Welfare Benefits Up-rating Bill

Lord Bishop of Ripon and Leeds Excerpts

Tuesday 19th March 2013 Lords Chamber

Moved by

[The Lord Bishop of Ripon and Leeds]

2: Clause 1, page 1, line 4, at end insert “save for the exclusions specified in section (Protecting children’s benefits and tax credits)”

[The Lord Bishop of Ripon and Leeds]

My Lords, I will also speak to the other amendments in this group. Amendments 2 and 8 are paving amendments for a new clause to protect child benefits and child tax credits from the effects of this Bill. The substantive amendment to which they refer is Amendment 11. This follows extensive discussion in Committee, and is designed to halt the disproportionately negative effects of the Bill on children and their welfare. Amendments 13, 14 and 15 are consequential, and no doubt the noble Baroness, Lady Meacher, will speak to her Amendment 14A.

The Bill affects 30% of all households. Of those with dependent children, it affects 87%. Of lone-parent households, it affects 95%. Conspicuously, 11.5 million children suffer as a result of this Bill. This is in addition to the effects that our austerity measures have already had on children. In 2012, the Institute for Fiscal Studies estimated that there would indeed be a reduction of 0.9% in real-terms income for all households from 2010 to 2016. For a couple with two children, that fall will already, without this Bill, be 4.2%: equivalent to a fall of £215 per year for a couple without children, or £1,250 for a couple with two children. This Bill adds to that discrepancy, and it is that which cannot be fair.

It is true that we need particular concern for those in or on the verge of poverty. This Bill fails that test, too. For the poorest 20% of households, the IFS estimates to which I have referred suggest that the reduction in income is 7% from 2010 to 2016. In addition, 60% of the Bill’s savings come from those in the poorest third of our population, and 3% from those in the richest third. This will mean that, on the Government’s estimates, 200,000 more children will be in poverty, half of them in working families.

That in itself must make us pause to see what other ways there are to make the £0.9 billion savings which the child-related parts of this Bill are designed to produce in 2015-16. It is not for us today to declare what those alternatives should be. However, they do exist. Whether through reducing tax reliefs on pension contributions for the wealthy, or through introducing national insurance contributions on employer pension contributions, there are a number of different ways in which we could explore raising this money, which would not affect children in the ways in which this Bill does. We need to find a way for the burden of our fiscal challenges, so well described in the previous debate, to fall on those who, like me and many Members of this House, can afford to meet it, rather on than those who cannot. The noble Lord, Lord Newby, spoke in Committee of the importance of reviving the economy for the benefit of the future. That is absolutely right, but not at the expense of children’s needs now.

The major thrust of these amendments is to defend the nine out of 10 children in this country who are affected by the Bill. This effect is cumulative; it comes on top of the reductions already made. It has been argued that since many people are currently seeing wage increases of only 1%, benefits should also rise by only 1%. However, this Bill is an additional blow for those with children whose wages have increased by only 1%. Not only are their wages declining but, by this Bill, provision for their children will decline, too. These benefits affect those in work just as much as those who are not in work. None of the benefits referred to in these amendments is an out-of-work benefit. This is a transfer of the burden from all of us to those with children, and that increased burden on children cannot be right.

I continue to be particularly concerned at the continued gradual erosion of child benefit. The 1% cap comes after three years of the freezing of child benefit, so it is a cap on a figure that has already been reduced. From 2011 to 2015, the increase in child benefit will be 2%, rather than the estimated 16% of CPI over that period. Therefore, a couple with three children with one earner, such as a corporal in the Army, will lose £552 a year by 2015. A couple—one a childminder, let us say, earning £240 a week and the other a postal worker on £395 a week—with two children will lose £3.51 a week by 2015.

Child benefit has long been a crucial part of the support for families in our culture. That is particularly so for those on low wages. For very many families, child benefit is explicitly set aside to provide for children. Parents will struggle by making savings on their own lifestyle, sometimes even by going without meals themselves, but they will ensure that the child benefit that they receive is spent on their children. We owe it to the next generation to ensure that this element of our society, our children, is not disadvantaged, and certainly not disadvantaged by so much more than households without children.

In addition, child benefit plays a particular role in support of those in work because it acts as an earnings disregard in the calculation of housing and council tax benefits. Any reduction in child benefit is therefore a disincentive to returning to work. For a two-child family in work, on a low income and living in rented accommodation, the cut between 2010 and 2015 is not only the £4.80 a week in child benefit but an extra £4.10 in lost benefits. This working family on a low income therefore loses almost £9 a week.

