlook, as the Opposition have overlooked, the many gainers—the 870,000 rebate claimants and the 73,000 supplementary benefit claimants, who are old-age pensioners, many of them standing to gain £2 a week.

    I regret that, because I gave way, I am now told that my time is up. If I gauge the mood of the House correctly, there has been a welcome for the principles of the Bill, and there has been little criticism of the useful reduction in the size of the Civil Service and the benefits that the scheme will give. Nor has there been any general criticism of bringing sickness payments into tax. There has been acceptance of the need to simplify the arrangements for financial assistance with costs. I therefore commend the Bill to the House.

    Question put, That the Bill be now read a Second time:—

    The House divided: Ayes 295, Noes 233.

    Division No. 10]

    Ayes

    Adley, RobertCostain, Sir Albert
    Aitken, JonathanCranborne, Viscount
    Alexander, RichardCritchley, Julian
    Alison, Rt Hon MichaelCrouch, David
    Amery, Rt Hon JulianDean, Paul (NorthSomerset)
    Ancram, MichaelDickens, Geoffrey
    Arnold, TomDorrell, Stephen
    Aspinwall, JackDouglas-Hamilton, Lord J.
    Atkins, Rt Hon H (S'thorne)Dover, Denshore
    Atkins, Robert (PrestonN)du Cann, Rt Hon Edward
    Baker, Kenneth (St.M'bone)Dunn, Robert (Dartford)
    Baker, Nicholas (N Dorset)Durant, Tony
    Beaumont-Dark, AnthonyDykes, Hugh
    Bell, Sir RonaldEden, Rt Hon Sir John
    Bendall, VivianEdwards, Rt Hon N. (P'broke)
    Bennett, Sir Frederic (T'bay)Eggar, Tim
    Benyon, Thomas (A'don)Elliott, Sir William
    Best, KeithEmery, Peter
    Bevan, DavidGilroyEyre, Reginald
    Biffen, Rt Hon JohnFairbairn, Nicholas
    Biggs-Davison, Sir JohnFaith, Mrs Sheila
    Blackburn, JohnFarr, John
    Blaker, PeterFell, Anthony
    Body, RichardFenner, Mrs Peggy
    Bonsor, Sir NicholasFinsberg, Geoffrey
    Boscawen, Hon RobertFisher, Sir Nigel
    Bottomley, Peter (W'wich W)Fletcher, A. (Ed'nb'gh N)
    Bowden, AndrewFletcher-Cooke, Sir Charles
    Boyson, Dr RhodesFookes, Miss Janet
    Braine, Sir BernardForman, Nigel
    Bright, GrahamFowler, Rt Hon Norman
    Brinton, TimFox, Marcus
    Brittan, Rt. Hon. LeonFraser, Rt Hon Sir Hugh
    Brooke, Hon PeterFraser, Peter (South Angus)
    Brotrerton, MichaelFry, Peter
    Brown, Michael (Brigg&Sc'n)Gardner, Edward (S Fylde)
    Bryan, Sir PaulGarel-Jones, Tristan
    Buchanan-Smith, Rt. Hon. A.Gilmour, Rt Hon Sir Ian
    Buck, AntonyGlyn, Dr Alan
    Budgen, NickGoodhart, Sir Philip
    Bulmer, EsmondGoodhew, Victor
    Butcher, JohnGoodlad, Alastair
    Cadbury, JocelynGorst, John
    Carlisle, John (LutonWest)Gow, Ian
    Carlisle, Kenneth (Lincoln)Gower, Sir Raymond
    Carlisle, Rt Hon M. (R'c'n)Grant, Anthony (HarrowC)
    Chalker, Mrs. LyndaGray, Hamish
    Channon, Rt. Hon. PaulGrieve, Percy
    Chapman, SydneyGriffiths, E. (B'ySt. Edm'ds)
    Churchill, W.S.Griffiths, Peter Portsm 'th N)
    Clark, Hon A. (Plym'th, S'n)Grist, Ian
    Clark, Sir W. (Croydon S)Grylls, Michael
    Clarke, Kenneth (Rushciffe)Gummer, JohnSelwyn
    Clegg, Sir WalterHamilton, Hon A.
    Cockeram, EricHamilton, Michael (Salisbury)
    Colvin, MichaelHampson, Dr Keith
    Cope, JohnHannam, John
    Cormack, PatrickHaselhurst, Alan
    Corrie, JohnHastings, Stephen

    Havers, Rt Hon Sir MichaelOnslow, Cranley
    Hawkins, PaulOsborn, John
    Hawksley, WarrenPage, John (Harrow, West)
    Hayhoe, BarneyPage, Richard (S W Herts)
    Heath, Rt Hon EdwardParkinson, Rt Hon Cecil
    Heddle, JohnParris, Matthew
    Henderson, BarryPatten, Christopher (Bath)
    Hicks, RobertPatten, John (Oxford)
    Higgins, Rt Hon Terence L.Pattie, Geoffrey
    Hill, JamesPawsey, James
    Holland, Philip (Carton)Percival, Sir Ian
    Hooson, TomPeyton, Rt Hon John
    Hordern, PeterPink, R.Bonner
    Howe, Rt Hon Sir GeoffreyPollock, Alexander
    Howell, Rt Hon D.(G'ldf'd)Porter, Barry
    Howell, Ralph (N Norfolk)Prentice, Rt Hon Reg
    Hunt, David (Wirral)Price, Sir David (Eastleigh)
    Hunt, John (Ravensbourne)Proctor, K. Harvey
    Irving, Charles (Cheltenham)Pym, Rt Hon Francis
    Jenkin, Rt Hon PatrickRaison, Timothy
    JohnsonSmith, GeoffreyRathbone, Tim
    Jopling, Rt Hon MichaelRees, Peter (Dover and Deal)
    Joseph, Rt Hon Sir KeithRees-Davies, W. R.
    Kaberry, Sir DonaldRenton, Tim
    Kellett-Bowman, Mrs ElaineRhodes James, Robert
    Kimball, Sir MarcusRhysWilliams, Sir Brandon
    King, Rt Hon TomRifkind, Malcolm
    Kitson, Sir TimothyRippon, Rt Hon Geoffrey
    Knight, Mrs JillRoberts, M. (Cardiff NW)
    Knox, DavidRoberts, Wyn (Conway)
    Lamont, NormanRossi, Hugh
    Lang, IanRost, Peter
    Latham, MichaelRoyle, Sir Anthony
    Lawrence, IvanSainsbury, Hon Timothy
    Lawson, Rt Hon NigelShaw, Giles (Pudsey)
    LeMarchant, SpencerShaw, Michael (Scarborough)
    Lennox-Boyd, Hon MarkShelton, William (Streatham)
    Lester, Jim (Beeston)Shepherd, Colin (Hereford)
    Lewis, Kenneth (Rutland)Shepherd, Richard
    Lloyd, Ian (Havant&W'loo)Shersby, Michael
    Lloyd, Peter (Fareham)Silvester, Fred
    Loveridge, JohnSims, Roger
    Lyell, NicholasSkeet, T. H. H.
    McCrindle, RobertSmith, Dudley
    Macfarlane, NeilSpeed, Keith
    MacGregor, JohnSpeller, Tony
    MacKay, John (Argyll)Spence, John
    McNair-Wilson, P. (NewF'st)Spicer, Jim (WestDorset)
    Madel, DavidSpicer, Michael (S Worcs)
    Major, JohnSproat, Iain
    Marland, PaulSquire, Robin
    Marlow, AntonyStainton, Keith
    Marshall, Michael (Arundel)Stanbrook, Ivor
    Marten, Rt Hon NeilStanley, John
    Mates, MichaelSteen, Anthony
    Maude, Rt Hon Sir AngusStevens, Martin
    Mawby, RayStewart, Ian (Hitchin)
    Mawhinney, Dr BrianStewart, A. (ERenfrewshire)
    Maxwell-Hyslop, RobinStokes, John
    Mayhew, PatrickStradling Thomas, J.
    Meyer, Sir AnthonyTapsell, Peter
    Miller, Hal (B'grove)Taylor, Teddy (S'end E)
    Mills, Iain (Meriden)Tebbit, Rt Hon Norman
    Mills, Peter (WestDevon)Temple-Morris, Peter
    Moate, RogerThatcher, Rt Hon Mrs M.
    Monro, Sir HectorThomas, Rt Hon Peter
    Montgomery, FergusThompson, Donald
    Moore, JohnThorne, Neil (IlfordSouth)
    Morris, M. (N'hampton S)Townend John (Bridlington)
    Morrison, Hon C. (Devizes)Townsend, CyrilD, (B'heath)
    Morrison, Hon P. (Chester)Trippier, David
    Murphy, ChristopherTrotter, Neville
    Myles, Davidvan Straubenzee, Sir W.
    Neale, GerrardVaughan, Dr Gerard
    Needham, RichardViggers, Peter
    Nelson, AnthonyWaddington, David
    Neubert, MichaelWakeham, John
    Newton, TonyWaldegrave, Hon William
    Normanton, TomWalker, Rt Hon P.(W'cester)
    Nott, Rt Hon JohnWalker, B. (Perth)

