Social Security (Additional Payments) (No. 2) Bill

Baroness Laing of Elderslie Excerpts

Committee stage
Monday 6th March 2023 Commons Chamber

[The Parliamentary Under-Secretary of State for Work and Pensions (Mims Davies)]

It is a pleasure to see you chairing the Committee this afternoon, Dame Eleanor.

I thank hon. Members for the useful debate on Second Reading and I welcome this opportunity for a more detailed examination of the Bill in Committee. Clause 1 enables the Government to make three separate cost of living payments of £301, £300 and £299 to individuals or couples with a qualifying entitlement to an income-related social security benefit or tax credit. I have listened carefully to the hon. Member for North East Fife (Wendy Chamberlain). We have looked in the round at what we have done before, and I want to set out strongly to the Committee that we have worked very hard, whether on the household support fund or on this Bill, to support the most vulnerable through the really tough times that she described. I hope to give the Committee answers that will show that.

To be clear, the clause sets out that the qualifying days for each of the cost of living payments will be specified in secondary regulations, which will help to minimise work disincentives and fraud risks. In response to amendments 4, 5 and 6, it might be helpful if I clarify for the hon. Lady that the dates set out in clause 1 are backstop dates, meaning the latest possible qualification dates that could be set out in regulations. Bringing those dates forward could not achieve the amendment’s desired effect, although I understand the sentiment.

In any event, making all cost of living payments by 1 April 2023 would not support our ambition to spread the support through 2023 and into 2024. In fact, we have increased the number of payments from those made in 2022, having listened and engaged with the feedback from MPs across the land. This ensures that as many people as possible will qualify for a payment at some point, including those who become entitled to a qualifying benefit later in the year and those whose earnings fluctuate from month to month. Making all the payments in one lump sum would mean that more people miss out.

I understand the hon. Lady’s point, but I must be robust in saying that we simply cannot do what she suggests, as it runs contrary to what we should be doing in spreading out support for the most vulnerable. It is also the total opposite of the Select Committee’s request for more payments. I hope she understands that and will withdraw her amendment.

[The Chairman of Ways and Means (Dame Eleanor Laing)]

I call the shadow Minister.

[Ms Karen Buck (Westminster North) (Lab)]

I, too, welcome you back to the Chair, Dame Eleanor.

We continue to support the additional payments covered by this Bill because they will deliver much-needed support to households facing the greatest cost of living crisis we have seen for decades, but we also continue to recognise the limitations inherent in any policy of one-off, flat-rate payments and the extra limitations of the approach taken here.

One of the problems that the additional payments are intended to address is the six-month lag between the value of social security benefits and real-world prices, which can lead to long-term impacts on the real value of benefits when inflation is high. That problem became critical in the winter of 2021, when it became obvious that annual inflation would reach over 10% by the time benefits were uprated by only 3.2% in the following April, using inflation data running up to the previous September.

We are still dealing with the consequences of the 2021 uprating decision. As the Institute for Fiscal Studies explains,

“in April 2023, the annual uprating of benefits will merely take them back to around the level they were at a year earlier—the shortfall that opened up between September 2021 and April 2022 will still remain unplugged.”

This means that the real value of benefits will be 6.2% lower in April 2023 than before the pandemic, and astonishingly, based on current forecast inflation, benefits will not return to their pre-pandemic level until 2025.

This problem was completely predictable well over a year ago—a year in which the Government could surely have applied themselves to coming up with a better solution than the one before us today. The approach of one-off, flat-rate payments could just about be justified last year by the international situation and the suddenness of the energy price surge, but that does not apply this year.

We know that one-off payments are a crude substitute for ensuring that social security benefits retain their real value. But even accepting the one-off approach, this Bill, while undoubtedly necessary, will lead to rough justice and, in some cases, poor value for money. It does not even attempt to relate payments to need; it sets qualifying conditions and arbitrary reasons; and it creates an arbitrary cliff edge in support based on whether people are receiving a penny of qualifying benefits.

Some households will be shielded from the impact of inflation—indeed, some will be more than protected—but, as these flat-rate payments take no account of household size and composition, which is one of our most fundamental concerns, there is huge variation in the protection that families in different circumstances will receive.

As the IFS has shown, in general it is those without children who are best protected, and larger families and households with disabled members who lose out most. Forty per cent. of families with three or more children, but only about 3% of those without children, would have been better off with a timely uprating of benefits. Seventeen per cent. of households receiving a disability benefit would have been better off had benefits been uprated in real time.

It is obvious that the flat-rate approach is inherently inequitable and poorly targeted, and it is hard to see how it can be justified given the time the Government have had to devise a better solution. That is further compounded by the qualification conditions, which insist that households must have received a positive award of a qualifying benefit within the month leading up to the qualifying dates. One of the issues that universal credit is supposed to address is fluctuating incomes, but fluctuations in income from month to month, the norm for many lower-income families, are simply ignored by this Bill.

The cliff edge in entitlement is well illustrated by the large number of households, an estimated 850,000, that would be better off by reducing their earnings to qualify for universal credit so that they can benefit from the additional payments. Families on earnings low enough to qualify for universal credit face losing up to £900 if they have a marginal increase in earnings just enough to take them out of receiving UC. It is therefore perfectly reasonable for colleagues to demand a full Government analysis of the distributional and public health impacts of this Bill.

This Bill falls short of what might reasonably have been expected from a Government who had plenty of time to come up with a better solution, but we want this money to go into people’s pockets as quickly as possible in what is, for millions, a deepening personal and family financial crisis, which is why we are not seeking to oppose or delay today’s proceedings.