Welfare Benefits Up-rating Bill

Angela Smith Excerpts

Tuesday 8th January 2013 Commons Chamber

[Debbie Abrahams]

I will not give way at the moment. I will finish my point and then make some progress.

The Children’s Society’s analysis shows that between £500 and £400 will be lost per annum by key workers such as a second lieutenant in the armed forces or a primary school teacher.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

In addition to the scenario my hon. Friend is outlining, these cuts come on top of the fact that the move from RPI to CPI for benefits will push a further 4 million children into poverty by 2020.

[Debbie Abrahams]

My hon. Friend is absolutely right. The Institute for Fiscal Studies has shown that nearly half a million more children will be living in poverty by the end of this Parliament, and that is without taking into account the 1% drop. Families up and down the country are struggling. Food prices have increased by 26% over the past three years, almost as much as energy prices. That is a real cut for ordinary families.

The second myth I would like to expose is the claim that welfare benefits have increased more than average earnings. In fact, since 2002 average earnings rose by 36% while jobseeker’s allowance, for example, increased by 32%. Between 2007 and 2010, to ensure that work pays, benefits for people in work rose by 53.1%, compared with 46.9% for out-of-work benefits. The Government have also claimed that the 1% cap will offset increases in tax thresholds. We know that at least 682,000 working families receiving child tax credit earn less than £6,420, so they will not benefit from those changes in tax credits.

I was going to refer to the myth that we need to do this to reduce the deficit, but that myth has already been blown out of the water in other contributions, so I will not go on about the fact that growth has been downgraded yet again, we are borrowing more than anticipated and our economy is one of the worst performing in the G7.

The Government’s response to their failing economic policies is what? It is to give tax breaks to the wealthiest in society. Some £3 billion is being given to 300,000 people earning more than £150,000 a year, with an average gain of £10,000, and the Government are making people on low incomes pay for it. According to the Office for Budget Responsibility, £500 million will be saved as a result of the 1% cut in 2013 and just over £2 billion in 2014, but that money could also be saved if the Government made different choices. It is clear where the Government’s priorities really are. The choices that the Government have made are underpinned by their ideology.

--- Later in debate ---

[Angela Smith (Penistone and Stocksbridge) (Lab)]

The Bill represents an unprecedented break with the principles underpinning the social contract that has characterised British society in the post-war period. No other Government—not even the Thatcher Government—have broken with the uprating principle to the degree that this Government have done so, and for very good reasons, because the loss of income incurred over time merely stores up problems for the future.

Earlier today my right hon. Friend the Member for South Shields (David Miliband) outlined the case for genuine welfare reform, on the basis that economic and demographic changes make such reform vital. I argue that at the heart of the debate is the need to look again at how we get people back into work. Labour’s job guarantee for the young and the long-term unemployed would be a good start on the road to proper, meaningful welfare reform, whereas the Government’s proposals, as laid out in the Bill, do not represent reform. Rather, they represent an old-fashioned attack on the victims of the Government’s double-dip recession: the low-paid and their children.

The attack on the jobless and the low-paid is simple to explain. In the context of the welfare changes already announced, which will take £18 billion out of the welfare budget for the working-age population, the 1% freeze represents an appalling but audacious decision on the part of the Con-Dem coalition to force those on the lowest incomes to pay the cost of the Government’s failure to inject demand into the economy, with borrowing going up and austerity measures being extended well beyond 2015. While £3.4 billion is given away as a tax cut to millionaires, the very lowest paid in society are being asked to pay for the Government’s economic failures. Even worse, it is those in work who will bear the greatest impact of the freeze inscribed in the Bill. According to the IFS, as we have heard many times today, 68% of those affected by the decision will be in work.

Yesterday we heard the Deputy Prime Minister—a Liberal MP—excuse his support for what is clearly an unfair and vicious attack on those who are least able to pay the price for economic incompetence by claiming that there is no alternative. The truth is that these savings, which amount to £3.7 billion, must be seen in the context of the £3.4 billion give-away to the very richest in society. On top of that, we all know that there is only one sure way of getting the deficit down in the long term: getting the economy growing again and getting people back into work.

The real victims of today’s measure are, of course, children—blameless children who will feel the impact of squeezed budgets. Many already know what it is like to see their parents fall back on food banks to keep them fed. Children are primarily the responsibility of those who bring them into the world, their parents, but we understand that society, too, has a responsibility towards them. After all, the young are our future. Society needs to nurture that future, invest in it and give it the best possible chance of delivering the prosperity we all need.

I will draw my remarks to a conclusion with one further point. The Government think that they are clever in the way they are shaping their savings profile. They think that they will escape the consequences of what they are doing because the jobless, the low-paid and the young vote in lower numbers than we all wish to see. The Government should think again, because that will not necessarily prove to be the case in 2015.