Social Security and Pensions

Andy McDonald Excerpts

Monday 7th February 2022 Commons Chamber

[David Rutley]

No, I will make some progress. I am sure the hon. Gentleman will chunter later, and I will look forward to that.

Since the start of the pandemic, the Government have assisted the country, its people and its businesses with more than £400 billion in support. Since 2011, the Secretary of State has used the consumer prices index for the year to September as the measure for price inflation in her annual statutory review of benefit rates. The Bank of England forecasts that CPI will reach 7% in spring, before falling to 5.2% in quarter 1 next year and returning to a more historically normal level of 2.1% by the beginning of 2024. CPI will be the measure used in the Secretary of State’s application of the triple lock, which will mean that the new and basic state pensions increase by the highest of earnings growth in the year to May and July 2022, CPI in the year to September 2022 or 2.5%.

Using the same period for CPI each year—I think this is the point that the right hon. Member for Leicester South (Jonathan Ashworth) was making, and I am keen to get to his point—means that the peaks and troughs are evened out over time. Around half the time, CPI in the year to April is lower than it is in the year to the preceding September, and around half the time it is higher, so there is a smoothing effect. I understand the point that he makes.

[Andy McDonald (Middlesbrough) (Lab)]

The Minister is making an interesting point. He talks about peaks and troughs and smoothing, but inflation is going in only one direction. At the end of this process, will people who are dependent on benefits be worse off or better off? It looks to me as though they are going to have a tough time on top of an already tough time.

[David Rutley]

We recognise that these are challenging times, and that is why, as I said to the hon. Member for Strangford (Jim Shannon), the Chancellor set out last week what we are doing to support vulnerable people with the rising costs of energy. We are taking steps to recognise and lean into the peaks in the inflationary pressures that we are seeing not just in the UK, but globally. We recognise the impact that global increases in energy prices are having on household finances. As the Chancellor announced recently, from 1 April the energy price cap will rise from £1,277 to £1,971—an increase of almost £700 in energy bills for the average household. We are introducing crucial and timely measures to help with the increased costs, as part of a comprehensive package of support worth £9.1 billion in 2022-23.

--- Later in debate ---

[David Linden (Glasgow East) (SNP)]

It is a pleasure, as always, to follow the hon. Member for Waveney (Peter Aldous) who, unlike most of his colleagues, makes quite a thoughtful contribution that is perhaps just slightly more in touch with what is happening on the ground in our constituencies.

Not to diverge from that moment of conciliation, I too pay tribute to our work coaches, as the shadow Minister—the hon. Member for Westminster North (Ms Buck)—and the Minister did. I am looking forward to yet another visit to Shettleston jobcentre in my constituency—I actually used to have more jobcentres in my constituency, but the UK Government in their infinite wisdom decided to shut three out of four jobcentres in Glasgow a few years ago. Although I have massive ideological differences with the Department for Work and Pensions, I have nothing but respect for the work coaches at the jobcentres, who do a phenomenal job, albeit implementing policy from Whitehall with which I profoundly disagree.

If a chain is only as strong as its weakest link, it is fair to say that our social security safety net is our society’s weakest link. We are debating the annual uprating orders against the unique backdrop of an ever-worsening cost of living crisis, with the very poorest in our constituencies consistently left behind by a Tory Government who are not focused on doing their day job. The cost of living crisis comes on the back of universal credit being slashed by £20 a week, which was the single biggest cut to social security since the formation of the modern welfare state. Those of us who do not sit in Caxton House’s ivory towers can see that millions of our fellow citizens are facing real hardship right now. The British Government must urgently reverse their universal credit cut and instead introduce an emergency package to support families and boost incomes.

