DOCUMENT IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T COPY NO
C P ( 7 0 ) 59
28 September 1970
CABINET
A S S I S T A N C E F O R T H E F A M I L I E S OF L O W WAGE EARNERS Memorandum by the S e c r e t a r y of State f o r S o c i a l S e r v i c e s
T w o powerful c o n s i d e r a t i o n s make it e s s e n t i a l that we should
provide additional help f o r poor f a m i l i e s with c h i l d r e n .
T h e r e is in the
f i r s t place our c o m m i t m e n t s to tackle the p r o b l e m of child p o v e r t y .
In
addition we have to p r o t e c t these f a m i l i e s f r o m the consequences of the
proposed reductions in expenditure,
2.
The S o c i a l S e r v i c e s C o m m i t t e e d i s c u s s e d this dual p r o b l e m on
25 S e p t e m b e r .
I explained that f o r technical r e a s o n s the obvious c o u r s e
of increasing f a m i l y a l l o w a n c e s and l i m i t i n g the cost by additional
^ l a w b a c k ' was not as we had hoped p r a c t i c a b l e .
3.
The C o m m i t t e e c o n s i d e r e d h o w e v e r that the F a m i l y Income
Supplement scheme ( F I S ) d e s c r i b e d b e l o w offered a sensible a l t e r n a t i v e
method of getting help t o these f a m i l i e s , though our d i s c u s s i o n t h r e w up
one point of doubt (see p a r a g r a p h 11).
W e a l s o discussed proposals f o r
modifying the l o w - i n c o m e r e m i s s i o n s f o r school m e a l and other c h a r g e s
that w i l l be going up.
4.
Although we could not in the short t i m e a v a i l a b l e put f o r w a r d f i r m
recommendations I think it is important that m y other Cabinet c o l l e a g u e s
should know what p r o g r e s s we have made and that we should at this stage
allocate a definite sum to p r o v i d e r e l i e f f o r these f a m i l i e s .
THE F I S S C H E M E
5.
The scheme is d e s i g n e d t o g i v e m e a s u r e of h e l p to the p o o r e s t
f a m i l i e s with children w h e r e the breadwinner is in f u l l - t i m e w o r k
(i. e. there is no entitlement t o supplementary b e n e f i t s ) .
Payments would
be made t o f a m i l i e s whose i n c o m e f a l l s short of an amount (the ' m a k e - u p
l e v e l ' ) which would v a r y a c c o r d i n g to the number of children as f o l l o w s : ­
1 child
2 children
3 children
£ 15 per w e e k
£17 per w e e k
£19 p e r w e e k
1
and so on in £ 2 steps.
T h e s e l e v e l s a p p r o x i m a t e t o the p r e s e n t tax
thresholds, and a l s o t o supplementary benefit l e v e l s assuming a v e r a g e
rents.
The payment would be 50 per cent of the s h o r t f a l l , subject to a
maximum of £ 3 per w e e k .
T h u s , a 3-child f a m i l y with an income
(including f a m i l y a l l o w a n c e s ) of £15 per w e e k would r e c e i v e £2 p e r w e e k .
6.
Supplementary B e n e f i t s c a l e s r e p r e s e n t no m o r e than a m i n i m u m
acceptable l i v i n g standard and we a g r e e d
that households with i n c o m e s
even up t o £ 4 par w e e k above this l e v e l a r e in many c a s e s v e r y hard
pressed.
7.
A w a r d s would n o r m a l l y be made f o r 6 months at a t i m e , based
on the income o v e r the 5 weeks p r e c e d i n g the c l a i m .
The scheme would
be a d m i n i s t e r e d through the offices of the D e p a r t m e n t of Health and
Social S e c u r i t y , and it is e n v i s a g e d that c l a i m s would be decided b y the
Supplementary Benefits C o m m i s s i o n , with a right of appeal t o an
independent appeal tribunal.
8.
It is c l e a r l y e s s e n t i a l that the scheme should start at the e a r l i e s t
possible date.
T h e r e is p r o v i s i o n in the c u r r e n t l e g i s l a t i v e p r o g r a m m e
for a " m a i n p r o g r a m m e " B i l l on f a m i l y a l l o w a n c e s , which a B i l l f o r
this purpose would r e p l a c e .
