Social Security and Pensions

Karen Buck Excerpts

Monday 6th February 2023 Commons Chamber

[Ms Karen Buck (Westminster North) (Lab)]

In a few weeks’ time, we will have the latest figures on households below average income. They are likely to confirm what we already know: that poverty will soar as the measures taken during the covid pandemic fall out of the adjustment. The figures will confirm what we see every day, and what the Trussell Trust and others see at their food banks, which is that the cost of living crisis is hurting millions. For those with the least, soaring inflation means hunger, cold, and the fearful wait for the bailiffs, for debt recovery, or for the forced imposition of a prepayment meter. It has meant families being unable to put a school uniform on their child’s back.

There are 4 million children already in poverty; 700,000 more children were in poverty than in 2010 even before the pandemic, and the Joseph Rowntree Foundation report of a few weeks ago estimated that one in seven families was going without essentials. One fifth of pensioners are in poverty, with older and disabled pensioners being most seriously affected—and there, too, the figures are going up.

In a report published last week, the Institute for Fiscal Studies said:

“Although it never sounds the most exciting part of benefits policy, the default indexation of benefits —what happens to their value each year if the government takes no deliberate action—is a first-order issue over the long term, and even over the short term when inflation is high.”

The IFS is right to make the important point that indexation and uprating are assumed to happen if the Government take no deliberate action. The annual uprating of working-age benefits with prices has long been the default in this country. When Governments fail to uprate benefits, that is a deliberate action, although they like to pretend otherwise.

Over the last couple of years, a new ritual seems to have been established in the run-up to the autumn statement: rumours circulate that the Government have not decided what to do, or whether they will uprate; think-tanks work out the implications of a freeze on rates of poverty and living standards; and charities and civil rights organisations urge the Government not to allow the real-terms value of benefits to fall. Uprating becomes a hot topic in the media speculation that attends any fiscal event. Then, at the last moment, we learn that the Government have decided to uprate after all. The Government expect praise for doing the right thing, and nobody considers for a moment what an extraordinary state of affairs this has become. However, it is an extraordinary state of affairs.

How can a social security system carry out its most basic functions if the value of basic entitlements is being eroded by inflation? Previous Governments did not need to spend weeks deciding whether to uprate; uprating was just what happened if they took no deliberate action. The sorry truth is that since 2010, Governments have increasingly treated the annual uprating of working-age benefits as a policy choice rather than a norm—a policy choice driven by short-term considerations, but with permanent effects that they prefer to ignore.

[Dr Luke Evans]

The hon. Lady is missing the key point that the universal credit taper was changed from 63p to 55p. That is new, and it makes a huge difference; those who are earning have more money in their pocket.

[Ms Buck]

The hon. Gentleman should go back to the original plans for universal credit, and to what the taper rate was intended to be at the very beginning, before a former Chancellor got his hands on it.

[Guy Opperman]

There is criticism that this Government are different, but the process has not changed since 1987. It has been exactly the same under 13 years of a Labour Government, under the coalition Government since 2010, and under this Government.

[Ms Buck]

I am slightly baffled by that. Although we have heard confirmation of the uprating this year, the point is that it comes on the back of years and years of that annual uprating simply not happening. The failure—[Interruption.] It is not a question of process; what matters is the outcome of the process. Over a number of years, the freeze on benefits and the failure to uprate has left us with a rise in poverty, as I have said.

[Guy Opperman]

I do not want to get too much into a tit for tat, but will the hon. Lady accept that there are 400,000 fewer pensioners in absolute poverty, that absolute poverty has declined by 1.2 million people, and that the living wage is going up?

--- Later in debate ---

[Ms Buck]

The Government have decided to refer to the absolute poverty figures only, which we would expect to go down as the years go by. However, under the standard measure of poverty, the relative measure, there is an increase in poverty. Indeed, if we want to get into the details, the Government’s preferred measure also shows an increase in poverty among families, including families with more children. This year’s uprating will at best serve to maintain the value of benefits, which has been severely reduced over the last decades. The resulting inadequacy of the safety net has played out exactly as one might expect; it contributes to increased numbers of children in poverty, to deepening poverty, and to increased need for food banks.

[Margaret Greenwood (Wirral West) (Lab)]

My hon. Friend is making an excellent speech. Does she agree that the last Labour Government took 1 million children out of poverty, and that we could do with having a Labour Government immediately to take further action?

[Ms Buck]

I could not agree more. The Labour Government demonstrated what could be done with will, policy and investment; they brought about a dramatic reduction in pensioner poverty and child poverty. A future Labour Government will do exactly the same. Of course we will support the motion, but the Government deserve no praise—

[Richard Graham (Gloucester) (Con)]

Will the hon. Lady give way?

[Ms Buck]

I have given away enough for the moment. The Government deserve no praise for refraining from a deliberate action that they should never have contemplated taking in the first place.

It is important to recognise the limitations to the uprating order. Although the nominal value of most working-age benefits will increase by 10.1%, there will be no change to the eligible cost limits of two crucial benefits: the childcare element of universal credit and tax credits, and the local housing allowance. Do the Government think that childcare and housing costs are immune to inflation? How does allowing the erosion of the value of childcare support fit with their stated aims of encouraging work progression and helping working parents to increase their hours of work?

