Welfare Benefits Up-rating Bill

Debate between Lord McKenzie of Luton and Lord Forsyth of Drumlean

Tuesday 19th March 2013 Lords Chamber

[Lord McKenzie of Luton]

My Lords, of course we are aware of what is going on in Europe, and I shall come on to issues of borrowing in a moment. We are talking here about an amount that is less than 0.1% of total government expenditure. The noble Lord cannot seriously be arguing that taking our position rather than that of the Government would bring the whole edifice crashing down. That simply does not reflect reality.

The problem that the Government have is that because they have failed to deliver growth in the economy there is a real risk—this is what is happening—that their austerity programme is making debt worse. This was again a point made in a very powerful article last week in the FT.

We have heard a great deal about the Labour Government’s record. When the Labour Government left office the economy was growing again and it was the austerity measures which choked off that growth. As to the Labour Government’s record on debt, before the international crisis hit, our debt levels were the second lowest in the G7, lower than when we came into office in 1997, I believe.

[Lord Forsyth of Drumlean]

I am following the noble Lord’s argument very carefully. If he is saying that we can get growth again by spending money uprating benefits in line with inflation, why will he not therefore make the commitment that a Labour Government would do that?

[Lord McKenzie of Luton]

My Lords, I make the commitment that we should review on the usual basis at each uprating period. No Government or Opposition immediately prior to a general election are going to pre-empt the programme they would have. The noble Lord knows that full well. He is making a silly political point.

There is a real risk that by cutting back you make the debt situation worse. It depends upon the multiplier. There have been some recent studies which suggest that it is made worse because the multiplier effect would mean that if you did not cut back you could create growth greater than the saving you are seeking to make. We shall hear from the Chancellor tomorrow about his view on borrowing for capital spend, for example. The relative merits of that depend upon the multiplier effect.

Ultimately, the argument in favour of the Government’s Bill as it stands is that it is locking in an unknown. You cannot know in year two or indeed the next year what the rate of inflation will be and you cannot know, therefore, the extent of the cut you are visiting on the poorest people in our country. That is what we object to in this Bill.

We could go on for ever in an economic debate, but I think it is time to test the opinion of the House.

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[Lord Forsyth of Drumlean]

I am happy to give way to him if he wants to explain where the money would come from, but I suspect not. A large part of his flock of the clergy will be recipients of benefits because of the wages that they are paid by the Church of England. Everyone is in the same boat here. The noble Baroness, Lady Sherlock, argues that somehow it is possible to find money which we have not got and that she is proud to support the amendment because of the reduction in the top rate of tax paid by those who she describes as millionaires. I remind her that those people are paying 5% more in tax than they did under her Government. I also remind her that the effect of cutting those high rates of tax has been to increase revenue and therefore to make it possible to do more in that respect.

Surely, by now, we have learnt that lesson. It is a cheap political argument to say that it is possible to create money out of thin air and that this Government want to protect the rich at the expense of the poor. If we want to help the poor, we have to get the economy growing again. The noble Baroness says that the economy is not growing because of this Government. The economy is not growing because of the burden of debt which she and her fellow members of the Labour Party ran up.

[Lord McKenzie of Luton]

The noble Lord keeps going on about debt. Is it not right that, because of the failures of the noble Lord’s Government, the lack of growth has meant that borrowing is now about £200 billion more than they planned when they came into being?

[Lord Forsyth of Drumlean]

I am utterly amazed by the noble Lord. He is now criticising us for spending £200 billion more than we planned, when part of that money is being used to provide the 1% uplift in benefits. Talk about wanting to have it both ways. On the one hand, he is criticising the Government for not borrowing enough, but now he is criticising the Government for borrowing more than we planned. The reason why we are having to borrow more than we planned is because of all the commitments made by the previous Government without a clue as to how they would fund them. That includes commitments on welfare. Welfare spending accounts for £1 in every £4 that the Government spend.

On the basis of the noble Lord’s criticism that we are spending £200 billion more, that would mean that £50 billion is going on welfare. In all the time that I have been involved in both Houses of Parliament, I have never seen a more irresponsible Opposition. It is not good enough for the right reverend Prelate to come to tell us that we need to do more to help working families with young children without explaining from where the money is to come or addressing the main problem.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, let me make it clear that we support each of these amendments. The request in the amendment in the name of the noble Baronesses, Lady Morgan of Drefelin and Lady Masham of Ilton, that there should be a review seems modest and straightforward. If the Government should seek to resist that, or a reasonable and clear alternative, I would be amazed.

