Welfare Benefits Up-rating Bill

Debate between Kwasi Kwarteng and Andrew George

Monday 21st January 2013 Commons Chamber

[Andrew George]

Amendment 10 stands in my name and in those of my right hon. Friend the Member for Ross, Skye and Lochaber (Mr Kennedy) and my hon. Friends the Members for Argyll and Bute (Mr Reid), for Manchester, Withington (Mr Leech), for North Cornwall (Dan Rogerson) and for Ceredigion (Mr Williams). Its purpose is to address the oft-repeated key concern of the Secretary of State and the Government—it has been repeated today by the hon. Member for Gloucester (Richard Graham) and others—that in certain circumstances and, admittedly, over selected periods, benefits have risen at a rate higher than wages, and that in straitened times such as these, a principle should be established whereby that should not happen and that average wages should be the marker against which future benefit rises are set.

A further weakness in the Government’s proposals, to repeat an earlier intervention of mine on the right hon. Member for Wokingham (Mr Redwood), relates to their intention to enshrine in future policy the blunt and inflexible instrument of a 1% rise beyond the next general election—up until 2016—and whether we can foretell with confidence what is likely to happen during that time.

[Kwasi Kwarteng (Spelthorne) (Con)]

Is it not the case that the 1% uprating is for two years? It is not designed to be extended after the next election.

[Andrew George]

The hon. Gentleman is right that it is for two years—it is from 2014 to 2016, which is beyond the next general election.

--- Later in debate ---

[Andrew George]

There has been a lot of selective quotation of statistics, with selective beginnings and ends of the time period within which those comparators are applied. I understood that the purpose of the Bill was as the Secretary of State articulated it when he introduced it—to ensure that benefits would never rise faster than average wages. Our amendment would deal with that.

[Kwasi Kwarteng]

My hon. Friend has suggested that people are referring to arbitrary time frames, but they are not. By looking at the past five years we can determine when the financial crisis began, so that is an entirely natural time frame to examine.

[Andrew George]

One can look at it in a variety of ways. If we examined a much wider time period, say the past 20 or 30 years, we would certainly not come to the conclusion that benefits have risen significantly faster than wages, because that is clearly not the case.

[Kwasi Kwarteng]

Will my hon. Friend acknowledge that the fiscal problem that the Government face began as a result of the financial crisis? It is therefore entirely logical to consider the matter over the period between the financial crisis beginning in 2008 and the present day.

[Andrew George]

But when does the crisis end? The figures produced by the Office for Budget Responsibility estimate that in three years’ time, wages will exceed CPI. One has to examine the matter over a much longer period. The Conservatives paid for some posters a couple of weeks ago to make the point that it was unacceptable for benefits to rise faster than wages, and the amendment would deal with that issue.

I said earlier that one big weakness of the Government’s proposal, and the reason why I opposed it, was the inflexibility of the 1% uprating. It takes no account of what may happen to food prices, for example, by 2015-16. It is all very well having a Bill that takes a clairvoyant view that a 1% increase will not press large numbers of working families, as well as out-of-work families, into severe and extreme hardship. However, we have experienced this year in the UK the impact of significant volatility in our climate. There has been significant climate change, which is having an impact on the food baskets of the world, including those in many developing countries and here. We therefore need to ask ourselves whether we can confidently say that there will not be food price spikes such as we saw only a few years ago. I suggest that we may see such spikes again. There is also tremendous concern about the potential volatility of energy prices. The 1% uprating figure is inflexible and somewhat arbitrary, and we cannot say with confidence that we will not need to introduce further primary legislation to revise that figure in 2016.

We must also consider the impact of the 1% uprating on housing. In their emergency Budget, the Government proposed to cut housing benefit from the 50th percentile of rents to the 30th percentile. Whether or not we like the fact that only 30% of the private rental market might be available to people in receipt of housing benefit, rather than half of it, it is essential that the rate is linked to the variation in private sector rents. The 1% uprating will break the link with what is available in the market and instead peg housing benefit back. In my area, and I know in many others, the Government’s attempt to peg it back by cutting the rate to the 30th per- centile of rents has failed to constrain private sector rents, so it has not had the desired impact. Maybe it has in some areas, but certainly not in mine or many others.

The measures that the Government have brought forward in the Bill have been ill thought through, and I fear that we will have to reconsider the figure set out in it next year or the year after. On that basis, we will listen to what the Minister says in response to the debate before we have the opportunity to divide the Committee on the amendment.

[Toby Perkins]

It is a great pleasure to follow the thoughtful and useful contribution of the hon. Member for St Ives (Andrew George) and the contributions of other hon. Members.

One thing that has come across in the speeches of Members on both sides of the Chamber is the economic illiteracy of the Government’s policy as part of a strategy for reducing the deficit. As other Members have said, one of the great things about welfare payments is that when people are living on the bread line, the money that they receive is spent in the local economy, often within their own community or on their own estate. They spend it at their local convenience store. They tend to spend it the minute they get it, rather than put it in trust funds, because they are attempting to sustain their life on the bread line.

When money is taken from the poorest in our society and at the same time given to the very wealthiest in our society, as was mentioned earlier, we are taking money away from people who will spend it in the real economy and giving it to people who are much more likely to take it out of the real economy and not spend it. It makes no economic sense, even on the basis that the Government are introducing this measure to reduce the deficit.