Social Security Benefits Up-rating Order 2022

Debate between Lord Shipley and Baroness Sherlock

Wednesday 9th March 2022 Grand Committee

[Lord Shipley (LD)]

My Lords, I thank the Minister for introducing this uprating order. The problem is that the combination of rising inflation and tax rises is creating a cost-of-living crisis that will affect practically every household in the UK but will be especially difficult for those on low incomes who make use of welfare payments.

Before the crisis in Ukraine, the Resolution Foundation reported that an average family will see household budgets reduced by £1,200 a year through a combination of soaring energy prices, the freezing of the income tax personal allowance and the rises in national insurance and council tax. Those on low incomes will find it hardest to make ends meet, because the major benefits are due to go up in line with a lagged measure of inflation. The September CPI rate had it at 3.1%, whereas the Bank of England expects inflation to peak at 7.25% in April and to average around 6.2% in the course of 2022—and all that is before the impact of the crisis in Ukraine is taken into account. Many commentators are forecasting an inflation rate for the UK of more than 10% later this year.

The Government really must not allow a situation to develop that means a deep cut in benefits year on year for people less able to withstand the impact of the rising cost of living. For example, those who must use meters to pay for their gas and electricity will be put under even greater financial strain because of their high cost compared with other methods of payment.

Even before the impact of the Ukraine crisis on the cost of living, this policy would have led to a £290 real fall in benefit income year on year for the 10 million households in receipt of these benefits. That would be an unacceptable cut in the incomes of millions of people who are already among the most vulnerable. The Spring Statement later this month provides an opportunity for the Chancellor to do something about this crisis, which was unnecessarily deepened by the removal of the £20 per week boost to universal credit.

Paragraph 12.1 of the Explanatory Memorandum on impact is hopelessly out of date. The assertion that the

“impact on business, charities or voluntary bodies is negligible”

is flawed. The impact will be very great, particularly on charities and voluntary bodies, which will see a huge increase in demand for their help as prices rise steeply and real incomes decline for millions of households.

I hope that the Minister will agree that this uprating order is out of date and that the Spring Statement needs to bring proper solutions to the deepening crisis in our cost of living and its impact on those with low incomes.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for introducing these orders and all noble Lords who have spoken. I agree with my noble friend Lord Jones that it would have been preferable had the uprating order been taken in the Chamber. Many of the orders that we deal with are technical; this one affects the incomes of some 20 million people at a time when we have never seen a cost-of-living crisis like this. Had it been taken in the Chamber, we perhaps would not have had a regret Motion, but here we are.

I thank my noble friend for mentioning my late and much-lamented noble friend Lord McKenzie. Every time we gather here, we miss him very much. I just wanted to read his name into the record.

First, a word on the guaranteed minimum pensions order, which is rather more technical. I have raised the question of equalisation in most previous years, but we have had a new development. A new Private Member’s Bill has just arrived in the Lords from the other place that aims to address the legal uncertainty that the current legislative situation can pose when a pension scheme tries to adopt a process for addressing GMP equalisation. The Government smiled on it at the other end. At Second Reading in the Commons, the Pensions Minister, Guy Opperman, accepted that what the Bill does is key because it

“gives the Government the ability to set out in regulations the details of how survivor benefits will work for surviving spouses or civil partners of people with guaranteed minimum pensions.”

He also made the point that the Bill

“gives the Government the ability to set out in regulations details about who must consent to the conversion of guaranteed minimum benefits.”—[Official Report, Commons, 26/11/21; col. 627.]

The Minister confirmed, at col. 628, that the Government backed the Bill. However, when the Commons got to Third Reading on 25 February—a long gap—he said:

“The reality is that there is no real way for my hon. Friend’s Bill to get through this House and the House of Lords in the time allowed”.—[Official Report, Commons, 25/2/22; col. 659.]


The Government have accepted that there are problems to be addressed on the matter of GMP equalisation, so can the Minister assure the Committee that if that Private Member’s Bill fails to get through, the Government will none the less speedily moved to address the outstanding issues?

I turn to the Social Security Benefits Up-rating Order, which we gather to debate every year, except of course during the years of shame, when the Government refused to update social security benefits as they should have done. I cannot remember a year when the context was so worrying for so many people. The cost of living is rising so fast that even those on middle incomes are struggling and it is a catastrophe for those on lower incomes. People are genuinely frightened about how they are going to manage. Demand for help from food banks is already skyrocketing, as it is for financial advice and debt support. The noble Lord, Lord Shipley, made a good point that the Explanatory Memorandum had not taken account of the impact on those organisations.

Local Government Finance Bill

Debate between Lord Shipley and Baroness Sherlock

Tuesday 10th July 2012 Grand Committee

[Baroness Sherlock]

But I hope that the letter will arrive any day now, despite the fact that I have never served as a councillor.

