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Social Security (Contributions) (Amendment No. 2) Regulations 2009

I am grateful to both noble Lords who have spoken. As the noble Baroness, Lady Thomas, was kind enough to indicate, I do not normally respond for the Government on these complex and challenging issues. It will become evident to the Committee that I have an obviously limited ability to deal with some of the very detailed issues. I want to deal with the more general issues first, if I may, if only to respond to the broad challenges. The noble Lord, Lord Howard, predictably identified that the current economic crisis is having a deleterious effect on public finances, on the estimates of growth in the economy and on the consequences for government expenditure. I think that the Committee is well aware of the attendant difficulties, and the noble Lord is right that the assumptions about growth that were made in the Government Actuary’s report were based on all the information and experience at the time, which were linked to the PBR in 2008. The GAD report recognised that assumptions are not necessarily borne out in practice. Indeed, section 8 of the report allows for divergences from the assumptions that have been made. The noble Lord, Lord Howard, is well aware that divergences will inevitably occur. He does not have too long to wait before the next Budget from my right honourable friend the Chancellor, when the figures for growth will take account of the changed circumstances. It might help the noble Lord to know that, if earnings decrease by 1 per cent over 2008-09, there will be a reduction in receipts of £2.48 billion—an illustrative figure of the difficulties that attend the seriousness of the situation that we all face. I therefore cannot make assumptions at this point about my right honourable friend’s Budget by telling the noble Lord, Lord Howard, what the effects on health and education will be if the surplus is eroded by the loss of resources that are needed to sustain it at its predicted level. He will have to bide his time. After all, he is a patient man, and he has to wait only a matter of weeks for the Budget, when all will be revealed. He will be able to develop his perspective on what is good for the nation at that time. I have no doubt that a very high percentage of what is good for the nation will be criticism of the Government rather than an effective alternative, but we will wait and see. I will not prejudge the noble Lord on that, and I look forward to the debates that we will have at that time. I am concerned about the issues which the noble Baroness, Lady Thomas, has introduced to the debate. She may well have been in the House this afternoon when the Government were being berated for the amount of money that was being spent by government quangos on communication. She identifies absolutely clearly that new people are becoming unemployed or dependent on benefits for the first time. They need information, which someone must provide. That is a cost on a communication budget. Inevitably, therefore, I am a little loath to take criticism of government expenditure. I fully appreciate her point about effective communication on entitlement, which is very important. Only the other day, the Government emphasised the extent to which we were directing ourselves to ensuring that families and individuals who are entitled to benefits should have effective communication on those matters. I accept the point that the noble Baroness, Lady Thomas, made in detail about low-income families. She mentioned costs, and she will know that certain costs are decreasing. I have to take the jibes of the noble Lord, Lord Howard, about the return on investments. That is, of course, an issue for many people on fixed incomes. By the same token, however, inflation is plummeting in certain crucial areas, some of them absolutely critical to the very categories of people that we are addressing. Certain aspects of the cost of living are dropping rather than rising, against our expectations in the Pre-Budget Report before Christmas. I bear in mind the point of the noble Baroness, Lady Thomas of Winchester, which is borne out by the Government’s response. She will know that we took steps to ensure that cold weather payments for pensioners should increase, against a background of the severity of this winter and recognition of their difficult circumstances. I understand her anxieties on these points. We will have to return to them. They are part of the general issues of necessary expenditure currently confronting the Government, against a very difficult economic situation that we share with the vast majority of countries, particularly those that seek to sustain a requisite level of support for those in need. I have not dealt with these issues with quite the accuracy that my noble friend Lord McKenzie, the Minister for Work and Pensions, would have. Although he will not forgive me for my weaknesses, I hope that the Committee will. Motion agreed.