    Wall, Sir PatrickWilkinson, John
    Waller, GaryWilliams, D.(Montgomery)
    Walters, DennisWinterton, Nicholas
    Ward, JohnWolfson, Mark
    Watson, JohnYoung, sir George (Acton)
    Wells, John (Maidstone)Younger, Rt Hon George
    Wells, Bowen
    Wheeler, JohnTellers for the Ayes:
    Whitelaw, Rt Hon WilliamMr. Anthony Berry and
    Whitney, RaymondMr. Carol Mather.
    Wickenden, Keith

    NOES

    Abse, LeoEllis, R. (NE D'bysh 're)
    Adams, AllenEnglish, Michael
    Allaun, FrankEnnals, Rt Hon David
    Anderson, DonaldEvans, Ioan (Aberdare)
    Archer, Rt Hon PeterEvans, John (Newton)
    Ashley, Rt Hon JackEwing, Harry
    Ashton, JoeFaulds, Andrew
    Atkinson, N. (H'gey,)Field, Frank
    Bagier, Gordon A.T.Fitch, Alan
    Barnett, Guy (Greenwich)Flannery, Martin
    Barnett, Rt Hon Joel (H'wd)Fletcher, Ted (Darlington)
    Beith, A. J.Foot, Rt Hon Michael
    Benn, Rt Hon TonyFord, Ben
    Bennett, Andrew (St'kp'tN)Forrester, John
    Bidwell, SydneyFoster, Derek
    Booth, Rt Hon AlbertFoulkes, George
    Bottomley, Rt Hon A. (M'b'ro)Fraser, J. (Lamb'th, N'w'd)
    Bray, Dr JeremyFreeson, Rt Hon Reginald
    Brown, Hugh D. (Provan)Freud, Clement
    Brown, R. C. (N'castle W)Garrett, John (Norwich S)
    Brown, Ronald W. (H'ckn'yS)George, Bruce
    Brown, Ron (E'burgh, Leith)Gilbert, Rt Hon Dr John
    Buchan, NormanGraham, Ted
    Callaghan, Rt Hon J.Grant, George (Morpeth)
    Callaghan, Jim (Midd't'n&P)Grimond, Rt Hon J.
    Campbell, IanHamilton, James (Bothwell)
    Campbell-Savoury, DaleHamilton, W. W. (C'tral Fife)
    Canavan, DennisHardy, Peter
    Cant, R. B.Harrison, Rt Hon Walter
    Carmichael, NeilHart, Rt Hon Dame Judith
    Carter-Jones, LewisHattersley, Rt Hon Roy
    Cartwright, JohnHealey, Rt Hon Denis
    Clark, Dr David (S Shields)Heffer, Eric S.
    Cocks, Rt Hon M. (B'stol S)Hogg, N. (E Dunb't'nshire)
    Cohen, StanleyHolland, S.(L'b'th, Vauxh'll)
    Coleman, DonaldHomeRobertson, John
    Concannon, Rt Hon J. D.Homewood, William
    Conlan, BernardHooley, Frank
    Cook, Robin F.Horam, John
    Cowans, HarryHoyle, Douglas
    Craigen, J. M. (G'gow, M'hill)Huckfield, Les
    Crowther, StanHudson Davies, Gwilym E.
    Cryer, BobHughes, Mark (Durham)
    Cunliffe, LawrenceHughes, Robert (Aberdeen N)
    Cunningham, G.(Islington S)Janner, Hon Greville
    Cunningham, Dr J. (W'h'n)Jay, Rt Hon Douglas
    Dalyell, TamJohn, Brynmor
    Davidson, ArthurJohnson, Walter (Derby S)
    Davies, Rt Hon Denzil (L'lli)Johnston, Russell (Inverness)
    Davies, Ifor (Gower)Jones, Barry (East Flint)
    Davis, T. (B'ham, Stechf'd)Jones, Dan (Burnley)
    Deakins, EricKaufman, Rt Hon Gerald
    Dean, Joseph (Leeds West)Kerr, Russell
    Dempsey, JamesKilroy-Silk, Robert
    Dewar, DonaldKinnock, Neil
    Dixon, DonaldLambie, David
    Dobson, FrankLamborn, Harry
    Dormand, JackLamond, James
    Douglas, DickLeighton, Ronald
    Douglas-Mann, BruceLewis, Arthur (N'ham NW)
    Dubs, AlfredLewis, Ron (Carlisle)
    Duffy, A. E. P.Litherland, Robert
    Dunnett, JackLofthouse, Geoffrey
    Dunwoody, Hon Mrs G.Lyon, Alexander (York)
    Eadie, AlexMabon, Rt Hon Dr J. Dickson
    Eastham, KenMcCartney, Hugh
    Edwards, R. (W'hampt'n S E)McDonald, Dr Oonagh

    McElhone, FrankRobinson, G. (Coventry NW)
    McKay, Allen (Penistone)Rooker, J. W.
    McKelvey, WilliamRoss, Ernest (Dundee West)
    MacKenzie, Rt Hon GregorRowlands, Ted
    McMahon, AndrewRyman, John
    McTaggart, RobertSandelson, Neville
    McWilliam, JohnSever, John
    Magee, BryanSheldon, Rt Hon R.
    Marks, KennethShore, Rt Hon Peter
    Marshall, D (G'gowS'ton)Short, Mrs Renée
    Marshall, Dr Edmund (Goole)Silkin, Rt Hon J. (Deptford)
    Marshall, Jim (Leicester S)Silverman, Julius
    Mason, Rt Hon RoySkinner, Dennis
    Maynard, Miss JoanSmith, Rt Hon J. (N Lanark)
    Meacher, MichaelSnape, Peter
    Mellish, Rt Hon RobertSoley, Clive
    Mikardo, IanSpearing, Nigel
    Millan, Rt Hon BruceSpriggs, Leslie
    Miller, Dr M. S. (E Kilbride)Stewart, Rt Hon D. (W Isles)
    Mitchell, Austin (Grimsby)Stoddart, David
    Morris, Rt Hon C. (O'shaw)Strang, Gavin
    Morris, Rt Hon J. (Aberavon)Straw, Jack
    Morton, GeorgeSummerskill, Hon Dr Shirley
    Moyle, Rt Hon RolandTaylor, Mrs Ann (Bolton W)
    Mulley, Rt Hon FrederickThomas, Dafydd (Merioneth)
    Newens, StanleyThomas, Jeffrey (Abertillery)
    Oakes, Rt Hon GordonThomas, Mike (Newcastle E)
    O'Neill, MartinThomas, Dr R.(Carmarthen)
    Orme, Rt Hon StanleyThorne, Stan (Preston South)
    Palmer, ArthurTilley, John
    Park, GeorgeTorney, Tom
    Parker, JohnUrwin, Rt Hon Tom
    Parry, RobertVarley, Rt Hon Eric G.
    Pavitt, LaurieWainwright, E. (Dearne V)
    Pendry, TomWatkins, David
    Penhaligon, DavidWeetch, Ken
    Powell, Raymond (Ogmore)Welsh, Michael
    Prescott, JohnWhite, J. (G'gow Pollok)
    Price, C. (Lewisham W)Whitehead, Phillip
    Race, RegWhitlock, William
    Radice, GilesWigley, Dafydd
    Rees, Rt Hon M (Leeds S)Willey, Rt Hon Frederick
    Richardson, JoWilliams, Rt Hon A.(S'sea W)
    Roberts, Albert (Normanton)Wilson, Gordon (Dundee E)
    Roberts, Ernest (Hackney N)Wilson, Rt Hon Sir H.(H'ton)
    Roberts, Gwilym(Cannock)Wilson, William (C'try SE)
    Robertson, GeorgeWinnick, David

    Woodall, Alec
    Woolmer, KennethTellers for the Noes:
    Wrigglesworth, IanMr. James Tinn and
    Wright, SheilaMr. Frank Haynes.
    Young, David (Bolton E)

    Question accordingly agreed to.