Our economy has not recovered to where it was pre pandemic, yet we have soaring inflation on a scale not seen for decades, which shows no sign of going away any time soon. Consumer prices were 5.4% higher in December 2021 than they were a year before—the highest inflation rate in almost 30 years. In mid-December the Bank of England forecast that the CPI inflation rate would remain at around 5% over winter, before rising to 6% in April 2022. However, based on last week’s forecasts from the Bank of England, we can now safely expect inflation to rise to over 7% in just a couple of months. The rise in CPI inflation coincides with the perfect storm of a significant rise in energy bills, by 54%, to an average of £1,971 from April. Then we have to add to the mix the Tories’ regressive and deeply unpopular national insurance hike, which will clobber the very youngest and the lowest earners in the country.

It is not just the Opposition, and indeed the SNP, that are raising the alarm about the cost of living crisis. New analysis from Citizens Advice Scotland found that an estimated 640,000 people—around one and seven—are finding their household energy bills unaffordable due to low incomes, with the figure set to increase due to the energy price hike. Yes, I acknowledge that the autumn Budget made some modest adjustments to the taper rate for universal credit, but only for those who are in work. For context, that actually impacts only four in every 10 universal credit claimants.

Analysis from the House of Commons Library shows that over 340,000 households in Scotland are directly affected by the £20 a week cut to universal credit, with incomes slashed by £1,040 per year. To help the Minister understand, that is £1,040 a year less for people to spend in our communities on gas, electricity and the weekly food shop. I can tell the Minister that my low-income constituents in Parkhead, as I suspect is also the case for his in Macclesfield, will not be finding that extra £1,000 in their savings, because many of our constituents live month to month and hand to mouth. Instead, the Minister’s constituents, like mine, will be going without food or heat just to try to keep their heads above water this winter. That is why charities such as the respected Trussell Trust, whose food banks are in increased demand, want the Government to reinstate that £20 cut from universal credit. They want to stop families “spiralling into destitution” with steeply rising costs for heating and food.

Besides reversing cuts to universal credit, the British Government must urgently deliver a financial package to help families by delivering a low-income energy payment, matching the Scottish child payment UK-wide, introducing a real living wage and increasing statutory sick pay in line with a real living wage.

[Andy McDonald]

The hon. Gentleman is making an excellent contribution. Universal credit was uplifted in response to the covid crisis. The situation for the poorest in our society has not improved over this period, and in fact, going into this cost of living crisis, it is getting worse and worse. Does he therefore agree that it is a completely unsustainable position to remove that £20 uplift in universal credit, and that the correct response, among the many responses, should be to restore that with immediate effect?

[David Linden]

I am grateful to the hon. Gentleman for that intervention. I think we all welcomed the increase to universal credit at the beginning of the pandemic, but it was a clear admission by the UK Government that social security was inadequate in its current form. A lot of people were plunged into using universal credit, perhaps for the first time, and it was their only interaction with the social security system. Lo and behold, many of those people using the social security system for the first time ever realised that a lot of the stereotypes and nonsense that comes out of Whitehall about a life on benefits somehow being luxurious and about lying around watching “The Jeremy Kyle Show” were not actually the case, and that the social security system was so poor. It is only a suspicion of mine, but I think that is why Ministers at the time decided to put that £20 in place. I say to the hon. Gentleman and the Minister that if the Government could concede in March 2020 that universal credit was inadequate, surely they have to understand that it is inadequate now.

The other point that I am sure the hon. Member for Middlesbrough (Andy McDonald) would have made is that the uplift was not extended to those on legacy benefits. People in receipt of legacy benefits had increased costs as a result of the pandemic and having a disability. Some 2.5 million people in these islands were denied that £20 uplift by the Government. That is subject to action in the High Court, and the Government would have done well to realise that they should not have had to be taken to a legal court on that, and that the policy was morally wrong in the court of public opinion.

The orders before the House do not do any of the things I have suggested need to be done in reforming social security, and it cannot always be left to the devolved Governments of these islands to try to alleviate bad social security policy from a heartless and callous Westminster Government for which Scotland did not vote. Indeed, we have not voted for a Conservative Government since the 1950s. While the SNP is doubling the Scottish child payment in April, the Tories at Westminster have cut £20 a week in universal credit from some of the very same families, knowingly pushing thousands of families into poverty.

