Social Fund Winter Fuel Payment Regulations 2024

Lord Desai Excerpts

Wednesday 11th September 2024 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, these regulations are a mistake and I want my concern on the record. I want to make it clear from the start that the financial mess inherited by our Government is a result of 14 years of austerity and financial mismanagement, and I reject any suggestion that public sector workers are benefiting at the expense of pensioners. That is simply a crude attempt to divide working people, and we should reject it as such. I will therefore vote against the cynical regret Motion from the Official Opposition, and I say to the noble Baroness, Lady Stedman-Scott, that she does herself no favours attaching her name to the Motion.

There are several key points I wish to make. First, even if the case for austerity measures were accepted, the cut in winter fuel payment was not a necessary element in the July package; it was a choice. Secondly, whatever steps are taken to increase the take-up of pension credit, millions of the poorest pensioners will still suffer from an increase in fuel poverty—Age UK came out yesterday with a figure of 2.5 million. Thirdly, the effect of the triple lock should not be double counted and, in any event, it will fail to offset the effect of the cut in the winter fuel payment over the lifetime of the current Parliament. I urge the Government, even at this late hour, to hold back on any change, pending full consultation on an alternative approach to tackling fuel poverty, while retaining the advantages of a universal benefit.

It is important to understand more about why the Government wanted to include the measure in the July package, despite its obvious political downside. Unlike other possible options, it achieved in-year savings and used an existing structure for means testing the benefit, rather than having to create a new structure. However, they failed to appreciate the two adverse consequences of using the pension credit means test. First, it has a ceiling that everyone agrees is far too low. Secondly, there is no form of marginal relief, as it is not relevant for the purposes of means testing pension credit.

In response, the Government—my Government—have attempted to head off the widespread opposition to the regulations. First, they have argued that the winter fuel payment had to be cut as part of the July package to make the figures balanced. Secondly, they have argued that the impact would be offset by increasing the take-up of pension credit and, thirdly, that the impact would be ameliorated by the existence of the triple lock on the state pension. All of these arguments, regrettably, fail.

First, the cut was not necessary, even as part of the July package. There is of course a debate to be had about the need for austerity, particularly as an instant response. However, even if the need for the July package were to be accepted, the question as to whether it had to include the cut in the winter fuel payment is a separate issue. Posed in those terms, it is obvious there is no a priori reason that it had to be a necessary element of the package. Whatever risks the Government faced, they were addressed by taking the package as a whole and not by its individual elements. Despite the Government’s protestations about tough choices, there is no avoiding the fact that it was, nevertheless, a choice, thereby raising concerns about their attitudes to universalism and pensioners in general.

The second issue is pension credit, which other speakers have addressed. We know that the increase in the take-up of pension credit will be limited. It is important to acknowledge what the Government are doing to increase the take-up of pension credit, but, regrettably, there is a long history of ineffective take-up campaigns for means-tested benefits, going back to the 1940s, for national assistance, and beyond. There is no evidence that we now know more than they did in the past about how to overcome the intractable problems arising from stigma, complexity and a lack of knowledge. I am sure other speakers will go into detail on that.

My third point is about the triple lock, which does not offset the impact of the cut in the winter fuel payment. The Government suggested—not today but in other commentaries—that the triple lock increases to the state pension over their term in office would

“outstrip any reduction in the winter fuel payment”.

Unfortunately, this is an obvious case of double counting. I have done the sums, and almost all the pension increases that will occur over the coming five years are required to protect pensioners against the impact of inflation. Pensioners cannot spend that money twice, covering both increases in the cost of living and at the same time replacing the winter fuel payment. The purpose of the triple lock is to protect pensioners against inflation, keep state pensions in line with general living standards and nudge the pension gently upwards. I have calculated that, based on the latest OBR assumptions, the impact of the triple lock, taken by itself, means that the new state pension and the basic state pension will be barely 1% higher than they would have been, even with the statutory minimum increases. This is less than the winter fuel payment, which pensioners are losing because of this measure.

