Welfare Benefits Up-rating Bill

Debate between Ian Mearns and Madeleine Moon

Tuesday 8th January 2013 Commons Chamber

[Ian Mearns]

What is shocking for low-income families is the impact of VAT on their real income. Rises in VAT and other taxes of that nature have a disproportionate impact on people on lower incomes.

[Mrs Moon]

Will my hon. Friend give way?

[Ian Mearns]

I am afraid that I will not, because I need to make progress.

The shocking statistic is that the number of people experiencing in-work poverty has risen to 1.6 million. Sadly, workers are increasingly reliant on welfare to top up their low wages. The number of families receiving tax credits has risen by 50% since 2003 and 4.4 million jobs pay less than £7 an hour. We have to ask ourselves whether we want to continue to support a situation in which private employers in particular do not want to pay a living wage to the staff that they employ in order to make profits.

As the Secretary of State knows all too well, a real-terms cut will have a much greater impact on low-income households than on higher-income households because basic living costs make up a greater proportion of their income. Even when a cut is proportional to income, it is often felt more acutely by a household on a lower income, as a greater proportion of its income is spent on essentials such as food, fuel and clothing.

On Friday, The Daily Telegraph reported the managing director of Waitrose as predicting that the prices of basic food such as bread and vegetables could rise by up to 5% this year, and in the past few months utility companies have hiked up their prices—the biggest change that I have seen so far is 10.8%. How on earth are the low paid and those out of work supposed to heat their homes and feed their families if their benefits are not increased in line with inflation? Families are already having to make difficult choices between heating and eating.

Make no mistake about it, the Bill is intended to squeeze further the already squeezed. Analysis by Unison shows that in-work poverty is becoming the modern face of UK hardship. It is estimated that the freeze suggested in the Bill will cost an average family with two children more than £1,000 by 2015-16. The Chancellor may point to changes in personal tax allowances as the reasoning behind the Bill, but that will do little to offset the shortfall in the income of working families. The Child Poverty Action Group argues that a working family eligible for both housing and council tax benefit will gain only 13p a week extra—13p!—as a result of the extended personal allowances. We should remember the furore that the 20p upgrade in old-age pensions caused under the last Government, and in this case we are talking about 13p. It is a slap in the face for the working poor and their children.

The CPAG has also spoken of its grave concern about the Bill, arguing that failure to

“uprate in line with inflation will increase absolute child poverty, relative child poverty and the material deprivation”

of many children. The Bill fails any fairness test with regard to income distribution, and it fails the working poor, the job seeking, the caring and the disabled poor. It will push those at the bottom further down the ladder.

The Bill is shrouded in smoke and mirrors. The Chancellor’s choice of start date to illustrate the rise of out-of-work benefits is 2007, but if we take a longer period, for instance beginning in 1979, we can see that benefits have risen significantly less than wages. He talks about strivers and skivers, but I see something different on the ground—families scraping by in low-paid work or jumping from insecure jobs to benefits and back again. The truth, unlike what the Government keep spouting, is that the vast majority of those who rely on benefits and tax credits are either in work, have worked or will desperately be trying to get into work in the near future. They have made a contribution to society, but their families are really struggling.

Welfare to work is a two-part equation: welfare and work. Where there is no work—in many parts of the north-east there is not a great abundance of work—there must be welfare that is enough to sustain families fairly. I know that in difficult times we all have to think about ways of reducing the bills that face the Government, but let us do that in a way that is proper, productive and economically and socially beneficial. Let us do it by stimulating, not stagnating, our economy; by unlocking the huge investment potential of UK business; and by creating hundreds of thousands of real jobs, building houses and reinvigorating our infrastructure, not by punitively poisoning the minds of ordinary people and punishing the poor.