Previous Section Back to Table of Contents Lords Hansard Home Page

Lord McCarthy: I am glad the noble Lord referred to Amendment No. 12; we shall come to that in a moment. I said that I could not imagine what the Minister would say, but I did not imagine that he would say nothing. But that is in fact what he said. I shall not go into it now—it is far too late—but at one stage he said that two-thirds of the unemployed are not long-term unemployed, which means that one-third are. He said that they are better off on means-tested benefits. I do not believe he meant that, but that is what he said.

Lord Mackay of Ardbrecknish: In fact there are circumstances—for example, where there is a spouse and children—when a person may find that he receives more money on income-related benefit than on unemployment benefit. In certain circumstances they are able to do that. Not everybody in the first 12 months currently receives only unemployment benefit. Many receive income support because that is a fairer benefit for their circumstances.

Lord McCarthy: I thought that income support and unemployment benefit were obtainable now. In fact the Government are taking them away. Is that not right? I am sure we can agree that few people will be better off on income support.

The Minister said also that we should not worry about comparability between what people pay in contributions and what they receive in benefits because there is a kind of cross-subsidy. The Government are cutting the benefit in half but the contribution is exactly the same. Nevertheless, they say, "Never mind, you may receive an old-age pension". That appears to be their justification. I do not regard that as an appropriate argument.

The Minister says that there are certain overall benefits to be obtained from this system. We all know what they are. The Government are doing this to reduce expenditure in the hope that they can justify a round of tax cuts. At the end of the day that is what will happen. So in fact there are no benefits for people who will one day receive the old-age pension. It seems perfectly reasonable to us that, if a benefit is cut in half, the contribution should be cut in half or at least reduced.

20 Apr 1995 : Column 659

We cannot see the reason for the provision to which Amendment No. 12 relates. We do not believe that the Government think that there really is any case. The Government do not give examples. Where is the circumstance when somebody somehow pays in a sum of money in the last week to pay themselves into a benefit? Why do not the Government give examples? An issue of this sort must be based on the belief that there is observable, clear misuse of the benefit; that there are a range of people who at the last minute come along and pay up their benefit in the last week. If that is so, why do not the Government stipulate two or three weeks or perhaps a month? Why do we have this strange provision that one cannot get out of being disentitled to a benefit by paying the money in during the last week? I do not believe that those circumstances will ever arise. Unless the Government can give me an answer to that question, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 12 not moved.]

Lord Carter moved Amendment No. 13:

Page 2, line 24, leave out ("25") and insert:
("(i) in the case of a person aged 25 or over, 25; and
(ii) in the case of a person aged under 25, 20").

The noble Lord said: In moving Amendment No. 13 I shall speak also to Amendment No. 15. When introducing the last group of amendments my noble friend Lord McCarthy said that they concerned a matter of simple equity. These amendments are even more simply equitable than the previous group and I hope we can convince the Minister of that.

The purpose of the amendments is to adjust the contribution conditions for jobseeker's allowance for the unemployed aged less than 25 to reflect the lower level of benefit that they will receive in return for those contributions. We believe that because they receive less they should pay less. It is a matter of simple equity. I am not sure that the Government fully understand that concept. The Labour Party believes in the ultimate perfectibility of man and will continue to try to convince the Government of that.

We want to ensure that the rules which govern entitlement to jobseeker's allowance are fundamentally fair. Unless the existing rules are reviewed, young people who become unemployed will find themselves, having worked and having paid the same level of contribution as older people, receiving less benefit in return. That is not equitable. The amendment will ensure that the contribution conditions of the jobseeker's allowance for young people reflect the lower rate of benefit to which they are entitled. We know why there is a lower rate of benefit; it is for no other reason than to save money.

Under the jobseeker's allowance it is proposed that unemployed people under the age of 25 will receive a lower rate of benefit which will be paid at the same rate for this age group as income support. Thus, at the 1995-96 rates, an unemployed 24 year-old will receive

20 Apr 1995 : Column 660

£36.85 per week in jobseeker's allowance as opposed to £46.45 for a 25 year-old —a difference of 20 per cent. or a £520 25th birthday present.

