House of Lords
NHS: Private Companies
(11 years, 2 months ago)
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Lord Winston
To ask Her Majesty’s Government whether they have plans to exempt private companies providing services to the NHS from corporation tax.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, the Government will not be exempting private sector providers of NHS services from corporation tax. The purpose of Monitor’s fair playing-field review is to ensure that any providers, be they NHS, for-profit, community or voluntary sector organisations, that are able to improve the services offered to patients are given a fair opportunity to do so.
Lord Winston
I am grateful to the noble Earl for that reply and deeply reassured that corporation tax will not be in the equation. Given that the NHS is not good at costing out its treatments, how can he be sure that the private sector will not charge what it thinks the market will bear rather than the actual cost of the treatment it is delivering?
Earl Howe
My Lords, the Government’s policy is that competition should never be deployed for competition’s sake but only in the interests of patients. Furthermore, competition should be on the basis of quality and not price. The answer to the noble Lord’s question is that we need to arrive progressively at a system of tariffs that fairly reflect the value and cost of the work that providers do, and that all providers should compete equally on that basis.
Baroness Jolly
My Lords, Parts 3 and 4 of the Health and Social Care Act were rigorously debated. Will my noble friend confirm that the regulations covering this will be laid down soon, as 1 April is less than two months away?
Lord Harris of Haringey
My Lords, it is gratifying that the private sector will be expected to pay corporation tax. However, can the Minister tell us how the private sector will make an appropriate and proper contribution to meet the needs of a full and broad range of training within the NHS, given that in some instances it will not be providing a full range of services?
Earl Howe
The noble Lord raises an important point. A great deal of work is currently being done on the way in which the education and training of NHS clinical staff is funded. Changes are being made this year in order to make funding fairer and more transparent generally, and the Government will consider any further recommendations that Monitor may choose to make in this area if they would bring about further benefits to patients.
Earl Howe
My Lords, the system will operate in a way that ensures that non-NHS providers who provide services to the National Health Service pass a quality test with the Care Quality Commission. They will be obliged after that, should they receive the benefit of contracts from the NHS, to demonstrate that they have abided by the terms of the contract.
Lord Brooke of Alverthorpe
My Lords, as the Government are contemplating introducing a new factor into contracts in which government work is let out to international companies to ensure that they are paying their tax properly, what will they do about the NHS? Have they any plans to apply that kind of system to letting contracts for NHS services?
Earl Howe
My Lords, the answer to that question will need to wait until Monitor has reported to the Secretary of State, which it has not yet done. I know that it is considering a number of aspects of the fair playing field generally, and that may well be one of them. When I am in a position to answer that question, I will be happy to do so.
Lord Flight
My Lords, what will the Government’s policy be towards the term of contracts? One of the big problems with PFI has been that the contracts were too long, but it is quite difficult to combine getting both commitment to service and investment and prices updated.
Earl Howe
My noble friend is absolutely right. Various contracts have been criticised for being too long: PFI is perhaps a good example. Other types of contract have been criticised for being too short because they do not enable providers to invest on a sufficient timescale in order to be able confidently to bid for work. I have little doubt, once again, that this is an area that Monitor will look at and make recommendations upon.
Lord Foulkes of Cumnock
My Lords, will the Government consider requiring companies providing services in the NHS to pay their employees at the very least the national minimum wage and preferably a living wage?
Lord Naseby
My noble friend mentioned tariffs. Will it be a tariff across the whole of England or will it reflect the differing costs, particularly in overheads, of, say, an operation in London and an operation further north?
Earl Howe
My Lords, there are tariffs that are nationally set and others that may be locally set, but there is scope to vary even the national tariffs if there is a good reason to do so on the grounds of local variation in costs. There is some flexibility in the system, but the main basis of the policy, as I stressed earlier, is that, where competition occurs, it should be on the basis of quality and not price.
Baroness Meacher
The CQC has an incredibly important job to do, but we know that it is very overstretched. What systems do the Government have in place to ensure that the CQC’s scope is adequate to monitor all private and NHS facilities and ensure that they are providing a sufficiently good service?
Earl Howe
I am aware that the board of the CQC is looking at that very question at the moment in the light of the Mid Staffordshire review. The noble Baroness is absolutely right. I think the essence of the answer to her question is that a risk-based approach must be adopted so that areas that are deserving of more attention from the CQC receive it and areas that are of lesser concern are allowed to act accordingly without interference.
Baroness Royall of Blaisdon
My Lords, the Minister spoke of the possibility of local tariffs. How does that translate into regional pay? Is the Minister in favour of regional pay for people working in health service?
Earl Howe
I am not sure what the noble Lord’s question about the living wage implies. I answered a question about the minimum wage, which is what the law entails. It is of course up to employers to ensure that they pay their employees in a way that is not derisory and that reflects the value of the work that they do.
EU: Membership
(11 years, 2 months ago)
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Baroness Morgan of Ely
To ask Her Majesty’s Government which European Union member states have indicated that they are willing to consider a request from the United Kingdom to develop a different relationship with the European Union, either within or outside the existing European Union treaty.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)
My Lords, the Government frequently discuss a range of issues with other European Union member states, including the key challenges that all EU countries face. Those include dealing with the eurozone crisis, increasing competitiveness and taking steps to improve democratic accountability. Many EU member states agree about the need for reform to address those challenges.
Baroness Morgan of Ely
I thank the Minister for that reply. I am sure that most member states would agree on the need to reform some aspects of the EU, but for the UK to develop a different relationship with the EU, every member state would have to agree. Any country could say no, and that would be the end of the story. That would leave this country in a very precarious position, particularly given that the Prime Minister has promised a referendum. Does the Minister therefore agree that the fate of the future relationship with the UK with its main trading partner is too serious a matter to gamble on the whim of any single country, particularly in the light of the fact that the Governments may change in the next few years?
Baroness Warsi
The Government certainly feel that the challenges in Europe at the moment are too serious to ignore. As the noble Baroness herself says, there is a need for reform. There are some serious challenges in relation to competitiveness, the changes that have come about because of the eurozone and the most serious issue of improving democratic legitimacy. There is a real disconnect between the citizens of the European Union and what they feel that the European Union is doing for them. It is right, therefore, that Britain is leading that debate.
Baroness Falkner of Margravine
My Lords, does my noble friend agree that, with banking union on the table, the financial transaction tax, fiscal union and eventually political union within the 17 euro-ins, now is probably not the time to be defining parameters and deciding where we want to go; and that we need to see how those things evolve before we decide what representations we are to make about the EU?
Baroness Warsi
My noble friend always comes at these matters with real experience, but on this occasion I have to disagree with her. It is precisely because of the real challenges to which she refers that this is the time to ensure that we are at the forefront of forming the debate and reforming the EU to being in the best interests of this country, but also of the wider European Union.
Lord Liddle
My Lords, taking the noble Baroness back to the original Question, although there is sympathy among several member states with some of the themes of the Prime Minister’s speech, and although there is widespread agreement on the need for reform, surely that is seen to be reform that affects the whole of the EU. What is the position if there is no treaty that reforms the whole EU by 2017? Will the British Government then be pressing for a special renegotiation purely for Britain? Since the Prime Minister’s speech, how many member states have indicated that they might support such a special renegotiation for Britain alone?
Baroness Warsi
I can assure the noble Lord that we have set out on the right path. It is right for us to acknowledge, as he does, the need for reform. It is right for us to move forward with ensuring that we work out our relationship with the European Union. The balance of competences review that the Government are undertaking will lay out where we feel that the European Union helps and where it hinders.
The noble Lord asked from where support has come. Only last weekend, we saw the Prime Minister take a very front-footed, brave and national-interest position on the European budget. I could read to the noble Lord many quotes of support from around the European Union—from the Danish PM, the Swedish PM and the Finnish PM. I assure him that there is a real appetite for reform across the European Union. Those of us on this side of the House are leading that debate, but I am sure that, in due course, noble Lords opposite and, indeed, the Labour Party will also commit to that reform.
Lord Mackay of Clashfern
My Lords, it seems likely at the moment that some reform will be required to meet the needs of the eurozone. As the noble Lord, Lord Owen, powerfully reminded us in the debate on the Queen’s Speech at the opening of this Session, that requires the United Kingdom to have a position about what the situation should be because it is not in the eurozone. It is bound to affect the whole European Union. Surely it is better to think about it now than to wait until a decision that we have not had time to think about is suddenly required.
Baroness Warsi
I assure my noble and learned friend that we think about these matters all the time. A new treaty has not been ruled out; it is being actively discussed in the corridors of Brussels and many capitals across the EU. The Prime Minister agrees with those who believe that, in the next few years, the EU will need to agree on treaty change to resolve the crisis in the eurozone, to which my noble and learned friend referred, while protecting the interests of those outside the eurozone and driving forward reform for all.
Lord Tomlinson
Would the Minister agree if I suggested to her that in all these requests that we are making for renegotiating the relationship with the European Union, some of them must be abundantly clear without waiting for the balance of competences review? Can she give us a list of some of the imperative items on that shopping list?
Baroness Warsi
This Government do not believe in pre-empting decisions without consulting experts and the public.
Baroness Warsi
Noble Lords opposite may see this as a matter of fun, or indeed as a matter that they take quite lightly. We take consulting with the public, and indeed with experts, extremely seriously. We believe it is important that those with the expertise in various areas take part in the balance of competences review, which will conclude in 2014. On the basis of that, matters will be put into the manifestos of individual political parties. I can assure noble Lords that in the Conservative manifesto, there will be a referendum. I am not sure whether noble Lords opposite can confirm whether their manifesto will have a referendum in it.
Libraries: Closures
Baroness Bakewell
To ask Her Majesty’s Government what plans they have to limit the ongoing closure of public libraries across the country.
Lord Gardiner of Kimble
My Lords, every authority in England is required by statute to provide a comprehensive and efficient library service. In 2011-12, authorities invested £820 million in their libraries. The closure of a library does not necessarily signify a breach of an authority’s duty to provide a comprehensive and efficient service. Library services are adapting to changing needs. The Government have appointed a specialist libraries adviser to work with local authorities and Arts Council England.
Baroness Bakewell
I thank the Minister for that Answer. Good news is always welcome, however meagre, but the bad news is coming in torrents. Three hundred and twenty-six libraries are under threat, have closed or have left council control since April last year. Newcastle is planning to close 10 out of 18 libraries and Liverpool 10 out of 19. Given the disproportionately heavy cuts to local authority funding in the north of England, when will the Secretary of State use her considerable reserve powers to stop this cultural catastrophe?
Lord Gardiner of Kimble
My Lords, I am very well aware that the noble Baroness is a formidable supporter of public library provision. Indeed, on Saturday I visited two libraries for National Libraries Day, in Eye in Suffolk and Diss in Norfolk, and I am very much aware of the points of view and their importance to communities. To come to the Question, clearly it is important that the local authorities reflect on the local need. That is precisely why there is a specialist libraries adviser, as I particularly mentioned, whose job it is to work with the local authorities where there is a question of libraries being at risk. Clearly, a number of rationalisations have gone on but I take the points that the noble Baroness has made very seriously indeed.
Baroness Miller of Chilthorne Domer
My Lords, what advice would my noble friend give to a community group such as that in Friern Barnet, who wanted to keep their library open and were willing to staff and fund it but found that their local council, Barnet, took them to court to get them out? Happily, the situation is now resolved and the library has stayed open but is that not against the spirit of the statute, where the community is willing and able to take the library on?
Lord Gardiner of Kimble
My Lords, there are some very strong examples of community-managed libraries, and I very much support the work that they are undertaking. Indeed, guidance for local authorities on community-managed libraries has only just been published by the Arts Council and the Local Government Association. Professionally qualified librarians are also key to the public library service, and the librarians I met in Diss and Eye were an example of dedicated commitment.
Lord Elystan-Morgan
My Lords, the Minister said, I am sure quite accurately, that the closure of a public library does not of necessity mean a breach of the statutory obligations on that particular local authority. Bearing in mind the scale shown by the noble Baroness, Lady Bakewell, of the closure of public libraries, however, at what point is there a clear breach of everything that statute intended in that connection?
Lord Gardiner of Kimble
As the noble Lord has referred to, this is about a comprehensive and efficient system. I shall expand quickly and briefly on the fact that we have heard about closures but there are in fact some incredibly good success stories of openings and relocations. One of the key challenges for public library provision is where we locate them so that they can be an even greater part of the modernised situations—for instance, new libraries alongside cafes and adult learning classes. These are areas where we can have new openings in urban and rural areas and expansions in certain areas. There will be cases where they will be rationalisation but there is a responsibility to ensure that it is a comprehensive network.
The Lord Bishop of Worcester
My Lords, the Minister has just mentioned success stories. I wonder if he is aware of an exciting development in Worcester of a joint university/city library, which Her Majesty the Queen opened last year. Does he agree that this unprecedented partnership provides a model—a win-win approach if ever there was one—for other places to follow? I wonder, if he has not done so, whether he would like to visit it.
Lord Gardiner of Kimble
I am very keen on rural rides. The Hive in Worcester, as the right reverend Prelate has mentioned, is a new library and history centre, and the first ever joint public and academic library in the country. I could go through the very long list of success stories. I know that there are communities worried about their public library provision but there are good stories to be told in Hackney, Lewisham, Newton Abbot, Clapham, Oldham, Northumberland—I could go on.
Lord Collins of Highbury
My Lords, a comprehensive library service is about more than simply the supply of books. It is about encouraging the joy of reading; it is about education. I fear that some of the noises that we have heard from local government simply about alternative provision do not meet the standard, let alone the number, of libraries that my noble friend Lady Bakewell has referred to. What is the Minister’s view about the standards for a library service that meets that need for encouraging reading?
Lord Gardiner of Kimble
My Lords, the Government and the department have continued to fund the Reading Agency and the Book Trust, two very important charities in that sector; indeed, the Book Trust is involved with book-giving for children. One of the key points that I identified on my visit to these libraries is that we are going through a technological revolution in terms of libraries. The number of e-books that are loaned has risen in two years from 100,000 to nearly 600,000. We are going to have to deal with those new technologies and how we encourage young people and the community to be involved. Among the key pilot schemes are the 22 schemes for automatically joining primary schoolchildren—I am told that in Norfolk they will be joined at birth—and the children will encourage their parents to come to the libraries as well.
EU: UK Membership
Lord Davies of Stamford
To ask Her Majesty’s Government how many jobs they think would be created by the United Kingdom leaving the European Union.
Viscount Younger of Leckie
My Lords, the Question is based on multiple hypotheticals and intangible variables. I will do my best to deliver my response with a touch of realism. The Government’s policy on the EU is clear. It was set out most recently in the mid-term review and was confirmed in the Prime Minister’s speech, so no analysis has been made at this time of the number of jobs that might be created or, indeed, lost as a result of a UK exit.
Lord Davies of Stamford
My Lords, I am afraid that the Minister’s bureaucratic evasion cannot avoid the bare fact that no one has ever suggested that leaving the European Union would create a single job, but everybody knows that doing so would put at risk many jobs, both present and future, depending on future decisions about the location of investment. Against that background, why are the Government gratuitously creating this uncertainty for investors and employers? Can we have an explanation for why over the past few weeks several Cabinet Ministers have openly been talking about their willingness to leave the European Union?
Viscount Younger of Leckie
The noble Lord is right in saying that we were right to stay within the European Union. The reason that decisions have been made to get rid of the uncertainty is because questions are being asked, not only within the UK but within Europe, about our future, and it is right to settle that now. I stress that the noble Lord is right in saying that it is very important that we stay in the EU. The single market provides UK businesses with access to a market of 500 million customers worth around £11 trillion in 2011. Between 1992 and 2008, the single market is estimated to have raised EU GDP by 2.13% and to have created 2.77 million new jobs. It is estimated that those benefits could be doubled with the removal of the remaining trade barriers.
Lord Pearson of Rannoch
My Lords, given that only 9% of our GDP exports to the European Union, declining and in deficit, that 11% of our GDP exports to the markets of the future, rising and in surplus, and that 80% stays in our domestic economy, is it not obvious that that 91% of our GDP, which is made up of our non-EU exports and our domestic economy, would generate several million new jobs if they were freed from the stifling overregulation from Brussels?
Viscount Younger of Leckie
It may not surprise the noble Lord that I do not agree with his approach. It is estimated that around 3.5 million jobs in the UK are dependent on trade with the EU. The UK exports a wide range of goods and services to other European member states, everything from cars, worth more than £13 billion in 2011, through music, which represents £1 billion and even more once related services, royalties and licences are included, to a wide variety of food and drink products, worth close to £10.5 billion. There is much to be lost if we leave the EU.
Lord Razzall
My Lords, if we take the follow-up question by the noble Lord, Lord Davies, and indeed, the Minister’s answer to the last question, does he not fear, realistically, that the uncertainty created by the Prime Minister’s commitment to a referendum in 2017 will risk reduced investment and employment in British manufacturing industry, particularly in the motor car industry, to which he referred?
Viscount Younger of Leckie
I do not agree with my noble friend, but I stress again that it is right to end the uncertainty of the questions that are persistently asked. My noble friend mentioned UK car manufacturers. They effectively saved £0.9 billion in 2009 by not having to pay the common external tariff to export to the EU. This equates to a saving of £1,100 per vehicle exported in 2009 to the EU. I stress that there are large figures involved in needing to settle the uncertainty.
Lord Soley
I put it to the Minister that he is not answering the question about the judgment of investors as a result of the uncertainty created by a referendum. Can we have his assessment of the impact of the uncertainty of a referendum on inward investment?
Viscount Younger of Leckie
I cannot give any specific figures on that, but I stress again that it is important to end the uncertainty. That is why my right honourable friend the Prime Minister has set out in the other place his stall in terms of how we go forward, including with a referendum.
Lord Dobbs
My Lords, can my noble friend assist a simple soul? Am I right in believing that we run a substantial balance of payments deficit in our trade with the European Union? Does that not therefore mean that there are more jobs dependent on that trade in Europe than there are in this country?
Viscount Younger of Leckie
I do not agree with that particular approach. European markets count for under half of UK exports of goods and services. Seven of the UK’s top trading partners are EU member states.
Lord Reid of Cardowan
My Lords, multiple hypotheticals and transient variables seem the very essence of the Government’s policy on Europe. Avoiding those, will the Minister answer a factual question? When last year, in the middle of the eurozone crisis, I asked the Government whether there was not an approaching fork in the road, and whether they would envisage the possibility of a two-speed, or multi-speed, Europe, I was told that the Government did not envisage that under any circumstances. What happened to change their mind?
Viscount Younger of Leckie
The answer to the noble Lord’s question is that we are fully focused on staying within the EU. We do not see a two-tier Europe coming forward.
Lord Hannay of Chiswick
Can the Minister clarify another simple point? How does the announcement of a referendum in four years’ time, the result of which cannot possibly be predicted, remove uncertainty?
Viscount Younger of Leckie
The Prime Minister emphasised in another place that now was not the right time to hold a referendum, and that it would be right to hold a referendum after the next election—and after, we hope, the current EU crisis has abated.
Mental Health (Discrimination) (No. 2) Bill
National Health Service (Clinical Commissioning Groups—Disapplication of Responsibility) Regulations 2012
(11 years, 2 months ago)
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Companies Act 2006 (Amendment of Part 25) Regulations 2013
Lord Popat
That the draft regulations and order laid before the House on 18 and 19 December 2012 and 10 January be approved.
Relevant documents 15th and 16th reports from the Joint Committee on Statutory Instruments, considered in Grand Committee on 6 February.
Enterprise and Regulatory Reform Bill
Viscount Younger of Leckie
That the amendments for the Report stage be marshalled and considered in the following order:
Clauses 1 to 7, Schedule 1, Clause 8, Schedule 2, Clauses 9 to 14, Schedule 3, Clauses 15 to 20, Schedule 4, Clause 21, Schedules 5 and 6, Clauses 22 to 24, Schedule 7, Clauses 25 and 26, Schedule 8, Clauses 27 and 28, Schedule 9, Clause 29, Schedule 10, Clause 30, Schedule 11, Clauses 31 and 32, Schedule 12, Clauses 33 to 35, Schedule 13, Clauses 36 to 45, Schedule 14, Clauses 46 to 50, Schedule 15, Clauses 51 to 53, Schedule 16, Clauses 54 to 56, Schedule 17, Clauses 57 to 64, Schedules 18 and 19, Clause 65, Schedule 20, Clauses 66 to 69, Schedule 21, Clauses 70 to 84.
Welfare Benefits Up-rating Bill
(11 years, 2 months ago)
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Baroness Stowell of Beeston
My Lords, the Bill before us is about securing a stronger economy for the future. Noble Lords are well aware of the challenge we currently face. We are dealing with a deficit which is unprecedented in peacetime. Back in 2010, we were borrowing £1 in every £4 that we spent, and interest payments were costing us £85 million a day.
Baroness Anelay of St Johns
My Lords, a considerable number of Members of this House are leaving, but there are still some staying behind to take part who would like to listen to the Minister, who is trying to present the opening of this debate. I should be grateful if Peers leaving could do so quietly.
Baroness Stowell of Beeston
I am grateful to my noble friend. Back in 2010, we were borrowing £1 in every £4 that we spent, and interest payments were costing us £85 million a day. We have begun to make progress on that deficit—it has since reduced by a quarter. But there are still difficult decisions to be taken if we want a stronger economy that delivers a better future for everyone. Let me be clear about that: everyone, all of us, whoever we are, deserves the chance to do the best for ourselves and our families.
Several commentators have said that we should look first to make savings from those with the broadest shoulders—the richest in society—and I am proud to say that we are. This Government’s plans increase the total tax contribution from the most well off. As a result of our actions, the richest pay more tax on capital gains, more stamp duty on their homes, more tax on their pensions and are less able to avoid or evade tax. The top 20% of households continue to make the greatest contribution towards reducing the deficit. The Autumn Statement raises more than £1 billion pounds a year from the richest and more than £8.5 billion over the forecast period. Overall, the richest will pay more in tax during this Parliament than under the previous Government’s tax plans.
However, as we seek to reduce the deficit and retain credibility with financial markets, we cannot ignore the welfare budget. From 1997 to 2010 spending on working age welfare increased by some 60% in real terms. Today, it accounts for £1 in every £8 that the Government spend. The Institute for Fiscal Studies has said:
“When cutting public spending dramatically to help reduce an unsustainable budget deficit it is almost inevitable that spending on benefits and tax credits—which account for 30% of the government’s total budget—will be targeted”.
But in seeking savings from welfare, we have always sought to strike a balance, and that is true of this Bill.
The Bill provides for most working-age benefits, tax credits and statutory payments to be subject to a 1% increase in 2014-15 and 2015-16. I will not go through the full list but it is set out in the Schedule to the Bill and the Explanatory Notes. As a result of this, the Bill will save £1.9 billion in 2015-16. We have also retained safeguards for a number of key benefits, which will not be subject to the provisions in the Bill.
For pensioners, we are maintaining our commitment to the triple lock, a commitment which will see the basic state pension rise by earnings, prices, or 2.5%, whichever is highest. In 2013-14, when both prices and earnings growth are below 2.5%, we will ensure that the poorest pensioners will see the same cash increase by over-indexing the guarantee element in pension credit, which would normally rise with earnings. In addition, for disabled people and carers, we have committed to uprating benefits covering additional needs to the costs that they incur because of their disabilities in line with inflation. The protection applies to disability living allowance, attendance allowance, carers allowance, the disability premiums in working age benefits, the disability elements in tax credits, the carer premium and the support component of the employment and support allowance. Those are not included in this Bill: they are protected. We have sought to find a balance between making necessary savings and protecting those who are least able to increase their spending power.
We have also sought to strike a balance between supporting those on benefits while containing the costs of the welfare system. Let us not forget that most people have faced significant pay restraint in recent years. Looking at average incomes over the past five years, including those in low-paid jobs, those in work saw their incomes rise half as quickly as those on out-of-work benefits, at a rate of 10% compared to 20%. Let us not forget that public sector workers have had their pay frozen and then increased by just 1%. Indeed, even with the 1% increase on these benefits, on current projections out-of-work benefits will still be at a higher level in 2015-16 than if they had been uprated by average earnings growth since the financial crisis began. While people want to know that the welfare system is there for them in hard times, when they need to draw on it, they also want to be confident that it reflects the budgeting decisions that people have to take in work and that it incentivises people to find and take work.
By setting out clear savings commitments in legislation, the Bill also seeks to give certainty, both to taxpayers and to the markets, that this Government are committed to securing fiscal credibility in the years ahead, and it is “the years ahead” that I am particularly concerned with. Investing in credibility and stability is an investment for the long term, and it is, of course, a means to an end. Yes, we have to rebalance the public finances, but not simply so that we can point to a nicely balanced budget in the ledger.
In my eyes, the real end is ensuring that the next generation can benefit from a stable and growing economy, one where they are able to secure a job, become productive members of society and get on in life. I do not believe we can achieve that end without taking these difficult decisions.
Noble Lords need not look far for reassurance that this Government’s approach is the right one. In Spain and Greece, one in every two young people in the labour force is unemployed. Italy and Portugal are not far behind. I do not pretend that unemployment is not a problem in this country, but the decisions that we have taken to restore the public finances and the credibility and stability we have secured with the financial markets have been key to securing the stability of our own labour market. Over the past year, the UK employment rate has grown faster than any other G7 country. Employment in the private sector is up by more than 1 million since the election, while the last quarter saw further improvement in youth unemployment, a fall in long-term unemployment and a fall in unemployment overall. For me, this underlines the critical importance of the Government’s fiscal plans. We are trying to repair a damaged economy so that we can secure something that makes a real difference to people’s lives—a sound economy backed by an expanding labour market for them and for future generations.
But a sound economy has to go hand in hand with a strong social settlement. We can get the economy going again, but we will have failed if we still have a welfare system which does not make work worth while. So at the same time as we are restoring the public finances, I would ask your Lordships to remember that we are working to restore the welfare system as well. This year will see the introduction of universal credit, an historic change that will create a welfare system that is simpler, more effective, and designed to ensure that work pays. We expect some 3.1 million households to gain from the move to universal credit, on average by £168 per month. This is a progressive reform. Around 75% of the households that gain are in the bottom 40% of the income distribution. Overall, we believe that universal credit could lead to the equivalent of up to 300,000 additional people in work through improved financial incentives alone.
It is important that we see this Bill in its broader context. It enables the Government to make savings that are crucial to reducing the deficit and to maintaining our credibility with the financial markets while protecting those on fixed incomes or with additional needs. But at its heart it is a Bill for the long term, one that plays a crucial role in repairing the public finances, and so one that is an investment in a sound and stable economy in the future, and a future that is better for everyone. It is on that basis that I commend this Bill to your Lordships’ House.
Lord McKenzie of Luton
My Lords, I start by thanking the noble Baroness, Lady Stowell, for her explanation of this Bill, but let me say at the outset that we consider this to be a bad Bill that should not reach the statute book, and we have much to do in Committee.
The Chancellor of the Exchequer has said that it is, in his terms, shirkers who will be affected by these cuts to tax credits and benefits, and of course uprating by less than the rate of inflation is a real-terms cut. However, analysis now shows that two-thirds of those affected by this Bill are actually in work, striving to rise above poverty levels and support their families. The Children’s Society shows that up to 40,000 soldiers, 300,000 nurses and 150,000 teachers will lose out as a result of this Bill. Despite what we are told, disabled people are not properly protected. The Bill penalises working mothers and punishes children, trapping them in poverty. Two-thirds of those hit by cuts to tax credits and benefits are women.
There could be no starker example of this Government’s values than the fact that at the same time as they are introducing this Bill, they are seeking to give 8,000 millionaires an average tax cut of £2,000 a week. Compare this with the 71p increase per week for somebody on JSA. We will seek to ensure that the Bill does not proceed while these tax cuts are being implemented. It is anyway entirely unnecessary. If the Government are so determined to uprate most benefits and tax credits by just 1%, they can do it by way of the annual uprating process, precisely as they are doing for 2013-14.
Those affected by the Bill are having to shoulder the burden of the Government’s continuing economic failure in jobs and growth. The 2012 Autumn Statement made abundantly clear that with a shrinking economy last year and growth forecasts downgraded again for this year, next year and every year up to 2016, the Government are also failing to tackle the deficit and debt.
The Chancellor has been forced to announce that he will not meet his fiscal rule to get the debt down by 2015, with the result that the Government are borrowing a staggering £212 billion more than they planned. Nearly 1 million young people are out of work and the claimant count is forecast to be 275,000 a year higher in 2015. The OBR expects the economy to be 3.6% smaller in 2016-17 than it thought it would be just a year ago.
However, the Government still will not change course. Nothing in this Bill will help growth and jobs. Nothing in this Bill will help build a stronger economy. Everything in this Bill will contribute to depressing demand and putting more pressure on hard-pressed public services. There is no recognition that low-income families have high marginal consumption rates, so restricting their income will impact very directly on demand in our economy. Therefore, the poorest are being asked again to bear more of the burden. The IFS says that this will include 7 million working households, who it calculates will lose on average £165 a year.
Taken together with other changes in the Autumn Statement, the real income of a one-earner family will reduce in real terms by more than £500 by 2015-16. The Government’s own impact assessment shows that the average loss in income is higher for families in the lower deciles than for those in the higher deciles. Those at the bottom lose £4 to £5 a week; those at the top lose £1 to £2 a week.
As USDAW put it in its briefing, this Bill is another blow to working families. Compared with a CPI uprating, the Bill will cost a working family on a modest income nearly £800 a year. We know from the Minister herself —Esther McVey—that it will result in an extra 200,000 children being pushed into poverty on top of the 800,000 the IFS already estimates have entered that state due to the coalition’s policies. This is why we will demand that the Government produce a comprehensive assessment of the Bill’s effects on child poverty.
Any claim that increases in the personal tax allowances will compensate low-income working families for such losses does not bear examination. Many will not reach the tax threshold, being in part-time jobs at the minimum wage. For those who do, a tapering away in housing benefit and council tax support will negate much of the suggested advantage.
Of course, we still do not have from this Government a cumulative impact assessment of all the changes made to tax credits and benefits since May 2010—an issue so brilliantly pressed by my noble friends Lady Hollis and Lady Sherlock in a recent debate. When introducing the Bill, there was not a scintilla of recognition by the Minister of how much the living standards of the poor have already suffered under this Government. There was no recognition either of the tsunami of cuts that are about to engulf hundreds of thousands of our fellow citizens in the form of the bedroom tax and local council tax support schemes.
I accept, as the Minister said, that the Government have not ignored the welfare budget. Under it, they have already taken £20 billion from the poor. We are told that it is necessary to legislate for the 1% restriction to provide certainty for the taxpayer, the markets and claimants. These are entirely specious assertions. Taxpayers will not have certainty about the costs of social security without knowing claimant numbers, which of course are heavily dependent on the growth that this Government have failed to deliver.
It is frankly ludicrous to argue that the markets will take fright in respect of the amounts involved if you have just declared your intentions to uprate by 1% rather than enshrine it in legislation for two years in circumstances where your public sector net debt is heading north of £1.4 trillion. In any event, the market knows full well how determinedly brutal you can be when it comes to cuts.
