Welfare Benefits Up-rating Bill

John McDonnell Excerpts

Monday 21st January 2013 Commons Chamber

[Dr Whiteford]

I start by paying tribute to the work of the Scottish Campaign on Welfare Reform, which has done so much to draw attention to the impact of the measures in the Bill. It speaks volumes that more than 60 charities, Churches, other faith groups and trade unions have come together to speak with one voice to express their concerns about this heartless Bill and to support amendments that might mitigate some of its most adverse impacts.

The problem with what we are debating tonight is that an uprating cap of 1% is entirely arbitrary. It will inevitably cause hardship not just to those on low incomes but to those on middle incomes. I want to try to focus on amendment 7, which was supported so eloquently by my hon. Friend the Member for Brighton, Pavilion (Caroline Lucas). It is important that we try to restore a link to prices this evening. The problem with a below-inflation flat-rate uprating of benefits is that it represents a real-terms cut in the incomes and living standards of those who already live in the most straitened circumstances and will continue to do so for the next three years. Some 70% of those who are adversely affected are families with children and an estimated two thirds of the savings derived will be taken from the pockets of people in low-paid or part-time work.

Tonight, we have repeatedly heard, not least from the hon. Member for Gloucester (Richard Graham), that it is unfair, when people in work may be receiving below-inflation rises, not to impose a real-terms freeze in the uprating of benefits. That is a particularly facile argument, which we rehearsed on Second Reading. It goes without saying that whereas someone with a job with average pay would receive £200 or £300 for a 1% increase, depending on whether they were a man or a woman, a person on benefits of £70 a week would see an annual increase of £36. That probably would not even take me beyond the boundaries of my own constituency. It is wrong to pretend that 1% of not very much is equivalent to 1% of an average salary—or, indeed, of the very generous salary that so many people in this place enjoy.

As others have highlighted, there is a great deal of uncertainty in the Bill. If inflation stays in line with OBR predictions, the Government’s approach will result in a 4% real-terms cut in tax credits and benefits by 2015. That is a very big “if”, though: the OBR’s crystal ball has not been very effective to date and it has certainly not been good at predicting inflation—or, pretty much anything else. If inflation is higher than the guesstimates from the OBR, the impact on low and average-income households will be greater than we predict today. That is why we must preserve the link between social protection payments and the cost of living.

The Government’s distributional analysis of the impact of the autumn statement shows that next year the people in the five lowest income deciles will be worse off as a consequence of the cumulative impact of the Government’s changes to the tax and benefits system, and the least affluent will be the most affected. In contrast, three out of five people on average incomes and above will be better off. That exposes the truth of the matter: the Government have set themselves priorities and made choices that make those on low and average incomes pay for the tax breaks for the very wealthy. The poorer half of our society is being asked to carry the can for a financial crisis and a failure of political leadership that is not of its making, rather than seeing that burden shared across society.

The other key point that I want to make this evening—again, one that I made on Second Reading—echoes points made by the hon. Member for Gateshead (Ian Mearns) earlier today. It is that the measures of inflation that we use are not especially good at measuring the impact of inflation on lower income households. We know that low income households spend a far greater proportion of their resources on essentials such as food and domestic fuel. In the past five years, food prices have risen by around 30%, and the prices of some staple foods, such as potatoes, have risen by 40%. Projections for next year are for rising prices for a number of staple commodities because of poor harvests in north America and many parts of Europe, not least in our own country. Thrifty shoppers, as we know, are adept at switching to cheaper brands when money is tight, but when global prices are on an upward trajectory there is often nowhere to hide.

The other disproportionate expense for low income families is domestic energy, which is another area where prices have soared and fluctuated in recent years. The 20% increases in gas prices announced before Christmas are just the latest in a series of cumulative hikes in the price of fuel in recent years. There is snow on the ground outside today; that may be unusual here in London, but it is just normal winter weather in my constituency. In such conditions, families, especially families with young children, need to heat their homes adequately.

Although neither the consumer prices index nor the retail prices index captures the full impact of inflation on the lowest income households, the retail prices index includes some housing costs and is more likely to reflect the actual inflation that poor people experience. The Bill will cause tangible hardship, quantifiable in real money terms and in practical ways for people on low incomes. Hundreds of thousands of people who are disabled, who are carers, who are lone parents, will be particularly hard hit. It will hit families, whether they are in or out of work, dealing with the added expense of bringing up children. It will not cut the deficit—indeed, it will take money out of local economies and inhibit recovery at a time when we should be trying to get local economies going. On the basis of the Government’s own assessment, 200,000 more children will be pushed into poverty by this part of the Bill alone. We know that the long-term cost of child poverty cannot be measured only in financial terms. The long-term implications for children who grow up in deprivation are well quantified. The results are devastating and store up problems for the future, some of which we are still dealing with from the last period of austerity and the last poverty measures back in the 1980s and 1990s.

