Welfare Benefits Up-rating Bill

Bill Esterson Excerpts

Tuesday 8th January 2013 Commons Chamber

[David T. C. Davies (Monmouth) (Con)]

It is never a pleasure to support any Bill that will leave some people worse off, but Members of both Government parties do so out of a heavy sense of duty and responsibility, both to those who pay taxes and to those who receive them. It is unfortunate, to an extent, that this debate has been framed, perhaps not in this House today, but in some quarters of the press, as a kind of battle between workers and shirkers or, even more regrettably, between immigrants who have come to this country and are sponging off the state and those British nationals who have been here all their lives and paid taxes.

It is true that some people have come to this country and have received too generous an amount in benefits. It is equally true that a lot of eastern Europeans—I know that both points are true from the experience of my own extended family, who are eastern Europeans—have come to this country, sometimes speaking very little English and sometimes with qualifications that are not recognised here, and have managed to find work very quickly, have used that work to get better jobs, and have ended up contributing a great deal to our society. It is true that some British people have not wanted to take on the jobs that have been snapped up by eastern Europeans.

I would have no hesitation in saying to somebody who is fairly young and in their 20s that they should be willing to accept any job going, no matter how demeaning it may appear. I have worked in nightclubs and done other low-paid work in my life. I would have more of a problem, however, with saying to people I know who spent 20 or 25 years working for Tata—British Steel as was—who lost their job through no fault of their own and who may be a father of three or four, “You have to go to work in Starbucks on the minimum wage.” It is a shame that we find it hard in our benefit system to distinguish between different types of people, but that is the way it is.

We are not here to talk about penalising people; we are here because we have a simple problem, which was put eloquently by the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) when he said that we do not have any money.

[Bill Esterson (Sefton Central) (Lab)]

If the hon. Gentleman is saying that that is the problem, why is he supporting a Government who are only too happy to give a tax cut of £2,000 a week to everybody earning more than £1 million a year? How does that add up? How is that fair?

[David T. C. Davies]

Put simply, the total amount of tax that we are taking from the rich has increased, as my right hon. Friend the Secretary of State has said, and that has not been denied by any Opposition Member. The total amount of money that we are taking from the rich has increased, which means that the total amount that we have to take from those who are not so rich has gone down somewhat. That is how I would justify it.

--- Later in debate ---

[Dame Anne Begg]

I thank my hon. Friend, because she sets up my point on how the proposals undermine the Government’s flagship policy of introducing universal credit. Universal credit will create problems—she alludes to the fact that it will be paid monthly, and that housing benefit will be paid directly to individuals, who must make the decisions she describes.

One big claim for universal credit is that it will make work pay in all circumstances, but Government Members somehow cannot understand that making work pay means increasing benefits, because the majority of people who receive the benefits that will be affected by the Bill are in work. The group who are out of work and the group in work are often the same people, as my hon. Friend the Member for Westminster North (Ms Buck) has said—they move in and out of work.

The principle of universal credit is to smooth the move into work. The Government are freezing the benefits that make up universal credit statutorily for the next three years. I do not know why we are not having the normal uprating debate. There is no reason why the measure must be in the form of legislation, which makes me suspect that it is a political decision. The freezing of those benefits will tie the Government’s hands on the introduction of universal credit and could undermine it.

In spite of everything that has been said today, tax credits were a huge success. They increased the income of workers on low wages and made work pay. For the first time in at least two generations, the poverty trap was ended—I thought that it had gone for ever. There was a genuine poverty trap created by the previous Conservative Government and to all intents and purposes tax credits got rid of that. Almost everybody was better off as a result of tax credits unless they lived in a high accommodation cost area such as London or they had a large number of children. Work paid. The incentives did not always work because work did not pay enough. Through the Bill, the Government are repeating the same mistake—the incentives to move into work under universal credit will not be high enough to make work pay in all circumstances.

[Bill Esterson]

My hon. Friend is making an excellent point about the impact of universal credit. I am sure she is aware that the DWP itself says that 1.8 million main earners will be worse off if they take extra hours under universal credit than they are under the current arrangement. The figure for second earners is 300,000.

[Dame Anne Begg]

Indeed, and Barnardo’s has just published a report which says that families that depend on child care to allow the adults to work will be worse off if they increase their hours. The claims that are being made for universal credit—that it will do away with the cliff edges, smooth the transitions and make work pay in all circumstances—are false. The Bill will make that more likely to happen, not less likely.

Welfare benefits have already been attacked and reduced. We have heard today about housing benefit. Still to come are the changes to council tax benefit, and tax credits have been frozen for the last two years. We now know that universal credit will be set at a level comparable to the benefits that it will replace—income-related job seeker’s allowance, income-related employment support allowance and housing benefit, as well as tax credits. If those benefits have not increased with inflation, by the time universal credit comes in it will be set at a much lower level as a result of the decisions taken today. That will mean less support through universal credit for those moving into work. Unless the Government intend to change the tapers and the disregards—and I have heard nothing to suggest that—the difference between being in work and out of work will not be very great, and on many occasions people could be made worse off by increasing their hours or taking work in the first place.

I have always suspected that when the Government said that no existing claimants would lose in cash terms from the introduction of universal credit, it was their intention to reduce what people were receiving before the move to universal credit. This Bill confirms that that is exactly what they intend. They seem to have missed the essential point—to make work pay, the Government need to increase in-work support, not decrease it as this Bill will do. So when universal credit is introduced and fails to be the magic bullet that the Government have claimed—when it does not do all that has been claimed—they cannot say that they were not warned. That is why I will not support the Bill and will vote for the amendment.