Social Security (Up-rating of Benefits) Bill

Debate between Baroness Stroud and Lord Freud

Report stage
Tuesday 2nd November 2021 Lords Chamber

[Lord Freud (Con)]

I ask your Lordships’ indulgence to make a few observations following events last week, in the context of Amendment 5 on poverty, in the name of the noble Baroness, Lady Sherlock. My noble friend Lady Stroud and I are not pursuing our amendment on universal credit at this time.

I was delighted with the Chancellor's decision to improve work allowances and reduce the universal credit taper to 55%. According to my intelligence, this was very much a last-minute decision. I have always felt that there is a tipping point in terms of encouraging people to work more, and a taper of 55% is much more likely to be near that point than the 65% at which we were forced to start the new welfare system. However, I am much more concerned that the Chancellor did not feel able to improve the standard allowances, which have been eroded by 9% in real terms over the last decade, and which are now too low. There would be no point in an amendment which sought a vote on the standard allowance, since I believe that the Chancellor has done enough to eliminate any risk of rebellion among Conservative Back-Benchers on the issue. I am conscious, also, that Lady Stroud and I have tried the patience of the House by moving an amendment considered inadmissible by the Clerks.

Nevertheless, I sense that a sea change in public attitudes to welfare is now under way. In my account of the traumatic reform of the welfare system Clashing Agendas, I quote Rupert Harrison, the then-Chancellor’s chief of staff, on why the benefit cap was introduced. He told me:

“I know it didn’t make much in the way of savings but when we tested the policy it polled off the charts. We’ve never had such a popular policy.”

That was in 2010. This year, there have been a number of polls showing that most people in the country support extending the universal credit uplift. I do not believe that turn-round in attitudes has been purely because of the perceived meanness of the standard allowance. Universal credit is perceived as a fair and rationale safety net which eliminates the arbitrary nature of the legacy systems.

So, as the Chancellor contemplates the £25 billion of headroom that he is reported to have built into his Budget arithmetic, I urge him to use a small proportion of that figure to alleviate the real hardship being suffered by our very poorest citizens as soon as possible. My three-point recommendation to him is: first, restore the 9% erosion in standard allowances; secondly, tie the standard allowance to average earnings, something that we are debating in the context of pensions right now; and, thirdly, start getting rid of the excrescences such as the two-child policy and the benefit cap.

There is no need for late-night reactive decisions by a UK Chancellor on the shape of our welfare system. One of the clauses that I inserted into the Welfare Reform Act 2012 allows comprehensive trialling by the DWP of all the major elements within universal credit to discover the econometric impact of changes. For instance, the department can discover the exact optimal point of the taper, among many other aspects of the benefit. It may be that the point at which the Treasury makes the most tax and loses the least welfare revenue is a taper of 50%, for example, rather than 55%. The department can test and keep testing as society changes.

I thank my long-time colleague, my noble friend Lady Stroud, for her indefatigable efforts to find a way to help the most vulnerable in our society. Without all her energy and passion, I do not believe we would have achieved the progress that we have.

[Baroness Stroud (Con)]

My Lords, I shall speak to Amendment 5 in the name of the noble Baroness, Lady Sherlock. I thank and pay tribute to my noble friend Lord Freud, who I believe did a huge service in putting his weight behind the amendments last week.

This amendment speaks to the impact that changes to social security have on those who are in poverty, and it is that poverty impact which I want to focus on here. I want to put on record my thanks to the Minister for all that she did to work with the Chancellor to ensure that as we stand here today the universal credit taper rate is being lowered to 55% and the work allowance increased by £500. Those who are doing everything they can to ensure that they and their families work themselves out of poverty will benefit hugely from this budgetary intervention.

However, it goes without saying that, as my noble friend Lord Freud has just alluded to, there is a group who will not benefit from this change: those on the standard allowance, those who cannot work, those with sicknesses and disabilities. It is to that group that this House must now turn its attention. Testing this House with inadmissible amendments late at night is not the business for today, but we need to keep our focus on this issue.

The challenges that we and many across this House highlighted were the rising costs of inflation and rising fuel bills at the same time as the removal of the £20 uplift. The NICs increase will not impact on that group. A new Social Security (Uprating of Benefits) Bill is coming to the House shortly. It will cover universal credit and focus on the annual uprating of universal credit in line with inflation. We have an opportunity to argue that this should be in line with where inflation will be at the time when it is laid rather than where it was in September, in order to protect these households. There is also a fund of £500 million that has gone to local authorities to cover the colder months of the year. That should be ring-fenced and allocated to those who are on the standard allowance and unable to work or, better still, put through universal credit for that group.

Speaking specifically to the amendment, one of the reasons why the Government are struggling to deliver poverty impact assessments on pensioner poverty or working-age poverty is that they have yet to decide how they are going to define and measure poverty. This matters, and it is one of the key reasons why they have so frequently walked into trouble on issues of poverty. If only the Government realised that poverty measurement can be their friend and guide. It could have guided them through their decision-making during the pandemic and through the challenges of free school meals. I have heard it said that this cannot be done in real time, but with RTI we are so much closer to being able to measure real-time impacts and make informed choices to protect our most vulnerable people.

However, today is a day to say thank you to the Government for their investment in the lives of those who are in work and on low wages, but also to ask them to be watchful for the poverty impacts on those who cannot work—those with disabilities, children and pensioners—and to take action where vulnerability is visible.