Social Security (Additional Payments) Bill

Jonathan Ashworth Excerpts

2nd reading
Wednesday 22nd June 2022 Commons Chamber

[Dr Coffey]

I will not take any further interventions from the hon. Gentleman, because he has already intervened. I am sure that if he wants to contribute to this debate he will have put in to speak.

In 2019-20, children in households where all adults were in work were about six times less likely to be in absolute poverty than children in a household where nobody works. That is why our economic priority during the pandemic was to protect, support and create jobs through the furlough scheme and the many other measures we took as part of our plan for jobs.

[Jonathan Ashworth (Leicester South) (Lab/Co-op)]

The Secretary of State will of course know that her figures on absolute poverty and relative poverty are disputed by the various stakeholders who work in this field. One of the issues that is concerning people with regard to poverty is the failure to uprate benefits this year along the lines of this year’s levels of inflation. She has rightly said that pensions and benefits such as disability benefits and universal credit—and, hopefully, the minimum income guarantee and pension credit—will rise in line with inflation this September. She is coming under some pressure on that now. Can she give us a guarantee that she will not resile from that position?

[Dr Coffey]

The right hon. Gentleman may not be aware that I cannot make any declaration about the rises in benefits; I can only point to our policy in terms of, for example, the triple lock for pensioners. That is because I am required by law to undertake a review of the benefits once a year and I have not yet done so. I am sure that he will judge us on past performance, especially in following the regular legislation.

The unemployment rate is now below the low level we saw before the pandemic—close to the lowest since 1974—and we have more people on payrolls than ever before, but we are not resting on our laurels, particularly with a record number of vacancies in the labour market. We want people to get into work and to boost their incomes, which is why we launched the Way to Work scheme, quickly connecting claimants with employers looking to fill vacancies. Having turbo-charged jobcentres into super, almost dating, agencies in the way that they match people looking for work to people offering work, I am confident that we will achieve our target to move half a million people into jobs by the end of the month. There are hundreds of thousands more people benefiting from a pay packet, along with the prospect of a better job tomorrow and a future career.

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[Jonathan Ashworth (Leicester South) (Lab/Co-op)]

Let me begin by being clear with the Secretary of State: we do not intend to divide the House. We understand that the Government need to put in place the architecture to make these arrangements swiftly. None the less, we want to put on the record a number of points, on which I hope Ministers will provide some clarity in their response to Second Reading and throughout proceedings today.

Like many Members, the message that I am hearing up and down the country could not be clearer: for many of our constituents, these are the toughest times that anyone can remember. More than a decade of underwhelming economic growth has meant that today the cost of living is skyrocketing and pay packets are failing to keep pace with inflation. By next April, wages will be worth £2,000 less in real terms than in 2020, with real pay in the UK falling at the fastest rate for 20 years, leaving household finances stretched to breaking point. Prices are up in the shops and the cost of petrol is through the roof. Energy bills are sky-high, and the lifting of the price cap later this year means that they will increase further. Families everywhere are saying, “Enough is enough!” It should be no surprise that today’s statistics show a 12% increase in those with council tax arrears.

The Secretary of State took great care to explain why she is taking action to help those in need now, and the measures are welcome as far as they go, but the House has to understand that the future is bleak: energy market expert Cornwall Insight is warning that the energy cap could rise by a further £1,000 in October; inflation is at 9.1% today, with worse on the way; the cost of living will rapidly rise further; pensioners will see the value of their pensions and savings attacked by inflation; and working families will be left desperate to protect the value of their wages from the ravages of inflation—and the edict of Ministers tells them to take a pay cut.

Ministers hope that interest rates and tax increases will dampen demand in the economy, and thereby slow economic output. Pain today and pain tomorrow is their policy to get inflation under control, even though the Office for Budget Responsibility warned, following the spring statement, that we are heading for the biggest fall in living standards since the 1950s, with more children set to be pushed into absolute poverty. Labour was clear that taking no action following the spring statement would have amounted to the wilful impoverishment of many of our constituents—a price that we never believe is worth paying. We therefore proposed a windfall tax on North sea gas and oil producers to help families and pensioners, and we are pleased that after some months the Government finally listened to our representations.

We recognise the extra support that the Government are allocating today, but in reality this legislation—important though it is—is a short-term sticking plaster because of a series of long-term policy failures to grow our economy sufficiently, and to address the longer-term problems and hardship that have been growing over the last 10 years due to attacks on social security and unfair pay settlements.

[Jonathan Edwards]

Does the shadow Secretary of State agree that missing from the Bill is any support for unpaid carers, and does he share my hope that the Government will bring forward proposals in the near future to help that group?

