Welfare Benefits Up-rating Bill

Caroline Lucas Excerpts

Monday 21st January 2013 Commons Chamber

[Stephen Timms]

I will make a little more progress and then I will gladly give way again.

In moving amendment 12, I wish to focus on the effect of clause 1, as it stands, on child poverty. Previously—reflecting the commitment in the coalition agreement to eradicate child poverty by 2020—the Government have published the effect of Budgets, spending reviews and autumn statements on child poverty. We know from the Institute for Fiscal Studies that, taking account of everything that the Government announced before the autumn statement, child poverty is set to go up by 400,000 by 2015 and 800,000 by 2020. In this autumn statement, they did not mention child poverty at all. There was no mention in the impact statement, where it should have been. I tabled a question and the Minister told me that he would reply as soon as possible: I am still waiting.

Despite the Government’s best efforts, the answer did slip out in an answer from a different Minister. In that, we read that the three years of uprating will increase child poverty by an additional 200,000 on top of the increase that is already due. That means that we are on track for 1 million more children below the poverty line by 2020. That is a devastating blow and will undo all the progress of the last 15 years.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The powerful figures that the right hon. Gentleman cites show that this is a cruel and callous Bill. Given that that is the case, does he not think that Labour supporters might be disappointed that he will not commit now to re-link the upratings with RPI? Nor has Labour said that if it were to form a Government next time, they would reverse the Bill. Is not there a danger that people will think that it is all rhetoric and no action from the Opposition?

[Stephen Timms]

The time to announce how benefits would be uprated for next year is later this year in the normal way. The time for the following year is the end of next year. We reject the Bill, which is the Chancellor’s partisan and unprecedented device to set out the trajectory for two years’ time, before we know anything about the future course of inflation.

Ministers still say that they are committed to eradicating child poverty. It says so in the coalition agreement. That commitment is clearly now fictitious. The Bill is simply incompatible with that commitment. Ministers should stop pretending. They have given up on reducing child poverty. They have not just given up on publishing the numbers as they used to do: they have given up on delivering the goal as well. Now they are implementing policies that will force child poverty up.

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[Mr Redwood]

I quite agree. I would like to see a more generous regime for disabled people, as my hon. Friend rightly says. To pay for that, I have come up with suggestions both on getting more people back into work, which is the best way, and on dealing with the issue of eligibility so that only our own deserving cases get the generous treatment that we rightly expect.

In summary, the policy is not easy. Ministers have to watch to make sure that it does not become unintentionally more penal. We want much more work on the side of promoting jobs and growth because we come here to eliminate poverty, not to make it worse. It is also time for the Opposition to join the serious conversation about how we tackle these obstinate and difficult issues, given that the high-level aims—getting rid of poverty and making it more worth while to work—are, mercifully, shared across the House.

[Caroline Lucas]

I will speak to amendment 7, which stands in my name. It is an attempt, at least, to neuter what I believe is a cruel and callous Bill by restoring the historic link between benefits and tax credits and the retail prices index.

It is a fiction that benefit levels are too high. Someone who relies on benefits is poor and will be struggling to survive from week to week; if any unexpected costs occur, they will probably have to go without or go into debt. The Institute for Fiscal Studies points out that we do not know at least two important things about the Bill: we do not know what the actual effects of breaking the link with prices will be, because that will depend on future price levels, which exposes the poorest in society to serious inflation risk; and secondly, we do not know the Government’s view on how benefits should be indexed in the longer run, and we ought to.

What are we to make of the Government’s long-term policy intentions? Unfortunately, I think they are clear: to chip away at the welfare state and leave people to fend for themselves, with US-style deprivation for the unsuccessful. It is a scandal to expose poor people to such risk and insecurity, especially at the same time as the most wealthy are set to enjoy a significant tax cut. That is why I have tabled my amendments, which represent the very minimum safety net that must be in place.

[Mr John Leech (Manchester, Withington) (LD)]

Will the hon. Lady explain whether she tabled amendment 7 because RPI is normally higher than CPI, or because she believes that it is a better way of working out inflation?