    Bill read a Second Time.

    Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

    Social Security And Housing Benefits Money

    Queen's Recommendation having been signified—

    Resolved,

    That, for the purposes of any Act of the present Session to make provision for the payment of statutory sick pay by employers; to make new provision with respect to the grant of, and the payment of subsidies in respect of, rate rebates, rent rebates and rent allowances; to amend the law relating to social security and war pensions; and to amend section 44 of the National Assistance Act 1948, it is expedient to authorise the payment out of money provided by Parliament of—
  • (1) sums required for the payment for the initial year and each subsequent year of—
  • (a) a subsidy to be known as 'rate rebate subsidy' to each rating authority;
  • (b) a subsidy to be known as 'rent rebate subsidy ' to each housing authority; and
  • (c) a subsidy to be known as 'rent allowance subsidy' to each local authority, being (in each case) a subsidy calculated in the manner prescribed by an order made by the Secretary of State with the consent of the Treasury;
  • (2) the expenses of the Advisory Committee on Rent Rebates and Rent Allowances;
  • (3) any administrative expenses of the Secretary of State incurred under the said Act of the present Session;
  • (4) any increase attributable to the said Act of the present Session in the sums payable out of money so provided under any other Act.
  • And that it is expedient to authorise the payment of any sums into the Consolidated Fund.—[Mr. David Hunt.]

    Agriculture And Horticulture

    10.15 pm

    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food
    (Mrs. Peggy Fenner)

    I beg to move,

    That the draft Agriculture and Horticulture Development (Amendment) Regulations 1981, which were laid before this House on 4 November, be approved.

    I understand that it will be for the convenience of the House if with this we consider also the following motions:

    That the draft Farm Structure (Payments to Outgoers) (Variation) Scheme 1981, which was laid before this House on 4 November, be approved.
    That the Agriculture and Horticulture Grant (Variation) Scheme 1981 (S.I., 1981, No. 1533), a copy of which was laid before this House on 4 November, be approved.
    That the draft Farm and Horticulture Development Regulations 1981, which were laid before this House on 4 November, be approved.

    The House will recall that on 3 November 1980 we debated a motion concerning European Community document 9280/80 which set out proposals to restrict investment aids for milk and pig production. Those proposals eventually formed part of a larger package of structural measures which was agreed by the Council of Ministers at the CAP price-fixing in April of this year. Three of the motions that we are considering today implement the terms of those measures in the United Kingdom. They are the Agriculture and Horticulture Grant (Variation) Scheme 1981—which I shall refer to as the AHGS—the Farm and Horticulture Development Regulations 1981—usually called the FHDS—and the Agriculture and Horticulture Development (Amendment) Regulations 1981—abbreviated to the AHDS.

    As many hon. Members will know, the AHGS and the AHDS—which replaced the FHDS in October last year—give effect to the main provisions of EC directive 72/159 on the modernisation of farms. The AHGS also has to conform to conditions laid down by that directive. The changes now to be made are introduced partly by new EC regulations and partly by a new directive which amends directive 72/159.

    EC regulations are directly applicable in all member States and so technically need not be incorporated into our domestic legislation. However, if we did not amend our own legislation it would be misleading and incomplete. We also wanted to clarify certain points. In addition, we had to implement the amendments which have been introduced by means of an EC directive which does not have direct effect in member States. These are the main purposes of the three statutory instruments.

    The House may wonder why it is necessary to amend the FHDS, which has been closed to applications for over a year now. Under that scheme and its successor, the AHDS, a farmer undertakes to carry out an approved programme of investments over a period of up to six years—called a development plan—the purpose of which is to bring the income of his business up to at least the average non-agricultural income—known as the comparable income—per labour unit.

    Development plans approved under the FHDS, which has been closed for a year, will last up to six years after the scheme closed to new applicants and may be varied during that time. Consequently, any changes to the current schemes also have to be applied to future variations of development plans under FHDS. The statutory instrument does that. In addition, because the principal regulations had already been amended several times, we have taken the opportunity to consolidate them so that they are more convenient.

    I turn to the substance of the three statutory instruments. As I mentioned earlier, the main changes to the schemes are the introduction of restrictions on aid to investment in milk and pig production. As regards dairying, the effect will be to limit aid under the AHDS and new variations under FHDS to that part of the investment needed for a maximum of 40 cows per labour unit in the case of businesses with up to one and a half labour units—in other words, up to 60 cows. For businesses which already have more than one and a half labour units—that is, 60 cows—an increase in the herd size of not more than 15 per cent. is permitted. Businesses expanding beyond those limits will be eligible for aid on the relevant proportion of their investment. However, under the AHGS, aid will be limited to businesses with not more than 40 cows. Any business which expands above, or which already exceeds, that limit will not receive any aid under this scheme. The sort of investments that will be subject to those restrictions are milking parlours, dairies, buildings housing dairy cows, including fixtures and fittings and so on. We shall not be excluding from grant aid items such as buildings for young stock or general purpose investments such as fencing, drainage, machinery sheds and so on, even if they are on specialist dairy farms. We shall continue to exclude aid for the purchase of dairy cows.

    The restrictions on aid to pig production will work in a different way. Until now, under all three schemes the limitations have been financial, and they have applied to the amount of investment in this sector that is eligible for grant. Those financial limits were laid down in directive 72/159. They are to be replaced by rules which will limit aid to the investment needed to reach 550 pig fattening places per business. For breeding enterprises, one breeding sow will be considered to be equivalent in this equation to 6·5 fattening pigs. There has always been a rule under which farmers wishing to obtain grant on pig investments must show that their business could produce 35 per cent. of the feeding stuffs required for all the pigs in the business. This rule remains unchanged. The sort of investments affected here will be buildings used for housing pigs together with integral fixtures, fittings and equipment.

    General purpose items such as feedstores and slurry tanks will not be excluded from grant aid. The purchase of pigs will continue to be ineligible for grant aid. In introducing the restrictions we want to be as reasonable and as fair as possible, while remaining within Community law. With that in mind, we are exempting from these changes farmers who already have an approved development plan that includes investment in these sectors. However, anyone seeking to vary a development plan to include investments of a type that would be caught by the restrictions will have to comply with them. No doubt hon. Members will remember that when we introduced the AHDS and AHGS in October last year one of the main changes from the previous scheme was the dropping of prior approval. I can understand, therefore, that some farmers who may have started work or incurred expenditure in some other way on an item of investment which would now become subject to these new restrictions, may be concerned that they will be caught out by the new rules. To avoid that, we shall honour such claims and requests, provided that the farmer can produce evidence that he entered into a legally binding commitment to incur the expenditure before the statutory instruments came into operation.

    We believe that these exemptions are entirely justified and are within the scope of the EC regulations. The three instruments we are considering at the moment make several further changes in the capital grant schemes. As I mentioned earlier, farmers who wish to claim grant under the AHDS must have an income below the comparable income and must carry out investments in a development plan designed to bring them up to at least that level.

    Up till now, farmers whose businesses generated the comparable income but were at risk of falling below that level have been able to qualify for a development plan. The rate of grant they received, however, was reduced to 80 per cent. of normal rates. Under the amended regulations now before the House, such farmers whose businesses already generate more than 120 per cent. of the comparable income per labour unit will no longer be able to undertake development plans. Those earning between 100 per cent. and 120 per cent. of the comparable income will have grant limited to two-thirds of normal rates. Very few farmers will, in fact, be affected by this change. In 1979, for example, only 11 development plans were approved in this category in the whole of the United Kingdom.

    Another necessary change to our schemes concerns the labour unit and business expenditure limits eligible for grant aid. These general financial limits on investment under the schemes are to be changed with effect from 1 January 1982. Farmers are limited at present to about £32,915 worth of grant-aidable investment per labour unit over a period of two years for the AHGS and per development plan for the ANDS. This is subject to an overall limit per business applied in the United Kingdom of about £136,000 under the AHDS and about £99,000 under the AHGS. The limit per labour unit is being raised to about £44,875, which is a significant increase. The overall limit under the AHGS which is United Kingdom imposed will net be changed, but the overall limit under the AHDS will be reduced by about 1 per cent. to £134,626, a new limit imposed by the European Community. This slight reduction will not apply to farmers who have already submitted development plan proposals and many farmers will be able to benefit from the increased limit per labour unit.

