(11 years, 8 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
Mr Speaker
We come now to motion 6 on pensions, with which we will debate motion 7 on social security.
The Minister of State, Department for Work and Pensions (Steve Webb)
I beg to move,
That the draft Guaranteed Minimum Pensions Increase Order 2013, which was laid before this House on 28 January, be approved.
Mr Speaker
With this we shall consider the following motion, on social security benefits uprating:
That the draft Social Security Benefits Up-rating Order 2013, which was laid before this House on 28 January, be approved.
Steve Webb
The guaranteed minimum pensions order is a routine and technical order which provides for contracted-out defined benefits schemes to increase their members’ GMPs that accrued between 1988 and 1997 by 2.2%, in line with inflation. I assume that this will be uncontentious. The order paired with this is the Social Security Benefits Up-rating Order 2013.
I shall begin with the basic state pension. Despite the tough fiscal context, the Government remain committed to protecting those who have worked hard all their lives, which is why we have stood by our triple lock commitment to uprate the basic state pension by the highest of earnings, prices or 2.5%. This year the third element of our triple lock comes into play for the first time—our 2.5% minimum commitment. That means that we shall be increasing the basic state pension by more than inflation for millions of pensioners.
Mr Alan Reid (Argyll and Bute) (LD)
I congratulate my hon. Friend on the work he has done as pensions Minister to drive through the triple lock, which means that pensioners will get an above-inflation increase this year. The days of 75p increases, which happened under the previous Government, are long gone.
Steve Webb
I am grateful to my hon. Friend for pointing that out. He will know that we have set a minimum increase of 2.5%, which is what we are having this year. Under that policy, it would now be impossible for us ever to go back to the days of 75p increases.
Stephen Timms (East Ham) (Lab)
Will the Minister confirm that the order contains a real-terms cut in the amount of the basic state pension?
Steve Webb
The right hon. Gentleman is well aware that the Government increase benefits in line with inflation in the year to September, as did his Government. He will know that inflation under the consumer prices index in the year to September was 2.2%, and we have increased not in line with inflation, but by more than inflation, at 2.5%.
Steve Webb
I have obviously dealt with the point, but I am happy to give way again.
Stephen Timms
The Minister will have heard today’s announcement that CPI is currently at 2.7%. Last year he claimed that he was introducing a substantial real-terms increase in the level of the basic state pension. On precisely the same terms he used last year, this order has a real-terms cut. Will he confirm that the order contains a real-terms cut in the level of the basic state pension?
Steve Webb
I well remember our exchanges last year, and I seem to recall that the right hon. Gentleman rejected that way of measuring things.
Our above-inflation increase will be £2.70 a week, taking the new level of the basic state pension to £110.15 a week. That means that from April 2013 the basic pension is forecast to be around 18% of average earnings. My right hon. and hon. Friends might be pleased to know that that is a higher share of average earnings than at any time in the past 20 years. Our triple-lock commitment means that the average person reaching state pension age in 2012 with a full basic pension can expect to receive an additional £12,000 in basic state pension over the course of their retirement.
Let me turn to additional state pensions, often referred to as state earnings-related pension schemes. This year SERPS pensions will rise by 2.2%, which means that the total state pension increase for someone with a full basic pension and average additional pension will be around £3.33 a week, or £175 a year. Unlike the Labour party, which froze SERPS in 2010, the coalition Government will, for the third year in a row, uprate SERPS by the full value of CPI.
Let me turn to pension credit. As I announced in my statement on 6 December, we have taken steps to ensure that the poorest pensioners will benefit from the effects of our triple lock. Each year the standard minimum guarantee must be increased by law at least in line with earnings. That means that the minimum increase this year would be 1.6%. However, we decided to increase the value of the standard minimum guarantee credit by 1.9% so that single people will receive the full increase of £2.70 a week, which is equal to the increase in the basic state pension, while couples will receive £4.15 a week. Consistent with our approach last year, the resources needed to pay that above-earnings increase to the standard minimum guarantee have been found by increasing the savings credit threshold, which means that those with higher levels of income will see less of an increase.
Jim Shannon (Strangford) (DUP)
Although the increase in pension credit is welcome, what steps are the Government taking to ensure that those who do not take up pension credit are enabled to do so? A vast number of people in Northern Ireland—somewhere in the region of 100,000—are not taking advantage of pension credit, and I am sure that the same applies across the whole United Kingdom.
Steve Webb
The hon. Gentleman is right that non-take-up of pension credit has been a persistent problem. Over the past year or so we tried a pilot scheme in which we took a sample of people we thought, based on our records, might be entitled and put the money in their bank account. We then wrote to them to say, “We’ve put some money in your bank account. Would you like to claim pension credit?” The experiment failed. Incredibly, people did not claim it, or decided that they did not want or need it, or thought that they were not eligible. Even putting money into people’s bank accounts, based on our records, did not succeed. However, I have some good news for the hon. Gentleman. As a consequence of the universal credit reforms, whereby housing benefit for working-age people will be merged with universal credit, we will be merging housing benefit for pensioners with the pension credit.
The reason that is relevant to the hon. Gentleman’s question is that we know that some people claim their housing benefit and not their pension credit, and that some claim their pension credit and not their housing benefit, but when we combine the two in a single payment each group will claim both and we anticipate several hundred million pounds of extra benefit expenditure to low-income pensioners as a result. I think that that will be the most tangible thing that any Government have done in many years.
Michael Ellis (Northampton North) (Con)
Will the Minister confirm that that will also save administrative costs to the state, because we want as much saved in such costs as possible?
Steve Webb
My hon. Friend is right that placing the housing element in a single benefit—the pension credit—rather than it being a separate claim through a local authority will reduce administrative costs and increase take-up as well.
On disability benefits, this year the coalition will ensure that those who face additional costs because of their disability and who have perhaps less opportunity to increase their income through paid employment will see their benefits increased by the full value of CPI. Therefore, disability living allowance, attendance allowance, carers allowance and the main rate of incapacity benefit will all rise by the statutory minimum of 2.2% from April 2013, as will the employment and support allowance support group component and those disability-related premiums paid with pension credit and with working-age benefits.
Stephen Lloyd (Eastbourne) (LD)
Will the Minister make it absolutely clear for the record that, despite some noise in the media, disability benefits are all going up by the higher rate?
Steve Webb
Yes. My hon. Friend is right. The specific benefits for the extra costs of disability are all rising by the full 2.2%.
Stephen Timms
Will the Minister tell the House by how much the benefit paid to people in the ESA support group will go up overall under the order?
Steve Webb
As the right hon. Gentleman knows, the main rate of ESA will rise by 1%, which is just over 70p a week, and the addition that people in the support group receive will go up by 2.2%.
Mr Russell Brown (Dumfries and Galloway) (Lab)
What message can I give to one of my constituents whose doctor has notified me that she has terminal cancer and is on a syringe drive and whose disability living allowance has been taken from her?
Steve Webb
I sympathise with the hon. Gentleman’s constituent, whose individual circumstances I do not know. Disability living allowance has not yet been reformed by this Government, so we have changed nothing about DLA. If his constituent believes that she has been wrongly assessed, I hope that she will have his support in appealing against that decision.
On working-age benefits, as the International Monetary Fund has said, strong fiscal consolidation is under way, and reducing the high structural deficit over the medium term remains essential. As we continue to face pressure on our national economy, we have had to take some tough decisions. There was, as my hon. Friend the Member for Eastbourne (Stephen Lloyd) has suggested, speculation about benefit freezes. It is true that we cannot afford to be as generous this year as we have been in the past. However, in the exercise of his discretion in the uprating of certain benefits, having regard to the national economic situation, the Secretary of State has found sufficient money to pay a 1% increase to those of working age on the main rate of jobseeker’s allowance or income support, as well as for housing benefit and the main rate and work-related activity component of employment and support allowance.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Has today’s news that inflation is set to stay very high for the next few years encouraged the Minister to rethink in any way this real-terms cut in working benefits?
Steve Webb
The rate of CPI has been 2.7% for four consecutive months. We were aware of the level of inflation when we made these judgments about 2013. Clearly, there are things we can do to help ourselves with the cost of living. For example, the cost of petrol is 10p a litre lower than it would have been if we had implemented the previous Government’s escalator; council tax bills, which are a huge cost of living for many people, have been frozen in many places for three years; and people in low-wage work will receive a substantial income tax cut in April. Those measures will all help people with the cost of living.
Sheila Gilmore (Edinburgh East) (Lab)
It is interesting that the Minister should mention council tax, because in large parts of the country many working-age people, working and unemployed, will be paying substantial sums in council tax, and that will have a big effect on their standard of living.
