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Earl Russell: My Lords, by long convention, this debate is treated as an occasion for a general discussion on the social security system. That has never been more appropriate than it is this year. The orders themselves, I am thankful to say, contain nothing particularly extraordinary. I assure the Minister that I shall not make

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another speech on single parents. I have made a good many; there are more to come; but this is not the occasion for another.

I shall touch on two points in relation to the orders. First, I am pleased to note the verdict of the Government Actuary that there is no need for a Treasury supplement for the National Insurance Fund this year. That does a little to dispel the atmosphere of crisis which is occasionally generated around that subject.

The other matter is that, not for the first time, I wish to deplore the failure to uprate the capital limits for eligibility for benefits. That failure is a disincentive to saving and I hope that that is not what the Government want.

It is possible that this may be the last statement that we have in this form, and that suspicion can only be increased by the Prime Minister's rather curiously-worded threat to "go the full Monty" on welfare reform. I wonder why the Prime Minister had the vanity to think that that would be a turn on.

There is always a need to review the social security system. On these Benches, we are well aware of that and we are in the middle of reviewing our policy. We are particularly concerned with the elimination of poverty traps. The Minister will remember that in an Unstarred Question on 3rd June, I wished the Taylor Committee a fair wind. That is without prejudice to any comments that I may make on its ultimate conclusions.

We cannot prejudge the welfare reform. Government policy on social security seems to be still in the period of "Let 100 flowers bloom", and they even have a field to grown them in. We shall have to judge what they are doing when they ultimately do it.

What is increasingly concerning--and concerned me more as I listened to the Minister this evening--is the fear that they are setting out on the operation starting from a mistaken diagnosis. Mistaken diagnosis does not always lead to mistaken treatment. Were it so, it is likely that none of us would be here now. Our ancestors would have died long ago before our previous ancestors were born. But when I listened to the Minister, he gives the number of people in poverty as an indication of the failure of the welfare state. I do not see how that can be so unless he is proposing to increase benefit levels, and I do not believe that he is.

He gave the number of people and the number of households who are workless as an indication of the failure of the welfare state. It simply passes my understanding how the Government can suppose that that is so. I should have thought that that was rather a failure in the general economy--a failure to generate a sufficient number of jobs. Blaming the welfare state for that is simply a case of shooting the messenger.

I share the suspicions of the noble Lord Higgins, that the exercise may be Treasury-driven, especially having noticed, well before the election, the number of occasions on which the Prime Minister expressed the hope that he could spend more on health and education by reducing the social security budget.

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We can reform the welfare state or we can cut costs but there is a potential conflict between those two objectives. While we should all like to cut costs, we should be careful of portraying an atmosphere of crisis. If the Minister cares to look at the current Social Trends, he will see that in the Eurostat figures for the spending on social protection in the EU--if he wishes, he may point out that that is not quite the same as social security but the pattern does not differ very widely--we come ninth out of 11 countries listed. The four missing are Luxembourg, the Republic of Ireland, Greece and Spain. While I believe Greece and Spain come below us, Luxembourg comes above us, and with the Republic of Ireland it depends precisely which method of measurement is used. Therefore, we are certainly not at the top.

The increase in social security spending has been a global trend over the past 20 years or so. Because it is a global trend, it is most mistaken to put it down to a particular failure of the British welfare state. It is a regular rule of explanation that the explanation must be as wide as the phenomenon it explains. The Minster's speech failed to pass that test.

Also, if we look at what the Government Actuary said in his Politeia Lecture of 27th January, when he was talking about the actuarial basis for pension reform, he said:

    "The fact that future costs of social security in the UK look much more manageable than in most other countries reflects relatively low benefits which can be expected from the public system".

He pointed out--and the point bears repeating--that the financing method will not alter the way in which the population ages or obviate the need to transfer resources from the working population to the retired population. Transferring costs to the private sector is not a cost-free option.

If we look at what is causing all that, it is fairly obvious what are the main global causes: ageing, which the Government Actuary reminds us is a matter of reduced fertility as well as reduced mortality, relationship breakdown and the flexible labour market. I remind the Government that we live in a global market in which there is free movement of capital but not free movement of labour. That is something which must tend to reduce the value of labour and therefore must tend globally to increase the costs of social security.

