Welfare Benefits Up-rating Bill

Baroness Hollis of Heigham Excerpts

Monday 11th February 2013 Lords Chamber

[Baroness Hollis of Heigham]

My Lords, normally one can say something halfway decent about some aspect of any social security Bill. I think that for the first time in 20 years in your Lordships’ House, I can find nothing good to say about this Bill at all—nothing. It is simply a lock-in cuts Bill which, to save £3 billion, will send 1 million poor children into deeper poverty by 2020 so that the better off among us, including myself, are spared a tax rise while millionaire earners have a hefty tax cut that is, curiously, also worth £3 billion.

Why do we oppose this Bill? It is simple, really. First, as my noble friend Lord McKenzie said, it is entirely unnecessary. We have always had annual up-ratings to respond to inflation; we now have a 1% rise for the forthcoming year and a Bill, costing many hours of parliamentary time, continuing it for a further two years. Why? The only defence offered by the rather fragile impact analysis is “certainty” for the financial markets, the public, and recipients themselves. Certainty, my Lords? Even if the Government cruelly ignore inflation, which the OBR believes will hit nearly 4% by 2015-16, benefit spend will still depend on the future number of claimants as well as on the level of their benefit. Exactly how can the Government give certainty to the markets and, that nice touch, certainty for the recipients, who will no doubt be grateful to learn that their benefit cuts are guaranteed for the next three years? No, the Bill is to lock in these benefit cuts for the poorest—to take it off the agenda, so to speak—in preparation, I do not doubt, for further cuts still to follow.

After all, if our solicitous concern for the markets and the public was driving this Bill, we would offer the same certainty to taxpayers for the next three years. There would be frozen tax allowances, so no more Lib Dem raising of the thresholds with the very real uncertainty that causes for NEST, auto-enrolment and, no doubt, the markets. There would be frozen tax rates, so no pre-election handouts. No, the Chancellor wants to lock the poor into their cuts, while being free in an election year to adjust the taxes that fall on the rest of us.

Secondly, the spin surrounding this Bill is deliberately and unpleasantly misleading, suggesting that these cuts fall on the undeserving poor, so that is all right then—the ones with closed curtains. It is not all right but, in any case, it is completely untrue. We had the distinctly ugly spectacle of the Iain Duncan Smith press releases while this Bill progressed through the other place, implying that these cuts were morally as well as financially desirable because they would help to wean the poor off benefit dependency, which the noble Lord, Lord Bates, cited today, as though the recipients were addicts waiting for their next benefit fix rather than loving and responsible parents trying desperately to feed their children. That was while IDS knew, as we all know, that two-thirds of these capped benefits are going to people in work on low pay with children to support. IDS smeared every poor family in this land, and I had thought better of him.

Why do we need these top-up benefits, such as housing benefit and tax credits for people in work? We all know why, don’t we? It was because while a wage may be acceptable for a single man in a full-time job on minimum wage, that wage will be hopelessly inadequate for a family man with two or three children to support unless it is topped up by tax credits. So unless employers raise wages substantially not to a living wage but to double the current pay to make good—to something like £10 or £12 an hour, which is not going to happen—their children will now become poorer still. That of course is why the argument that because pay is being capped to 1% so benefits must be is utterly fake, because Iain Duncan Smith—Mr Smith—knows perfectly well that they are largely the same group of people, their low but capped pay being topped up by low and, in future, artificially capped and lowered benefits.

It is precisely because earnings have fallen below inflation over the past few years during the recession that the tax credit bill has risen to compensate for that shortfall. Firms have also cut hours rather than sack staff; 3.5 million people are now involuntarily underemployed. As one family man in Norwich said to me not long ago, at least tax credits help to make up the difference.

So instead of the Government explaining and accepting, as they should, that the increase in tax credits is due to falling wages and that it helps to protect families, we are instead told that as wages have fallen, so must benefits, thus ensuring that the working poor face a double lock on pay and tax credits—and of course the universal credit, when it comes in, will no longer take the strain.

