Welfare Reform and Work Bill

Baroness Lister of Burtersett Excerpts

Monday 21st December 2015 Lords Chamber

[Baroness Pitkeathley (Lab)]

My Lords, once more we are looking at the problems faced by carers. This amendment would ensure that the full benefits of people on very low incomes who are regularly and substantially engaged in caring rise in line with inflation. As we have heard, Clause 9 proposes that the rates of certain working-age benefits will be frozen for four years at their 2015-16 rate, while Clause 10 makes equivalent provision for certain tax credit elements. The freeze excludes carer’s allowance, attendance allowance and certain disability benefits, but despite their exclusion, we should remember that many carers receive other means-tested benefits as a significant or major part of their benefits package, and as a result will not be protected from the real-terms cut. For example, research shows that half of carers claiming carer’s allowance also receive income support because they are on a very low income. The Government have announced that the carer addition top-up to income support would rise with inflation, but this does not mean that carers are protected. The main chunk of these carers’ benefits will face a real-terms cut of 4.8% over the period 2016-17 and the year after as a result of the freeze. This is on top of previous below-inflation increases of 1% since April 2013.

By 2019-20, carers will be receiving nearly £190 a year less in income support alone than they would have if the whole benefit was uprated in line with CPI. For carers who receive a wide set of means-tested benefits in their households, the cumulative cut in income due to the freezing of numerous benefits will be substantial. Even protected benefits such as carer’s allowance have been the subject of recent real-terms cuts as the indexing base has changed, something with which noble Lords will be familiar. The freezing of working-age benefits such as income support will place further financial pressure on carers, many of whom are already suffering significant financial hardship.

Evidence collected from more than 4,500 carers in the Carers UK State of Caring Survey this year suggests that almost half of carers—48%— are struggling to make ends meet, as we heard earlier from the noble Baroness, Lady Meacher. Of carers who responded to the survey, 45% said that financial worries are affecting their health, and of those struggling to make ends meet, 41% are actually cutting back on essentials like food and heating. Some 26% are borrowing from family and friends, and 38% are using up their savings to get by, which suggests that the squeeze on carers’ finances is not sustainable in the long term. As one carer said, “I am already on the edge. How can I be expected to get by with less?” We have to take on board the fact that increasing financial hardship is pushing some carers to breaking point—they may feel unable to continue caring and be forced to seek paid work and relinquish entirely their caring role. It is clear that this makes no moral sense. As my noble friend Lady Hollis would say, it is not decent. Given that carers are saving the nation £132 billion a year, this not only makes no moral sense; it makes no economic sense either. I should have thought the Government would really understand this. I beg to move.

[Baroness Lister of Burtersett (Lab)]

My Lords, I rise to speak to Amendments 98 and 99, in my name and that of my noble friend Lord Kirkwood of Kirkhope, to whom I am once again grateful for his support.

Amendment 98 would delete child benefit from the list of benefits covered by the four-year freeze. Amendment 99 applies to child benefit the triple lock that currently governs the uprating of retirement pensions, a policy promoted by CPAG—again, I declare my interest as honorary president—and End Child Poverty.

Far from a triple lock, child benefit has been the victim of a triple whammy since 2010. It was first frozen for three years and then uprated by only 1%, and now it is to be subject to a four-year freeze. The upshot is that, according to CPAG’s calculations, it will have lost 28% of its value between 2010 and 2020. In other words, it will be worth less than between a quarter and a third of what it was when Labour left office. A graph prepared for me by Professor Jonathan Bradshaw shows how the gain in value under the previous Labour Government has already been nearly wiped out. It also shows how child benefit represented a much higher percentage of average earnings in the early 1980s under another Conservative Government. However, it was then subject to similar treatment to now, until it was rescued by Sir John Major, who understood why child benefit is important and why its value should be protected. Sadly, his successors do not appear to share his understanding.

I tabled these amendments to encourage a debate about the role of child benefit. I quite accept that it is rather ambitious to argue for the extension of the triple lock to child benefit in the current context, but there is a parallel with pensions. One of the justifications for its application to pensions, and for excluding pensions from the freeze, is that pensioners are among those least able to increase their incomes through work. Leaving aside how true this still is of younger pensioners such as myself, it is in some ways even truer of children. I know the response will be that their parents can increase their income through paid work, but as the judges in the benefit cap case made clear, children’s rights cannot be sacrificed for any failing on the part of their parents.

Moreover, one of the reasons why the family allowance—the mother of child benefit—was introduced in the first place was that wages cannot and should not take account of the number of mouths a wage earner has to feed. In the jargon, child benefit enables horizontal redistribution from those without children, such as myself, to those with, and recognition that we all benefit from children being brought up as healthy, thriving citizens. It may be a bit of a cliché but children do represent our future. Of course, as most people do have children, for the majority it in any case represents redistribution over their own life course.

