Public Spending: Portillo measures the benefits of targeting: Social security is the 'cuckoo' that the Chief Secretary is seeking to evict from the Treasury nest

AS THE Prime Minister and Michael Portillo, Chief Secretary to the Treasury, would have realised yesterday, there is more than one way of skinning the cat of public spending.

The suggestion that the Government might, just might, axe pounds 1bn worth of free prescriptions for pensioners and children was greeted with uproar at Westminster yesterday.

Yet not a peep of protest was raised when Norman Lamont announced his Budget measures to restrict married couples' allowance and mortgage interest relief to the lower tax band rate of 20p - saving the Treasury pounds 1.7bn a year from next April.

John Major and Mr Portillo could have learnt from the 'damaging travesty' of press reports that appeared in the Sunday newspapers of 6 November 1988, after Nigel Lawson, then Chancellor, had briefed lobby reporters about plans to 'target benefits'. According to some of those present, Mr Lawson allegedly said: 'There is a minority (of pensioners) who have difficulty in making ends meet. Pensioners as a whole are doing very much better than ever before. We have got to see in the evolution of the social security system whether we can do better targeting there.'

According to the reporters, targeting meant switching resources from universal benefits for all - like free prescriptions - to finance greater help for the poorest. Identical headlines in the Observer and the Sunday Telegraph said: 'Means test threat to pensioners'.

The Observer report began: 'Millions of pensioners could lose their rights to such universal benefits as free prescriptions. . .'

Mr Lawson said in his autobiography, The View from No 11, that what he actually said was: 'We have to see in the evolution of the social security system whether we can do better, so that we can help the minority of pensioners who genuinely do have difficulty in making ends meet.' He had wanted to head off pressure for a general increase in pensions for all, over and above inflation, to target extra help on the oldest and the neediest.

As this year's social security spending paper pointed out, that is what has happened since - adding up to 'a pounds 1bn a year increase in expenditure in real terms, compared with the benefit structure in place before the 1988 reforms. . . In addition to normal upratings, help worth more than pounds 700m has also been provided for pensioners in receipt of income-related benefits through a number of special increases to Income Support premiums since 1989'.

The spending paper also said: 'Further evidence of the success of the Government's policy in targeting benefits to the most needy is shown by the range of expenditure on benefits across the net income distribution, taken from the Households Below Average Income statistics published in July 1992. . .

'Overall, people with below average incomes receive 75 per cent of all social security spending.'

Conversely, a quarter of this year's pounds 80bn social security budget could be going to people on above-average incomes - many of them among the 6.9 million families on child benefit, and the 9.9 million pensioners.

However, child benefit and pensions are bound by firm Conservative manifesto commitments, and cutting into the bone of other benefits is physically difficult and politically impossible. The more one benefit is trimmed, the more the claimants fall into the safety net of other benefits.

As for the better-off, one Tory MP said last night: 'How do you tell which pensioners are collecting their free prescriptions in a Rolls-Royce?'

Meanwhile, the inexorable rise in social security spending continues - up by more than a fifth, in real terms, to pounds 74,140m in the year to last April, and projected to increase by a further 8.6 per cent in real terms by 1995-96.

It was that very rate of projected increase that Mr Portillo said yesterday was 'unsustainable'. If unemployment continues to fall, that would relieve some of the pressure, but the pressures are rising elsewhere.

Leading article, page 21

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