Welfare Benefits Up-rating Bill

Debate between Alan Reid and Marcus Jones

Monday 21st January 2013 Commons Chamber

[Mr Reid]

Well, we did not hear any policy from the hon. Lady. I can only assume that she still follows the previous Government’s borrow-and-spend policies.

I support amendment 10, rather than the Labour party’s “empty space” policy. Amendment 10 would have benefits increase in line with the increase in average earnings.

The tax increases under this Government have quite rightly fallen most heavily on those with high incomes, who are paying a far higher proportion of their income in tax than under the previous Government—let us take, for example, the increase in capital gains tax. If there were a Liberal Democrat Government and not a coalition Government, the well-off would be paying far more tax—a mansion tax, for example. The Government have also helped people in low-paid jobs by increasing the personal allowance, which I hope will be raised to £10,000 before the end of this Parliament. The work done by the Minister of State, my hon. Friend the Member for Thornbury and Yate (Steve Webb) on universal credit will also help people on low incomes. Pensioners have also been protected from the cuts, because of the triple-lock guarantee, and my hon. Friend is introducing the new single-tier pension—another major achievement.

The group of people we are discussing this evening, whose incomes would be cut by clause 1, are those in receipt of working-age benefits, but not disability benefits. Coalition is all about negotiations and reaching compromises. It is important to note what would be happening to welfare benefits if we had a Conservative Government and not a coalition. We know from statements in the public domain that a Conservative Government would propose a benefits freeze, not a 1% increase, and that the cuts would apply to all benefits, not just those listed this evening. Such a freeze would last for several years—not just three years, as under the coalition Government’s policy—and child benefit would be awarded only for the first two children in the household. These are all policies that a Conservative Government would introduce, but which the coalition is not. We also know, as was made evident earlier—certainly from the cheers on the Conservative Benches behind me—that a Conservative Government would reduce the top rate of tax to 40%, not leave it at 45%. Liberal Democrats in government have achieved a great deal in lessening the impact on welfare benefits uprating, compared with a purely Conservative Government.

However, my main concern about the measures in the Bill—this echoes concerns raised by the right hon. Member for Wokingham (Mr Redwood) and others who have spoken—is that committing the country to a 1% increase for three years now, before we know what inflation will be when the increase comes into effect, could end up being harmful to people on low incomes, because we have absolutely no idea how much world fuel and food prices will rise in those three years. I recognise the strength of the argument that benefits for people out of work should not rise at a higher rate than the earnings of those in work, which is why amendment 10 proposes to increase such benefits by the same percentage as the rise in average earnings over the previous year. Amendment 10 would be a fair compromise between the need to cut the deficit and the need to provide a safety net for those dependent on welfare benefits.

There has been a lot of talk about scroungers and curtains being drawn. I entirely reject such rhetoric. It is important to note that strong sanctions are available for those receiving jobseeker’s allowance. For example, people can lose their jobseeker’s allowance for up to three years if they do not apply for a job that their adviser tells them about, do not accept a suitable job offer, leave a job voluntarily, lose their job because of misconduct or do not take part in a compulsory Work programme. Therefore, sanctions are indeed available.

I represent a very rural constituency. It is important to point out that prices on islands or remote parts of the mainland are higher than in most of the rest of the country, and that people on jobseeker’s allowance in remote areas who are finding it difficult to get a job in the area in which they live are on very low incomes. We should not commit ourselves to only a 1% increase for the next three years, because we do not know what will happen to prices during that time.

[Mr Marcus Jones]

Would my hon. Friend acknowledge that if we had applied the logic that he is now advocating over the last five or six years and pegged benefits to wage rate inflation, the people he is talking about—the people he is trying to help—would be far worse off?

[Mr Reid]

A lot depends on where we start. If we are talking about rises matching prices or wages, it all depends on the starting point—if we pick a different starting point, we get a different result.

I was talking about the next three years. We know what the rise in average earnings was last year, so obviously we know what the rise in benefits would be in 2013-14. We do not know what it would be in 2014-15 or 2015-16, but setting the increase to the rise in average earnings, rather than a fixed rate of 1%, would mean that as the economy gradually grew, the level of growth in the economy would be paid to those on benefits, as well as those in work. That is a better approach than having a fixed rate of 1% for three years.

No Government have control over world food and energy prices. At Prime Minister’s questions last week I raised this potential problem when I asked the Prime Minister what contingency plans the Government had for benefit increases, should food and energy prices rise by more than expected. He answered by pointing to the good work being done by my right hon. Friend the Secretary of State for Energy and Climate Change to ensure that energy companies put people on the lowest available tariffs. That will indeed be a big help to people on low incomes, but if energy prices rise by more than expected, the lowest tariff will rise by more than expected too. After I heard the Prime Minister’s answer, I am afraid that I was left to form the conclusion that the Government have no contingency plans for a scenario in which prices rise by more than expected. I hope that when my hon. Friend the Minister replies to this debate, he will be able to reassure me on that point. I hope there is a plan B, in case world prices go up by more than expected.

Setting future increases to the increase in average earnings would address the legitimate argument that out-of-work benefits should not rise faster than earnings and would help to cut the deficit. For example, if the CPI figure were used for 2013-14, benefits would increase by 2.2%. If average earnings were used, they would increase by 1.6%, saving half the amount that a 1% increase would save. It is also important to point out that cutting public spending on its own will not eliminate the deficit. We need to grow the economy as well. All the economic research indicates that money put into the pockets of people on low incomes is far more likely to be spent straight away than it would be by those on higher incomes. Not increasing welfare benefits by the rate of inflation will have an impact on shops and other businesses, as well as the recipients themselves.