[Caroline Lucas]

I think the answer is probably both of the above. Recently, the RPI has been higher. I would have been happy to look at an amendment—no such amendment exists, unfortunately—that combined the work that the hon. Gentleman’s party has been doing on earnings with my effort to get a link back to the RPI and prices. We should look at whichever is the most generous. I stuck to the RPI link in my amendment because I wanted it to be realistic enough to get more support across the House. I fear that I might have been a little over-ambitious.

It worries me that instead of seeking to restore the link to prices, the official Opposition have not sought to protect people who are seeking work, but appear to have picked out one or two benefits, such as employment and support allowance and maternity benefit, for proper protection. They have ignored, for example, those on jobseeker’s allowance, as long as some sort of workfare system is brought in for people who have been looking for work for two years. Do the Opposition think that it is okay for the link to be broken for JSA recipients in the meantime? The Opposition amendments offer an improvement to a nasty Bill, and for that I support them, but I believe they expose a certain cowardice in not confronting the stereotypes and myths that the Government continue to perpetrate. Why are the Opposition not standing up for unemployed people and restoring the link to RPI? I do not accept that they could not consider that principle today, and it is disappointing that they will not. A link to prices is an absolute minimum, a safety net red line.

[Richard Graham (Gloucester) (Con)]

Will the hon. Lady confirm that she is advocating a return to a link between all benefits and the retail prices index from now on? In 2012-13, benefits went up by 5.3% and the Office for National Statistics labour statistics show that the pay of all those in work went up on average by 2.1%. What impact does the hon. Lady think that would have over a few years on the morale of people in work? Would it act as an incentive to work, or to retreat back to benefits as fast as possible?

[Caroline Lucas]

The hon. Gentleman’s intervention shows the different beliefs that he and I have about the great British public. I do not believe that most people have to be pushed into work by cruel incentives; I believe that the vast majority want to work, contribute and feel part of a wider society. That is where he and I differ.

[Richard Graham]

I am with the hon. Lady; I do believe that most people want to work. I am asking her about the impact it will have if somebody off work continually gets double, if not more, the increase that working people get. Surely she understands that there is a link.

[Caroline Lucas]

The proposition is spurious. First, it happens very rarely; secondly, we ought to look at the actual amounts of money involved. The Government talk glibly about percentages, but the percentage of something very small is still very small. The amounts that we are talking about do not make that much difference. What does make a difference is social solidarity and the sense of people really being in it together. If this Government cared more about making that a reality than just having the rhetoric, we might stand a chance of securing a happier and better-off society.

[Richard Graham]

rose—

[Caroline Lucas]

I should like to make some progress because I have let the hon. Gentleman in twice.

[Hywel Williams]

The hon. Lady would of course also argue that historically benefits have been very low indeed and, in fact, the amount of money that people have to live on is miserably low. I think that the majority of the British public would accept that and accept that we need to raise benefits substantially. That is why it is so important to use a rate that raises benefits by the highest amount, perhaps by RPI or earnings.

[Caroline Lucas]

I absolutely agree with the hon. Gentleman and thank him for his intervention. I think that people do want that to happen, partly because it is what they would want if they themselves fell into difficulties, and it is what they would want for their families and friends, who unfortunately and increasingly are in exactly that position.

[Andrew Bridgen]

rose—

[Charlie Elphicke]

rose—

[Caroline Lucas]

I will give way in a moment, but I should like to make a little progress on the other amendments.

The Opposition have supported the public sector pay freeze and the switch from RPI to CPI introduced by the coalition, saying that they did so on a short-term basis to tackle the deficit. The former shadow Pensions Minister, now shadow Chief Secretary to the Treasury, the hon. Member for Leeds West (Rachel Reeves), said that the Opposition supported the switch to CPI indexation as a temporary measure, and in July 2011 she said:

“Making a permanent change from the use of the retail prices index to the consumer prices index with the impact being felt even after the deficit is long gone is an ideologically driven move that we do not support.”––[Official Report, Pensions Public Bill Committee, 14 July 2011; c. 293.]