Steve Webb
The unprecedented three-year freeze in council tax in many areas is a huge boost not only to those on the lowest incomes but particularly to those whom one might describe as not rich and—
Steve Webb
I wonder if the hon. Lady would allow me to finish replying to her previous point before she intervenes with the next one. The three-year freeze will help particularly those whom I would describe as not rich and not poor—not poor enough to get benefit and not rich enough not to care. We meet them all the time; they have saved a bit, worked hard, and feel penalised. Our freeze will benefit those people in particular.
Sheila Gilmore
It may be an unprecedented freeze in England, but it is not unprecedented in Scotland. It is a very regressive form of assisting people, because the higher their level of council tax banding, the more advantage they get from it. Someone who is already in receipt of council tax benefit gets no benefit from the freeze, and the effect on councils is to lead them to raise the cost of many fees and cut services. In fact, therefore, the poorest and most vulnerable do not benefit from a council tax freeze.
Steve Webb
In responding to the hon. Lady, I occasionally lose count of the logical flaws in her argument. However, I will take one in particular. The Government have made available for this coming year, 2013-14, an additional £100 million to help local authorities to dampen down the effect of the council tax benefit changes. Many local authorities have reduced the subsidy given on empty homes and on second homes—which are not generally associated with poverty, I would add—and many have damped, or reduced to zero, the impact on council tax. Some Labour authorities have chosen not to do that, which is an unfortunate political decision.
I remind those who might consider voting against the order—the interventions that we have heard suggest that the Opposition are considering it, or perhaps they want to give that impression—that they would be voting against an above-inflation increase in the state pension, a full increase in line with CPI for disability benefit, and any increase in any benefit this coming April.
Kate Green (Stretford and Urmston) (Lab)
I am sure that the Minister will be reluctant to penalise with his uprating measures people who are in employment, so why is statutory maternity pay encompassed within the 1% freeze? Has he seen the letter in The Guardian today from six mums who have written to complain about this measure and point out that having a new baby costs families money?
Steve Webb
Statutory maternity pay applies to those who are leaving work to have a baby and who often return to work, and for those in work our income tax cut in April will be a very substantial benefit. It is true that the 1% figure applies to SMP. It also applies to in-work benefits such as tax credits, which are not within the scope of the order. That is a consistent approach, particularly given that many people in work, such as those in the public sector, are also getting a 1% increase.
Mr David Winnick (Walsall North) (Lab)
The Minister says that we cannot vote against the 1% figure without opposing the uprating of pensions and the rest. That may well be so, and no doubt he is pleased about it, but the fact remains that whether we vote against it or not, some of us feel very strongly about it because we believe that it is hitting the most vulnerable, and I look on it with loathing and contempt. Only a Tory-led Government could carry out such a measure.
Steve Webb
I do not know whether the hon. Gentleman’s Front Benchers share his loathing and contempt, but they have a vote to cast and they can use it if they want to.
Steve Webb
No, I am going to conclude; there will be plenty of opportunity for people to contribute.
At a time when the nation’s finances remain under real pressure, this Government will be spending an extra £2.8 billion in 2013-14 to ensure that those people who are least able to change their regular income are protected against increases in the cost of living. Of this, about £2.1 billion is for the state pension, including an above-inflation increase for the basic pension; nearly £500 million will go to disabled people and their carers; and nearly £300 million will go to people of working age. We have protected the triple lock, we have helped our poorest pensioners, and we have protected the key benefits for disabled people. Even as we face the need to make savings to rebalance our economy, we have still found money for a 1% increase to help to support those who are not currently in work. I have set out our ongoing commitment to ensuring that even in these difficult times no one is left behind. I commend the orders to the House.
Stephen Timms (East Ham) (Lab)
I thank the Minister for his explanation of the measures, albeit that it was brief. He reminded us, correctly, that this is the third year since the announcement of the triple lock for the basic state pension. There is absolutely no doubt that the triple lock has been a great success as a rhetorical device. The term has entered the lexicon, and I note that the Minister’s right hon. Friend the Secretary of State for Culture, Media and Sport has gone one better and announced a quadruple lock for the Bill that she recently placed before the House.
While in rhetorical terms the triple lock has undoubtedly been successful, I am afraid that the reality has been rather different, because once again the increase in the state pension is less this year than it would have been if the uprating method previously used was still in place. In retail prices index terms, for the second year this is a real-terms cut in the value of the basic state pension, as well as—I made this point earlier—a real-terms cut in today’s consumer prices index rate.
Stephen Timms
We have made it plain, in all the three uprating debates since the election, that in our view there would have been a case for a temporary move from RPI to CPI uprating, as a contribution to reducing the deficit. Unfortunately, the Government decided that this should not be a temporary move, but a permanent move—or so we thought. Now it turns out that they are not even uprating in line with CPI for a large part of the benefits, but the position is the one that I have set out.
Richard Graham (Gloucester) (Con)
Will the right hon. Gentleman confirm whether the change from RPI to CPI, for the pension indexation of Labour party agents, is temporary or permanent?
Stephen Timms
I think the hon. Gentleman is asking me a question about the administration of the Labour party on which, I am afraid, I am unable to assist him.
It is worth reflecting on the history of the triple lock. In its first year, it was announced but not actually implemented. If it had been implemented, it would have produced, from the Government’s point of view, an embarrassingly small pension increase. The Minister, sensibly, chose to override it and instead apply a larger increase that in that year was in line with RPI. At its first outing, therefore, it failed. In its second year—last year—it was actually implemented, and delivered an increase in line with CPI, along with working-age benefits. This year it is being applied again, and for the first time it is delivering something better than CPI uprating—a point made by the Minister.
The increase in CPI, as measured last September, was 2.2%, and the uprating amount in line with the triple lock is 2.5%. So that is it: in comparison with the CPI uprating, which until recently was the Government’s policy for working-age benefits, the triple lock has delivered a higher pension by a paltry 0.3%. Of course, if it had been applied in the first year, it would have been less than the CPI uprating. The triple lock has delivered a higher pension of 0.3% over three years—a rather derisory achievement. It is clear that the triple lock has been something of a damp squib. Of course, if it was something other than a damp squib, the Chancellor would have vetoed it long ago.
Stephen Lloyd
I have a lot of respect for the right hon. Gentleman’s honesty generally, and in particular in this area. Will he therefore agree with me that it is unfortunate that the Government in which he served as a Minister did not have a triple lock, otherwise pensioners all those years ago would not have received an uprate of only 75p?
Stephen Timms
Had the previous uprating RPI mechanism been in place, there would have been a larger pension increase this year and last year than has been delivered. I am grateful for the hon. Gentleman’s comments about my honesty, so let me pay a tribute to him. As a man who is also frank, he will recognise that the last Government did an enormous amount, particularly through the introduction of pension credits, to reduce the extent of pensioner poverty. In the past, pensioners were always more likely to be poor than the population as a whole, but that ceased to be the case under the policies of the last Government. Indeed, pensioner poverty was halved, as my hon. Friends have said.
Greg Mulholland (Leeds North West) (LD)
The right hon. Gentleman highlights the pension credit, but if he truly believes that all pensioners should receive that extra money, why does he not support the Government’s idea to move towards a higher pension rate for all?
Stephen Timms
I am sure we will have an interesting debate on the Government’s proposals when the time comes, but there is no doubt that pension credits made enormous inroads—thankfully—into pensioner poverty in Britain.
Mr Winnick
Shortly after we were elected in 1997, did we not introduce both the non-means-tested winter fuel allowance, which the previous Tory Government had refused to do, and the free television licence for pensioners, which I had tried to introduce in a private Member’s Bill on Friday 16 January 1987, when the Tories opposed it with a three-line Whip?
Stephen Timms
I congratulate my hon. Friend on his foresight in pushing for that change. I am delighted that, partly thanks to his work, the previous Government were able to deliver it. It is greatly appreciated by pensioners.
In my view, the triple lock has been a triumph of rhetoric, but a damp squib in reality. One can only hope that the quadruple lock delivers rather more for those following the Marriage (Same Sex Couples) Bill than the triple lock has done, but perhaps we should be a bit kinder to the triple lock. Perhaps we should credit it at least with saving pensioners from the fate of strivers. The order locks in the strivers tax to working-age benefits for the coming years. Strivers are being hammered.
It is worth looking back at what the Minister said last year about working-age benefits. It is hard to believe now, but last year he announced a 5.2% increase in working-age benefits:
“These increases will ensure that the most vulnerable people in society are protected and that those looking for work get the support they need to move into the labour market.”—[Official Report, 23 February 2012; Vol. 540, c. 1046.]
How different is the picture today! After another 12 months of failed economic policy in which the economy has hardly grown and the Government’s forecasts for unemployment and borrowing have risen sharply, the most vulnerable are no longer being protected; they are being hammered and are paying the price for the failure of the Government’s economic policy and the Chancellor’s inability to deliver the steady growth and falling unemployment that he promised.
