Social Security and Pensions

Debate between Jonathan Edwards and Nigel Mills

Monday 7th February 2022 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

I think the Minister will find that he has managed to unite the whole House and every speaker in this debate. Sadly for him, he will find that every speaker, including me, thinks that the rise we will vote through tonight is not sufficient for the situation we find ourselves in. We will all ask the Government to go away and try to find some more.

We should be aware of the logic behind what we are doing. We are trying to give the people on the least—those who are out of work, those who cannot work, and those who have retired and therefore no longer work—sufficient money to pay all their bills. Unless we believe that people’s benefits are way higher than what they need, if we do not give them an inflationary increase every year, by definition they cannot possibly pay next year for all the things they had last year.

In this pretty unique situation of the rising cost of living, we are asking those with the least to get themselves not only through this winter, but through all of next year and all of next winter, based on an inflation measure that was taken before this winter. What they have to pay their energy bills in March 2023 will be based on a calculation of what was needed in September 2021. That surely cannot be right or logical. When bills are rising as sharply as they are, I cannot see how it is physically possible for people to do that.

Sadly, it does not look likely that we will be sat here in a year’s time with it all having reversed and with the gas price back to where it was a year ago. It does not look like a temporary blip; it looks like some of these prices will be baked in for a long time. There is sufficient uncertainty out there that there could be further challenges to come. I urge the Government to have a long, hard look at whether we really ought to have this system and whether we cannot do better than using September inflation figure to set the benefits and pension rise six months later.

At the start of the pandemic, the Government rightly chose to introduce the £20 uplift in universal credit. We managed to get that done in a matter of days. Last November, at the Chancellor’s financial statement, the reduction in the taper rate was announced and the Government managed to get that into force in a matter of days—on 1 December. Yet now we are told that they have to use the September inflation figure and cannot use a later one, even though we had the December figure in the middle of January, about three weeks ago, and three whole months before the rise comes into force.

I accept that some of the older, clunkier benefits—those whose systems are based on steam-driven 1980s IT that seems to work by shoving KitKat wrappers into the fuse box to patch it—may take a bit longer to programme. However, I would hope that for universal credit and the state pension—the two largest ones and the ones that affect the most people—we could take a more up-to-date figure. That would not fix the situation and wholly resolve the fact that inflation will be at 6% or 7%, but at least people would have got a 4.8% rise based on the December CPI rate rather than 3.1%. That would have been of help.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

The hon. Gentleman speaks with great authority on all these issues. I have been in the House for over a decade, and it is always a pleasure to listen to him on economic matters. In his view, is anything stopping the Chancellor from making a statement in his March Budget to reflect the cost of living and address some of the issues raised in the debate?

[Nigel Mills]

No, I think the Chancellor could do that at any point and, as I said, he can make changes to the biggest benefit system quite quickly if he sees the need to.

The case that I am trying to make to the Minister is that, at times, the Government can act much faster. I accept that huge investment in IT for legacy benefits that we are phasing out may not be effective, but I would have thought that, in the modern world, with the more modern systems, we could move on from basing the April rise on the inflation position six months earlier. I hope that the Government can find a way to base the rise at least on the December measure, so it is only three months out of date. I accept that for most years that would not make much difference, and for some years it could actually mean a slightly lower rise than using the September figure, but at least that would give us the best possible protection against this awful situation. Inflation is already much higher than it was at the reference point, and it will be even higher still by the time these amounts are paid.

I fear that the position is even worse than that at which I started—that of believing that benefits are in the right place and therefore an inflationary rise is needed. I genuinely fear that many of the benefits we have are now lower than people need, so a lower than inflation rise for benefits that are already too low leaves people in an impossible position. That is why I supported retaining the £20 uplift in universal credit.

I have told the Government many times that, if they believe that all these benefits are sufficient for the standard of living that we want people to have, they should do and publish an assessment of the basket of things that people have to buy and prove they can afford to buy them all. I would then happily support them. If such an assessment showed that benefits were too high, we could have a debate, but it is incredibly unlikely that it would show that. It is overwhelmingly likely that it would show that the measures that were necessary over the last 10 years have ended up going too far and that we are not giving people enough for the decent standard of living they ought to have. If that is so, we need to fix them. I challenge the Government to publish that assessment over the next year and prove their case that benefits are okay. Let us then get the inflationary increase done right. We cannot keep having this same debate in which many of us think that benefits are not in the right place and yet we cannot prove it because that is for the Government to do and, for some reason, they do not want to.

Finance Bill

Debate between Jonathan Edwards and Nigel Mills

Monday 2nd July 2012 Commons Chamber

[Jonathan Edwards]

It is a pleasure to contribute to the debate. It has been very interesting listening to the debate on income tax for the 2013-14 financial year. Hon. Members already know the position of the Plaid-SNP-Green group; we were among the handful of Members who voted against the inclusion of the new 45% additional rate in the founding principles of the Bill at the conclusion of the Budget debate earlier this year. Indeed, the official Opposition seemed to miss that debate, with the exception of two Labour Members, the hon. Members for Newport West (Paul Flynn) and for Bolsover (Mr Skinner). I also tabled amendments in Committee, which were supported at the time by the official Opposition, including some that they have chosen to table for this evening’s debate, which naturally I will support if they decide to push them to a vote later.