When it comes to claimants, I am sure that most would forgo the certainty of a 1% increase—a maximum of 1%—for the prospect of a fair review on an annual basis, because what this Bill is doing is placing inflation risks with the most vulnerable members of society. Inflation just three years out is difficult to predict, and should it, contrary to current expectations, dip below 1%, the Government can pocket the benefit. Are the Government really saying that whatever the level of inflation, say in year three, they will allow any level of cut to be visited on the nation’s strivers? The justification for the 1% is that benefits have been rising at a faster rate than earnings over the past few years—we heard that from the Minister—but this means that the families receiving in-work benefit are getting a double blow from the Bill. If you look at the longer trend—the DWP gave us the figures just this morning—average earnings have increased at a much faster rate than benefits over the medium and long term.
However, the reality is that this Bill is not about shoring up the markets. It is about trying to shore up the dwindling political standing of the Government. It is about trying to foster a political climate—a party-political dividing line—that says that recipients of tax credits and social security benefits are feckless and workshy, and stay in bed while others go out to work for a living. The Government, of course, are only for the latter.
I was struck by a contribution when the Bill was debated in the Commons, from which I shall briefly quote. It was stated:
“But the insidious aspect of the Bill is that, in seeking to open up a philosophical divide of that type, it becomes not an issue of political leadership, but of political pandering to some of the fears, insecurities and downright prejudices that can be stoked up in society—the ‘us and them’ mentality and the sense of resentment and envy. When people start playing fast and loose with those factors—and we have seen early examples against the backdrop of this legislation in the last week to 10 days—they are following a very risky strategy indeed”.—[Official Report, Commons 21/1/13; col. 86.]
That was Charles Kennedy. That any Government should seek to prey on the lives of poor people in this way for party advantage is disgraceful. The ploy is anyway unravelling. Of some 14 million working-age households with someone in work—strivers in anyone’s language—around half are disadvantaged by this Bill.
However, it is not only people in work who are strivers. What about a lone parent struggling on income support to nurture a young child to be part of a responsible future generation; or someone on income support because they devote every waking hour to care for someone, saving the state hundreds of thousands of pounds over the years; or someone on JSA who has been made redundant through no fault of their own, desperate to get back into work? These are strivers too.
Any claim that disabled people are being fully shielded from the cuts in this Bill are of course false. Disabled people in the work-related activity group—by definition those found not fit for work—will have their ESA uprating capped at 1%, thereby losing, according to the Disability Benefits Consortium, £87 a year. Those in the support group fare little better, with the support component being out of scope but the core component being subject to the cap. This, at least, we will seek to address in Committee. Of course, disabled people will miss out not only on this basis. Other benefits on which disabled people are disproportionately likely to rely, such as housing benefit, will also be restricted. We will seek, in Committee, to reverse the real-terms cut in statutory maternity pay. That would reverse just part of the losses that working women are suffering from cuts to maternity pay, pregnancy support and tax credits. The House of Commons Library research shows that low-paid new mothers are losing out to the tune of some £1,300 because of this.
This is a wretched Bill with the wrong priorities. It does nothing for jobs, which is why we will press that it not enter into force until a compulsory jobs guarantee can be introduced, focused on the long-term unemployed and paid for by restricting pension tax relief on high earners. The injustice at the heart of the Bill is another attack on the poor, including the individuals and families who subsidise all of us because they work for low wages, meaning that we all benefit from cheaper goods and services. They should not be treated in this way.
If the Government have their way on this Bill, it will mean another spur to poverty, more food banks, more payday loans, more households having to choose between heating and eating, and more despair for those striving to do the right thing. We have a duty to stop it.
Lord German
My Lords, it will not surprise the House that I start from a different place from the noble Lord, Lord McKenzie. I will refer later to the use of the word “language”. I hope that your Lordships’ House will join us in saying that we should not use language that tries to segregate different groups of people. I shall illustrate that later. My starting point in examining this Bill is to ask whether it meets the policy objectives that it sets for itself and whether it is a proportionate response to the problem that it attempts to solve. As the principal policy objective that it seeks to fulfil is to make an impact on the underlying structural deficit that this country faces, it is an impossible analysis if we do not start with an examination of that factor.
In 2010, the Government set themselves the objective of eliminating the inherited structural budget deficit by the end of this Parliament—that is, by 2015. However, external circumstances, such as the problems within the eurozone, intervened which made that a much more difficult task to accomplish. So the Government took the decision to slow down the elimination of the structural deficit from five years to seven years, to 2017-18. Of course, they could have chosen to meet their original target date by imposing even more challenges to government expenditure—by increasing the tax take and by digging deep into the health and education budgets, and presumably further into the welfare budget as well. They chose not to do so. The consequence of that is a need to take further steps in budget reduction and this measure does that. It is aimed at 2015-16, the last of the financial years that will be determined before the next general election.
My first point is that sticking to the original timescale for deficit reduction would have meant a much more challenging debate than the one we are having today. Clearly, many noble Lords are concerned about the welfare budget reductions contained in the Bill. I can understand that concern. It is never easy reducing welfare payments; it is very uncomfortable and something which gives me concern as well. However, it would have been a lot worse if the Government had not slowed down the deficit reduction programme.
There are, and will continue to be, very difficult decisions to be made, and this Bill is one of them. However, those who object to the budget reductions in the Bill must say whether they are in favour of either a further extension of the already extended deficit reduction programme—slowing it down even further, going beyond the planned seven years and increasing the level of borrowing substantially—or taking money from some other source. It would be helpful to know where noble Lords stand on this matter. I listened very carefully, but I was unable to detect where that money might come from. The Bill cannot stand alone in some sort of splendid financial isolation. When there are hard choices to be made, it is important to know whether others are prepared to face up to them. There are also further tax measures to come if the Government are to meet the new seven-year timetable. We can take some comfort from the IFS Green Budget scrutiny, which, taking this Bill into account, determined:
“The whole set of tax and benefit changes introduced between the start of 2010 and 2015-16 will hit the richest households hardest”.
My second point is about proportionality. Many noble Lords will recall debates in this House where the figure of an additional £10 billion reduction was bandied about. The Chancellor of the Exchequer said last year that,
“we will have to find greater savings in the welfare Bill. £10 billion of welfare savings by the first full year of the next Parliament. Iain Duncan Smith and I are committed to finding these savings”.
However, the cumulative figure that this measure provides is not £10 billion but £3.6 billion—and that includes this year’s uprating order. That accords with the approximately £1 in every £3 of public expenditure that goes on welfare. Therefore, it could have been far worse for the welfare budget.
I am pleased that arguments made by those on the Liberal Democrat Benches have been taken on board by the Government. There will be no capping of child benefit at two children; there will be no cessation of housing benefit for the under 25s; and there will be no absolute freeze on working-age benefits. Thankfully, that is not the trajectory of this measure.
Spreading the burden across the years and taking relatively small amounts of money from a large number of people is a sensible approach. A lot of people paying a little is better than the alternative of a small number of people losing a lot of money in a single year. Here, I am talking about the welfare budget. Some have suggested taking out child benefit and tax credits from the Bill, but this would wipe out £1.5 billion of the £3.6 billion of savings, which would once again have to be found elsewhere.
Given the budget restraint, the Bill takes a sensible approach. It is sensible because, since the financial crisis, out-of-work benefits have risen twice as fast as average earnings—by 20% compared to 10%. For many, the effects will be short-term, as most people out of work find work again within three to six months. Also, the Government have capped public sector increases at 1%, so there is also an element of fairness to the measure. Besides, the shadow Secretary of State for Work and Pensions recently said that he wished to see incomes rise faster than benefits.
This measure is temporary. It is time-limited to end in the financial year 2015-16. Unless changed again by an incoming Government, the present arrangements for annual uprating will apply once more. However, there are some rough edges to the Bill. I hope that the Government will explain and debate these in detail in Committee. It is right to have sweeping exemptions for pensioners, the sick and the disabled—but some anomalies will need explanation, justification and perhaps amendment.
I said that I would say a little more about the language used in discussions and debates on these matters. The word “shirkers” has been used already in the debate. I do not find it helpful. It is not just one side who are saying this. According to the Labour Benches, it was the Chancellor who used the word “shirkers”. However, the word was also used by the shadow Secretary of State for Work and Pensions in a speech last year at the London School of Economics. I hope that noble Lords from all parts of the House will support the notion that we have to be extremely careful not to negatively categorise people. It does no good at all to use inflammatory language to distinguish between those in work and those out of work. The benefits trap itself is to be deplored. That is why there is so much to be gained by the new universal credit. The principal message I take from this is that as a country we must offer a helping hand, rather than deprecate the people who are trapped by the current benefits regime, which soon will be radically altered.
I want to say a word about child poverty, because I read so often of the figures produced by pressure groups that have written to many noble Lords in relation to this Bill. The child poverty measure, as I discovered when there was a committee inquiry in the National Assembly for Wales, is very difficult to sustain both internationally and in this country. In the first year of this Government, the numbers in child poverty—according to the international measure—fell substantially in the United Kingdom. That is because the median is used as the measure in this country. It is time that we had a new measure if we want to see what is happening in respect of children in poverty in this country and in other countries. I hope that noble Lords from all sides of the House would agree that continuing to use the current measure is no way to examine this issue, despite the fact that it substantially benefits the Government’s argument.
Finally, I hope that the Bill puts to an end any further reductions in the welfare budget before the next general election. Of course, there may be minor, necessary adjustments, but these past few years have really been a difficult time, with very hard decisions having to be taken about the size of the welfare budget. I hope that, in his response, the Minister will offer your Lordships some reassurance that this area of spending reduction has now reached its conclusion for the continuing length of this Parliament.
Lord Adebowale
My Lords, I declare my interest as chief executive of Turning Point, an organisation that works with many of the people who will be affected by this Bill, should it become an Act. I felt compelled to join in this debate because many of the people who stand to be affected are people with whom I and my organisation work; they are some of the most vulnerable in society. It is important that we remind ourselves of this during the course of the debate.
In his opening remarks, the Minister made the point that the rich were going to pay more and carry a greater burden than the poor. However, it is the poor who feel the impact more than the rich. I refer to an article I once read by the sister of the Mayor of London. She pointed out that during times of austerity, the rich of course feel the burden of cuts, but generally the burden is restricted to deciding whether they should take one or two cooks on holiday with them this year. We should think about this Bill in that context.
I would like to raise a few points about the Bill’s potential impact on certain groups and make a few further points about fairness and public attitudes. Those who stand to be impacted include many working-age adults; many people accept that now as a given. Many of those with complex needs and challenges are the people supported by Turning Point. We work with people who are experiencing challenges such as substance abuse, mental ill health, learning disabilities, employment difficulties or a combination of some or all of these. I have said in earlier debates that I have yet to meet any one of our clients who does not want to work.
Around half of those who used Turning Point’s integrated, complex-needs services last year have already had benefit and housing difficulties. They have had problems accessing disability benefits despite physical and mental health problems and have been left with debts due to lengthy appeals processes. The point is that people are already struggling due to changes that have begun to affect them and there are still other changes that will start to hit from April.
I got some advice from Crisis, an organisation that is well respected across the House. It gave me an example of a young man called Russell, who had been urgently looking for a shared property in London since September, but did not have the deposit that nearly all landlords require. His rent for a small studio flat was, until September, paid by housing benefit. However, when the changes to the shared accommodation rate kicked in, his housing benefit was slashed from the £180 a week he required to £86 a week. As a result, he had to drop out of his computer course to look for somewhere to live and has accumulated nearly £3,000 in arrears and been served an eviction notice. Homelessness was a real threat for Russell. I am really pleased to report that this morning, I was told that he has just managed to find a new place to live, but has no idea how he is going to pay back the debt accumulated over that period.
The Bill has been described as a real-terms cut with the IFS estimating that, given the current forecasts for inflation, it could amount to a cumulative 4% real cut in the benefits affected. In reality, we do not know what its impact will be as it depends on future inflation rates. The IRS states that this will expose some of the most vulnerable to inflation risk.
I recognise and welcome the fact that disability benefits and carer’s allowance are exempt from the legislation, but the problem remains that the Bill will apply to the main rate and the work-related activity group component of employment and support allowance. According to Disability Rights UK, all of the 991,000 disabled people receiving ESA in the support group and work-related activity group will experience the impact of a 1% cap, and it estimates that that will amount to a loss equivalent to a loaf of bread and a pint of milk per week, or £87.65 a year. That does not sound like a lot, but I come across people whose lives are hugely affected by the ability to afford that loaf of bread and that pint of milk each week.
The Government talk about fairness, which is a big part of their motivation for reform. The debate about skivers versus strivers has been played out a lot recently, and whether it is helpful or it contributes towards polarising opinion and increasing stigma is perhaps a matter for another discussion. Still, the employed and the unemployed cannot be compared with one another so simply. For a start, many working people are in receipt of benefits. We know from recent data that households with at least one employed adult have accounted for 93% of the increase in the number of housing benefit claims in the past two years and that there are around 3.6 million working households already living on an economic “cliff edge” who could be squeezed further by this Bill. The Children’s Society has calculated that the Bill will mean that by 2015, a lone parent with two children on a weekly income of £530 would lose £424 a year, and a couple with two children on a weekly income of £635 would lose £351 a year.
Public attitudes to welfare spending are often impacted. I think that the prejudices which have been mentioned by contributors to this debate are based on the fact that the public do not often understand what the actual impact of this Bill will be on individuals. An argument used in favour of reform is that the welfare bill accounts for a quarter of total government spending. Last year’s data show that the DWP does indeed account for 23% of all public spending, or £166.98 billion. However, of the £159 billion of that sum which went on benefits, 47%, or around £74 billion, went on state pensions compared with JSA and incapacity benefit, which saw spending of approximately £4.9 billion each. Despite this, a YouGov poll recently commissioned by the TUC has found that on average, people think that 41% of the entire welfare budget goes on benefits to unemployed people. The same poll also suggests that support for this Bill actually depends on the level of understanding of it, as I have already mentioned. The Government have a duty to educate the public on the realities of welfare benefits and the impact on the poorest in society as opposed to being tempted to take advantage of ignorance of this matter.
The Government want to improve fairness and incentivise work, but welfare reform cannot be tackled in isolation from other factors such as the labour market and current inequalities. Despite it being a commonly held view, it is difficult confidently to identify evidence of widespread welfare dependency and intergenerational worklessness. The Joseph Rowntree Foundation and the University of Bristol recently found that only a very small minority of households, some 15,350, have had two or more generations who have “never worked” and of those, many of the second generation have been out of work for less than one year.
Policies that change behaviour are a risk when the roots of the problem go beyond behaviour. Just one worrying trend is the 109% rise in the number of people being helped by food banks, as reported recently by the Trussell Trust. While some people think that food banks are a good idea, research in Canada seems to indicate that the level of nutrition provided by such food is very low compared with the ability to choose your own produce. I am worried that the impact of welfare changes, spending cuts to services and rising living costs could contribute to a further increase in the use of food banks. It would be interesting to know whether Ministers think that an increase in the use of food banks would be a credible and useful outcome of this Bill.
I worry that the Bill risks pushing vulnerable people, including disabled ESA recipients, the working poor and people such as Russell, further away. I would like the Minister’s response to perhaps provide some advice for the Russells of this world—he is not alone and represents maybe a few hundred thousand people—as to what they should do when faced with the impact of the proposed Bill.
The Lord Bishop of Leicester
My Lords, it is a privilege to follow the noble Lord, Lord Adebowale, who speaks with real authority and experience in this matter and who came to speak in Leicester this time last year to a group exploring the public responsibility for the poor.
It seems to me that, from time to time, it falls to these Benches to raise questions about the moral responsibility of this House and perhaps today is one such occasion. I want to ask what is the fundamental purpose of the Bill before us. The Minister has asserted that it is to achieve a stronger economy for the future. If that is the case, presumably it is designed to achieve short-term savings in response to a present budget deficit. However, because of its long-term effects, it looks like part of an ideologically motivated attempt to alter the very nature of the welfare state. If that is the case, we must ask ourselves what is the limit of our collective responsibility for the poorest in our society. I believe that there is confusion in this Bill about that limit in at least three key areas.
First, there is impact of the Bill on working families. One of the main arguments used to justify the Bill is that it is unfair that out-of-work families should see their benefits rise at a faster rate than hard-working families who are facing a squeeze in their wages. Others have made this point already. However, this claim is both inaccurate and unhelpful. It is inaccurate because the fact is that working families, and low earners in particular, are among those worst affected by this Bill, as we know. Working tax credit, one of the benefits included within the cap, is only available to working households. Other benefits that are also included, such as child benefit and child tax credit, are available to both working and non-working families. The House of Commons Library has estimated that if only out-of-work benefits were subjected to the 1% cap, 80% of the proposed savings would disappear. According to the Resolution Foundation, 60% of the impact of the Bill will fall on working households. In 2015-16, the 1% uprating policy will take a total of £2.8 billion out of the pockets of the very people who the Government should be seeking to support. More than at any other time, these families are relying on tax credits and other benefits to help compensate for the squeeze in their earnings and the rising prices of essentials.
As other noble Lords have mentioned, it is also unhelpful to set up a false distinction between in-work “strivers” and out-of-work “shirkers”. All of us who are actually in touch with the effects of this Bill in local communities know that many are losing their jobs through no fault of their own. Contrary to ministerial rhetoric, the vast majority of unemployed people want to work: 70% of unemployed people find work again within a year and only a tiny minority of workless households contain two generations who have never worked. As if it is not enough to lose your job, some of these people are now being vilified and impoverished.
Secondly, the Bill will have an adverse impact on the population at large. In total, it is estimated that 6.4 million families with children will be affected. That is 87% of all families with children and 95% of lone-parent families with children. While nearly all families will be affected by this policy, it is the poorest families who will bear the disproportionate share of the burden. The Government’s own impact analysis reveals that two-thirds of the cost of this measure is from the bottom third of the income distribution; only 3% is from the top third. Surely this is completely inconsistent with the Prime Minister’s statement that,
“those with broader shoulders should bear a greater load”.
I am not afraid to say that I think this is wrong.
Of course, this Bill comes on top of all the other welfare cuts that are disproportionately affecting low-income families, such as cuts in disability benefits and in the local housing allowance. I see at first hand the effects of these in my own city of Leicester, where the bedroom tax will affect 13% of tenanted households; the benefit cap will affect 585 households; and cuts in council tax support will affect 16,000 households, which will have to pay some element of council tax for the first time.
The Institute for Fiscal Studies estimates that the combined effect of all the tax and benefit changes introduced between 2010 and April 2015 is to reduce the incomes of the poorest fifth of families with children by about 7%. As others have said, the inevitable impact of this policy will be a further increase in child poverty. The Government’s own estimates are that this Bill will push 200,000 more children into poverty. Even before this measure was announced, the Institute for Fiscal Studies was already estimating that relative child poverty was set to increase by about 400,000 between 2010 and 2015. In Leicester, 32% of children are already in poverty, well above the 21% national average. This policy will substantially increase that number. I ask the Minister: what are the Government doing to reduce the impact on these 200,000 children?
Finally, I fear for the long-term implications of this policy. This Bill breaks the historic link between benefits and price inflation, which will have implications not just over the next three years but in 10 and 20 years’ time. We have not had enough public and political debate about this. The cumulative impact of this policy is a substantial erosion in the real value of benefits for the poorest working-age households, which is already considerably below what most people agree is necessary to achieve an adequate standard of living. Families that are already in a financially precarious position due to debt problems, lack of family support and so on will be particularly vulnerable, pushing many into unmanageable debt and triggering mental health problems, homelessness and family breakdown.
The changes to uprating policies announced by this Government already mean that the level of means-tested support will be 7% lower by 2016-17. If inflation turns out to be higher than currently forecast, the impact on living standards will be even greater—a serious risk that does not appear to have been adequately considered by the Government. Every unexpected increase in food prices or fuel costs will hit the pockets of those least able to bear the cost. What flexibility will there be to support vulnerable families if inflation rises much higher than the 2.2% measured by the consumer prices index?
If we wind the clock forward, what kind of safety net will be left in 10 or 20 years’ time? I fear that we are heading in the direction of a United States-style welfare system, where healthcare provision and pensions are large and protected but working-age provision is less generous and more stigmatised, barely providing enough for people to live on without relying on charitable handouts, where visits to the food bank are not an emergency response to an economic crisis but an integral part of the welfare state. Is this really the kind of society that we want to live in?
This Bill will not help the well-being of the most vulnerable in our society. It will depress hard-working families even further, remove much needed support for the vulnerable and unable to work, and potentially take us in the wrong direction for a generation, condemning countless children to poverty. It is a proposal that I cannot support.
Lord Bates
My Lords, as I listened to the right reverend Prelate, I struggled to think of one point in this Bill on which this House might be unanimous, but I venture that it is this: that the provisions of the Bill are unwelcome. However, the question was never whether they were welcome; it was always whether they were necessary.
The roots of this Bill in this Parliament lie in the bill for the previous Parliament: the doubling of the national debt and the biggest budget deficit in the developed world and in our own peace-time history. From 2003 to 2010, the previous Government spent £171 billion on tax credits, contributing to a 60% rise in the welfare bill, which was unsustainable. I have never quite been able to get to grips with the idea that profligacy is compassionate and that sound management of your finances is somehow hard-hearted and uncaring.
Other myths that have been put forward surround language. “Shirkers”, for example, is an expression that I would never use, having grown up on Tyneside with many people who found it degrading to be in receipt of government aid through welfare rather than having the dignity of earning a salary. I never use that phrase, but, of course, it was never this Government who started its use; it was Mr Liam Byrne—to whom I shall refer a couple of times in this speech. He said at the Labour Party conference in September 2011:
“Let’s face the tough truth—that many people on the doorstep at the last general election felt that too often we were for shirkers not workers”.
That was not a Conservative statement. In a speech given by Mr Byrne at the London School of Economics in January last year, he said:
“Labour is the party of hard workers not free-riders. The clue is in the name. We are the Labour Party. The party that said that idleness is an evil. The party of workers, not shirkers”.
It is important when we have a debate of this nature, which is clearly highly charged and emotive, that we correctly ascribe the language being used.
Let us place the proposed savings that this measure will bring about in some sort of context. We are talking here about proposed savings in 2014-15 of £1.1 billion, rising to £1.9 billion in 2015-16. That is 1% of the £117 billion bill for social welfare, excluding pensions and sickness. Another argument used is that this is somehow a pernicious measure which seeks to attack the poor while helping the rich, yet the argument used about higher-rate tax cuts is worth further examination. Higher-rate taxpayers will pay more tax to the Government in every single year of this Parliament than they paid in any single year of the previous Parliament. The increase of the higher rate of tax to 50p in the pound came into effect on 6 April 2010. If ever there was deathbed conversion on the part of the previous Government, that was it. In 13 years, they did not put up the higher rate of tax; it came into effect two days before the Dissolution of the previous Parliament. We are moving forward and saying that you will pay more through capital gains tax, more through the reduction in the pension tax relief threshold, more through the freezing of inheritance tax, which will come later, and in a number of other ways.
Therefore, the point that the Government are focusing on fairness in restoring the public finances is an important one. For example, changes in child benefit will mean that those who earn salaries over £50,000 will progressively lose their child benefit, which has widespread support as being fair. The raising of the personal allowance has halved the tax bill of someone who is on the minimum wage and taken 2.2 million of the poorest working families out of tax altogether. The state pension has risen from £97.65 in 2010 to £110 per week in the current year, including one of the largest rises in the level of the state pension ever in 2011.
There is another crucial element, which is reducing the welfare dependency culture in the UK, which has trapped millions on welfare and is a huge waste of human potential. Between 1997-98 and 2010, while average earnings increased by 30%, tax credit spending increased by 340%. The result was that by 2010, 90% of all workers were eligible for some form of welfare.
That leads me to another point on which I should like to press my noble friends on the Front Bench a little further. Given the opportunity, I will return to it in Committee. With the introduction of universal credit, we will have a system where, no matter what the salary of the job, you will always be better off in work by a straight line table of 65p in the £1. It is very important that people should always be better off in work. That is one of the principles at the heart of this reform. However, in the debate on 17 January led by the noble Baroness, Lady Hollis, which I guess was a bit of a forerunner of this debate, one of the issues that I raised was the living wage. I should like to explore it further.
I followed it up in a Question for Written Answer, in which I asked what would be the effect on the bill for social security benefits of raising the minimum wage to the living wage. If the argument, which I fully support, is that we want to reduce welfare dependency, then whether that welfare dependency comes through levels of benefits or inadequate levels of income, it needs to be treated exactly the same. The Answer was:
“The Government support the idea of a living wage and they encourage businesses to participate. However, requiring employers to pay a living wage higher than the national minimum wage could be burdensome to business and damage the employment prospects of low-paid workers … In the absence of evidence on the living wage’s adoption by employers and the resulting effect on employment levels and patterns, it is not possible to estimate the net effect on income tax and national insurance receipts, or on social security benefits”.—[Official Report, 29/1/13; col. WA 315.]
On the first part of the Answer, I would say that if it was the case that the minimum wage destroyed jobs, why have we continued to increase it from £5.93 in 2010 to £6.08 in 2011 and then to £6.19 per hour in 2012? Presumably, we accept that it does not destroy jobs.
When it comes to calculating the cost, Her Majesty’s Treasury seems unable to estimate it, but the Resolution Foundation has estimated that the living wage would introduce gross savings of £3.6 billion in increased tax revenues and a reduction of £1.1 billion in tax credits and means-tested benefits—a not insignificant sum, as it is the same as would be yielded by the 1% cap on welfare increases over the next three years.
I therefore encourage my noble friend to reconsider the issue of the living wage. As a Conservative, I think that we should help companies to create wealth and jobs through lower taxes, not by subsidising low pay. That is worth looking at. It would be entirely in keeping with the principles of the Secretary of State for Social Security and, I am sure, the Chancellor of the Exchequer, and I would support it. That would show that we are on the side of low-paid employees who are struggling to get on in life and whose contribution and effort we respect and admire.
Baroness Hollis of Heigham
My Lords, normally one can say something halfway decent about some aspect of any social security Bill. I think that for the first time in 20 years in your Lordships’ House, I can find nothing good to say about this Bill at all—nothing. It is simply a lock-in cuts Bill which, to save £3 billion, will send 1 million poor children into deeper poverty by 2020 so that the better off among us, including myself, are spared a tax rise while millionaire earners have a hefty tax cut that is, curiously, also worth £3 billion.
Why do we oppose this Bill? It is simple, really. First, as my noble friend Lord McKenzie said, it is entirely unnecessary. We have always had annual up-ratings to respond to inflation; we now have a 1% rise for the forthcoming year and a Bill, costing many hours of parliamentary time, continuing it for a further two years. Why? The only defence offered by the rather fragile impact analysis is “certainty” for the financial markets, the public, and recipients themselves. Certainty, my Lords? Even if the Government cruelly ignore inflation, which the OBR believes will hit nearly 4% by 2015-16, benefit spend will still depend on the future number of claimants as well as on the level of their benefit. Exactly how can the Government give certainty to the markets and, that nice touch, certainty for the recipients, who will no doubt be grateful to learn that their benefit cuts are guaranteed for the next three years? No, the Bill is to lock in these benefit cuts for the poorest—to take it off the agenda, so to speak—in preparation, I do not doubt, for further cuts still to follow.
After all, if our solicitous concern for the markets and the public was driving this Bill, we would offer the same certainty to taxpayers for the next three years. There would be frozen tax allowances, so no more Lib Dem raising of the thresholds with the very real uncertainty that causes for NEST, auto-enrolment and, no doubt, the markets. There would be frozen tax rates, so no pre-election handouts. No, the Chancellor wants to lock the poor into their cuts, while being free in an election year to adjust the taxes that fall on the rest of us.
Secondly, the spin surrounding this Bill is deliberately and unpleasantly misleading, suggesting that these cuts fall on the undeserving poor, so that is all right then—the ones with closed curtains. It is not all right but, in any case, it is completely untrue. We had the distinctly ugly spectacle of the Iain Duncan Smith press releases while this Bill progressed through the other place, implying that these cuts were morally as well as financially desirable because they would help to wean the poor off benefit dependency, which the noble Lord, Lord Bates, cited today, as though the recipients were addicts waiting for their next benefit fix rather than loving and responsible parents trying desperately to feed their children. That was while IDS knew, as we all know, that two-thirds of these capped benefits are going to people in work on low pay with children to support. IDS smeared every poor family in this land, and I had thought better of him.
Why do we need these top-up benefits, such as housing benefit and tax credits for people in work? We all know why, don’t we? It was because while a wage may be acceptable for a single man in a full-time job on minimum wage, that wage will be hopelessly inadequate for a family man with two or three children to support unless it is topped up by tax credits. So unless employers raise wages substantially not to a living wage but to double the current pay to make good—to something like £10 or £12 an hour, which is not going to happen—their children will now become poorer still. That of course is why the argument that because pay is being capped to 1% so benefits must be is utterly fake, because Iain Duncan Smith—Mr Smith—knows perfectly well that they are largely the same group of people, their low but capped pay being topped up by low and, in future, artificially capped and lowered benefits.
It is precisely because earnings have fallen below inflation over the past few years during the recession that the tax credit bill has risen to compensate for that shortfall. Firms have also cut hours rather than sack staff; 3.5 million people are now involuntarily underemployed. As one family man in Norwich said to me not long ago, at least tax credits help to make up the difference.
So instead of the Government explaining and accepting, as they should, that the increase in tax credits is due to falling wages and that it helps to protect families, we are instead told that as wages have fallen, so must benefits, thus ensuring that the working poor face a double lock on pay and tax credits—and of course the universal credit, when it comes in, will no longer take the strain.
Nevertheless, the Government claim that we cannot afford not to cut benefits, an argument that has been run today. Benefit expenditure overall has grown, partly because tax credits help to offset low pay and lowered hours of work but mainly because pensioners are protected from any cuts, their pensions are rising and more of them are living longer. That is good news. However, the dirty news is that the unemployed and the low-paid, and their children, are now being blamed by IDS for what his colleague, Steve Webb, is rightly doing for pensioners. How cynical can you get? Pensioners get a triple lock into greater comfort, which I welcome, while the poor of working age get a double lock into increased poverty.
Let us be clear, and I make this point again: this is about policy choices. As my noble friend Lord McKenzie has said, the Government have shown that they are on the side of millionaires, who are receiving a tax cut worth £3 billion, rather than 1 million poor children who will see their parents made poorer still by around £3 billion.
Above all, the Bill and its impact analysis cheat. They both treat these cuts as though they were freestanding—one-off, so to speak—and apparently not so very large. Around 30% of households will see an average cut of £3 through this policy, according to the impact analysis documents, when actually those cuts are a further slice off income on top of the myriad other cuts since 2010 that are already damaging poor families. We have heard nothing about those today, even from those who sit on the coalition Benches. In that regard, I say, “Shame on you”, because they are deleting what is clearly absolutely central to this debate. We have been offered no assessment of the cumulative impact of these cuts—£18 billion of cuts and no public analysis of how they build up or of whom they hit.
