Skip to main content

Social Security: Payment Arrangements

Volume 415: debated on Tuesday 9 December 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

3.38 p.m.

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Social Services. The Statement is as follows:

"The House will recall that last February we debated arrangements for paying social security benefits and the implications for the sub-post office network. Widespread anxieties had been aroused in the country by misleading reports of what were thought to be the Government's intentions arising from a study of payment arrangements carried out last year in consultation with Sir Derek Rayner. Since then the Social Services Committee studied the matter and issued their own report. The Government are publishing today their reply to the Select Committee (Cmnd. 8106). Because we want to consult widely on the changes we now propose, this reply is in the form of a consultative document. It includes the full report of the original study by officials.

"The consultative document makes it clear that we stand firmly by the pledge of my right honourable friend the Prime Minister of 28th February that retirement pensioners will continue to have their pensions paid weekly at post offices if they wish. We also repeat our commitment to safeguard the sub-post office network. The Government consider that these commitments can be fully honoured without sacrificing our wish both to give the public more choice and to save taxpayers' money by increasing efficiency.

"Three main changes in the system of payment are proposed. The first change that we have in mind is to enable those who so wish to have their pensions or child benefit paid direct to a bank account by automated credit transfer. Such payments would be four-weekly in arrears. There would be no compulsion.

"Secondly, my department will make a number of internal changes which will produce useful administrative savings and which the Select Committee recommended should proceed.

"Thirdly, we propose that child benefit should be paid four-weekly for most mothers. People in receipt of supplementary benefit, family income supplement, the additional benefit for one-parent families and widows pensions together with mothers with four or more children, would be able to continue with weekly payment. This is a much larger group for weekly payment than the team of officials suggested and it takes account of our concern to protect vulnerable groups.

"In the light of the anxieties expressed by the House, the Government have paid particular attention to the effect of these changes on Post Office finances and on sub-post offices. If these proposals were implemented then clearly there would be a reduction in DHSS business in post offices. By about 1987–88, DHSS would hope to reduce its adminstrative costs by about £38 million a year at today's prices. About £25 million of these savings would come from reduced encashment charges paid to the Post Office. In these circumstances, the Government have thought it right to use the opportunity presented by the British Telecommunications Bill to allow the Post Office to conduct across its counters a wider range of business for the public sector. After discussing this with the Post Office, the Government are satisfied that if this Bill is approved there will be considerable scope for new counter business. The Government estimate that allowing for some expansion of current business sales, volume across the counter should increase by about 8 per cent. in the next five years compared with the 6 per cent of business lost as a result of the DHSS changes under the Government's proposals. The Post Office accepts these estimates.

"These proposals will save taxpayers' money and provide more modern methods of paying benefits without damage to the sub-post office network. However, we are anxious that there should be full opportunity for public discussion of these proposals. We shall therefore be discussing them with all the main interests, including the National Federation of Sub-Postmasters, over the next three months before taking final decisions."

3.43 p.m.

My Lords, we are grateful to the noble Baroness, Lady Young, for repeating that Statement made by her right honourable friend the Secretary of State for Social Services in another place. There are a number of questions I wish to put to her. The Statement says:

"Because we want to consult widely on the changes we now propose, this reply is in the form of a consultative document".
Are we really to understand—and I ask this quite firmly—that they are proposals and are not in fact at this stage intentions? It continues:
"we stand firmly by the pledge of my right honourable friend the Prime Minister of 28th February that retirement pensioners will continue to have their pensions paid weekly at post offices if they wish".
However, we also remember that the Prime Minister before the election gave an assurance that pensions would be continued either in line with prices or earnings, whichever was the greater, but within a comparatively short time the Prime Minister went back on that, and some of us understand that she would have reduced the pension had it not been for a few noble Lords in this House, perhaps in the Cabinet, who prevented that from happening. I may be quite wrong about that, but I do not think I am. We want to be perfectly certain, therefore, that any undertaking given today will be carried out.

What exercises the minds of my noble friends and myself is that there is to be a change whereby those in receipt of child benefit can have their money paid direct on a credit transfer and that such payments will be four-weekly in arrears. The Statement says "there will be no compulsion", but if one looks further on, the Statement goes on to say:
"Thirdly, we propose that child benefit should be paid four-weekly for most mothers".
The implication is that people in receipt of child benefit will have no option but will have their money paid four weeks in arrears. This is a very serious matter for a family dependent on child benefit week by week. Why is it that such payments, although made four-weekly, are not made two weeks in arrears and two weeks in advance as is roughly the position with the present retirement pension? It is important that one should not have to wait four whole weeks to get one's benefit in arrears. Payment should be somewhere in the middle, say two weeks in arrears and two weeks in advance.