Scotland’s SNP Government are already spending £71 million to mitigate in full the bedroom tax and an additional £10.9 million to mitigate other welfare cuts, including the benefit cap and changes to local housing allowance rates. As the former UN special rapporteur on extreme poverty and human rights, Philip Alston, pointed out,

“mitigation comes at a price and is not sustainable.”

I guess the question I would pose not just to the Government, but to all parties in the House, is this: is the sum total of their ambition for devolution simply to be a sticking plaster for Westminster’s ever-weakening social security net?

Far too many households have been left behind and will not benefit from this uprating, because the Tories are refusing to fix known policy failures. It is not just universal credit that needs fixing. When it comes to the benefit cap, thousands of households have seen their incomes hit hard because the Government have refused to extend the grace period that gives claimants nine months’ exemption from the benefit cap. As the Poverty Alliance points out, how the benefit cap is designed means that those who require the highest level of support from the benefit system are the most likely to be affected. That is simply unjust and it is having a brutal and real impact on low-income families.

Based on the DWP’s latest figures, 180,000 households have had their benefits capped, including more than 6,400 households in Scotland. The benefit cap disproportionately impacts lone-parent families—the majority of whom are women—as well as larger families and black and minority ethnic families.

While we are at it, we need to address the two-child limit and the associated rape clause. Quite simply, thousands of families with children are being pushed into poverty because the British Government refuse to scrap the two-child limit on child tax credit and universal credit. I do not know how the two-child limit and the associated rape clause ever got past the Government’s family test, but I am sure the Minister will reflect on that in his winding-up speech.

Research by the Child Poverty Action Group shows that the majority of those affected by the two-child limit are families with three children and, indeed, the majority are working families. In April last year, 1.1 million children were affected by the two-child limit—237,000 more than the previous year. That number will continue to grow, as nearly all low-income families with three or more children eventually become subject to the limit.

The five-week wait for the first payment is also needlessly pushing people into hardship. That could be easily fixed by implementing our proposal to turn advance payment loans into non-repayable grants after the claimant is deemed eligible.

I will turn to sanctions, because far too many households face destitution because DWP rules push them into debt through sanctions and deductions. The Minister will recall that last week I tagged him in a tweet about the fact that it took his Department 151 days to reply to my letter about a constituency case. If the DWP can sanction my constituents for failure to attend a jobcentre or for turning up late, I wonder whether we would do well to sanction the Minister for not keeping up with his correspondence pile or for failing to reply to Members of this House. I am reminded of the old saying that what is sauce for the goose is sauce for the gander.

The SNP has long called for the UK Government to fix these utterly fundamental flaws in the UK’s social security system. We need to deliver a system that actively tackles poverty and inequality, and that empowers people. Put bluntly, Scotland’s Government, though they wish to, cannot change these policies, as 85% of welfare expenditure and income replacement benefits remain reserved to this place and to UK Ministers. That includes universal credit, which is a reserved benefit.

My hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown) will touch on the pensions aspects of the orders, so I will draw my remarks to a close with what is becoming an annual comment from me on uprating. The Westminster austerity agenda continues to punish and to make life a misery for some of the most vulnerable people in all our constituencies. I know that the orders we are debating tonight are an annual formality for the House, but so long as Scotland remains bound to Westminster, I and my party will always speak up for the most vulnerable and make the case for a decent, robust and generous social security system. There is no escaping the fact that, until Scotland is independent, we are forced to accept the majority of social security policy from a Westminster Government we did not vote for and whose support can, at best, be described as meagre.

--- Later in debate ---

[Nigel Mills]

No, I think the Chancellor could do that at any point and, as I said, he can make changes to the biggest benefit system quite quickly if he sees the need to.

The case that I am trying to make to the Minister is that, at times, the Government can act much faster. I accept that huge investment in IT for legacy benefits that we are phasing out may not be effective, but I would have thought that, in the modern world, with the more modern systems, we could move on from basing the April rise on the inflation position six months earlier. I hope that the Government can find a way to base the rise at least on the December measure, so it is only three months out of date. I accept that for most years that would not make much difference, and for some years it could actually mean a slightly lower rise than using the September figure, but at least that would give us the best possible protection against this awful situation. Inflation is already much higher than it was at the reference point, and it will be even higher still by the time these amounts are paid.