I need to refer briefly to the third element in this package, that of the lower disability addition of universal credit. That is already being reduced from its current £57 a week to £28 a week under universal credit. Now it will be reduced further by this Bill. It seems extraordinary to reduce a benefit before it has even come into effect, especially when it provides for the needs of disabled children and their extra financial demands. These children need our support so they can live full and creative lives, and therefore benefit not just themselves but all of us. Children already contribute more than their fair share to our austerity burden. This Bill adds to their burden. I hope that we shall at least remove this extra pressure on them by accepting this amendment. I beg to move.

[Baroness Sherlock]

My Lords, I thank the right reverend Prelate the Bishop of Ripon and Leeds for introducing this amendment. I also congratulate him on continuing to press his concerns in this area after failing to receive any comfort at earlier stages of the Bill. I congratulate the Lords spiritual in general for being willing to stand up for what they believe, despite the inevitable volley of artillery that came their way the moment they dared to raise their heads above the cathedral parapet. It may be that we have them to thank for the extended interest in welfare benefits, which is much more than we see normally. I am delighted to see it.

As we have heard, this amendment would remove a number of children’s benefits and credits from the scope of the Bill. Since we on these Benches wish to remove all benefits and tax credits from the scope of the Bill, we are pleased to support it. We have heard at different points in the passage of this Bill that it has a disproportionate impact on families and children. The Government’s impact assessment shows that two-thirds of households affected are families with children. We also know that the Bill will have a direct effect on child poverty in Britain. Ministers have previously announced—as the right reverend Prelate noted—that this Bill alone will put a further 200,000 children into relative poverty.

In Committee, I asked the Minister to tell the Committee what the impact would be on the three other poverty measures in the Child Poverty Act. I got nothing back at all. Now the Child Poverty Action Group has dragged some information from the Government by means of the Freedom of Information Act—although it should not have had to use a FOI request to get it. I would have hoped the Minister could have told us the information when I asked for it in Committee. The Government have not yet offered a narrative assessment even of measures, for example, of material deprivation. However, they were forced to admit what would happen to the number of children in absolute poverty. In response to that FOI request, the DWP admitted for the first time that it estimates that around 200,000 more children in Britain will be pushed into absolute poverty by this uprating policy.

This is a shocking figure, which reveals the depth of what is wrong with this policy. It also removes the Government’s defence that the problem is with the relative poverty measure, rather than with the impact on children themselves. On the back of those figures, some new analysis for the Child Poverty Action Group by Landman Economics found that an increase of 600,000 children in absolute poverty is likely between 2010 and 2015, and that is net of any improvements as a result of universal credit.

As we have heard at many stages of this Bill, too many parents go without to ensure that they can heat their homes and feed and clothe their children. As the costs of food and energy have soared, more parents spend more of their money on these basic costs. Yet vital support that they depend upon is being cut in real terms in order to hand a tax cut to the very richest. It is not only the Church of England that has come out against these priorities; Archbishop Peter Smith, vice-president of the Catholic Bishops’ Conference of England and Wales stated:

“It is unjustifiable that the poorest children, who often have no other safety net, will be left bearing the brunt of economic difficulties as a result of significant real-term cuts to social security”.

The archbishop noted something that many of us know: that like many other charities across the country, Catholic agencies supporting parents find themselves ever more confronted with parents unable to afford even basic essentials, such as healthy meals or warm clothes for their children. That would be exacerbated by this Bill.

The real shame is that so many of those families have no alternative way of reducing that problem. Most victims of this Bill are working families. The parents are already doing the right thing; they are out working. One of the real disappointments about the debates we have had is the failure to acknowledge that, far from this being something that penalises only people who are not working, it is in fact the very same people who have had below-inflation or no pay increases and who have struggled repeatedly to get out, get work and get hours, who are hit by these cuts to tax and benefit support.

The Bill is a completely inappropriate way to address the uprating of essential state support for families. We already have perfectly good mechanisms to uprate annually in the light of inflation and prevailing economic conditions. These are poor choices for the Government to be making. The families who will be hit are not responsible for the failure of the Government to get the economy growing again. They are just doing their best to manage in difficult times, but the Government are planning to cut the value of the help that they get from the state to fund a tax cut for people earning £1 million a year. We should not be doing this, and we on these Benches are pleased and proud to support the amendment.

--- Later in debate ---

[Lord Newby]

My Lords, the whole House can agree on one thing. We all want to support families with children and ensure that children in this country have the opportunity to fulfil their potential. We have been discussing how we attempt to achieve that in the extremely difficult economic times in which we live.