Yesterday, the deputy political editor of The Sunday Times reported that:

“Sunak and Hunt want a new benefits crackdown, including”

increasing the

“threshold under which people must attend regular job centre interviews/meet work coaches to be raised to 18 hours”.

If the Government are serious about helping parents to progress, they should ensure that parents are better off working more hours, rather than using the crude and unproven instruments of conditionality. As the IFS has shown, parents in the lower thirds of the earning distribution already stand to lose 58% of their additional earnings when moving from 20 to 40 hours of work a week.

Incentives to progress are already weak, so allowing inflation to erode the value of childcare support makes absolutely no sense. As evidence to the Work and Pensions Committee stated recently,

“The childcare support provided with UC is only sufficient to cover part-time hours, because the cap it is subject to has been frozen for six years”,

and

“A fixed cap amid rising childcare costs means fewer hours are eligible for reimbursement under UC today compared to Working Tax Credit in 2005—potentially restricting parents’ employment options.”

While I am on the subject, we hardly need reminding that the requirement for parents who claim childcare support to pay up front heaps the burden on to low-income parents, and contributes to the nightmare of overpayments and deductions, which contribute to the debt and destitution crisis.

The local housing allowance remains frozen for the third year in a row—at least, that is how everybody apart from the Secretary of State sees it. He said in his written statement of 17 November:

“I can also confirm that the local housing allowance rates for 2023-24 will be maintained in cash terms at the elevated rates agreed for 2020-21.”—[Official Report, 17 November 2022; Vol. 722, c. 24WS.]

Perhaps the Minister can explain how those rates, which are based simply on the 30th percentile of local rents in 2019—since when rents have risen by 8% overall according to the Institute for Fiscal Studies, and vastly more in some parts of the country—can seriously be described as elevated.

[Margaret Greenwood]

I thank my hon. Friend for giving way—she is being very generous. According to the Institute for Fiscal Studies, freezing local housing allowance, as opposed to uprating it to match local rents, will reduce support for nearly 1.1 million households by an average of £50 per month. Does she agree that that is an utterly impossible situation for people to face, and that we need action from the Government on it?

[Ms Buck]

It is absolutely impossible. Rents are such a major component of people’s expenditure. For that shortfall to first be fixed, and then to grow, is inexplicable. It absolutely eats into people’s residual income.

Nearly 1.5 million universal credit households receive the housing allowance. Of those, 844,000, or 58%, have rents above the maximum that local housing allowance will support. On average, they face a shortfall of £100 a month, which has to come out of their residual income.

[Richard Graham]

I am grateful to the hon. Lady, with whom I served on the Work and Pensions Committee a long time ago, for giving way. Have this Government not increased benefits by more than inflation, which is something that Labour never did in the 13 years it was in power? Secondly, will those on universal credit not be £1,000 better off as a result of the further reduction of the taper in the universal credit system, which she and the right hon. Member for East Ham (Sir Stephen Timms) continue to insist should be scrapped completely? Where does she think the social justice is in her party’s proposals?

[Ms Buck]

The fact of the matter is that poverty is rising —pensioner poverty is rising, child poverty is rising, and the local housing allowance and the childcare element are not keeping up with costs. That is simply a fact.

[Jeremy Corbyn (Islington North) (Ind)]

If I may, I will just take my hon. Friend back to the point she was making about rent levels, which have gone up extraordinarily in the past six months. London now has the highest rents of any city in Europe, and many people on benefits living in the private rented sector are paying well over £100 a month out of their remaining benefit. Does she not think that there is also a case for looking at local housing allowance levels?

[Ms Buck]

This freeze in local housing allowance, which is such a critical element of people’s income, is causing such hardship for hundreds of thousands of families. That is not only undermining living standards in the middle of a cost of living crisis, but leading to utterly perverse disparities between areas due to differences in rent inflation. The 30th percentile of rents in Bristol is £100 more than in Newbury, but the amount of housing support that those who live in Bristol can receive is £12.50 less than those who live in Newbury. To quote the Institute of Fiscal Studies again:

“the current approach makes little sense. It permanently bakes in historic information about differences in rents across the country, while entirely ignoring current information about those differences.”

We can see the real-world consequences playing out on our streets as rough sleeping soars and council homelessness units are stretched to breaking point.

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

I simply want to respond briefly to the intervention of the hon. Member for Gloucester (Richard Graham), who mentioned me in passing—inaccurately, I must say. He was wrong to say that benefits have been uprated in line with inflation. At the moment, the headline rate of benefits is the lowest in real terms for 40 years, following the repeated freezes we have had. Does my hon. Friend agree that the hon. Member for Gloucester ought to check the record?

[Ms Buck]

I totally agree with my right hon. Friend, who speaks with expertise on this issue.

The fact is that we have seen the implications of freezes in benefits. We are seeing it in soaring poverty, and we are seeing support for housing and childcare costs failing. Those things need to be based on real-world prices, not those obtained in the past. Universal credit and legacy benefits need to be uprated with general inflation—not just once in a while, but every year—if their value is not to be permanently eroded. It would be welcome if the Minister could commit to those basic principles at least.