Welfare Benefits Up-rating Bill

Ian Mearns Excerpts

Monday 21st January 2013 Commons Chamber

[Charlie Elphicke]

I will speak briefly. I think that it is important that all of us who represent communities with a lot of deprivation, such as my constituency of Dover and Deal, make sure that the Government, or any Government, have policies that make work pay. About 5 million people in this country could work but do not. We need more of an incentive for people to realise their potential and do well in life. Part of that needs to be an economic incentive. Let me pray in aid the words of the Chancellor of the Exchequer:

“We have to acknowledge that over the last five years, those on out-of-work benefits have seen their incomes rise twice as fast as those in work. With pay restraint in businesses and Government, average earnings have risen by about 10% since 2007. Out-of-work benefits have gone up by about 20%. That is not fair to working people who pay the taxes that fund them.”—[Official Report, 5 December 2012; Vol. 554, c. 879.]

[Ian Mearns (Gateshead) (Lab)]

Will the hon. Gentleman give way?

[Charlie Elphicke]

I will in a moment.

It is also unfair on those people who are not in work, because they have no incentive to go and seek work. We need to provide that incentive, not because we want to attack people who are unemployed but because we want to give them every incentive to get work, realise their potential and take the opportunity to do really well in life and be a great success.

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[Mr McCann]

rose—

[Ian Mearns]

rose—

[Charlie Elphicke]

I have been quite generous in giving way, so I would like to make a bit of progress.

Let me turn to the issue of child poverty. We heard a lot of rhetoric on child poverty from the shadow Minister, in addition to the amazing spending commitment that he delivered to the Committee in response to my intervention. Let us look at the child poverty figures, which the Opposition say are a key reason to oppose clause 1. The figures from the last Parliament show that, after housing costs, there were 3.6 million children in poverty in 2004-05. In 2009-10, there were 3.8 million. In other words, it went up 200,000 under the previous Government. The figures for 2010-11, the latest available, went down 200,000 under the present Government. The achievement of the previous Labour Government was therefore to increase child poverty by 200,000—not a great record, to put it mildly—while the present Government have been in office at a time when child poverty has been falling.

Let us also consider the fact that there were 700,000 children in severe poverty in 2004-05. By the end of the Labour Government, that figure was the same. After one year of this Government, however, the figure had gone down to 600,000. Before the Opposition start talking about child poverty, they ought to take a closer look at their record in office. We also need to have a closer look at the policy of universal credit, which, according to Government statistics and the Red Book, will take about 350,000 children out of poverty.

It is important that we look after children and give them the best possible start in life, and this Government are committed to that. The Secretary of State for Work and Pensions is certainly committed to that, as am I. I am committed to the Bill, and the measures in clause 1 are really important because we need to do all we can to ensure that people who are not in work achieve their potential, get into work, do really well and achieve great success in their lives.

[Ian Mearns]

The hon. Member for Dover (Charlie Elphicke) forgot to mention that while those on benefits have had their benefits uprated at twice the rate of those in work in percentage terms over the past five years, the actual increase in financial terms has been on average about £49 for those in work and about £12 for those on benefits. Those figures were put into the public domain by Paul Lewis on “Moneybox” on BBC Radio 4, and I have no reason to disbelieve him. I wonder whether the hon. Gentleman has. It is important to take those figures into consideration. Percentages are meaningless; 50% or 100% of very little is still very little. Making comparisons in the way that he did demeans the debate.

I would like to thank you for calling me to speak, Mr Evans, because this is an important debate on a Bill that, if voted through, will have a detrimental impact on many thousands of my constituents and others across Tyneside and the north-east. I have said this before, but it is important: the way in which this country’s economy works is very different in different parts of the country. It is therefore important to remember that the equation of welfare to work is a two-part equation. Welfare is one part; work is the other. In some parts of the country, there is no work; in others, between a dozen and 20 people—or even more in some places—wait for each vacancy. In such places, where people have no real opportunity to get work anywhere near their own locality, there must be decent welfare so that they can sustain themselves, their families and, most important, their children.

I was fortunate enough to speak in previous debates on this issue earlier this month, so I shall keep this speech as brief as possible, given that many Members will wish to take part in the debate. I shall try not to repeat the points I have already made. Instead, I shall focus on the impact that the Bill will have on families and, particularly, on children. I also do not want to disregard one important set of people—namely, those with mental health difficulties. I believe that the impacts of the Bill on those people has been underplayed to a certain extent.

I visited Tyneside Mind in Gateshead on Friday and spoke to a range of service users there. It is disturbing to see the increased pressure being put on those vulnerable people, who are in a fragile state of mind, to jump through a whole range of hoops, and to see the impact that the new measures are having on them.

[Hywel Williams (Arfon) (PC)]

Does the hon. Gentleman accept that this situation puts great pressure on local agencies that are trying to help people back into work—the Agored Cymru in my constituency, for example, which works with people with mental health and substance abuse problems—and that they are feeling the pinch as well?