My contention is that people are suffering now and that is why the link to prices should be restored now. The Opposition seem to have swallowed the Government line that this measure is necessary despite acknowledging that it is ideologically driven. I repeat my disappointment that apparently they will not support my amendment 7.

This is a debate about priorities, not necessarily about affordability. As the right hon. Member for South Shields (David Miliband) made very clear during his strong speech on Second Reading, today, prices are increasing and they have been rising faster than earnings in recent years. We are in the grip of a harsh public sector pay freeze imposed by the Government and supported by the Opposition. If the Opposition really believe in making sure that benefits reflect the increase in the price of a pint of milk or a pair of school shoes, or what it really costs to make sure that people can survive without becoming destitute, I ask them again to reconsider whether they might support my amendment.

[Charlie Elphicke]

Does the hon. Lady share my puzzlement that she has tabled an amendment—a principled amendment with which I disagree—suggesting that the RPI measure of inflation should be used, and yet the official Opposition will not support it although they gave a commitment at the Dispatch Box that they wanted inflation uprating? Does she not find that strange?

[Caroline Lucas]

I thank the hon. Gentleman, who has encapsulated what I said in my earlier intervention and what I am saying now. Yes, it is strange, and disappointing.

Let me say a few words about RPI and earnings. The right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) and the hon. Member for St Ives (Andrew George) have tabled amendments on earnings that would improve the Bill, and I support them. However, we have a public sector pay freeze, and earnings growth right now is slow; people are experiencing falling living standards as energy bills and food prices rise faster than income. In the longer term, however, earnings are important. Since the second world war, the UK norm has been for earnings to rise faster than prices, with real wages rising in most years, driving living standards higher.

[Andrew Bridgen]

Will the hon. Lady give way?

[Caroline Lucas]

Let me make a bit more progress.

It is worth remembering that benefits were linked to earnings until 1980, when the Thatcher Government changed the link to prices in order to save money. That was a deliberate and aggressive policy to run down benefit levels. In 1980, unemployment benefits were one fifth of average earnings; today, they are one tenth. Earnings are important in the long term, but in the current context, I worry that focusing on earnings when they are so low, without the link to RPI, risks being a smokescreen for existing Government policy. I worry that without the additional protection of a link to prices, the link to earnings will not protect people from inflation risk over the next three years. People must, at the very minimum, be able to keep up with the rising cost of living. My personal view is that benefits should increase either in line with RPI or in line with average earnings, depending on which is higher, but I deliberately tabled a more modest amendment that would just restore the link to RPI because I wanted to press the Committee to provide that minimum protection in the face of this Bill, and hoped that such an amendment would garner more support.

[Andrew Bridgen]

The hon. Lady stated earlier that a 1% increase in benefits is a very small increase on a very small amount of money. Is she aware that the welfare budget is almost a third of all Government spending and is by no stretch of the imagination a small amount of money?

[Caroline Lucas]

If the hon. Gentleman made a distinction between the overall benefits bill and pensions, he might find that he had a rather different set of figures before him.

It is not true that the Government are doing this to be fair. The measure is an unnecessary, spiteful and counter-productive attack on the poor. It is unnecessary because it is ludicrous to blame the unemployed and the low-paid for the deficit and to elicit from them the highest price for paying it off when high earners are receiving tax breaks. As the Government well know but conveniently forget, the culprits behind the entire financial crisis were the bankers on their very high incomes, many of whom do very well from over-generous tax relief on pension contributions and will benefit from the tax cut that is being granted to the highest earners with the abolition of the 50p rate. I welcome the Opposition’s amendment on the latter point.

The measure is spiteful because the Government insist on suggesting that it is somehow unfair that benefits have gone up by 20% when they know very well that 20% of very little is very little, and that in cash terms the average annual increase for those on jobseeker’s allowance over the past five years has been just £2.37—that is hardly the life of Riley that Ministers are pretending. Again and again they frame the debate around misleading percentages instead of the reality of hard cash increases that are far lower for people on benefits than for those in work.

[Mr Marcus Jones (Nuneaton) (Con)]

The hon. Lady talks about reality. The reality that the country faces is that we are running a huge deficit year on year and have been doing so for some years. Will she say a little about that? Can she say how she proposes to pay for the policy she advocates and how much it would cost?

