Mr Major’s Parliamentary Answer on Family Income – 10 December 1985

Below is the text of Mr Major’s Parliamentary Answer on Family Income on 10th December 1985.

Mr. Ralph Howell Asked the Secretary of State for Social Services at what level of gross income a man with a wife and two children aged 10 and 15 years, who was claiming all benefits and allowances to which he and his family are entitled, would be as well off in net weekly spending power while working as he would be if unemployed (a) before the recent uprating and (b) after the uprating.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Major) Before the recent uprating the man’s gross earnings would have needed to be £40.55 compared with £40.68 after the uprating.

Mr. Ralph Howell Is my hon. Friend aware that I am disappointed with his reply, because although he has told us the point at which such a person would enter the poverty trap, he has not told us at what point he would escape from it? Is he aware that such a person needs an income in excess of £130 a week to make working worth while before the uprating, and that the greater part of the work force falls into a similar category? Is not the only way to escape from this depressing situation to raise the tax thresholds well clear of the benefit cut-off points, by ceasing to index benefits and by a co-ordination of the taxation and welfare systems?

Mr. Major It is true that the gap between income, whether in or out of work, does not become significant until gross income exceeds £110. My hon. Friend is aware that one of the main objectives of the Green Paper is to ensure that people are better off in work than out of work. We can study the proposals in the White Paper shortly. My hon. Friend is aware that income tax thresholds have risen by 20 per cent. since 1979, taking 1.25 million people out of tax.

Mr. Tony Lloyd The Minister referred to £110 being the significant level at which wages and benefits diverge. Is he aware that fewer than one in five adult manual workers earn below that level of income, so we are talking about very low wages indeed? Is the Minister aware that that level of income is only two thirds of what one of his hon. Friend’s last night boasted had been paid to him, on an annual basis, for his support of one of the fixed Channel link propositions? Is that not the real measure of the division in our society?

Mr. Major I have no comment to make on the hon. Gentleman’s second point. On his first point, I hope that, in view of what he said, he and his party will support the proposals in the White Paper – which, to a substantial extent, will be geared towards meeting the problem that he outlined.

Mrs. Virginia Bottomley Is my hon. Friend aware that many of those concerned about the potential disincentives to taking paid employment because of our welfare and taxation systems believe that the maintenance of child benefit at realistic levels is one of the most effective ways to counteract the unemployment and poverty trap?

Mr. Major My hon. Friend is a powerful lobbyist on that point. She knows that we have given strong support to the child benefit system in recent years. I hope that she is satisfied with what has been achieved.

Mr. Meadowcroft The question asked by the hon. Member for Norfolk, North (Mr. Howell) highlighted the problems of the take-up of benefits. What is the Minister doing to increase that take-up, without which there is no point in having benefits? Is not a great deal of poverty caused because people do not claim the benefits to which they are entitled? Does the Minister intend to increase publicity to help to alleviate that problem?

Mr. Major The answer to increased take-up of benefits is not simply one of publicity. One substantial difficulty has been the complexity of the system. I hope the hon. Gentleman has noted that we have reviewed the system, one of the benefits of which may be substantially higher take-up. For example, we expect the family credit system to have a much higher take-up than family income supplement.