Clarke stands by state pension

A CABINET battle over the future of the welfare state was foreshadowed yesterday by the Chancellor with an assurance that there will be no attempt to allow people to opt out of the basic state pension.

Kenneth Clarke's remarks appeared to rebut recent hints by Michael Portillo and Peter Lilley, two leading Thatcherites, that the Government would encourage opting out from state pensions to prevent the burden of the welfare state becoming unsupportable.

Mr Clarke said: 'I regard a basic retirement pension as an inevitable key part of the welfare state and I don't see that ever being opted out of or left as a vestigual remain for those that can't make a provision for them(selves).'

Ministers confirmed last night that Budget measures to stop abuses of invalidity benefit are expected to add more than 200,000 to the unemployment total over three years.

With the Treasury assuming that unemployment will stay at about 2.75 million, that could raise the total near to 3 million, which would be highly embarrassing in the run- up to a general election.

Mr Lilley, Secretary of State for Social Security, said 70,000 people a year would lose invalidity benefit because of tighter medical tests to be introduced in April 1995. But MPs were not told they will go on the unemployment register.

Mr Lilley said that as a result of the abolition of unemployment benefit and its replacement by a new jobseeker's allowance, which is available only for six months, he estimated about 90,000 people a year would not qualify for Income Support because they had savings. They would only be able to claim National Insurance Credits and will still be registered unemployed.

So he did not expect that to produce any significant reduction in the unemployment register.

Paul Convery, of the Unemployment Unit, said this was the first attack on the principle under which paying into the National Insurance Fund guaranteed rights to benefits.

Mr Clarke said there would be a basic pension above which people could take private pensions, and he also questioned the importance

attached to 'family values'

by Thatcherite Cabinet colleagues.

'I think family values go with apple pie and motherhood. Everybody is in favour of them. The desirability to any individual of being in a stable family is overwhelmingly obvious. On the other hand I think the day-to-day practicalities of politics have to deal with society as it is; society has changed a lot in our lifetime and it is going to carry on changing. I don't believe we should use things like the welfare state as an instrument for trying to move those changes in any particular

direction.'

The Government's obligation was to deal with people less fortunate than the majority in the best way it could 'and to encourage them to be self-reliant and self-

supportive'. Mr Clark said that was the aim of the childcare allowance in the Budget, providing pounds 28 net a week against childcare costs to families on family credit, disability working allowance, housing benefit and council tax benefit.

The majority of single parents wanted to get jobs and get off the minimal levels of benefit at income support and 'do want to look after themselves and their children'.

Mr Lilley announced the first stage in the Government's strategy for rolling back part of the welfare state. Replacing unemployment benefit will save pounds 100m a year while more than 200,000 claimants over three years will lose invalidity benefit through tougher medical checks from April 1995. That will save an extra pounds 500m a year, or pounds 3bn a year by the end of the century, and the benefit, will be replaced by taxable incapacity allowance.

The medical tests involve a system under which points are gained for failing to grasp a paperback with each hand, and having difficulty with using scissors. Donald Dewar, the Labour spokesman, attacked the changes and the compensation package for VAT on fuel as a 'con'.

Tory MPs continued to praise the skill of the Chancellor's package, but many were becoming increasingly alarmed at the impact of the cuts in the local government spending. 'The council tax is going to soar next year. It could lead to councils being capped right across the country,' said one MP.