Let me remind the Minister of something else he said last year. He said that
“there were siren voices from some quarters suggesting that we could not afford, or that we should not go for, this inflation figure. He is absolutely right that the coalition parties decided that it was a priority. That is something that I am proud to be associated with.”—[Official Report, 23 February 2012; Vol. 540, c. 1045.]
I think we can safely assume that he is not proud to be associated with the shabby treatment of working-age people in the social security system. This year, the siren voices have won. This year, the coalition parties have decided that safeguarding strivers is not a priority. This year, and for the next two years, the most vulnerable are being kicked in the teeth. The measures will come into effect at the beginning of April, on the same day as the introduction of the tax cut for everyone earning over £150,000 a year.
Steve Webb
The right hon. Gentleman will have noticed that I did not use the word “strivers”. Will he clarify who he means by “strivers” and who he is excluding from that definition?
Stephen Timms
The term “strivers” refers to those who are working, who are often struggling to make ends meet and who are going to find things a good deal harder because tax credits are being uprated by only 1%. That is being done on exactly the same day as every one of the 8,000 people earning over £1 million a year will get a tax cut averaging over £2,000 a week. Let me remind the Minister that that will happen on the same day as the employment and support allowance paid to a single person aged over 25 goes up by 70p a week. The hon. Member for Eastbourne (Stephen Lloyd) reminded the House a few minutes ago about the 75p a week pension rise some time ago. This order will give the people I have just described a 70p a week increase, and that is a disgrace.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
Will my right hon. Friend confirm that, although strivers are the very people the Prime Minister has said he wants to protect, he will ultimately be damaging them as a result of the new regulations?
Stephen Timms
That is undoubtedly the case. The rhetoric and the reality are quite different.
Dame Anne Begg (Aberdeen South) (Lab)
Does my right hon. Friend acknowledge that the bedroom tax will also come into effect on 1 April? That means that a large group of people whose income has not gone up by very much will have to subsidise their housing costs to a far greater extent than they are doing at the moment.
Stephen Timms
My hon. Friend is absolutely right. It is fair to say that the bedroom tax is increasingly being seen as a hated tax across the country, as its impact becomes clearer and the date on which it will be applied approaches. It will make life a great deal harder for those people who have no option to move into a smaller place because there are no smaller places available in the council or housing association stock.
I commend to the Minister the speech made by the Bishop of Leicester in the other place in the Second Reading debate on the Welfare Benefits Up-rating Bill on Monday. He said of the Bill:
“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.”—[Official Report, House of Lords, 11 February 2013; Vol. 743, c. 471.]
He was speaking for Britain. The Resolution Foundation has pointed out that the measure is a strivers tax, and that well over half the savings from uprating working-age benefits by just 1% over three years will be taken from people in work, because tax credits are being cut in real terms.
My hon. Friend the Member for Stretford and Urmston (Kate Green) has pointed out that the provisions will hit women particularly hard. The House of Commons Library has calculated that two thirds of those hit will be women. The real-terms cut of £180 to statutory maternity pay has already been dubbed the “mummy tax”. Taking into account all the cuts that will affect a woman during pregnancy and the first year of her baby’s life, including maternity pay, pregnancy support, tax credits and child benefit, the loss adds up to an average of £1,700. So, on the day when the highest paid are getting a massive tax cut and the rich are getting a £3 billion tax giveaway, people who are striving will be hammered.
Steve Webb
The right hon. Gentleman’s words in Hansard will show that he is very concerned about all this. Will he therefore tell the House whether it is his intention to reverse any of these measures?
Stephen Timms
The hon. Gentleman knows that we have demanded not only an inflation-level rise this year but a similar rise for both the two years covered by the Welfare Benefits Up-rating Bill. As to our policies for beyond the next election, he will have to await our manifesto, just as the whole country is eagerly awaiting it. It will tell him how we will put these problems right.
Ian Murray (Edinburgh South) (Lab)
Is my right hon. Friend as surprised as I am—I asked the Secretary of State for Scotland this question this morning—that it is a Liberal Democrat Minister who is about to give the biggest tax cut to millionaires the country has ever seen, while at the same time ensuring that people trying to do the right thing are worse off?
Stephen Timms
My hon. Friend is absolutely right. That does surprise me very much because in opposition the Minister’s party used to champion reducing child poverty. In government, however, it has surrendered and is cutting in real terms the incomes of the poorest in what is frankly a craven surrender to the Tory party at its worst. It is implementing policies that even Mrs Thatcher did not dare propose.
Kate Green
My right hon. Friend is right. This order will simply make poor people poorer. Is it not absolutely cynical that, rather than face up to the fact that more children will be in poverty as a result of these miserable measures, the Government decide instead to change the definition of child poverty?
Stephen Timms
That appears to be what they are going to do, and it was striking that the impact assessment for the Welfare Benefits Up-rating Bill did not tell us what the impact on child poverty would be. After the election, the Minister and his colleagues started well and said, “Yes, we are serious about tackling child poverty; here are the figures.” They have stopped that now and it is difficult to get an answer out of them even with a parliamentary question. My hon. Friend is absolutely right—they apparently want to change the definition of child poverty, but they will not get away with it because we will be able to tell what is going on.
Mr Winnick
My right hon. Friend is being very generous with his time. Is he aware that, as someone who from time to time did not always agree with every aspect of the Labour Government during their 13 years—although I certainly did in the vast majority of cases—one of the things that most pleased me were the measures that lifted so many families out of poverty? Both Tony Blair and his successor as Prime Minister can be proud of that.
Stephen Timms
My hon. Friend is right. There was dramatic progress on reducing child poverty but, as I shall explain in a moment, all that ground will sadly be lost under the current Government’s policies. Those policies are hitting the disabled because, as the Minister said, although disability living allowance is being raised in line with the consumer prices index, employment and support allowance is not. On Second Reading of the Welfare Benefits Up-rating Bill the Secretary of State said that he was protecting people in the ESA support group. In fact he is not and, as the Minister confirmed, their benefit will be uprated by less than inflation—I know the hon. Member for Eastbourne has taken a close interest in that matter. Those people will see their income rise by less than inflation; they will have a real-terms cut.
As we have discussed, child poverty will rocket. The Institute for Fiscal Studies, where the Minister once had the task of compiling the statistics on child poverty, was already predicting on the basis of Government policies an increase in child poverty of 400,000 by 2015 and 800,000 by 2020.
Stephen Lloyd
I appreciate the right hon. Gentleman’s generosity in giving way. He mentioned the Institute for Fiscal Studies. Does he agree with its director, Paul Johnson, who said that
“the 1% uprating of welfare would start to put benefits back in line with earnings after welfare has grown twice as much as wages in recent years.”?
Stephen Timms
It would be particularly interesting to see a revised child poverty forecast from the Institute of Fiscal Studies, which I expect to appear before the Budget. We now know—as I say, these figures had to be dragged out of reluctant Ministers—that this order plus the Welfare Benefits Up-rating Bill will increase the number of children growing up below the poverty line by 200,000, including 100,000 in working families.
Kate Green
I am grateful to my right hon. Friend for allowing a further intervention. When Government Members say that the uprating of benefits is in line with the uprating of wages, including in the public sector, are we not talking about the exactly the same people who are facing a double whammy? Those receiving the 1% benefits uprating are the same as those receiving the 1% pay uprating.
Stephen Timms
My hon. Friend is absolutely right, and we are talking about a large group of people. Indeed, the hon. Member for Eastbourne and I were on the radio together when somebody rang in whose total income was £71 a week. She was going to get an increase of 70p a week as a result of this order and she asked, “How am I supposed to manage?” To their credit, the hon. Gentleman and his friend from the Conservative party, the hon. Member for Camborne and Redruth (George Eustice), could not give her an answer.
Stephen Lloyd
I recollect that radio programme. I am sure the right hon. Gentleman will accept that the point was that surviving on £70 a week is a challenge for anyone in any circumstances, with or without a benefit uprate.
Stephen Timms
The hon. Gentleman is absolutely right, but what was clear from that contributor was the despair at the prospect of a rise of only 70p a week. At a time when inflation is running at more than 2% and is likely to increase, according to the Bank of England inflation report published today, that is a very alarming prospect indeed.
Mr Reid
The right hon. Gentleman is being generous in taking interventions. I have been sitting listening and wondering what the Labour party’s policy is. If my memory is correct, he said earlier that CPI was currently 2.7%. Will he tell the House by how much all these benefits would have been increased if a Labour Government were in power?
Stephen Timms
I answered that point earlier. I was hoping the hon. Gentleman was going to tell us why, after he attacked us a few moments ago for the 75p pension rise of many years ago, he is this evening supporting a 70p increase for people such as those who are dependent on employment and support allowance in the work-related activity group. If he explained the conflict between the two positions he has taken, I would be very grateful to him.
Mr Reid
I am sure the right hon. Gentleman will recall that I spoke in debate in support of an amendment to the Welfare Benefits Up-rating Bill to increase benefits in line with average earnings, and that is still my view. As he knows, the order is not amendable, so either we vote for the whole thing, including the triple lock for pensioners, or we vote against it, but my views are on the record.