I fear that the position is even worse than that at which I started—that of believing that benefits are in the right place and therefore an inflationary rise is needed. I genuinely fear that many of the benefits we have are now lower than people need, so a lower than inflation rise for benefits that are already too low leaves people in an impossible position. That is why I supported retaining the £20 uplift in universal credit.

I have told the Government many times that, if they believe that all these benefits are sufficient for the standard of living that we want people to have, they should do and publish an assessment of the basket of things that people have to buy and prove they can afford to buy them all. I would then happily support them. If such an assessment showed that benefits were too high, we could have a debate, but it is incredibly unlikely that it would show that. It is overwhelmingly likely that it would show that the measures that were necessary over the last 10 years have ended up going too far and that we are not giving people enough for the decent standard of living they ought to have. If that is so, we need to fix them. I challenge the Government to publish that assessment over the next year and prove their case that benefits are okay. Let us then get the inflationary increase done right. We cannot keep having this same debate in which many of us think that benefits are not in the right place and yet we cannot prove it because that is for the Government to do and, for some reason, they do not want to.

[Andy McDonald]

The hon. Member is making an excellent point about the assessment that would be needed. Does he think that, in an assessment of adequacy, it would be relevant to factor in the consequences of underpayment in terms of monetising demand on other services that people go to? There is a cost to poverty and usually it is extraordinarily expensive not just for the person suffering from it but in regard to the demand on other governmental services.

[Nigel Mills]

I absolutely agree that asking people to live without enough money to heat their houses and to eat creates all manner of knock-on consequences that will inevitably end up costing the taxpayer money in the long run. It should not be a big challenge or a contentious point of debate to want to ensure that the benefits we are giving the poorest in society are enough for them to live on, so I cannot see why we would not publish periodic analysis just to check that everything is in working order.

We should remember that many millions of people cannot go and get a different job or work a few extra hours to make up the difference. They cannot work, they are retired or they are not in work—they have no chance to earn an income, so what we give them is what they get, and we need to make sure that it is sufficient.

--- Later in debate ---

[John McDonnell (Hayes and Harlington) (Lab)]

I resent the premise of this debate. I resent the Government bringing forward an unamendable order on such a significant issue, because that leads to the conclusion, as the hon. Members for Amber Valley (Nigel Mills) and for North East Fife (Wendy Chamberlain) said, that if we reject the order there will be no increase whatsoever. We should not allow Parliament to be blackmailed in that way. The response is fairly straightforward: on the issue of poverty in this country, there has to come a time when this House rises up. We have heard example after example. We can all give examples from our own constituencies—the heartbreaking stories of how people are suffering at the moment. So we should not accept the Government bringing forward an unamendable order and expecting us either to go through the Lobby like sheep and vote for it, or to abstain.

[Andy McDonald]

Does my right hon. Friend agree that this country is facing a crisis that is being visited on the poor, and that to put this House in the position of simply having to accept it is absolutely reprehensible? We should be demanding that this order be taken away and that we get a proper settlement and a proper increase for the people most in need. Surely that is the duty of this Parliament.

[John McDonnell]

I completely concur. I understand those who say that if we vote against this tonight we will be accused of voting against an increase, but far from it—if we vote against it we will be instructing the Government to come back immediately with an alternative that meets the cost of living challenge that working people now face.

It is no good relying on statistics from seven months ago when we know the crisis that people are facing. I find it interesting that the Government can arrive at flexibility when they are saving money but not when they want to assist our constituents. I say that because I was here for the debate on the triple lock. At that time, as my right hon. Friend the Member for East Ham (Stephen Timms) has pointed out, we were facing the prospect of an increase of 8% based on the triple lock linked to earnings. Actually, that was pretty damn accurate as to what people would be facing. The Government were fleet of foot. They scrapped the triple lock altogether, suspended its operation and then came forward with this.

