Benefits: Reductions

Lord Bassam of Brighton Excerpts

Thursday 1st November 2018 Lords Chamber

Moved by

[Lord Bassam of Brighton]

That this House takes note of the impact on family life of multiple reductions in welfare benefits, universal credit, tax credits, housing benefits and child benefit.

[Lord Bassam of Brighton (Lab)]

My Lords, before I begin my contribution I ought first to declare my interest as a member of the CPAG board; I am a trustee. I also offer a disclaimer: there are no jokes in this script and there are a lot of statistics. Labour Peers have tabled today’s debate to enable a focus on the impact of cumulative cuts to a multiple range of benefits. During the debate I am sure that many colleagues will wish to join me in paying tribute to Baroness Hollis, who recently passed away. Patricia was a big figure nationally and locally in her home town of Norwich. She was greatly respected for her work, championing measures that attacked poverty and promoting the interests of women in the social security and pension system. She also pioneered moves to bring greater equality to pensions. She was a first-class DWP Minister. When she became a Peer in 1990, she had already made a name for herself as a councillor in Norwich and had completed a five-year term as leader of the council. She had integrity and a fine intellect.

When Patricia made an argument everyone listened, even when they did not want to hear it. She was one of those who, early on, saw the harm and long-term damage that council house sales would do to the social fabric of our communities. From the time of her elevation she became a highly effective spokeswoman for the Labour Party on housing, local government, disability and social security. During her time in opposition in the 1990s she led moves to ensure pension sharing when couples divorce. This later became law. Again in opposition she led—indeed rose—from the Privy Council Benches to oppose cuts to tax credits, which, if carried through, would have devastated the household budgets of the working poor. When she wound up that debate, you could literally have heard a pin drop, and you could certainly see and feel the discomfort her argument generated on Benches all around the Chamber. So today I intend to invite the Government to instigate an annual “Hollis Debate” to be held in her memory, to consider what best can be done to tackle poverty and its causes.

Patricia’s passion in tackling poverty was borne of personal experience—something both she and I shared, and which helped hone her arguments. Her father was a farm labourer and her mother worked in service—which, curiously, were jobs which my mother undertook in raising me in rural Essex during hard times. More importantly, Patricia Hollis argued rightly that we need to stop looking at the cuts to benefits in isolation, instead looking holistically at the impact of multiple cuts. Too often, opposition has focused on the singularity of a cut—say to child benefit or housing support. Consequently, Labour will insist today that we look across the range of income support measures which the Government have systematically reduced over the last eight years. Only then will we have an accurate picture of how the Government have increased poverty.

It is worth just reminding ourselves of the legacy left by the last Labour Government in terms of poverty reduction. We invested substantially in health, education and particularly childcare. Both child and pensioner poverty rates were falling when we left office, and the economy was growing. We tried to cement these gains in countering child poverty through the Child Poverty Act, which set targets and defined needs. During our time in government we attacked poverty by using tax credits to make work pay, and by increasing the value of key benefits like child benefit, which had the double benefit of putting more money in the pockets of the poor—but usually of mothers. This enabled Labour to take over 1.1 million out of child poverty. Many of these measures have now been reversed, so it is estimated that 5.1 million children will be in families below the accepted poverty threshold by 2021. Why?

Most commentators would argue that it is because of the way in which, since 2010, many of the income support cuts have been loaded. The dual reduction in child benefit through freezes in value and the two-child cap will mean that, by 2021, the value of the benefit will be 23% lower than in 2010. The austerity budgets of Chancellors Osborne and Hammond have loaded deficit reduction on to cuts in spending at about 80% as opposed to increased taxation at roughly 20%. This policy continues, and is clear when we look at the detail of the Budget. The Resolution Foundation found that social security cuts will continue to hit the poorest hardest. It calculates that the richest fifth of households will gain £390 a year by 2023-24, whereas the poorest will lose an average of £400. With the increase in the higher tax band rising to £50,000 next April yielding a net gain of £540, those on benefits will lose out because of the continuing freeze on benefits, leading to a loss of a further £200 a year.

Coupled to these cuts have been reductions brought about by the overall benefit cap, set at £20,000— £23,000 in London—and the changes in tax credits. These latter changes have been particularly damaging, because they impact on families of “just about managing” parents in work. It is thought that roughly two-thirds of children in poverty are in families where parents are working. The problem for them is the combination of income support cuts linked to pay pegged at national minimum wage levels, and insecure work and zero-hours contracts.

The CPAG has undertaken research into the cumulative impact of social security cuts on family incomes. The losses are dramatic. Lone parents with children will be £1,940 a year worse off on average as a result of cuts in the legacy benefit system, and £2,380 worse off as a result of universal credit cuts. Of particular concern is the breaking of the link between need and entitlement—a fundamental principle in a means-tested social security system. Two examples of this are of course the benefit cap and the two-child limit, and a third the bedroom tax.