Stephen Timms
I am grateful to the hon. Gentleman for clarifying that he opposes what the Government are doing in this order.
I was talking about the impact on child poverty. We are expecting the revised projections from the Institute for Fiscal Studies ahead of the Budget. On the basis of the numbers that Ministers have reluctantly given us for the impact of this measure on child poverty, we will see a projected increase in child poverty of more than 500,000 by the expected date of the next election and 1 million by 2010. That is a shameful record indeed, undoing so many years of progress made in reducing child poverty by the previous Government, as my hon. Friend the Member for Walsall North (Mr Winnick) pointed out.
Stephen Timms
I will give the hon. Gentleman the answer I gave a few moments ago. We think there would have been a reasonable case for the Government to make a temporary change to the uprating methodology, from RPI—the previous methodology—to CPI, but unfortunately they did not do that. They came up with a proposal for a permanent change to the methodology, using CPI only, but now they are not even sticking to that and have reduced the figure further to 1%.
What if inflation rises sharply in the next few years? The Governor-designate of the Bank of England has suggested that there should be greater flexibility in the inflation target used by the Monetary Policy Committee. If inflation rises sharply, the consequences for working families—for strivers, struggling to get by at the moment and lumbered with a 1% rise hard-wired into law for next year and the following two years—do not bear thinking about. The Bank of England inflation report published today places a probability of 39% on inflation being over 3% before the end of this year. The fan chart shows possible figures of 5%. What would the consequences be for people who will see a 1% rise in their incomes for the next three years if inflation rose in that way?
Why are the Government doing this? Why have the siren voices won this year? It is because the Government’s economic policy has failed. Let us look at the three years covered by this order and the Welfare Benefits Up-rating Bill. Compare the spending on unemployment benefits over those three years, which was predicted in the Budget last year, with the spending predicted in the autumn statement, just a few months later. The forecast spending on unemployment benefits over those three years went up, just between the Budget and the autumn statement, by the same amount that this order and the Bill will save over those three years. That is what is happening—the Government are clawing back the increase in unemployment benefits resulting from the failure of their policies from those who receive those benefits.
Stephen Lloyd
The right hon. Gentleman talks about the failure of the Government’s economic policies. Does he accept two absolute facts—that this is the worst economic recession since the great depression, and that since the general election the coalition Government have generated 1 million extra private sector jobs?
Stephen Timms
The hon. Gentleman is undoubtedly right that this is a very serious financial crisis, although I do not remember Government Members making that point before the election. I ask him to justify to the House why, on the very day that these measures will take effect, millionaires will all get a tax cut averaging more than £2,000 a week.
Stephen Lloyd
Under the coalition Government, people on higher incomes will pay more tax than they did during the entire 13 years—except for 30 days—of the Labour Government, during one of the strongest and most powerful booms we had had for 40 years. Can the right hon. Gentleman defend that record?
Stephen Timms
What would the hon. Gentleman say to the woman we spoke to on the radio, who will get a 70p per week rise as a result of this order? How would he defend to her the fact that the Government whom he supports will give a tax cut of £2,000 a week to everybody who earns more than £1 million a year? For me, that is completely indefensible, although he may have a defence—
Stephen Lloyd
Does the right hon. Gentleman accept that the IFS and other bodies have said that under the coalition’s tax policies the wealthier will actually pay more tax than they did before?
Stephen Timms
It is the people at the bottom who are being clobbered by this measure, and that is clear from the analysis. The hon. Gentleman has not defended the tax cut—I do not blame him as I do not think it can be defended that millionaires should get this enormous tax cut on the very day that people such as the woman on the phone to us on Radio 5 Live will get a 70p per week rise.
Ian Murray
I think what the hon. Member for Eastbourne (Stephen Lloyd) is trying to say is that the 50p tax rate created £7 billion of tax avoidance, so rather than going after the tax avoidance the Government have reduced the rate.
Stephen Timms
My hon. Friend is right: if it is an avoidance problem, the Treasury should address that.
Strivers will pay the price for the Government’s economic failure. The most vulnerable are being hammered and the rich are getting a tax cut. The solution is to get Britain back to work. That is why we have argued for our compulsory jobs guarantee. It will cost about £1 billion a year. We will pay for it by restricting the tax relief on pensions saving for those earning over £150,000 per year. We will guarantee anyone over 25 who has been in receipt of jobseeker’s allowance for two years the offer of a choice of jobs or a training position, and after that the payment of jobseeker’s allowance will cease.
The case for our compulsory jobs guarantee received a welcome boost from the Minister’s Department when it published an evaluation of the last Government’s future jobs fund. I am grateful to both Ministers who are in their places on the Front Bench for the publication of this helpful and informative evaluation. The evaluation pointed out just how successful the future jobs fund was in getting young people back to work. It estimated that the net benefit to society as a whole was £7,500 for every participant in the future jobs fund, and that is after taking account of all the costs of the initiative. Of the gross cost of some £750 million for the future jobs fund, over half was recouped by the Treasury in additional tax payments and reduced benefit payments. Our compulsory jobs guarantee will repeat that success for the over-25s. We will get Britain back to work; we will end this punishing spiral of increasing struggle for strivers and for the most vulnerable in order to fund, as the Government find they have to do, the price of ever-increasing unemployment.
The proposals in this order for working-age benefits are a disgrace, although the Minister made a perfectly fair point in his speech earlier—that an increase is better than no increase at all. The proposals for pensions uprating are worth having—I put it no more strongly than that—but the proposals for working-age benefits are shameful and quite contrary to everything the Minister’s party argued for when in opposition. I hope that in the course of this evening’s debate we will be able fully to expose that.
John McDonnell (Hayes and Harlington) (Lab)
It is unfortunate that the order cannot be disaggregated, which would allow us to vote for its individual elements—supporting the increases at the rate of inflation and opposing those with a 1% increase. The breaking of the historic link between inflation and social security benefits, which has lasted over a generation on a political consensus, is a significant step, so it is important for us to judge it issue by issue in respect of the people affected by it.
I have looked at the Government’s impact assessment, which says that we are affecting one in eight households. The households most affected—those most likely to receive a cut—will be those further down the income scale, families with children and women who are heading lone parent families. I think that when we take decisions such as this, it is important to assess the position of those whose benefits are at stake and to look at their plight. The Institute for Fiscal Studies said that 2.5 million workers’ families will lose an average of £215 a year; 7 million in work will lose £165 a year; and, to reiterate what was said in previous debates, 68% of those affected by the order will be in work.
An assessment undertaken by the House of Commons Library showed that these families are already facing higher inflation because they spend more on food and utilities. Their experience of low income is quite startling. Children born in families with low incomes already have a birth weight 130 grams lower on average than children in social classes 4 and 5. These families are more closely associated with infant mortality and chronic disease later in life, yet these are the ones whose benefits and income we are cutting. Before their second birthday, a child from a poorer family is already showing a lower level of attainment than those in professional families. By six, a poorer child will already have been overtaken in terms of attainment by a child of lesser ability from a professional family. Children aged up to 14 from unskilled families are five times more likely to die from an accident and 15 times more likely to die from a fire at home than a child from a professional family. Such children also leave school with fewer qualifications.
Last year, according to the figures, 130,000 people—and they will be the people whom we are discussing tonight—including 20,000 children were fed by the Trussell Trust through its food banks. That is the reality of what is happening to the people whose benefits we are cutting tonight—for that is effectively what we are doing.
I pay tribute to Save the Children for two pieces of research that it conducted. One was a survey of parents, and in the other it talked to children directly, which I think was quite a significant thing to do. It is important for the voices of children to be heard in the House. As the survey of parents showed, what families are currently experiencing is shocking; and, as I have said, those are the families whose benefits we are cutting.
In response to the survey, well over half the parents on low incomes—more than 60%—said that they were having to cut back on food, while more than a quarter said that they had skipped meals in the last year. One in five families said that their children had to go without new shoes when they needed them. A large number of the children in poverty said that they were missing out on things that many other children took for granted, and one in five specified school trips. One in five parents in poverty said that they had had to borrow money to pay for essentials such as food and clothes in the past year. Those are the families who are in the most poverty, and they will be impoverished even further as a result of what we are doing tonight.
Mr Russell Brown
My hon. Friend is entirely right. Organisations such as Save the Children, Barnardo’s and the Children’s Society have produced the cold hard facts that Labour Members all know about. I should like to think that Government Members would get a grasp of the facts as well.
Does my hon. Friend recognise, as I do and as, I think, many people do, that a mother who is trying to prepare a meal and put it on the table often says that she will eat something later, when in fact she is skipping that meal in order to feed her children, knowing full well that they need food in their bellies to get through the rest of the day?
