Mr Major’s Speech to the Institute of Directors – 11 April 1988

Below are extracts from Mr Major’s speech in Edinburgh on 11th April 1988 to the Institute of Directors.

CHIEF SECRETARY TO THE TREASURY

The new Social Security system represents a much needed and long overdue simplification. At the heart of the reform is the ending of the discrimination between low income people in work and those not in work on benefit. That is critical to an enterprise economy. We have ended the absurdity whereby someone obtaining a pay rise could actually lose more in tax and benefits than the increase in income.
Moreover, Family Credit will make it more worthwhile for many unemployed people with families to take a job.

We are also targeting help better – at families with children and the disabled in particular, while providing an extra 200 million pounds to ensure that no-one on Income Support will receive less in cash terms than they used to on supplementary benefit.

It is misleading to suggest that there is a contradiction between the Budget on the one hand and the social security reforms on the other. The Budget will help build greater prosperity. That is essential if we are to have the resources to meet our obligations to those in need. We have been able to reduce taxes in the Budget. But only after we had already planned to spend 2 billion pounds more on social security. That expenditure was committed before tax rates were cut. Since 1979 both Supplementary Benefit and the Family Income Supplement have been protected against inflation. And that has, rightly, been given priority over tax reductions when necessary.

One fact is clear. Unless the economy is sound and growing we cannot afford the improvements in social security and other services that we all wish to see. We cannot protect the poor if the country is poor. As we look to the future we can see growing demands on social security and social services, not least because of demographic changes. We must build prosperity now if we are to discharge these obligations, as we are determined to do. To build that growth is the basis of our policy. And the success of that policy is the basis of our capacity to provide for those in need.

Any reform to a cumbersome and poorly targeted system, which has grown up piecemeal, will inevitably involve some losers. That is what better targeting means. Nevertheless, the Social Security reforms actually leave 88 per cent of all those receiving benefit either better off or nor worse off in cash terms than they were under the old system. But what matters as much as that to people of working age on benefit is that, thanks to our policies, we are forecasting another year of economic growth at the 3 per cent it has averaged since 1981 – which means more jobs will be added to the 1.5 million created since March 1983.

Critics of the Social Security reforms have been curiously blind to a number of important facts.

First, our plans provide for 2 billion pounds more to be spent this year than last on social security despite the fall in unemployment from 2.9 million last April to 2.5 million now.

Second, an extra two hundred million pounds is to be spent on Family Credit. This is expected to benefit over twice the number of low income working families with children as used to benefit from the Family Income Supplement. Overall 2 out of 3 working families with children who receive income-related benefits will be better off than under the old system.

For example, a married couple with 2 children aged 13 and 16 and one income from work of 110 pounds a week gross, paying average rated and average Local Authority rent, will as a result of the reforms, be 6.20 pounds a week better off than under the old system.

Nor have our critics recognised the extra resources we are making available to the disabled. Spending on the disabled has already gone up by 80 per cent in real terms since 1979. And the reforms are providing further help for many disabled people.

For example, those severely disabled living on their own will now get a Severe Disability Premium of 24.75 pounds a week instead of domestic assistance averaging 6.35 pounds a week under the old system.

We have also set aside up to 5 million pounds this year for the Independent Living Fund. this fund, to be set up in co-operation with the Disablement Income Group, will make payments to severely disabled people who need to employ domestic help in order to continue to live in their own homes.