[Jonathan Ashworth]

The hon. Gentleman anticipates a point I am going to make, which is why now is a good moment to turn to the specifics of the Bill. I want to raise a number of points that I hope Treasury Benchers will address throughout proceedings this afternoon, particularly regarding how the Bill impacts on four groups: the self-employed on universal credit; disabled people and carers; pensioners; and larger families.

First, on the self-employed who claim universal credit, the minimum income floor will reduce universal credit payments for some self-employed people to zero. Could the Minister clarify, in responding to the debate, whether self-employed universal credit claimants whose UC payments are zero purely because of the minimum income floor will be entitled to these cost of living payments?

Secondly, on how this impacts on disabled people, the disability charity Sense has warned today of the increasing numbers of disabled people pushed into debt as a result of the rising cost of living. Those on the Treasury Bench must surely understand that many disabled people have needs that make heating and electricity to power equipment particularly central to their wellbeing, so that economising on energy can bring severe hardship.

As my hon. Friend the Member for Battersea (Marsha De Cordova) raised a few moments ago, disabled people on non-means-tested benefits will get £150 as a minimum, and indeed those on means-tested benefits will get the £650. I appreciate that the Secretary of State says this is a responsibility of the Business Secretary, but Ministers did recently change the rules on the warm home discount scheme so that 290,000 people on disability living allowance, PIP and attendance allowance are no longer eligible.

For people on PIP, that means that the Government are giving £150 to them after it was taken off them through the changes to the warm home discount scheme. This is robbing Peter to pay Paul, and it suggests that one hand of Government does not know what the other hand of Government is doing. How can that be justified?

[Marsha De Cordova]

My right hon. Friend is making an excellent point, and he probably articulated it even better than I did. Does he also agree with me that the whole premise of DLA, PIP and attendance allowance is to help meet some of the extra costs faced by disabled people? The Secretary of State has stated that this is a different Department—it is BEIS—but she must none the less acknowledge the purpose of these benefits, and taking away one payment and giving some money back with another is actually going to leave nearly 300,000 disabled people worse off.

[Jonathan Ashworth]

My hon. Friend is absolutely right. I can assure her that she speaks with an eloquence on these matters that I rarely muster, and I thought she put her points powerfully.

Even though many disabled people have been given an additional £150, for many of them that will not cover the additional cost of inflation when applied to disability-related benefits. For example, for those on universal credit, the supplement for someone unable to work or engage in work-related activity rose by about £240 a year less than if it had been uprated in line with the consumer prices index. In addition, someone receiving the daily living component of PIP is worse off by £185 on the standard rate and by £274 on the enhanced rate as a result of the sub-inflation upratings later this year.

That is one of the reasons why many people out there are particularly concerned that the Secretary of State—I understand that, in legislation, she has to review these matters—and the Government may well resile from their commitment to inflation-increase benefits and pensions this September.

Equally, the hon. Gentleman who sits for a Welsh constituency that I cannot remember, and I am not sure I can pronounce it either—[Interruption.] The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) raised carer’s allowance, and people claiming carer’s allowance will not get any extra support. Carers often have higher energy bills because of their caring responsibilities, yet people in receipt of carer’s allowance—remember that they provide care for at least 35 hours a week and earn less than £132 a week—are likely to be hit hard without additional support. Why were carers left out of this package?

Thirdly, I want to talk about pensioners. We have 2 million pensioners in poverty, and the number is rising. The Prime Minister promised that pensions would keep pace with wages and prices, but, without any thought as to how hard pensioners are finding it to make ends meet, Ministers broke that promise by removing the so-called triple lock. That meant a real-terms cut of about £500 in the basic state pension—the biggest real-terms cut, I believe, for about 50 years. I was pleased to see Ministers commit to honouring the triple lock for next year, but we can see the pressure Ministers are coming under and we hope the Secretary of State does not break that promise for the next financial year.

We also need clarity from Ministers on whether the standard minimum guarantee of pension credit will be uprated in line with the consumer prices index in September. Pensioners on pension credit will receive the £650, as the Secretary of State knows, but pension credit uptake is not what it should be. If we could drive up the uptake of pension credit, Loughborough University estimates than an extra 440,000 retirees could be lifted out of poverty. With approximately 850,000 pensioners not claiming pension credit, a huge number are set to miss out. Failing to do more to increase pension credit uptake could mean that two thirds of the poorest pensioners will not get the extra £650.

