Welfare Benefits Up-rating Bill

Baroness Sherlock Excerpts

Tuesday 19th March 2013 Lords Chamber

[The Lord Bishop of Ripon and Leeds]

My Lords, I will also speak to the other amendments in this group. Amendments 2 and 8 are paving amendments for a new clause to protect child benefits and child tax credits from the effects of this Bill. The substantive amendment to which they refer is Amendment 11. This follows extensive discussion in Committee, and is designed to halt the disproportionately negative effects of the Bill on children and their welfare. Amendments 13, 14 and 15 are consequential, and no doubt the noble Baroness, Lady Meacher, will speak to her Amendment 14A.

The Bill affects 30% of all households. Of those with dependent children, it affects 87%. Of lone-parent households, it affects 95%. Conspicuously, 11.5 million children suffer as a result of this Bill. This is in addition to the effects that our austerity measures have already had on children. In 2012, the Institute for Fiscal Studies estimated that there would indeed be a reduction of 0.9% in real-terms income for all households from 2010 to 2016. For a couple with two children, that fall will already, without this Bill, be 4.2%: equivalent to a fall of £215 per year for a couple without children, or £1,250 for a couple with two children. This Bill adds to that discrepancy, and it is that which cannot be fair.

It is true that we need particular concern for those in or on the verge of poverty. This Bill fails that test, too. For the poorest 20% of households, the IFS estimates to which I have referred suggest that the reduction in income is 7% from 2010 to 2016. In addition, 60% of the Bill’s savings come from those in the poorest third of our population, and 3% from those in the richest third. This will mean that, on the Government’s estimates, 200,000 more children will be in poverty, half of them in working families.

That in itself must make us pause to see what other ways there are to make the £0.9 billion savings which the child-related parts of this Bill are designed to produce in 2015-16. It is not for us today to declare what those alternatives should be. However, they do exist. Whether through reducing tax reliefs on pension contributions for the wealthy, or through introducing national insurance contributions on employer pension contributions, there are a number of different ways in which we could explore raising this money, which would not affect children in the ways in which this Bill does. We need to find a way for the burden of our fiscal challenges, so well described in the previous debate, to fall on those who, like me and many Members of this House, can afford to meet it, rather on than those who cannot. The noble Lord, Lord Newby, spoke in Committee of the importance of reviving the economy for the benefit of the future. That is absolutely right, but not at the expense of children’s needs now.

The major thrust of these amendments is to defend the nine out of 10 children in this country who are affected by the Bill. This effect is cumulative; it comes on top of the reductions already made. It has been argued that since many people are currently seeing wage increases of only 1%, benefits should also rise by only 1%. However, this Bill is an additional blow for those with children whose wages have increased by only 1%. Not only are their wages declining but, by this Bill, provision for their children will decline, too. These benefits affect those in work just as much as those who are not in work. None of the benefits referred to in these amendments is an out-of-work benefit. This is a transfer of the burden from all of us to those with children, and that increased burden on children cannot be right.

I continue to be particularly concerned at the continued gradual erosion of child benefit. The 1% cap comes after three years of the freezing of child benefit, so it is a cap on a figure that has already been reduced. From 2011 to 2015, the increase in child benefit will be 2%, rather than the estimated 16% of CPI over that period. Therefore, a couple with three children with one earner, such as a corporal in the Army, will lose £552 a year by 2015. A couple—one a childminder, let us say, earning £240 a week and the other a postal worker on £395 a week—with two children will lose £3.51 a week by 2015.

Child benefit has long been a crucial part of the support for families in our culture. That is particularly so for those on low wages. For very many families, child benefit is explicitly set aside to provide for children. Parents will struggle by making savings on their own lifestyle, sometimes even by going without meals themselves, but they will ensure that the child benefit that they receive is spent on their children. We owe it to the next generation to ensure that this element of our society, our children, is not disadvantaged, and certainly not disadvantaged by so much more than households without children.

In addition, child benefit plays a particular role in support of those in work because it acts as an earnings disregard in the calculation of housing and council tax benefits. Any reduction in child benefit is therefore a disincentive to returning to work. For a two-child family in work, on a low income and living in rented accommodation, the cut between 2010 and 2015 is not only the £4.80 a week in child benefit but an extra £4.10 in lost benefits. This working family on a low income therefore loses almost £9 a week.