Much of the debate on Second Reading and in Committee focused on differing interpretations of, and often selective quotations from, a series of reports. Hon. Members attempted to argue that their party’s interpretation of the statistics was most valid, and we heard some of that again this evening. They were essentially making economic arguments about taxation—about the Government’s claim that the loss of tax revenue from shifting the 50% additional tax rate to 45% would be compensated for by the stimulus it would provide to the wider economy, and that given the amount of forestalling and income shifting that the 50% rate has apparently generated, we would be better off in future and, ultimately, more tax would be paid. That is the thrust of the argument.

I simply do not buy the idea that a tax cut will make those avoiding the 50% rate choose to contribute to society by paying at the 45% rate. What the Treasury should be doing, rather than giving a tax cut to those earning in excess of £3,000 a week, which is almost twice the average income in two months for most of my constituents, is closing down all the clearly aggressive tax avoidance schemes, some of which have been highlighted in recent weeks, and ending the tax havens that provide a nice bolthole for those who wish to hide their income.

For my party, however, the issue of taxation is one of principle. We believe that people should be proud to pay taxes and contribute to society. It should not be a game in which those who can afford to pay an accountant pay less and then consider it a triumph or a success. As I said during a debate in Committee, the Scandinavian model of taxation and social security is in my party’s DNA. Some might say that that is the difference between ourselves and the Labour party, which announced the introduction of the additional rate as a temporary measure, bringing it in literally weeks before the party left government. Where we believe that the additional rate is part and parcel of contributions to society, Labour remains unclear how long the now official Opposition intended to continue the additional rate.

This tax cut for the mega-rich leaves a bitter taste in the mouth. Public sector workers in my constituency face pension changes, meaning that they have to pay more in, that they get less out and that they work longer—that is, those who still have their jobs after spending several years with pay freezes and the threat of regional pay dangling over them. Living standards for private sector workers in my constituency are being squeezed, and many families struggling to make ends meet are being stigmatised by the Government, while the disabled and the vulnerable face tribunals to decide whether their pain is real. It is not acceptable that we are in a society which tells those at the bottom that they have a culture of entitlement, while those at the top get huge and unnecessary tax cuts. Why do we think that we can cut the poor’s income to make them work harder, but incentivise the rich through tax cuts? That is perverse thinking.

We support the aim of amendment 3, which would give those public sector workers earning less than £21,000 who have had their pay frozen a £250 tax rebate. They deserve it, as do many private sector workers who have lost out because of the Treasury’s austerity economics.

We support also amendment 1, tabled by the official Opposition, despite its effect of wiping out the additional rate altogether for 2013-14. Given their failure to vote on the inclusion of the 2013-14 rate in the Bill at the time of the Budget, we recognise that their intent is to show their belated support for maintaining current income tax rates. If the amendment is successful, we expect the Government to reinstate the top rate at 50%.

With last week’s figures confirming that the double-dip recession is deeper than first thought, and with the cuts now beginning to feed their way through the system, giving a tax cut to the mega-rich is a funny way of showing that we are all in this together.

[Nigel Mills]

It is a pleasure to follow the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). I shall make a few brief remarks on various subjects in the Bill, starting with the granny tax, which I also spoke about on either Second Reading or during the Budget debate—we seem to have been debating it for a long time, particularly those of us who have done a few weeks in Committee on some of these topics.

I was one of those who heard the Budget, heard the Chancellor briefly mention what became known as the granny tax and did realise what it was likely to mean. I was not one of those, like the hon. Member for Leeds West (Rachel Reeves), who claimed that the Chancellor had hidden it in his speech; it was clearly there.

Those of us who, in our short time as Members, have argued that we need to simplify our tax regime face a problem when one way suggested by the Office of Tax Simplification is this very idea. To be fair to the OTS, it did not envisage its idea being introduced quite so quickly. I suspect that generally it would be quite keen to have its ideas legislated on in a matter of weeks, but on this one it intended there to be further consultation and deliberation. It was, nevertheless, one idea that it came up with as a way of removing one of the regime’s complexities, whereby an additional allowance has to be claimed, the policy justification for which was determined a long time ago. It is perfectly reasonable for the Government to revisit it and to wonder whether, of all the groups in society who need such extra help, pensioners earning more than the state pension are one of them.

Those people who have done the right thing and saved, and who now have a little private pension on top of their state pension, are generally the ones in whom we want to encourage pension-saving behaviour, but the basic personal allowance is rapidly heading towards the £10,000 target in the coalition agreement, and the benefit of that higher personal allowance has to be clawed back. We are seeing a complexity with a reducing benefit, and we are perfectly entitled to want to understand the policy justification for it when we spend the limited amount of money that we have. It is not, therefore, an unreasonable or illogical proposal for the Government to bring forward; there was a year’s notice, and there is a chance for consultation to consider its impact.