In all the debates on the cut in the winter fuel payment, I am not aware of anyone arguing that there is no case for change. The winter fuel payment is and always was an anomalous benefit, particularly as it affects high earners. A payment that, in practice, recipients can choose to spend as they wish should always have been included in taxable income. The fact that it was not is a historical accident, arising from how and when it was introduced, rather than a clear policy decision.

I therefore agree with the 2015 Labour manifesto, which said:

“We will stop paying Winter Fuel Payments to the richest five per cent of pensioners”.


That was the right policy then, and something like it is the right policy now. In other words, those with the broadest shoulders should bear the burden of the cut, rather than the millions of the poorest pensioners who struggle to make ends meet. Given the case for change, the Government at this late stage should hold back on the cut to the winter fuel payment, pending a full consultation on an alternative approach to tackling fuel poverty while retaining the advantages of a universal benefit.

[Lord Desai (CB)]

My Lords, there seems to be rather a hurry to embrace economic rationality on the part of the new Government. We know what economic rationality always says: cutting income tax for the rich is good policy because that encourages growth, and cutting the benefits of the poor is good policy because that balances the budget. All through economics—the science that I teach—there has always been this root. The poor must be made to suffer because, as Malthus pointed out, if you give them more money, they will only breed more children. That is no good. Giving money to the poor is a loss, but give money to the rich and the rich will benefit.

I imagine that there is an idea that a big hole in the fiscal accounts was suddenly discovered. I do not think so: I think we all knew there was a fiscal hole. We have all been through the pandemic and through the last 15 years, when the economy has had a very low growth rate—in fact, practically no growth rate. We know all that. We also know the public accounts numbers that were available giving us the ratio of deficit to GDP. None of this was a surprise. If you want to really tackle the deficit, you need a 10-year horizon to do it. Do it rationally; do not do it quickly, do not do it in a haphazard fashion and do not just immediately say, “Oh, I have to make a very tough decision”. As soon as a politician says “tough decision”, you know the poor are going to suffer.

Poverty Reduction

Lord Desai Excerpts

Thursday 22nd February 2024 Lords Chamber

[Lord Desai (CB)]

My Lords, as the last speaker from the Back Benches, I will concentrate very much on my work on poverty. I was born in a poor country and have worked professionally as an economist on poverty for much of my career; I will not go into the details of my writing.

There is obviously a very complicated set of conditions, circumstances and consequences of poverty. Poverty is a global problem. A sociology scholar, Peter Townsend, wrote a very good book, Poverty in the United Kingdom, a fat book published by Penguin in the 1970s. He had an interesting idea. He conducted a survey asking people what sort of foods they ate: “Did you have roast beef for Sunday lunch”, things like that. People asked why he was doing it. He said, “You’re poor if you don’t feel part of the community where you live”. Something about having normal foods and things like that is very important. He conducted a very large survey with more than 2,000 observations and tried to establish that when you think about poverty, you think of people and whether they feel part of the community. It was very interesting.

A famous economist, Amartya Sen, has done a lot of work on poverty. He said, “You’re poor if you cannot develop all the potentialities that you have”. For example, it is not good enough to say that we all need a certain kind of income. If I am disabled or cannot walk, I need extra facilities and extra income to be able to do what you do. We have to think of the variety of circumstances that prevent people doing what they should be able to do.

I am going to say something fairly controversial. There is one answer. People do not like it but I have to say it. It is the only satisfactory answer that I know, and it is to have a basic income or a citizen’s income. I have been advocating that, in one way or another, for 30 or 40 years now. The idea is that just as we all have the right to vote, we should have a right to income. Some areas, such as Alaska, and some countries have implemented a basic income plan. The idea is that every adult who is eligible to vote should have a certain basic weekly or monthly income. Of course, this is a very controversial issue. People say, “Why should you pay people for not working? If they get money for not working, they will never work again and that is terrible”.