Nevertheless, the Government claim that we cannot afford not to cut benefits, an argument that has been run today. Benefit expenditure overall has grown, partly because tax credits help to offset low pay and lowered hours of work but mainly because pensioners are protected from any cuts, their pensions are rising and more of them are living longer. That is good news. However, the dirty news is that the unemployed and the low-paid, and their children, are now being blamed by IDS for what his colleague, Steve Webb, is rightly doing for pensioners. How cynical can you get? Pensioners get a triple lock into greater comfort, which I welcome, while the poor of working age get a double lock into increased poverty.

Let us be clear, and I make this point again: this is about policy choices. As my noble friend Lord McKenzie has said, the Government have shown that they are on the side of millionaires, who are receiving a tax cut worth £3 billion, rather than 1 million poor children who will see their parents made poorer still by around £3 billion.

Above all, the Bill and its impact analysis cheat. They both treat these cuts as though they were freestanding—one-off, so to speak—and apparently not so very large. Around 30% of households will see an average cut of £3 through this policy, according to the impact analysis documents, when actually those cuts are a further slice off income on top of the myriad other cuts since 2010 that are already damaging poor families. We have heard nothing about those today, even from those who sit on the coalition Benches. In that regard, I say, “Shame on you”, because they are deleting what is clearly absolutely central to this debate. We have been offered no assessment of the cumulative impact of these cuts—£18 billion of cuts and no public analysis of how they build up or of whom they hit.

We had a debate on this a couple of weeks ago. I hope that noble Lords will forgive me if I repeat the broadest of statistics; as the Government will not, I will try. With the invaluable help of CAB and Landesman economics, we tracked the cumulative effects of all the cuts since 2010 on one family: a couple with two young children, he a security guard in full-time work on minimum wage, living in a £100 per week council house and, obviously, entitled to pay council tax. He gained £1.71 per week from the raising of the tax threshold and then went on to lose £30 to £35 per week in benefit cuts. If one of his children is disabled, say, he will lose over £40 per week. Under the universal credit, the cuts increase to £50 per week if he is in work or £65 per week if he is unemployed. It gives a new meaning to the slogan that the universal credit will make work pay—yes, by reducing the benefit floor underneath it.

Those statistics were the result of a weekend’s work. With more time, I would have tracked the cumulative effect not only on the security guard’s family but on a lone-parent family, on a childless couple and on a single person, because they all share the cuts. It is not rocket science; it is standard policy analysis on standard family types, as they are called, and yet we are told that the DWP and HMRC with, what, 60 professional analysts, powerful computer modelling and a couple of months in hand to do the work are unable tell us what the total effect of these cuts will be, which some of us were able to work out in a weekend? I really cannot believe that they do not know what the impact of their policy initiatives is and who bears the bill. They still will not or cannot tell us. If they do not know, it is an utter dereliction of social duty, it really is—you cannot develop policy and be indifferent to its effects—but if, however, they do know and are not telling us, it is a deceit that I cannot believe my former department would stoop to.

Finally, what makes me angriest of all—the right reverend Prelate the Bishop of Leicester powerfully focused on this—it that this Bill is grotesquely unfair on whom it falls, on poor children above all. Since when, as we talk about us all being in this together, do we include poor children in the we, but exclude comfortably off pensioners like me, who have experienced not a penny of cuts? What sort of we is that? The noble Lord, Lord Bates, said nobody was telling him where to find the money. I urge him and the noble Lord, Lord German, to accept that we are today making policy choices, not following financial imperatives. It really is about choices about who pays and, ultimately, who gains. It really is. With £32 billion spent on pension tax relief still untouched, although two-thirds goes on the better off, and what is happening on tax reductions for millionaires, these are political policy choices.

We could all have done different and in the process saved the situation that poor children will fall into, stumble into, as a result of what we are doing today. These cuts will fall on those in rented housing who rightly fear losing their home, rather than on those who have two, three or, as the papers have recently told us, even eight homes. They fall on those who go to food banks, not to foodie restaurants. They fall on separated loving dads who have their children stay over at week-ends, rather than on fathers who lose contact and refuse them. They fall on families with a wheelchair user rather than a Ferrari driver. These cuts fall on the vulnerable but voiceless, rather than on those of us with resilience and resources, but who, of course, are more likely to vote. It is a shameful little Bill. As Hobbes might have said, it is nasty, brutish and short.