John McDonnell
Indeed. According to the survey, half the parents questioned had gone without food themselves at some time in the past year to ensure that their children were fed.
We sometimes forget that children have views as well, and that those views can permeate a whole family. When a family is living in poverty, the children understand what is going on. They have a glimpse of what is happening, and they realise what their parents are going through. I found the survey of children shocking as well, and quite startling. Save the Children said that
“the most striking finding from the survey is the extent to which children are aware of the financial strain their parents are under. Parents are stressed by lack of money and”
—whatever they do—
“many children are sharing this burden.”
It said:
“The majority of all children (58%) think it is getting harder for their family to pay for everything.”
Those children understand. It also said:
“Over half of children in poverty (52%) agree that not having enough money makes their parents unhappy or stressed.”
Kate Green
My hon. Friend is advancing a powerful case. I am glad that the Secretary of State is present. He often says that debt is a route to poverty, but is not the situation that my hon. Friend is describing proof that, in fact, poverty will drive those families into debt?
John McDonnell
That is true, and I shall say more about it shortly. There is a wider debate to be had, but the pressure on parents that forces them into debt eventually has implications for their children.
According to Save the Children,
“Over a third of children…say their family struggles to pay the bills….4 in 10 children… ‘agree’ or ‘strongly agree’”
—that phrase is typical of surveys—
“that their parents are cutting back on things for themselves, such as…clothes and food.”
The children witness their mums and dads not eating properly.
Let me leave the last word to the families themselves. A number of parents were quoted extensively by Save the Children. It is worth reading quite a few of those quotations, because they hit home and reveal what people are really experiencing. One parent said:
“ I regularly leave the heating off and use blankets and jackets to keep warm so that we have more money towards the food bill... I buy the cheapest brand foods so that I can afford the right amount of fruit and veg for the children. Missing a meal or two a week is not uncommon for me so that my children can eat. My children never go without what they need, but I sometimes have to.”
Brendan is 13. He says:
“I had shoes that were all broken up and full of holes. People at school laughed at me…I saved up my own money for my own shoes, but I don’t care about the brand or the make.”
They are the people who will be driven further into poverty as a result of the decisions we take tonight. We now have 3.5 million children living in poverty, and as a result of the last Budget, the autumn statement and today’s measures, we will probably have another 400,000 or 500,000 children living in poverty by 2015. We are blighting a generation.
Those children will never forgive us, and nor should they forgive us, because we are currently redistributing wealth from the poor to the rich, not from the rich to the poor so that we can tackle poverty and child poverty. That is why I wish I could vote against tonight’s orders. We are in a bind, however. If we vote against this order, we vote against the CPI increases as well. I hope lessons will be learned so that in future years we will properly consider each element of any such proposals.
Any Member who votes for this order tonight should feel a weight of guilt on their shoulders. Individuals and families are suffering greatly. The Save the Children survey findings reflect what we see in our constituencies. People say to us in our advice surgeries every week that they cannot survive on the income they have, whether they are in work because of low wages, or out of work because of low benefits, or—that dangerous combination—in work and on benefits at the same time. They cannot survive on their incomes.
Poverty is not just about income, of course. There is a range of other interventions that need to be discussed and debated, but those other interventions do not work if people cannot put food on the table. They do not work if people are cold at night and do not have shoes or a coat to put on their children. That is why we must halt this cutting of benefits.
We must instead start to look at how we can create a fairer society. We had a consensus for at least two generations after the welfare state was established that when inflation took hold, we would increase social security benefits in line with inflation, so that the poorest would be protected. I agree that we occasionally had rows in this House—both between and within parties—about what form that protection should take. I refused to support the shift from RPI to CPI. That was a debate worth having, and even under the new definition at least people on social security benefits were protected. Now we have torn up that consensus and the people who suffer will not be those who take part in party political debates, but the sort of people who were surveyed by Save the Children, and most of them will be children. That is a total disgrace.
We cannot vote against the Government tonight because of the nature of the order before us, but we can campaign against these measures, and that is what we will do. We will take our argument into our constituencies. We will mobilise people, and I think this generation of children will remember who forced them further into poverty. Any Member who votes for this order tonight will pay for it in the long term—even if they end up paying for it in history. Those Members will be taking part in the impoverishment of a whole generation—kids who cannot afford coats, school shoes and school trips and whose parents have to go without food. That is unacceptable in 2013 in the seventh richest country in the world.
Sheila Gilmore (Edinburgh East) (Lab)
It is a shame that if we talk for as long as many of us would like to talk tonight, we will probably be slightly unpopular with some. However, people who will be affected by these changes will be watching these proceedings, and they will be dismayed to see that this important debate has been tacked on to the end of the parliamentary day and not a single Conservative Back Bencher is sufficiently interested to want to take part in it. When I was standing for election in 2010, the Liberal Democrats used to like to position themselves, at every hustings I was at, somewhere to the left of Labour, but it is their Back Benchers who are defending the Government’s choices—for they are choices. The public have to be well aware of that.
One regrettable thing about what has been happening for nearly three years now is the constant pitting of one group against another: older people against younger people, and people in work against those not in work. That is not helpful because it provides no analysis of the real roots of the problems facing us. The hon. Member for Eastbourne (Stephen Lloyd) has been doing a good job of defending the Government. He made the point about how out-of-work benefits have risen by more than earnings in the past five years, using it to justify the 1% rise. However, he knows that if we look at a different time period, we come up with a very different figure. Since 1979, unemployment benefit and its successor benefit, jobseeker’s allowance, has fallen from 22% of average earnings to 11% of average earnings. We are starting from a very low base indeed, and it is not right or fair therefore to say that 1% is adequate for people who are struggling.
Why are we in some of these spending positions? The irony of all this is that so many of the policies we are facing will drive up spending, be it on some of the benefits under discussion today or on the related benefits—the ones that would come under the tax system at the moment, such as tax credits. Some 90% of new housing benefit claimants in the past couple of years have been people in work, and that has been because of the level of wages and because these people are in part-time work. That has been driving up the housing benefit totals, which the Government are very concerned about, as I am. I am not comfortable with the fact that, as we are told repeatedly, the housing benefit bill has risen so much in the past 10 years, but we need to examine the reasons for that. The major reason is that so many people on low incomes are finding themselves with no other housing choice but the private rented sector, the cost of which in housing benefit is very high. If we do not tackle that underlying issue, in one way or another, be it by creating more affordable housing or by dealing with the issue of private sector rents, the housing benefit bill will still creep up and up, and in a couple of years’ time we will not have made any progress in reducing it.
In the meantime, many of our constituents living in low rent housing are about to have their income cut substantially. I have a constituent in her 50s who lives in a house that is not grand—it is a two-bedroom house, where the second bedroom is small and the kitchen opens off the living room. That removes the notion that she could have someone in to share—one of the Minister’s fondest examples. At her age and stage of life, why should she be expected to live in that way? She will be losing £50 a month in April, and I can assure the Minister that in my city the choices of where to move to are very limited, even if she wanted to move or should move.
When we are looking at a figure of 1%, we have to consider what is happening in the wider sphere. If just one thing—one change—were happening, it would not be quite so painful for a lot of families, but these things are happening to the same people. I give the example of a lady who is on employment and support allowance in the work-related activity group. She will be suffering from the 1% rise as well as from the £50 knocked off her housing benefit. People such as her have to deal with the cumulative effect of what is happening. She did not want to be claiming benefit. She did not want to fall ill in her 50s, but it is something that, after a working life, has happened to her and to thousands and thousands of people like her up and down this country.
Instead of dealing with the issue in this rather rushed way, perhaps the Government could do as some organisations have asked and make a cumulative impact assessment of the effects of the change on disability. Why do we not have that, and why do we not make time available for a proper debate? We need to see what is happening. Some people may see the change as relatively small, but a whole package of measures is coming in.
I am seeing a big change. A couple of years back, people would say that the Government’s welfare reforms were all about “those terrible scroungers—it’s not me and mine, it’s somebody else.” Now, people come to my surgeries and ask, “Why is this happening to me? I’m not a scrounger. How come this is happening? I’ve worked hard all my life, so why is it happening to me?” People are not inherently either workless or working. People move in and out of work, particularly at the lower-paid end of the spectrum.
We know why the measure had to be brought in this year. It was because the Government’s economic policies had failed. I am glad the hon. Member for Eastbourne decided to raise the question of jobs. It is frequently said in this place that 1 million private sector jobs have been created, and therefore our economic policy is working. The Prime Minister says it all the time. In January 2011, within a short time of coming into office, the Government told us that half a million new private sector jobs had been created. Presumably that was the true figure at the time. Many of us think that one of the reasons for the increase in jobs was the economic stimulus applied by the previous Government; it was certainly very soon for the coalition Government’s policies to have taken effect. If that figure was correct and the figure of 1 million is correct, since then—two years ago—apparently only half a million jobs have been created. But—it is a big but—in that period, 170,000 jobs in colleges were reclassified from the public to the private sector, and 100,000 jobs appear to be unpaid work placements. At the last Department for Work and Pensions questions, the employment Minister, the hon. Member for Fareham (Mr Hoban) admitted that unpaid jobs were being counted in the total. Apparently, the Prime Minister does not know, because he still talks about his million jobs and how wonderful it all is.