[Caroline Lucas]

I am grateful for the hon. Gentleman’s intervention, and yes, I can tell him how much it would cost: about £7.3 billion, according to the Library.

[Mr Jones]

rose—

[Caroline Lucas]

The hon. Gentleman has asked me a question, so he should let me answer it; I am very happy to do so. We face a number of choices, and the key thing is where we decide that the axe is going to fall. His Government would like the axe to fall on the poorest and most vulnerable; I would prefer that it fell on those with the broadest shoulders. That is the difference between us. It is also important to say that his Government’s policies are draining demand out of the economy and making the deficit worse. If I were in his shoes, I would be looking to see why my own Government’s policies are exacerbating the deficit, not making it better. If we looked for some alternatives, we might find a more positive way forward.

[Mr Jones]

rose—

[Caroline Lucas]

I have let the hon. Gentleman intervene once, and I think that is probably enough.

The policy is also counter-productive. [Interruption.] Perhaps the hon. Member for Nuneaton (Mr Jones) would like to listen to this, because it addresses his point. Such a measure is counter-productive because, first, if money is taken from people who are only just surviving, they will experience more crises that the state will then have to step and pay for; and secondly, if money is put into the pockets of the poorest, they will spend it into the economy and thus address the deficit that we are trying to deal with.

[Mr Redwood]

Does the hon. Lady agree, though, that the policies of extremely expensive energy that she promotes are at the root of poverty now, and that if she would reverse her policies and go for cheap energy, we might be able to do something for the people we want to help?

[Caroline Lucas]

I congratulate the right hon. Gentleman on his attempt, but it was a bit feeble. All the evidence from Deutsche bank, the International Energy Agency and many other places tells us that rising fuel bills are a result of rising gas prices, and the percentage extra on people’s fuel bills that is coming from renewable energy, which, sadly, he is not a fan of, is very much smaller. I do not agree with his premise.

If our priority is fairness, we should be seeking savings from those who can afford it, not penalising the poorest and pushing them into ever more precarious misery. Without this very basic link to RPI, what exactly are we saying to people on benefits? We are giving them a message of punishment that says, “You’ve done something wrong. It’s your fault that you don’t have a job and the state is going to make life hard for you.” Frankly, that is despicable. Oxfam says that it is Dickensian and rightly points out that slashing the incomes of those at the bottom is not just cold-hearted but wrong-headed, because it will depress the economy further.

I said earlier that most people want to work, and I could cite very many examples from my own constituency of people who have come to my surgeries who are desperate for work but have been unable to find it. The link to RPI, as I have said, is essential. It is the absolute minimum acceptable. The Government have already taken from the poorest by switching to CPI and now they want to heap even more misery on people who simply cannot absorb it. Amendment 7 seeks to provide the most basic protection for benefits from the accumulative erosion of value that severing the historic link to prices will create. I commend the amendment, and hope to press it to a vote.

[Andrew George]

Amendment 10 stands in my name and in those of my right hon. Friend the Member for Ross, Skye and Lochaber (Mr Kennedy) and my hon. Friends the Members for Argyll and Bute (Mr Reid), for Manchester, Withington (Mr Leech), for North Cornwall (Dan Rogerson) and for Ceredigion (Mr Williams). Its purpose is to address the oft-repeated key concern of the Secretary of State and the Government—it has been repeated today by the hon. Member for Gloucester (Richard Graham) and others—that in certain circumstances and, admittedly, over selected periods, benefits have risen at a rate higher than wages, and that in straitened times such as these, a principle should be established whereby that should not happen and that average wages should be the marker against which future benefit rises are set.

A further weakness in the Government’s proposals, to repeat an earlier intervention of mine on the right hon. Member for Wokingham (Mr Redwood), relates to their intention to enshrine in future policy the blunt and inflexible instrument of a 1% rise beyond the next general election—up until 2016—and whether we can foretell with confidence what is likely to happen during that time.