We know that working-age benefits have been hit hardest, with some benefits simply abolished, and many frozen or uprated at rates lower than inflation. The Child Poverty Act was abolished, and when Iain Duncan Smith was Secretary of State he famously even tried to get rid of a definition of poverty. Studies by the IFS, the Resolution Foundation and the Human Rights Commission show that the cumulative distributional effect of these measures has fallen on those on the lowest incomes in work and with children, and that lone parents in particular have been the biggest losers, making George Osborne’s claim that “we’re are all in this together” a cynical lie.

What depresses me most is that, despite Mr Hammond’s claims that “austerity is almost over” this week as he announced modest reversals of the universal credit cuts, there are more to come. The IFS has demonstrated that 75% of the cuts announced in 2015 are yet to arrive. By 2020, £40 billion will have disappeared from social benefits. Compare that with the £2.7 billion the Chancellor claimed to be putting back. Current plans are projected to remove a further £15 billion-worth of support.

All this comes at a cost: an insecure family life, an increased reliance on food banks, access only to poorer-quality housing, and reduced childcare support such as Sure Start—some 600 centres have closed to date. We have hungry children using breakfast clubs often funded by the schools themselves, at precisely the same time that free school meals are cut. We can see the effects. Our streets house more homeless people, elderly people are neglected, and our social care system is creaking. The IFS estimates that all the gains made by Labour in reducing poverty will be undone by 2020.

It does not have to be this way. We know how to tackle poverty, and especially child poverty. During Labour’s last time in government the UK was the best-performing OECD country at taking children out of low-income households and providing good wraparound childcare through Sure Start. We used the national minimum wage, along with tax credits, to help lift working families out of poverty. We protected pensioner incomes and obliged enrolment in workplace pension schemes to ensure universal coverage. Earlier Labour Governments promoted equal pay and tackled wage discrimination in the workplace. Taken together with the founding of the welfare state, Labour has historically put in place measures that lifted working people out of poverty. That is a record to be truly proud of.

We need as a nation to reinvigorate interest in ending poverty. One way to achieve this is to better inform the public debate and ensure that, at a time when we have close to full employment, there is an understanding that it comes with people in work who are poor. Zero-hours contracts, part-time working, the operation of the gig economy and reduced rights at work are all features of modern working life. But if we develop the conversation about poverty, poverty pay, the poverty of the workplace and the poverty of work experience, we will at least have gone some way towards Patricia Hollis’s belief that, if people understood the arguments about poverty and social justice, they would want to bring that poverty to an end. That is a legacy worth following. Let Baroness Hollis’s insights and example of fighting poverty during her long years in public service be our inspiration and our guide, and let us name that debate in her honour.

--- Later in debate ---

[Lord Bassam of Brighton]

My Lords, I thank everybody for their participation in this debate. The quality of it has proven the need that I identified at the outset: that we ought to have an annual Hollis debate on poverty and the best way to tackle it. I was greatly heartened by the warm words from all sides of the House about our late friend Baroness Patricia Hollis and her legacy. I recognise from some of the contributions—particularly those of the noble Lord, Lord Kirkwood, and my noble friend Lady Andrews—the way in which Patricia worked and her generosity of spirit. You often felt that she was there to make the case and advocate the case, even when she was being briefed by her civil servants. I well remember coming out of a meeting where she and I were being briefed for some future debate, and the civil servants were thanking her for the briefing she had just given them. That was a testament to her knowledge, and concentration on the detail of her brief.

There have been some common threads in this debate, although it has not always sounded quite like that. Colleagues on the Conservative Benches have been critical in part of the way in which universal credit has been rolled out. They recognised and acknowledged some of the problems with the system. The noble Baroness, Lady Buscombe, made an aggressive defence of the Government’s policy and I expect no less from her. The welter of statistics that she delivered this evening bear some close inspection and, on our side, we will want to reflect on some of the points she made. I think there was agreement, too, on both sides of the House that it is important that we place work at the centre of ensuring that people have an opportunity to work their way out of poverty, and that the relationship between the benefits system and the world of work is extraordinarily important, particularly for people on low incomes. Getting that right is very difficult. Our Government made strides and progressed in that direction; it is right that the current Government do the same.

However, it remains the case that there are losers from the introduction of universal credit. Almost two in five households will lose an average of more than £50 a week and 2.8 million households will see their income cut. A million home owners will see tax credits disappear, losing £43 a week on average, while 600,000 working single parents—I stress: working single parents—will lose money as well and 750,000 households on disability benefit will lose an average of £76 a week. There are more losers from this scheme than there are winners but getting it right is most important and, on our side, while we recognise that universal credit is a valuable system, we also recognise that it has flaws and that this Government have much to do to put those flaws right.

I thought that the Chancellor’s Statement this week was in one sense an admission of mistakes made in the past and an acknowledgement that more needs to be done in the future. We on our side of the House will argue that case because the impact on family life of these changes is profound. Anybody who doubts that should attend a surgery run by an MP, or go to a CAB or a law centre, and listen to some of the stories that come forward. They do not paint a happy picture.

That said, I am grateful to the House for its forbearance. I have learned a lot from this debate and I am sure that other colleagues have as well. It was a very fitting legacy to our friend Patricia Hollis, who was not just an inspiration but a great mentor to us all. She will will be greatly missed.

Motion agreed.