I recognise that the Minister for Pensions and Financial Inclusion—the hon. Member for Hexham (Guy Opperman), who is not in his place—has been leading a campaign to drive up the uptake and has even been ballroom dancing with Len Goodman. However, the Bill’s impact assessment, which the Government have published today, shows that 1.4 million pensioners are benefiting, but in the second round it is estimated that 26,000 fewer payments will be made to pension credit recipients. Can the Secretary of State or the Minister responding to the debate—the Under-Secretary of State, the hon. Member for Macclesfield (David Rutley)—explain why that is and what it says about the success, or otherwise, of the Government’s pension credit take-up campaign?

Families with children are poorly served by flat rate payments. Families in the bottom half of the income distribution with two or more children spend twice as much on food, essential household goods and services, clothing, footwear and transport. Families with three or more children are likely to spend an additional £500 on energy, but the support on offer is not adjusted for size of family.

We recognise that the cost of living payment, combined with the £150 council tax rate, will provide £1,200 for working-age households in receipt of means-tested benefits. However, that will not cover the whole increase in energy bills, especially as further large increases in the price cap, perhaps of £1,000, are expected in October. Nor will it provide much mitigation of the wider price food rises.

Let me spell it out. We know that there will be another rise in gas and electricity prices, possibly of £800 to £1,000, for a family who have already faced an increase of £850. That family will therefore need to find at least £1,650. They will get the council tax deduction of £150; they will get the energy bill loan, turned into a grant, of £400; and they will get £650, paid in two instalments, supposedly to cover the year ahead. That is £1,200 in total, which will still leave them £450 worse off because of the energy price rises this year. As that comes on top of last October’s £20-a-week cut in universal credit, that family’s standard of living will be down by £1,450 on last year—£28 a week. That is even before we take into account the food shopping bill, which Kantar has today predicted will go up by at least £380. The Governor of the Bank of England has warned of “apocalyptic” increases in food prices.

Surely more Government action is needed. Ministers will retort that they are helping families to find employment; employment should indeed be the best defence against the rising cost of living, but under this Government, 8 million people in work are in poverty and are picking up food parcels for their families because of low pay and family circumstances. Some 2 million working families are on universal credit and have suffered similar losses to those who are out of work: they have lost the £20 uplift, they faced a real-terms cut in universal credit in April, and their wages are being outpaced by inflation, even after the national living wage increase.

I recognise that the Minister will respond that the Chancellor has reduced the UC taper rate and increased the work allowance, and that those with the highest earnings who qualify for universal credit gain the most from the reduced taper. However, for those with very low earnings, the gains are much less than the losses elsewhere. A lone parent with two children would lose £1,200 if they were not working, but would lose £1,300 if they were working 10 hours, nearly £700 if they were working 20 hours and £400 if they were working 30 hours. These families have already lost substantial amounts, and the package that the Chancellor has announced does not make up for it. Those examples are not exceptional. They will have a familiarity to every Member who speaks to their local food bank or citizens advice bureau. The problem is that the flat payment system takes no account of family size or special needs.

I hope the Minister addresses those points this afternoon, because we need more than quick fixes to protect the living standards of our constituents and tackle the chronic injustices of poverty. We entered the living standards crisis not just on the back of years of underwhelming economic growth, but after years of cutting, freezing and restricting access to social security, which left us with a threadbare system and an explosion in food bank, baby bank, bedding bank and fuel bank usage. The real-terms value of out-of-work benefits is the lowest for years. We have seen the pernicious two-child policy, caps on support, inadequate help with housing and council tax, and real-terms cuts to universal credit—real-terms deductions to the amount that people on universal credit are forced to grapple with.

That is why child poverty is rising on its way to 5 million, with half a million more children destitute and 500,000 children going without a decent bed at night. The outcry from our communities forced the Government to take short-term action, but we need a long-term plan to rebuild social security, grow the economy, raise living standards, and defeat child and pensioner poverty, so that the victims of poverty can participate fully in society. That is what I am determined to build.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I have now to announce the result of today’s deferred Division on the Abortion (Northern Ireland) Regulations 2022. The Ayes were 215 and the Noes were 70.

[The Division list is published at the end of today’s debates.]

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[Sir Stephen Timms (East Ham) (Lab)]

I am very pleased that the Bill is in front of us. The Select Committee has been clear in the past few weeks that, without a big measure on this kind of scale, low-income families would be in very serious trouble indeed in the coming months. I echo the tribute that has just been paid by the hon. Member for Aberdeen North (Kirsty Blackman) to Jack Monroe and her campaigning on this. She gave very compelling evidence to the Select Committee at our meeting on 9 March.

The package that has come forward has been widely welcomed. We put out a call for evidence on the cost of living in May. In response, the Joseph Rowntree Foundation said that,

“the package provided much-needed support for households, which will protect many of them against rising costs over the coming year.”

