Welfare Benefits Up-rating Bill

Debate between Lord King of Bridgwater and Lord Bishop of Leicester

Tuesday 19th March 2013 Lords Chamber

[Lord King of Bridgwater]

My Lords, I agree with a particular point that my noble friend has made and would like to add that the Bill has come forward on an especially interesting day. I refer to Cyprus. The warning is on the packet. There has been a certain amount of calm around, as though we had come through all our problems and were moving steadily forward into calm waters, and as though the eurozone was secure. The financial markets, with the euro increasing in value, may have had that illusion. However, it has all been blown away. I have not heard any recent news; I do not know whether there has been a decision yet about what Cyprus will do. We should remember that, at the moment, there is a very real risk. Clearly, people have been caught in Cyprus. If Portugal, Spain and Italy decide that this will be the European practice, people there may find that their savings and funds in their banks are not as secure as they had been assured they were. After all, everyone thought that there was a clear undertaking that below a certain level, around €100,000, their own bank accounts were at no risk. If that changes, we face a very serious situation.

There is complacency around, as I picked up from an article today by the chief economist of HSBC, as though with just a bit of going forward and a bit more luck we will be back on the old growth train and in the business that we were in before. What has been exposed is that over many years we have been living on borrowed money, on a construction boom in the financial services area and on public expenditure. Now that those have to be constrained, suddenly people are turning around and saying, “How, as a country, are we going to earn our living in future?”. We are finding that we have slipped in the leagues. In one of our most successful areas of overseas earnings, defence expenditure, we have now slipped a place and China has overtaken us. China is now taking away a number of the markets that our manufacturers used to serve extremely well. It is said that we hope to sell Typhoon to Oman, the UAE and one or two other countries, but the point has been made that its successor will be made in America, and that will be the end of one of our most successful overseas earnings. When you see where we earn our living in the world, we are not in a happy place.

That is why I very much agree with my noble friend Lord Forsyth. All of us in this House would like to say, “Let’s increase benefits. Let’s deal with all the hard cases and see how we can give people more money”. Look at the situation in Ireland, where benefits have been cut by, I think, 10%. There has been talk of cuts today but in fact we are taking about how big an increase the Government should impose, not an absolute cut in the amount. Other countries in Europe are cutting by 6%, 10% or 12% the actual amount that people are getting—what hardship that must represent.

This is not a pleasant speech to make. It is much more popular to say, “Let’s have some more benefit”. I say this against a background of a new situation that has suddenly come upon us: if this House—the unelected House of Lords—decides today to cut right through one of the decisions made as part of the prudent financial planning to find our way out of the problems that we are in, and if that triggers a loss of credibility in our national approach and the Government’s approach to tackling those serious problems, it will really be a problem for people on benefits if there is a run and we then find that the low interest rates that the Government have enjoyed for their substantial borrowing no longer apply.

I agree with my noble friend on this point. There is an illusion that somehow we are reducing our debt. We are not; we are reducing the rate at which the debt is increasing. One of the blessings that we have had is that at least we have been able to borrow at an extremely low rate because we had some credibility. If the House of Lords today kicks away one of the planks that help to shore up the credibility of a Government who have a plan to try to deal with our problems, and if those international interest rates are then demanded of the Government and the country when we try to borrow money, the problems that we will incur for all our people could be vastly greater. Look at the tragedies that exist now, such as the unemployment rates in Spain, which is 50% in certain age groups.

We have held things together so that we have a lower unemployment rate than the eurozone countries. There is so much that we have to hang on to. This is a dangerous time. I say seriously to your Lordships: do not tamper at this stage with this very difficult situation, at a time when we are least able to face it and when it could quite seriously endanger our whole economic structure. I do not think that people understand what a mess the world is in at present. There is a huge amount of complacency around. We are not by any means out of the woods yet, and it is our duty to ensure that we hold firm.

I intend to support my right honourable friend Iain Duncan Smith, whose commitment to this area I think we all admire enormously. He is doing the best that he can. He is agreeing to an increase in benefits for the most deserving people in this country, but not as large an increase as they might have hoped to see. That is the only realistic approach that can be taken at this time.

[The Lord Bishop of Leicester]

My Lords, I have lent my name in support of this amendment, and I am happy to speak in support of it.

This debate is about who should bear the greatest weight of the burden imposed by the Government’s need to reduce debt. I hope that the noble Lords, Lord King and Lord Forsyth, might consider accepting an invitation from me to come to the city of Leicester to explain to our local Child Poverty Commission why it is in the interests of children in poverty that they should become poorer at the moment because that will serve the national interest regarding debt, and that this House is working in their interests by reducing the uprating of their income to 1%, however much inflation rises. They might accept an invitation to explain that also to the unemployed and to voluntary associations in Leicester, which anticipate a tsunami of difficulties such as homelessness and dependence on food banks. They can come to listen to the response to this Bill from those who are dependent on benefits through no choice of their own, who can explain what that is like and how much harder it will get in the years ahead.

If the purpose of this Bill is to control welfare costs, this is not the right way to go about it. The key to reducing the benefit bill is to change the circumstances that lead many people to need benefits, such as the absence of job opportunities, too much short-term, low-paid work, the shortage of affordable housing, and expensive, patchy childcare. We should be focusing on those issues, not cutting benefits in real terms, which simply creates hardship without addressing the underlying issues.

This Bill is both unnecessary and ill conceived. It will harm the most vulnerable in our society and do nothing to promote work incentives. I have heard nothing at Second Reading, in Committee or today to make me change my view that this Bill ideologically shrinks the welfare state regardless of desperate need. Nor does it change my view that we are heading for a US-style welfare system that is dependent on food banks and hostels. We know that we can do better than this, we must do better than this, and we should amend the Bill.