We had a debate on this a couple of weeks ago. I hope that noble Lords will forgive me if I repeat the broadest of statistics; as the Government will not, I will try. With the invaluable help of CAB and Landesman economics, we tracked the cumulative effects of all the cuts since 2010 on one family: a couple with two young children, he a security guard in full-time work on minimum wage, living in a £100 per week council house and, obviously, entitled to pay council tax. He gained £1.71 per week from the raising of the tax threshold and then went on to lose £30 to £35 per week in benefit cuts. If one of his children is disabled, say, he will lose over £40 per week. Under the universal credit, the cuts increase to £50 per week if he is in work or £65 per week if he is unemployed. It gives a new meaning to the slogan that the universal credit will make work pay—yes, by reducing the benefit floor underneath it.
Those statistics were the result of a weekend’s work. With more time, I would have tracked the cumulative effect not only on the security guard’s family but on a lone-parent family, on a childless couple and on a single person, because they all share the cuts. It is not rocket science; it is standard policy analysis on standard family types, as they are called, and yet we are told that the DWP and HMRC with, what, 60 professional analysts, powerful computer modelling and a couple of months in hand to do the work are unable tell us what the total effect of these cuts will be, which some of us were able to work out in a weekend? I really cannot believe that they do not know what the impact of their policy initiatives is and who bears the bill. They still will not or cannot tell us. If they do not know, it is an utter dereliction of social duty, it really is—you cannot develop policy and be indifferent to its effects—but if, however, they do know and are not telling us, it is a deceit that I cannot believe my former department would stoop to.
Finally, what makes me angriest of all—the right reverend Prelate the Bishop of Leicester powerfully focused on this—it that this Bill is grotesquely unfair on whom it falls, on poor children above all. Since when, as we talk about us all being in this together, do we include poor children in the we, but exclude comfortably off pensioners like me, who have experienced not a penny of cuts? What sort of we is that? The noble Lord, Lord Bates, said nobody was telling him where to find the money. I urge him and the noble Lord, Lord German, to accept that we are today making policy choices, not following financial imperatives. It really is about choices about who pays and, ultimately, who gains. It really is. With £32 billion spent on pension tax relief still untouched, although two-thirds goes on the better off, and what is happening on tax reductions for millionaires, these are political policy choices.
We could all have done different and in the process saved the situation that poor children will fall into, stumble into, as a result of what we are doing today. These cuts will fall on those in rented housing who rightly fear losing their home, rather than on those who have two, three or, as the papers have recently told us, even eight homes. They fall on those who go to food banks, not to foodie restaurants. They fall on separated loving dads who have their children stay over at week-ends, rather than on fathers who lose contact and refuse them. They fall on families with a wheelchair user rather than a Ferrari driver. These cuts fall on the vulnerable but voiceless, rather than on those of us with resilience and resources, but who, of course, are more likely to vote. It is a shameful little Bill. As Hobbes might have said, it is nasty, brutish and short.
Lord Low of Dalston
My Lords, it feels presumptuous to rise after a powerful speech such as that, but I shall try to do my best.
This miserable little Bill is not only mean-spirited and out of touch; it, or rather the spin surrounding it, is misleading, not to say dishonest. Moreover, the whole enterprise is misconceived. It is out of touch in the way it perpetuates the relentless attack on welfare, which is depicted as an aberration in social policy, to put it no higher, that needs to be reversed instead of as a mark of a civilised society acknowledging its obligation with increasing prosperity to look after its less fortunate members. Recipients of welfare are demonised as battening on society, and crude cutting is mystified in the rhetoric of helping people off benefits and into work.
The Bill’s justifications are misleading in their use, not to say their creation, of five myths. First is the myth that there is a radical separation between those on welfare and those in work, but many of the benefits that will be pegged by this Bill go equally to those on welfare and those in work: tax credits, for example. The second is that benefits have risen twice as fast as pay. They may have if you pick your dates correctly, but everyone knows that historically wages have risen considerably faster than benefits, which are pegged to the rate of inflation.
The third myth is that percentage, as opposed to cash, increases are a fair reflection of these things. I think that a caller to “Any Answers?” on the radio got this right when he pointed out that a 1% increase on the national average wage of £500 a week amounts to £5: a worthwhile sum. However, 1% on jobseeker’s allowance of £71 amounts to only 71p. That is as much of an insult as Gordon Brown’s 75p increase in the old age pension.
Fourthly, there is the myth that any shortfall in benefits is made up for by the increase in personal tax allowance. This applies only to those in work, of course. Anyway, as Citizens Advice has shown, capping the uprating of benefits will swamp any gain from the increase in the personal tax allowance, certainly for low-income households.
The fifth myth is that the most vulnerable are protected, but you do not protect the poor by cutting welfare since it is the poor who rely on welfare. You only have to look at the treatment of disabled people, whom the Government maintain they are protecting under the Bill, to see the essential dishonesty of the Government’s propaganda. Here, I declare my interest as having a connection with a number of disabled people’s organisations, which are mentioned in the register.
Disabled people are certainly vulnerable. They have experienced a drop in income of £500 million since the emergency Budget of 2010. The Government have already reduced the measure by which benefits are uprated from the higher RPI to the lower consumer prices index. Some benefits for disabled people and carers, such as disability living allowance, the support group component of employment and support allowance and disability-related tax credits are exempted from the reduced uprating. This acknowledgment that disabled people need additional protection is welcome. However, notwithstanding the Government’s claims, the Bill will still mean a real-terms cut in vital support for many disabled people. DLA will continue to rise by inflation, but this is not the case with employment and support allowance.
Following a work capability assessment, people who are unable to work can be placed in either the support group or the work-related activity group. Many disabled people are being placed in the work-related activity group. For them, the Bill will cap the uprating of this benefit to 1%. This will mean in effect that households in the work-related activity group receiving ESA will be £87.65 a year worse off. Furthermore, disabled people who are placed in the support group, meaning that their impairment or condition is such that they are not expected to look for work, have been given only limited protection from the reduced rate of uprating. The ESA that disabled people in the support group receive is made up of a core payment with an additional support group component. Only this additional component will continue to rise by inflation, with the core element rising by only 1%. This means that, overall, disabled people in the support group will see their ESA payments rise by just 1.4% rather than inflation. This will mean that a disabled person in the support group of ESA will be £62.76 a year worse off.
The real-terms loss of financial support that disabled people receiving ESA will face compounds a situation where disabled people are disproportionately more likely to live in poverty than non-disabled people. The problems of living on a low income are then compounded by the extra disability-related costs. When these are included in the measurement of poverty, the proportion of households with a disabled member living in poverty doubles to almost 50%. The Government’s impact assessment recognises that the Bill will impact on disabled people. It states that households where someone describes themselves as disabled are more likely to be affected than those where no person describes themselves as disabled—34% of households as against 27%.
For disabled people who also rely on other benefits, such as housing benefit, the reduced rate of increase will impact on the financial support they need to live. Despite assurances that disability benefits will be protected and continue to increase by inflation, disabled people claiming ESA, housing benefit or any other benefit not specifically for disabled people will see a real-terms cut to the amount of financial support that they receive.
The Bill will also reduce the rate at which the lower tier of the disabled child addition of universal credit increases. Disabled children in the UK are already disproportionately likely to live in poverty. Approximately 40% of all disabled children—about 320,000—live in poverty, compared with a poverty rate of 30% across all children. Nearly one-third live in severe poverty, where a family’s income is less than 40% of the national average. Under universal credit, which will begin to come into effect later this year, parents of disabled children can receive a benefit called the disabled child addition. This will replace the current disabled child tax credit.
Under universal credit, the support available for disabled children who do not receive the high rate of the DLA care component will be cut by one-half, from around £57 a week under the disabled child tax credit to £28.52. Furthermore, the Bill will mean that the value of this benefit will increase at a significantly slower rate—by just 1%—as opposed to in line with the consumer prices index, which is currently 2.7%. As a result of the Bill, parents of disabled children receiving the lower disabled child addition of the universal credit will lose £25.21 a year or £75.63 over the next three years.
Finally, the Bill is misconceived because, with the economy flatlining, it does not make sense to take purchasing power out of the hands of a section of the population that is most likely to spend what it has. The fiscal squeeze is set to tighten in 2013-14 compared with 2012-13, and the IMF is warning that planned cuts may need to be scaled back if growth does not build momentum by early 2013. Talk of growth, such as we heard in this House a fortnight ago, is largely beside the point while the level of demand in the economy is still so low. In these circumstances, the last thing we need is a further reduction in the level of demand. It even undermines the automatic stabilisers.
If the Government are to be as good as their word on the protection of disabled people, at a minimum the whole amount of ESA needs to be uprated in line with inflation for those in the work-related activity group, as well as the support group, and not just the additional support group component. Disabled people should be exempt from the reduced uprating of other benefits, such as housing benefit. I invite the Minister to respond positively to this proposal in the winding-up speech, before I start drafting amendments for Committee.
European Council
(11 years, 2 months ago)
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Lord Tomlinson
May I ask the noble Lord, Lord Hill, one simple question? We have the Statement on the European Council in the Printed Paper Office, but in the very last sentence it refers to the multiannual financial framework, as set out in document 37/13. I have been now two or three times to the Printed Paper Office, and that document is not available. It makes it very difficult for Members to comprehend the Statement when the principal part of the European Council in discussions on the multiannual financial framework is not available to Members of the House. I apologise to the noble Lord for interrupting him before he starts.
Lord Hill of Oareford
I am happy to be interrupted at all times. I apologise for that and will see what we can do to put that right as soon as possible.
With the leave of the House, I will now repeat a Statement made earlier in another place by my right honourable friend the Prime Minister. The Statement is as follows:
“Mr Speaker, I am sure that the whole House will join me in sending our best wishes to Pope Benedict following his announcement today. He has worked tirelessly to strengthen Britain’s relations with the Holy See, and his visit to Britain in 2010 is remembered with great respect and affection. Pope Benedict’s message on that visit of working for the common good is something that spoke to our whole country, and I am sure his successor will continue to provide a voice of inspiration for millions around the world.
Last week’s European Council agreed the overall limit on EU spending for the next seven years, starting in 2014. When these multiyear deals have been agreed in the past, spending has gone up, but last week we agreed that spending should go down. By working with like-minded allies, we delivered a real-terms cut in what Brussels can spend for the first time in history.
As the House knows, the EU budget is negotiated annually, so what we were negotiating, initially at the Council last November and again last week, was not the individual annual budgets but rather the overall framework for the next seven years. This includes the overall ceilings on what can be spent—effectively, the limit on the European Union’s credit card for the next seven years.
During the previous negotiation, which covered the period 2007-13, the previous Government agreed to an increase in the payments ceiling of 8% to €943 billion. Put simply, this gave the EU a credit card with a higher limit, and we are still living with the results of allowing the EU’s big spenders to push for more and more spending each year. In fact, only last year, while member states had to make tough decisions to tighten their belts at home, the big spenders succeeded in increasing the 2012 European budget by another 5% compared with the previous year. If no deal had been reached, the existing ceilings would have been rolled over and annual budgets could have continued to soar for the next seven years. Because annual budgets are negotiated by qualified majority voting, it can be difficult to constrain spending in these annual negotiations. By contrast, the seven-year limits are agreed by unanimity. So this was our chance to get the ceilings down in line with what could be afforded.
The European Commission produced an initial proposal for increasing the payments ceiling still further to €988 billion. This was strongly supported by a number of member states. The first negotiation took place at the Council in November and, although the President did then reduce this during the Council itself, it was still some way short of the real-terms cut we were looking for. Together with like-minded allies from a number of countries, including Germany, Sweden, the Netherlands and Denmark, we rejected the deal on the table and told them to think again.
At this Council, we made further progress. Together with like-minded allies—many of whom, like Britain, actually write the cheques—we achieved a proper look across all the areas where spending in the Commission proposal could be cut. While there are areas where we could and should go further, not least on reforming the common agricultural policy and reducing the bureaucratic costs of the European Commission, we agreed a real-terms cut in the payment limit to €908 billion. That is €80 billion lower than the original proposal. It is €35 billion lower than the deal agreed by the previous Government, which is still in operation today, and it is €60 billion lower than the emergency arrangements which would have come into place if there were no seven-year deal.
But my aim was not simply to cut the credit card limit. I wanted to set the limit at a level that would deliver at worst a freeze and at best a cut in the actual spending over the next seven years, and this is indeed what this deal delivers: a real-terms cut. If you take the latest complete budget—the one for 2012—and freeze spending at that level for the next seven years, you would have spending of €932 billion. Our new payments limit means spending cannot rise above €908 billion, so we have slashed €24 billion off a real freeze on the last completed budget. Of course, the budget set in 2012, which Britain voted against, was unacceptably large, but even against the average of the past two completed years—2011 and 2012—this deal still delivers a real-terms cut.
Of course, this deal must now be voted on by the European Parliament. The European Council has said that it is prepared to accept some flexibilities about how spending is divided between different budget years and different areas of spending, but we are absolutely clear that this must be within the framework that the member states have now agreed. The EU’s seven-year budget will now cost less than 1% of Europe’s gross national income for the first time in its history.
Let me say a word about how this deal is likely to affect the UK’s contribution; a word about how it is likely to affect what the UK receives from the EU for research, for our regions, and for our farmers; and a word about what this means for growth and competitiveness across the European Union as a whole. On the UK’s contribution, the House will remember how the previous Government gave away almost half of our rebate. This has had a long-term and continuing effect on the UK’s net contributions. It is worth remembering why. When the European Union spends money on, for example, structural funds and cohesion payments in eastern European countries, the UK no longer gets a rebate on this money. As a result, almost whatever budget deal was done, our net contributions were always likely to go up, but as a result of this deal, they will be going up by less.
The only two sensible things we could do to protect the British taxpayer in these negotiations were to get the overall budget down and to protect what is left of our rebate, and that is exactly what we have done. While the actual amount that the UK contributes will depend on technical factors such as the size of the annual budgets, economic performance and exchange rates, as a result of this deal we now expect the UK’s contribution to the EU to fall as a share of our gross national income. As for the rebate this Government inherited, it is completely untouched. As ever, throughout these negotiations, the rebate was attacked repeatedly, but I successfully rejected all the calls for change. Under this Government, the British rebate is safe.
In terms of what the UK receives, I wanted to make sure that our universities are well placed to receive research work, our less well-off regions are treated fairly compared with others and our farmers continue to receive support for the environment schemes they put in place. On these points, the section of the budget that includes spending on research, innovation and university funding is up by a third, and this money is handed out on the basis of quality, so Britain’s universities are particularly well placed to benefit. We have ensured that structural funds will continue to flow to our less well-off regions. Britain’s share will remain broadly the same, at around €11 billion. And while we have cut spending on the common agricultural policy overall, we have protected the flexibility which will allow us to direct funds to support both the environment and the livelihoods of our farming communities.
Overall, this is a better framed budget in terms of growth, jobs and competitiveness. It is disappointing that administrative costs are still around 6% of the total, but overall spending on the common agricultural policy will fall by 13% compared with the previous seven-year budget. Research and development and other pro-growth investment will now account for 13% rather than 9% of the total budget. Reform of EU spending is a long-term project, but this deal does deliver important progress. Working with allies, we took real steps towards reform in the European Union. It is a good deal for Britain, a good deal for Europe and, above all, a good deal for all our taxpayers. That is what we have delivered, and I commend this Statement to the House”.
My Lords, that concludes the Statement.
Baroness Royall of Blaisdon
My Lords, I thank the Leader of the House for repeating the Statement by the Prime Minister on the outcome of the European Council meeting. Like the Prime Minister and the Leader of the House, I pay tribute to Pope Benedict XVI. He is a spiritual leader for 2 billion people and a theologian of great distinction. His visit to the UK in 2010 will be long remembered as a proud moment for millions of Catholics, other people of faith in this country and, indeed, many Members of this House. His decision to stand down is not one that he will have reached lightly. It is right that all sides of your Lordships’ House acknowledge his service, and from these Benches, I do so now.
On the European Council, I join the Prime Minister and the Leader of the House in welcoming the fact that an agreement has been reached on a cut in the seven-year payment ceilings for the European Union budget. At a time when so many budgets are being cut at home, last October the other place voted for a real-terms cut in the EU budget, and it was right to do so. That is what my party argued for in the debate. In the resulting vote, the Prime Minister was given a strong negotiating mandate for a real-terms cut in the budget. We are therefore glad to see the agreement reached at the European Council. However, as well as restraint in the budget, we needed reform—prioritising growth within a smaller budget by cutting back even further on wasteful spending.
First, on agriculture, the CAP fell as a proportion of spending from 46% in 1997 to 33% in 2010. We welcome the modest decline in agriculture spending as a share of the European budget, from 31% in 2013 to 27% by 2020. The Leader was right to say that there is further to go in this area, with agriculture making up just 1.5% of the total output of the European Union but still accounting for nearly 30% of the budget.
Secondly, we welcome the increase in funds targeted towards growth infrastructure, R&D and innovation. However, can the Government confirm that the achievement of a declining budget compared to November’s proposal came not at the expense of agricultural spending but in part at the expense of this funding for growth? Can the noble Lord also tell the House that proper investment will continue to be made by the EU in science, as urged by many UK university vice-chancellors last week?
Thirdly, the Opposition and the Government agree on the need for the EU to play its part in effective development, diplomatic and governance support in north Africa. Can the Leader of the House therefore say what discussions took place about how the EU could play this enhanced role in the context of the decision in this budget round to freeze the European Development Fund, which provides assistance to that region? Given the new emerging challenges across the Sahel, what information can the Leader of your Lordships’ House provide on how funding to that region will be affected? Will he also take this opportunity to update the House on the transition road map for Mali, which forms part of the Council conclusions?
Fourthly, given the very significant and unprecedented difference between the ceiling on payments and the ceiling on commitments agreed on Friday, can the Leader tell the House what discussions took place on how this would be dealt with in the years ahead?
This budget agreement shows that contrary to the views of some Members opposite, the European Union is capable of change, and that it is capable of change when we work with our allies. However, while this budget agreement brings restraint, Europe still needs a plan for recovery and growth. The Council conclusions talk about the importance of trade agreements. Can the Leader update the House on developments on the possible EU-US trade agreement and on how the Government see it being developed this year, including at the G8 summit? However, do the Government also recognise that the long-term changes to the budget and the possible EU-US trade agreement are not a substitute for a growth strategy now for Europe?
There are 26 million people unemployed in the European Union, more than 6 million unemployed young people looking for work and, shamefully, 1 million of them are here in the UK. I should be grateful if the Leader can say what specific budgetary measures were agreed in relation to young people and employment—for example, on the European youth guarantee.
The European economy is struggling and the British economy is flatlining. What Europe now needs—what Britain now needs—is a plan for jobs and growth. That is the way in which Europe must change, and that must be the priority for the months and years ahead, in both Britain and the European Union.
Lord Hill of Oareford
My Lords, I am grateful for the broad welcome given to the Statement by the noble Baroness, Lady Royall. She made the point that this negotiation demonstrated, as I believe it did, that the EU is capable of change. It was not that long ago that some in the party opposite were saying that my right honourable friend the Prime Minister was isolated in Europe. The deal that he managed to strike demonstrated that, by working closely with our allies, particularly with the Nordics, he has been able to secure a good deal and a deal which, overall, will lead to savings, so we are far from being isolated. That is absolutely right in the current climate.
On agriculture, I agree with the noble Baroness that there is more to do on CAP. Generally, in these negotiations one does not always achieve everything that one wants. Britain’s overriding priority was to go for a freeze, or, if possible, a real-terms cut in the overall credit card limit or ceiling, which we have achieved. Some steps were taken and the CAP budget was reduced for the next seven years from a proposed €320 billion to €277 billion, so that is some progress, but I accept that there is more to do.
As regards growth, as the noble Baroness said, the budget for R&D has increased. The Connecting Europe Facility has also been increased. In terms of making savings on where some of those moneys have come from, my right honourable friend was keen to make bigger savings in the administration costs and he was disappointed not to have got those because there is a widespread feeling that we could have done better. We managed to take €1 billion out, but I am sure that more could have been done.
On the noble Baroness’s important points about governance in Africa, the Sahel and the road map for Mali, it is true to say that the overwhelming priority of this Council was sorting out the multi-annual financial framework, so the amount of time spent on some of these other important issues was proportionately less. As regards Mali, at the European Council the contribution made by the French was praised and the United Kingdom gave them strong support. We will contribute by training troops from the west African nations, as the noble Baroness will know. Generally, our approach is to try to develop a more sophisticated, political, diplomatic strategy alongside a military strategy.
The European Development Fund went up by a modest amount, so I am not sure that it was frozen. If I am wrong on that, I shall correct what I have said.
On the gap between the ceiling on payments and the ceiling commitments, raised by the noble Baroness, I understand that that size of gap is not untypical in terms of these negotiations. It is broadly in line with what had been the case in the previous seven-year negotiations. The European Commission also said that it thought that scale of gap was deliverable.
On growth generally, the noble Baroness is right to point to the importance of the trade negotiations and to see whether we can make more progress on the EU-US talks. I know that my right honourable friend the Prime Minister spoke to President Obama not long ago to try to make further progress on that. I also know that good progress has been made on those talks with Canada and negotiations are being taken forward with Japan. Opening up the European Union and encouraging trade is one of the most powerful ways in which to help growth and to get jobs, especially for the young, about which the noble Baroness is concerned.
Lord Dholakia
My Lords, I thank my noble friend for repeating the Statement in your Lordships’ House. Perhaps I may say how much we welcome the Statement, and in particular the fact that research and university budgets have not been affected. At a time of economic recession, when national and household budgets are shrinking, it is right that the European budget should reflect the gravity of the situation. However, two elements have been preserved: growth and jobs. Is my noble friend able to quantify the overall impact on growth and jobs resulting from the reduced European Union budget?
Lord Hill of Oareford
I am grateful to my noble friend for his overall welcome, and for the support he has given over a considerable period to my noble friends who took part in these important negotiations. I am not able to give a specific calculation of what the contribution of a smaller budget is likely to be to jobs and growth, because so many variables are in play: what happens in the eurozone, what happens to trade, how far we get with these talks and so on. What I am able to say is that the increased line on research and development should be of particular benefit to British universities, given that the money is distributed on the basis of quality—and, as we all know, British universities are renowned for their quality.
Lord Wigley
My Lords, will the Leader confirm my understanding that structural funds will continue to flow to regions of economic need. I believe those were the words he used? If so, will he confirm that the funds will remain at the levels that were previously anticipated for qualifying areas such as west Wales and the valleys, and that the source of funding will not be repatriated under last week’s agreement?
Lord Hill of Oareford
My Lords, on the question of these important funds, the noble Lord will be aware that the direction of travel, which the British Government support, is to try to make sure that they go to the least well-off regions in the European Union. With the accession of new countries to the east, it is important that they should have those funds. On the noble Lord’s specific question, we currently expect that the overall receipts will be broadly comparable to 2007 to 2013 levels. There will be a domestic application process that the Government will have to go through in due course, as a result of which we will know what the figures are.
Lord Howell of Guildford
My Lords, I apologise for not being in my place for the first two minutes of my noble friend’s speech. Is not by far the best outcome of this very satisfactory budget negotiation, on which my right honourable friend the Prime Minister should certainly be congratulated, the fact that it demonstrates that when we go for constructive reform in the European Union, we are not without friends—and indeed, that we are gathering an increasing number of allies? Will my noble friend point out to those who keep talking about Britain being isolated and marginalised that the opposite is the case, and that when we develop our ideas further for European reform, clearly we will have more friends?
Perhaps I might add a second question. I read in the papers this morning that up to 20% of the entire EU budget will now be spent on climate-related and green issues, including energy. Can my noble friend confirm whether that is true? If it is, what can we do to make that expenditure far more efficient in achieving good environmental and energy results?
Lord Hill of Oareford
On my noble friend’s second question, I will need to see whether I can provide better particulars on how the figures break down, and what the basis is for the speculation that my noble friend saw—whether it is to do with the energy elements of environment funds through the CAP, for example. I am not sure about that, so I will see what I can do. On his general point, I could not agree more. This outcome shows that Britain was far from marginalised and isolated in the negotiations. It also shows that the pessimistic view held by some that Britain is doomed to fail, and therefore should not go into negotiations with a strong position trying to win others round to our point of view, is entirely wrong.
I remember that many years ago when I was working for the then Prime Minister, John Major, there were similar views to the effect that Britain would never be able to win an opt-out of the single currency or an opt-out of the Social Chapter, but in fact those were both successfully achieved. Similarly on this occasion, there were people looking forward with eager anticipation in the expectation that my right honourable friend the Prime Minister would not be able to secure Britain’s interests. In fact, he has; I agree with my noble friend that by being clear in one’s objectives and by assembling alliances—in this case, with the Germans, the Swedes, the Dutch and the Danish—it is perfectly possible for Britain to secure its objectives, and it will continue to be so.
Lord Pearson of Rannoch
My Lords, I hope it will not ruin the Prime Minister’s day if I offer congratulations on a small step in the right direction. However, I think he is going a bit far when he describes the present situation as “a good deal for taxpayers”. Could the noble Lord tell us what this country’s gross and net contributions now become? In 2012, our gross contribution was some £22 billion, of which we got back around £11 billion, so our net contribution was £11 billion a year. That represents the salaries of 1,000 nurses at £30,000 a year every day, which we never see again. Therefore, I still have to query whether this whole arrangement is anything but a disastrous deal for British taxpayers.
More importantly, perhaps, is it true that the European so-called Parliament is going to vote on this new proposal in secret? If so, does that not nicely confirm the nature of this animal? What happens if the EU Parliament votes this down? Do we go back to some 2% inflation per annum for the next seven years? Could he enlighten us on that before we get too overwhelmed by the Prime Minister’s success?
Lord Hill of Oareford
I shall do my best to calm the House down, my Lords. I noticed that in the space of the comments of the noble Lord, Lord Pearson, he went from expressing concern about causing my right honourable friend the Prime Minister an anxiety attack by praising him, to rescinding that praise by the end.
On the cost to the British taxpayer, clearly, so far as the negotiation was concerned, the fact that the Prime Minister managed to end up with a credit card limit that was so many billions of euros lower than had been initially proposed is a cause of some modest satisfaction to the British taxpayer. That cost would have been lower if a chunk of our rebate had not unfortunately been surrendered in those negotiations in 2005 in the hope, as I understand it, that there would then be a deal on the CAP: a deal that has not been forthcoming. That explains why, although the overall figures are considerably lower—and they do represent a real-terms cut, which is what everyone wanted—the cost to the taxpayer is nevertheless higher than one would like.
On the European Parliament, like the noble Lord I have read some of the speculation there has been about that. The European Parliament has a role to play in approving the budget, but our position is that that agreement was struck by the 27 member states that are responsible for finding the money. We believe that some of the situations that the noble Lord has invited me to speculate about will not come to pass, but we need to see what happens. I will not be drawn into his alluring hypothetical situations.
The Lord Bishop of Worcester
My Lords, we on these Benches wish to join in paying tribute to His Holiness the Pope following his announcement. We give thanks for the outstanding contribution that he has made to the common good as well as to the welfare of the church during a long and distinguished ministry. He is in our prayers, as are those responsible for electing his successor, and as are the many Roman Catholics who will have been distressed and disorientated by his announcement.
Mention of the common good brings me to the EU budget and the welcome announcement that has been made. Can the Leader of the House assure us that the Government will focus their attention on what the budget seeks to achieve as well as on its size? There is a broader question here of what constitutes good stewardship of the resources that Europe has at its disposal. Stewardship requires a way of living that recognises that everything belongs to God and that all resources must be used for his glory and the common good. It requires us to find ways of collaborating with others to make the resources in our possession work for the good of all, as intended by God.
The Leader of the House will know that in 2004 the Sapir report was commissioned by the European Commission to look at ways in which the EU might deliver on the promise made in 2000 of becoming the most competitive knowledge-based economy in the world by 2010. The report argued that:
“As it stands today … the EU budget is a historical relic. Expenditures, revenues and procedures are all inconsistent with the present and future state of EU integration”.
Can we have an assurance that the Government will press for a more radical restructuring of the European Union budget in the time to come?
Lord Hill of Oareford
My Lords, I recognise the important points made by the right reverend Prelate on behalf of the Bishops’ Bench in respect of His Holiness the Pope.
On the overall administration of the EU budget, I think my right honourable friend the Prime Minister has made it clear that he shares the sentiment that the way in which it appears to have been going up and up does not suggest very good stewardship—to use the right reverend Prelate’s word. In the years ahead we will carry on trying to bring pressure to bear, as we will in trying to make sure that all the funds that are allocated are spent responsibly and wisely on the ends for which they were intended.
Lord Tugendhat
My Lords, I think it is the turn of this side of the House. As a former budget Commissioner, perhaps I may add my congratulations to those of others to the Prime Minister on his achievement. I also emphasise the points made by my noble friend Lord Howell about the importance of alliances. This shows that when alliances are built up, results can be achieved, something that many people would not have believed possible. The way in which the Labour Party voted before the last round of budget negotiations, when it thought that it was setting the Prime Minister an impossible target, is an indication of how effective British diplomacy has been on this occasion.
Finally, does my noble friend agree that there is no stronger supporter of the European Union than Chancellor Merkel? The fact that she is on the same side as us gives the lie to those who argue that you measure support for the European Union by the size of the budget. No one would suggest that British patriotism can be measured by the level of public sector expenditure, and it is a complete fallacy to suppose that one should measure support for the European Union, as so many in the European Parliament do, by the size of the budget.
Lord Hill of Oareford
I think I agree with every single point that my noble friend Lord Tugendhat has made. He has underlined the importance of alliances, which is clearly right, and he has drawn particular attention to the strength of the relationship that my right honourable friend the Prime Minister has worked hard to develop with a number of allies, including Chancellor Merkel. It is also true that in domestic politics the level of commitment is not related solely to the size of a budget. Given his experience, I have listened with particular care to my noble friend and I endorse his conclusions.
Lord Hannay of Chiswick
My Lords, I hope the Minister will get some pleasure from somebody who is normally a critic of the Government’s European policy saying that I thought an extremely good deal was sealed last week. I am also delighted that the Prime Minister, in his Statement, drew the right conclusion from it, which was that you can get a good deal if you work carefully with your partners.
Was the noble Lord the Leader of the House not slightly surprised that one thing that no one has commented on so far is that the Prime Minister has committed himself to a budget that goes three years beyond the date of the referendum which he has said he is going to call? On this vexed question of the rebate, will the noble Lord the Leader of the House perhaps confirm that the change in the British rebate that took place in 2005 was simply Britain agreeing to pay its fair share of the structural fund spending in the new member states? Does he think that we should not have paid that fair share? We were the primary protagonists of those member states joining.
Lord Hill of Oareford
First, I very much welcome the noble Lord’s welcome for my right honourable friend the Prime Minister’s achievement, from a different perspective from that of the noble Lord, Lord Pearson of Rannoch. I am obviously very aware of his background and experience in these matters, so am glad to receive it.
On the noble Lord’s point about the rebate in 2005, my understanding is that the other side of that deal, as it were, was supposed to be reform of the CAP, which, sadly, has not been forthcoming. That will cost the taxpayer in the region of, I think, €8.5 billion. From the point of view of wanting to defend the interests of the British taxpayer, I am extremely glad that my right honourable friend the Prime Minister has taken a robust line on Britain’s abatement. He was pushed to surrender more of it but felt that to do so would be wrong. I am glad that he resisted that pressure.
