Welfare Benefits Up-rating Bill

Baroness Donaghy Excerpts

Monday 11th February 2013 Lords Chamber

[Baroness Donaghy]

My Lords, I pay tribute to the noble Lord, Lord Sheikh, for being a hard-working and successful entrepreneur. I know several people who have two or three part-time jobs who work extremely hard and who remain low paid. I never cease to be surprised that the low paid are always blamed for being low paid and being eligible for tax credits, but low-paying employers are never blamed for their part.

This Bill is political and deserves a political response. The challenge has been issued by the noble Lords, Lord German, Lord Bates and Lord Brooke of Sutton Mandeville: “What would I do instead of this Bill?”. In the words of Yosser Hughes, “Gissa job” and I will tell you. This Bill is completely unnecessary, it is based on a misrepresentation and it is playing politics with people’s lives. All this will become apparent when the impact is actually felt by real people, when the jobless numbers rise and child poverty increases.

First, there was absolutely no need for the Bill, as has already been said by several speakers. The Government already have the power to uprate by 1% this year, next year and the year after at the appropriate time without new primary legislation. So why do it? The Work and Pensions Secretary, Iain Duncan Smith, said that it would,

“provide certainty for taxpayers, the markets and claimants”.—[Official Report, Commons, 8/1/13; col. 189.]

I ask the Minister: what certainty can there possibly be when the level of inflation in the next three years—a key ingredient, she must accept—is unknown? What certainty can there be when the markets are up and down like a yo-yo? I suppose it could be said that higher rate taxpayers have been provided with certainty, and claimants are certain that they will be a lot poorer. The real reason for this unnecessary Bill is to provide a symbolic dividing line between the coalition Government and the Labour Opposition—short-term political gain on the back of those at the bottom of the labour market—and this sleight of hand will be found out.

Secondly, the Bill is based on the false premise that this is about fairness between taxpayers and those out of work. The Chancellor himself stated that,

“over the last five years, those on out-of-work benefits have seen their incomes rise twice as fast as those in work”.—[Official Report, Commons, 5/12/12; col. 879.]

Everything has been pitched to present this Bill as an act of fairness to working people whose earnings have risen by about 10% since 2007 while out-of-work benefits have gone up by about 20%, but we all know how misleading this comparison is. I negotiated wage increases for the poorest paid in universities for 16 years, 90% of them women, mainly part-time. Using percentages to present a case is designed to mislead. We used to say that 10% of nothing is still nothing.

The whole presentation by the Government is about employed versus unemployed, when the reality is nothing of the kind. It is actually about divide and rule. Thirty per cent of households will be affected. Those most likely to be affected are families with children, particularly lone parents, 90% of whom are women. The Government claim that many of those affected by the Bill could cope with the below-inflation benefits by moving into work, but 60% of those households affected are in work. The Government claim that the disabled will be protected, but disabled people in the ESA support group will see their basic allowance of £71 uprated by 1%. This represents almost 70% of their out-of-work support and 991,000 disabled people receiving ESA in 2012 will experience a 1% uprating, representing a loss of £87.65 a year, as has already been said.

The real weasel words come when we are told about child poverty. The Parliament Under-Secretary, Esther McVey, said that there would be,

“an extra 200,000 children being deemed by this measure to be in relative income poverty compared to uprating benefits by CPI … It is misleading to look at the impacts of uprating in isolation”.—[Official Report, Commons, 15/1/13; col. 715-16W.]

Note the words “deemed” and “relative income poverty” in an attempt to minimise the impact. Mr Duncan Smith went on to say:

“If we take the figures on that relative income point across the period covered by the spending review, we can see that some 350,000 children net will be lifted out of poverty, even if we take into account the effect of this Bill”.—[Official Report, Commons, 21/1/13; col. 131.]

So either we have 200,000 extra children in poverty or we have 350,000 fewer in poverty. In a recession we are all poorer so the poorest are comparatively better off—what unbelievable nonsense.

Thirdly, the Government are playing politics with people’s lives. They claim it is about rebalancing the economy and making work pay. Let us say for the sake of argument that the 60% on diminishing tax credits who are in work get better jobs, leaving room for the 40% who are not in work to do the lowest paid jobs. Where are these jobs coming from? Last year 300,000 jobs were lost from the public sector. The OBR predicts the loss of a further 900,000 jobs by 2017-18, while the Institute for Fiscal Studies predicts 1.2 million lost jobs in the public sector over the same period.

The Government think they are all going to come from the private sector, and so far they have, but there is no growth in the economy. People are spending what they have on energy, food and rent, and large retail chains are going out of business. Maybe they will all become self-employed. Between June 2008 and April-June 2012 the number of self-employed rose to 4.2 million, a rise of 367,000. During the same period, the number of employees declined by 434,000. Maybe this is how we are going to work our way out of poverty.

However, if you look at the figures, 80% of that increase in the number of self-employed were aged over 50 and more than likely to be male, according to the Office for National Statistics. So we are turning into a nation of 50 year-old entrepreneurs. When you delve even further, they turn out to be construction workers, carpenters, taxi drivers, et cetera. This suggests people who have little choice about their employment status, whose job prospects have diminished because of age barriers and who are probably bumping along on the bottom of the labour market, getting what they can but not continuous employment. It could also explain why output is flat while employment is growing. It is not the brave new world but more like a twilight zone.

The Government are not looking after the economy; they are looking after their own. The gap between rich and poor, already unacceptable, will widen. The Times Magazine last week said that a child born in Lambeth is likely to die eight years before their counterpart in Kensington and Chelsea. I presume that the latter need the extra eight years in order to spend their tax breaks. It is bad enough that we live in a society that tolerates these differences in mortality rates. This Bill is intended to be a propaganda coup for the Government. It will soon be seen for what it is: a gratuitous attack on the poorest and weakest in an unequal society.