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[Steve Webb]

I will not for the moment, because my hon. Friend has joined our proceedings relatively recently. I should like to respond to the amendments that my hon. Friends and others have tabled, and I hope he understands that.

Amendment 7, tabled by the hon. Member for Brighton, Pavilion (Caroline Lucas) and supported by the hon. Member for Banff and Buchan (Dr Whiteford), is in fantasy land, I am afraid. It not only rejects the savings in the Bill but would add additional savings on top by linking benefits to RPI. I have to give credit to the hon. Member for Brighton, Pavilion, because she knows how ludicrously expensive her amendment is and I am grateful to her for being frank about that. In a single year, it would cost £2.6 billion more than the current plan.

[Caroline Lucas]

rose—

[Steve Webb]

Let me respond a little further. The hon. Lady said that we should choose RPI because, essentially, it is bigger on average. The point about correcting benefits for inflation is not just to find the biggest number possible, but to measure inflation properly and correct benefits accordingly. We could also have a separate debate about the adequacy of benefits, but to use a flawed inflation measure that even the Office for National Statistics, which constructs it, says does not meet international standards, is a crazy direction to take, even if the hon. Lady did not need to find £2.5 billion.

[Caroline Lucas]

The hon. Member for Banff and Buchan (Dr Whiteford) addressed the fact that RPI is not a perfect indicator, but it is better than what we have. On the question of paying for our proposal, this is about priorities. If the Government limited tax relief on pension contributions to £26,000, that would give them £33 billion. If they cracked down on tax evasion and tax avoidance, they could get more than £100 billion. It is about political choices: this Government want to target the poorest and we do not.

[Steve Webb]

If it were trivial to raise £100 billion from the filthy rich, I suspect that most Governments would have been there by now.

The most credible, coherent amendment in this group is amendment 10, which was moved by my hon. Friend the Member for St Ives (Andrew George). He was so nice about me that I was almost tempted to accept the amendment, but not quite. Let me explain the reasons why not.

The first relates to the specifics of the amendment, which links benefit increases in 2014-15 and 2015-16 to whatever amount average earnings grow by. Based on the forecasts—I accept that that is what they are—that would mean an above inflation increase in the second of those two years, because we think that average earnings in a couple of years’ time will be more than CPI, as is the case in many normal years. At a time when we all agree that money will be tight, my hon. Friend is suggesting that an above inflation benefit increase in the second of those two years should be a priority. I do not think that it should be. At a time when we will have to make other difficult decisions about saving, the first consequence of his amendment—I do not imagine that he meant this—would be to lock in what we expect to be an above inflation increase in benefits in 2015-16. I do not believe that that will be our priority at that point.

Had we been in Committee upstairs and the Bill had further stages to go through, my hon. Friend may well have said that this was a probing amendment and we could have had a chat about it, but if we were to agree to the amendment tonight it would become part of the Bill that will go to the other place. It is a serious amendment that would have an unintended consequence.

Secondly, this is not intended as a wrecking amendment, but it would have that effect. We estimate that it would wipe out virtually all the Bill’s savings. Although I understand that my hon. Friend shares my concern about the impact on people on low incomes, that money would have to be found somewhere else. I do not believe that there is a painless way of finding that money or that the social security budget would be exempted from finding it.

We have already had to do some very difficult things on welfare spending in the Parliament whereby we have targeted particular benefits and identified particular issues, and a relatively small number of people have faced large cash losses. This is a different approach. It is a gradual approach that will create much smaller losses, but for much larger numbers of people. At a time when we are trying to find savings from this budget, I believe that spreading the pain relatively thinly across a larger group, rather than focusing on a smaller one, is the way to go.

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The Deputy Speaker resumed the Chair.

[Caroline Lucas]

On a point of order, Mr Deputy Speaker. I wonder whether consideration could be given to how our business could be organised better, so that legitimate amendments could be put to a vote rather than being talked out. My amendment was supported by at least four parties, and the amendment of the hon. Member for St Ives (Andrew George) would no doubt have received significant support as well, but there was no time for that happen. I think that it would be a worrying precedent if the only amendments put to a vote were those tabled by members of the official Opposition.