Lord Ryder of Wensum
My Lords, in the event that Scotland votes next year to become an independent nation, and therefore ceases to be a member of the European Union, can my noble friend confirm that the resources normally allocated to Scotland will be reallocated to the other three partners within the United Kingdom: namely, Northern Ireland, Wales and England?
Lord Hill of Oareford
My Lords, one thing that is clear in the document that I believe has been published today by constitutional experts looking into some of the implications, were there to be a vote in favour of independence in Scotland, for membership of organisations such as NATO or the European Union is that it is, to say the very least, unclear how things would pan out. However, the assumption that everything would just roll on is certainly questioned. My noble friend is right to highlight those concerns. Difficult and complicated negotiations would need to take place.
Lord Lea of Crondall
My Lords, will the noble Lord the Leader of the House agree that, given the complexities of these negotiations and the widely recognised need to explain to the British people how these things work, this is not the right time for the Secretary of State for Education to say that the question of understanding the European Union and its history and geography will be removed from the national curriculum?
Lord Hill of Oareford
I always admire the ingenuity with which certain Members of this House manage to broaden the scope of the matter at hand. There are many ways in which we can try to increase public understanding of membership of the European Union, which lies at the heart of why so many people question the nature of our relationship with it. People’s trust in the institutions of the EU does seem to be wearing thin. Whether or not better geography and history teaching will help with that, I leave to others to decide.
Social Care Funding
(11 years, 2 months ago)
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The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, with the leave of the House I shall now repeat a Statement made earlier today in another place by my right honourable friend the Secretary of State for Health, on the funding of care and support in England. The Statement is as follows:
“With permission, Mr Speaker, I would like to make a Statement on the funding of care and support in England. As we get older, none of us can have any way of knowing what care needs we will eventually face. Some will be blessed with a long and healthy life, but many others will be less fortunate.
Today many older people and people with disabilities face paying the limitless—often ruinous—costs of their care, with little or no assistance from the state. While those with assets of less than £23,250 do receive support, those with assets above this level receive none. This is desperately unfair, particularly for those who have worked hard all their lives to pay off their mortgage, to save for their future or to have something to pass on to their loved ones, only to see their property sold and their savings wiped out—something that happens to more than 30,000 people every year or 100 people every day. The system we have also sends out the wrong message: that you are better off not saving for your future because any savings will only disappear in a puff of smoke.
Today I can announce this Government’s radical plans to transform the funding of care and support in England, bringing a new degree of certainty, fairness and peace of mind to the costs of old age, disability and living with long-term conditions, while ensuring that the greatest level of financial support goes to those with the greatest need. We propose to introduce a cap on an individual’s financial contributions towards the cost of care, and a significant increase in the level of assets a person may hold and still receive some degree of support from the state.
In 2010 this Government asked the economist Andrew Dilnot to look at the whole issue of funding for care and support. The independent Dilnot commission published its recommendations in July 2011. In response to those recommendations, and following extensive engagement with the care and support sector, we published the Care and Support White Paper and the progress report on funding reform in July 2012.
In the progress report, we accepted some of Andrew Dilnot’s main recommendations, including those around a consistent, nationally set eligibility threshold for care and support, and universal deferred payments—whereby no one will have to sell their home in their lifetime to pay for care costs. I would like to take this opportunity to thank Mr Dilnot and his team for their excellent work.
A core principle set out by the Dilnot commission was that people should contribute to the costs of their own care but that those costs should be limited and people should be protected against the potentially catastrophic costs of care. This should come through a cap on those costs, and an extended means test. One person in 10 will be faced with care costs in excess of £100,000, with a small number facing costs significantly higher still.
To give everyone peace of mind, from April 2017 we will introduce a cap on the amount that someone over state pension age will be liable to pay. The Dilnot commission’s original suggestion was for a cap of between £25,000 and £50,000 in 2010-11 prices, which is the equivalent of between £30,700 and £61,500 in April 2017 prices. Despite the extremely challenging economic situation we find ourselves in, we have come as close to this range as possible.
The cap will be set at £61,000 in 2010-11 prices, or £75,000 once it is introduced in April 2017. The intention is not that people should have to pay up to £75,000 for their care costs. But by creating certainty that this is the maximum they will have to pay, they can then make provision through insurance or pension products so that they are covered up to the value of the cap, thereby reducing the risk of selling their home or losing an inheritance they have worked hard to pass on to their family.
Young people who already have care needs when they turn 18 will now receive free adult care and support when they reach 18. People who develop a care need after 18 but before state pension age will be protected by a cap that is below the £75,000 threshold.
The other measure that we propose is significantly to increase the amount of assets that a person can hold and still receive financial support for their residential care- home costs. Currently, this is set at £23,250. If a person has assets valued above this level, including, in some circumstances, the value of their home, they receive no support. The Dilnot commission recommended that this threshold be raised dramatically to £100,000 in 2010-11 prices. We accept this recommendation.
From April 2017, the threshold will be increased so that those with assets worth £123,000 or less, equivalent to Dilnot’s recommended level, will all receive some degree of financial support for their care costs. People with the fewest assets will receive the most support. This will, for the first time, provide financial protection for those with modest wealth, while ensuring that the poorest continue to have all or the majority of their costs paid.
Everyone will benefit from the peace of mind that a cap brings. The introduction of a cap and the extended means-tested support will help many people in the most challenging circumstances—we expect up to 16% of older people who need care to face costs of £75,000 or more. But, of course, none of us knows whether we will be one of that 16%. Everyone will benefit from the peace of mind that these changes bring and, by 2025, up to 100,000 more older people will receive financial support for their care costs as a result.
My right honourable friend the Chancellor and the Treasury have rightly insisted that we identify how we pay for the additional costs of these proposals. In this day and age, making promises that you cannot pay for makes those promises meaningless. We have therefore identified exactly how to pay for them. These reforms will cost the Exchequer £1 billion a year by the end of the next Parliament. With the agreement of the Chancellor, they will be met in part by freezing the inheritance tax threshold at £325,000 for a further three years from 2015-16. The Chancellor and the Chief Secretary to the Treasury have agreed that the remaining costs over the course of the next Parliament will be met from public and private sector employer national insurance contributions revenue associated with the end of contracting-out as part of the introduction of the single-tier pension.
These two new proposals join with others previously announced when we published the draft care and support White Paper last summer. They include, from 2015, the ability of people to defer the payment of residential care costs so that no one needs sell their own home to pay for them during their lifetime. Also from 2015, a national minimum eligibility threshold will be introduced to end the lottery of local access that can see support provided to someone in one area but not in another. Taken together, today’s proposals and those already set out in the draft care and support Bill represent a new era of support for the elderly and disabled in England.
Thanks to the certainty that these proposals will introduce, people should no longer feel that they have to hoard every penny in case the very worst happens or feel that they are powerless and that there is no point in saving at all. Rather, they will be able to plan and prepare sensibly for their future. This will be supported by a wider range of financial products becoming available in the market designed to help people to plan and prepare for their later years and to reassure them about how much they will pay. We will work with the care and support sector—with local authorities, charities, care providers and individuals, and with the financial services industry—to develop these plans and to introduce them practically.
Our society is ageing. By 2030, the number of people aged over 85 will double, and the number of people with dementia will exceed 1 million. As the number of older people with such long-term conditions increases, we need to become a society where people prepare and plan for their social care costs as much as they prepare and plan for their pension. Sadly, this is an issue that Governments of all colours have long failed to tackle. While there are many other things that need to be done to prepare for an ageing population, these reforms herald a historic change in the way that care and support is funded in this country.
The economic circumstances are challenging, but these commitments demonstrate our determination to help people who have worked hard, saved and done the right thing to prepare for the uncertain hand that fate deals to all of us in old age. By introducing these reforms within the timescale and at the thresholds set out, they will also be sustainable and consistent with our overriding priority to reduce the deficit inherited from the previous Government. We want our country to be one of the best places in the world to grow old. These plans will give certainty and peace of mind about the cost of care, making sure that we can all get the support we need without facing unlimited costs, while also ensuring that the most support goes to those in greatest need. I commend this Statement to the House”.
My Lords, that concludes the Statement.
Lord Hunt of Kings Heath
My Lords, we are grateful to the noble Earl for repeating the Statement.
It is accepted on all sides of the House that our current social care system is living through the worst of all possible worlds: a cruel lottery in which people who go into later life with everything for which they have worked so hard on a roulette table and the most vulnerable are always the biggest losers. So it needs to change. The Secretary of State has today published a modest plan that will make the system fairer than it is today, and he is to be congratulated on that. We welcome elements of what he has announced. A cap of £75,000 is certainly better than no cap at all. Raising the means-test threshold will help more people on lower incomes to get some help with their charges. It is a step forward, but it is a faltering one, and only one of a series of measures that are required if older people and people with long-term conditions are to be given sufficient care and support. We need a holistic, cross-party approach.
Last week, the Francis inquiry exposed some very serious issues within the National Health Service which impact on the quality of care for a growing number of older people in our hospitals, often with several different illnesses. The NHS is overwhelmed with the demands being made on it, the tightening of its finances and the rightful emphasis on safety and quality. The changes being made by the Health and Social Care Act focus on the commissioning responsibility of general practitioners but, overwhelmingly, the real need for GPs is to focus on improvements in primary care, including accessibility and support for older people in their homes. Just when local authorities are needed to do so much more to help prevent admissions to hospital and to have much faster and more sensitive support for people discharged from hospital, they are having to cope with huge reductions in expenditure.
It is hard not to feel a sense of disappointment when listening to the noble Earl—first, because a Statement on a subject of such importance was briefed to the media before Parliament; because the Government have abandoned any efforts to build a cross-party consensus before rushing to announce their proposals; and because they have chosen to rewrite the Dilnot report with figures of their own, breaking the careful logic so apparent in Dilnot’s report.
There are four problems with what has been announced today, which I will address in turn. First, it fails the fairness test. We will have a durable solution to the problem only if we can answer this question: will it help every person and every couple to protect what they have worked for, whatever their wealth and savings? This package falls way short. According to Demos, the £35,000 cap, as recommended by Dilnot, would benefit about 3.2 million pensioners. A per person cap of £75,000 will benefit only 1.4 million. For the average couple, the cap is £150,000. That might be enough to protect detached houses, but it will not protect the average semi-detached home in large parts of England.
The Secretary of State selectively quoted Andrew Dilnot and, specifically, what he said about the £75,000 cap. I remind the House that Dilnot said that the cap was,
“higher than we would have wanted—£11,000 higher than the top end of our range —and I regret that”.
Will the noble Earl confirm that people with modest to average homes and savings are not protected under this plan? The Secretary of State claimed that insurance companies will step in with new products so that more people can protect their assets but, in oral evidence to the Health Committee, the Association of British Insurers said that it did not believe that the capped-cost model would result in a market for pre-funded care assurance. I would be grateful if the noble Earl could say what confidence he can give the House that a market will emerge. What discussions have been held recently with the insurance market?
The second issue that I am concerned about is that this addresses only a small part of the overall social care funding problem. With this decision, the Government have prioritised the funding of a cap on care costs with new money, over and above addressing the crisis in council social care budgets. Will the noble Earl confirm that this was against the advice of Andrew Dilnot to the cross-party talks? What it means in practice is that vulnerable people will continue to face rising charges as councils put up fees to cope with the growing shortfall in their budgets. This is the effect of the Government’s care policy in practice: they are asking people to make up the councils’ shortfall, making it more likely that they will have to pay right up to the new £75,000 cap. To many people, that will not feel like progress.
More than £1.3 billion has been cut from local authority budgets for older people’s social care since the coalition came to power. Care charges are rising well above inflation and councils are warning that by 2024, they will be overwhelmed by the cost of care. Does the noble Earl accept that forecast and, if he does, how will the plans announced today help to address it? It is true that the Government have raised the capital threshold to £123,000, and we welcome that, but can the noble Earl give the House any confidence that the extra support people will receive through a more generous means test will not be more than offset by increasing care charges, caused by collapsing council budgets? Many people may not know that the cap does not reflect what people actually pay for care but a local authority average, and does not include accommodation costs. As the noble Earl will know, accommodation costs can be considerable. Do the Government have any proposals at all to cap those costs, given the risk that they might rise as care home owners take advantage of additional state support?
The third element relates to inheritance tax. In 2007, a flagship pledge was made to increase the inheritance tax threshold to £1 million by the party to which the noble Earl has the honour to belong. Just eight weeks ago, the Chancellor said that he would increase the threshold in two years’ time, so what has happened in the past two months to make the Chancellor change his mind? The irony will not be lost that they are now increasing death taxes to pay for their plan. The noble Earl has said that the rest will be made up from national insurance. Does he think it is fair to ask the working-age population to pay for something else, rather than older people? Also, what safeguards will be available for people who have paid for their own care costs up to the cap and then have responsibility taken over by the local authority? What happens when the fees paid by that person are more than the local authority is willing to pay? Would that mean the person having to move from the home they are in to another and, if so, is the noble Earl aware of the risks involved in moving frail, elderly people from the environment that they have become used to?
What is the impact of this announcement on the considerations of the joint Select Committee that is now considering the draft Bill? I understand that it is shortly to report. Will it be asked to reopen its discussions and, if the noble Earl intends to publish further draft clauses, can he say what parliamentary process will be arranged for their scrutiny? I should also like to ask the noble Earl whether, through the usual channels, we might have an early opportunity to debate this announcement. The noble Lord the Leader of the House was very kind last week, when the Francis inquiry Statement was made. He said that he would see whether a debate on the Francis report could be arranged and, to his great credit, my understanding is that a Question for Short Debate tabled by the noble Lord, Lord Patel, has been prioritised for debate. I think it will be on 11 March. Could the good offices of the noble Earl be put to the same effect, so that we could indeed have a very early debate?
In conclusion, up to a point we of course welcome what has been announced today. It is a start but it will not lead to more integration of care. Indeed, it may well entrench the separation between two systems: of free at the point of use NHS and of charged-for social care. It is interesting that Demos described it this morning as being “unambitious” and “miserly”, and that it,
“will do little to solve one of the most vital social problems facing our generation”.
Would it not have made more sense, rather than developing these piecemeal plans in isolation, to have set them out as part of a single vision for a sustainable health and social care system in the 21st century?
Earl Howe
My Lords, first, I thank the noble Lord, Lord Hunt of Kings Heath, for his positive welcome for at least some elements of the Statement, which I know reflect the view of his own party on some of the principles enunciated by Dilnot and which have not been a matter of disagreement between us. I am very pleased that those principles are reflected in the structure that the Government have announced.
The noble Lord began by saying that we needed a holistic approach to the funding and delivery of social care. I could not agree with him more but it is important to remember that the remit given to the Dilnot commission focused on one particular aspect of social care funding. It never pretended to give it an instruction to solve every problem that faces us over the next 10 to 20 years in funding social care, or indeed to tell us how we raise the quality of social care or give life to the prevention agenda, which I know is as close to the noble Lord’s heart as it is to mine. He rightly said that the NHS has an important part to play in that.
The financing of local authorities is a major issue, which we still have to grapple with. I do not duck that and I would of course welcome cross-party consensus on that issue, if it can be reached. However, reading some of the public’s comments today on the Government’s announcement, they have been on the whole very measured. While some regret that we were not able to conform precisely to the parameters that Dilnot recommended in terms of the cap, nevertheless we have got reasonably close to them given the current economic circumstances that we face.
The noble Lord asked me whether the announcement we have made passed a key test, which is: will these arrangements help every person in the country? My answer is: yes indeed they will, because everybody in the country will now get the reassurance that, whatever their circumstances, they will get the long-term care and support that they need without facing financial ruin. People will benefit wherever they receive care, be that in a care home or in their own home, and they will be more in control—they will be more easily able to plan and prepare for the care and support that they might need at some time in future.
On that score, the noble Lord asked me about products that may be developed by the financial services sector. We have engaged very fully with the sector, and we are under no misapprehension that it has been as keen as anyone to see this announcement. The certainty that it gives firms in that sector will enable them to develop products that they can market to those who would like to provide for their old age and their care costs in an affordable way, and we are now giving them the freedom and scope to do that.
The noble Lord asked how the cap will actually work. It will cover eligible social care costs that the local authority assesses that it would meet at a price that the local authority would pay. Individuals would be responsible for meeting their eligibility care costs up to the cap. Where they cannot afford to do so, the local authority will provide financial support, as I have said, to those with less than £100,000 of assets in 2010-11 prices who are in residential care. This will rise to around £123,000 at implementation. The cap would cover the cost of social care. Someone in residential care will always be responsible for a contribution to their general living costs—that is, their heat, food and light—as they would when living at home. That amount would be set nationally at around £10,000 in 2010-11 prices, as recommended by Dilnot, but anyone who is unable to afford that will be helped by the local authority. We view that flat contribution to hotel costs, if I can describe them that way, as a fair way of implementing a rule around the country that is easy for everyone to understand and does not involve massive bureaucracy. Altogether, the design of the cap sets out what we believe is a fair partnership between the state and the individual that protects individuals from the prospect of catastrophic costs.
The noble Lord indicated that the Association of British Insurers was disquieted by this announcement, but in fact today the ABI said that the reforms were a potential step forward. Stephen Gay, their director of life savings and protection, said:
“This is potentially another positive step forward in tackling the challenges of an ageing society. The cap and the higher means test give people greater certainty and will enable them to plan ahead for later life. What is important now is to work through the implementation of what is a complex system, and we are looking forward to working with government and the care sector”.
I read that as a reasonably positive endorsement of this package.
The noble Lord asked me about draft clauses for the Care and Support Bill. It is not our intention to publish draft clauses designed to implement Dilnot. Instead, as and when the Bill is introduced to Parliament—and I cannot give any commitment as to when that will be—we will have inserted the relevant clauses for consideration by both Houses, and we believe that that is the right way to set about things. With regard to a debate in your Lordships’ House, I will willingly pass the noble Lord’s suggestion to our colleagues in the usual channels.
Baroness Oppenheim-Barnes
My Lords, my noble friend may recall that when we previously discussed this problem on the Floor of your Lordships’ House, I voiced the very strong concerns that I have held for a long time. That is because when I was in another place, I faced a number of constituents in my surgery saying, “We’ve worked hard all our lives, we’ve done everything that we can do and we’ve paid for everything, and now they’re going to sell my house, whereas someone who has done nothing and saved nothing is going to get their treatment for free”. In his opening remarks, my noble friend has answered all those points, so they are extremely welcome.
On the other hand, when I raised these points with previous Governments, their reply was, “Well, the British taxpayer should not be asked to subsidise the inheritance of their future children”. I felt that that was a very harsh view to be taken, and my noble friend has put that right. This is an important step in the right direction. It may not be possible for the Minister to answer this, but if a person who has entered a care home, and made whatever provision they had to with regard to resources, unfortunately dies within a very short period, will any sort of rebate be given?
Baroness Northover
My Lords, I interrupt briefly to say that if noble Lords make brief contributions more of their colleagues will be able to get in this critical debate.
Earl Howe
My Lords, I am grateful to my noble friend for her remarks. She is of course quite right; many of us have heard for years the concerns of members of the public, friends and family about what might be the catastrophic burden of care costs in old age. If there is one thing that everyone should welcome, it is that aspect of this announcement. With regard to a rebate, no, that is not in our sights at the moment. If someone were to die in the circumstances posited by my noble friend, the arrangement would have to remain as set out to that person at the outset. We would not expect to move the goalposts after that person had died.
Lord Warner
My Lords, I should declare my interest as a member of the Dilnot commission. It would be churlish not to welcome the Government’s acceptance in large part of the Dilnot architecture for reforming the funding of social care for the medium and longer term.
I have a couple of questions for the Minister. As I understood what he was saying, the new capping system is likely to start in 2017-18. I understood him to be saying that a new national threshold for eligibility criteria would start at the same time. That would therefore mean that the present eligibility criteria, interpreted by local authorities, would stay in existence for another four years, so we would have four more years of the tightening of those eligibility criteria.
I remind the Minister of a paragraph in our report that drew attention to the fact that there was strong evidence of a major shortfall in the existing funding of social care that could not be put right by our recommendations, and that if those problems were not resolved on a cross-party basis, they would simply undermine the functioning of our recommendations in the medium to longer term.
Earl Howe
My Lords, I hope that I can put the noble Lord’s mind at rest. In doing so, I thank him once again for the work he did on the Dilnot commission. It is our intention that the eligibility criteria will be introduced from April 2015—so, in advance of the Dilnot arrangements. As he well knows, that national minimum eligibility will be set to make access to care more consistent around the country. In addition, carers will have a legal right to an assessment to care for the first time. I take his point about trying to achieve cross-party consensus on social care funding.
As for funding in the existing system, in the last spending review we made, as he knows, an additional £7.2 billion over four years available for care and support. Since then, we have provided local authorities with an additional half a billion pounds. We believe the challenge creates an opportunity for local authorities to innovate and to explore new ways of working better to meet the needs of their local populations and to optimise the use of the resources that they have. Many local authorities are already innovating, and we are committed to supporting them to deliver further service improvements.
Lord Sutherland of Houndwood
My Lords, I am pleased to welcome the Government’s Statement today. This has been a long time in the waiting, not simply from this coalition Government, who have done well to get this far, but from previous Governments. There has been prevarication for more than 10 years, and it is about time we got started. We have now started. As has been said, this is a first step on the way. There are many steps to be taken thereafter, and a great deal of discussion and, if possible, cross-party consensus would be useful.
Will the Minister confirm that an adequate length of time will be made available for that, not simply a Question for Short Debate, in the near future? Secondly, will he confirm that it would be open to any Government, perhaps his own Government, to look again at the financial thresholds that they are setting in this Statement as and when, as we all hope, the economy improves?
Earl Howe
I am grateful to the noble Lord, Lord Sutherland, and pay tribute to his work over many years in this field and in the royal commission some years ago. I will convey his wishes to my noble friend and other members of the usual channels. I agree that it would be unsatisfactory to have an unduly short debate on a complex and important subject.
As regards the thresholds, I hope I can reassure him. It is our intention, as I mentioned, to introduce clauses into the care and support Bill when it reaches Parliament that would embody the essence of the Dilnot proposals but to leave it to regulations to set the relevant numbers for the cap and the means test, for example, so that it would be a relatively easy matter for a future Government, if they so wished in brighter economic circumstances, to change those figures if they felt that that was the right thing to do.
Lord Lipsey
My Lords, better half a loaf than no loaf at all and, to that extent, I welcome the Government’s Statement. Does the Minister agree with all noble Lords who have spoken who have emphasised the importance of all-party agreement, if it can be obtained on this subject, so that old people know the background they have to plan against when looking to their futures? With that in mind, will he meet one of the points made by my noble friend Lord Hunt by trying to make this package slightly more favourable to the less well off and not, as it is, somewhat, at the moment tilted towards the better off, so that it is easier to achieve that all-party agreement and to go forward united to something that all old people will so greatly welcome?
Earl Howe
My Lords, I thank the noble Lord. I am with him in spirit. I say that because not only do I believe in cross-party consensus on a matter as important as this, but I hope he will accept from me that the way we have tried to structure this package, taking the cap and the means test in combination, has precisely been to target those of more modest means. Currently only those with assets of less than £23,250 and a low income receive help from the state with their care costs. Our changes will mean that those with property value and savings of £100,000 or less in 2010 prices will start to receive financial support. That means that the most support will go to those in greatest need. I am advised that had we, for example, opted for a higher means-test threshold, it would not in practice have brought into the net that many more people. We felt that the fairest way of cutting the cake was to try to concentrate the benefit on those of lowest means while also removing the fear of catastrophic care costs from everybody in the system.
Baroness Jolly
My Lords, we on these Benches are delighted that the Government decided to implement the principles of the Dilnot report. The care and support Bill places a duty on local authorities to provide information and advice. In addition, there will be a need to set up some sort of taxi-metering system in order to achieve that outcome. Has the Minister any idea about how that might be achieved?
Earl Howe
My noble friend is absolutely right. One of the tasks that faces us over the next two or three years is to ensure that every member of the public has easy access to information which enables them to make plans and take decisions about their own or their family’s future. We will therefore be working very closely with local authorities on that front. It is important that there are websites. My department is already devoting a section of its website to appropriate information on this front. More generally, we need to ensure that the system is not only fair to people, but clear to people.
Baroness Pitkeathley
Following the question from the noble Baroness, Lady Jolly, I believe it is the Chinese who say that a journey of a thousand miles starts with a single step. We have certainly made more than a single step today, on which I congratulate the Government. Two major problems remain, as other noble Lords have said. First, there is not enough money in the system, and secondly, people do not know about it. They do not know that they have to pay for social care, never mind up to £75,000. Is the Minister confident that what he said about information and advice—and this is yet another responsibility for local authorities, which are already strapped for cash—will enable people to plan in the way to which he is so clearly committed?
Earl Howe
I quizzed my officials very closely on that very point only this morning and received very firm reassurances on that front. I completely agree with the noble Baroness about how important this is. She is right; there is a widespread lack of knowledge among the general public about what they are entitled to and what they may not be entitled to. Collectively, we need to put that right. I take her point about additional burdens on local authorities, but ultimately I hope that they will see it as in their own interests to inform the public before they are inundated with questions that will take them a lot of time and effort to answer. I can assure her that work on these lines will be very vigorous, and I will be happy to keep her up to date on the work we are doing over the months ahead.
Lord Cormack
Does my noble friend agree that it is a pity that so many details were given to the media this morning before we had them in Parliament? Will he clarify one point that he made in his answer to the noble Lord, Lord Warner? He said that the eligibility criteria would change as from 2015. The new system will not be operative until 2017. What precisely does that mean?
Earl Howe
First, I completely agree with my noble friend that the leak to the media over the weekend was highly regrettable. I do not know how it occurred. It certainly was not of my making or that of my ministerial colleagues in the Department of Health. We wished to make this announcement to Parliament first of all, and I am sorry that that did not happen.
My noble friend’s second question relates to the national minimum eligibility threshold. We believe that that can be introduced in advance of the Dilnot package because what it is designed to do, as I explained earlier, is to give people greater certainty about their access to care wherever they live around the country, particularly for those who move from one place to another. That is a separate issue from those covered by Dilnot, although it was one of those which the commission considered. It is separate from the issue of the cap or the means test, which we believe can logically come in at a later date.
Baroness McIntosh of Hudnall
My Lords, as one of those in the Chamber today who is not an expert on social care matters, I ask the noble Earl whether he can reassure the great many people who are hearing about this for the first time as to what it means in practice for them when they have to start paying for social care—or, more particularly, when they become in need of social care. When we have a Budget, newspapers often produce ready reckoners, showing the impact of tax rises, reductions or whatever is being introduced on people in particular circumstances. Will the Minister encourage his department, and encourage his department to encourage local authorities, to produce the kind of information that ordinary people can understand, which will show them in easily understood, ready-reckoner terms what they will be in for if they need long-term care?
Earl Howe
My Lords, I absolutely agree with the noble Baroness on how important this is. It is quite complex to explain the whole system in words. The system will depend on the operation of a sliding scale which, by its nature, is difficult to describe other than pictorially. Nevertheless, the basics of the rules of these funding arrangements are straightforward and can be described. They are, as the Statement described, two essential elements, being the maximum level that people have to pay for their care—which we are setting at £61,000 in 2010 prices; £75,000 in 2017—and the means test, which is £100,000.
Of course, there are nuances around that, such as around couples and how the system will work for them. That is a question that the noble Lord, Lord Hunt, asked me which I did not answer. At present, a couple could potentially face two sets of unlimited care costs. By protecting them from these costs, the reforms offer them significant benefits which need to be spelt out. In most circumstances, even if a couple both had care costs at £75,000, the level of the cap, they would contribute less than this because housing assets do not count towards the means test if one of the partners remains resident in the home. All those sorts of things need to be made clear. We will do our very best to work with others to ensure that these messages have not only the greatest clarity but the greatest coverage.
Lord Pearson of Rannoch
My Lords, I do not want to make a European point so much as to ask the Government whether they have not got their spending priorities tragically wrong. In our previous debate, I asked the noble Lord the Leader of the House how he could justify sending £11 billion in net cash annually to Brussels to be filtered away. Here we are, with this debate on the Dilnot commission, and, from the remarks of the noble Lord, Lord Hunt, we have made a step forward. However, clearly this is not adequate to look after the needs of our old and infirm for many years.
How can the Government throw away £11 billion with one hand and then say that we cannot afford more than £1 billion by the end of the next Parliament to look after our old and infirm? Are we a civilised society?
Earl Howe
My Lords, I hope that we are a civilised society. While I understand the noble Lord’s point of view on the European Union, the fact is that if we are fully paid-up members of the European Union we have legal obligations to contribute to the Community budget. That is a given.
However, like any Government, we need to look at the totality of government commitments in the round. We have decided that, against competing priorities, this is a very high priority. That is why we have brought forward these proposals.
Horsemeat and Food Fraud
(11 years, 2 months ago)
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The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley)
My Lords, with your Lordships’ permission, I will repeat a Statement made today by my right honourable friend the Secretary of State for Environment, Food and Rural Affairs in another place. The Statement is as follows:
“Mr Speaker, I would like to update the House on recent developments on horsemeat and food fraud.
The events we have seen unfold over the past few days in the UK and Europe are completely unacceptable. Consumers need to be confident that food is what it says on the label. It is outrageous that consumers have been buying products labelled beef but which turn out to contain horsemeat. The Government are taking urgent action with the independent Food Standards Agency, industry and European partners.
Let me turn first to the facts. On 15 January, the FSA was notified by the Food Safety Authority of Ireland of the results of its survey of processed beef products on the Irish market. The Irish study identified trace amounts of horse and pig DNA in the majority of the sample, but identified one product, a Tesco burger, where there was evidence of flagrant adulteration with horsemeat. Investigations in Ireland are ongoing.
On 16 January, in order to investigate implications for the UK market, the FSA announced a four-point plan. This included telling implicated food businesses to test their processed beef products. It also included launching a full scientific study of processed beef products on the UK market.
On 31 January, the Prison Service of England and Wales notified the Food Standards Agency that traces of pork DNA had been found in a selection of meat pies labelled as halal. While trace contamination does not necessarily indicate fraudulent activity, any contamination is clearly of concern to faith communities, and the affected products were quarantined and contracts suspended.
On 4 February, the FSA announced that it had tested a consignment of frozen meat that was being stored at Freeza Meats in Northern Ireland for horse DNA. This consignment had been detained by the local authority in October 2012 because of labelling irregularities. The consignment is under the secure control of the local authority. None of this consignment has entered the food chain and so no recall is necessary. As part of the investigation, Newry and Mourne local authority has tested current products from Freeza Meats, and neither horse nor pig DNA has been found in any of these products. The FSA is undertaking a detailed investigation, which includes following the supply chain of Freeza Meats and any other producers that are implicated.
On the evening of 6 February, Findus Foods informed the Food Standards Agency that it had confirmation of horsemeat in frozen beef lasagne products. The lasagne was produced in Luxembourg by a French company, Comigel, with the meat supplied by another French company, Spanghero. The test results were supplied to the FSA on the morning of 7 February. The Food Standards Agency is urgently investigating this in liaison with the French authorities and the police. The FSA has assured me that it currently has no evidence to suggest that the products recalled by Findus represent a food safety risk.
