Welfare Benefits Up-rating Bill

Baroness Grey-Thompson Excerpts

Monday 11th February 2013 Lords Chamber

[Baroness Grey-Thompson]

My Lords, I have listened with great interest to the debate so far, and I, like many others, have a number of concerns with this Bill. Capping the uprating of most benefits to no more than 1% for the next three years will mean an exponential increase in the net losses each year. The Government have already reduced the welfare budget for working-age people, so this Bill will be yet another blow for low earners and unemployed, sick, or disabled people.

My first concern is that the impact of benefit uprating changes will swamp any gains from raising tax thresholds for low-income households. Uprating changes are less noticeable than other cuts but over the years can have a large impact on someone’s income. Between 2011 and 2015, the uprating changes to child benefit alone will result in a real-terms cut of almost £6 a week for a family with two children. Child benefit, in addition, plays a role in determining the level of housing and council tax benefit paid to those on low incomes in work. The real-terms cut due to child benefit uprating alone during that period is almost £11 a week.

Households with someone working full time on the minimum wage, if there are children, not only will suffer a real-terms loss of £11 a week between 2011 and 2015 but will gain less than £2 a week from the rise in the tax threshold, because a rise in net income means a drop in housing and council tax benefits. Also, the effects of this Bill will not be greatly eased by the change in the personal tax allowance. Low-income households will lose most of the increase in income through a reduction in benefits such as housing benefit and tax credit. Paradoxically, it is the middle and high earners who will receive the full benefit of this measure.

Secondly, uprating changes are not occurring in isolation from other benefit cuts. In considering this Bill, it is important to have in mind the full impact of all the changes. Very few people who rely on benefits or tax credits as part of their income, whether in or out of work, will experience a cut in uprating alone. There have been numerous other cuts to tax credits, housing benefit, council tax support and disability benefits as well as capping. Citizens Advice has analysed the overall impact for a household through a series of changes in circumstances on what we currently know. The analysis demonstrates in a small way the combined impact of the changes on some groups, assuming that this Bill is passed. The example I want to present is not at the extreme end as there will be many people who will be even more severely hit by the cuts and will lose much more.

A couple, Mike and Anne, have two girls aged 12 and seven. They live in a three-bedroom property belonging to a local housing association and are both working full time with a combined income of about £46,000 a year. With this joint income they will be about £17 a week better off from tax and benefit changes in 2015 than they were in 2011. They will lose about £6 a week in real terms from the uprating of child benefit, but they will gain around £23 from the change in the tax threshold, giving an overall gain of £17 a week. However, this position rapidly deteriorates if the family circumstances change for the worse. If, say, Anne becomes ill and is diagnosed with MS, she may have to cut her hours because she quickly becomes exhausted.

The couple split up and Anne becomes a lone parent. She now has earnings of £10,000 a year, but is entitled to some help through benefits, including disability benefits and premiums in recognition of the extra costs she now faces as a result of her illness. Between 2011 and 2015, someone in her position will suffer a large loss in benefits, around £58 a week, while gaining only about £2 a week from the rise in the tax threshold as the gain in net earnings leads to a reduction in benefits. That is an overall loss of £56 a week. This is made up of an underoccupancy charge, loss of lower rate DLA, a £5 council tax payment and about £18 due to all the uprating changes.

That is the loss under the current system. The loss under universal credit will be even greater for someone in Anne’s position. If she moved over to universal credit at the point when her health deteriorated, she would not get transitional protection, and in 2015 would have a real-terms income of £95 a week less than in 2011. This is because under universal credit she will get no more financial support than someone who is not ill or disabled. If Anne’s condition further deteriorates and she has to leave work, she is awarded the middle-rate care component of DLA and is placed in the ESA support group. She now has a great many extra costs.

The overall real-terms loss between 2011 and 2015 for a household in this position is about £34 a week, and that assumes that Anne keeps DLA or the same value in PIP. This loss includes a real-terms loss of about £15 due to uprating changes, despite the protection for disabled people. Again, this is all under the current system. Under universal credit, if Anne does not get transitional protection, she will be £61 worse off in real terms in 2015 than someone in her position would have been in 2011. The extra loss is due to the loss of the severe disability premium offset by the rise in the support element of universal credit.

In summary, between 2011 and 2015, this couple with a joint income of £46,000 a year have a real-terms gain from tax and benefit changes of £17 a week; they would have a £23 gain if they did not have children. A disabled lone parent in Anne’s position who is working will have a real-terms drop of £56 a week overall, despite the gain from the raising of the tax threshold. The drop will be a real-terms drop of £95 a week between the current system in 2011 and universal credit in 2015. For someone in Anne’s position and in the support group, the real-terms loss is £34 a week, or £61 a week if on universal credit.

People are already struggling to manage, as has already been mentioned by my noble friend Lord Adebowale. The numbers going to food banks are rising steeply. These proposed changes impact disproportionately on those with a low income because more of their income goes on buying essentials, and it is these essentials such as fuel and food that are subject to high inflation. For many, this can mean making choices such as whether to keep the house warm or to eat properly. Disabled people who cannot work, those who are unemployed and cannot find work, and those on low earnings who are working are all being affected by other benefit cuts. Decisions on uprating should not be taken without recognising the cumulative impact. Many in your Lordships’ Chamber have asked about the cumulative impact of these changes, and I would urge the Government to look at this again.

I will not repeat the words of the right reverend Prelate the Bishop of Leicester, but I wholeheartedly support his views. We have to understand where we are going as a society and how we want it to be viewed. In the Welfare Reform Bill, the Minister, the noble Lord, Lord Freud, said consistently that the most vulnerable should get the most support, but I fear that as this Bill progresses, that may not be the case.