    Another small alteration in the running of the AHDS will be the inclusion of forestry income in the provisions relating to the achievement of the comparable income. It will work like this. In calculating his end-of-plan income, a farmer has had to discount any income from nonagricultural sources in respect of his first labour unit. Only 20 per cent. of his income, or 50 per cent. if he is in a less favoured area, can count from non-agricultural sources in respect of the second and subsequent labour units. As forestry has not been regarded as an agricultural activity, income from it has not been allowed to count when a farmer has been calculating his income. Now, however, forestry income will be included both for establishing eligibility for entry to the scheme and for calculating end-of-plan income. This should help the smaller hill farmer who has previously found it difficult to meet the income qualification for admission to the EC scheme.

    The range of items of investment covered by the schemes and the rates of grant will remain the same as before with one exception. I am pleased to tell the House that grant aid will in future be available for the provision of permanently sited durable structures for cladding with plastic which are to be used for agricultural purposes. We already pay grant on such structures to horticultural enterprises. However, plastic clad structures are now being used for housing animals, particularly sheep, and we considered it only right to aid them on the same basis as for horticultural purposes.

    Most of these changes to our grant schemes will come as no surprise to the farmers who will be affected by them. The decisions taken by my right hon. Friend the Minister and his colleagues in the Council of Ministers earlier this year were fully publicised at the time and the farming unions in the United Kingdom have been kept informed of developments. In addition, there has been fairly wide coverage in the agricultural press of the changes which are to come, and we issued a further press notice on the day these statutory instruments were laid before the House. I do not think, therefore, that it could be claimed that we have been keeping anybody in the dark on this subject.

    Finally, I turn to the fourth statutory instrument which we are considering today—The Farm Structure (Payments to Outgoers) (Variation) Scheme 1981. This scheme provides for the payment of grants to ageing farmers as an incentive to them to give up the farming of uncommercial units. The statutory instrument we have before us today makes very minor amendments to the principal scheme which Parliament approved in 1976. The principal scheme contains references to other regulations made under directive 72/159 which are now obsolete, but it fails to mention later regulations which replaced them. The variation before the House therefore rectifies this omission by replacing the deficient references with a general form of words which will relate to any regulations which have been or may be made under directive 72/159. As I mentioned earlier, the change is very minor and will have no practical effect on the farmers involved in the scheme.

    With all of those rather mouth-jumbling initials, I hope that I have been able to make matters clear to the House. I commend the regulations and schemes to the House.

    10.32 pm

    The Parliamentary Secretary has given a fairly lucid explanation of the technical aspects of the orders. I intend to confine myself to the two main issues, which are basically the limitation of the grant available to dairy farmers and to pig producers respectively.

    We are all aware that the background to the curtailment of grant eligibility of dairy farmers is the huge milk surplus in the European Community, which costs the Community thousands of millions of pounds. Conservative Members have recently sought to point out that there has been a fairly sharp reduction in the amount of butter intervention. At huge cost, the Community has indeed managed to dispose of butter, but no one can deny that there is still a very substantial structural surplus in the EEC milk sector.

    I shall come to that.

    These changes in the eligibility of dairy farmers for capital grants derive from the Commission's approach to this problem over a period of years. It is worth mentioning that of all the measures and proposals put forward by the Commission, some of which have been implemented—usually in a rather different form from that originally conceived by the Commission—this is probably one of the smallest and least significant. Certainly, it is far less significant and important in terms of its cost and impact on the dairy sector than, for example, the large payments made to dairy producers throughout the Community to give up production or to change over to beef production.

    Before the hon. Gentleman goes too far in adumbrating on the huge intervention stocks, may I remind him that we learnt in Question Time last week that intervention stocks in Britain represent only two days' consumption.

    If we had a domestic agricultural policy we would not be introducing any of the changes. Their only justification is that they are EEC regulations and the only surpluses that count are overall EEC surpluses.

    The issue is not how much butter is in intervention but the enormous cost of the milk sector. We could prevent any butter from going into intervention if we were prepared to spend another £2,000 million to sell it to Russia even more cheaply and in even larger quantities. No one who knows anything about the dairy sector in the Community denies that there is a huge surplus.

    Of course, there is no surplus in Britain. On the contrary, we still do not meet all our requirements, but there has been a substantial increase in British production over the years and our share of the domestic market has increased significantly.

    Ministers in successive Governments have accepted that as long as we are in the Community it is impractical to expect that we should be able to isolate ourselves from measures aimed at reducing the size of the milk surplus. However, let us be under no illusions. The measure before us is not only not aimed at tackling British surplus but discriminates unfairly against the British dairy industry, because we have, on average, much larger dairy herds and a significantly more efficient industry than the rest of the Community.

    Many would ask, therefore, why we should be penalised more than the rest of the Community. I read recently that about 40 per cent. of our herds are of 50 cows or more, against an EEC figure of about 4 per cent. I hope that the Minister will tell us what percentage of British dairy herds have 60 cows or more and will therefore be ineligible because of the restriction that the Government are imposing.

    Although the amounts involved in the curtailment of grants in the pig sector are probably less than the sums involved in the dairy sector, British farming and the NFU find the curtailment of grants to pig producers less acceptable.

    The first reason is that' there are no huge structural surpluses in the pig sector. In addition, our pig industry has gone through difficult times in recent years, partly because of high sale prices in the EEC, which are implicit in the CAP. The pig sector has suffered for a long time, as has the poultry sector, because of high feed costs—about 70 per cent. of production costs are attributed to feed costs.

    The MCAs operated adversely against the pig sector. Over a long period, the Labour Government succeeded in altering the size of the MCAs, but, ironically, when the MCAs became positive MCAs, after everything that we had gained in successive arguments, the size of the MCA was reversed and what was achieved by reducing the size of the negative MCA became a disadvantage with the positive MCA. There is no question of that being a defence. The Labour Government introduced a special subsidy to help the pig industry and I hope that this Government will be prepared to introduce a pig subsidy if it becomes necessary in the future.

    It seems as if the outlook for the pig industry is better at present and, therefore, it is discouraging that at this of all times the Government are implementing these EEC measures, which have the effect of wiping out the eligibility for grant of many pig herds. I hope that the Parliamentary Secretary will tell us what proportion of British pig producers will cease to be eligible. The proportion must be significant, but presumably we are talking about a smaller proportion in the dairy sector.

    As the Parliamentary Secretary explained, the limits are 85 breeding pigs or 550 fatteners. Of course, the 35 per cent. feed rule is being retained, which is important. As the Parliamentary Secretary knows, the EEC regulation permits a member State to adjust the limit where it can be shown that the 550 pig places will not provide a comparable earned income for 1·5 man work units. Looking at the figures objectively, because net profitability per pig in Britain is relatively low, I believe that Britain would qualify for this adjustment, and the NFU has also produced figures which point in that direction. The adjustment is important—1,000 pig places as opposed to 550 places. I ask the Parliamentary Secretary why that provision is not included in the regulations.

    The basic issue here is, of course, the fact that Britain as a member of the EEC has to implement these policies whether or not they are in the interest of our agricultural sector. In some sectors we do not produce a surplus. In the pig sector we fall a long way short, producing well under half of our bacon. The Parliamentary Secretary is always talking about scope for expansion. This is an area where there is that scope, particularly given the problems in the Danish pig industry. The Danes are unable to meet the quotas in Britain because of the severity of the situation there. Many people find it difficult to accept that we should have to limit our grant aid schemes in this way, given the Government's overall objective of increasing British agricultural production.

    We do not exaggerate the impact. The amount of money lost to the industry as a result of the changes is not massive compared with the many other sources of income going to the industry. However, the principle is important. I hope that the Minister will make it clear that we shall not continue to accept limits which seem to apply fairly and equally but which in practice discriminate against the British industry because we have larger units.

    We can accept changes from time to time, but it is important for the Government to make it clear that they will resist proposals, particularly in relation to the co-responsibility levy on milk, which discriminate against British agriculture.

    10.45 pm

    I shall confine my remarks to the restrictions on aid to dairy investment and pig production. I criticise the hon. Member for Edinburgh, East (Mr. Strang) for what he said about surpluses. It does no good to the industry to harp on surpluses. It is foolish, because circumstances change so rapidly in agriculture that one day there is a surplus and the next there is no surplus. Even if one accepts the butter problem, milk powder is scarce. It is unhelpful for the Opposition to constantly highlight the surplus instead of trying to assist, as the hon. Member for Edinburgh, East did towards the end of his speech, by tackling discrimination against British producers. I agree with the hon. Gentleman in that respect.

