Welfare Benefits Up-rating Bill

Lord Bishop of Leicester Excerpts

Monday 11th February 2013 Lords Chamber

[The Lord Bishop of Leicester]

My Lords, it is a privilege to follow the noble Lord, Lord Adebowale, who speaks with real authority and experience in this matter and who came to speak in Leicester this time last year to a group exploring the public responsibility for the poor.

It seems to me that, from time to time, it falls to these Benches to raise questions about the moral responsibility of this House and perhaps today is one such occasion. I want to ask what is the fundamental purpose of the Bill before us. The Minister has asserted that it is to achieve a stronger economy for the future. If that is the case, presumably it is designed to achieve short-term savings in response to a present budget deficit. However, because of its long-term effects, it looks like part of an ideologically motivated attempt to alter the very nature of the welfare state. If that is the case, we must ask ourselves what is the limit of our collective responsibility for the poorest in our society. I believe that there is confusion in this Bill about that limit in at least three key areas.

First, there is impact of the Bill on working families. One of the main arguments used to justify the Bill is that it is unfair that out-of-work families should see their benefits rise at a faster rate than hard-working families who are facing a squeeze in their wages. Others have made this point already. However, this claim is both inaccurate and unhelpful. It is inaccurate because the fact is that working families, and low earners in particular, are among those worst affected by this Bill, as we know. Working tax credit, one of the benefits included within the cap, is only available to working households. Other benefits that are also included, such as child benefit and child tax credit, are available to both working and non-working families. The House of Commons Library has estimated that if only out-of-work benefits were subjected to the 1% cap, 80% of the proposed savings would disappear. According to the Resolution Foundation, 60% of the impact of the Bill will fall on working households. In 2015-16, the 1% uprating policy will take a total of £2.8 billion out of the pockets of the very people who the Government should be seeking to support. More than at any other time, these families are relying on tax credits and other benefits to help compensate for the squeeze in their earnings and the rising prices of essentials.

As other noble Lords have mentioned, it is also unhelpful to set up a false distinction between in-work “strivers” and out-of-work “shirkers”. All of us who are actually in touch with the effects of this Bill in local communities know that many are losing their jobs through no fault of their own. Contrary to ministerial rhetoric, the vast majority of unemployed people want to work: 70% of unemployed people find work again within a year and only a tiny minority of workless households contain two generations who have never worked. As if it is not enough to lose your job, some of these people are now being vilified and impoverished.

Secondly, the Bill will have an adverse impact on the population at large. In total, it is estimated that 6.4 million families with children will be affected. That is 87% of all families with children and 95% of lone-parent families with children. While nearly all families will be affected by this policy, it is the poorest families who will bear the disproportionate share of the burden. The Government’s own impact analysis reveals that two-thirds of the cost of this measure is from the bottom third of the income distribution; only 3% is from the top third. Surely this is completely inconsistent with the Prime Minister’s statement that,

“those with broader shoulders should bear a greater load”.

I am not afraid to say that I think this is wrong.

Of course, this Bill comes on top of all the other welfare cuts that are disproportionately affecting low-income families, such as cuts in disability benefits and in the local housing allowance. I see at first hand the effects of these in my own city of Leicester, where the bedroom tax will affect 13% of tenanted households; the benefit cap will affect 585 households; and cuts in council tax support will affect 16,000 households, which will have to pay some element of council tax for the first time.

The Institute for Fiscal Studies estimates that the combined effect of all the tax and benefit changes introduced between 2010 and April 2015 is to reduce the incomes of the poorest fifth of families with children by about 7%. As others have said, the inevitable impact of this policy will be a further increase in child poverty. The Government’s own estimates are that this Bill will push 200,000 more children into poverty. Even before this measure was announced, the Institute for Fiscal Studies was already estimating that relative child poverty was set to increase by about 400,000 between 2010 and 2015. In Leicester, 32% of children are already in poverty, well above the 21% national average. This policy will substantially increase that number. I ask the Minister: what are the Government doing to reduce the impact on these 200,000 children?

Finally, I fear for the long-term implications of this policy. This Bill breaks the historic link between benefits and price inflation, which will have implications not just over the next three years but in 10 and 20 years’ time. We have not had enough public and political debate about this. The cumulative impact of this policy is a substantial erosion in the real value of benefits for the poorest working-age households, which is already considerably below what most people agree is necessary to achieve an adequate standard of living. Families that are already in a financially precarious position due to debt problems, lack of family support and so on will be particularly vulnerable, pushing many into unmanageable debt and triggering mental health problems, homelessness and family breakdown.

The changes to uprating policies announced by this Government already mean that the level of means-tested support will be 7% lower by 2016-17. If inflation turns out to be higher than currently forecast, the impact on living standards will be even greater—a serious risk that does not appear to have been adequately considered by the Government. Every unexpected increase in food prices or fuel costs will hit the pockets of those least able to bear the cost. What flexibility will there be to support vulnerable families if inflation rises much higher than the 2.2% measured by the consumer prices index?

If we wind the clock forward, what kind of safety net will be left in 10 or 20 years’ time? I fear that we are heading in the direction of a United States-style welfare system, where healthcare provision and pensions are large and protected but working-age provision is less generous and more stigmatised, barely providing enough for people to live on without relying on charitable handouts, where visits to the food bank are not an emergency response to an economic crisis but an integral part of the welfare state. Is this really the kind of society that we want to live in?

This Bill will not help the well-being of the most vulnerable in our society. It will depress hard-working families even further, remove much needed support for the vulnerable and unable to work, and potentially take us in the wrong direction for a generation, condemning countless children to poverty. It is a proposal that I cannot support.