The 7 February announcement that very significant amounts of horsemeat had been found in Findus lasagnes moved this issue from one of trace contamination to one of either gross negligence or criminality.
On 8 February, Aldi withdrew two beef products after its tests found that they contained horsemeat. The products were supplied by the same company, Comigel, that supplied Findus. Asda and Tesco also withdrew products from the same suppliers on a precautionary basis.
Food regulation is an area of European competence. Under the European legal framework, the main responsibility for the safety and authenticity of food lies with those who produce, sell or provide it to the consumer. In the UK, the FSA was set up by the previous Government as an independent agency. I have sought to respect its independence. It leads the operational response. I am here today to update the House on progress with its investigations and on the action that I have been taking with the industry and with European counterparts. I have made clear my expectation that food businesses need to do whatever is necessary to provide assurance to consumers that their products are what they say they are.
The Minister of State and the FSA met food retailers and suppliers on 4 February, and made clear that we expected the food industry to publish the results of its own testing of meat products to provide a clearer public picture of standards in the food chain. In response to the Findus announcement on 7 February, the FSA in addition asked that all producers and retailers test all their processed beef products for the presence of horsemeat.
On Saturday 9 February, I called in the major food retailers, manufacturers and distributors to make clear my expectation that they needed to verify and trace the source of all their processed beef products without delay. At this meeting with the British Retail Consortium, the Food and Drink Federation, the British Meat Processors Association, the Federation of Wholesale Distributors, the Institute of Grocery Distribution and individual retailers, I made clear that I expect to see the following from them: meaningful results from this testing by the end of this week; more testing of products for horse along the supply chain and industry co-operating fully with the FSA on this; publication of industry test results every three months through the FSA; and them letting the FSA know as soon as they become aware of a potential problem in their products. I made it very clear that there needs to be openness and transparency in the system for the benefit of consumers. Retailers and processors need to deliver on these commitments to reassure their customers.
Let me reiterate: the immediate testing of products will be done across the supply chain. This includes suppliers to schools, hospitals and prisons as well as to retailers. The FSA issued advice to public service providers on Sunday 10 February in advance of the working week. I would also like to reiterate that the FSA has assured me that it currently has no evidence to suggest that recalled products represent a food safety risk. The Chief Medical Officer’s advice is that even if bute is found to be present at low levels, there is a very low risk that it would cause any harm to health. People who have bought any Findus beef lasagne products are advised not to eat them and to return them to the shop they bought them from as a precaution.
The ultimate source of these incidents is still being investigated, but it is already clear that we are dealing with Europe-wide supply networks. I am taking action to ensure that there is effective liaison with the European Commission and other member states. I have been in touch with the Irish Minister, Simon Coveney, on several occasions since 28 January. I have spoken to him again twice today and have also spoken to European Commissioner Borg, the French Minister, Stéphane Le Foll, and the Romanian Minister, Daniel Constantin. I emphasised the need for rapid and effective action. I am grateful for the good co-operation that there has already been. I have agreed with Minister Coveney that there will be an urgent meeting of Ministers from the member states affected, with Commissioner Borg. In addition, we agreed that this issue will be on the agenda of the Agriculture Council on 25 February.
At the moment, this appears to be an issue of fraud and mislabelling, but if anything suggests the need for changes to surveillance and enforcement in the UK, we will not hesitate to make those changes. Once we have established the full facts of the current incidents and identified where enforcement action can be taken, we will want to look at the lessons to be learnt from this episode. I will make a further Statement about this in due course.
In conclusion, I want to reiterate that I completely understand why people are so concerned about this issue. It is unacceptable that people have been deceived in this way. There appears to have been criminal activity in an attempt to defraud the consumer. The prime responsibility for dealing with this lies with retailers and food producers, who need to demonstrate that they have taken all necessary actions to ensure the integrity of the food chain in this country. I am in daily contact with the FSA. This week, I will be having further contact with European counterparts and will meet the food industry again, together with the FSA, tomorrow”.
That concludes the Statement.
Lord Knight of Weymouth
My Lords, this is a very serious issue of public confidence in the food that we buy. I share the Minister’s outrage that horsemeat is being passed off as beef. Food prices are rising sharply and those having to buy cheaper food are therefore more likely to buy processed and cheaper sources of meat. We must particularly ensure that these people are confident that food standards and labelling are accurate.
Equally, food processing and manufacturing is one of the most important employers in this country. British food is an area of great potential growth for us and we must do all that we can to maintain and sustain confidence in our industry. In that vein, I am grateful to the Foods Standards Agency for its briefing and its work in providing reassurance that there is no risk to health.
However, I am concerned at the Secretary of State’s media performances over the weekend, which will have raised doubts in some people’s minds over health. For example, he said:
“We may find out, as the week progresses as the tests begin to come in, that there is a substance which is injurious to human health … We have no evidence of that at all at the moment. At the moment this is a labelling issue”.
He is sowing the seeds of doubt. For the sake of clarity, will the Minister be clear now as to whether he believes there to be any risk to human health from food sold as processed beef in this country?
Health worries focus on the traceability of horsemeat, and in particular any bute or other medicines consumed by horses entering the food chain. In 2012, the Food Standards Agency found eight instances where UK horsemeat was contaminated with bute, which is banned from entering the human food chain. In five instances the horsemeat was exported to France, in two it was exported to the Netherlands, and in one it was consumed in the UK.
There are 75 horse passport-issuing organisations in the UK, making it difficult to check their status. Each has a different design of passports, making it easier to produce forgeries. Last May, a truck was seized in this country and false horse passports were seized. I gather that abattoirs do not have to keep records of passports but should return them to owners or to Defra. Is it not time to rationalise this system so that we can trace horsemeat properly?
I also understand that the FSA carries out rigorous inspections in abattoirs. Does it inspect further upstream in manufacturing and processing plants? If not, should that now be introduced as random inspections to increase public assurance up the supply chain? Will the Minister guarantee that cuts to the Food Standards Agency have not, and will not—the Secretary of State again was very uncertain about this in a Channel 4 news report that I saw over the weekend—compromise meat hygiene inspections and its ability to ensure that meat is legal and safe?
The Minister will know that his Government removed responsibility for the labelling of product content from the FSA in 2010. Three government bodies are now responsible for ensuring that our food is correctly labelled, legal and safe: namely, Defra, the Department of Health, and the Food Standards Agency. Is that not incoherent and open to the sort of confusion that we all know can occur between different government departments? Would it not be sensible for the Government to centralise that function once more?
I understand that two types of tests are taking place—those carried out by retailers and those carried out by local authorities under the supervision of the Food Standards Agency. The local authority tests are of retail, wholesale and catering premises. Are the councils concerned being reimbursed for the cost of this work? The tests being carried out by retailers, which are due to the Secretary of State by Friday, will cover only the major retailers. Should he not ask large wholesalers and large caterers to carry out similar tests under a similar stringent timeline?
The timeline for the local authority tests is four weeks to collect and screen samples to ascertain the presence of horse DNA and another four weeks for confirmatory tests to give the proportion of other meats. As I understand it, the plan is for all those results to be published at once in mid-April. This seems an excessive timeline. I understand that we have to get the results right, but will the Minister consider releasing the results on a weekly basis as they come in, as part of his commitment to transparency? Can we also get a cast iron guarantee that schools and hospitals will be tested across the country? The Secretary of State is clear that the retailers are responsible for the food that they sell. Will the Minister tell us who he considers to be responsible for food served in schools, hospitals and prisons? Is it the head teacher or the chair of governors, the hospital manager or the prison governor? If it is the retailer who is responsible, we need to know who to hold account for food, should there be a problem in those circumstances.
The Secretary of State has also speculated in the media that there is a criminal conspiracy. Has the Minister involved the police, having acknowledged evidence of widespread criminal behaviour? Is he passing information on to the police if he has those suspicions? Can he reassure us that no UK companies are currently being investigated by Defra, the FSA or other UK authorities in respect of passing off horsemeat as beef?
Can the Minister tell us, given the Government’s growing influence as committed Europeans, how he is working with the Commission? The Irish appear to have blamed the Poles for the first case back in January, the French appear to blame the Romanians for the Findus case, and the Poles and Romanians are denying responsibility robustly. Is the Commission going to get a grip and answer questions on where the horsemeat comes from so that we can begin the important work of traceability?
However, it is not just the Commission that needs to get a grip. We need the Government to give clear advice to people and public sector caterers on what they should do with their frozen beef products. Ministers need to stop sending mixed messages about whether they would eat beef lasagne or not. A full police investigation into the alleged criminal adulteration of meat products is needed. The European police are being involved. We have heard about an international criminal conspiracy. What is happening with the UK police? The Irish Government called in the police and special fraud investigators at the beginning of this month. Perhaps our Government must do the same.
A quicker testing regime is needed to reassure the public about what is happening. Supermarkets and food industry tests must be reported by Friday, but the Government need to speed up the official tests that they are conducting across 28 local authorities. We need some positive release around the horse slaughter tests that are going on at the moment. Those in the UK are testing for bute, which is banned from the human food chain. Given the concerns about the horse passport system and horse traceability, we believe that meat should be held in storage until proven clean.
With these sorts of measures and robust action from Ministers on the front foot, I think that we can get some reassurance back into our food supply. At the moment, I do not see that from Ministers. I see uncertainty in their media performances and their performances generally on this issue. Our British food industry needs them to step up to the plate and raise their game.
Lord De Mauley
My Lords, the Secretary of State held an urgent meeting with food businesses on Saturday to get to the bottom of this unacceptable situation. The Government and the FSA insisted that more and tougher testing will take place. The food industry has accepted this, and we expect to see initial results from industry testing by the end of the week. Retailers and industry bodies will now work with the FSA on making checks further down the food chain. They have also agreed to let the FSA know as soon as they become aware of a potential problem in their products. At the moment, there is no evidence to suggest that there is a food safety risk.
The noble Lord asked about the split of responsibilities. By law, retailers are ultimately responsible for ensuring their products’ safety and accurate labelling. However, we join up across government to back this up with nearly 100,000 risk-based checks each year. The front-line testing regime checks that what is in the packet is what it says on the packet and was the same before 2010 as it has been since. There continues to be a rigorous risk-based system of checks by local authorities’ trading standards teams, overseen by the FSA. That is how the testing works.
The noble Lord asked about public sector purchasing, and he is right to do so. Public institutions are within the scope of the UK-specific authenticity sampling programme and, therefore, suppliers of meat products to schools, hospitals and prisons are included in the local authority surveillance programme. In addition, suppliers including caterers to public institutions are part of the extensive testing regime that the Food Standards Agency has established with the food industry, including food service businesses, to reinforce the integrity and confidence of processed beef supplies in Britain. This approach means that we will have an established industry testing approach, with the FSA undertaking additional verification and validation of authenticity, which ensures that industry takes responsibility for providing assurance to consumers, with the FSA providing appropriate oversight.
The noble Lord asked about local authorities and mentioned that results of testing were to come mid-April. My right honourable friend spoke to the chairman of the FSA today, and test results will be announced as soon as they are available, which is what the noble Lord asked for. He asked, too, about police involvement. The FSA is in touch with the police and Europol. We are investigating the food chain at the moment. The police have been informed and will take action if they find that people in this country have been deliberately defrauding consumers. If criminal activity has taken place abroad, the relevant authorities will be notified.
The noble Lord asked about collaboration with our European colleagues. The Statement mentions a certain amount about that. The Secretary of State spoke to EU Commissioner Borg today, and to Ministers in countries including Ireland, France and Romania. There will be meetings at official and ministerial level over the next few days and we will do all we can to assist in tracing sources of the meat in question.
The noble Lord asked about testing of horses killed in abattoirs for bute. Hitherto, under the regime that we inherited from the previous Government, we conducted risk-based testing, backed up by the passporting system. From now on, all horses going to abattoirs are being tested for bute and no horse carcasses can leave an abattoir until they are declared clear.
Lord Clark of Windermere
My Lords, there are clearly various aspects to this problem—the criminality, misleading of the general public and the issue of food safety. The Minister has given us an assurance today that there is no risk to food safety. May I press him on this issue and ask him a question? I understand that the science of veterinary medicine as it might pass on to food consumption for humans is based on minimum residue levels, but there are a number of veterinary medicines that do not subject themselves to that classification, such as phenylbutazone, which he mentioned, and many others. These medicines pose a risk to human health. We have a very elaborate and rigorous system of testing for those medicines, but this problem has emanated, as I understand it, not primarily from the United Kingdom but from other parts of Europe. Do other European countries test horsemeat with the same rigour for veterinary medicines—because that is where the danger is—as we do?
Baroness Trumpington
My Lords, may I ask the Minister whether he remembers or is aware of a debate on 1 May 1991? It concerned a Question from Lord Campbell of Croy, and I as the relevant Minister replied, using a few words written by the then Member for Penrith and The Border. What was his name?
Baroness Trumpington
Absolutely. He said:
“A Scotsman’s belief
Is that mince must be beef.
Imitations bring instant dismissal.
But some people abroad
Will contentedly plod
Through a plate full of horsemeat and gristle”.
Lord De Mauley
I thank my noble friend and point out to her that the occasion of which she speaks occurred no less than 14 years before I arrived in your Lordships’ House.
Lord Elystan-Morgan
My Lords, following the point made by the noble Lord, Lord Clark, does the Minister agree that phenylbutazone is an active carcinogenic agent? If within the next two weeks the FSA is satisfied that there is evidence of such contaminated horsemeat having come into the United Kingdom or, indeed, any other meat that is contaminated by veterinary processes in the way described by the noble Lord, will the Secretary of State ban forthwith all horsemeat products coming to our shores?
Lord De Mauley
My Lords, I share the seriousness with which the noble Lord takes the issue of bute. I have spoken about it at some length. He will know that imposing a ban is no small matter. Indeed, the onus is on the exporting member state to ensure that meat produced on its territory meets animal and public health requirements laid down in EU legislation. We have legislation in place to provide for a ban on imports where there are grounds for suspecting a serious threat to public or animal health. I hope that satisfies the noble Lord.
Baroness Crawley
My Lords, I am certain the Minister would agree that consumers have a right to expect that the food they eat is what it says on the label and that it is legal and safe. As president of Trading Standards, I know that trading standards officers across local authorities are doing all in their power to locate and remove any affected food in the current crisis. However, how does the Minister think it is possible for Trading Standards, working with the FSA and their partners in environmental health, to maintain proper targeted surveillance of the UK-wide food sector when food sampling budgets have been cut by approximately 50% over the past five years—most of it in the past two years—and when Trading Standards has lost 700 officers over the same period in local authority cutbacks? Something has to give.
Lord De Mauley
My Lords, it is right that industry should be responsible for the safety and authenticity of the food it produces and sells, which is why the Government work with it to maintain confidence in the food chain. All systems of standards and quality control depend to a certain extent on self-regulation and due diligence. While the Government have a role in checking and monitoring industry, particularly where there are public health issues, non-regulatory approaches and agreements can be just as effective and can be achieved faster than legislation. This can be seen in our approach over recent days, where government and industry have come together with a joint aim of maintaining consumer confidence in the food chain.
The Lord Bishop of Ripon and Leeds
My Lords, I return to the question of the contamination of halal meat, which got a brief reference in the Statement and has real implications for faith communities and faith relationships. This may not have been a matter of deliberate fraud but it must have been dangerously careless. Can the Minister give us more reassurance on the action taken by the food industry as regards finding non-halal traces in allegedly halal food, including in food supplied by government contracts such as prison suppliers?
Lord De Mauley
My Lords, I agree wholeheartedly with the right reverend Prelate that it is essential that people can have confidence that what they are eating is what it is made out to be. There is responsibility throughout the food chain. Suppliers are responsible for what they supply onwards to other organisations and businesses. We are reminding public bodies of their responsibility for their own food contracts. We expect them to have rigorous procurement procedures in place with reputable suppliers. We expect caterers and suppliers to public institutions to have appropriate controls, including testing and sampling regimes, in place to ensure the authenticity of their products. If caterers have any doubts about the provenance of their product, they should seek assurance from their suppliers.
Lord Forsyth of Drumlean
When I was Secretary of State for Scotland, I had to deal with an E.coli crisis, the BSE crisis and a problem with some radioactive gas being delivered to the Barr’s Irn Bru factory. Therefore, I have considerable sympathy with my right honourable friend in dealing with a food crisis of this kind. Will my noble friend accept our congratulations on the way in which the Secretary of State has handled it and reject the criticisms of the noble Lord, Lord Knight, who I am not sure realises that the chairman of the FSA is one of his colleagues—the noble Lord, Lord Rooker? Between them, the noble Lord, Lord Rooker, the Secretary of State and his colleagues have done an excellent job in balancing the need to give the public information with the need not to destroy businesses. Going back to the BSE crisis, the French unilaterally imposed a ban on Scottish grass-fed beef, which lasted for several years and did enormous damage. My right honourable friend is to be congratulated on not operating in a way that is damaging to the interests of businesses throughout the United Kingdom and, indeed, throughout Europe, while at the same time taking sensible measures which are required to protect the public interest.
Lord De Mauley
My Lords, I will pass on my noble friend’s comments to my right honourable friend.
Lord Harris of Haringey
My Lords, the Minister has repeatedly said that there is no evidence of a threat to food safety, which is obviously welcome news. However, he glossed over an answer to the question asked by my noble friend Lady Crawley. There have been massive reductions in the resources available to local Trading Standards to pursue proper food safety tests. Further, the number of food inspectors has been reduced. This clearly poses a risk. If there is potentially criminal fraudulent activity involving the substitution of one form of meat for another, could there not also be criminal activity involving cavalierly ignoring hygiene regulations or the rules on additives? What assurances can the Minister give us that those matters will be addressed properly in the future?
Lord De Mauley
My Lords, I can assure the noble Lord that the Government take these issues extremely seriously. The FSA has certainly not dropped its guard. As my noble friend Lord Forsyth, said, it has been doing an extremely good job in very difficult circumstances and the Government are supporting it in that. As I explained earlier, the nature of sampling is risk based and focused on protecting consumers. Staff reductions have not affected the level of testing carried out on meat. Meat produced in UK approved slaughterhouses is inspected by official veterinarians and meat inspectors working under their direction. They also ensure that meat hygiene regulations are complied with in abattoirs and meat establishments.
Baroness Miller of Chilthorne Domer
My Lords, does the Minister agree with me that the length of the food chain is part of the problem? For example, in one lasagne you can get four or five sorts of meat from different sources, even if they all comprise beef. There are all sorts of things that people could mistrust, such as salami made from donkey. Labelling is absolutely crucial. If I may say so, checking as much as we can is only ever going to be a case of shutting the door after the horse has bolted.
Lord De Mauley
My Lords, I have a lot of sympathy with much of what my noble friend said. She is right: our supply chains are complicated nowadays but that is how the market has developed and we have to work with that. She is also right that labelling is absolutely key. We must ensure that it is accurate.
Lord Palmer
My Lords, I have been involved in the food chain literally since I could walk, and an awful lot of people outside this Chamber or the other place would not know what bute was. Is it perhaps worth having a tiny statement by the Government telling people what bute is and the fact that it poses a very low risk to human health?
Lord De Mauley
Yes, my Lords. I have spoken at some length on bute, which, as I am sure noble Lords are aware, is a substance administered to horses with evidence of lameness or whatever to enable them to go about their business. The whole purpose of the passporting system is to ensure that a substance such as bute does not get into the food chain.
Baroness Browning
I very much welcome the Government’s recent announcement that proper cookery lessons are to be reintroduced into our schools, and I hope that there will be more home-made lasagnes rather than those that are pre-bought. However, given the fact that a lot of people rely on convenience foods and trust in brands, and if it is established that there is a problem with equine medicines in the food chain, is there an intention to look at foods such as stock, which is a concentrated product that is widely used domestically and commercially? Is any testing being carried out because of the obvious implications beyond those for beef?
Lord De Mauley
My noble friend makes an important point and I agree with her. I can add to my answer to the noble Lord, Lord Palmer. Phenylbutazone, known as bute, is a commonly used veterinary product and is a non-steroidal anti-inflammatory drug. Bute is not approved for use in food-producing animals because it is not known to be safe for human consumption. An animal that has been treated with bute is not permitted to enter the food chain.
Lord Judd
My Lords, is this whole sad saga not an exemplary indication that if we are to look to the well-being of the British people, we must put all our efforts into effectively working together with the people and Governments of Europe to resolve issues that can be resolved only on a basis wider than our own national frontiers?
Lord De Mauley
My Lords, I could not have put it better myself and, as I explained, my right honourable friend has been in touch not only with the European Commissioner today but with Ministers from the various other European member states involved. It is extremely important that we collaborate very closely with them.
Lord Martin of Springburn
My Lords, given that it was our Irish neighbours who notified us of this problem, do they have a better safeguarding system than ours?
Lord De Mauley
My Lords, the Irish were acting on intelligence. They conducted their test and, lo and behold, they found horsemeat. We had not received similar intelligence but I have no doubt that our testing regime is absolutely rigorous.
Viscount Ullswater
My Lords, under European Commission Regulation 504/2008, a vet must record in a horse passport all treatments with veterinary medicinal products, which determines whether a horse can enter the food chain. Are Her Majesty’s Government satisfied that this part of the regulation is being adhered to? The occupier of a slaughterhouse must hand the passport of a slaughtered horse to the vets at the slaughterhouse, who must record the microchip number of the animal, mark the passport accordingly and send it to the issuing authority. Are the Minister and the Government satisfied that that is happening in every case?
Lord De Mauley
My Lords, the appearance is certainly that that is the case, but that matter will be part of the ongoing investigations. Perhaps I may add to my answer to my noble friend Lady Browning on whether we test stock, as in stock cubes. It would be very difficult to test stock cubes because there will be little or no DNA present in them.
Baroness Donaghy
My Lords, can the Minister assure the House that food taken off the supermarket shelves in response to these revelations will not appear in food banks?
The Countess of Mar
My Lords, in many ways, this is a sign of the times. Cheap food means that manufacturers are constantly chasing their bottom line. There is also a surplus of horsemeat on the market because people cannot afford to keep horses. Can we not somehow resolve this problem by putting horsemeat into pet, as opposed to human, food? Can he corroborate or deny a statement made today in the Daily Telegraph that we imported 9,000 tonnes of Mexican horsemeat into this country, and what are its safety implications?
Lord De Mauley
My Lords, what is important is that consumers know what they are buying and that labelling is done properly and honestly. Retailers are responsible for both the safety and the correct labelling of the products that they are selling, which is why government work with industry to maintain confidence in the food chain. All systems of standards and quality control depend to some extent on a certain amount of self-regulation and due diligence. While the Government have a role in checking and monitoring industry, particularly where there are public health issues, non-regulatory approaches and agreements can be just as effective and achieved faster than legislation. This can be seen in our approach over recent days, where the Government and industry have come together with the joint aim of maintaining consumer confidence in the food chain.
Lord Lucas
My Lords, in a city where you can get an extraordinary variety of meats such as crocodile, kangaroo and ostrich—not to mention snails, fish lips and other exotics—does my noble friend not feel that all this fuss about eating a bit of horse is seriously contaminated with bull?
Lord De Mauley
My Lords, I am not sure how to answer that, save to say that I, like my noble friend, enjoy a good variety in my diet.
Welfare Benefits Up-rating Bill
(11 years, 2 months ago)
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Lord Brooke of Sutton Mandeville
My Lords, I was never a good enough cricketer to have played all-day cricket before I was 20 but, thereafter, I played it for another 40 years, and I can still recall vividly how being the first batsman to face the bowling after the lunch interval was always a tribulation. On this occasion, I am conscious that it was the close of the innings of the noble Lord, Lord Low of Dalston, that occasioned the interval, but it remains very much a privilege to share membership of your Lordships’ House with him. On any matter, I should, in cricketing terms, always give him the benefit of the doubt. In the mean time, the lunch interval has been surprisingly long, but I assume that there is a possibility, as sometimes happens in English cricket, that snow has affected the wicket.
The precise subject of the Bill is a new wicket for me to play on. I do not think that it is mandatory for me to declare an interest but, once upon a time, I was a Treasury Minister for nearly four years. Among the seven Treasury colleagues with whom I shared the ministerial responsibilities in those years, I was the only one who had never worked in the City, although I was, for 24 years, its MP. My noble friend Lord Lawson of Blaby was generous in involving us all in the gestation of Budgets but, in practical terms, my direct responsibilities might have been described as Treasury housekeeping, with all three main subjects being housekeeping oriented, and I had up to a dozen minor ones, including—perhaps unexpectedly—the Central Office of Information. It is quite possible that no one else in your Lordships’ House knows the origin of the ministerial concept of “the line to take”, except the noble Lord, Lord Hennessy of Nympsfield—and he knows only because I told him. However, it was the Treasury that thought of the policy first.
The only relevance to today’s business that I can detect from those years is that the EU budget Council, on which I sat for all my Treasury days, had methods of computation every bit as complicated as those in the Bill. It is a nice complement to the Bill, and to my noble friends in charge of it, to have had today’s Statement, which has enabled us to get our eye in. However, my remarks will be brief.
The great excitement on the Bill relates to whether the noble Lord, Lord McKenzie of Luton, can be seduced during its passage through your Lordships’ House into sharing with us how the official Opposition propose to handle the problem that the Bill addresses, for which they were in no small degree responsible for creating. I lived through the 1969 to 1971 recession running a business in New York City, of which my chief memory is the “news in brief” item in the Wall Street Journal to the effect that the best index of the recession’s severity was that the Mafia had had to lay off two judges in New Jersey. However, I acknowledge that running anything during a recession is not in itself amusing.
I do not know how many others in the Chamber of your Lordships’ House today have had the stamina to watch the video which is currently available on one’s PC within the Palace through the kindness of MoneyWeek. It raises all sorts of financial nightmares that lie ahead of us. I stayed with it till it reached its conclusion only because I wanted to see how it would end and I was unsurprised when it concluded with a hard sell to buy MoneyWeek and its attendant publications. To conjure up a quasi-Richter scale of nightmare, it had to be painfully repetitious but from Lloyd George’s 1909 legislation onwards, no Administration avoided some of MoneyWeek’s blame.
A more elegant prospectus was advanced by the article in the Times below the day’s cartoon on 17 January this year by its accomplished columnist Camilla Cavendish. Those who have approached Horse Guards on Whitehall from the Embankment will know that, pausing at the traffic lights when red at the Whitehall junction, enables one to read the Cavendish family motto on the back of a statue to the Duke of Devonshire, who served in Gladstone’s Cabinet: “Cavendo tutus”, a play on words meaning secure by being cautious. It promises well. I shall quote a single opening sentence and three paragraphs from her article, which was on current welfare expenditure. They will be marginally edited for clarity. The opening sentence reads:
“As the debate about welfare rolls on, … it is … revealing that far more working people get their income topped up by benefits than most of us ever imagined”.
The first paragraph I want to quote states:
“There is no official figure for exactly how many [working people] are on benefits. But what is clear is that their numbers increased dramatically under the previous Government: from 700,000 when Labour took office in 1997 to 4.7 million on the equivalent entitlements in 2010, rising to between 6 and 7 million people, once housing benefit and council tax benefit are included … in a period that was, for much of it, one of unprecedented prosperity”.
The second paragraph I wish to quote states:
“In the good times, it was possible to fudge the decision about which aim—rewarding work or rewarding children—should take priority. Now the decision is unavoidable. The coalition has broadly decided to prioritise work through the Universal Credit system, which aims to make paid work more worthwhile. But it is also sensitive to the risk that the rising cost of living is entrenching poverty. Until it imposed the 1 per cent cap last week”—
that was the week of 7 January—
“the coalition had continued its predecessor’s policy of uprating benefits in line with inflation”.
The third and final paragraph I want to quote—the last paragraph of her article—states:
“Poverty campaigners know that the public is unsympathetic to adults who don't want to work, so they have shifted the argument to defending welfare benefits for the low-paid. But the explosion in numbers in the past 15 years makes it difficult to defend the status quo”.
That concludes my quotations from that article.
When the noble Baroness, Lady Hollis, whom I am delighted to see in her place, chose and opened a debate on housing in the autumn of 2010, I said that I thought that subject, and those that we are debating today, were potentially the key endeavours of this Government. I reiterated that at the time of the Pensions Bill and the Welfare Reform Bill. I am without expertise in these matters but I regard them as so important that I sought to learn by attendance at the majority of Grand Committee proceedings on the Welfare Reform Bill where matters were, in my view, most admirably conducted throughout, although without, in cricketing parlance, my much troubling the scorer myself. However, I shall do the same on this Bill—this time, I gather, in this Chamber.
The great Claud Cockburn in his engaging memoirs said that the world was divided between those who preferred surprises and those who liked things to turn out as they expected. By illustration, he said that, if he were ever caught in an Alpine snowstorm, the mere sight of a St Bernard would restore his morale, even if the cask around its neck was empty of cognac.
I shall go into Committee with an open mind and recognition that the Bill can perhaps be technically improved but in the hope that we shall learn more than a little of the Official Opposition’s intentions, which the noble Baroness, Lady Hollis, implied would be more thoughtful than political. She must forgive me if I have misremembered her precise adjectives, but I have tried. If, however, the noble Baroness thinks that her speech was other than political, I think she may deceive herself. Certainly one would need to know more of the thoughtful detail to appreciate what its economic consequences would be. It is almost 60 years since I was a soldier but, if, unlike Grand Committee on the Welfare Reform Bill, we are to listen to unremitted hostility, it will seem, at least for me, in military terms as simply being smoke. These matters are too important for that.
Finally I shall speculate in Committee on what the late Lord Russell—Conrad to most of us—would have made of all this. In your Lordships’ House both he and the late Lord Newton—Tony to many of us—were kind enough to remind me that I had given them respectively their first maiden speeches on the order paper in the Oxford Union. Indeed in the interests of balance, I shall speculate on what Tony Newton would have made of it all too. In the mean time, that is not a bad double barrel. I hope your Lordships’ House will forgive me hereafter, although I shall obviously observe the rubric, if I am briefly absent at the 90th birthday party of the noble Baroness, Lady Sharples.
Lord Touhig
My Lords, I am very pleased to follow the noble Lord, Lord Brooke of Sutton Mandeville. Some years ago he contested the parliamentary constituency of Bedwellty in the Conservative cause. It later became the constituency of Islwyn, which I had the privilege of representing for 15 years. I am sure that from his experiences in the Welsh valleys and the fact that his mother was Welsh, he will certainly know where I am coming from in this debate.
Although we all recognise the difficult economic climate in which decisions around benefits are being made, we must ensure that families are never left unable to afford the essential costs of daily living. Our priority must always be to ensure that those who face financial difficulty due to illness, disability, low pay or unemployment are still able to pay their rent, heat their homes, and feed their children; basic necessities which everyone in this Chamber takes for granted.
The Westminster Catholic Children's Society works with some of the poorest families in London. Its chief executive, Rosemary Keenan, recently said:
“It is hard for many of us to imagine what it is like for a mother to only have £1 left and know she still has to feed her children”.