P r o v i d e d we get the l e g i s l a t i o n on the
statute book by C h r i s t m a s , we would hope t o be able t o invite c l a i m s f r o m
next A p r i l and start payments at the beginning of August.
9.
On the b a s i s of the F a m i l y Expenditure Survey we e s t i m a t e that,
as at A p r i l 1970, a p p r o x i m a t e l y 210,000 f a m i l i e s w e r e in the paragraph 5
group, and that, assuming 75 p e r cent t a k e - u p the c o s t in a full y e a r
would have been about £ 8 . 5 m i l l i o n (this includes £ 1 m i l l i o n f o r an
adjustment to Supplementary B e n e f i t in ' w a g e - s t o p ' c a s e s ) .
Some
5-600 e x t r a staff would, on this b a s i s , be r e q u i r e d f o r the take-on p e r i o d ,
( A p r i l - A u g u s t ) and some 200 t h e r e a f t e r .
10.
On the same b a s i s ( i . e . A p r i l 1970 earnings l e v e l s ) it is e s t i m a t e d
that to c o v e r the group r e f e r r e d t o in paragraph 6 would have brought in
about another 300, 000 f a m i l i e s at an e x t r a c o s t (on the same assumption
as t o take-up) in the r e g i o n of £10 m i l l i o n per annum,
I I .
11.
If we a r e to have any p r o s p e c t of starting the schema next y e a r ,
the numbers I have g i v e n in p a r a g r a p h 9 must be r e g a r d e d as the l i m i t .
In discussion in the S L C o m m i t t e e , h o w e v e r , it was pointed out that the
anticipated i n c r e a s e in earnings between A p r i l J970 and August 1971
will mean that substantially f e w e r people w i l l be in this income group but
that higher p r i c e s w i l l l a r g e l y c a r r y the need up into the paragraph 6
bracket.
It was suggested t h e r e f o r e that the m a k e - u p l e v e l s should be
raised t o a l l o w f o r this.
The m a t t e r i s , h o w e v e r , not a simple one.
If
for e x a m p l e this meant that we should be taking the l e v e l s substantially
above the tax t h r e s h o l d s , the combination of tax and the 5 0 per cent taper
of the scheme m i g h t produce a m a r g i n a l tax rate c£ as much as 82 per c e n t ,
which could be r e p r e s e n t e d as a s e r i o u s d i s i n c e n t i v e , though at this l e v e l
2
of income the combined effects of t a x and benefits in cash and kind a r e
probably r a r e l y understood.
M o r e o v e r we now have t o consider whether
the paragraph 6 group w i l l have m o v e d up the income - though not
n e c e s s a r i l y t o the same extent the r e a l income - l a d d e r ,
K not the
number w i l l be t o o l a r g e to take o n b o a r d by August 1971.
Further,
we shall have to g i v e P a r l i a m e n t some explanation of the l e v e l s c h o s e n ,
and if this involves d i s c l o s i n g our e s t i m a t e s of the m o v e m e n t of earnings
it could, I suppose, be e m b a r r a s s i n g .
12.
C l e a r l y , t h e r e f o r e , we shall have t o give further consideration to
the l e v e l s and n u m b e r s , and I have asked officials of the Departments
concerned to d o this as a m a t t e r of u r g e n c y .
H o w e v e r , in v i e w of the
timetable it is e s s e n t i a l t o get ahead with preparations f o r the s c h e m e ,
including p a r t i c u l a r l y the drafting of a B i l l f o r introduction as soon as
Parliament returns.
F o r this r e a s o n I would like t o have m y c o l l e a g u e s
a g r e e m e n t to the scheme in p r i n c i p l e , subject to the further consideration
I have sugge sted.
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INCREASED CHARGES
13,
The a v e r a g e weekly i m p a c t o v e r the y e a r of the proposals f o r
school m e a l s and w e l f a r e m i l k would be in the following range (depending
on the c h i l d r e n s a g e s ) ; ­
r
2 adults
with
with
with
with
one child
two children
three children
four children
2s. 6d t o 3 s . 6d,
5s.
to 7 s .
7s.
t o 9s, 6d.
7s.
t o 1.2s.
In the case of school m e a l s the impact would be concentrated in the weeks
when the child is at school. In addition t h e r e would be i n c r e a s e d c h a r g e s
f o r p r e s c r i p t i o n s and optical and dental s e r v i c e s but the e f f e c t of these on
a f a m i l y would not be spread evenly o v e r the y e a r and while n e g l i g i b l e in
some c a s e s it could be quite high in o t h e r s .