    I am unhappy about the proposals. They discriminate against the British producer. Far from there being a surplus of milk in Britain, the supplies for manufacturing purposes are becoming short. More milk must be produced in Britain. More milk means more employment, which is vital. In my constituency, the huge plant at Torrington has been short of manufacturing milk for a long time because of the shortage of liquid milk. That is wrong. To introduce a disincentive to dairy producers seems unwise. More milk for manufacturing plants means more employment.

    I confess that I am a stock man. The balance is wrong in Britain. We produce far too much cereal and not enough stock. I regret anything that could hinder the development of stock.

    New investment in Britain's dairy industry is vital. Circumstances can change rapidly. The issue might involve only a few people, but it could affect confidence. I am unhappy about the proposal. I hope that the Minister will return to Brussels and achieve some relaxation for our industry. We are discriminated against in the measures, and that is unfair.

    I do not disagree much with the hon. Member for Edinburgh, East about the restrictions on aid to pig production. It is unfortunate, and I am unhappy about the suggestion.

    We need to increase our pig herds and our pig production, because that would mean more employment. We must be more determined now that the Government have created a climate in which confidence can be restored. The hon. Member for Edinburgh, East was stretching matters when he claimed that the previous Government had done everything possible to assist over MCAs. The hon. Gentleman has forgotten all the argument that occurred at the time. In the better climate that now exists, it is right that investment in pig production should continue.

    I hope that the. Minister can obtain in Brussels some relaxation of the restrictions in order to encourage the efficient and progressive pig farmer in the United Kingdom. I trust that my hon. Friend will examine the matter again. I am unhappy about the situation, though I should not feel inclined to vote against the regulations. My hon. Friend the Minister of State nods. If I felt strongly enough I should vote against them, but I do not think that that situation has been reached. I hope, however, that the Government will seek some relaxation of the restrictions.

    I believe passionately that agricultural production is getting out of balance. There is too much concentration on cereals and other crops. We need to get back to meat, beef and pig production. The regulations do not help. They do not create the confidence that is necessary.

    I see a reference in paragraph 4 of the Farm and Horticultural Development Regulations 1981 to bank loan guarantees. I hope that the Minister can influence our Treasury friends. The problem is not the guarantee of the loans. The problem is the interest rate. I hope that progress can be made, especially if the Americans play their part, in achieving a considerable drop in interest rates. This would help investment in agriculture more than anything else. It is interest rates that hinder development.

    With those few words, and seeing that the Chief Whip has arrived, I shall simply repeat that I am slightly unhappy but that I shall take no further action so long as the Minister takes note of what I have said.

    10.52 pm

    I should like to direct my remarks to that part of the Minister's opening statement that related to plastic cladding and structures. I think I am right in saying that this provision is covered in paragraph 10 of the Agricultural and Horticultural Development (Amendment) Regulations 1981, as my hon. Friend may be able to confirm in her reply.

    I declare a constituency interest. A company in my constituency, Filclair U.K. Ltd., is one of five companies, I believe, that have adapted their previous work in structures for the horticulture industry to cover sheep houses, which seem already to have achieved some success. I understand that sheep wintered in houses produce 30 per cent. more live lambs than out-wintered ewes in the same flock. I welcome the extension of grant to cover this type of structure.

    The concern of my constituents—I understand that it is also the concern of other companies already active in this sphere—is that the extension of grant could be said to apply to that part of the structure for which no standards are apparently laid down. I understand, in the case of tubing, in particular, that unless some specific standard is laid down for galvanising, there is a fear that structures erected by those seeking to enter this field without using adequate material would not last the 10-year period that I understand would be required to provide the life that is the term of the grant. I should be grateful if my hon. Friend the Parliamentary Secretary would deal with that point.

    On the face of it, it seems that there is a logical case here for examining standards. The Agricultural Development and Advisory Service has been very helpful in the move from horticulture to sheep structure It has been suggested to me that the National Institute of Agricultural Engineering might well be the appropriate body to assist in setting such a standard. There would be a number of other aspects which would be considered for a standard if the matter were worked upon. For example, I am told that the length of the tie rods is of importance. Those more expert in these matters than I may wish to add to the list.

    I recognise that my hon. Friend the Parliamentary Secretary may not be able to give a complete reply tonight. If she is unable to give the kind of response that I am seeking, I hope that she will let me know about this matter in the near future. With the time now available, it is of importance to those already in the industry and those who might wish to extend from horticulture to sheep buildings.

    What I have raised may touch on the wider question of standards relating to the whole industry. My hon. Friend may wish to comment on that in her reply.

    10.56 pm

    I question the use of plastic on farms, beyond its use in horticulture. I came down the M11 today in a gale. I saw a plastic building half away across the road. Plastic structures are untidy. They are an insubstantial material on which to give grants. They are hardly the sort of things that one wants to see helped in any way to get on to farms.

    I agree with my hon. Friend the Member for Devon, West (Mr. Mills). We are very unbalanced between livestock and arable farming. In my part of the world, East Anglia, which is largely arable farming country, we always used to have plenty of livestock on every farm. There is no reason why those farms, which are mainly big farms, should not carry a livestock unit. It may be that the fanner cannot be bothered with it. Very often he is probably making such a good thing out of sugar beet, barley, wheat and potatoes, so as not to want to bother with livestock. But there is very much imbalance.

    I have today looked at the Ministry's slaughtering figures for fat cattle. They have dropped considerably from the figures for this time last year. I believe that no arable lands can remain in good fettle for long without some form of livestock on them. I urge the Minister to encourage the younger farmer by giving him a chance of having a livestock unit within and arranged with the larger arable farmer. This has happened in one or two places in my constituency. The younger, smaller farmer has a livestock unit, using some of the buildings which would not be used otherwise, buying straw from the larger farmer and returning the muck to the large farmer.

    East Anglia has lost many of its dairy herds over the past two or three years and dairy herds provide a large proportion of the store cattle which go into fattening stock later. We are becoming dangerously short of stockmen, of livestock and of many arable farms. I hope that we shall use all our endeavours to encourage those sectors.

    I welcome the inclusion of forestry. There is no doubt that belts and windbreaks have always been a great advantage to arable farming in the area that I represent. Forestry is rightly included in the schemes that we are discussing.

    Finally, if only the Government would put into being the agreement between the Country Landowners Association and the National Farmers Union, some of the damage that was done by the previous Labour Government when they introduced the inheritance of tenancies would be reduced. Younger farmers would thus be enabled to get into farms that are presently not open to them. I have no doubt that many pension fund owners would be pleasd to let their land, as would other landlords, if only the Government would implement the agreement that exists between the CLA and the NFU.

    Unfortunately, that agreement did not go nearly far enough. It should have included long-term leases within it. However, it went a certain way. Next year the Government should introduce legislation to put the agreement into effect.

    I am grateful to the Chair for allowing me to take part in the debate. We are dealing with a minor matter, but some of the underlying issues will have an effect on the entire industry. One of the most important issues is the imbalance between livestock and arable farming, which could have great repercussions throughout farming.

    11.8 pm

    I do not want to go over the ground that my hon. Friend the Member for Devon, West (Mr. Mills) covered with such distinction and clarity. However, I wish to draw attention to the unpredictability of the needs of both the EEC and the world outside it. We are about to see the first member of the EEC withdraw from it, by which I mean Greece. Today's newspapers include a clear indication by the Greek premier that, subject to a referendum, which he is certain to win, Greece will withdraw from the EEC.

    Within the next three years Spain and Portugal will join the Community. Within the next three or four years we shall have an EEC with a substantially different balance of milk production and consumption of milk products than in the past. It is true that the olive oil lake and the wine lake will become more excruciating problems, but we are about to enter an era in which the milk surplus will be substantially smaller.

    When I intervened in the short speech of the hon. Member for Edinburgh, East (Mr. Strang), it was to remind him that at Question Time last week we learnt that intervention butter stocks in the United Kingdom amounted to not two months' or two weeks' supply but two days' supply. These are intervention stocks, as the Minister emphasised. They do not include the working stocks of the private manufacturing sector. The so-called butter mountain is two days' consumption in the United Kingdom.

    Not so many years ago there was a cheese mountain. That diminished within five months to a matter of days' consumption. We need to remember also that milk production each year depends upon a factor that cannot be predicted by farmers or controlled by Governments—the weather. The weather controls the rate at which grass grows. Grass is still the paramount efficient food for milk production. No amount of skill by Ministries will control the weather.

    In the 1960s there was a Supplementary Estimate of £78 million—then an immense sum of money—when there was a temporary shortage of beef. Those of us whose memories go back as far as that know the desperate consequences of a shortage and how an apparent surplus can so quickly be transformed into a shortage.