To sum up, linking benefit increases to average earnings is much fairer all round and avoids committing ourselves to a fixed figure unnecessarily far in advance. I hope that the Committee will support amendment 10, and I hope that you will allow it to be put to a vote, Mr Amess.

Equitable Life (Payments) Bill

Debate between Alan Reid and Marcus Jones

Wednesday 10th November 2010 Commons Chamber

[Mr Alan Reid (Argyll and Bute) (LD)]

I start by putting firmly on the record my belief that the Government have implemented the parliamentary ombudsman’s report and have honoured the pledges made before the election. It was always part of the parliamentary ombudsman’s report that this would be a political decision for the Government to make, taking the public finances into account when they set the cap. The Government have set the cap at £1.5 billion. I wish it could have been more, and I hope that it will be possible to revisit this in future when the public finances are in a better state.

I have sympathy for amendment 1, but let me state my understanding of how it would work in practice. It does not alter the cap that has already been set, so if the pre-September 1992 with-profits annuitants were to be compensated to the same level as the post-September 1992 with-profits annuitants, there would be less for the latter group of people. If the cap remains the same, and the amendment does not alter the cap, giving more to some people would mean giving less to others. I ask the Financial Secretary and the hon. Member for Leeds North East (Mr Hamilton) who moved the amendment to comment on that when they respond.

I want to press the Government on why they have chosen the date of September 1992. As other hon. Members have said, the maladministration started in June 1991. Penrose found that when the Equitable Life Assurance Society’s board papers were sent to the Government Actuary’s Department on 11 June 1991, there was information in those papers showing that the society was not in a good position. Had the Government Actuary’s Department publicised that information at that time, investors would have been deterred from investing in the society. There is a strong argument for saying that the date should be not September 1992 but June 1991.

On 30 July 1992, in an internal briefing, the Government Actuary’s Department described the society as being one of the

“companies on whom we have been keeping a close watch for a number of years”

and said that Equitable Life remained a company “which caused serious concern”. There was evidence in July 1992—in fact, before July 1992—that the Government Actuary’s Department was aware that Equitable Life had problems. Surely that should have been made public and investors should have been deterred. In his response, will the Minister clarify why the date of September 1992 was chosen, because it certainly seems to me that an earlier date—say June 1991 or possibly even earlier—would have been more appropriate?

[Mr Marcus Jones (Nuneaton) (Con)]

I would like to speak mainly about the position of with-profits annuitants and the pledge that I and other Members of all parties made before the general election—that the Government should make fair and transparent payments to those who had suffered as a consequence of the debacle of Equitable Life. I am talking about 350 local people in my constituency who are part of the Equitable Members Action Group. Those 350 include people associated with many companies that were in the Equitable Life scheme. Many hundreds of other people are affected. For some, Equitable Life provided their only private pension to supplement their state pension provision.

I welcome the fact that for a number of my constituents, that pledge has been made good, and I understand that the trapped annuitants in the post-1992 cohort will receive 100% of their compensation. I am delighted about that. Needless to say, I am also very concerned for the pre-1992 Equitable Life investors for whom, it seems, there will be no compensation at all. That seems contrary to the recommendations of the parliamentary ombudsman, contrary to EMAG’s suggestions and contrary to the views of Sir John Chadwick, for whom not many Members have a great deal of time.

I understand that it is difficult to quantify the losses, but, if the Government have the will, the losses of the pre-1992 annuitants should be explored. The people to whom we made a pledge before the general election in May were not necessarily concerned whether they were pre-1992 annuitants or post-1992 annuitants. Their concern was as Equitable Life policyholders looking for justice.

If the Government and the Treasury have the will to deal with this situation, they should do so; if not, they should explain how I justify the position to constituents who have been wronged.

If the Government and the Treasury are prepared to look at compensating the pre-1992 annuitants, there has to be a health warning, because there is a law of unintended consequences, should we be stuck at the compensation figure of £1.5 billion. Many of my constituents who are post-1992 annuitants might be unaffected by any decision to include the pre-1992 annuitants.

Amendment 7 deals with that position and the relative losses. The Treasury should consider it, although I am concerned about whether it could be taken into account within the current comprehensive spending review or would need to be considered after the current CSR period expires.

I would like to ask the Minister several questions. First, will he look again at how to compensate the pre-1992 annuitants, and at how that might be quantified? Will he commit to working with his Treasury colleagues to take into account payments beyond the CSR period to enable the pre-1992 annuitants to be compensated without prejudicing the position of the post-1992 annuitants and that of Equitable Life policyholders generally?

I implore the Minister again—I did so in the last debate on this subject—to recognise that the Government’s decision over Equitable Life raises questions not only about the integrity of the current Government, but about the integrity of savings and investments for one’s retirement. I am well aware that many of my constituents do not have their own retirement provision. The Government should encourage people to provide for their retirement, but if we do not ensure that there is a safety net for people who have invested and done the right thing for their retirement, they will think that it is not worth putting themselves out by investing money for their retirements during their early years of work.

I ask the Minister to consider those points extremely carefully before any decisions are taken this afternoon.