It d o e s not s e e m n e c e s s a r y
to take account of the withdrawal of f r e e m i l k f r o m junior schools in that
f e w f a m i l i e s a r e l i k e l y to buy m o r e m i l k as a r e s u l t of t h i s .
On the
other hand, the withdrawal of a g r i c u l t u r a l subsidies might r a i s e food costs
by some 2s. t o 3s. a w e e k f o r a f a m i l y of three c h i l d r e n and an income of
£20 to £25 a w e e k but not b e f o r e next September a t the e a r l i e s t .
In the
housing f i e l d new p r o p o s a l s f o r housing finance and f o r an i m p r o v e d rent
rebate s y s t e m w i l l be ready shortly but w i l l not a f f e c t housing costs
b e f o r e A p r i l 1972 at the e a r l i e s t ,
M e a n t i m e rents a r e l i k e l y to r i s e in
accordance with previous trends j but this w i l l not be a consequence of the
current p r o p o s a l s ; the effects w i l l be m i t i g a t e d f o r a l a r g e p r o p o r t i o n of
Council house tenants by the existing ( d i s c r e t i o n a r y ) r e n t rebate s c h e m e s .
f
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14.
It is e s t i m a t e d that at present income l e v e l s something like
10 per cent of households w i l l be unaffected by the p r o p o s e d i n c r e a s e s
provided that they take up their e x i s t i n g entitlement to e x e m p t i o n or
remission,
A s m a l l e r number of households - about half a m i l l i o n ­
might be caught by s o m e , but not a l l of the i n c r e a s e s .
A b o u t 13 m i l l i o n
households, of which s o m e b\ m i l l i o n a r e f a m i l i e s with c h i l d r e n , would
be liable t o pay the i n c r e a s e d c h a r g e s in full.
T h i s last g r o u p c o v e r s a
wide range of i n c o m e s f r o m v e r y high to v e r y m o d e s t ones.
The
increased c h a r g e s a r e l i k e l y to be h a r d e s t on f a m i l i e s with incomes just
above the e x e m p t i o n l i m i t ,
15.
My p r o p o s a l s f o r F I S have a l r e a d y besn d r a w n t o take account of
the i n c r e a s e d food c o s t s mentioned above but the scheme in its p r e s e n t
f o r m falls short of the upper l i m i t of the present r e m i s s i o n s c a l e s f o r
the benefits affected by our p r o p o s a l s and would not t h e r e f o r e h e l p
f a m i l i e s in that range of i n c o m e , o r , indeed, just above it.
The S o c i a l
S e r v i c e s C o m m i t t e e have c o n s i d e r e d whether s o m e a l t e r a t i o n in the
r e m i s s i o n l e v e l s should be made t o soften the impact of the i n c r e a s e d
charges and withdrawal of the subsidy f o r w e l f a r e m i l k but thought that
the possibility should b e examined of further extending the a m b i t of the
FIS t o c o v e r this l e v e l of i n c o m e .
T h e r e m a y , h o w e v e r , be v e r y
substantial difficulty in th?s f o r the r e a s o n given at the beginning of
paragraph 11 a b o v e .
CONCLUSION
16.
T h e s e a r e p r o b l e m s of some intricacy and it would be d e s i r a b l e
to r e - e x a m i n e them in the S o c i a l S e r v i c e s C o m m i t t e e b e f o r e putting
final proposals t o the Cabinet.
I a m not yet able t o offer f i r m e s t i m a t e s .
T o a l l o w us t o p r o c e e d with our m a i n e x e r c i s e I suggest t h e r e f o r e that
we p r o c e e d on the b a s i s that £20 m i l l i o n in a l l (including the
£ 8 , 5 m i l l i o n o r i g i n a l l y estimated as the cost of the FIS scheme t o h e l p
towards which I have a l r e a d y offered savings of about £ 4 . 5 m i l l i o n )
should be set aside f o r the two purposes I have d e s c r i b e d , the p r e c i s e
allocation of such expenditure between r e m i s s i o n a r r a n g e m e n t s and/or
FIS being left f o r d e t e r m i n a t i o n in the light of further c o n s i d e r a t i o n .
K J
Department of Health and Social S e c u r i t y , SE1
28th September 197 0
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