[Ian Mearns]

I have no doubt that that is the case. It applies to the north-east of England where the capacity of local authorities to help out local communities has been dramatically undermined—disproportionately, by comparison with other parts of the country.

This Bill provides yet another example of the Government demonising the most vulnerable in our society, making the poorest live in relative poverty. The Government’s decision to cap uprating on certain benefits and tax credits will, as confirmed only last week by the Minister with responsibility for disabilities, result in around 200,000 more children living in poverty. Let us bear in mind the fact that this is not the only policy forcing those on the lowest incomes into poverty. We need look only at the sprouting of food banks everywhere truly to understand the impact of this Government’s welfare agenda.

According to the Child Poverty Action Group report entitled “The Double Lockout: How local income families will be locked out of fair living standards”, this Bill

“is poverty-producing and means that both absolute and relative child poverty will increase”.

How exactly? First, delinking the uprating of benefits from increases in the price of commodities such as fuel and food will obviously result in a fall in standards of living for anyone dependent on state assistance. Given that two thirds of the households affected by the Bill have children in them, it is not hard to understand why child poverty will increase. Furthermore, given that proportionately poorer households spend more on basics such as fuel, food, water and other households necessities, their rate of inflation is higher when the prices of those basic goods increase faster—a trend we have seen over recent years.

In the last few months we have seen utility companies hiking up their prices—the highest change we have seen is about 10.8 or 11%. How on earth are the low paid and those out of work supposed to heat their homes if their benefits are not increased in line with inflation? We are going to see families—we are already seeing them—having to make the difficult choice between eating or heating.

The Children’s Society estimates that the following professions are also affected: 300,000 nurses and midwives in the NHS; 150,000 staff in primary and nursery schools; 1.14 million admin workers, secretaries and secretarial assistants; 44,000 electricians and electrical fitters; 510,000 sales assistants and cashiers; and 42,000 armed forces personnel.

[Toby Perkins]

Does not that list of people in those professions that are going to be badly hit fundamentally undermine the idea that the Bill is really about incentivising lazy people to go and get a job, which will happen only if the incentive system is made a little bit nastier?

[Ian Mearns]

I think it is the ultimate insult to ordinary people’s intelligence to say that in order to incentivise those at the top end of the economy we have to pay them more, while incentivising people at the bottom end by paying them less. “We are all in this together”—I don’t think.

By no stretch of the imagination should these hard-working people—all those I have just listed—be regarded as shirkers. The Joseph Rowntree Foundation estimates the cost of child poverty to the taxpayer as £25 billion, despite the fact that 57% of children living in poverty have one parent working. Surely increasing the number of children suffering from child poverty, which is what the Bill will do, will take more out of the Treasury’s coffers in the long term than would be saved from capping the uprating.

[Martin Horwood]

On the subject of insulting people’s intelligence, will the hon. Gentleman vote for either of the amendments that seek to change the rate of this benefit cut?

[Ian Mearns]

What I will do is listen to the debate and see whether I can be convinced one way or the other.

Given that the majority of the people impacted by the Bill are in work, the Minister should perhaps have listened to my suggestion on Second Reading: why not legislate for a living wage so that low-paid workers are not reliant on the Government to top up their income but are paid an adequate wage?

[Margot James]

The hon. Gentleman talks about low-paid people and what they are suffering, but will he acknowledge that many people have been taken out of tax altogether, including 3,000 in his own constituency, and that 30,000 people in his constituency have at least benefited from the increased personal allowances?

[Ian Mearns]

I live in the heart of my constituency, among the people whom I represent, and, oddly enough, the people whom I represent do not feel massively better off as a result of the Government’s changes. VAT, for instance, has a dramatically greater impact on those at the lower end of the income spectrum.

[Kate Green]

Is not one reason why very low-paid people do not gain in any way from an increase in the tax threshold the fact that if they are working part-time on the minimum wage, they will be below the tax threshold in the first place?

[Ian Mearns]

The position in my constituency is exemplified by the fact that household income probably hovers just above £20,000 per annum. That is household income, not personal income.

[Mr McCann]

Is it not the case that people do not feel better off because since the Government took office, the price of the average weekly shopping basket has risen by 17%?

[Ian Mearns]

I could not agree more, and that, of course, has a dramatic impact on people at the lower end of the income spectrum.

Let me clarify something that I said a moment ago. The average income per household in my constituency is just above £20,000 per annum, but that average is dragged up by some relatively well-heeled neighbourhoods. An awful lot of my constituents are struggling to get by, and I have a fantastic amount of sympathy for them, but there seems to be a compassion bypass on the Government Benches.

Given that most of the people affected by the Bill are in work, perhaps the Minister should adopt my earlier suggestion and return to the idea of a living wage. That could reduce the benefits bill, and also make companies such as Starbucks pay their staff a real wage so that we, the taxpayers, would not have to subsidise multinationals that may not be paying the corporation tax that they should be paying.

The Chancellor talks of strivers and skivers, but I see something different on the ground. I see families scraping by in low-paid work, or jumping from insecure jobs to benefits and back again. I have come across people who are working with all their might and main, moving from one part-time job to another just to scrape a living, and all too often the work that they are doing is demeaning and low-paid.