    In a world crying out for food we want our policies to produce a surplus on average, not a shortage. One can never expect that, taken over a period of years, one's production will equal one's consumption, precisely because of the unpredictable elements. Therefore, is it better to budget for a surplus when the world is short of food or for a deficit? Obviously, the sensible answer is to budget for a surplus.

    There is the perfectly legitimate consideration of employment in our processing industries. If we allow our processing industries to collapse, when there is a particularly good spring and summer and the growth of grass is more than anticipated there will be nothing to take up that extra flush of milk in excess of the requirements of the liquid milk market. Therefore, this is part of good husbandry, in the agricultural sense, as well as being an important source of employment, often in parts of the country where there is no alternative manufacturing employment. We need to remember that.

    I have a small milk factory at the top of the Culm Valley. At one stage it closed. It then reopened to make use of butter oil and turn it into a product known as "Gold". That factory employs a substantial number of people, not just from one village, but from several around it. It is typical of the scene to be found in creameries—whether they are in Crediton, Torrington or Lostwithiel in Cornwall—throughout the South-West. Let us remember that the cost of closing them falls on the taxpayer in terms of unemployment benefit. The cost does not fall only on the people concerned. Therefore, do not let us succumb to an enthusiasm to balance the books elsewhere in Europe at the expense of a healthy producing and manufacturing industry in Britain.

    The House sometimes debates aspects of the Brandt report. Sympathetic sounds are made from both Front Benches. However, what many people in the desperately poor countries need is not money—they cannot eat that, and moreover it often sticks to the fingers of the politicians and administrators in their countries—but food. They cannot live on grain alone. Milk products are often dried. They are among the most important nutrients that the EEC can supply to the grossly underdeveloped countries of Africa, Asia and South America. It does not make sense to be full of sympathy and good intentions, but to make sure that one does not have the manufactured milk supplies to send.

    The hon. Member for Edinburgh, East spoke of selling EEC butter cheaply to Russia. If my memory serves me correctly, the EEC stopped doing that a considerable time ago, yet the hon. Gentleman referred to it as if it were happening now, or at least last Wednesday. He misleads the public when he revives memories of a purely temporary situation.

    We have such a thing as a national agriculture industry whose characteristics are not identical with the average of the EEC as whole, whose pattern of agriculture is much more efficient, whose pattern of agriculture is much more efficient, whose density of holding is greater and whose burden of interest is the largest in Europe. Those are the factors that we must accommodate in making judgments on what is, and, even more importantly, what is not, acceptable in EEC policy.

    11.10 pm

    This has been an interesting debate. I apologise again for all the mouth-jumbling initials.

    The hon. Member for Edinburgh, East (Mr. Strang) asked about the average size of dairy herds. Just over 40 per cent. of the herds in England have fewer than 40 cows; in Northern Ireland it is 70 per cent; in Wales, 60 per cent; and in Scotland, about 37 per cent. Moreover, in the United Kingdom as a whole 25 per cent. of herds have fewer than 20 cows.

    The hon. Gentleman also expressed concern about the size of pig holdings. In December 1979 about 75 per cent. of holdings in the United Kingdom had fewer than 400 pigs. Only 8·4 per cent. had between 400 and 999, and 5·5 per cent. had in excess of 1,000. The average pig herd in the United Kingdom had fewer than 200 pigs. That should be compared with Holland, which had the next largest average herds, with about 160, and Demark with about 100.

    The hon. Gentleman referred particularly to what he regarded as discrimination against larger units. I trust that the figures reassure him that that is not totally so. He hoped that the Government would stand firm against discrimination against larger units. He may be aware that we are opposed to most of the Commission's proposals on milk, except the supplementary levy, exactly because we believe that they discriminate against larger units.

    The hon. Member also asked why, in the derogation for the pig herds, we have not included the discretionary 550 to 1,000. The average United Kingdom pig herd is well below 550. As I pointed out, it is less than 200. Many pig units have already received assistance, so we concluded that at least at present we have no need to take advantage of the derogation. However, I assure the hon. Gentleman that we shall keep the matter under review.

    My hon. Friend the Member for Devon, West (Mr. Mills) also made a point about larger units and I trust that he will have been reassured by my comments on the Government's insistence that we shall not be discriminated against. Indeed, the 15 per cent. extra was deliberately negotiated, as we have slightly larger units and we did not want them to be discriminated against.

    My hon. Friend also raised the problem of pig farmers who expand their enterprises beyond the new pig limits. Under the former FHDS—and now the AHDS—such farmers will be eligible for aid on a proportion of their investment, up to the limit. Under the AHGS, any claim that is received that covers investment over the limit will be rejected. My hon. Friend will know that many of us share his concern about the level of interest rates and the relative effect that that has on farmers who are in debt as a result of their investments.

    My hon. Friend the Member for Arundel (Mr. Marshall) was specifically concerned about the new section that gives grants—like those being given in the horticultural sector—for plastic cladding in the agricultural sector. At present no standards have been laid down about the structure of plastic-cladded sheep housing. All items under the grant schemes must be of a capital nature. They must be permanent and durable structures. That leaves a fair amount of scope within our general requirement that the item must last for about 10 years. There is no British standard, but we shall look into the points that my hon. Friend raised. I realise that they are of concern to him.

    I do not wish to press my hon. Friend unduly, because I recognise that she is trying to be helpful. However, I am sure that she will understand the concern of those manufacturers who say that, although there is a general provision that the structure should last for 10 years, it is easy for someone new in the field to come along and say that the structure will last that long, and discover that it will not only after it has fallen down.

    I take that point and I shall look into the question and write to my hon. Friend. There is no British standard, but my hon. Friend has expessed concern and I should like him to receive a proper answer.

    I have heard my hon. Friend the Member for Norfolk, South-West (Mr. Hawkins) speak before on the subject of his concern—livestock units in East Anglia. He is right to be concerned, and he often expresses his views. He will know that in the last review we improved the relativity between livestock and cereals. The Commission's paper on the reform of the common agricultural policy and the mandate makes additional proposals for creating a balance between the livestock and cereal sectors. We have strongly supported those proposals.

    Together with other hon. Members, my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) made a serious point about surpluses. I am delighted that I do not have to stand at the Dispatch Box and accept responsibility for the weather. My hon. Friend was most courteous about that. Governments are blamed for everything but the weather. Most commodities in surplus amount to no more than a week or two weeks' supply.

    My hon. Friend referred in particular to the surplus in butter. As he will know from the parliamentary reply that he received, the surplus consists of only two days' supply. In an industry such as agriculture, which, as my hon. Friend said, is subject to the vagaries of the weather, the line between too much and too little is sometimes very fine and it is impossible to arrange for supply to equal exactly demand. As my hon. Friend pointed out, it is better to have a surplus than a shortage. Given the position in Eastern Europe today, I am sure that all hon. Members will support that view.

    I trust that I have answered the points that have been raised about the provisions, which sound more complicated that I expect they will prove to be. I trust that they will be accepted.

    Question put and agreed to.

    Resolved,

    That the draft Agriculture and Horticulture Development (Amendment) Regulations 1981, which were laid before this House on 4 November, be approved.

    Resolved,

    That the draft Farm Structure (Payments to Outgoers) (Variation) Scheme 1981, which was laid before this House on 4 November, be approved.

    Resolved,

    That the Agriculture and Horticulture Grant (Variation) Scheme 1981 (S.I. 1981, No. 1533), a copy of which was laid before this House on 4 November, be approved.

    Resolved,

    That the draft Farm and Horticulture Development Regulations 1981, which were laid before this House on 4 November, be approved.—[Mrs. Fenner.]

    Statutory Instruments, &C

    In order to save the time of the House, I propose to put together the three motions on statutory instruments.

    Motion made, and Question put forthwith pursuant to Standing Order No. 73A(5) (Standing Committee on Statutory Instruments &c.)

    Housing

    That the draft Grants by Local Authorities (Appropriate Percentage and Exchequer Contributions) (Amendment) Order 1981, which was laid before this House on 23 October, in the last Session of Parliament, be approved.

    Road Traffic

    That the Motor Vehicles (Variation of Speed Limits and Speed Limits on Motorways) (Metrication) Regulations 1981 (S.I., No. 1372), a copy of which was laid before this House on 19 October, in the last Session of Parliament, be approved.

    Industrial Organisation And Development

    That the draft Scottish Seed Potato Development Council Order 1981, which was laid before this House on 13 November, be approved.— [Mr. Berry.]