I need to refer briefly to the third element in this package, that of the lower disability addition of universal credit. That is already being reduced from its current £57 a week to £28 a week under universal credit. Now it will be reduced further by this Bill. It seems extraordinary to reduce a benefit before it has even come into effect, especially when it provides for the needs of disabled children and their extra financial demands. These children need our support so they can live full and creative lives, and therefore benefit not just themselves but all of us. Children already contribute more than their fair share to our austerity burden. This Bill adds to their burden. I hope that we shall at least remove this extra pressure on them by accepting this amendment. I beg to move.

[Baroness Sherlock]

My Lords, I thank the right reverend Prelate the Bishop of Ripon and Leeds for introducing this amendment. I also congratulate him on continuing to press his concerns in this area after failing to receive any comfort at earlier stages of the Bill. I congratulate the Lords spiritual in general for being willing to stand up for what they believe, despite the inevitable volley of artillery that came their way the moment they dared to raise their heads above the cathedral parapet. It may be that we have them to thank for the extended interest in welfare benefits, which is much more than we see normally. I am delighted to see it.

As we have heard, this amendment would remove a number of children’s benefits and credits from the scope of the Bill. Since we on these Benches wish to remove all benefits and tax credits from the scope of the Bill, we are pleased to support it. We have heard at different points in the passage of this Bill that it has a disproportionate impact on families and children. The Government’s impact assessment shows that two-thirds of households affected are families with children. We also know that the Bill will have a direct effect on child poverty in Britain. Ministers have previously announced—as the right reverend Prelate noted—that this Bill alone will put a further 200,000 children into relative poverty.

In Committee, I asked the Minister to tell the Committee what the impact would be on the three other poverty measures in the Child Poverty Act. I got nothing back at all. Now the Child Poverty Action Group has dragged some information from the Government by means of the Freedom of Information Act—although it should not have had to use a FOI request to get it. I would have hoped the Minister could have told us the information when I asked for it in Committee. The Government have not yet offered a narrative assessment even of measures, for example, of material deprivation. However, they were forced to admit what would happen to the number of children in absolute poverty. In response to that FOI request, the DWP admitted for the first time that it estimates that around 200,000 more children in Britain will be pushed into absolute poverty by this uprating policy.

This is a shocking figure, which reveals the depth of what is wrong with this policy. It also removes the Government’s defence that the problem is with the relative poverty measure, rather than with the impact on children themselves. On the back of those figures, some new analysis for the Child Poverty Action Group by Landman Economics found that an increase of 600,000 children in absolute poverty is likely between 2010 and 2015, and that is net of any improvements as a result of universal credit.

As we have heard at many stages of this Bill, too many parents go without to ensure that they can heat their homes and feed and clothe their children. As the costs of food and energy have soared, more parents spend more of their money on these basic costs. Yet vital support that they depend upon is being cut in real terms in order to hand a tax cut to the very richest. It is not only the Church of England that has come out against these priorities; Archbishop Peter Smith, vice-president of the Catholic Bishops’ Conference of England and Wales stated:

“It is unjustifiable that the poorest children, who often have no other safety net, will be left bearing the brunt of economic difficulties as a result of significant real-term cuts to social security”.

The archbishop noted something that many of us know: that like many other charities across the country, Catholic agencies supporting parents find themselves ever more confronted with parents unable to afford even basic essentials, such as healthy meals or warm clothes for their children. That would be exacerbated by this Bill.

The real shame is that so many of those families have no alternative way of reducing that problem. Most victims of this Bill are working families. The parents are already doing the right thing; they are out working. One of the real disappointments about the debates we have had is the failure to acknowledge that, far from this being something that penalises only people who are not working, it is in fact the very same people who have had below-inflation or no pay increases and who have struggled repeatedly to get out, get work and get hours, who are hit by these cuts to tax and benefit support.

The Bill is a completely inappropriate way to address the uprating of essential state support for families. We already have perfectly good mechanisms to uprate annually in the light of inflation and prevailing economic conditions. These are poor choices for the Government to be making. The families who will be hit are not responsible for the failure of the Government to get the economy growing again. They are just doing their best to manage in difficult times, but the Government are planning to cut the value of the help that they get from the state to fund a tax cut for people earning £1 million a year. We should not be doing this, and we on these Benches are pleased and proud to support the amendment.