Social Security

I am conscious of your strictures, Madam Deputy Speaker, to confine our remarks to the topic for debate, and I shall endeavour to do so. I hope that you will allow the odd lapse. Yesterday, I received a helpful press release from the Office for National Statistics, which suggested that we are at a tipping point for the potential number of claimants. For the first time for some years, the trend in employment is declining and the number of people unemployed is increasing. That is noticeable and I shall remind the House of the statistics. The unemployment rate has increased from 4.7 per cent. to 5.1 per cent. over the period October to December 2005. The number of unemployed people has increased by 108,000 over that quarter and by 123,000 over the year, to reach 1.54 million. In tandem with that alarming increase, there has been a significant increase in the inactivity rate for people of working age. That is relevant to the debate because it affects potential claimants. The number of economically inactive people of working age has risen by 59,000 to reach 7.95 million—the highest figure since comparable records began in 1971. At the same time, the average number of job vacancies for the three months to January 2006 was 616,800, which is down more than 34,000 over the previous 12 months. While unemployment is rising, job vacancies are declining, which suggests that there may be a significant change in the number of claimants in the coming year. It will be interesting to see what—if anything—the Chancellor makes of that in his Budget statement next month. A connected issue relating to those in receipt of benefits is tax credit. We have been told that, from April 2006, the level of income that the Chancellor will disregard, which was £2,500 a year, will rise significantly to £25,000—a move that I welcome as it will take a large number of tax credit recipients out of the pernicious series of negotiations with the Inland Revenue into which they are required to enter to determine whether they are entitled to tax credit as their income changes during the year. All Members will have countless examples from their advice surgeries of members of the public who cannot understand the informative—I shall be polite—letters that they receive from the Revenue on that subject. I wanted to know the cost of that move to the Exchequer, so I put a parliamentary question to the Chancellor last month. I received a reply from the Paymaster General, who was incapable of providing the information. I shall read part of the reply, which stated:"““The increase in the disregard from £2,500 to £25,000 from April 2006 is part of a package of measures announced in the 2005 pre-Budget report . . . It is not possible to produce robust estimates of the impact of individual elements of the package of measures, as there are significant interactions between the different components.””—[Official Report, 26 January 2006; Vol. 441, c. 2246W.]" That answer is not acceptable. It is beyond belief that the Chancellor could announce such a major measure, which will have an impact on a large number of people, without understanding its effect on the public finances. I shall be looking for clarification in the Chancellor’s Budget statement. Another aspect of tax credits relates to the issues we are discussing: the impact of child support measures. It was disappointing that, in his pre-Budget report, the Chancellor failed for at least the second successive year to uprate to any degree the family element of child tax credit, which has been frozen—as indeed has the child care element of working tax credit. Both measures would have done something to help families on the lowest incomes out of child poverty. I turn to the pension element of the uprating. I have been following with some interest the statements about pensions of the Minister for Pensions Reform, who is not in his place, so I welcomed his comment in this debate, when he appeared for the first time to acknowledge the need to encourage incentives to save. Under the Labour Government, savings have roughly halved nationally. One of the main contributory reasons is the introduction of so much means-testing in the pensions environment. It is essential that the Government’s measures in response to the Turner commission reduce dependency on the state and on means-testing, and they have acknowledged that as an important ambition. I shall look particularly at how they achieve it and should welcome the opportunity to participate in that debate over coming weeks. I urge the Government to take care that they do not damage the existing savings regime in our pensions industry. It has already suffered significant damage from measures taken by the Government, as we heard earlier, so it would be the height of folly if the introduction of a low-cost national pension savings scheme, or its equivalent, caused the migration of all existing savings arrangements to that scheme to the detriment of pensioners and the savings industry. It is also important that the Government do not fall into a mis-selling trap of their own making. It could be avoided if there were an element of compulsion in the national pension savings scheme. If there is an auto-enrolment system, as proposed by Lord Turner, individuals must be given some advice, one way or another, to determine whether saving for their pension is right at a particular stage of their working life. I am thinking particularly of graduates at the beginning of their careers who have to pay off tuition fees and so on. Is it really appropriate for them to be saving for their pensions at the beginning of their career when they have costly debts to pay off? I also urge the Minister to ensure that there is sufficient confidence in whatever savings scheme is established to allow people on lower incomes to participate if they want to do so. Experience has shown the difficulties of previous Government schemes that were rolled out with great fanfare but not taken up in the numbers that the Government wanted, in part because people felt that the Government would not play fair with them and the rules were changed. I do not criticise this Government particularly because all Governments have a tendency to change the rules as they go along, so whatever regulatory oversight regime is in place, there should be an element of independence. Just as, to their credit, the Government introduced independence for the Bank of England, they should consider a regulatory oversight regime for the national pension savings scheme that is independent of Government.