Child benefit thus has an important function in supplementing wages without the drawbacks associated with means testing. In particular, it cannot be accused of subsidising low-paying employers and it does not create poverty traps. CPAG’s annual research into the cost of a child carried out by my colleague at Loughborough University, Professor Donald Hirsch, shows how the benefit represents core income, not an extra for families, so perhaps it is not surprising that, despite what the noble Lord, Lord Lawson, said in our first sitting about its unpopularity, a recent poll of 1,000 parents for End Child Poverty found that only one in 10 parents thinks that child benefit and child tax credit should not keep up with inflation. As many as two-thirds thought they should be increased in line with the cost of living or more, with virtually no difference between income groups. As I said, most people are parents at some point in their lives, and many grandparents will share these concerns about decent benefits for their grandchildren.

Moreover, because it is paid to the so-called “hard-working families” beloved of politicians, child benefit can act as a work incentive. It therefore makes no sense to freeze it when one of the primary objectives of the freeze, according to the impact assessment, is to increase work incentives, and it makes every sense to uprate it in line with average earnings. There is also a strong case for uprating it in line with personal tax allowances.

Those of us who have been in the game for a long time, such as my noble friend Lord Kirkwood, will remember that child benefit replaced child tax allowances as well as family allowances. At the time, there was a cross-party consensus that they should therefore be treated as akin to personal tax allowances when it comes to uprating policy. Unfortunately, that consensus soon broke down, but it does not invalidate the argument. For a Government who purport to care about child poverty and making work pay, it makes no sense to sink huge amounts of public money into raising tax allowances while freezing child benefit. Apart from anything else, the latter reaches parents in work earning below the tax threshold who gain nothing from further increases in personal tax allowances. Also, low-income parents earning above the tax threshold lose most of any gains from an increase in the personal tax allowances through cuts in means-tested benefits—a drawback that will increase under universal credit.

A constant thread running through our deliberations these last few days and weeks—however long it has been—has been how, despite government protestations, the best interests of the child have not been a primary consideration, as required by the UN Convention on the Rights of the Child. I fear that this Bill will be used as evidence against the UK when its record is interrogated by the UN committee next year. If at the very least the Government were prepared to remove child benefit from the four-year freeze, it would represent a degree of mitigation.

[Baroness Sherlock (Lab)]

My Lords, I will not detain the Committee long as I made clear the Opposition’s approach to the uprating of benefits on the last group of amendments.

Amendment 97 would allow benefits claimed by carers to be increased in line with inflation. My noble friend Lady Pitkeathley once again outlined very powerfully the problems faced by carers. I commend her brilliant, long and persistent attempts to put these things before the public and Ministers.

As the Committee heard in previous debates, there must be a real danger that the state will start to penny-pinch its way into driving carers out of caring, leaving those for whom they care to be the responsibility of the state. Throughout this Bill there seems to be little attempt to try to assess the costs to the public purse that might accrue to other parts of government, national or local, as a result of savings in the social security budget. My noble friend Lady Lister, in moving her amendment, advocated a triple lock for child benefit. I very much appreciated the history lesson for those of us who remember going back to where that is. The CPAG warned us that during the last Parliament child benefit lost 13% of its value against CPI, and 16% against RPI. Of course, that is far from the only cut affecting children. The levels of benefits and tax credits for children have faced repeated real-terms cuts.

I am using this amendment to ask the Government to do something very specific that they keep refusing to do—namely, to provide a cumulative impact assessment of the effect on particular categories of people of the changes that they are making. Whenever we ask them to do this, they put up two defences. The first is that it is all a bit complicated because everybody’s circumstances are different, so they cannot be expected to produce a single cumulative assessment. Well, somehow the Treasury and the IFS have managed for years to assess the impacts of measures on categories of people, if necessary by modelling them in relation to different household sizes and compositions. We would be happy to get that.

The Government’s second argument is that you cannot just consider benefits, you have to consider all the other wonderful things the Government are doing, such as the national minimum wage and tax allowances. That is fine. Include those in the models as well and we can all see who will be better off and who will not as a result of the combination of all these effects. A variation on that defence is that it is too hard because of the dynamic effects of the Government’s wonderful welfare reforms. Translated, that means either the Government reckon that universal credit will make people better off or that they are going to make them so desperate that they will have to work because they will have no other choices. In neither case have the Government produced enough evidence, let alone hard evidence, that can be included in modelling and put in the impact assessment, because the evidence is not there—so they just say that it is all a bit hard.

I have tried repeatedly to get the Government to do this, as have other noble Lords, and we are getting nowhere at all. But there comes a stage where if the Government keep bringing forward legislation which repeatedly attacks the same people, and do not do this, there is a significant democratic deficit. It is hard to know how this House can begin to understand the implications of what is being done when the Government simply refuse to give us the evidence to do it. So I urge the Government to take advantage of this debate to agree at last to address the gaping hole in the evidence and commission some cumulative impact assessments.