Low-income Households

Baroness Burt of Solihull Excerpts

Tuesday 14th September 2010 Westminster Hall

[Lorely Burt (Solihull) (LD)]

Welcome to the Chair, Ms Clark, for your first chairmanship of a Westminster Hall debate. I am sure that you will always guide us wisely and fairly.

I congratulate the hon. Member for Westminster North (Ms Buck), who spoke with great passion. Her presentation was extremely well researched, but the facts that she presented support her case, which is exactly what one would expect. Liberal Democrats certainly do not take these issues lightly, and we heard in the passionate words of my hon. Friend the Member for Colchester (Bob Russell) that no ideological pleasure is taken from any cut made by the Government.

Liberal Democrats are in coalition because the country is in a financial pickle. We are borrowing £1 of every £4 that we spend, and if we do not do something about it, two main things would happen. First, we would lose our AAA borrowing status, which would mean that we would have to pay more to borrow, which would mean that our economic standing in the world would go down and we would go into economic meltdown, similar to Greece.

[Ms Buck]

I am listening carefully to the hon. Lady, who is making important points. However, the purpose of my debate was to query the Government’s claims, and their practice of requiring a deficit reduction programme to fall disproportionately on the poorest people. I am not sure that what she is saying, important and valid though it is, actually addresses that point.

[Lorely Burt]

I am not sure that what I am saying is not relevant. I shall discuss the effects of the reductions that we will make, but I contest the hon. Lady’s claim that many of them are not fair. Well researched though her presentation was, there are things that she cannot know—a great deal is still to come from the Government.

Much of what has been presented has been based on speculation, and there is a great deal of scaremongering at present. Clearly, as the hon. Member for Cities of London and Westminster (Mr Field) said, people are afraid. The time to become afraid is when we see what the Government are proposing. They are trying hard to make their proposals as fair as possible.

I want to make a second point about why we are doing this—it is the legacy. The hon. Member for Cities of London and Westminster said that we must take a grip of the existing situation. That would apply whatever party were in government. I am declining the invitation of the hon. Member for Westminster North because I want to talk about the issues that she wants to me to raise. She mentioned the report of the Institute for Fiscal Studies. I do not claim to be an expert, but it was selective in what it chose to raise, and it ignores some of the major parts of the Budget, including changes to tax credits, the increase in income tax personal allowance and freezes on council tax. It does not take account of the choices on which measures in previous Labour Budgets to continue and which to reverse, or the effect of future Budgets.

The debate on the effect of Government policy is legitimate, and all parties must be prepared to discuss that, but with respect, the debate is happening too soon. The way in which the vast majority of changes to Department for Work and Pensions policy and savings in the welfare budget will be implemented will not become clear until after the departmental spending review in October. Any debate before then is bound to be based on media speculation, of which we have had sufficient.

One reason for the consultation on departmental spending is to ensure that the difficult decisions are not made lightly, and that any cuts are made in a way that protects those on the lowest incomes. Alongside the cuts is a radical programme of core Liberal Democrat policies specifically targeted at people on low incomes—the income tax pledge, the pupil premium and the re-linking of the basic state pension to earnings. However, in the coming weeks and months, the Government must ensure that they focus on ensuring that those groups most likely to be on low incomes are protected, specifically disabled people, older people, young people and people who are long-term unemployed.

[Kate Green]

It is absolutely right to want to protect the most vulnerable, and I am grateful to the hon. Lady for mentioning the disabled, but are we not already seeing increasing numbers of disabled people going through the new work capability test for employment and support allowance and being found to be ineligible for that benefit, and being pushed on to the lower level of jobseeker’s allowance? Can we expect that position to become even more of a problem as existing incapacity benefit claimants are put through the test and perhaps experience the same outcome? Is that not a cause for concern, particularly when there is an exceptionally high number of appeals against work capability tests, many of which are proving successful?

[Lorely Burt]

The hon. Lady makes an important point, but the issues to which she refers began under a Labour Government, which she supported. We must be sure that the tests that are imposed on people are absolutely fair.

Several hon. Members mentioned housing benefit. The proposals have not yet been fully created, and it is not yet possible to say what impact they will have on low-income households. However, any cap on maximum local housing allowance payments must ensure that those with large families are not unfairly discriminated against, and I hope the Minister will speak about that.

I shall conclude on a slightly more positive note, by mentioning some of the positive changes for low-income households. On the income tax threshold, we have increased the personal allowance by £1,000, so 880,000 people will come out of tax altogether and 23 million other taxpayers will benefit by £170 million a year.

We have discussed the child element of tax credits, and some hard decisions have been made so that the poorest families will benefit much more than those who can afford to bear the burden. In addition, the coalition Government will increase the personal allowance to £10,000 per annum, which the Liberal Democrats pledged in their manifesto, and will lift the poorest 3 million people out of income tax altogether.

The Government are consulting on the pupil premium to determine the exact figure for it. It will attach additional funding to children from low-income households and will dramatically improve the life chances of children from families that fell into a poverty cycle under the last Government.

With the re-linking of pensions to earnings, pensioners will finally receive a fair deal with no more 2p—or whatever it was—increases in their pension. Under the triple lock proposed by the Liberal Democrats, the basic state pension will rise in line with prices or inflation, or by 2.5% a year, whichever is highest.

The consultation is taking place. The theory and principle to which we adhere is that savings may be made on benefits through large-scale simplification. The consultation paper proposes a universal credit to replace the main three forms of benefit support—jobseeker’s allowance, employment support and income support—as well as other sorts of benefit. We will allow a uniform taper rate so that when people find work, benefits will be withdrawn in line with earnings. I agree that the previous Labour Government tried hard to resolve the poverty trap, and the taper may be a solution to ensure that it will always be profitable to go to work.

The division between rich and poor increased under the previous Labour Government. Throwing money at the problem has not provided the solutions that they and everyone wanted. I hope that in the dire financial straits facing the country, the present Government will be imaginative in creating a fairer way of ensuring that people achieve prosperity and work in the best possible way.