As the right reverend Prelate said, a lot of us do unpaid work, especially women. One way to think of poverty is that, at various stages of their lives, women have circumstances that force them into poverty, or at least into low-income jobs. Suppose we implement a policy I proposed in my recent book, The Poverty of Political Economy. We pay every woman who is on the electoral register £100 per weekend. I am being moderate because I do not want to frighten the horses too much. That is £5,000 per year. Let us say that there are 30 million women voters. I am making all this up, but I do not think it is impossible to finance that sort of thing. If we do that, one thing is quite certain regarding things such as child poverty, lack of heating in the house or lack of food. If the woman in the family gets an income supplement, she is going to spend it on the family as well as herself, on things such as household expenditure and heating. This has been shown in some countries that have tried it.

I know people say that income is not enough, but if you want a single policy, let us try it and let us make it universal. Rather than saying, “Let me first identify who is poor and give it only to them”, give it to everybody. Then, if you want to allow the people who are rich not to have it, they can either give it up, use it as part of a tax payment or whatever. Make it completely universal.

If you make it universal, many of the problems that families have from poverty would be tackled. Obviously, there will be problems of what to do for poor single men or elderly people, but we have pensions for the elderly. If we find that there are people who would not be helped because they are not in any of these categories, that is all right.

I am not the only person who advocates this. James Meade, a Nobel Prize-winning economist at Cambridge, was another, as was a man whose name I am trying to remember—the FT’s economics correspondent, whose first name was Sam—

[Lord Lamont of Lerwick (Con)]

Brittan.

[Lord Desai (CB)]

Yes, it was Sam Brittan. Sam Brittan, James Meade and I were the three people advocating a basic income back in the 1960s and 1970s. This is not a new idea; there is a whole volume called the Palgrave International Handbook of Basic Income, in which I have a contribution. The whole idea of a basic income is the most convincing way I have seen to tackle poverty.

There was a social justice commission appointed by John Smith, when he was leader of the Labour Party. I submitted evidence to it, but it came to nothing because he passed away.

I do not have any more time, but the whole idea of a basic income, paid to women on the electoral register, is something that we should explore seriously to see whether it works.

Universal Credit

Lord Desai Excerpts

Thursday 9th September 2021 Lords Chamber

[Lord Desai (Non-Afl)]

My Lords, it is almost a universal law of poverty studies—I used to do that 40 years ago—that any level of payment at which the Government of the day fix as being necessary is 15% short of what is really needed. Peter Townsend, a great economist carried out a study way back in the 1970s in which he was able to show that what we then had by way of supplementary benefits was 15% to 20% short.

When the £20 extra was given in the pandemic, the Government just fixed the existing allowance to what it should always have been. One of the things that happens when you puts your name down to speak is that people write letters. The actors’ union, Equity, has written to me. Actors are peculiar people because even in normal circumstances they have a precarious career. They never know when they will get a role, especially in the pandemic because of the restrictions on large gatherings. Even now, when the theatre and film industries are reviving, the situation is always peculiar. Even when one is employed, one is insecure and inadequately compensated. For them, saying that the economy has recovered and wages are rising is not good enough. There is a large class of such jobs; even when one has a job, one is not actually secure.

For those people, £20 is a lot of money. Two-thirds of actors are in the position whereby under universal credit they are insecure in terms of having an adequate amount of money. I therefore urge the Government to extend their hand—I know things are hard—and perhaps do what the noble Baroness, Lady Fookes, said. If they have to do it, please do it slowly. Break it down into stages and try to see from the data where it will hurt most and do something. Please do not do it suddenly. The best of all possible worlds would be to make the extra £20 permanent.

Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2021

Lord Desai Excerpts

Wednesday 10th February 2021 Grand Committee

[Lord Desai (Non-Afl)]

My Lords, I declare an interest as the chairman of a company set up by a private company to pay compensation for asbestos-related problems. This is all very familiar territory. I will make only a small point because everybody else has said some good stuff.

I wonder how this compensation compares to legal decisions against private companies sued for asbestosis. I have been doing this compensation thing for about 15 years. It was on my suggestion that the company was set up by a big construction company that made asbestos. I have been following the numbers. At some stage, it might be useful to look at the legal decisions made by the courts—noble Lords will know that there have been changes to Scottish decisions and so on—which would enlighten us in revising our regulations. I just want to put that suggestion forward. If the Minister wants, I can get the data from our company, which was set up under Law Debenture. That is my suggestion.