Every Member who has spoken so far, on both sides of the House, has said that this will mean a cut in people’s living standards when faced with the prospect of a 7% rate of inflation. The hon. Member for Waveney (Peter Aldous) eloquently set out the rationale for why the Government needed to do more, but I say to him that the Government will not do more unless this House is firm in its view and rejects this order tonight. They will not come back with an emergency package unless we start kicking up a fuss on both sides of the House. That is why they have come to the House with an unamendable order. They were worried that if there was an amendable order, we could have had a majority in this House for doing something better on behalf of our constituents. I find it outrageous that they have tried to put us in this position.

The hon. Member for Amber Valley, who is no longer here, made an extremely interesting speech, as he always does. I do not usually agree with him on much, but he always presents an argument we can understand—or a rationale, anyway. His argument to the Government was that if they are trying to tell us that their social security system is meeting the needs of our people, they should publish the basket of goods, the costings and so on. Well, the Government do not do that, but others do.

Frequent reference has been made tonight to the Joseph Rowntree Foundation’s analysis of poverty and of what the Government’s measures will do. The figures are startling. Over 8 million working households are in poverty, as are 2.1 million pensioners and 4.3 million of our children. My hon. Friend the Member for Cynon Valley (Beth Winter) made the point that, in the fifth richest country in the world, we have over 4 million children living in poverty. The figure for disabled people is now 3.8 million, which has increased dramatically over the last four or five years as a result of benefit cuts.

I am not willing to sit here tonight and be blackmailed into either voting for this motion or abstaining. I want the opportunity to vote against it and to give an instruction to the Government to go away and do better: to come back with a real proposal that will increase benefits, at least so that they match inflation. After 11 years of austerity, I would expect the Government to be coming up with proposals to start making up some of the ground that has been lost over that time, as my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) said.

I will make one final point. Every time we have one of these debates, we get a Government Minister telling us how wonderful they are because they have created all these new jobs that people can go into. I met a group of unpaid carers this morning, and I said that it looked as though their allowance was going to go from 67% to 69%. Given the hours they work as unpaid carers, even if they are doing 35 hours per week—most of them do triple that at times—they will be paid something like £2 an hour for what they do. Unpaid carers save this country about £130 billion in costs that would otherwise fall on the state. They cannot get other jobs because they are looking after their relatives. They are desperately underfunded and most of them, as a result, are living in poverty. This order will do nothing for them whatsoever.

My commitment to that group of carers I met this morning means that I will not vote for this. I will vote against it, and I will demand better action from this Government. I will demand that Ministers go away and come back tomorrow with a realistic proposal that will tackle poverty in this country and lift at least some of those carers out of the hardship and suffering that they are unfortunately experiencing at the moment.

--- Later in debate ---

[David Rutley]

As we explained during oral questions earlier today, we are providing a package of £58 billion in support for the disabled, and we are working incredibly hard to ensure that more of them who are able to do so can get into work. A huge package is available. We have talked about the three-part plan that the Chancellor set out last week, involving £9 billion of support to tackle the energy challenges facing people across the country, in addition to the normal support that we provide.

[Andy McDonald]

Will the Minister give way?

[David Rutley]

I will make some more progress.

The aim over the two years of the pandemic has been to give fairness to pensioners by protecting the value of the state pension in 2021-22, despite the decline in earnings, and to taxpayers in 2022-23 by suspending the earnings limb of the triple lock because of a statistical anomaly, distorted by the cumulative effects of the economic impacts of coronavirus. Although inflation rose by 0.5% last year, pensions rose by 2.5%, and this year they rose by 3.1%. Over two years, pensions have risen by 5.6%.

The right hon. Member for East Ham (Stephen Timms) made an important point about pension credit take-up. I have been speaking to my colleague the Pensions Minister, who says that take-up increased from 71% in 2017-18 to 77% in 2018-19. However, more work is clearly needed, and we are working very hard to increase awareness.