Can the Minister confirm that the number of people in receipt of benefit payments weekly has increased from 35 to 45 per cent. in the last year, indicating that more and more people have found it necessary to ask for their pensions to be paid weekly? If that increase has occurred in the last year, surely it is important that they should have an opportunity of continuing to get their pensions weekly. The Statement later refers to the administrative costs and says:
"About £25 million of these savings would come from reduced encashment charges paid to the Post Office".
Is there a hidden redundancy in that? In other words, how many jobs are likely to be lost by this proposed change? It goes on:
"there will be considerable scope for new counter business".
I appreciate it may be difficult for the Minister to answer this, but is she in a position to say what new counter business is likely to come the way of the Post Office?

To be frank about all this, is this not really being introduced for no other reason than to save something like £50 million in payment benefits in a year, by paying them in arrears so that £50 million less is paid in the first financial year? In other words, is this not a way of saving in the sense that payment does not appear in one year's accounts but in the next? I am not suggesting there will be that amount of saving and that people will not get their pensions. Of course they will. It just seems to indicate that £50 million is expected to be saved in benefit expenditure in the financial year when child benefit is paid in four-weekly payments. If that is so, it really is not good enough. It is those who are in the greatest need who receive this money and w ho want it weekly, and I hope that there will not be the compulsory element that the Statement suggests.

3.50 p.m.

My Lords, I should like to join in thanking the noble Baroness for repeating the Statement made in another place. We on these Benches welcome the Government's intention to seek the widest possible consultation on their proposals. We are glad that no compulsion is proposed in regard to moving to direct payment to bank accounts, and we welcome the fact that retirement pensioners will be able to continue to draw their pension weekly and to do so at the post office. However, like the noble Lord, Lord Wells-Pestell, I am very doubtful about the proposal to make child benefit payable monthly in arrear for most mothers, even though they will still be able to collect it at the post office. To make a monthly payment possible is one thing, but to make it compulsory for most mothers is another. Do not the Government consider that where there is weekly payment of wages it is best to have weekly payment of benefit?

We welcome the Government's belief that they can safeguard the sub-post office network, and I wish to emphasise that we on these Benches regard the rural post offices as a very important social service. We should like to be assured that the Government will seek to maintain them, even if the increased across-the-counter-sales which they expect do not meet the losses caused by their proposals.

My Lords, I should like to thank both the noble Lords, Lord Wells-Pestell and Lord Banks, for their welcome of the Statement. With regard to the first point raised by the noble Lord, Lord Wells-Pestell, regarding consultation, I should like to make it clear that this is a consultation document and we welcome the views of all those who are interested in the matter. The views should be sent to the DHSS by the end of February. This is an important matter, and in every sense this is a consultation document.

On the very important point about payment of retirement pensions I wish to make it quite clear that we have decided that retirement pensioners and widows should continue to receive their benefits weekly at the post office, if they wish to do so; but at the same time we think that there may be some people who would prefer to receive their payments less often than weekly, and therefore we are making possible direct credit to a bank account at either four-weekly or 13-weekly intervals.

With regard to the question that the noble Lord raised concerning my right honourable friend the Prime Minister, I should make it quite clear that she said that pensions would keep up with prices; and we have stood by that.

The noble Lords, Lord Wells-Pestell and Lord Banks, referred to difficulties that might arise if child benefit is paid at four-weekly intervals in arrears. I think we all recognise that the first time this occurs there will be a difficult transition for some people, because clearly the system will be different, but of course they will not receive any less money; it will come at less frequent intervals. There is no question of there being less money. No one would have the money paid into a bank account unless he agreed to do so. The recipient would need to have a bank account and he would have to give the details of it. So although the benefit will be paid at four-weekly intervals in arrears, it will be paid at a post office.

There is the protected group who would have the right to have the benefit paid weekly if they wished. It is hard to say that there could never be difficult cases, and in such instances it would be possible to go to a local social security office and ask to have the benefit paid, if that were necessary. But there would be the protected group that I have indicated in the Statement.

The noble Lord, Lord Wells-Pestell, asked me whether there would be any hidden redundancy involved and whether there would be a reduction in the size of the Civil Service. In fact more staff will be needed in the DHSS in order to give the public the option of having benefits paid directly into bank accounts. The extra staff, who might eventually number 300, will be required because it will take more staff time to adjust payments following a change of a beneficiary's circumstances with this particular payment method. However, the calculations on savings that we have made represent net savings and include the number of extra staff.

It is difficult for me to give an answer about the precise nature of new counter business, but I can say we believe that this will depend upon the competitiveness and the marketing skills of the Post Office; but I understand that it has in mind work for transport authorities and possibly for the energy industries as well. The power to undertake this work will be included in the new telecommunications Bill, which is currently before another place.

We believe that at the end of the day real savings will accrue from these new proposals, and we think it right that the savings should be made in the administrative parts of the budget rather than on the benefits themselves.