Yet this is the case for an ever-growing number of parents. They are being forced to choose between turning on the heating or putting food on the table. Over the past year, we have witnessed a 44% rise in the number of families relying on emergency bed-and-breakfast accommodation after losing their homes, and a staggering 79% increase in the number of people visiting food banks.
By capping the up-rating of key benefits at less than half the rate of inflation, this mean-spirited Bill stands to further exacerbate the problems faced by some of the poorest people in our country. In short, it will widen the gap between family income and the price increases of basic commodities such food and fuel, further undermining people's ability to achieve decent living standards.
Kevin Flanagan, the director of St. Antony's Centre in Manchester, warns,
“We are already seeing increasing levels of family poverty and homelessness; any further real-term reduction of benefits will only worsen this situation”.
One particular concern widely held among the organisations working to support struggling families is the breakneck speed at which changes are being made. This Bill cannot and should not be considered in isolation; it comes as yet another blow to the poorest people, in a long line of already devastating cuts. Perhaps most worryingly, it comes at a stage when many key provisions of the Welfare Reform Act have yet to be implemented, including the capping of household benefits; cuts to council tax benefit; and new penalties for those deemed to be under-occupying social housing. The cumulative effect of these measures, which are being simultaneously thrust upon families this year, will create significant reductions to household incomes that are already under immense strain for many families. With such a widespread change under way, it is important that time is allowed for proper assessment and appropriate adjustments to be made.
However, the Government are already committed to further real-terms benefit cuts both for the immediate future and the next three years. It is irresponsible to legislate for a fixed annual increase of 1% when there can be no guarantee of how the rate of inflation will change between now and 2015. It is very possible that we will see families eventually facing an even bigger gap between incomes and prices in the years to come.
This rush to make short-term savings is not only unjust but economically unwise. It will inevitably increase homelessness, cause mental health problems for many and create higher personal debt. As a consequence, the cost of more family poverty will ultimately fall back on the taxpayer. This is not some Dickensian tale. In Britain in the 21st century, some 200,000 children will be pushed into poverty, growing up in unheated households or going to school hungry. They will face real risks to their education and health, which apart from the devastating human cost will almost certainly require expensive interventions by the state further down the line.
One particularly unpalatable aspect of the debate surrounding this legislation has been the rhetoric contributing to the isolation and stigmatisation of the vulnerable in our society. A number of noble Lords have spoken about this. Seeking to differentiate those in poverty as “deserving” or “undeserving” serves only to scapegoat those who are the victims of Britain’s stagnant economy. They are blamed. The implication is that if we did not have the people labelled “benefit scroungers”, everybody would be in work and the economy would be all right. This sort of rhetoric harms the vulnerable and clouds the fact that the majority of people who stand to be affected by the Bill are in fact hard-working men and women in low-paid jobs.
There are currently 6 million British workers in poverty. They rely on benefits to bridge the gap between a lower-than-living wage and rapidly rising living costs. These people will bear the brunt of the Bill when they are hit by real-terms cuts to their essential working tax credits and child tax credits. Furthermore, a below-inflation rise in benefits risks creating work disincentives, especially when working people face above-inflation rises in food and transport costs. For a worker receiving the minimum wage and facing a 4.2% rise in the cost of their commute, the Bill simply means that work will pay less than ever before. There are also more than 1 million disabled people who will be directly affected, adding to the pressures they already face from changes including the overhaul of the disability living allowance and the time-limiting of employment and support allowance.
The Government have consistently said that disability benefits are exempt from the 1% cap on benefit rises, yet the cap applies to employment and support allowance, which helps people who have barriers to work because of their disability. People with conditions like autism who are struggling to find work but who want to contribute will miss out under this legislation. Just 15% of adults with autism are in full-time work, yet research by the National Autistic Society shows that the vast majority want to work. Benefits for them are a necessity, not a luxury. The Government need to change their rhetoric to acknowledge the fundamental necessity of benefits to thousands of disabled people and their families up and down the country.
John Coleby, the director of St Joseph’s Pastoral Centre, which serves the Catholic Archdiocese of Westminster and provides specialist support to adults with learning difficulties, echoed the warning of many disability charities when he said that,
“the Bill should not be seen in isolation”,
from other cuts that were,
“creating a climate of uncertainty and fear”,
among disabled people for their future living standards and their independence, both of which are coming under increasing threat.
This debate has frequently and mistakenly been framed around the fairness of benefits rising faster than wages. It fails to acknowledge the fundamental issue at stake: namely, whether individuals and families are able to maintain their basic well-being. A comparison with wage increases is ultimately a false one to draw because in pounds and pence terms, families are struggling to make ends meet on a daily basis. The average weekly take-home pay in Britain is £395. That is five and a half times the jobseeker’s allowance of £71 and seven times the under-25s jobseeker’s allowance of £56.25. Faced with those differences, is anyone seriously suggesting that people labelled “benefit scroungers” would rather stay at home than be in work?
The average weekly shopping bill has risen by £5.66 in the past year alone, and is set to continue rising annually by at least 4%. Energy bills, too, have risen well above the rate of inflation, with the largest companies putting up prices by 7.6%. It is unthinkable that a mere 71 pence a week in jobseeker’s allowance, or a 99 pence a week rise in employment and support allowance, will come anywhere near bridging that gap. This is what a 1% rise means—71 pence and 99 pence—for people in these difficult circumstances.
Rather than focusing on misleading comparisons between benefits and wages, we should ensure that those who need support will still be able to afford the soaring costs of food, heating and accommodation. Overall, the impact of the Bill on vulnerable people and their families will be overwhelming. The decision to cap benefit increases so far below rising prices comes rapidly on the heels of a programme of widespread welfare cuts, the combined effect of which will further erode the ability of the lowest-income families to meet their daily living costs.
It is unjustifiable that parents and children will go hungry and that their homes will be put under threat through the misfortune of being ill, unemployed, disabled or simply working in low-paid jobs. The rush to make short-term savings will cause irreparable damage to those who are most in need of protection, and risks transforming our current economic challenges in this country into a very real poverty crisis.
Lord Kirkwood of Kirkhope
My Lords, it is a pleasure to follow the noble Lord, Lord Touhig, who is an expert in his field and brings an interesting Welsh dimension, as does my noble friend Lord German, to this important debate. It has been an excellent debate so far, reflecting the rising level of apprehension that exists in the country about what the future holds, particularly for the low-income, working-age households that the Bill particularly affects.
I am in some difficulty with the Bill because, at the risk of sounding pedantic, I do not even agree with the title. The Bill’s Short Title is “Welfare Benefits Up-rating Bill”. The Long Title is “To make provision relating to the up-rating of certain social security benefits”. I have argued this etymological, perhaps pedantic, point before. There is a world of difference between statutory social security entitlements and welfare benefits. Welfare benefits were things that we inherited from our American cousins. They have nothing whatever to do with the statutory provision that we in the United Kingdom have enjoyed for the past 20 years.
I agree with noble Lords who made powerful speeches about the kind of language that we use to frame the debate. It is not just “drivers” and “skivers”, but goes more fundamentally to the point that since Section 150 of the Social Security Administration Act 1992, which the Bill seeks to amend, we have always had uprating. I was there when that Act was cast. It put the uprating debate beyond short-term party-political arguments. It stated that there were entitlements that gave people on various benefits a stake in creating the wealth of our country. That is a very important element in the social cohesion that we have enjoyed in this country to date. We are at risk of setting a very bad precedent with the Bill by disrupting this for a three-year period.
My noble friend Lady Stowell made a powerful but, I think, Treasury-influenced speech with important points that cannot be ignored.
We need to try to have a more measured, long-term public discussion about what is going on. The public are ignorant about the facts of social security, and I mean that in the polite sense of the word. They are just untutored about what is going on. They are frightened to death by some of the gross figures because we always talk about cash as snapshot cash figures—and the quantities are truly frightening for anybody who does not know anything about it—instead of talking about percentage shares of the wealth of the country and the long-term longitudinal dimension to some of this debate, which tracks what families do in the course of a life, and looks at people going in and out of work and the contributions they have made through the national insurance contribution system, or what is left of it.
We should and could have a much more informed debate about what we think we can afford. If Britain is a poorer country, as I believe it is—I do not know for how long it is going to be poorer, but it is certainly not going to go back to sustainable levels of growth in the near future—we have to ensure that the country knows what that means for the future. It is an ageing society. We are all living longer and that is a success story, but we have to pay for that, too. We are talking not just about health costs but about costs across the whole public policy area. That debate is not happening to the qualitative level and the political extent that it should. That is the first point I wanted to make.
My second point concerns something that one or two colleagues have mentioned. On top of everything else, this Bill worries me. I could be persuaded that for the next 12-month period there is a case for looking at the uprating of benefits, and I would certainly want to engage in that. However, I am deeply worried that this is on top of everything else. I would like to think that I have been studying this as long as anybody, but I have no idea what the next five years are going to hold, particularly for low-income working-age families. The point that was powerfully made by the noble Baroness, Lady Hollis, was that the cumulative effect of all this has not been analysed by anybody. I would argue—and I think that the people sitting behind the Minister would probably say this—that the situation has been changing so fast that it has been impossible to pin down a cumulative analysis of what has been going on. I agree with her that this has to be done.
I want to make a connection between what the noble Baroness was saying and what my noble friend Lord German was saying, because he said something important with which I fundamentally agree: these cuts now have to stop. Between now and 2015, I will stand shoulder to shoulder with my noble friend Lord German, particularly in relation to low-income working-age households, in arguing that there should be no more cuts after this. Anything else would be to risk poverty and deprivation on a scale that we underestimate at our peril. If my noble friend Lord German and I get our way and stop any future change beyond this Bill, we could get on and do the arithmetic that the noble Baroness, Lady Hollis, is suggesting. Perhaps it is calculus, not arithmetic. If we do not do that, we will all be arguing blind. I certainly do not know what the full consequences will be of everything that has happened to date, and I do not think that that is safe. I want to come back to that in my final point.
I want to make one other point about fairness. I think the noble Lord, Lord Adebowale, made it earlier. There is a qualitative impact to these cuts as well as a quantitative one, particularly for low-income working-age households. The noble Lord said this powerfully; he has more experience in the front line than I have. The impact of a 1% cut for somebody in the lower two deciles of income is much more profound than for others. It does not matter what the cash effect is; it is the impact.
Another matter that deeply concerns me but that has not been drawn out enough is the residual level of unsecured debt that these households are carrying—estimates just shy of £6,000 on average. It worries me that this is what we are putting into households across the United Kingdom with an average unsecured debt of £6,000. The impact question has a qualitative as well as a quantitative effect.
In closing, I want to try to promote an amendment to this Bill because, as we have been saying, an inflation risk has been introduced in a way that we have never seen before. This Bill imposes a 1% uprating in 2014-15, regardless of inflation. I am sure that we all trust the Office for Budget Responsibility; I am not an economist, but it seems to me that their forecasts have been pretty dodgy in terms of some of the metrics in the economy in the past. If they are not right about a 2.6% increase in CPI, and a 2.2% increase the year after, in 2014, anything in excess of that will increase these cuts.
Nobody in this room can tell me what that increase will be. I have done these metrics but will get them checked before Committee, because my arithmetic is not great, but if inflation were to be 2% more than the OBR’s current forecast over the next two years, the savings in 2015-16 increase from £1.9 billion to £4.7 billion. Who can put their hand on their heart and say that they know that we are not going to face this kind of inflationary increase? With food costs, fuel costs and rent costs, some families will certainly experience a 2% increase over the OBR estimate. I do not know how widespread that will be, but some of them will face that, so it is just not safe for us as legislators. I know there might be some issues of financial privilege in some of this, but I think it is possible to amend this Bill in a way that says that in Clauses 1 and 2, subsection (1) shall be disapplied if inflation goes higher than 3% or 4%. I do not know. That is a political decision, and we will have to think about that.
Let me make it clear that I am not trying to take away the power of the Government eventually—as long as they stay within the envelope of the OBR’s estimates—to seek the automaticity of the 1% increase that is suggested in this Bill. However, if it goes anywhere above that, they have to default back and argue the case year by year using the 1992 Section 150 provisions. I think that would be a modest amendment. It would give people like me some comfort to know that there was some protection for these low-income households in future.
I say to colleagues, having been thinking about this carefully over the weekend, that if we do not do that there are next to no other circumstances in which it would be safe to introduce this Bill the way it stands at the moment. It will impose an inflation risk that is a one-way bet for the Chancellor, because if it goes up he gets more savings, and if it does not he gets the savings in any case. Therefore, we have to think carefully about this in Committee. I will happily participate in any discussions around an amendment of that nature in order to ensure that we give some protection to some of these families in future.
Baroness Grey-Thompson
My Lords, I have listened with great interest to the debate so far, and I, like many others, have a number of concerns with this Bill. Capping the uprating of most benefits to no more than 1% for the next three years will mean an exponential increase in the net losses each year. The Government have already reduced the welfare budget for working-age people, so this Bill will be yet another blow for low earners and unemployed, sick, or disabled people.
My first concern is that the impact of benefit uprating changes will swamp any gains from raising tax thresholds for low-income households. Uprating changes are less noticeable than other cuts but over the years can have a large impact on someone’s income. Between 2011 and 2015, the uprating changes to child benefit alone will result in a real-terms cut of almost £6 a week for a family with two children. Child benefit, in addition, plays a role in determining the level of housing and council tax benefit paid to those on low incomes in work. The real-terms cut due to child benefit uprating alone during that period is almost £11 a week.
Households with someone working full time on the minimum wage, if there are children, not only will suffer a real-terms loss of £11 a week between 2011 and 2015 but will gain less than £2 a week from the rise in the tax threshold, because a rise in net income means a drop in housing and council tax benefits. Also, the effects of this Bill will not be greatly eased by the change in the personal tax allowance. Low-income households will lose most of the increase in income through a reduction in benefits such as housing benefit and tax credit. Paradoxically, it is the middle and high earners who will receive the full benefit of this measure.
Secondly, uprating changes are not occurring in isolation from other benefit cuts. In considering this Bill, it is important to have in mind the full impact of all the changes. Very few people who rely on benefits or tax credits as part of their income, whether in or out of work, will experience a cut in uprating alone. There have been numerous other cuts to tax credits, housing benefit, council tax support and disability benefits as well as capping. Citizens Advice has analysed the overall impact for a household through a series of changes in circumstances on what we currently know. The analysis demonstrates in a small way the combined impact of the changes on some groups, assuming that this Bill is passed. The example I want to present is not at the extreme end as there will be many people who will be even more severely hit by the cuts and will lose much more.
A couple, Mike and Anne, have two girls aged 12 and seven. They live in a three-bedroom property belonging to a local housing association and are both working full time with a combined income of about £46,000 a year. With this joint income they will be about £17 a week better off from tax and benefit changes in 2015 than they were in 2011. They will lose about £6 a week in real terms from the uprating of child benefit, but they will gain around £23 from the change in the tax threshold, giving an overall gain of £17 a week. However, this position rapidly deteriorates if the family circumstances change for the worse. If, say, Anne becomes ill and is diagnosed with MS, she may have to cut her hours because she quickly becomes exhausted.
The couple split up and Anne becomes a lone parent. She now has earnings of £10,000 a year, but is entitled to some help through benefits, including disability benefits and premiums in recognition of the extra costs she now faces as a result of her illness. Between 2011 and 2015, someone in her position will suffer a large loss in benefits, around £58 a week, while gaining only about £2 a week from the rise in the tax threshold as the gain in net earnings leads to a reduction in benefits. That is an overall loss of £56 a week. This is made up of an underoccupancy charge, loss of lower rate DLA, a £5 council tax payment and about £18 due to all the uprating changes.
That is the loss under the current system. The loss under universal credit will be even greater for someone in Anne’s position. If she moved over to universal credit at the point when her health deteriorated, she would not get transitional protection, and in 2015 would have a real-terms income of £95 a week less than in 2011. This is because under universal credit she will get no more financial support than someone who is not ill or disabled. If Anne’s condition further deteriorates and she has to leave work, she is awarded the middle-rate care component of DLA and is placed in the ESA support group. She now has a great many extra costs.
The overall real-terms loss between 2011 and 2015 for a household in this position is about £34 a week, and that assumes that Anne keeps DLA or the same value in PIP. This loss includes a real-terms loss of about £15 due to uprating changes, despite the protection for disabled people. Again, this is all under the current system. Under universal credit, if Anne does not get transitional protection, she will be £61 worse off in real terms in 2015 than someone in her position would have been in 2011. The extra loss is due to the loss of the severe disability premium offset by the rise in the support element of universal credit.
In summary, between 2011 and 2015, this couple with a joint income of £46,000 a year have a real-terms gain from tax and benefit changes of £17 a week; they would have a £23 gain if they did not have children. A disabled lone parent in Anne’s position who is working will have a real-terms drop of £56 a week overall, despite the gain from the raising of the tax threshold. The drop will be a real-terms drop of £95 a week between the current system in 2011 and universal credit in 2015. For someone in Anne’s position and in the support group, the real-terms loss is £34 a week, or £61 a week if on universal credit.
People are already struggling to manage, as has already been mentioned by my noble friend Lord Adebowale. The numbers going to food banks are rising steeply. These proposed changes impact disproportionately on those with a low income because more of their income goes on buying essentials, and it is these essentials such as fuel and food that are subject to high inflation. For many, this can mean making choices such as whether to keep the house warm or to eat properly. Disabled people who cannot work, those who are unemployed and cannot find work, and those on low earnings who are working are all being affected by other benefit cuts. Decisions on uprating should not be taken without recognising the cumulative impact. Many in your Lordships’ Chamber have asked about the cumulative impact of these changes, and I would urge the Government to look at this again.
I will not repeat the words of the right reverend Prelate the Bishop of Leicester, but I wholeheartedly support his views. We have to understand where we are going as a society and how we want it to be viewed. In the Welfare Reform Bill, the Minister, the noble Lord, Lord Freud, said consistently that the most vulnerable should get the most support, but I fear that as this Bill progresses, that may not be the case.
The Lord Bishop of Ripon and Leeds
My Lords, my colleague the right reverend Prelate the Bishop of Leicester argued that in this Bill we are again putting pressure on those who are already the poorest in our society. We want to urge the Government to look again at the effect of the Bill on child poverty, not just over the next three years, but on into the future. I will not repeat my colleague’s arguments, but in that context, I want to ask three questions of the Minister.
First, will the Government make some commitment about benefits for asylum seekers, especially child asylum seekers? I ask this as a member, alongside the noble Baroness, Lady Lister, of the parliamentary inquiry into asylum support for children and young people, which has recently reported. I am told that benefits for asylum seekers are not welfare benefits, and that although they are benefits designed for the welfare of those in destitution, they are beyond the scope of this Bill. In that Alice-in-Wonderland world, I would nevertheless plead with the Government to give some comfort to asylum-seeking children and those who work with them.
Until 2008, these benefits were pegged at 70% of income support, but now they are not related to anything at all and have fallen to between 50% and 60% of income support. No increases were made in 2012 and we are told that there are no plans for any increases in the near future. I am thinking of a teenage girl in Leeds who has to look after her disabled mother as they seek asylum after fleeing from terror. She goes without meals herself in order to ensure that her mother is kept out of destitution. Will the Minister press her colleagues to ensure that the 10,000 asylum-seeking children who are at the most deprived end of our society are given a fair chance in life?
It is always a privilege to follow the noble Baroness, Lady Grey-Thompson, in these debates. Will the Government look again at the effect of the provisions of this Bill on disabled children? While some disability benefits are to be protected, the lower child disability addition of universal credit is included in the Bill among the benefits to be capped at 1% per annum. I follow the noble Lord, Lord Low, in asking that this should be looked at again. This benefit will be halved under universal credit; families with disabled children will have that element of their benefit reduced from £57 a week to £28, and now that savage reduction will be compounded by an increase of only 1% rather than by inflation. Will the Government consider the cumulative effect of the various measures on disabled children?
Alongside that, again with the noble Baroness, Lady Grey-Thompson, I am concerned about the effect on families of the continuing erosion of child benefit. This benefit has long been the mark of our support for children in our society, but already we have seen a significant number of families being deprived of this universal benefit altogether. The social value of paying this benefit to the mother has, I believe, not been properly or adequately counted. It is a benefit that is widely used to support the next generation, but it is now being refused to many. The 1% increase in 2014-15 follows three years of freezing the uprate so that, over the five years from 2010 to 2015, the level of child benefit for a family with three children will have reduced by £380 a year—in addition to the other reductions for children in deprived circumstances. Child benefit is key to the welfare of our society and it needs to be protected.
Finally, other noble Lords, particularly the noble Lord, Lord German, have asked the Minister whether she will encourage her colleagues, and indeed everybody else, not to use derogatory or dismissive language when they refer to those who receive welfare benefits. I will go a bit further than that and ask whether she will make it clear that the vast majority of those on benefits are not shirkers, fraudsters or spendthrifts. The majority of those who receive benefits are in work and the majority of those out of work would love to work if they could find jobs. The stigmatisation of those who receive benefits is both serious and dangerous. In 2011, there was an increase of 30% in attacks on disabled people, fuelled by stories of how people were falsely claiming disability allowances. Politicians and journalists are accused of spreading a mythology that causes stigma. Will the Minister today begin the process of slaying that myth by declaring that responsibility for poverty does not lie with the poor, so that we can, together, seek to support one another in helping those in most poverty, especially those in child poverty, within our society?
Lord Sheikh
My Lords, I welcome the Bill as it will restore fairness and simplicity to the process of social security payments. It will also deal with the question of affordability. It is important for a Government of any persuasion to show that they empathise with taxpayers who are essentially paying for welfare handouts. The concept of fairness is one of the reasons for proposing this Bill. It is worth remembering that the coalition Government inherited the biggest budget deficit of any country in the developed world. It is estimated that capping social security benefits in this manner will save the Treasury £3.7 billion in 2015-16 and that, thereafter, there will be permanent savings each and every year in our welfare spending.
Welfare spending increased by 60% under the previous Government but this did not produce the intended result of helping individuals to return to work. If we can get more people in work, some of them will receive salary progressions and improve their standards of living. In the years 1997 to 2010, when average earnings increased by 30%, tax credit spending increased by 340%. One of the aims of this Bill is to tackle the lack of aspiration and ambition among a number of those who have been trapped in poverty. I believe that the 1% uprating stipulated in Clauses 1 and 2 will improve incentives to work.
It is true that the welfare debate has been described in overly simplistic terms in certain quarters. However, it is a fact that a culture of dependency exists in some areas. Previous Governments have tried to tackle this issue with the best of intentions but the complexity and scope of the problem has often meant that past strategies have not been successful in addressing the matter. Children and young people who live in households where adults do not engage in any form of employment are not only the most deprived in our society but are most likely to follow this path once they leave full-time compulsory education. This generational cycle of worklessness is a key factor in the rising levels of welfare dependency and poverty in our communities.
I am sure that all noble Lords will agree that work gives people pride and confidence. Unemployment sometimes creates depression and has an adverse affect on people. Work is good for people’s mental health, their physical health and their general well-being. These benefits have been demonstrated repeatedly. Dependency is not liberating; it constrains people and prevents them achieving their ambitions.
Baroness Hollis of Heigham
I am grateful to the noble Lord for giving way for a moment. Would he not agree that, on the contrary, what welfare benefits such as tax credits have done, and what universal credit proposes to do, is to make work pay and thus get people back into the labour market, exactly as he wishes?
Lord Sheikh
I still feel there is a culture of dependency. Obviously, we would like to get more people into work and incentives must be given to people to go to work. People have become trapped in our welfare system and they need to be freed. This Bill will make a great contribution to their liberation.
The Government deserve recognition for trying to ensure that we have a fair welfare system to support those in genuine need. Social security should be for people who find themselves out of work and are trying to get back into employment. This House recently debated the success of the Asian community who were expelled from Uganda and came to settle in this country in 1972. My family was among those people who were expelled by General Amin and who came here. A number of these Asians came here penniless and were initially housed in Army camps. At the outset they received state benefits but they came off those benefits, and started to work and established small businesses. They have been successful and now offer employment to others, pay taxes and create wealth for the country. It is unfortunate that some people have chosen not to make a contribution to society and have opted to receive benefits as a way of life. The welfare system was created to ensure that people were not left destitute if they lost their jobs. It was viewed as a matter of support for those who were down on their luck. It is unfortunate that the original purpose of this safety net has been distorted.
I wholeheartedly support the Government’s decision to retain the uprating of long-term disability benefits at the rate of inflation. I also support the triple-lock guarantee for basic state pensions, which means that pensioners will receive an increase of at least 2.5%. A compassionate society is one that shows respect and understanding to the most vulnerable. I am proud that the Government have taken these steps as they are both a moral and civil duty. Further to erroneous reports about these measures, I would be grateful if the Minister could inform your Lordships’ House of the steps Her Majesty’s Government are taking to ensure that people are well informed and reassured about policy regarding disability and pension provision.
It is neither prudent nor fair to distribute welfare payments or benefits without question or regard for our economic situation. The uprating measures in this Bill will show considerable savings by 2015-16 and for years after that. This is essentially about taxpayers’ money. We have a financial deficit that we need to rectify and we need to put the country on a sound financial footing. We can achieve this by reducing our spending, applying appropriate taxes and undertaking more business at home and overseas. I have spoken on the latter point in your Lordships’ House previously. We cannot afford to continue paying welfare benefits as in the past.
The Government have reduced the deficit by a quarter since they came to power in 2010. Obviously, this is to be commended. More than 1 million jobs were created in the private sector in the same period. The FTSE 100 index has risen above 6,300 points for the first time since May 2008. If we can achieve more growth we will create more jobs, and if we can encourage people to work rather than be dependent on the state, more people will be gainfully employed. I support the Government on getting the economy right and we must be firm and keep on the right track. It will indeed cause pain to some people but, of course, if a person is ill it is necessary to take strong medicine. We should not borrow our way out of the current financial crisis. Borrowing is the easy way but it is the wrong way.
There are wider social implications at the heart of this debate. We cannot ignore the resentment and anger felt by hard-working families who see others making a conscious effort not to work being rewarded handsomely by the state. Failure to address this issue may cause tensions within communities. I am sure that some of us have heard the expression, “I cannot afford to go to work”. This is an absurd situation and we are perhaps the only country where people are better off not working.
The measures in the Bill are necessary to remedy the culture of dependency that is blighting some members of our population. The Bill is a sign of the Government’s commitment to ensuring that we live in a fair society. The fact remains that since the economic downturn salaries have risen on average by 10%, whereas payments for some individuals in receipt of benefits have risen by 20%. We need to look at all areas of expenditure for our well-being, which will of course include the welfare benefits. The present state of affairs is simply not sustainable. I am supporting this Bill as it is a step forward in dealing with issues relating to affordability and fairness.
Baroness Donaghy
My Lords, I pay tribute to the noble Lord, Lord Sheikh, for being a hard-working and successful entrepreneur. I know several people who have two or three part-time jobs who work extremely hard and who remain low paid. I never cease to be surprised that the low paid are always blamed for being low paid and being eligible for tax credits, but low-paying employers are never blamed for their part.
This Bill is political and deserves a political response. The challenge has been issued by the noble Lords, Lord German, Lord Bates and Lord Brooke of Sutton Mandeville: “What would I do instead of this Bill?”. In the words of Yosser Hughes, “Gissa job” and I will tell you. This Bill is completely unnecessary, it is based on a misrepresentation and it is playing politics with people’s lives. All this will become apparent when the impact is actually felt by real people, when the jobless numbers rise and child poverty increases.
First, there was absolutely no need for the Bill, as has already been said by several speakers. The Government already have the power to uprate by 1% this year, next year and the year after at the appropriate time without new primary legislation. So why do it? The Work and Pensions Secretary, Iain Duncan Smith, said that it would,
“provide certainty for taxpayers, the markets and claimants”.—[Official Report, Commons, 8/1/13; col. 189.]
I ask the Minister: what certainty can there possibly be when the level of inflation in the next three years—a key ingredient, she must accept—is unknown? What certainty can there be when the markets are up and down like a yo-yo? I suppose it could be said that higher rate taxpayers have been provided with certainty, and claimants are certain that they will be a lot poorer. The real reason for this unnecessary Bill is to provide a symbolic dividing line between the coalition Government and the Labour Opposition—short-term political gain on the back of those at the bottom of the labour market—and this sleight of hand will be found out.
Secondly, the Bill is based on the false premise that this is about fairness between taxpayers and those out of work. The Chancellor himself stated that,
“over the last five years, those on out-of-work benefits have seen their incomes rise twice as fast as those in work”.—[Official Report, Commons, 5/12/12; col. 879.]
Everything has been pitched to present this Bill as an act of fairness to working people whose earnings have risen by about 10% since 2007 while out-of-work benefits have gone up by about 20%, but we all know how misleading this comparison is. I negotiated wage increases for the poorest paid in universities for 16 years, 90% of them women, mainly part-time. Using percentages to present a case is designed to mislead. We used to say that 10% of nothing is still nothing.
The whole presentation by the Government is about employed versus unemployed, when the reality is nothing of the kind. It is actually about divide and rule. Thirty per cent of households will be affected. Those most likely to be affected are families with children, particularly lone parents, 90% of whom are women. The Government claim that many of those affected by the Bill could cope with the below-inflation benefits by moving into work, but 60% of those households affected are in work. The Government claim that the disabled will be protected, but disabled people in the ESA support group will see their basic allowance of £71 uprated by 1%. This represents almost 70% of their out-of-work support and 991,000 disabled people receiving ESA in 2012 will experience a 1% uprating, representing a loss of £87.65 a year, as has already been said.
The real weasel words come when we are told about child poverty. The Parliament Under-Secretary, Esther McVey, said that there would be,
“an extra 200,000 children being deemed by this measure to be in relative income poverty compared to uprating benefits by CPI … It is misleading to look at the impacts of uprating in isolation”.—[Official Report, Commons, 15/1/13; col. 715-16W.]
Note the words “deemed” and “relative income poverty” in an attempt to minimise the impact. Mr Duncan Smith went on to say:
“If we take the figures on that relative income point across the period covered by the spending review, we can see that some 350,000 children net will be lifted out of poverty, even if we take into account the effect of this Bill”.—[Official Report, Commons, 21/1/13; col. 131.]
So either we have 200,000 extra children in poverty or we have 350,000 fewer in poverty. In a recession we are all poorer so the poorest are comparatively better off—what unbelievable nonsense.
Thirdly, the Government are playing politics with people’s lives. They claim it is about rebalancing the economy and making work pay. Let us say for the sake of argument that the 60% on diminishing tax credits who are in work get better jobs, leaving room for the 40% who are not in work to do the lowest paid jobs. Where are these jobs coming from? Last year 300,000 jobs were lost from the public sector. The OBR predicts the loss of a further 900,000 jobs by 2017-18, while the Institute for Fiscal Studies predicts 1.2 million lost jobs in the public sector over the same period.
The Government think they are all going to come from the private sector, and so far they have, but there is no growth in the economy. People are spending what they have on energy, food and rent, and large retail chains are going out of business. Maybe they will all become self-employed. Between June 2008 and April-June 2012 the number of self-employed rose to 4.2 million, a rise of 367,000. During the same period, the number of employees declined by 434,000. Maybe this is how we are going to work our way out of poverty.