I do not support the principle of the localisation of council tax benefit—as my earlier speech may have made clear. Even if I did, under these terms I would not be happy about it. I would think that I had been sold a pup. One reason for differing views within local authorities—I hope that the Minister will help me understand this better—is that potentially there will be significant regional differences in the impact of this policy.

I will refer again to the report on council tax benefit of the Institute for Fiscal Studies. The IFS note that the pain of this cut will fall disproportionately on poorer areas. It states that in cash terms, the cut in funding will be larger in areas where council tax benefit spending is highest—the more deprived areas of Britain. The report goes on to point out that almost 90% of local authorities face a funding cut of between £10 and £25 per dwelling. It would seem that the risks described by other noble Lords are all downside. That must be of serious concern to local authorities. What does the Minister envisage happening? Will the Government be able to take account of the different positions?

I will give an example. The OBR forecasts a reduction in the number of people claiming passported benefits as a result of the combined effect of presumed economic growth and welfare reform—an increase, therefore, in the number of low earners. The effect on CTB would be to see fewer people claiming maximum council tax benefit or its successor, and more people claiming partial council tax benefit as a result of moving into work. Has any work been done by the OBR to see how even those cost assumptions would be? The most recent quarterly Northern Economic Summary from IPPR North showed two things that spring to mind. First, the number of young people not in education, employment or training is highest in the north of England, at 19%, compared to an average of 16% in England. Given the trends in youth unemployment, that could see more people moving into the unemployed category rather than out of it.

Secondly, the report found that the amount of time people are spending on jobseeker’s allowance is increasing. Almost half—47%—of those claiming JSA in the north have been doing so for more than six months. The average time people have been claiming benefits is more than double what it was during the previous 2008-09 recession. Here I am trying to tease out an understanding of whether the assumptions underlying the costings of the impact on local authorities, and the extent to which they have been future-proofed, have taken account of north-south divides and differences, and what assumptions have been made about changing patterns.

Finally—I will come back to this when we debate later amendments—the Minister will be aware that 85% of council tax benefit at the moment goes to the lower-income half of households, and that almost half goes to the lowest-income quintile. Inevitably, any cuts are bound to be borne by the poorest households. Given the combination of poor households and poor areas being hit, is the Minister not concerned about what will happen to the economies of those areas? I know from talking to at least one northern authority that such a significant proportion of its households are in receipt of a variety of means-tested benefits that cuts in the Welfare Reform Bill alone will, it is anticipated, produce a reduction of demand in the economy as a whole. Have the Government modelled any of those impacts on a regional basis?

[Lord Shipley]

My Lords, first, I do not share the concern of the noble Baroness, Lady Hollis, about the capabilities of local government and councillors. Councillors are perfectly able to produce fair and equitable council tax support schemes. However, one problem we have is that timescales are driving the publication of draft schemes very quickly. Inevitably, draft schemes that go out to consultation will be different. After all, lots of things that local government does are different. Council tax rates are different. It would not be surprising, given differences between local authority areas that there may be differences in council tax support schemes. However, timescales are likely to prove too tight. I think that there will be a problem over equalities impact assessments and the timescales that they require. I would prefer a start date of April 2014, but we will come to that in a moment.

The real issues remain financial support, the level of financial support going into those schemes, and the new burdens doctrine. Amendment 73A matters quite profoundly because we are having a debate about the 10% cut and how it should be applied, and I absolutely subscribe to the view that it cannot simply be loaded on to the working poor. I would prefer it, if it is to be applied, to be spread across council tax payers generally.

Secondly, it has become clear to me that 10% is at the low end of what the reality will be. It will be significantly higher than that and, for the reasons that my noble friend Lord Tope outlined, demand is likely to rise and the change of title from “council tax benefit” to “council tax support” is likely to produce more people applying for it. Economic conditions remain difficult and will continue being difficult for the next two to three years; therefore, more people are likely to be applying.

Thirdly, the fixed-grant system that the Government are likely to introduce seems dubious in terms of who will actually decide on which data the government estimates are based. I fear that the estimates of demand over the first two years of the scheme will prove to be understatement. Therefore, the Government should manage the risk. In the context of 28% front-loaded cuts in the current and previous financial years, which have had a great impact on councils’ ability to meet all their obligations, there is a major principle at stake. If we have a new burdens doctrine, it ought to be applied; otherwise there is no point in the Government having a new burdens doctrine. Given the sum of money involved—£500 million, 10% of the £5 billion annual commitment to council tax benefit—this is an acid test of whether the new burdens doctrine has a future.

I sincerely hope that the Government will look again at this whole issue. I have subscribed, in my role as vice president of the Local Government Association, to the view that if you are going to localise—we are trying to devolve and localise—it is entirely appropriate for local government to take responsibility for this. They are the ones who set council tax. Therefore, they are the ones who are capable and should be responsible for setting the level of council tax support, but they have to be able to do it in the context of knowing that that cash will be available and the risk will be managed against rising demand by a Government that is supportive of them.