We live in a world with a cult of what is nowadays misleadingly known as efficiency. That means that the costs of, if I may so put it, the warehousing of labour are shifted regularly from employers on to the state. Those costs must fall somewhere. I am not necessarily arguing that the state is always the right place to put them but, when the Prime Minister describes the flexible labour market as the real world, he should be prepared to foot the bill which results.

If one wants to try to tackle any of that, one should, as far as one can, tackle the global trends, which are involved. If the causes of the increase in social security spending are outside the social security system, then many of the cures should be also.

Let us take, for example, spending on disability, which is causing concern. I wonder whether increasing the enforcement powers of the Health and Safety

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Executive would do more to reduce the costs of disability to the social security system than any welfare reform you could imagine. At least that is a point worth considering and it is worth costing.

It seems to be a problem that the economy is not generating enough jobs for the people who want them, and this is particularly true in individual pockets of high unemployment. The Scottish Select Committee has recently reported that a third of all young unemployed in Scotland are in the City of Glasgow. One wonders whether repairing the west coast main line, which needs doing anyway, might do more to reduce the social security budget than any measures brought in through welfare-to-work.

In one of these pockets where the local economy has in effect collapsed, it is no good blaming the unemployed and telling them that they ought to look harder for work. That is only telling the rats to run round the treadmill faster. It does not get them anywhere. In that kind of situation I cannot help feeling that the notion of welfare dependency, now so fashionable, is something of a mirage. We all depend on something, whether it is an employer, a pension, inherited wealth or the benefit system. If we say that someone suffers from welfare dependency, I think we are saying no more than that he has nothing else to depend on.

On one occasion I have seen my son submitting 100 job applications in one week. Not a single one of them got so much as an acknowledgment. In a situation like that you see the truth of the maxim that hope deferred maketh the heart grow sick. If people talk in a way which encourages people to think that they are feeding welfare dependency, they may be saying no more than the proverbial jolly miller,

    "I care for nobody, no, not I, If nobody cares for me".

The state is sometimes mistaken to take that sort of remark at its face value.

The Scottish Select Committee also found that 20 per cent. of the young unemployed were suffering from some form of handicap such as illiteracy, a criminal record, a physical disability or a drug addiction. In those cases, simply chasing people will not get us far. When we assess the kind of reviews we want and the kind of objectives we want, we must accept that there is a possibility of conflict between the objectives. The European Convention on Human Rights is a constant balancing of objectives which have to be weighed against each other. For example, if one thinks about poverty traps, one has to weigh the good objective of encouraging people into work against the good objective of reducing costs. The things that need to be done to remove poverty traps are extremely expensive, especially the lengthening of tapers on housing benefit, which is one of the most urgent things that needs to be done. I am not arguing for indiscriminate spending but I am arguing for an attempt, difficult though it may be, at sensible cost benefit analysis.

In talking about encouraging people into work, I must say that I think it necessary to allow an exemption for people who have to care for young children, especially for children under five. I do not think it is the state's

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business to intervene in anything where the judgments that are needed are so personal. The Social Security Select Committee on a recent visit to Wisconsin reported on the requirement that in Wisconsin people must seek work when their youngest child reaches 12 weeks old. It stated,

    "We regard that 12 week requirement as potentially damaging for both mother and child. It could be argued that this requirement is also inefficient, in that by making the mother work outside the home, the State has to pay for child care (possibly expensive and possibly low quality)".

It is not the state's business to teach people how to live; it is the state's business to help them to make their own choice effectively. If anything like that should ever come into force here, it would be deeply regretted. I am pleased to see the Minister nodding in sympathy at what I have said.

One of the matters that we on these Benches are determined about is, in the words of our previous manifesto, that we should encourage people to work without compulsion. That is a view that has been forcefully supported recently by the Scottish Select Committee, on the ground of employers' reluctance to have a conscript workforce, on the ground of efficiency and on the ground of common humanity. Those words "without compulsion" are our policy and they will remain our policy for so long as I have the privilege to speak for this party on this subject.

Concern is expressed in government circles about the problem of consent for social security taxation. Mr. Field in his Beveridge lecture observed that,

    "the poor no longer have enough votes to win an election".

But Mr. Field is out of date if he thinks those who need to think about their right to social security are only the poor. One needs only to look at the history of income support for mortgages to see that that is not so. We are told that between the previous two elections 8 million people suffered a spell of unemployment. We all know that that could happen to any of us. That is the basic reason for taxpayers to consent to the social security system. They pay their taxes for the same reason they buy lottery tickets; namely, "It could be you".

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