The truth, unlike what the Government keep spouting, is that those who rely on benefits and tax credits are in work, have worked, or will be desperately trying to find work in the near future. They are not scroungers, but victims of a stagnated economy, and the Government are undoubtedly making the situation worse. We need to stimulate the economy rather than stagnating it. We need to provide jobs in places such as the north-east. That, rather than crippling those who are on the lowest income levels in the whole economy, is the way to reduce the benefits bill.

Let me say this to Members in all parts of the House. When they walk towards the Lobbies, they should think long and hard about whether they can vote to allow 200,000 more children to live in poverty. I know which Lobby I will choose.

[Mr Redwood]

I think it would be a good idea for us to start by working out what we agree about, because during debates such as this the House sometimes becomes very tribal. It seems to me that we agree that we hate poverty, and that that is true not just of the Opposition but of the two governing parties. We see poverty as a scourge. We come here to promote and support policies that will make people better off and improve their living standards—of course we do—and today’s debate is about how we can achieve that in very straitened and difficult circumstances.

I should have thought it was common ground that we need to ensure that it is more worth while to work. In order to ascertain whether that is common ground, I intervened on the right hon. Member for East Ham (Stephen Timms)—who was very eloquent—and he said that that was indeed Labour policy as well as Conservative and Liberal Democrat policy. So we agree that we want to get rid of poverty and that we need to make work more worth while. That is where our Ministers are faced with a difficult dilemma. Last year’s benefits uprating occurred at about the peak of the spike in inflation and so benefit recipients got the 5.2% increase whereas low-paid people working alongside them in their local communities got perhaps 1.7%, if they were lucky—that was about the average. Suddenly, in one fell swoop, people were 3.5% worse off in work than out of work because of the normal uprating.

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[Mr Redwood]

What a miserable world the hon. Lady lives in. People on £30,000 and £40,000 need more money as well as people on £10,000 and £20,000, and I am here to try to ensure that they get more money. I do not believe that the Government should take all their money; they should be allowed to keep more of it so that they have more to spend, which would create more jobs. I thought that was part of the Opposition’s argument—or it would be, were we having a different debate. They will not use that argument today, because we are debating benefits.

My right hon. and hon. Friends on the Front Bench are trying to deal with part of the problem by taking people out of tax altogether and cutting the amount of tax that those at the lower end of the income scale have to pay. That is a very good thing to be doing. They are also about to launch their universal credit in trial systems. The whole purpose of universal credit, as described, is to make it more worth while to work and to deal with the fact that if benefit is taken away too quickly, people face a high rate of tax combined with benefit withdrawal, which is a big disincentive to going to work. It might even get in the way of their going to work, as they might not have enough money for the bus fare, the clothes they need and all the rest of the things one needs when setting oneself back up in a job. That is very important.

[Ian Mearns]

Where is the work?

[Mr Redwood]

The hon. Gentleman shouts “Where is the work?”, and of course we need more work. There are a lot of jobs on offer and we wish people well in applying for and getting them. I accept his implied point: in some parts of the country work is very scarce and we need economic policies that promote it. That is where lower taxes can be extremely helpful, and I urge my colleagues on the Front Bench to do more, if they can, because if more money is circulating in people’s pockets, bank accounts and purses, we will have more spending in the economy, which will help.

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[Andrew George]

I am sure that my right hon. and hon. Friends will make up their own minds on that issue. I do not speak for them, but I have made it clear that I will vote against the Bill as it stands, because I do not think it addresses the fundamental concerns that I have enunciated elsewhere.

To return to congratulating my hon. Friend the Minister on his achievements, my beloved coalition colleagues may not like what I am about to say—[Hon. Members: “Don’t say it!”] Having listened to what has been articulated by those in the Conservative party in recent months, we have to acknowledge what would have happened had my hon. Friend and, indeed, the Liberal Democrats not been in the coalition Government. First, we have to question whether we would have had the increase in the personal tax allowance, on which I congratulate the coalition Government. The Conservatives made it quite clear that they wished not only to freeze benefits altogether but to do so for six years, so we would not even be getting a 1% rise. There would have been a wider impact on pensioners and the disabled, which would have been significant. Child benefit would have been constrained, as well as being cut from families with more than two children.

[Ian Mearns]

The hon. Gentleman is making a powerful contribution. Given what he has said, does he reject the spin of some Government Members who have said that people on benefits have had their income uprated by 20% over a five-year period as opposed to 12.5% for those who work? When we examine the figures in cash terms—the impact on people’s pockets—we see that the uprating has been worth an average of £49 for people in work and only £12 or so for those who rely on benefits.

[Andrew George]

There has been a lot of selective quotation of statistics, with selective beginnings and ends of the time period within which those comparators are applied. I understood that the purpose of the Bill was as the Secretary of State articulated it when he introduced it—to ensure that benefits would never rise faster than average wages. Our amendment would deal with that.