Dickens has been mentioned several times today. Whereas some speakers have talked of “A Christmas Carol” and the days of Scrooge, I was set thinking of “A Tale of Two Cities”, and indeed a tale of two countries. Today the Scottish Government announced an extra £5.7 million for advice services to support people who have to face the problems associated with these welfare cuts. It is a sad state of affairs when people are using food banks; it is a sad state of affairs when disabled people who, through no fault of their own, cannot persuade an employer to give them a job, are being pushed further into poverty and are being blamed and vilified for the state of the wider economy. People in Scotland have a choice and I look forward to the day they will get to make that choice in a referendum on their future governance, because never again will they have to take the Tory policies that they did not vote for.

Amendment 7 would make this deeply flawed Bill slightly less iniquitous and slightly less unfair, and would ensure that the very poorest families do not carry a disproportionate share of the burden in tough economic times. I urge Members across the Chamber to support us this evening when we push it to a vote.

[John McDonnell (Hayes and Harlington) (Lab)]

I apologise, Mr Amess, for persisting in seeking to speak at this late hour. I sat through the five hours of Second Reading and time did not permit me to be called then, and I have tabled an amendment tonight which we will not reach. One could become paranoid at times. I wanted the opportunity to set out my views briefly on this core element of the Bill for my own constituents.

I will vote for every amendment that seeks to ameliorate the Bill. That includes the amendments that have been tabled from both sides, including by my own party. I feel there is a moral imperative to do so. There was a consensus for a time in our country about how we dealt with welfare benefit upratings: they would increase on the basis of either earnings or inflation, whichever was the higher. That consensus was achieved because there was a moral commitment to protect the poorest in our society—in a civilised society. It went alongside a steady rise in wages at the time. What we have seen recently—it has impacted on my constituents particularly—is wage cuts and wage freezes across the public sector and in some parts of the private sector. I opposed the wage freeze in the public sector that was supported by my own party.

In the past 12 or 15 months we have seen a succession of measures—more than a dozen key measures—that have cut the income of my constituents. The Bill is the last straw. People in my constituency are suffering and will suffer more as a result of this measure. As I mentioned in a recent debate in Westminster Hall, there is a gulf between the views and experiences of some Members of the House and the experiences of many of our constituents and the way that they suffer. I thought that might be particular to my community—a working-class multicultural community that is taking a battering at present—but I looked at some of the statistics in the briefings that were prepared for this debate.

The Government’s own household survey of those living below the average wage identified 11% of families in that category who cannot keep their homes warm. I looked at the Save the Children survey, which found that 14% of children do not have a warm coat this winter. I looked at the survey undertaken by Contact a Family, the charity that works with families who care for disabled children. It was an extensive survey which found one in six families going without food, one in five without heating, one in four without the specialist adaptations that they need, and a third taking out a loan to pay for food and heating.

I looked at the Zacchaeus 2000 Trust work that has been undertaken by the Centre for Research in Social Policy, which demonstrated how the basic income from benefits has decreased in relation to the inflationary impact on basics such as food, heating and rents. I also looked at the work it had done on nutrition for expectant mothers and the concern, which was echoed some time ago by the Minister himself, about the incidence of poor maternal nutrition resulting in low birth weight.

The right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) expressed his fear that this was, effectively, dog-whistle politics, that the poor were being used as a political football between the parties. I share those fears. I wish I did not. That was the tenor of the debate that was opened up in the budgetary statement by the Chancellor of the Exchequer—the reference to curtains, and the debate that has gone on in the media about skivers and strivers. I have more faith in the British people. I do not believe that they accept the terms of that debate. I think the British people have a sense of fairness and a sense of moral commitment to people less fortunate than themselves. That is why I do not think there is majority support for the measure. I think that, as a result of this debate, understanding is overcoming prejudice. Prejudice will be defeated by humanity; there will be an upsurge of popular support for those of us across the House who will oppose this legislation tonight and are calling for the Government to think again about the whole trajectory of their welfare cuts.

My right hon. Friend the Member for Birkenhead (Mr Field) has done immensely important work about interventions to tackle deprivation. There is a whole range of them, and they are not just about income. However, his work has found that those interventions are impeded from the outset if people are struggling simply to put food on the table, heat their homes and have some kind of decent standard of living.

Clause 1 is a major setback for large numbers of people right the way across our country. It undermines their standard of living and diminishes the whole of our society. It will have repercussions for a long time to come, unless we defeat it tonight.