The Government accept the general principle of paying less benefit to unemployed people under the age of 25. All the evidence we see from the CAP and elsewhere indicates that their cost of living—and this is a matter of pure common sense—is no lower than for those aged over 25 and the lower rate of benefit will cause severe hardship. It will make it much more difficult for those people to seek work. The CAP provided us with examples. I shall not take up the time of the Committee by going through them, but there are extremely worrying cases.

While the rate of the jobseeker's allowance for the under-25s will be significantly reduced, the amount that they pay in national insurance contributions remains unchanged. It means that young people will be paying more than those aged over 25 relative to what they receive in return. The amendments seek to reduce the contributory conditions for under 25 year-olds and the proposed reduction to correct the imbalance is 20 per cent.

On the broader issue of allowances for people under 25, the Government may justify the lower rates of benefit for that age group on the basis that they do not have the same earnings expectations and commitments as those who are older —that is what the noble Lord, Lord Inglewood, said at Second Reading. However, we all know that a young person living independently has the same needs as somebody who is older. A person's 25th birthday does not alter the level of expenditure. Bills for food, electricity, gas and water are no higher for somebody aged 26. The lower wage levels do not justify a rate of benefit which is below survival level.

The Government may argue also that there has never been a direct relationship between what people pay in national insurance contributions and what they receive in benefits. That will not surprise us; the Bill is all about removing by statute the rights to benefit which people thought they were paying for while they were working. Unless the contribution rules which govern the entitlement to JSA are reviewed, young people who have worked or paid at the same level of contribution as older people—who have paid the same amount into the system—will in fact receive a lower rate out of the system if they become unemployed. The amendment seeks to reflect the lower rate of benefit by making their contributions more equitable.

Unless the Minister, when he replies, can explain the rationale for the reduction for those under 25, we can only conclude—I think we know the answer already—that the issue is about saving money and has nothing to do with the real needs of individuals who find themselves unemployed. The amendments seek to reduce the contributory conditions for the under 25 year-olds under the JSA to make them proportionate to the lower rate of benefit which that group will receive. The amount of contribution with which the person will have been credited will be reduced. The amendment proposes a reduction of 20 per cent. to reflect the lower rate. The figures justify that in terms of return for the contributions which have been paid. It is a matter of simple equity. Those two words have not convinced the

20 Apr 1995 : Column 661

Government so far, but I hope that in this case, where the argument is so strong, the Government will feel minded to accept the amendments. I beg to move.

9 p.m.

Lord Mackay of Ardbrecknish: As the noble Lord, Lord Carter, explained, his amendments would reduce the amount of national insurance contributions someone aged under 25 will have had to have paid, or been credited with, in order to receive a contribution-based jobseeker's allowance. Our proposals to pay lower rates of benefit to young people are not a breach of the contributory principle: the national insurance scheme is a pay-as-you-go scheme. People are not paying in specifically to fund their own benefit, and there is no direct relationship between the contributions paid by an individual and his personal level of benefit. It is an established principle that Parliament can alter rules of individual benefits and adapt them to meet current needs.

JSA is about bringing together two benefits—unemployment benefit and income support. It is a well established feature of income support that young single people receive a lower rate of benefit. Under JSA we will be adopting the same treatment for all unemployed young people.

The lower benefit rates recognise the fact that younger people generally have lower earnings expectations and commitments. The average earnings for the 18-to-24 age group are less than two-thirds of the average for all adults. However, I say to the noble Lord, Lord Carter, that those who are not living at home and are on their own—many in this group are still living at home—are eligible for housing benefit and council tax benefit. Young people who have families can claim income-based JSA and get the same rate of benefit as any other family in the same income circumstances. There are ways in which young people in such circumstances can receive benefit at the same level as those aged over 25 years. If they are in circumstances where they are eligible for HB and CTB, they get those benefits without any reduction.

The main point I wish to make is that in the job market the average earnings for those aged between 18 and 24 are less than two-thirds of average adult earnings. I believe that that is a sensible reflection of the rules of the current income support system and more adequately reflects the reality of the job market in which young people are working or are trying to find jobs.

Next Section Back to Table of Contents Lords Hansard Home Page