Ian Murray
I am delighted that my hon. Friend has allowed me to intervene to point out that the other big contributors to the million new jobs total are people on short and zero hours contracts. They are classified as employed when they are not being paid.
Sheila Gilmore
I thank my hon. Friend for that point. I was about to say that many of the jobs are exactly of that nature, which ratchets up the support payments. People on low earnings or who work very part-time hours are the very people who depend on housing benefit and, in many cases, tax credits. When we look at that situation, we see that the wonderful recovery in jobs is really not so wonderful. Indeed, some of the jobs are so part-time as to be almost invisible.
Life is very difficult for people who work in those kinds of jobs. They often have to start work at very difficult hours. A constituent who came to see me was desperate to work, and she found a job, but it meant that she had to get from Edinburgh to Livingston, which is about 20 miles. Without a car, it is quite a long way—it may be 18 miles; my figures might not be quite right. She had to get there for 7 o’clock in the morning. How can someone do that when they do not have a car and public transport is either non-existent or very expensive? That job did not last long, because she could not keep it up.
Another constituent was told by a large department store, for which she had worked for a number of years in a job that fitted with her children’s school hours, that that option was no longer available to her. She now had to work for just 12 hours—she had previously managed to work for 20 hours—or she had to go on a flexible contract so that she could be called in whenever the shop wanted her. That was difficult—in fact, virtually impossible—for her because of things such as child care arrangements. She could not just suddenly come in on a Saturday or come in of an evening. The job had suited her needs, and it had brought a reasonable income that enabled her to support her children. Now she was told, “Well, if you don’t like it, there are plenty of people looking for these jobs and we can fill them very easily. If you do not want the new contract you can simply leave.”
That is the kind of job offer that many people are getting. If, on top of that, tax credits, which have been frozen for the past couple of years, go up by only 1%, and housing benefit payments are limited, those people will indeed suffer.
Julie Hilling (Bolton West) (Lab)
Has my hon. Friend made an estimate of the number of people who have to juggle two, three or more part-time jobs? How many of the new posts that have been created are occupied by just one person who is trying to juggle different jobs and doing just a few hours in each one every day?
Sheila Gilmore
That is a good question. We need to know far more detail about those figures. We know from the people who come to see us, the people we talk to and the people we meet when we go around our constituencies exactly what is happening: if people can get more than one part-time job they will do so in order to make up their income, but it can be difficult for them.
That is the backdrop to these provisions. That is the bigger picture that the public will want to understand, as they realise that this will actually happen over the next few years. It has begun to hit many people hard, and it can only get worse. We must make it clear that if we are to be part of a society that is truly one in which we are all in it together, we should not go down that road.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
It is a pleasure to follow the other Back-Bench contributions in this somewhat sparsely attended debate, particularly the hon. Member for Hayes and Harlington (John McDonnell), who always speaks with consistency and clarity on these issues. Like him, I very much regret that the motions have been grouped in such a way that voting against the egregious real-terms cut in working-age benefits would potentially jeopardise the essential support to some of the most disadvantaged people in our society. I regret that it is not possible to vote against part of the measures.
When we debated the issue a few weeks ago, I raised a number of concerns. What I have heard this evening has done nothing to assuage those concerns. A below-inflation rise and a real-terms cut over three years will do nothing except pile on the pain for low and middle-income households that are already paying the price of the recession. The cap of 1% on the uprating of working-age benefits will drive low-income families into real hardship, increase levels of deprivation, and accentuate the gross inequalities that plague our society. It will hit parents especially hard, particularly those in low-paid or part-time work. Given the extremely short time that we had to debate this a few weeks ago, with strict time limits, it would be utterly wrong to allow this debate to end without challenging those points and reiterating the key issues.
It is fair to say that low-paid workers have already borne the brunt of the economic downturn. Many people have seen their working hours cut. Increasingly, we find people, especially women, working part-time when they really want a full-time job. Those who have child care and caring responsibilities, as the hon. Member for Edinburgh East (Sheila Gilmore) mentioned a moment ago, often find themselves in seasonal, temporary, part-time, insecure and sometimes zero hour contract work. It is extremely difficult for them to juggle the competing demands on their time if they have caring responsibilities or children to look after.
We should not forget that unemployment is still unacceptably high and concentrated geographically in certain parts of the UK. It is neither fair nor accurate to lay responsibility for high unemployment solely on people who are unemployed. Although it may be easier for us to abdicate responsibility for economic policies and political decisions and blame unemployed people for their own plight, we should acknowledge the role of the wider economy, the climate we are living in, our political response to it and the inadequacies of that in creating the present high levels of unemployment.
The key point is that it is not just the unemployed who are hit by a freeze and a cut in working-age benefits—it is people in work who will pay the highest price. The Resolution Foundation has said that around 60% of the cuts will fall on people in work. It is important to see the impact of the autumn statement in the round, looking at the freeze on benefits alongside other measures. According to Citizens Advice, a family of two parents both working in full-time low-paid jobs, with two children, paying a modest rent of £130 a week, will be more than £12 a week worse off by 2015. A similar family with one full-time earner on minimum wage will be about £13 a week worse off by 2015.
A disabled lone parent of two children receiving the support component of employment and support allowance will see a comparable net loss of income in real terms. This does not take account of the cuts that such families have already experienced through last year’s changes to the tax credit system and child care support. The distributional analysis of the Government’s own impact assessment shows that the Government’s reforms will hit the lower half of the income spectrum hard. The analysis by the Institute for Fiscal Studies shows that the pain of the austerity measures is being felt in the lower five income deciles, with the biggest losses in the lowest deciles.
The point that I have made previously in debates on this subject is that although these distributional analyses can be helpful, they do not tell the human story. More than that, they do not show the disproportional impact that the rising cost of living has on low-income households. In the context of today’s inflation forecasts that show that high inflation is set to be with us for several years, this point becomes even more acute. Whether it is hikes in domestic fuel prices or rises in the price of staple foods, it is the things that lower income households most depend on that are going up in price most quickly. I have said before that I do not think the retail prices index or the consumer prices index is a particularly good measure for assessing the experience of inflation in lower-income households, but the CPI for sure underestimates the real impact of those real-term cuts in support.
This is not just abstract economic theory. We are talking today about the difference between a 1% rise of about 71p and an inflationary rise of a meagre £1.50 a week. It is important that we bear in mind what we are doing. Abandoning any link with earnings or prices sends a strong signal that the Government are abandoning any support for citizens going through tough times. It undermines the social contract that most of us thought we had.
The 4% cut in real terms to low and middle-income families will have material consequences for thousands of families right across the UK. These are deeply regressive measures. They are mean and miserable. They will affect 30% of all households in Scotland. They will affect the vast majority of families with children. Given the importance of the issue, the consequences that it will have for our constituents, and the lack of time that we have had to debate it, it is a scandal that the Government Benches are so empty this evening. No one has risen from the Back Benches to defend this egregious policy. I urge the Government to think again.
Dr Whiteford
I am just concluding, and the hon. Gentleman was absent for most of the debate, so I do not think it is fitting that he should try to get in at the last gasp.
Mr Russell Brown (Dumfries and Galloway) (Lab)
I had not intended to speak this evening, but my hon. Friend the Member for Hayes and Harlington (John McDonnell) has somewhat inspired me. He spoke on a subject that I want to say one or two things about. It is extremely saddening that we are taking both orders together, because we on the Opposition Benches—[Interruption.] Well, we can support one order, but we have severe difficulties with the other. We will see what happens.
Steve Webb
Just to clarify, for the convenience of the House, we have three hours to talk about both orders. One is uncontentious, so the hon. Gentleman can talk to his heart’s content about the other and vote against it if he wants to.
Kate Green
Is not the problem that there is a single order dealing with the uprating of a whole range of benefits, including disability living allowance, which is going up by more than 1%, and other working-age benefits that are limited to only 1%? The problem is that a single order is dealing with a combination of benefits within it.
Mr Brown
Exactly, and that is the difficulty we face this evening.
I have raised the point about the 1% freeze on benefits before. I have asked Ministers in both the Department for Work and Pensions and the Treasury what kind of impact assessment has been done and what consultation there has been between the two sets of Ministers, but I have never had a straight answer. What we will be witnessing over the three-year period, according to the Government’s figures, is almost £6 billion being saved or, as I would put it, £6 billion being taken away from the lowest income households. The Minister must surely know that that £6 billion would have been spent in the local economy.