Universal Credit

Lord Desai Excerpts

Tuesday 2nd June 2020 Lords Chamber

[Baroness Stedman-Scott]

I am happy to take that point back to the department and will write to the noble Baroness in due course.

[Lord Desai (Lab)]

Given that the Chancellor has shown flexibility in designing his deal for the unemployed, will the Government consider suspending, at least temporarily, all the cuts which people on universal credit have had to suffer and which, in any case, should have been removed? Will they suspend them for, say, another 18 months?

[Baroness Stedman-Scott]

I do not wish to be negative in any way but I have no knowledge of the Government considering that. Therefore, I am unable to say more than I have already said.

Poverty

Lord Desai Excerpts

Thursday 14th July 2016 Lords Chamber

[Lord Desai (Lab)]

My Lords, it is a privilege and an honour to follow the noble Baroness, who has done so much for digital literacy in this country. I entirely agree with her last suggestion that people in the charity field should improve their digital skills. The Charity Commission should also improve its website. I have been there and it is a nightmare.

The noble Lord, Lord Bird, started by saying that poverty is a complex issue. He has done a great deal about it; I have done nothing similar but I did a great deal of measuring of poverty when I was an active economist.

It is striking that when we started thinking about poverty, we thought first in terms of nutrition—do people have enough money to buy enough food for subsistence?—and all the measurements started in terms of calories. When Charles Booth was wandering around the streets of east London, he spotted poverty when he saw children playing truant from school. He put his emphasis on what it was that made those children truant. He was looking at a new-generation problem, and it turned out that their parents did not have enough money to pay the fees for primary school education because, despite England being a rich country in those halcyon Victorian days, we did not have free primary education.

Starting from there, what we have heard in the debate is that poverty is a complex issue because lots of different things are mixed up with it. At bottom, it is about a lack of spendable income. Money in your hand can solve a lot of problems. Around 40 years ago I was doing some work in connection with Peter Townsend’s pioneering efforts to measure poverty. He pointed out that national insurance, or whatever income supplement there was at the time, was inadequate and should have been 15% higher. I think that a universal law for measuring poverty is that the poverty level is always 15% higher than whatever the Government pay. We know that Governments are always slightly meaner than they need to be.

We also have problems around aspirations, problems around disability and the problems faced by carers, whose lives are blighted because they do not have enough money to have any kind of life outside caring. We need to view poverty as a multidimensional issue which Professor Amartya Sen—as many people will be aware—in the course of his lifelong work explained in terms of the notion of capabilities. We would like people to be capable of many things throughout their life, whether that is good health, activity, the pursuit of knowledge or the pursuit of happiness, whatever it might be. In a sense, the poor are those who do not achieve many of the capabilities that should be available to them.

We have spent too much time using a false measurement of poverty, which was established by the European Union; that is, 60% of median income. I think that is the silliest thing I have seen in my life. I know of no income distribution in any country where the distribution of income is such that no one is under 60% of median income. There always will be people living at that level. It depends on how high the median income is. Now that we have Brexited, I hope that one of the few things the Government could do is set up a proper measurement of poverty that really accounts for how many poor people there are, how many poor children, and how many different ways people are poor, and whether it due to dependence, disability, a lack of digital skills, inadequate housing and so on.

We must recognise that this is a complex problem that requires a suitably rational allocation of money. Of course money is not plentiful; it is always scarce, so we have to be careful about how it is allocated. We must also look beyond current poverty to the lifetime chances of people in poverty. The investment required in children’s health and education is possibly one of the highest-paying that could be made in removing poverty. Tackling poverty is a complex and multifaceted task. I am sure that the Minister will tell us in his reply how universal credit will take care of most problems. I am sure that it will, but I repeat my fundamental law: add 15% to whatever you were going to give in universal credit, and your problems might then be solved.

Let me say lastly that when we look at poverty in the UK, we must not forget that the real poverty is elsewhere. We must not slacken our efforts to fight poverty around the world as well.