The case is the same with the amendment of the noble Lord, Lord Kirkwood. As I understand the proposition, he is saying that should in any year the current expectations of inflation be in excess of 3%, which we currently expect to be the case, the 1% automatic uprating would not apply and there has to be an annual assessment, as happens at the moment. That assessment might lead to a 1% uprating, or to some other form of uprating, but there would not be the automatic application of 1%. Who knows what will happen to inflation? I do not predict that there will be a surge in inflation but, if there were to be, is any level of real cut in the standard of living of poor people acceptable to the Government? Is that what they are saying? They would be if they rejected this amendment.

[Lord Forsyth of Drumlean]

Would the noble Lord apply the same principle to pay in the public sector?

[Lord McKenzie of Luton]

We are talking about specific provisions in the Bill about the uprating of benefits. The noble Lord has worked quite hard to differentiate himself from the noble Lord, Lord Kirkwood, and his amendments. The suggestion that somehow having this provision in the Bill will fuel wage inflation across the land, fuel expectations up and down the country and bring the economy to a halt is, frankly, frivolous and a nonsense. The noble Lord knows that full well. He is an experienced parliamentarian and an able debater, but I do not believe that he did himself justice in the way he sought to pick away at the noble Lord’s amendment.

[Lord Forsyth of Drumlean]

I was asking the noble Lord a straightforward question. He is enunciating the principle that if inflation were at 3% or more, it would be necessary to abandon a position that held the increase in benefits to 1%. I am simply saying that if that is the Opposition’s view, is it also their view in respect of public sector pay? If inflation turned out to be much higher, would the same apply to people working in the public sector? If not, why not?

[Lord McKenzie of Luton]

My Lords, we are debating a different Bill. If the noble Lord wants to debate a proposition about public sector pay, let us have some propositions and we can consider that. The noble Lord knows full well that he is trying to lead the Opposition in a particular direction.

I come back to the point that the amendment of the noble Lord, Lord Kirkwood, is very straightforward. It just says that an automatic 1% uprating would not apply automatically if inflation reached a certain level. That seems entirely unobjectionable and I cannot see why the Government cannot accept it. If the Government do not accept it, they have to say what level of inflation, what level of real decrease in people’s circumstances, they would find acceptable, because that would be the consequence of rejecting the amendment. This is a very modest proposition. I really am surprised at the trouble that the Government are having with accepting it. I would hope at least that the noble Lord’s colleagues would stick with him on this issue as the arguments that we have heard against it are quite spurious.

Welfare Benefits Up-rating Bill

Debate between Lord McKenzie of Luton and Lord Forsyth of Drumlean

Monday 25th February 2013 Lords Chamber

[Lord Forsyth of Drumlean]

I am most grateful to the noble Lord. I am a bit puzzled because he said in answer to my noble friend Lord Bates that we were discussing the policies of this Government, not the last one. He is a little selective. However, given what he has described—an economy which is not growing at all—how on earth does he expect to fund the increase in benefits that he says he is in favour of? That is the crux of the matter. It is not about where we would like to be or how the world might be different, the fact is that the economy is not growing. If the economy is not growing, how is it possible to expand the welfare budget?

[Lord McKenzie of Luton]

I was talking about the last Labour Government in response to points that the noble Lord himself made earlier on. On growth, I would outline that there is one particular proposal that we in the Labour Party have been working on—the long-term jobs guarantee, and we have explained how it could be funded by, yes, restricting tax relief for the wealthiest in terms of pension contributions. It would get people into work, get them spending, and take them off benefits and welfare support. That is the way to do it. Perhaps I can turn this back to the noble Lord. The approach the Government have undertaken has simply failed to deliver growth; it is not happening. Everyone knows that and it does not need me to expound on it. The Government have failed to deliver.

It is because of that that we are challenging this burden of a real-terms cut. The noble Lord said that it is not a cut, but of course it is a cut in real terms because it is a cut in people’s living standards. It is also a cut that we do not know the magnitude of over the life of this Bill, which is why we object to it so strongly. We do not know what the rate of inflation is going to be in two years’ time. We can speculate on the impact of the downgrading of our credit rating, but getting growth in the economy and thus providing more employment is certainly more likely to impact in a positive way. That is what we would argue for and plan for. It is making the people at the bottom end of the income scale pay for the failure of this Government that we object to. This Bill is the wrong way to deal with benefits uprating. There is a tried and tested way that has operated for many years which is open to the Government rather than locking it down and forcing people into a real-terms cut in their living standards.

I suspect that we will have another round of this argument on Report because it is the fundamental part of our objection to the Bill, but in the mean time, I beg leave to withdraw the amendment.