When I first arrived in this House, in 1997, the then Labour Government decided to introduce a national minimum wage, which effectively put money into people’s pockets. The impact assessment at the time was based on £1 million being given to the poorest households, which clearly would then be spent in the local economy. For every £1 million spent in the local economy, 40 jobs were created.
If the Minister is able to do his work—I think that he is an intelligent man—he will see that taking £6 billion out of local economies over three years will have a detrimental impact. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) is telling me that yet another high street outlet is on the brink this evening, so more jobs might go.
Julie Hilling
Does my hon. Friend agree with the International Monetary Fund, which states that the cuts to welfare benefits will cost the UK economy £40 billion, almost double the cuts to welfare?
Mr Brown
I do not know whether it will be £40 billion, because I have not seen the figures, but I trust what my hon. Friend says. There is no doubt that it will have a severe and adverse impact on the economy.
I come now to the point that my hon. Friend the Member for Hayes and Harlington made about families and children. If we do not give the next generation the right start in life when they are children, we give them the wrong start. I must say to the Minister that even now we see across our country the struggle that my party had in government to undo some of the damage from the previous 18 years. The damage can be done in a short period, but it takes an awful lot longer to recover from. We struggled in government to try to get things back on track. What the Minister is doing today is not what he said he would do when he was in opposition.
When he leaves this place tonight, I implore the Minister to pick up a copy of a documentary called “Poor Kids”. I have seen it a couple of times and it is heart-breaking, to say the least. As a father and grandfather, I say to the Minister that what the documentary shows is not beyond belief, because it does happen. It happens in many towns and cities across this country where families are living on basically nothing. Children as young as eight, nine or 10 years old have become worldly wise: they know about not having money and what debt is, and they understand how trying to put a meal on the table can result in other elements of poverty. That is not how children in this country should be spending their early years. They survive on hand-me-down clothes, not necessarily from older brothers or sisters but from other family members. Despite what many people think, charity shops on our high streets are an absolute godsend for such families, because sometimes they are the only way children can be clothed.
Parents sometimes sacrifice their own meals to feed their children. Perhaps I have led a sheltered life, but it was only when it was drawn to my attention that some mothers will prepare a meal for their children and tell them, “I’ll get something to eat later,” that I realised—I take no pleasure in saying this—that I witnessed that as a child in my household. I was part of a family of five and I know only too well now—perhaps I was naive when I was younger—that that was going on in my household. I witnessed my mother having nothing to eat while the rest of the family sat waiting for my father to come home from work.
Ian Murray
My hon. Friend is making an incredibly impassioned speech. The stories from the documentary and those that we all hear in our constituency advice sessions—one family in my constituency has been living off the cheapest white bread and jam for the past few months—are happening now, before the impact of any of these changes is felt, and the inflation of energy and food prices, the bedroom tax and the 1% uprating will make the situation not just worse but much worse.
Mr Brown
My hon. Friend is spot on. It is very difficult for families at the moment and it is about to get worse. The Minister mentioned the housing benefit changes. Some places are under-occupied and we all have families coming to us regularly—almost weekly—saying that they need an extra bedroom. Surely the Minister and other Government Members know, however, that to marry up families who are under-occupying and those who are overcrowding is a mammoth task.
Sheila Gilmore
Not only is it a mammoth task, but, in fact, if it was possible to reshuffle people into the right-sized houses within a reasonable time scale, there would be no saving to the Government; and yet they have a saving in their budget.
Mr Brown
My hon. Friend is correct. I worry about some of the figures that the Government are working with in terms of savings. Only time will tell, two or three years down the road, whether all this has been worth it.
We need to give children a proper start in life. We really do. As my hon. Friend the Member for Edinburgh South (Ian Murray) said, we are already witnessing difficult enough times for many families.
Julie Hilling
What does my hon. Friend have to say about the fact that we are the seventh richest country in the world and yet last year 200,000 people had to go to food banks? In that context, what does he think we should be saying to the Government?
Mr Brown
My hon. Friend makes the same point as my hon. Friend the Member for Hayes and Harlington. We are the seventh richest nation but this is how we are treating families—treating children—in this country. Two food banks are about to start in my constituency. I hate the idea, but I recognise that it is the only way some families are going to survive. My wife volunteers and works alongside the local church providing meals for homeless families. In reality, there are very few homeless families, but there are families who are in great need of a hot meal a couple of times a week. It is right that she does that, and I suspect that if at some stage I ever retire from this place she will have me in there helping her—because it is going to that long before we throw off what we are witnessing at the moment.
I mentioned to the Minister earlier the case of the lady who has lost her disability living allowance and I told him what her GP said to me. The GP also said that his practice is now coming under real pressure because aspects of the welfare reform are starting to bite. He has patients with fluctuating conditions, mental health problems and stress-related illnesses that are leading them back in to see him. People are going back to their GPs to look for help, support, guidance, and even help with completing forms. Some GP practices are beginning to creak at the seams in having to deal with people they should not really be seeing—people whose conditions will never, in all honesty, get any better medically. It is a real worry when the professional people in our communities are beginning to see, to recognise and to understand that life is really going to get tough for some.
Let me finish by saying to the Minister that if he has not watched the documentary “Poor Kids”, I suggest that he and many others do so, because it is quite frankly heartbreaking. This is not how people should be living in the seventh richest country in the world, and things are only going to get tougher for these families.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
There are two major issues at hand in these orders. The second order is uncontroversial, as the Minister explained at the outset, but inside the controversial order on social security benefits uprating are two issues in particular. First, there is the nature and extent of the uprating of pensioner incomes; and, secondly, there is the Government’s decision to cut in-work and out-of-work benefits. It would be better if those two things had been separated to allow for a proper debate on both, but the Government have taken the decision to place one inside the other.
The debate began with the Minister taking the Floor, and he was followed by my right hon. Friend the Member for East Ham (Stephen Timms), who forensically dissected the impact of the Government’s policy on hard-working families, strivers and the most vulnerable. Further contributions came from only one side of the House—the Opposition side. We heard from my hon. Friends the Members for Hayes and Harlington (John McDonnell) and for Edinburgh East (Sheila Gilmore), the hon. Member for Banff and Buchan (Dr Whiteford), and my hon. Friend the Member for Dumfries and Galloway (Mr Brown). All their contributions were characterised by an emphasis on and an interest in how the Government’s decision to cut in-work and out-of-work benefits will affect families—not only families in what we might call the squeezed middle but families who are looking for work. I will return to the issue of what we might call the strivers tax, but let me first deal with the nature and extent of the uprating of pensioner incomes.
We have heard much from the Minister about the triple lock. I do not know if he is aware, but the original triple lock was a handgun produced by Smith & Wesson in 1908. Like the Minister, it had such high hopes for its triple lock. It claimed it was the best gun it had ever made and yet, just eight years later, the triple lock was redundant: it was a triumph of rhetoric over reality. The same might be said of the Government’s triple lock. This is the third year it has been in operation, and we know that the increase in the state pension is less than it would have been if the uprating method used by the previous Government was still in place. My right hon. Friend the Member for East Ham eloquently dissected that aspect of the case.
It is worse than that, however. The triple lock this year has produced a real-terms cut in the value of the basic state pension. The Minister shakes his head, but listening to his exchange with my right hon. Friend, one could only feel that the Minister wants to have his proverbial cake and eat it. Last year, the Minister trumpeted that he had delivered the highest real-terms increase in the state pension for about 10 years. Having in all seriousness claimed that credit, it is difficult for him now to avoid the blame for the very same mechanism that is producing a real-terms cut in the state pension.
I took a look at the Minister’s website this evening, just to see whether there was any further evidence of his liking to have his cake and eat it. What did I find? The Minister is calling and campaigning for his local citizens advice bureau to be protected from council cuts. Earlier in the debate, however, he defended strongly the council tax freeze as an important contribution to improving family income. I will let the House make its mind up on this second case of having cake and eating it.
Mr Reid
The pension increase is higher than both the rate of inflation and the increase in earnings. The hon. Gentleman seems to disagree with the 2.5% figure that the Government are putting forward. Will he tell us what the percentage increase in the pension would be if Labour were in power?
Gregg McClymont
Is the hon. Gentleman aware that inflation is now 2.7%, and that the pension is to be uprated by 2.5%? I do not have my abacus with me—maybe the hon. Gentleman should have one—but that seems like a real-terms cut to me.
Mr Reid
I am grateful to the hon. Gentleman for being generous in giving way. He knows perfectly well that under the previous Government and under this Government the rate of inflation in the previous September is used to calculate the pension increase for the following year. That has not changed, and this pension increase is higher than the rate of inflation at the standard time at which it is calculated.
Gregg McClymont
As far as I could take from that further intervention, the hon. Gentleman still maintains that inflation is less than 2.5%, when in fact it is 2.7%. [Interruption.] The Minister makes a comment from a sedentary position. If he wants to intervene I will be happy to let him, but before he does so let me deal with the hon. Member for Argyll and Bute (Mr Reid). It is clear that CPI inflation is currently 2.7%. The basic state pension is to be uprated by 2.5%. Is that, or is that not, a real-terms cut? It obviously is. Would the hon. Gentleman like to intervene again?