However, if you look at the figures, 80% of that increase in the number of self-employed were aged over 50 and more than likely to be male, according to the Office for National Statistics. So we are turning into a nation of 50 year-old entrepreneurs. When you delve even further, they turn out to be construction workers, carpenters, taxi drivers, et cetera. This suggests people who have little choice about their employment status, whose job prospects have diminished because of age barriers and who are probably bumping along on the bottom of the labour market, getting what they can but not continuous employment. It could also explain why output is flat while employment is growing. It is not the brave new world but more like a twilight zone.
The Government are not looking after the economy; they are looking after their own. The gap between rich and poor, already unacceptable, will widen. The Times Magazine last week said that a child born in Lambeth is likely to die eight years before their counterpart in Kensington and Chelsea. I presume that the latter need the extra eight years in order to spend their tax breaks. It is bad enough that we live in a society that tolerates these differences in mortality rates. This Bill is intended to be a propaganda coup for the Government. It will soon be seen for what it is: a gratuitous attack on the poorest and weakest in an unequal society.
Lord Wigley
My Lords, I am delighted to follow a number of long-standing colleagues with whom I have campaigned on these issues over many years. I, too, voice my concern about this Bill, which will result in real-terms cuts in support for thousands of low-income people, including, despite government claims to the contrary, up to 1 million disabled people, particularly those endeavouring to work.
If the Bill goes through unchecked, the increase in welfare benefits will be 1% while CPI inflation stands at 2.7% and RPI inflation at 3%. As the noble Lord, Lord Kirkwood, mentioned, inflation may well increase substantially. This will lead to real-terms cuts during the next three years in payments to support those who are working and contributing to the economy. They are the very “hard-working families” so beloved of the spin doctors of those who want to underpin the concept of the deserving poor—deserving, apparently, of just 1% uprating. I cannot see how this will contribute to promoting a work ethic or allow working people to participate in a savings culture.
I shall refer to figures relating mainly to Wales, although I realise that the arguments will apply to many other areas, too. The effect of the measures in Wales will be disproportionally greater, since incomes per head in Wales are substantially lower than average incomes in England. Figures released before Christmas show that GVA per head in Wales stands at 75.2% of the UK average, so cuts to in-work benefits for the low-paid will hit Wales proportionately harder.
According to the most recent DWP data, as at 1 December last year, more than 125,000 families in Wales were receiving working tax credits. This comprises some 93,000 families receiving both working tax credits and child tax credits, and 32,000 families receiving just working tax credits. The 2011 census records that in my home area, the Gwynedd local authority area, 9,200 families were receiving one or more elements of tax credits out of the total 52,000 households. This means that 17.5% of all households were in receipt of tax credits. These people generally spend their money within their own local areas. The Welsh economy is made up overwhelmingly of small businesses. These working tax credit reductions will mean that demand is further sucked out of local economies as people have, in real terms, less money to spend.
The uprating will also hit those seeking work. The Government may intend this real cut as furthering workforce discipline, surmising that, as benefits will be even lower, so people will be prepared to take any job. In this, they are fundamentally mistaken. Many unemployed people, particularly in Wales, are seeking work in vain because the economic policies of the Government are failing. There are some parts of the west Wales and the valleys area whose GVA per head is only 65% of the UK average, with 21 unemployed people chasing every vacant job. Putting the morality of this on one side for a moment, starving people back into work has no prospects of success if the jobs are just not there.
If we are to combat this, boosting skills alone will not cut it; we must also tackle the demand side of the economy. We have to make sure that there is real work out there for people to do. The Government's Work Programme, allegedly designed to take people off benefits and into work, was utterly ineffective throughout the UK, but Wales recorded the worst figures, with the Department for Work and Pensions saying that only 1,380 of the 42,380 people on the programme entered long-term employment—a success rate of only 3%. In Wales, 77,377 people are looking for work and claiming jobseeker’s allowance, while just 20,310 vacancies are posted in jobcentres. This means that, across Wales, there are on average four people chasing every empty job
We are facing a vast increase in the number of the working poor—people who are now resorting to the food banks to feed their families. If this Government were serious about ensuring that work pays, they should legislate to ensure that work really does pay more in wages so that people do not have to resort to benefits to make ends meet. Legislating to uprate the minimum wage to the recommended living wage would be a good start, and I commend the points made by the noble Lord, Lord Bates, earlier in this debate.
It has been estimated that the private sector in the UK is sitting on a cash stockpile of as much as £700 billion, because it does not have the confidence to invest. Getting this prospective investment to create economically productive jobs is the challenge which the Government have so far failed to address successfully.
In Wales, although most economic powers are not devolved, we can take some steps to improve the situation. My own party, Plaid Cymru, recently successfully negotiated with the Welsh Government to secure £40 million of funding towards 10,000 new apprenticeship training places in Wales as part of a budget deal. We are also pressing for a new procurement policy that could create several thousand jobs through sourcing public sector contracts domestically. Such an approach might be beneficial also for the deprived parts of northern England which, like Wales, are suffering from ineffective economic policies.
Wales needs job-creating levers to improve our economy, not handouts and workfare. That is why it is essential that the powers recommended by part 1 of the Silk commission are implemented as soon as possible. Real work and training is what is needed, not temporary workfare schemes to take people off unemployment figures for six months. At the very least, the Government must make sure that increases in benefit rates reflect rises in the cost of living. Otherwise, this proposed cut will deepen inequality, increase poverty and further dampen the economic prospects of poorer areas.
Lord Whitty
My Lords, the noble Lord, Lord Sheikh, said it and, to a large extent, the noble Lord, Lord Wigley, demonstrated it as regards Wales; namely, that this Bill has wider social implications, but they are not welcome implications. They are to put a big burden of the sorting-out of our economic situation on low- paid working people. I follow the noble Lord, Lord Kirkwood, in saying that it is quite a dangerous move, after 20 years of virtual cross-party consensus, that we should virtually automatically uprate our benefits system, to break that system in this way in a Bill which is legislatively unnecessary. The noble Lord also said that we needed some clearer long-term thinking. My main points will be about that because, as many others have said, this Bill is surrounded by hugely misleading propaganda.
It is supposed to be part of a strategy on the part of the Government to reduce benefit costs, simplify the benefits system and increase employment, but any such strategy is put in jeopardy by a government believing their own propaganda and that of their press allies. That propaganda seems to be all about the distinction between the deserving and the undeserving poor—those who work and those who do not—but the burden of the Bill falls on those who do work, who are already squeezed by a cut in real wages, particularly at the lower ends of income, and who will therefore be twice hit by a cut in the real value of their benefits.
The propaganda also suggests that benefit recipients’ real living standards have risen dramatically faster than those who are in work. As the figures that have been provided to us by the CPAG show, the real value of unemployment pay and other social benefits has steadily fallen over several decades. The reason why there has been a slight reversal in the past couple of years is the dramatic fall in real wages at the bottom end. That is not a reason to aggravate that unfairness and retrogression by the means proposed under the Bill.
If the Government were really telling the public that we need to differentiate between those who work and those who do not, they would have provided for a benefit system that differentiated between levels paid to those in work and those out of work. The Bill does not do that. The Government have, rightly, stuck with focusing on need rather than on whether you are in or out of work. Of course, the downside of that is that they have hit both equally. For those who are in work, the Government claim that they have offset that by raising the tax threshold at the same time, but the tax threshold hike has been offset by the cut in housing benefit, the abolition for many and the cut for others in council tax benefit and other benefits. The net effect on the working poor of the Government’s measures has not been positive compared to those who are on benefit and who are out of work. The supposed strategy is as much at odds with the propaganda as the propaganda is at odds with reality.
I hope that the Government will find my second point slightly more constructive, but it is equally critical, not only of this Government but of previous Governments. Elements of the Daily Mail propaganda, as I would call it—to save Ministers’ blushes—are correct. That relates to the soaring cost of housing benefit and, within that context, to occasional, admittedly much exaggerated, stories of ludicrously high levels of housing benefit for particular families in particular situations, especially in London. Those families are obviously chosen to highlight a point. For obvious reasons, they tend to be families who fit the Daily Mail image of benefit recipients by being large in the number of children, probably out of work and almost certainly foreign.
There are thousands of other less dramatic cases in which, inevitably, housing benefit has risen above the rate of inflation. The Government, and all of us, have to ask ourselves why. It is because of the failure of the housing market, compounded, in some cases by the failure of local authority placement policies. It is not, by and large, due to the failure of the benefit system.
I have been banging on about the failures of the housing market for at least 10 years, for the past two years as chair of Housing Voice—as I should have declared—but so have many other people for far longer. The reality is that all parts of the housing market—out-of-reach mortgages, soaring private rents, unaffordable leasehold charges, the inadequate quantity of new social housing, and increasingly expensive social housing at that—reflect a failure to build, a failure to refurbish and a failure to provide housing choice fit for our society at various levels.
Hence, in all forms of tenure, housing costs are rising. Inevitably, that leads to a rise in housing benefit payments. I repeat that that is a failure of housing policy; it is not a failure of social security policy. I predict that the pressure on housing benefit, or what is intended will become the housing component of universal credit, will seriously sabotage and possibly completely undermine what I think is universally regarded as the commendable aim of introducing universal credit, unless housing benefit and the pressures on it are dealt with first in the wider context of housing policy.
Looking back, the roots of this problem go to a serious mistake, made, probably unconsciously, decades ago. Until the 1960s, the vast bulk of government intervention in the housing market was on the capital side: help to local authorities to build social housing; and help to homeowners and landlords to improve their stock. A much lesser proportion was on the revenue side in subsidies to people, and much of that was through tax relief on mortgage payments. We now have a completely switched system, so that more than 90% of state support in the housing market is revenue based and very little is capital based. In the next five years, £90 billion will be spent on housing benefit; £5 billion, at best, on new and improved housing. Within government, the two aspects are dealt with by entirely separate policies and entirely different departments. CLG designs housing policy; DWP decides housing benefit. If the two sides were brought together in one pot with one policy in one department, we could perhaps, over a period of years, develop a sensible housing strategy: building more houses, improving those we have, and providing selective support to tenants and householders who are faced with unaffordable costs.
Unless we do that, unless we take housing benefit out of the plans for universal credit strategy and put it back into housing policy, we will not solve the housing crisis, the pressure on housing benefit and therefore the pressure on the social security budget in total. Unlike other benefits, housing benefit—and, I guess, council tax benefit—depends not on your income or your family circumstances but on the home and the area in which it is situated and on the state of all the housing markets in that area. As long as the housing crisis persists, the total benefit bill will inexorably rise faster than inflation. Then the Treasury will again insist on real-terms cuts to the income of many of the poorest in our society, such as the proposals before us tonight.
I appreciate that in calling for a single approach to housing policy, I am parting company with some of my usual colleagues who are housing and policy campaigners, but I say to the Government and the Opposition that unless they start looking at this in a more strategic way and put both sides of the housing issue together, they will solve neither the housing crisis nor the pressures on the social security budget. Unless we do that, we will be back here in a few years’ time with a Government of one complexion or another unfortunately forced to put the cost of our failure on those who are least able to afford it.
Baroness Gardner of Parkes
My Lords, it has been a very wide-ranging debate, and many different aspects have been developed by different speakers. I start by taking issue with the noble Lord, Lord Whitty, for saying that we on this side have tried to make this a battle between the deserving and the undeserving. I do not think that there should be moral judgments like that, and I do not believe that our party is making them. I will start with the noble Lord’s speech because it was the previous one and therefore it is fresh in my mind. It is important to realise that housing benefit has been a great problem. He says that we need to address it. Of course we do. One way to address it is to restrict it, and that is what has had to be done.
I have seen people living in properties who have been getting housing benefit of about £80,000 a year. That is just the benefit. It is not their living costs or anything else. People in employment might be earning £20,000 a year in the same area. It is pretty hard to watch that happen. When I was chairman of social services on Westminster Council, many years ago, we discovered that housing in London was terribly expensive even then, and that there was plenty of space and lots of unoccupied properties in, I think, Liverpool. It was somewhere quite remote.
We gave all those people who had no housing rights at all the right to go there. We provided transport and everything else, and Liverpool was willing to provide the accommodation. One-third of those people arrived there. The other two-thirds vanished into the blue. They went off our housing list, but they never appeared anywhere else. Evidently they would rather do anything than leave London. When we now see these people living in a little shed in a back garden in Acton or somewhere, it is terrible that people so desperately want to stay in London, where housing is, I would say, at the top of the range in price, and the least available. We had terrible trouble then because all the bed and breakfast hotel accommodation, which is so widely used now, was taken up by tourists or new arrivals to the country. Even to get a bed and breakfast space we at Westminster Council had gradually to move out wider and wider. It got to the point where no one in London had any bed and breakfast space available.
I feel for councils now that have nothing to offer people. This problem has not arisen in five minutes. It goes back a long, long way. When I was on the Greater London Council, I remember that we had a Conservative housing chairman and a Labour Government at that time. The chairman said, “This is the time when we could solve the housing problem, because I know what we need in London and the Labour Government have good ideas on what they could do”. However, it never happened because each of those authorities changed. The Government and the council changed, so the whole scenario changed.
Housing is a major problem. What is very bad is the continuing increase in utility bills and fuel rises. People in council blocks have recently told me that they can manage to pay the rent—they were renting from people who had bought their leasehold because that was all that was available—but they could not afford to warm the flat because the fuel bill is so high. That is worrying, because we were told that every effort would be made to see that fuel bills came down to a level where a card payment at a prepayment meter, which most of those people have to use because it is the only practical way for them to budget, would not be more expensive than having a quarterly bill. Yet only last week someone told me that it is still 10% more. Of course, it is going up all the time. That would be something—there are many things—that could be done to help people. The housing issue is not such a battle now. It has been addressed by putting a ceiling on housing benefit.
I heard the noble Lord, Lord Wigley, talk about Wales and the shortage of work there. Surely a lot of those people who cannot get anywhere else to live in the country could go to Wales. If you are living on a benefit, it does not matter where you are living if it is fully paid for by someone else. I do not understand that position.
Lord Wigley
I am listening carefully to what the noble Baroness says. Surely she would not uproot families—families with children in schools and with support mechanisms around them in south-east England—and move them to Merthyr Tydfil or Middlesbrough, where they have no links at all.
Baroness Gardner of Parkes
I do not know that I agree. I arrived in this country and knew nothing about it. I had no job or anything else. Particularly if you have come from another country, it really does not much matter where you settle provided that you have the school that you want. Wales has always had a marvellous reputation for literacy, and I am quite sure that the schools would be good there. You want to be able to live in a safe, clean environment. Again, Wales is a beautiful country. I am a New South Welshman myself.
I do not want to be frivolous in this very serious debate. The one thing that we all have in common in this Chamber tonight is that none of us wants to see restrictions on anything. However, we just have to be realistic and look at the common sense of it. If we do not have the money to afford things, we cannot attempt to do it. It is all very well to think that you can do everything for everyone. I read in the statistics, which I think someone else quoted, that there was a 60% welfare increase under the previous Government between 2003 and 2010. Every household had to pay more than £3,000 a year to meet that extra increase of 60%, and the fact that we went too far and spent too much then is of course catching up with us now. It would be lovely if these things did not happen. However, this has happened and we have to try to put a stop on it, at least to be sure that we do not go on for ever.
The noble Lord, Lord McKenzie, spoke early on about how we denigrate people as being workshy. Again, when I was in dental practice we had only a very poor catchment area near us because the only way people could get to work was by bus. There was absolute overemployment in the country, but we would go to the jobcentre and get nice young people to come and start work. We made the mistake originally of giving them keys to the surgery. That was a big mistake because most of them did not last a week. Then you would phone and say, “Where is Joanie? We were expecting her at work”, and someone would say, “Oh no, she never gets out of bed before midday. We can’t do anything with her”. So this is not a new problem. There have always been people who did not want to work, but there are others who do. That is the tragedy today; plenty of people desperately want to work but cannot find the work, as the noble Lord, Lord Wigley, suggested about Wales. It really is a major problem.
However, the more difficult the world and the more difficult these situations, the more we have to address them. We cannot go on believing that it will all work out all right in the end, just keep your fingers crossed. I was very impressed with the speech by the noble Lord, Lord German. I have never heard him speak before, but he clearly understands all the technical terminology, which I cannot claim to understand at all. The noble Lord said that at the moment all these taxes hit the richest hardest. That is true, because they are paying the biggest bit. Someone else, who I think was on the other side—no, it was that marvellous noble Lord in the back row here. I cannot pronounce his name; it is a bit too difficult for me—
Baroness Gardner of Parkes
Thank you very much. The noble Lord said that some are hit harder than others and that to be hit hard if you are rich is not nearly as difficult as if you are poor. Every one of us would agree with that statement, so these things are not simple.
There was talk about food banks. The other day we had a question about food banks, which are a good idea. It is a disappointment that you might have to use a food bank but at least there is something there. When people talk about the difficulty of having to choose whether to warm the house or feed their children, surely food banks are better than leaving your child hungry. I can see someone disagreeing with me, but whatever I say, someone will disagree with me because there are two definite views on this. However, we have to be realistic.
I noticed that the right Reverend Prelate—was it the same Lord Bishop who is in his place? No, I think it was the previous one—the Bishop of Leicester said that it was just a short-term saving and that people were having to pay some element of council tax for the first time. Again, I think that council tax is perhaps one of the better forms of tax and that councils take into account where people really need help. I notice that even in business rates there is a provision whereby you can apply to have your business rates reduced, and that might enable you to stay in business and go on employing people who are working for you. Things are not that easy. The internet is destroying lots of shopping centres. There are issues there.
The noble Lord, Lord Touhig, made points that I agreed with strongly. He talked about the deserving and the undeserving. That seems to be the tag that they are giving us today. I remember Keith Joseph, in the days when he was very involved, talking about the cycle of deprivation. I have always thought that that still exists. If you do not know how to live frugally and do things for yourself, you cannot teach your children the same things because you do not know them to pass them on. This is very important. When times are hard for some people, they tend to buy food that is expensive and not necessarily nutritious. We get all the talk about obesity even in the very poor, and that is because the food that they can buy that is cheap is the worst for health. All these things are difficult.
The noble Lord referred to the climate of uncertainty and fear that we are trying to create—I do not know whether he said that we were trying to create it or whether we had done so—but that is certainly not the intention. There are things that we could do. I am strongly supportive of old people having bus travel passes or of transportability for people. Again, we did a great survey when I was chairman of social services and we discovered that the best thing possible was for people to continue to be mobile and to get around. If they could not afford the fares, they could not do that, and that added to the national health bill. If we are looking for a good economic thing, one of the good things is to keep people mobile and moving around as much as possible. The other things that are much more difficult are how to occupy them.
We have created a culture of dependency. As I said, those benefits went up 60%. This is the realistic situation that we have to bring back into line. The Bill has been demonised today in a way that is not fair. This side cares very much about people. It is simply that the answers are not easy. We would all like to do everything to help everyone, but you just cannot have it all ways. For that reason, I support the Bill.
Baroness Lister of Burtersett
My Lords, this Bill should really be titled the “Welfare Benefits Downrating Bill” because it will downrate the real value of the benefits and tax credits upon which the poorest members of our society rely. The Bill’s length, together with its effects and some of the divisive arguments that have been used to justify it elsewhere, make it—unfortunately my noble friend Lady Hollis got in first with my best line—nasty, brutish and short.
Among those who face greater hardship as a consequence are the 200,000 children who will fall into poverty as families with children and poor mothers are particularly hard hit. In the words of the Children’s Commissioner for England, it is unacceptable that children should have to pay the price for the economic malaise of our country. Could the Minister please explain how this projected increase in child poverty is compatible with the Government’s obligations under the Child Poverty Act 2010? Moreover, as a number of noble Lords have said, about one-third of households containing a disabled person stand to be affected, despite the claims to be protecting disabled people.
I wish to examine the two main arguments used by the Government to justify this nasty Bill. The Secretary of State told the other place that the arguments are,
“first and foremost about affordability”,—[Official Report, 21/1/13; col. 128.]
and that deficit reduction is at the heart of the measure. Oddly, he countered the charge that social security spending had risen faster than anticipated under his watch by rightly pointing out that,
“a huge part of that is spending on pensions”.—[Official Report, 8/1/13; col. 188.]
Yet pensions are not included in his Bill, which is supposedly “all about affordability”, as my noble friend Lady Hollis has underlined.
Ministers enjoy using the affordability argument to ask the Opposition what they would cut instead, as have the noble Lords, Lord German and Lord Bates today. I cannot talk for the Front Bench but similar sums could have been saved in a much less regressive way by forgoing tax cuts that benefit the better off the most. I am talking about not just the regressive cut in the additional rate of tax but also the increase in personal tax allowances, which are of no help to the one-fifth of workers too poor to pay tax, two-thirds of whom are women; of only limited help to those in receipt of certain means-tested support, which tapers away with higher post-tax income, and this will be even more the case under the universal credit; and of most advantage to higher-rate taxpayers. As a Gingerbread report put it:
“It would be hard to design a policy that was less well targeted on low income families”,
than raising personal tax allowances—the more so, given that the better-targeted child benefit has been frozen, as the right reverend Prelate the Bishop of Ripon and Leeds has pointed out.
In any case, if the policy is really about deficit reduction, cutting incomes at the bottom is counterproductive because, as the IMF has pointed out, this reduces demand. People on low incomes are more likely to spend their money, and in the local economy. According to the Office for Budget Responsibility, the multiplier effect of changing benefit levels, for good or ill, is twice that of personal tax allowances. So what is the sense of taking money out of poor people’s pockets in order to put some back into better-off people’s pockets in a way that is less likely to keep the economic wheels turning? Again, a number of noble Lords have made that point.
The second argument concerns fairness. There are two aspects to this. The first is that over the past five years out-of-work benefits have gone up by about double average earnings. In the debate in the other place, a Conservative Back-Bencher said that it,
“cannot be right ... for benefits to rise, year after year, faster than the wages of the low-paid”,—[Official Report, Commons, 21/1/13; col. 101.]
but the past five years have been an aberration. With the exception of a much needed boost to the real value of support for children achieved under the previous Government, benefits have year after year gone up by less than wages because they have been linked only to prices. The consequence is that, according to Professor Jonathan Bradshaw, the value of the basic safety net benefit received by a single person is now only 11% of average earnings compared with 18% in 1948 and 20% in the late 1960s. Moreover, the replacement rate of unemployment benefits is low comparatively, meeting only 53% of former net earnings for a couple with two children on average earnings compared with an OECD average of 76%.
A Joseph Rowntree Foundation study of existing uprating policies concluded that they,
“imply substantial long-term reductions in personal disposable income relative to earnings”.
Indeed, the Minister, Steve Webb, told the other place that,
“we think that average earnings in a couple of years’ time will be more than CPI, as is the case in many normal years”.—[Official Report, Commons, 21/1/13; col. 114.]
So even the Government do not believe that benefits were going to run away ahead of earnings, if they continued to be uprated in line with the CPI.
As has already been pointed out, the differential impact of inflation on different income groups due to big increases in food and utility prices means that people on benefits typically will have been hit harder by rising prices than the people on average earnings with whom Ministers like to compare them. They are also being hurt by cuts in housing benefit and are about to face cutbacks in council tax support. We can already see the consequences in the growing hardship documented by charities and the inexorable rise of the new alternative safety net of food banks.
I wish to refer briefly here to the findings of the independent parliamentary inquiry mentioned by the right reverend Prelate the Bishop of Ripon and Leeds. The inquiry,
“was shocked to hear of instances where children were left destitute and homeless, entirely without institutional support and forced to rely on food parcels or charitable donations”.
The asylum support system, which has failed these children, has not been increased at all this year, not even by the miserable 1% in this Bill.
Percentage increases, or what the noble Lord, Lord German, called a small amount, have to be understood in the context of the value of the benefits themselves. Analysis by my colleague Donald Hirsch at Loughborough University shows how working-age benefit levels are well below the minimum income standards that members of the public believe are necessary to live a decent life. It is sobering to reflect that if I were a single, unemployed person the £71 I would get a week in jobseeker’s allowance is less than a quarter of the allowance I can claim a day for attending your Lordships’ House.
The other fairness argument that has been put was articulated by the Chancellor in his Autumn Statement when he maintained that,
“fairness is also about being fair to the person who leaves home every morning to go out to work and sees that their neighbour is still asleep, living a life on benefits”.—[Official Report, Commons, 5/12/12; col. 669.]
As has already been said, this has encouraged the framing of the debate in the loathsome terms of strivers versus skivers in which striving is misleadingly treated as synonymous with paid work and skiving with out-of-work benefit receipt. With reference to this the Joint Committee on Human Rights, of which I am a member, has reminded the Secretary of State,
“of the importance of fostering respect for the dignity of the vulnerable, including benefits claimants”.
I am very glad that so many noble Lords have made the point about the importance of the language that we use.
I hope in this context that noble Lords will also have regard to a new Joseph Rowntree Foundation study, which debunked the conventional wisdom of an intergenerational culture of worklessness despite a search in the kind of areas most likely to produce it. The researchers found that typically young people,
“aspired to a life that included work”,
The study said:
“Without exception, parents also hoped for better for their children and, where possible, made practical efforts to help them towards employment”.
The noble Lord, Lord Bates and Lord Sheikh, are not in their places, but they might like to read that study because they seem to believe that a dependency culture exists widely in this country. Study after study demonstrates the work commitment of people in receipt of benefits, and I am sure noble Lords would not want to follow the example of the Conservative Back-Bencher in the other place who insisted during the Second Reading debate that,
“there is evidence of a culture of worklessness, whatever the Joseph Rowntree Foundation says”.—[Official Report, Commons, 8/1/13; col. 238.]
And what was the evidence? It was a caller to LBC radio.
A number of pieces of JRF research have also illuminated how the demonising division of the world into strivers and skivers belies the constant movement in and out of work at the bottom of today’s insecure labour market. The assumption that people out of work are skivers ignores the ways in which they strive to get on and to help their children to get on, strive to care for their families and often to improve their local communities, too. I suggest that it is an unfair slight on the good name of many of our fellow citizens to write them off as “shirkers”, “welfare dependents” and undeserving of decent benefits.
It is also unfair to suggest, as did the Secretary of State recently, that many of those in receipt of tax credits are somehow getting what they are not entitled to. This smacked of an attempt to deflect the evidence that around half of those affected by the Bill are in working households. This discrediting of tax credits ignores the ways in which, as has already been noted, they have supported low-income working families whose earnings have been squeezed during the recession, and have probably contributed to the lower than expected level of unemployment. To then compare the increase in benefit levels with these same squeezed wages as justification for this Bill, which also cuts tax credits, is to add insult to injury.
I suggest that the Government’s arguments do not withstand scrutiny. Instead, this is an unnecessary, political bill designed to divide one group of low-income people from another and to court public opinion. The one silver lining is that opinion polls suggest that the public are less enthusiastic than the Chancellor of the Exchequer had perhaps anticipated. By fixing benefit upratings at an arbitrary 1%, regardless of what happens to inflation over the next three years, rather than assessing the situation in the normal way, year by year, the Government are, in the words of the Institute for Fiscal Studies, exposing,
“the poorest in society to inflation risk”,
a point made powerfully by the noble Lord, Lord Kirkwood.
As even the right honourable John Redwood warned in the other place:
“If inflation suddenly took off”—
I am not sure about “suddenly”, because I have been reading reports about the new Governor of the Bank of England talking about economic policy which may well increase inflation—
“this would become a much tougher and crueller policy”.—[Official Report, Commons, 21/1/13; col. 66.]
It is already a tough and cruel policy. It does not deserve your Lordships’ support.
Lord Macdonald of Tradeston
My Lords, as previous speakers have emphasised, the impact of the Bill must be seen in the context of the radical reforms taking place across the welfare system—reforms which my noble friend Lady Hollis denounced so comprehensively in her coruscating and, indeed, moving speech following the equally persuasive critique of the right reverend Prelate the Bishop of Leicester.
At this late stage with so many criticisms so well expressed, I say simply that disabled people have suffered particular uncertainty and distress. Unfortunately, the changes proposed to their benefits in the Bill add more uncertainty. Yet, when announcing the Bill last year, the Chancellor said that he would exempt some benefits for disabled people and carers from the 1% cap on uprating. Indeed, the exceptions of disability living allowance and the support component of employment and support allowance are to be welcomed as an acknowledgement that disabled people need additional protection in these difficult economic times.
Regrettably, however, these protections do not go far enough to protect disabled people who have collectively experienced an estimated drop in income of £500 million since the emergency Budget of 2010. The reality is that measures in the Bill mean that many disabled people and their carers will experience cuts in the support that is essential if they are to cope with and overcome the barriers and extra costs that they face as a result of their disabilities. A serious concern relates to the changes around the employment and support allowance. The noble Lord, Lord Low of Dalston, has already explained in detail how the disabled will be left worse off. I will not repeat his excellent analysis, except to remind your Lordships that these cuts could cost disabled claimants between £63 and £88 per year.
On previous occasions, I have spoken in the House about the difficulties faced by those who suffer from dystonia. I declare an interest as patron of the Dystonia Society. Dystonia is a neurological condition which affects 70,000 adults and children in the UK. It causes involuntary and sometimes very painful muscle spasms, and is experienced by approximately 20% of disabled people with cerebral palsy. Many sufferers receive employment and support allowance, and for some that is essential support. Dystonia can be unpredictable, with symptoms varying from day to day, which makes regular employment a challenge. However, with adequate support, many will endure their dystonic spasms to prove that they are ready to work at least as well as they can. It seems unfair for the support that they should receive to be further threatened by this Bill. I therefore ask the Minister to consider amending the Bill to ensure that all aspects of the employment and support allowance are uprated to keep pace with inflation. I look forward to his response.
Lord Best
My Lords, my contribution to this debate considers the implications of the Bill for the nation’s housing. However, in the wider debate I align myself firmly with those who believe that there are better ways to reduce the national deficit than by cutting living standards for the poorest. For example, I note the announcement today of the Government’s intention to raise more funds—that is, more than were previously planned—through inheritance tax. I have made my own proposals in this House for other measures that would spare those on the lowest incomes; for example, by reducing the non-means-tested single person’s council tax discount, rather than reducing council tax benefit for current recipients. I do not enter this debate with the belief that cuts to the incomes of the very worst-off are an essential part of deficit reduction.
Turning to housing matters, I shall highlight three ways in which housing will be affected by the 1% limit on benefit increases. First, the new 1% cap on increases to local housing allowances—the housing benefit for private sector tenants—will accentuate the reluctance of landlords in the private rented sector to offer new tenancies or renew existing tenancies to those who rely on benefits. The new cap on rent increases on its own might not look significant but we have seen a succession of limitations on local housing allowances and another one is bound to affect landlord attitudes.
If the landlord puts up the rent by more than the 1% limit for the local housing allowance, the shortfall for the tenant to make up—the gap between the actual rent to be paid and the amount received by way of the allowance—will widen, taking more out of the tenant’s meagre income that is needed for other costs. Of course, as landlords will note, these extra pressures on tenants’ incomes make rent arrears more likely. The last thing that these landlords want is the hassle and expense of evictions. I was glad to note the special help through exemption from the 1% LHA cap for areas with the highest rents. But, because of the reductions to other benefits, a household in London is still likely to lose more than £500. This obviously increases vulnerability to getting into trouble with rental payments.
