Social Security (Contributions) (Re-rating and National Insurance Funds Payments) Order 2007

My Lords, I am grateful to both noble Lords who have contributed to this interesting debate. I appreciate that both welcomed the orders while presenting some limited criticism of them. Let me emphasise to the noble Lord, Lord Taylor, that I hear him when he talks about keeping up with inflation. I do not think I emphasised that we are talking about inflation under this Government: low levels about which the preceding Administration would have only dreamt. He will recognise, therefore, that these adjustments are taking place against a background of considerable economic stability, which, after all, is very important for everyone—as much for those who are less well off as for any other. The noble Lord emphasised the problems of the overpayment of tax credits, and he is right. We recognise that we have considerable work to do to refine and improve the system, and we have already made considerable improvements. Tax credits are a very important dimension of our welfare policy. More low- and moderate-income families receive support through tax credits than in any previous system of income-related financial support. Although I will of course take on board the proper anxieties expressed by the Opposition about the operation of the system, I emphasise that we have made considerable progress, particularly in tackling child poverty. The noble Lord, Lord Taylor, upbraided me on that as well. With slightly more generosity, the noble Lord, Lord Kirkwood, also mentioned that we missed the target. We narrowly missed the target against a background of, as is known, a very substantial inheritance of child poverty to tackle. In the 1980s and early 1990s child poverty doubled in this country, but in 2004-05, despite having narrowly missed this target, 700,000 children were lifted out of relative poverty. We want to hit targets, and I hear what the noble Lord, Lord Kirkwood, says about his gloom with regard to the more distant target. He can indulge in gloom if he likes—economists, after all, made their reputation indulging in gloom—but the Government are committed to hitting that target and are already making substantial progress towards it. I want to reassure the noble Lord on the overall position. I think he was asking me whether the Government take into account broader issues that may crop up which impact on low-income families and tax credits. Would a review have sufficient breadth? I understand what he says about the technicalities of the narrowly based review, but he will understand that no intelligent Government with the kind of priorities that we have in tackling child poverty would do anything other than look very closely at a report like that of UNICEF, to which he made reference, which identifies the tasks to be undertaken. While there are certain dated figures in the report, points are also made that show just how far this country had to come to emerge from the position that obtained before we came to office and the length of time it will necessarily take us to effect an amelioration. However, I want to assure the noble Lord that the policy is evolving within the context of a real appreciation of the broad objectives that we have set ourselves and the priorities we have identified. On the detailed points raised by the noble Lord, Lord Taylor, on overpayments, there have been difficulties but the improvement has been considerable. We did much better in 2004-05 than in the preceding years, with overpayments running around a fifth lower over that period, so we are moving rapidly in the right direction. Furthermore, the measures announced in the Pre-Budget Report 2005 will reduce overpayments by about a third when fully implemented. It is not an easy task. Overpayments made to the least well-off among our citizens present real problems regarding recovery, and we have to approach the issue with understanding and the recognition that we must not create hardship through a failure of the system. That is why there are costs involved. I want to assure the House that we are making significant progress in that area, as we are in tackling fraudulent claims. The noble Lord knows that there have been significant issues on fraud and overpayments. It is of course the Government’s responsibility to keep a careful watch over taxpayers’ money, and we are confident that we have got the measure of this development, one which has cost the nation and which needs to be remedied. I do not have precise figures on the improvements to hand, but we think that they will show that the very significant levels of fraud which occurred earlier have been sharply reduced. Indeed, I am confident about my statement in those terms. As is the wont of the Official Opposition, the noble Lord again asked me about inflation measurements, a matter we have discussed in the House recently. He will recognise that the inflation index we use puts us into a position of direct international comparison and is an appropriate and proper measure of inflation. However, both he and the noble Lord, Lord Kirkwood, emphasised that there are different inflation rates for different people. As he knows, the Office for National Statistics is working on this issue as a guide to policy, but that is not the same concept as relating benefits directly to inflation, which needs a clear, accurate and definitive measure that we will continue to use. Obviously the Government will take into account, in their aim of eliminating child poverty, those factors where the inflation rate may be higher for certain categories and therefore need to be taken into account. However, I must say that those factors will vary a great deal between families. There is no easy measurement of those figures and we would be looking for fool’s gold if we thought that there was. That is why, although I am chided by the Official Opposition, I think I would be on fairly safe ground in saying that they are unlikely to produce a policy initiative indicating that they will have variable rates of inflation for a whole range of people entitled to benefits from the state. I am therefore not able to give a great deal of reassurance on that point. The noble Lord also asked why the guardian’s allowance is lower than child benefit. The guardian’s allowance is not a substitute for child benefit and tax credits but is paid in addition to those benefits. It gives support to all families with children and recognises that a person is taking responsibility for a child whose parents have died and has additional costs. There is no obvious reason why it should be exactly the same as any other benefit; it is an additional concept. So that is the basis of that. The noble Lord, Lord Kirkwood, suggested that the best way to get the inflation problem out of the way is to base all these benefits on earnings. He said that there is a comparative loss if earnings are rising faster than prices and people receive these credits only on the basis of prices. I shall not accuse the Liberals of going quite that far at this stage but the noble Lord should be careful about how much he chides me on this matter. I understand what he says. We have had this debate in regard to pensions and he will know how constructive the Government are being in the Pensions Bill which is currently before the House of Commons. He will have to be satisfied with that as an earnest of the Government’s intent at present. I am conscious that I have been asked for a number of very precise details which I may have inadvertently glossed over, not through intent but through an inability to master entirely the detail, particularly when I know that the noble Lord, Lord Kirkwood, has a long history of work in this area which we all respect. This is probably true of the noble Lord, Lord Taylor, as well, although I know his work rather less well. My history is painfully thin and therefore, on this occasion, I must indicate to the noble Lord, Lord Kirkwood, that there are areas on the path he invites me to go down which I must resist lest I fall into the morass. At one stage the noble Lord suggested a wager on the child poverty target. He said that he would bet a monkey to a mousetrap. My response on behalf of the Government is that we are not going to takethat wager on, because neither side seems to be particularly advantageous to us. On Question, Motion agreed to.