Gregg McClymont
I am still waiting for the hon. Gentleman to confess that he was absolutely wrong to suggest that this is an above-inflation increase. That leads to some questions about the ability of the Liberal Democrats to devise economic and financial policy when they do not know the current rate of inflation and how it relates to the basic state pension.
Steve Webb
Understandably, the hon. Gentleman would like to be sitting where I am sitting. If he was, by how much would he have put the pension up?
Gregg McClymont
The Minister is determined to tease out from the Opposition what will be in our next manifesto. Our position is clear, and he is obviously trying to deflect attention from this real-terms cut in the pension.
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
Come on, Greg, you can do it. Just tell us!
Gregg McClymont
The Secretary of State must be less exuberant from a sedentary position.
I shall move rapidly on to the strivers tax. It is clear that strivers have been hit by a tax to pay the cost of the Government’s economic failure, while at the same time millionaires have received a £107,000 tax cut.
Ian Murray
Does my hon. Friend share my deep concern that this does not really have anything to do with economic policy or the deficit, but is driven by ideology?
Gregg McClymont
My hon. Friend makes a good point. The Chancellor thought that he could play clever politics and draw dividing lines between different sections of society, but he did not take it into account that this would hit those in work above all else. I am afraid that he has been too clever by half.
Let us be clear. One of the groups that will be particularly hard hit will be women. House of Commons Library analysis is clear that two thirds of those hit overall by the real-terms cut in benefits and tax credits are women.
Gregg McClymont
The Minister shakes his head, but that is House of Commons Library research.
There has built up a picture of a Government who, having failed miserably on the economy, want to make working people and those seeking work pay the price for their economic failure. Labour’s alternative is clear: get Britain back to work, introduce a compulsory jobs guarantee and bring down the unemployment bill—the price of failure that the country is paying.
To conclude, the proposals in the order for working-age benefits are an affront to hard-working people—although an increase is better than no increase, of course. If the Government want to plug the hole in their failing economic plan, they should cancel their tax cut for millionaires this April, not hit millions of working people on modest incomes. That is the reality of the situation. The pension proposals are, of course, worth having. Pensioners depend on these upratings every year to maintain their standard of living, so I will urge my hon. Friends to abstain on this order, but to campaign for a new set of economic policies as we move towards 2015.
The Minister of State, Department for Work and Pensions (Steve Webb)
This has been an interesting debate. We have heard heartfelt contributions from the hon. Members for Hayes and Harlington (John McDonnell), for Banff and Buchan (Dr Whiteford) and for Dumfries and Galloway (Mr Brown), the latter of whom described his own experience of childhood poverty. I would describe those two hon. Gentlemen—I am not sure the hon. Lady would accept this term—as socialists and so would clearly not be where we are, but would be taxing the rich far, far more to avoid the sorts of things we are having to do to reduce the deficit. Their Front-Bench team do not share their view, however, so although I respect their position that they would rather tax the rich, that is not the position of their Front-Bench team.
The right hon. Member for East Ham (Stephen Timms) was the classic personification of Labour now—a vacuum where there should be a political party. When asked what they would do now, both he and the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said, “Well, if this had been done, we might have done that, and in some years, we will produce a manifesto, but we’re not saying.” The hard-working folk who write Hansard could have simply inserted, “Vacuous twaddle here”. The House has a right to know what the official Opposition would do, but answer came there none.
The hon. Member for Edinburgh East (Sheila Gilmore), among others, asked for a cumulative impact assessment. Occasionally, when the Government produce such figures, they are met with some scepticism. The Institute for Fiscal Studies chose to analyse the cumulative impact of all the fiscal consolidation from the start of this Parliament through to the end, and it has stated this month in its “Green Budget” that
“those on the very highest incomes have clearly been hit the hardest”.
Steve Webb
I will finish the sentence. It goes on to say
“when looking at the fiscal consolidation as a whole.”
In other words, when looking at everything, which is what we were asked to do.
Sheila Gilmore
The other half of what the IFS said referred to the people in the lowest income deciles and the losses that they will incur. The cash reduction for people on the highest incomes will not impinge on their well-being in anything like the same way as these measures, including the 1% increase, will impinge on the poorest.
Steve Webb
In fact, the IFS figures are based on the percentage increases and, as we have been reminded repeatedly in the debate, the cash amounts for the very highest income earners are far higher for any given percentage figure. So, even taking percentages instead of cash amounts, the highest earners have, in the IFS’s words, been “hit the hardest”.
Steve Webb
No, I want to make some progress.
The right hon. Member for East Ham referred to the triple lock and the increase of 2.5% over inflation, compared with 2.2%, as derisory. I remind him that the extra 0.3% cost the taxpayer £150 million. I remember the funny-money days of Labour when £150 million was considered a mere rounding error. He dismisses it as derisory. When his party was in office, it was borrowing £150 billion a year, so I appreciate that for him £150 million is small change, but I still have the naive feeling that that amount is a lot of money. He and others derided our triple lock as though it were a trifle and of no consequence, but had Labour implemented the triple lock between 1997 and now, we would be spending an additional £3 billion on the state pension. So if Labour had applied the triple lock that he derides as inconsequential throughout their term in office, we would be spending £3 billion a year more on pensions. But perhaps he thinks that that sum is derisory, and a frippery, as well.
We have also been hearing about strivers. This is the classic dog-whistle politics of the Opposition. They accuse us of trying to divide people, yet they suddenly divide people—[Interruption.] It is not our side that has used that language.
Steve Webb
The Opposition have tried to divide people into “strivers” and “somebody else”. I am not sure who the “somebody else” is—a non-striver, perhaps. The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) is shouting out, but he is the man who said in his conference speech that Labour was on the side of the strivers, not the shirkers. We know who uses that language.
Why is it necessary to have the fiscal consolidation? It is because of the Labour party’s debts. There was £150 billion of borrowing in the final year of the last Labour Government. Labour takes no responsibility for that but, had the previous Chancellor’s plans been put into operation, it would have had to implement substantial spending cuts on public sector pay—which it has finally now agreed—and on benefits. Have we heard a single suggestion from the Opposition today on how they would make savings? They simply oppose every cut, pretend to be on the side of the poor, and never accept responsibility for how we got into this mess in the first place.
Steve Webb
No.
A number of people have said that we are the seventh richest country in the world, in terms of our gross national product per head, but we are of course also the country that was brought to the brink of bankruptcy by the last Labour Government. That is what we have had to deal with.
The hon. Member for Dumfries and Galloway mentioned people having their disability-related benefit reassessed. I would gently remind him that reassessing the millions of people on incapacity benefit, many of whom had been parked on benefit for a decade or more, was begun, rightly, by the last Labour Government. That process has been carried on. That is why people are being reassessed. We think it right not to park people on incapacity benefit for decades, only for them to retire and find that they have no pension either. So the reassessments are right. I entirely accept the point that they have to be done well, but they were begun under the last Government and they continue under this one.
Mr Russell Brown
Surely the Minister recognises that for people going through assessments it is almost like a revolving door. People with long-term and fluctuating conditions are losing benefits, eventually getting them reinstated, and then six months pass and they are back losing their benefits again. The system is not working for about 40% of people who have to go through a process time after time, making them even more ill.
Steve Webb
The Government fully accept that Labour’s work capability assessment was not working when we came into office, which is why we commissioned Professor Harrington to undertake a series of reviews. We have implemented his recommendations to make the test better, and that will continue under a new assessor.
Steve Webb
No. We have heard a lot of handwringing from the Opposition Front Bench, but no alternative proposition. We have been told that this measure will be devastating and cost the poorest people in the land billions of pounds, so surely we can have a commitment from the Labour party to reverse it. I think the hon. Member for Stretford and Urmston (Kate Green) said this measure was “egregious”, and we have heard how evil and unkind it is, so the Labour party is clearly committed to reversing it. However, those on the Front Bench know that they will weep crocodile tears and try to persuade people that they actually care about this stuff, but they will not find a penny to reverse any of it. That is the truth.
Steve Webb
No, I am reaching a conclusion.
We are bringing forward regulations that will increase the pension by more than the rate of inflation, taking it to the highest share of average earnings for more than 20 years. We are uprating key disability benefits by the rate of inflation, and ensuring that even in these straitened times we are able to increase benefits for people of working age. I commend the order to the House.
Question put and agreed to.
Resolved,
That the draft Guaranteed Minimum Pensions Increase Order 2013, which was laid before this House on 28 January, be approved.
Resolved,
That this House takes note of and approves the draft Social Security Benefits Up-rating Order 2013, which was laid before this House on 28 January.—(Steve Webb.)