Social Security and Pensions Debate
Full Debate: Read Full DebateKaren Buck
Main Page: Karen Buck (Labour - Westminster North)Department Debates - View all Karen Buck's debates with the Department for Work and Pensions
(2 years, 6 months ago)
Commons ChamberI join the Minister in thanking all the staff in the Department for Work and Pensions who, year in and year out, do so much to serve people on lower incomes. I can certainly speak from experience of my own caseload, as I know that individual staff in jobcentres and in the various call centres go out of their way to be of as much assistance as possible, particularly over the past two years. That needs to be recognised.
With each passing day we see more evidence of real hardship as the cost of living rises, and that hardship is experienced most by those on the lowest incomes. At the sharpest end, our food banks operated by the Trussell Trust and the Independent Food Aid Network are a stark measure of destitution, but all those on lower incomes are struggling—whether pensioners, working families, working people, carers or those permanently or temporarily unable to work due to sickness or disability—and the prospect of the coming months is filling people with fear.
All the organisations that work with those pensioners and working-age people, from Citizens Advice to the Child Poverty Action Group and many others, will report what is happening at the sharp end of their services as people are increasingly seeking assistance for help with debt and being driven into physical and mental hardship as a result of the financial situation that they find themselves in. This is not an abstract or statistical phenomenon; it is a reality of people in desperation.
The Secretary of State’s statement announcing a 3.1% rise in pensions and most but not all benefits for April 2022 was originally laid on 25 November, when the severity of the cost of living crisis that we are now facing was not fully apparent. We now know that by December annual inflation had already risen to 5.4%, and the Bank of England is forecasting inflation to peak at 7.25% in April this year. We have not seen a cost of living rise of this scale for over 30 years. The result is that in April pensions and benefits will be uprated by less than half of the annual increase in inflation. This shortfall between benefits uprating and actual inflation reflects the traditional lag between the data used for uprating and its coming into effect, as we have already heard.
However, what I do not understand is that in a system that is increasingly, in the digital age, being billed as flexible and responsive, we are unable to ensure that in the exceptional circumstances that we now face there is not greater responsiveness to the kind of shift that has left people exposed to rising bills. The Minister referred to there being a practical problem in being able to respond to the sharp change in circumstances we have seen over recent months, but he did not spell out what those practical limitations are and why, 12 years into a Conservative Government, it has been impossible to be more responsive to them.
The measures that the Government have put forward, as outlined by the Minister, fall far short in addressing the inflationary shock that households are now facing. The Government have opted for a “Buy now, pay later” scheme which means that, in order to avoid taxing the super-profits of the energy companies, customers will have to pay a forced levy for the next four years, while at the same time allocating targeted support according to 30-year-old property values.
The latter scheme means that some of the poorest households, pensioners and families with children are excluded from help if, for example, they happen to live in a housing association property built 20 years ago which, by virtue simply of being slightly newer, falls within a higher council tax band. We are allocating assistance on the basis of decades-old estimates of property values while ignoring the reality of data we happen to hold on the locations and identities of those in the lowest income bands. This also continues the recent trend of funding schemes through local councils that are not only much more unwieldy to administer but replace entitlement with discretion and easily risk missing out those most in need. That is true of the hardship fund, it has been true of discretionary housing payments, and it is now also true of the council tax scheme that the Government are seeking to adopt.
In contrast, we have put forward plans that will offset the energy price shock for low to middle-income families without requiring them to pay the energy companies back. This would be worth £600 to households on lower incomes, with a cut in VAT and an extended and increased warm home discount would be sufficient to provide a £400 warm home discount to 9.3 million households who would be entitled to receive it. Households that would be newly eligible include all working families with children that are claiming universal credit—currently, only those with incomes below £16,000 are entitled. In addition, our plan would extend eligibility to nearly a quarter of a million pensioners in the savings credit group.
We must also recognise the permanent impact of decisions on benefit uprating over the years, which are a contributing factor to the cost of living crisis. The crisis did not emerge fully formed in the last three or four months. My hon. Friend the Member for Reading East (Matt Rodda) will say more about the specific issue of pensions later, which was debated in the legislation that suspended the triple lock, but I will talk about working-age benefits.