    Question agreed to,

    European Community Document

    Motion made, and Question put forthwith pursuant to Standing Order No. 73B(5) (Standing Committee on European Community Documents).

    Control Of Claims Made For Foodstuffs

    That this House takes note of European. Community Document 6498/81 relating to claims made in the labelling, presentation and advertising of foodstuffs for sale to the ultimate consumer; and supports the Government's intention to seek agreement on measures which will effectively protect consumers from misleading claims for foodstuffs.— [Mr. Berry.]

    Question agreed to.

    National Coal Board

    Motion made, and Question proposed, That this House do now adjourn.— [Mr. Berry.]

    11.19 pm

    Along Cray Avenue in my constituency, several firms are located that operate in the building materials and do-it-yourself trade. There are nationally known names such as Marleys and Fads alongside local firms such as Kent Asphalt and Pickard Plant Hire.

    Last weekend, I counted eight firms in the D.I.Y. industry within less than half-a-mile of each other, all operating in an extremely competitive market where it is difficult for the small man to make profits. Yet they are precious to us in Orpington. They provide an excellent service to local residents, and employ many local people. I do not want any of them to be driven out of business by unfair competition.

    Unfortunately, further along the road in Sevenoaks Way, a large new warehouse is under construction. It must be all of 20,000 or 30,000 sq. ft. A sign outside announces that it is to be a Sankey's home centre. Yet another D.I.Y. superstore is opening shortly.

    Disturbed by the effect that this new store would have on the trade of my constituents, I have looked closely at Sankey's. Lo and behold, it is a subsidiary of the National Coal Board, run under the personal direction of the NCB chairman, Sir Derek Ezra. What on earth has the NCB got to do with the D.I.Y. industry? Why is it using public money to compete with small, private firms that find it hard enough to keep trading, let alone pay the taxes that finance the board's losses? If the NCB is so hard up for money, why does it not raise it by selling off an asset that it has no moral right to have in the first place?

    I have tried to answer these questions. I find that the NCB is quite heavily involved in non-mining activities. Placed in order of relevance to mining, the board has interests in fuel manufacture, fuel distribution, chemical processing, engineering, computer and scientific services, property ownership and management, exploration and development, brick manufacture, builders' merchants, D.I.Y. retailing and car sales and servicing.

    Most of these activities are related to coal mining and the legitimate needs of the board. The last three most definitely are not. They are highly competitive areas in which the private sector already gives good service at low profit margins.

    The board's accounts show an interesting division of profit between mining and non-mining activities, the loss on mining activities being almost exactly cancelled out by the profit on non-mining activities. The board's consolidated profit and loss account for 1979–80 shows a loss on mining activities of £23 million, with a profit on non-mining activities of £24·5 million.

    Of the £24·5 million, only about £4 million was derived from the manufacturing of coke and smokeless fuel, that being a return on capital investment in that activity of only 2·5 per cent. The profit of about £20 million on other non-mining activities was 31 per cent. of the capital employed. In other words, a respectable profit and return on capital employed in non-mining activities are being used to offset a poor performance in mining.

    I am, however, very concerned about the board's subsidiary companies in the do-it-yourself and builders merchants businesses, because it is here that public money is being used to the disadvantage of traders in the private sector. The NCB owns 60 per cent. of J. H. Sankey and Son Ltd., which operates do-it-yourself stores and builders merchants. The other 40 per cent. is owned by St. Regis International, to which I shall refer later.

    J. H. Sankey and Son Ltd. was, until recently, equal partner with Wickes International in Wickes Building Supplies, owning 19 sites, 13 of them trading. The NCB is a partner on an almost equal basis with Amalgamated Anthracite Holdings in the British Fuel Company, which operates through a subsidiary, Focus DIY Home Centres, of which there are at present three.

    The involvement of the National Coal Board in the do-it-yourself business is complex. It is very difficult to unravel the public money that has been invested in the board's non-mining activities, especially in relation to do-it-yourself superstores. However, it seems obvious that the money used, traced through the tangled web of financial relationships, is being employed both by Sankey and Focus to expand their do-it-yourself stores, supermarkets and superstores, at the overall rate of about 15 stores a year.

    I calculate that the National Coal Board's share of the capital expenditure involved must, therefore, be of the order of £5 million a year. Of course, such a sum is a small proportion of the £634 million spent by the board in 1979–80 on additions to fixed assets, the bulk of which was spent on mining projects. Of this, £393 million, according to the source and applications statement in the board's annual accounts, came from funded and temporary borrowings.

    The taxpayer is more concerned with Government grants to the NCB last year, which totalled no less than £251 million and were apparently credited to the profit and loss account. So the NCB's do-it-yourself investment is very small compared with the total of grants and loans available to the board. But it is growing.

    To take the example of the superstore now opening in Sevenoaks Way, the cost of opening and stocking a store of that size must be about £500,000, and that is for one store alone. One has to ask whether the NCB can afford to spend such money when it is making cuts in more crucial areas in order to fund its non-mining activities. The Financial Times of 20 January 1981 stated,
    "The National Coal Board will be forced to cancel parts of its investment programme unless it is granted financial aid, Sir Keith Joseph, the Industry Secretary, will be told next week.
    Sir Derek Ezra, the board's chairman, will lead a joint delegation with representatives of the mining equipment industry next Monday which will seek to impress on Sir Keith the growing financial pressure on the Board. The consequences of investment cuts for the mining equipment industry would be serious in the longer-term, for both the industry and the Coal Board."
    On 24 September 1981, the Financial Times referred again to this matter as follows:
    "The recession has forced the NCB to cut its huge capital investment programme and meant a major reduction in purchases of plant and machinery, Sir Derek Ezra said yesterday."
    It added that the board's overall capital expenditure of £715 million in 1981–82 would be £20 million less than last year in cash terms. It said:
    "Equipment purchases, contrary to the original aim, have been cut in real terms. New investment could be made only in sound projects and there has to be a priority order for these. No funds were available for doubtful projects."
    I might add to that that no funds should be available for projects unconnected with mining that lead to unfair competition with small businesses in the private sector. In any event, public money should not be used to prop up such projects. The board's trading profit and loss account for 1979–80 shows an approximate break-even on trading profit and interest charges of £184 million, being virtually funded by the Government deficit grant of £159 million. Government social grants of £91 million—making total grants £251 million—were credited within operating profit.

    So the board is taking more of the taxpayers' money to increase the capital employed, yet much of it goes on purely commercial, non-coal, non-mining activities in competition with private firms.

    Taking a closer look at J.H. Sankey and Son Ltd. we see that the board, under Lord Robens, who was the chairman, started buying into Sankey's in 1965. By cash injections it built up a 60 per cent. holding—£3·6 million of the £6 million issued capital—with St. Regis holding the other 40 per cent. Sir Derek Ezra, chairman of the National Coal Board, is the chairman of Sankey's. Lord Robens is vice-chairman and until earlier this year he was also chairman of St. Regis International.

    In his statement in the 1980 annual report Sir Derek Ezra said:
    "We extended our national spread of electrical branches, opening in Edinburgh and Leeds. Our further diversification into electrical and retail is important to help protect our company against the cyclical nature of the building industry. It is, however, important for us to continue developing further our nation-wide coverage on the trade side and during the year we opened new branches in Newcastle, Stockton, York, Nottingham, Littlehampton and Bridgwater."
    Based on its 1979–80 profits, Sankey's market value must be in the region of £30 million, valuing the Coal Board's stake at about £20 million.

    I mentioned Wickes Building Supplies. This company was acquired in 1968 by Sankey's, the present name being given to it when the Wickes Corporation of America bought in. By 1976, it was trading with Sankey's as a 50–50 partnership from combined large do-it-yourself and trade centres. In March, according to Sir Derek Ezra's chairman's statement, it had 13 stores with 20 more due to open in 1980–81. Sir Derek and Lord Robens were fellow directors of the company. The partnership has since been dissolved, the assets being shared between the partners, thus adding to the Sankey empire. Before then, the company had paid £4·5 milllion for 10 sites around the country providing 300,000 sq ft of retail warehouse space.

    There is then the British Fuel Company, which is a partnership between the National Coal Board and Amalgamated Anthracite Holdings Limited, the latter owning slightly more than 50 per cent., the board having a £4·7 million stake, according to the balance sheet of Amalgamated Anthracite Holdings Limited.