Citizens Advice welcomes the targeted support to low-income households and hoped that it would

“start to reverse the worrying trends we have seen in our data, including record-breaking food bank referrals.”

Unlike the previous announcements, this May package is properly targeted on low-income families, as it needed to be. The Resolution Foundation described it as offsetting

“the poor targeting of previous announcements.”

It also described it as “serious redistribution”. It is, I think, a serious response to a serious problem. I also welcome the Chancellor’s change of heart over the windfall tax to fund some of the help that is needed.

However, we need to be clear: the reason the Bill is needed is that the system for social security uprating has failed. It is a long-standing system. There is nothing new about the way it is done, but the unforeseen burst in inflation means that it simply has not worked this year. On this occasion, the decision has been taken to replace adequate uprating with ad hoc payments from the Treasury, which will certainly help us through the next few months. We need now to rethink the uprating system to make sure that it does not let us down again.

[Jonathan Ashworth]

I have a question for my right hon. Friend, the Chair of the Select Committee. Is he aware that, in 1976, the then Social Services Secretary, Barbara Castle, came to the House and uprated benefits and pensions for a second time in a year—there was a cost of living crisis then as well. The policy of the then shadow Secretary of State, Norman Fowler, was that uprating should take place twice a year. I wonder whether the Select Committee will consider the arguments that were made in the 1970s.

[Sir Stephen Timms]

My right hon. Friend makes a very important point. The Select Committee will certainly be looking at that. We are conducting an inquiry later this year on the question of the level of benefits, and the issue of how benefits should be uprated will certainly feature. I am intrigued to learn that the Secretary of State was able to do that in the 1970s given that we have been told that the IT systems in the 2020s cannot cope with it. I am certainly interested in seeing more on that.

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[David Rutley]

There is a statutory duty to review benefit cap levels at least once every five years, and this will happen at the appropriate time. When the Secretary of State decides to undertake the review, she will consider the national economic situation and any other matters she considers relevant at that moment in time.

I reiterate that carer’s allowance is not a means-tested benefit. Nearly 60% of working-age people on carer’s allowance will get the cost of living payment as they are on means-tested benefits or disability benefits. Carer’s allowance recipients will benefit from the £400 per household universal support being provided to help with the cost of energy bills.

People who receive carer’s allowance may live in a household that will benefit from the Government’s support package. For example, they may live with someone who receives a means-tested benefit, a disability benefit or tax credits. If so, the household will benefit from the cost of living payment.

The hon. Member for Westminster North (Ms Buck) has asked me in a number of debates why this measure does not more fully reflect different family sizes and formations. The challenge is trying to get these payments out as fast as possible. To do that, we need to get the payments out to “single benefit units,” as they are described, and households. The important thing to highlight is that most low-income families will be able to receive the £150 council tax support and the energy bill support, on top of the work allowance taper and the increase in the national living wage.

It is not possible to distinguish between those who have a permanent increase in their earnings and those whose earnings are temporarily fluctuating. If a UC claimant’s income subsequently falls, they will return to having a positive award after the cut-off date, and they may be eligible for the second payment.

The right hon. Member for Leicester South talked about the minimum income floor, which ensures we do not prop up unproductive employment or self-employment indefinitely. There is a start-up period to protect newly self-employed people. Beyond that, having a minimum income floor is the right policy. If it means there is a nil UC payment, the claimant would not be entitled to the means-tested payment. However, they would get the £400 energy payment and the £150 council tax rebate, and they would potentially be eligible for the household support fund. It is worth recognising that there are paid employment opportunities out there, given the high level of vacancies.

We have heard about the take-up of pension credit, and I am sitting next to the expert, the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman).

[Jonathan Ashworth]

Twinkle toes!

[David Rutley]

Whatever we want to call him, he will take this forward with aplomb, that is for sure.

There was a serious question about why the number of means-tested benefit recipients will fall in the second cost of living payment period, and it is because the projections reflect mortality rates. However, they do not reflect the important work many of us are doing to raise awareness, so hopefully many more people will claim it.

I think I have now answered most of the questions. The hon. Member for Richmond Park asked about industrial injuries disablement benefit, on which I would be more than willing to talk to her separately. We should not underestimate the additional payments from the household support fund to help people with the cost of essentials. The Chancellor announced another £500 million in his latest statement, and it will be available from October 2022 to March 2023.

In England, the £421 million household support fund will be administered by local authorities, and the devolved Administrations will receive £79 million through the Barnett formula. Importantly, there will be new guidance to local authorities on this latest extension of the household support fund to reflect the fact that some people who are not able to secure these additional payments will be able to go to their local council to secure support.