Apart from the benefits for which inflation uprating is fixed in statute, the uprating of working-age benefits, how they are uprated and whether they are uprated at all has been subject to an anarchic approach over recent years, driven by short-term political calculations of Ministers and Chancellors that have long-term consequences. Since 2010, the only consistency we have seen is that the departure from normal annual uprating with inflation has been in one direction only: downward, with rises capped at arbitrary rates or simply frozen.
To fully catalogue all the freezes and caps that have been introduced since 2010 would keep us here all evening. Fortunately, the Department’s recently published abstract of benefit rate statistics summarises the impact of the main DWP benefits. Between April 2010 and last April, the real-terms value in 2021 prices of child benefit fell by 16% and the real-terms value of jobseeker’s allowance and employment and support allowance fell by 8%. Remarkably, looking at the data for jobseeker’s allowance and its predecessor, the real-terms value is now 10% lower than it was in 1965. Meanwhile, the real value of the universal credit standard allowance for a single person over 25 fell from £348 per month in 2013 to £324 per month in 2021 after the removal of the £20 uplift—a fall of 7%.
Those uprating choices have had permanent effects on benefit adequacy that are not reversed when benefit freezes come to an end. Policy choices since 2010 have ensured that families today are in a much weaker position to deal with a period of rapidly rising inflation than they would have been otherwise. We have come into the crisis with child and pensioner poverty rising, families already experiencing fuel stress and destitution rising. As last month’s Joseph Rowntree Charitable Trust report stated:
“Broadly speaking, there seems little prospect of reversing the trends since around 2012/13 of rising child poverty (which rose by four percentage points to almost a third of children by 2019/20) and rising pensioner poverty (which has risen by five percentage points to almost a fifth of pensioners by 2019/20)”.
The cost of living crisis for low to middle-income households did not start with a surge in energy prices; it has been building for years.
Apart from the permanent effect of the policies enforced between 2010 and 2020, the order also enshrines a continuation of the freeze of local housing allowance rates. The uprating statement made a rather pathetic attempt to claim that the Government had decided to maintain LHA levels at the elevated cash rates agreed for 2020-21, as if the default position would have been to reduce them in cash terms. Let us be clear: the Government have decided to freeze housing allowance rates for the second year in a row. That is a policy choice, so Ministers should own up to it.
What the Secretary of State refers to as the elevated cash terms of 2021 was simply the policy of setting the housing allowance at the 30th percentile of the rental market. We know what happens when the local housing allowance is allowed to fall away from rent inflation, because we have been here before. Before the pandemic forced the Government’s hand, the housing allowance, like other benefits, had been frozen for four years following years of below-inflation uprating. But of course, rents were not frozen.
By 2019, the average shortfall between the housing allowance and rent for a two-bedroom house was £1,250—equivalent to 7% of the total income of a typical renting universal credit family. According to the Office for National Statistics’ experimental data on rental prices, rents rose by 3% just between February 2020 and December 2021. For many households, that rise alone is enough to cancel out the effect of the Government’s much-vaunted £150 council tax rebate.
I have, then, another question for the Minister to answer when he responds to the debate: what is the Government’s policy on the setting of housing allowances? Is it to give the lowest-income families access to the bottom 30% of the local private rented sector? Is it that housing allowances should fall in cash terms every year unless the Government decide otherwise? Or is it simply down to the whim of whatever the Chancellor of the Exchequer happens to decide? Housing allowances have real-world impacts: they affect people’s ability to secure somewhere to live and to face a shortfall between the rent they actually pay and the income available to them, and, as in so many aspects of benefits policy, they feed into the work of other Government Departments, particularly in respect of rising homelessness.
Finally, it is important not to forget the effect of the limits and caps on benefits that hit living standards in unpredictable and arbitrary ways. Those limits and caps include the bedroom tax, the two-child limit and the benefit cap, the latter of which has not been uprated since 2016. The rationale for the cap was purportedly to limit benefits to the same amount as the average incomes of working families. That rationale was always a sleight of hand, but surely even those who accept it have to ask why its value should be fixed at 2016 levels.
We see again the same pattern that has been a hallmark of uprating decisions since 2010: anarchic policy making and indifference to the living-cost pressures faced by people in ordinary households who need to rely on social security benefits. Working people, retired people and people with families are all categories of people on lower incomes. The cost of living crisis is upon us now; the time to act is now. We need to supplement this year’s uprating with a targeted package of support that offers real help to people who are struggling. That is what the Government should do and that is what Labour would do.