The Government had hoped that the caps and ceilings they have already applied to their support for housing costs would lead to private landlords lowering rents accordingly. But in most areas—very prominently in London and the south of England—rents have gone up instead. Last year, they increased by 7% in London and 3.4% across England and Wales. Landlords have been able to charge these rents because they can let to tenants who are not in receipt of benefits. Because so many new households in reasonably paid jobs are now unable to buy, landlords in much of the country can choose to take in these better-off homeseekers in place of those who need benefits.
As rents rise and the incomes of those in work do not keep up, more working households are requiring help with housing costs. New figures from the Building and Social Housing Foundation show that the proportion of housing benefits going to people in work is rising significantly, and working households now account for 90% of all new claimants. Caps on local housing allowances, therefore, affect the hard-working families whom the Government want to protect. Discouraging private landlords from letting to those in receipt of benefits means more working households, as well as those without a job, being left with nowhere to go.
This brings me to the second likely effect of the Bill: the adverse impact on social housing. The decline in home ownership, and the resultant ability of private landlords to choose to house those on rather higher incomes, magnifies the importance of the social housing providers. However, I fear that the Bill—not on its own but, as in the private sector, in combination with other reductions in support for tenants—will make things more difficult. A large proportion of housing association and council tenants derive income from benefits due to fall in real value for three years. If the gap between 1% and inflation, particularly inflation of food and fuel prices, is modest, this extra burden may not be too disastrous; if the gap is wide, as the noble Lord, Lord Kirkwood, has set out, those affected will really be struggling by year three. Even so, the 1% uplift is unlikely to be catastrophic; rather, it is the cumulative impact of this latest cut, on top of earlier reductions in help, which is likely to be pretty devastating for several hundred thousand social housing tenants, and therefore for their landlords, too.
I detect a gradual awakening to the magnitude of the problem that one of these changes will bring. This is the “underoccupation penalty” for those deemed to have a spare room. I named this the “bedroom tax” some 18 months ago and, although these words have been strongly criticised, I stand by them. I will spare your Lordships at this late hour another analysis of the truly awful consequences for 660,000 social housing tenants of this penalty, levy or tax. However, already I note that this measure is, understandably but unfairly, turning tenants against their social landlords, who will be required to collect the bedroom tax next April at an average of £14 per week per household. The anxieties of these housing providers about their ability to extract the money from hundreds of thousands of tenants, some of whom may already be in debt, is compounded by the knowledge that the Bill will mean that the real income of many of their tenants is now destined to fall. Combine this with the impending imposition of council tax at 20% to 30% for the same people, and the financial position of social housing tenants, and therefore of social housing, looks increasingly fragile. Throw in the new regime for paying housing benefit in big monthly sums directly to tenants, who face horrendous choices in juggling debts and spending on very low incomes, instead of the benefit going straight to the landlord, and the risk multiplies that rents do not get paid.
To those social housing tenants struggling with these new burdens, including bedroom tax, council tax, and caps on other benefits, the Bill before us may be the final straw. If landlords take the strain because arrears mount, and evictions and emergency housing cost a fortune, the housing associations and local authorities will have less money to support their local communities; to do all the preventive work that helps families to get on; to regenerate the neighbourhoods where they work; and, which brings me to my final point, to fund their production of additional homes.
The final way in which housing is likely to be affected by the Bill relates directly to the commitment of the Department for Communities and Local Government to addressing the very reason why welfare expenditure on housing costs is so high and is continuing to rise, not fall. This underlying cause of the UK’s appalling housing situation, now affecting almost every household in their 20s and 30s, is the acute shortage of homes that they can afford. This pushes up prices and rents, absorbing disproportionate percentages of income in return for questionable quality.
Housing shortages push up the welfare bill and mean taxpayers having to subsidise more people and to higher levels than in our competitor countries. Each year, the UK’s national housing deficit—the accumulating gap between extra homes required and new homes built—is growing by more than 100,000. This has to be reversed and DCLG Ministers are determined to get more homes built. That policy addresses the cause of rising housing benefit costs rather than the Department for Work and Pensions’ capping of benefits, which treats only the symptoms and simply penalises the victims of housing scarcity. Regrettably, the Bill will make the task of DCLG Ministers more difficult.
Private sector housebuilding must be boosted, but even if housebuilders got back to building at the levels of the boom years before the credit crunch of 2008, we would still be constructing far fewer homes than the number of households formed annually and still be adding to the national housing deficit each year. It is essential that the social housing sector massively boosts its output. I declare my interests as chairman of the Hanover Housing Association and president of the Local Government Association and stress the value of councils themselves building more homes once again.
With a steady source of secure income from their rent rolls, social landlords can borrow at low interest rates and can grow significantly with only modest capital subsidies. The disruption caused by the forthcoming succession of cuts to support for their tenants will hold back this potential for growth. Social landlords are making much increased provision to cover expected rent arrears. This diminishes the resources available for new work. The loss of income also reduces the confidence of their private sector lenders and deters ambitious development programmes which the nation desperately needs.
This is not a good Bill for housing. Directly in the private rented sector and indirectly but very significantly in the social housing sector, this latest instalment in the cumulative impact on very low-income households is likely to mean not just personal hardship for tenants but a negative influence on the whole housing scene and an undermining of other government departments’ genuine efforts to tackle not the symptoms but the cause of this country’s immense housing problems.
Baroness Massey of Darwen
My Lords, speaking at this point is always something of a challenge as most things have already been very effectively said. I shall be brief but I wish to build on the many brilliant and incisive speeches that have made reference to child poverty. I shall focus my remarks on the potential impact of the Bill on children and I shall conclude that the Bill needs a complete reworking.
I am aware that the Government wish to deliver a new welfare system. The question is: why punish children? Have we not learnt from all evidence, including recent significant reports, that every intervention with young children is the greatest safeguard we have for saving money in the long term, with reductions in criminal and other risky behaviour and greater achievement by children as they grow up? The noble Baroness, Lady Gardner of Parkes, mentioned economic sense. Surely giving children all the help they can get is economic sense. I submit that it is inaccurate and disrespectful to blame child vulnerability on parents who are deliberately out of work or addicted to drugs and alcohol. These are not the majority of parents.
I recall the responses to the Autumn Statement and to the Bill by charities, particularly those engaged in fighting child poverty. The Children’s Society urged the Government to reconsider the Bill, stating that, if it were passed, millions of children and families would suffer. The Child Poverty Action Group has said that the Bill will increase both absolute and relative child poverty and that the precepts of the Bill are “indefensible”.
I remember, too, as a trustee of of UNICEF UK, report cards on child well-being across the world’s richest countries—the result of research carried out for UNICEF by the Innocenti Research Centre. Report Card 7, published in 2007, provided a picture of child well-being across six dimensions, including material well-being, health and education. Britain did badly across the board. Report Card 10, on measuring child poverty and which covered the period up to 2009, indicated the relationship between the proportion of GDP spent on children and its consequences, and showed that policy choices by Governments significantly affected the lives of the poorest children. As to the UK, the report concluded that even though the UK had missed its own targets to reduce child poverty to 1.7 million by 2010, it had one of the largest reductions in child poverty. This was attributed to the previous Government’s focus on increasing household income.
The research and concerns that I have mentioned, and there are many others, speak for themselves. Why are the Government seemingly ignoring the evidence base for child poverty, ignoring those organisations that work with children and families, and ignoring the calls of families themselves who are worried about how they will feed, clothe and maintain the welfare of their children? Are all these people wrong? I think not.
Barnardo’s, as noble Lords will know, works directly with young people and their families through a network of services across the UK. Barnardo’s states that the Bill will impose real-terms cuts to the incomes of highly vulnerable and disadvantaged families who are receiving in-work or out-of-work benefits. Many such people are in work but on low incomes. The policy will punish children by trapping them in poverty. It is naive to berate certain groups for pushing children into poverty. We need to look at the true, broader picture. For young people aged between 16 and 24 who are seeking jobs, the allowance is £56.25 a week, and many vulnerable young people, including those leaving care, have no family to support them. How are they to cope?
It has been estimated and admitted by the Minister after the Second Reading debate in another place that 200,000 children will be pushed into poverty by the impact of this Bill—a figure mentioned in previous speeches. This is despite the fact that the Government are legally committed to meeting the targets set out in the Child Poverty Act, as my noble friend Lady Lister of Burtersett, has said. If we take the policies introduced by the Government since they came into office, it can clearly be shown that the poorest half of the population has become poorer, with the poorest losing out the most. At present, 3.6 million live in poverty. The Child Poverty Act places a duty on the Government to end child poverty by 2020. The Institute for Fiscal Studies, however, predicts that by 2020-21 absolute and relative child poverty will be 23% and 24% respectively; therefore, a further 1 million children will have been pushed into poverty by 2020.
The Government decided to cut benefits by linking them to consumer price index, rather than retail price index, inflation. If the Government were to introduce the second of these—the RPI—the poverty figure would grow. Families are suffering from the changes to the hours rules for working tax credit, from recent cuts to housing benefits and from the time-limiting of employment and support allowance for people who are too ill to work—to name but a few issues. In addition, the localisation of support for people on low incomes who pay council tax will be introduced. This will reduce the budgets of many families on out-of-work benefits. The abolition of the Social Fund and its replacement with local schemes seems very likely to be damaging to vulnerable families.
I could go on about reductions in childcare tax credit, increases in VAT, the tax credit for babies under one year-old, the increase-in-earnings taper of working tax credit, caps in housing benefit and the family element of child tax credit, which has been abolished for middle earners. Others have discussed other inequities very comprehensively.
I return to my primary concern about the Bill: it will be detrimental to the well-being of children, especially vulnerable children. The link between benefits and inflation should be preserved; benefits should increase by at least the level of the consumer price index; or the most vulnerable children should be protected by removing from the Bill child benefit, child tax credit and the child elements of universal credit.
The Bill needs a complete reworking. Let us hope that we can do that in Committee. I do not think that children should suffer the potential for greater child poverty. As I said earlier, any deterioration in child health and well-being will cost us dear in future. All children are the future and we jeopardise that at our peril.
Baroness Sherlock
My Lords, this has been an extraordinary debate. I hope that someone gives the proceedings to the Prime Minister to read. With it, they could give him a DVD of his pre-election appearance on the “Andrew Marr Show” in 2010 when he told the nation that he wanted to,
“take the whole country with me. I don't want to leave anyone behind. The test of a good society is you look after the elderly, the frail, the vulnerable, the poorest in our society. And that test is even more important in difficult times, when difficult decisions have to be taken, than it is in better times”.
We have heard many compelling arguments today against this Bill but I suggest that that statement from the right honourable David Cameron is one of the best. How far this Government have come from the days when its leader promised to protect the most vulnerable families in financially difficult times. Perhaps coalition has not tempered him after all.
My noble friend Lord McKenzie destroyed the case for this Bill in his powerful opening speech and many noble Lords have backed him up since then. Precious few speakers have disagreed with him. The noble Lord, Lord Bates, did his best, as did the noble Lord, Lord Sheikh, and they both stressed the need for fairness as cuts were being made. Coincidentally, that point was also made by the Chancellor of the Exchequer, George Osborne, when he introduced the Autumn Statement on 5 December 2012 when this Bill was announced. He spoke of the need to find savings in a way that was fair. He said that we need,
“to have a welfare system that is fair to the working people who pay for it”.—[Official Report, Commons, 5/12/12; col. 877.]
Just in case the point was not clear, the Guardian reports the Chancellor telling the “Today” programme:
“It is unfair that people listening to this programme going out to work see the neighbour next door with the blinds down because they are on benefits”.
So there we have it: this Bill is intended to penalise the workless in order to be fair to working people. What we have heard today has exposed that statement as being as misleading as it is disgraceful. We are not in a position where the country is populated by workshy people, living in houses where they claim £80,000 in housing benefit a year. The noble Baroness, Lady Gardner of Parkes, may want to know that in fact the limit for housing benefit is £400 a week.
As many noble Lords have noted, contrary to what the Government would have us believe, this Bill leaves behind some of the hardest-working members of our society; 68% of those hit are in work. The Bill will take an average of £165 a year from the pockets of 7 million working households. The Autumn Statement means that the real income of a one-earner working family is set to fall by £534 a year on average in 2015-16. That is without the average £14 a week in bedroom tax coming over the horizon for a third of social sector tenants, or the loss of council tax benefit of at least £5 a week for poor families.
The noble Lord, Lord German, said it is better to take small sums from a large number of people. They may be small sums to some people but I warrant that £10 a week will be sorely missed in those households. The Government’s whole argument about the need to incentivise and reward work is, as the right reverend Prelate the Bishop of Ripon and Leeds said, smoke. In fact I would go further than that. It is really music hall smoke and mirrors—the old-fashioned kind, where you direct the spotlight at the unemployed man in the front row while the accomplice goes round the back and picks the pockets of 40,000 soldiers, 300,000 nurses, 150,000 teachers, 510,000 shop assistants and more than 1 million administrators. This really is playing politics with the lives of hard-pressed families.
What really will be the effects of the Bill? We have heard only too clearly in the moving descriptions of the impact on the most vulnerable from the noble Lord, Lord Adebowale, and in the account from the noble Lord, Lord Best, of the problems being caused to so many low-income and middle-income families by the changes to housing support. According to Crisis, there has been a 22% increase in the number of people approaching their local authority as homeless in the past two years. Rough sleeping rose by 23% last year in England. The changes already made, and those coming through universal credit, have aggravated the problems caused by the serious shortage of affordable accommodation, as described by my noble friend Lord Whitty. This Bill will play its part by pushing low-income families further into a series of impossible choices. This point was made clearly by my noble friend Lord Touhig in a very comprehensive and powerful speech. Should they pay for food or heating; pay the bills or the rent?
Once again, as we heard from my noble friends Lady Donaghy and Lady Lister, there will be a disproportionate impact on women and children. Recent House of Commons Library research has shown that changes to tax and benefits in the Autumn Statement will hit women four times as hard. Of the £1.065 billion from new direct tax, tax credit and benefit changes in 2014-15 that the Library analysed in the Autumn Statement, an estimated 81%—£867 million—will come from women. This Bill is a key culprit. The list of benefits to be hit even includes statutory maternity pay. I do not think that we would have guessed that from the Chancellor’s description of the Bill’s rationale. I suppose that if I were about to give birth I might well have my blinds drawn at 8 am, but I do not think that was quite what the Chancellor had in mind.
It is not just mothers but children who are being hit. The right reverend Prelate the Bishop of Leicester, in a very powerful and impressive speech, reminded us that we are now in the shocking situation of being on course, according to the IFS and CPAG, to see a million more children in relative poverty by 2020. If the noble Lord, Lord German, thinks this poverty measure favours his Government, I would hate to think what would happen to child poverty with one that did not. I would be grateful if the Minister would tell the House how the Bill fits with section 14 of the coalition agreement, which states:
“We will maintain the goal of ending child poverty in the UK by 2020”.
Given the points made on this by my noble friends Lady Lister and Lady Massey of Darwen, what measures do the Government propose to bring forward to compensate for the effects of the Bill?
We have heard lots of figures today but if we remember no other statistic, let us remember this one from the Children’s Society: 11.5 million children will be adversely affected by the Bill. We heard very descriptively from my noble friend Lady Massey of Darwen about the risks posed to children. As Save the Children noted, the Bill will render parents less able to afford the basics in the short term, and will seriously limit the life chances of their children in the long term.
We also heard very powerful arguments from the noble Baroness, Lady Grey-Thompson, the noble Lord, Lord Low, the right reverend Prelate the Bishop of Ripon and Leeds, my noble friend Lord Macdonald of Tradeston, and others, about the impact of the Bill on disabled people. The Disability Benefits Consortium states that since the emergency Budget of 2010, disabled people have suffered a £500 million drop in their income. The Government tried originally to claim that they were protecting disabled people by exempting some benefits for disabled people and carers from the reduced uprating. Mr Osborne said in the Autumn Statement debate:
“We will support the vulnerable, so carers’ benefits and disability benefits, including disability elements of tax credits, will be increased in line with inflation”.—[Official Report, Commons, 5/12/12; col. 879.]
The truth was expressed succinctly by Richard Hawkes, the chief executive of Scope, who said:
“This bill doesn’t protect disabled people. In fact, it cuts support for the many disabled people who are looking for work”.
I think that the Minister has some explaining to do.
We are entitled to judge the Government by their own criteria. Has the Prime Minister passed his own test of creating a good society that does not leave behind the poorest in difficult times? When we are debating a Bill which, as my noble friend Lord McKenzie pointed out, means the unemployed will see their JSA rise by 71 pence a week while 8,000 people get an average tax cut of £2,000 per week, noble Lords may judge for themselves. Has the Chancellor passed his own test about being fair to working people? I think we know the answer to that, as well. In the Bill those working people are being asked to pay the price not only of the Government’s indefensible priorities but of the failure of their economic policy.
I was glad that the Minister acknowledged that unemployment is still a problem. The money this Bill will save will be about the same as the increase in social security spending resulting from the forecast rise in unemployment just between the Budget last year and the Autumn Statement. The pain will be felt by millions of households who are already close to the edge. The noble Lord, Lord German, asked us all where we would get the money from. As my noble friend Lady Hollis pointed out in her extraordinarily compelling speech, at heart the issue is simple. The Government have a choice and are choosing to cut payments to struggling households in order to fund a £3 billion tax cut for the highest earners in the country. I look forward to hearing the Minister defend that choice.
Lord Newby
My Lords, I thank all noble Lords who have taken part in today’s debate. It is an issue about which all participants feel passionately and I can well understand why. I will try to respond to as many questions as possible, but let me begin by reminding the House of the purpose of the Bill. As my noble friend Lady Stowell pointed out in her opening speech, this Government inherited an exceptional fiscal challenge. The financial crisis of 2008-09 resulted in the largest deficit since the Second World War and the UK experienced one of the deepest recessions of any major economy. Even before the recession began, the UK had the highest structural deficit of any country in the G7. This level of public spending was simply not sustainable. There are still tough choices to make. The savings from this Bill provide a significant contribution towards delivering the savings needed to ensure that spending is on a sustainable path. It is, of course, never an easy decision to take action on welfare spending and I understand only too well that the welfare system provides vital support to millions of people. I also understand that while benefit rates will rise in cash terms, they will be fall in real terms.
In these tough economic times, people have seen significant restraints in their pay across the public and private sectors. With welfare expenditure accounting for £1 in every £4 spent, it is simply unrealistic to think we can achieve the savings we need without taking further action on welfare. We have already had to take tough decisions on welfare spending in this Parliament, yet despite these, more than £200 billion was spent on welfare last year. Under the previous Government, spending for working-age people and children increased by around 60%—equivalent to an extra £1,400 cost per household in Great Britain. This is the context against which this Bill must be judged.
However, in making what we believe are necessary limits in welfare spending, I cannot stress enough that our motivation is not, to quote various noble Lords today, to “demonise”, to “stigmatise”, to brand the poor as undeserving, to impose a harsh ideology on them or to divide and rule. It is simply to help—albeit painfully—provide a sustainable platform for the public finances and the economy going forward. This is something that every citizen of the UK will benefit from in the longer term.
The right reverend Prelate, the Bishop of Ripon and Leeds, asked me for an assurance or statement that the vast majority of benefits claimants were not skivers. I am extremely happy to give such an assurance. Nobody in your Lordships’ House believes that to be the case; all of us know only too many people who are working extremely hard to make ends meet. I particularly acknowledge the point made by the noble Baroness, Lady Donaghy, about people on low incomes often having several jobs and still struggling to make ends meet. I acknowledge that that is the reality for many people in Britain today.
We have to return to the main point. If the savings from this Bill were not delivered here, they would have to be found somewhere else. That would mean additional pressure on other public services. To put this figure into context: £1.9 billion is equivalent to the salaries of about 45,000 nurses or around 40,000 teachers. To put it another way: it is equivalent to 500,000 primary school places. Anybody opposing the Bill needs to explain where the money is coming from.
Baroness Hollis of Heigham
My Lords, did the Minister and his colleagues make the same consideration when they decided to take £3 billion in tax relief and give it back to millionaires? Will that money not also have to be found for the 40,000 nurses and so on? Is he about to tell us?
Lord Newby
Do not worry, my Lords, I am coming to that. The implications of some of the speeches we have heard today are that we should not be making cuts at all, that no civilised society would, even in today’s circumstances, reduce public expenditure. For those who take that view, all I can say is that we simply cannot possibly agree. For those who accept that we should be reducing the deficit but disagree with these changes, my challenge is and remains this: what would they cut instead? The noble Baroness, Lady Hollis, was clear that she would reduce payments to pensioners—
Baroness Hollis of Heigham
My Lords, what I said was that I would scrutinise the tax relief available for the building up of pensions which costs £32 billion, of which at least £8 billion comes from the fact that people on higher rate incomes get higher rate tax relief. That is what I said I would scrutinise: not money from pensioners, but from the way that pension savings are artificially supported by tax relief, two-thirds of which goes to the better off.
Lord Newby
My Lords, I am extremely grateful to the noble Baroness for correcting me. In that case, and in view of her earlier intervention, I think that what she and the noble Baroness, Lady Sherlock, are saying is that the money will be raised from the millionaires who, in their view, are getting a windfall benefit of £3 billion. I believe that that is what both noble Baronesses have said. But it is clear that either they have not read or they do not believe the report from the Office for Budget Responsibility which suggests that the impact of reducing the higher rate of tax from 50% to 40% is probably £100 million and may be negative. The Government therefore simply do not accept the figures which have been quoted against us. The figure of £1 billion a year to which I think the noble Baronesses have referred was based on an HMRC static comparison. What we know only too well is that given the chance of paying 40% or 50%, the rich—surprise, surprise—change the way in which they order their affairs. There is no pot of gold through a 50% tax rate. My view is that, frankly, the Opposition are all confusion about this.
In the Second Reading debate on the Bill in another place, the right honourable David Miliband was widely praised for saying:
“The Government have projected the cost of all benefits, all tax credits and all tax relief for the next few years, and I am happy to debate priorities within that envelope. I will take the envelope that they have set, but let us have a proper debate about choices, not the total sum—a priorities debate, not an affordability debate”.—[Official Report, Commons, 8/1/13; col. 217.]
The Government have set out their priorities, but frankly, Labour has not begun to set its out. I do not know whether the Opposition agree with David Miliband. I certainly do not know, within the context of overall expenditure cuts, what their priorities will be. We have decided to protect pensioners as a top priority; does Labour agree? We have decided to take millions of people out of income tax as an incentive to work; does Labour agree? We have decided that people on high earnings should no longer get child benefit; does Labour agree? If it does not—and on some of those points, I simply do not know whether it does or not—what other cuts is it proposing in order to keep within the Government’s spending envelope, or within the terms of its own Fiscal Responsibility Act 2010 which committed the Government to halving government borrowing by the 2013-14 financial year. We look forward to hearing the answers, but it is clear that we are not going to hear them today.
Baroness Lister of Burtersett
My Lords, the noble Lord made the point about raising people out of tax, but in my speech I said that that is the least good way of targeting help on low-income families. It is a much worse way than, say, improving child benefit. Can he explain why the Government think that it is better to put money into personal tax allowances rather than protecting the incomes of people who are too poor to pay tax?
Lord Newby
My Lords, we think it is a basic principle that people on very low incomes should not be paying income tax. It may be a difference of view between this side of the House and the other side, but this is the view that we have taken. This is the policy that we are introducing and we will continue with it.
A number of noble Lords asked why we are proceeding via a legislative route. We believe it is only right that we set out our plans in advance and give as much certainty as possible. The Bill gives certainty on further savings, making a crucial contribution to our plans and helping us to maintain credibility, not least in the markets. We have to keep reminding ourselves that even a one percentage point rise in effective mortgage rates would add £12 billion a year to households’ mortgage interest payments, costing the average household with a mortgage around £1,000 a year. Given the current level of the deficit, such an interest rate rise, in the absence of a credible fiscal policy, is perfectly plausible. The IMF made this element clear when it said in October:
“To anchor market expectations, policymakers need to specify adequately detailed medium-term plans for lowering debt ratios, which must be backed by binding legislation or fiscal frameworks”.
This Bill takes us in that direction.
A number of noble Lords asked what will happen if inflation soars. First, the independent MPC remains committed to maintaining price stability, which is defined by the Government as an inflation target of 2%, as measured by the 12-month increase in the CPI. Although inflation is forecast by the MPC and the Office for Budget Responsibility to be above the 2% target in the near term, it is then forecast to fall back towards the target in the medium term. It is right that the Government make plans based on the best available forecast. However, we know that these are forecasts and targets and we are aware that external factors and unforeseen events can produce a different outcome.
We always monitor the rate of inflation and the impact that it has on households and the wider economy. That is why, in the Autumn Statement, we took action to help households with the cost of living, including cancelling the January fuel duty rise, providing funding for local authorities to freeze council tax and announcing a further increase in the personal allowance. We will continue to monitor the rate of inflation closely, based on monthly data on consumer price inflation published by the Office for National Statistics, and the impact that it has on the cost of living for families. This will continue to be a key consideration for this Government’s policies in the future.
Many noble Lords raised concerns over the impact of this Bill on poverty, particularly child poverty. I will start by saying that any two-dimensional measure for poverty, which looks at relative income only, is not an adequate way to measure progress on poverty. The most recent decrease in child poverty—a fall of 300,000 in the number of children in relative poverty in 2010—was due to the recession causing a fall in median income and pushing the poverty line down. That is clearly absurd, which is why we are consulting on a better measure of child poverty, one that includes income but goes beyond it to tackle root causes; for example educational failure, problem debt or worklessness.
In terms of how we tackle this issue, it is worth while looking at the success of the previous Government in dealing with child poverty. In the period 2003-04 to 2010, £170 billion was spent on tax credits but there was little or no progress in reducing the levels of child poverty. We in this Government want to look at some of these basic issues around educational failure, problem debt and worklessness. We recognise, as I am sure all noble Lords do, that education is one of the key factors in getting poor children out of poverty. That is why this Government are committed to providing additional funding for disadvantaged pupils through the pupil premium, which will rise by £2.5 billion a year by 2014-15. We are also spending £200 million extra in universal credit to support families with childcare costs. For the first time, this support will be made available to families who work fewer than 16 hours per week, which will mean that 100,000 more working families will be helped with their childcare costs. All two year-olds from low-income households will be able to access 15 hours per week of early education, starting with the poorest 20% in 2013 and extending it to 40% in 2014.
Debt is also a major problem for poor families, who not only take out debt but often take it out at extortionate rates of interest. That is why we are putting in place stronger, more responsive regulation of unsecured lending and other forms of consumer credit to ensure that borrowers are protected and can be confident of getting a fair deal, and why we have given the Financial Conduct Authority power to regulate loan sharks and cap interest from payday lenders for the first time.
However, work is the best route out of poverty. As my noble friend Lady Stowell set out at the start of this debate, the Government are reforming the welfare system to improve incentives for individuals to enter work. Universal credit will not only improve the financial incentives offered for people who want to work but will simplify the benefits system. Replacing the main benefits with one single payment and removing the complex system of hours rules and different tapers that currently exist means that claimants will understand that they are better off getting a job and increasing their hours. Under universal credit, 3.1 million households will benefit by an average of £39 a week and up to 250,000 children will be taken out of poverty. Any household whose migration to universal credit is initiated by the DWP will receive transitional protection, and there will be no cash losers from the policy.
A number of noble Lords have spoken eloquently about issues facing the disabled. I repeat that we have protected those benefits designed to reflect the additional costs that disabled people face as a result of their disability. Of course, as we have heard, this does not mean that no disabled people will be affected. In common with other working-age recipients, many disabled people will also be claiming benefits that include help towards everyday living expenses or housing costs, but those benefits for the extra costs of disability are protected. I am afraid that I cannot give the noble Lord, Lord Macdonald of Tradeston, the assurance that he is seeking in respect of ESA, but I suspect he is not too surprised about that.
Government policy towards disability is not limited to benefit levels. We will shortly be publishing the most comprehensive analysis of available data about disability since 2005, entitled Fulfilling Potential: Building a Deeper Understanding of Disability in the UK Today. This will help inform the next stage of our disability strategy: the development of actions, outcomes and indicators. It will help increase public understanding, change attitudes and enhance the commitment to improving the lives of disabled people. We are setting up a new disability action alliance, bringing together organisations of disabled people and organisations from across government and the public, private, voluntary and community sectors. This will take forward practical actions at both the national and local level, making a real difference to the lives of disabled people. We will publish a further strategic document and action plan to include the alliance actions as well as actions across government in the spring.
There have been a number of questions about the cumulative impact of the various changes that have been made in recent years and why the Government have not produced an analysis of these to the extent that people would like. Looking at the cumulative impact of tax, tax credit and benefit reforms since the June 2010 Budget, the top 20% of households continue to make the greatest contribution towards reducing the deficit as a percentage of their income and benefits in kind from public services. So far, HMT’s analysis has not included universal credit. Separate analysis shows that three-quarters of the gainers from UC are in the bottom 40% of the income distribution.
As noble Lords know, the analysis in this area is extremely complicated, and breaking down the results in detail is extraordinary difficult to do accurately, if not impossible. Similarly, not all policy changes can be modelled robustly, and the IFS has acknowledged that the effects of dynamic reforms such as those to disability living allowance and housing benefit cannot be precisely modelled. In these circumstances, it would be simply irresponsible for the Government to do so.
I shall try to respond to a number of specific questions as quickly as I might. The noble Lord, Lord German, asked me to commit the Government to no further welfare cuts in this Parliament. I remind him that at the Autumn Statement 2012, the Government said that detailed spending plans for 2015 and 2016 would be set in the first half of this year. We cannot prejudge the outcome. By “first half of this year”, we mean the back half of the first half of this year.
The noble Lord, Lord Bates, referred to the living wage. The Government support the idea of the living wage. Civil servants are paid the living wage; and contractors, for example at the DWP, are paid the living wage. My guess is that the living wage will increasingly become the norm, particularly in London.
The right reverend Prelate the Bishop of Ripon and Leeds asked about asylum seekers. Asylum-seeker benefit rates are a matter for the Home Office and are not within the scope of the Bill. I will draw his remarks to the attention of my colleagues in the Home Office, because I know that the right reverend Prelate feels strongly about that matter.
The noble Lords, Lord Kirkwood, Lord Whitty and Lord Best, and the noble Baronesses, Lady Donaghy and Lady Lister, in various ways talked about how the growing disparity between benefits and earnings impacts among other things on the housing market. There are very long-term, secular changes in the relationship between benefits and earnings and, as the noble Lord, Lord Whitty, said, there are long-term failings in the operation of the housing market. We will have many opportunities to discuss these, no doubt in Committee but more generally in your Lordships’ House. I am sorry that I have not been able to deal with them tonight. There are quite a number of issues that noble Lords have raised this evening that I have been unable to cover, and I look forward to debating them in Committee.
Welfare spending accounts for more than a quarter of all public spending. In these touch economic times, when people across the public and private sectors have seen significant restraint in their pay, this Bill finds the right balance between finding savings from welfare while ensuring that benefits and tax credits continue to be increased in cash terms. I commend the Bill to the House.