    This firm is engaged in the fuel distribution, road haulage, builders' supplies, heating engineering and car sales and servicing business. In 1980, it launched Focus Home Centres, a chain of do-it-yourself superstores. Sir Derek Ezra is a director. Lord Robens is a director of Amalgamated Anthracite Holdings Limited.

    As the Co-operative Retail Review remarked in October 1980,
    "Yet another entrant has appeared in the increasingly crowded DIY market in the form of 'Focus Homecentre Ltd' a joint subsidiary of the National Coal Board and the British Fuel Co. The NCB is already active in the sector with its 'Sankey Homecentres'."
    There is an overwhelming case for the National Coal Board to withdraw from the retail marketing field. It is using public money to compete on unfair terms with private enterprise. It is using money which would be better spent on mining equipment and the modernisation of our coal industry as the taxpayer would expect. I hope, therefore, that the Government, and my hon. Friend the Minister in particular, will look to the board to divest itself of its non-mining assets as soon as possible.

    11.40 pm

    I know that the House will be grateful to my hon. Friend the Member for Orpington (Mr. Stanbrook) for raising this subject. Our procedure for debates on the Adjournment gives the House a valuable opportunity to discuss from time to time not only questions of vital concern to individual citizens but important and interesting questions that lie a little outside the mainstream of our debates. In the limited time that I have available, before I come to the detailed points that my hon. Friend raised, it may be helpful if I give a broad description of the background and the nature of the National Coal Board's non-mining interests.

    As the House knows, the core of the board's non-mining activities date back to 1947, when the newly formed board inherited on nationalisation a remarkable range of assets from the former colliery companies. Over the years, there have been changes and developments and at present the board's non-mining activities are organised under two wholly owned subsidiaries which, in their turn, hold the board's interests in non-mining operating companies.

    The first of those holding companies is National Coal Board (Coal Products) Ltd., which holds all the NCB's investments in the making and processing of coal products, principally solid smokeless fuels and coal tar and their derivatives. The report and accounts of the holding company are included in the NCB's published report and accounts. In 1980–81, the last complete year, National Coal Board (Coal Products) Ltd's assets were £144 million, its turnover £233 million, and it made a loss, after interest and tax, of £10 million.

    The other holding company is National Coal Board (Ancillaries) Ltd., which holds the board's interest in the distribution and retailing of fuel, brickworks, Iand, computer services and engineering. Last year its assets were £84 million, its turnover £377 million, and its profit after interest, tax and minority interest, £11 million.

    That range of activities embraces a number of companies which operate in different markets and are faced with different problems. For example, the largest single operating subsidiary in terms of assets and turnover is National Smokeless Fuels Ltd., which operates the board's coke ovens and solid smokeless fuel plants. As the House knows, the market for both industrial coke and solid domestic smokeless fuels is contracting. National Smokeless Fuels Ltd. has therefore been forced, despite its efforts over the past years to bring its capacity into line with demand, to face uneconomically low levels of throughput that have forced up its costs.

    Last summer's report by the National Economic Development Council on industrial energy prices highlighted the problems that that position caused both for NSF and for consumers of foundry coke. Following that report, the Government were able to arrange, as my right hon. Friend the then Secretary of State announced on 29 June, for NSF to reduce its list prices for foundry coke by £10 a tonne so that our foundries would no longer be at a disadvantage in purchasing from NSF rather than importing coke.

    The board also owns Thomas Ness Ltd., which distils tar and manufactures and sells pitch, solvents filtering material, and a range of building materials that it has developed as a means of offsetting the contraction in the market for its main products, tar and pitch. The board also has interest in Staveley Chemicals, whose activities include the refining of benzene, an important byproduct of coke making, and its further processing into other chemical materials.

    As my hon. Friend said, the board also has other interests. Like other nationalised industries, the NCB carries out international consultancy work, which is a valuable means of broadening the board's experience and can help to secure export orders for British equipment manufacturers. The companies involved are British Mining Consultants Ltd. and Coal Processing Consultants Ltd.

    The board has a long-standing interest in fuel distribution and retailing. It has a substantial share of the wholesale market, but only about 5 per cent. of the retail trade. The board's holdings of land and its computer interests are also operated by subsidiary companies. The company that acts as its computer bureau does a third of its business with outside customers. Other activities include engineering, where the board has a small subsidiary which manufactures mining equipment and seismic exploration. In addition, the board has an interest in associated companies that manage and maintain boilers and heating plant, design and operate industrial boilers, including fluidised bed plant, and trade as builders merchants. The largest of those associated companies is J. H. Sankey and Son Ltd., in which the board holds a 60 per cent. share.

    The present arrangements for the financial control of those subsidiaries date back to 1972. In that year, after a thorough review of the board's non-mining activities, the then Minister of Industry explained to the House those principles on which the board's non-mining activities would in future be organised. The statement is of such importance that it may help the House if I quote it verbatim:
    "The utility of some of these activities to the Board has been challenged. Following our review, the Board has agreed with me on a reorganisation, which will allow it to concentrate on its main activities. This reorganisation, which the Board will be implementing as soon as it can, will enable any new financial requirements of the ancillary activities to be met from the private sector, which I believe is the right source.
    In order to make private sector participation possible, these ancillary activities will be organised as separate subsidiary companies, some of which will be wholly-owned in the first instance, which will be grouped under two holding companies. All these companies will be registered under the Companies Act. One holding company will become responsible for what are now the activities of the Coal Products Division, including North Sea gas; the other for the miscellaneous group of activities mainly concerned with fuel distribution. The board of each holding company will include outside directors. The assets will initially be transferred at book value, but the board will carry out a full revaluation of the assets of each holding company, taking professional advice as necessary.
    The constitution of both the subsidiary companies and the holding companies will be such that private participation will be possible, and it is there that these concerns will look for the finance which will be required to carry on their work. But my consent will be required for the raising of new capital by a wholly-owned subsidiary. I believe that this is a proper and sensible arrangement."—[Official Report, 21 December 1972; Vol. 848, c. 1609–10.]
    Those principles have governed the Board's management of these activities ever since.

    I should like to illustrate these points by reference to the case of J. H. Sankey and Son which my hon. Friend has mentioned. As hon. Members may know the board has held its interest in Sankey for many years. In the 1960s, the board adopted a policy of diversifying into new activities in order to protect the existing markets for coal products and its other existing interests. In particular, the board could see that the spread of home central heating was transforming the market for domestic heating.

    At the same time, the board decided that the coal industry was at a disadvantage because, unlike the gas and electricity industries, it could not promote its domestic appliances through showrooms in the high street After some consideration, the board decided, in consultation with the Government of the day, to buy an interest in a builders merchant to act as a vehicle to promote the retail sale of domestic solid fuel-burning appliances. The board decided to purchase an interest in Sankeys. Originally, it purchased a 75 per cent. interest, which was subsequently reduced to 60 per cent. at the request of the Conservative Administration in 1972.

    In accordance with the principles which were announced to the House in 1972, and which I have just quoted, Sankey's business is run as a separate management and financial unit, on commercial lines and at arm's length from the board.

    Within that framework, Sankey's has been a success. I understand that when the board acquired its interest, Sankey's had six branches; at the end of its last financial year on 31 March, it had 116. Over the past 10 years, the firm's sales have grown from £20 million to £163 million, the assets employed from £8·4 million to £58·9 million; the profits from £335,000 in 1971 to £4·7 million in 1979–80. Like other companies in this line of business, Sankey's profits fell away last year in difficult trading positions, and the firm has still not returned to profit, although I understand that the management is taking vigorous action both to curtail costs and to undertake some limited expansion of the profitable parts of the company.

    That history of growth clearly results from successful competition in the market. I have heard it suggested that the competition is unfair and has been achieved because of Sankey's access to subsidised funds. I believe that allegation to be untrue. Under the principles laid down by the previous Conservative Administration, the board has undertaken that Sankey shall not have recourse to public funds either directly from the National Loans Fund or indirectly through borrowing from the board unless the Secretary of State agrees. The National Coal Board has abided by those principles. Sankey's growth has been financed either by profits retained in the business; reserves grew from £167,000 in 1971 to just under £13 million in 1980–81, or by ordinary borrowings, on Sankey's credit, for which it pays an ordinary commerical rate.

    My hon. Friend further asked whether we had plans to require the National Coal Board to sell its interest in Sankey's to the private sector. The Government's attitude to privatisation is well known; and it is my attitude also. We believe very strongly that the public sector should do only those things which it alone can do and that that sphere presents challenge and difficulty enough to the real talents of those who——

    The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

    Adjourned at eleven minutes to Twelve o'clock.