Amendment of the Law

Debate between Alex Cunningham and Karen Buck

Thursday 20th March 2014 Commons Chamber

[Ms Karen Buck (Westminster North) (Lab)]

This is a budget that does little or, in many cases, nothing for the millions in the lowest income groups in this country. Unsurprisingly, the chief executive of the Joseph Rowntree Foundation has said:

“This is a Budget for the people who already have, not the people who need to benefit most from the return to growth.”

It is a lost opportunity to help the 13 million people on low incomes, who are unlikely to see any benefit from these measures. That assessment fits in with the analysis of the Institute for Fiscal Studies, which shows that more than 300,000 children will be pushed back into absolute poverty over the course of this Government and that, on present trends, 900,000 children will be returned to relative poverty by 2020. That will undo everything that the last Labour Government did to tackle poverty. The Budget sets a cap on overall social security spending while doing little or nothing to tackle the drivers of rising social security spending, especially among working people who are being squeezed by rising housing costs.

I want to talk about two policy areas that lie behind these failures. As we have heard, households have suffered the longest period of falling living standards and squeezed wages since the 1850s. We have had 50 consecutive months of a wage squeeze below inflation. I came into politics because I was driven by concerns about unemployment, and the growth in job numbers is undoubtedly good news, but it would be completely wrong to see the growth that has been achieved in recent months as an unalloyed success story. Among other things, one third of a million families are now working fewer hours than they want, with more people being forced into part-time employment. The latest job figures show 211,000 people entering self-employment, which represents a large proportion of the recent jobs growth. Self-employment is undoubtedly a good thing for many people, but one problem is that it is strongly associated with low pay. Low pay is part of the crisis that is underpinning the fall in living standards.

[Alex Cunningham]

My hon. Friend has quoted one organisation; let me quote another. Gillian Guy of Citizens Advice has said:

“The chancellor talked about making, doing and saving. This budget needs to work for those who are making do and can’t save”.

Are those the people that my hon. Friend is talking about?

[Ms Buck]

I am talking about the 13 million people on very low incomes, many of whom have incomes that are so low that they will not benefit from the change in the income tax threshold, welcome though that is. It will do nothing for the people whose earnings are already below it.

There are 5 million workers on low pay in the UK—one in five of the work force. That is one of the highest proportions in the developed world. The academic consensus shows clearly that the minimum wage, although fiercely and wrongly opposed by the Conservatives, boosted earnings without causing unemployment. It has all but abolished extreme low pay, but in recent years there has been an increasing spike in the number of workers on the minimum wage. The proportion of workers on the minimum wage has grown by nearly 60% in the past five years. Rather than being part of a continuous process of uprating the pay of those on low incomes, it is now becoming the going rate in many sectors. That is one of the causes of falling living standards for millions of people and of increased social security spending.

This is a particular challenge for London. Londoners did not benefit as much from the introduction of the national minimum wage as did people in many other parts of the country, because of the slightly higher wages. The trend towards more workers earning at or just above the level of the minimum wage has exacerbated the crisis in living standards in London.

As well as low pay, another challenge—and another driver of social security spending—is housing costs. It was interesting to see that yesterday’s report from the Office for Budget Responsibility stated:

“The largest driver of the rise in spending on housing benefit has been caseload growth in the private rented sector…The rising proportion of the renting population claiming housing benefit may be related to the weakness of average wage growth…almost all the recent rise in the private-rented sector housing benefit caseload has been accounted for by people in employment.”

The relationship between low pay—and a failure to uprate pay over a number of years—and rising housing costs is driving more and more people, particularly working people, into dependency on housing benefit.

None of us wants to see expenditure on keeping people unemployed or lining the pockets of private landlords by subsidising higher rents. We all want to see a fall in social security spending on these things, but while pay is low, while average living standards are not rising and while rents are rising, we are going to see more costs and expenditure in that area. But there is a solution. The Chancellor promised a rise in the national minimum wage to £7, but we saw a 17p increase. Many employers across the country could pay more than the national minimum wage and they should be encouraged to do so.

We will not see a cut in social security spending unless and until we reverse the calamitous fall in the building of social housing, which is the only safe and secure means of ensuring that low-income people have low housing costs. Combine those two things and we will see a major shift away from the social security spending, which we would like to see fall, into a rise in living standards for millions of people. This Budget has not been able to provide that.