I will spare noble Lords my speaking notes on the economic context, as we have already had a full debate on that. The only point I make in passing, in respect of the Opposition’s policies on deficit reduction, is that they passed legislation saying that by the forthcoming financial year it would be illegal not to have halved the deficit. It is therefore particularly surprising that they seem to have had no plan at the time to do it and have given no indication since of how they might have done it.

However, I must remind noble Lords again of the baseline from which these savings are being made. Tax credit expenditure increased by 340% under the previous Government compared to the benefits they replaced. Eligibility for tax credits was extended to nine out of 10 families with children and tax credits and child benefit accounted for £42 billion this year, which is over 40% of working-age welfare expenditure.

I will give noble Lords one other piece of context. The latest OECD figures show that of all the developed countries the UK, along with Ireland, spends the highest proportion of its national income on family benefits. We are not a country that takes these things lightly or a country that has not given very high priority to supporting families. We believe that that is absolutely a right priority and we support families with children as much as we can in the circumstances. Child benefit and tax credits exist to do that. However, as we have said, we have to focus resources where they are needed most.

A number of noble Lords, including the right reverend Prelate the Bishop of Leicester and the noble Lord, Lord Bates, have mentioned that this Bill is only one of a large number of measures that the Government are taking which affect families with children, in particular poor families with children. The noble Lord, Lord Bates, referred to the pupil premium, which will cost the Government £2.5 billion by next year. This will be worth £900 per disadvantaged child—and that is £900 in hard times. We are extending flexible support for early education. Since 2010, all three and four year-olds have been entitled to 15 hours of free childcare and we are extending this to 260,000 disadvantaged two year-olds from this year. This is immensely important to these families and it will be worth around £2,900 a year for the poorest families who benefit—£2,900 extra per family. We have found these hugely significant sums of money by making reductions elsewhere, because we place such a large priority on the poorest families.

As the noble Lord, Lord Bates, said, we protected the schools budget and the NHS budget. We are spending £1.2 billion on capital expenditure in schools. However, as the noble Lord, Lord Forsyth, has said, one of the most important things we have to do is leave our children and grandchildren with a lack of deficit or a deficit that they can manage. The savings in the Bill attempt to begin to do that.

The first group of amendments would remove child benefit, child tax credit and the lower rate of disabled child addition in universal credit from the Bill. This would remove nearly half the savings from the Bill, which is around £900 million in 2015-16. I should like to make a further point on universal credit, although it has not been the subject of much debate in this group of amendments. I am sure we will be dealing with this important issue in more detail when we debate Amendment 3, to which my noble friend Lady Stowell will respond. Suffice it to say that part of the principle underlying the decisions we have taken on disability and universal credit is the need for simplicity and our desire to target support to the most severely disabled children.

The right reverend Prelate the Bishop of Ripon and Leeds referred to child benefit and expressed his concern that it had been frozen or taken away from the highest earners. What he did not say was that the Government have increased child tax credit by £180—more than inflation—to more than cover, in the first few years, the reduction in child benefit. Taking child benefit and child tax credit together, we have tilted the expenditure away from affluent families and put more of the cash into poorer ones. I think that is a sensible priority and I am surprised that he appears not to agree.

A number of noble Lords have talked about the impact of the Bill on child poverty. As has been pointed out, the Bill is forecast to increase the number of children in absolute poverty by 200,000 and the number in relative poverty by 200,000. For the avoidance of doubt and in answer to the point made by the noble Baroness, Lady Sherlock, my noble friend Lady Stowell wrote to the noble Lord, Lord McKenzie, copied to other noble Lords, on 13 March. Her letter contained the figure about absolute poverty so, far from seeking to avoid mentioning it, we chose to circulate it. I am not saying that absolute poverty is not something we should be extremely concerned about but the term does not mean what most people think of as absolute poverty. The definition of absolute poverty is 60% of the median income in 2010-11 uprated to take account of inflation. The 200,000 children mentioned in respect of absolute poverty are very largely the same as the 200,000 who are mentioned in terms of relative poverty. You certainly cannot add those two numbers together.

At previous stages of the Bill, we have discussed the definition of child poverty and the importance of tackling child poverty. We know that if we focus on the relative income line we get some very odd results. We have pointed out previously that in 2010 300,000 fewer children were said to have moved out of poverty, not because anything changed in their lives but because the rest of society got poorer. The estimate on the impact of this Bill does not take account of policies which would cause child poverty figures to move in the other direction, such as universal credit which is expected to lift up to 250,000 children out of poverty, depending on the effect of the minimum income floor. We take the issues of cash and poverty, as currently defined, very seriously, but we also think that we need a broader definition of child poverty. That is why the Government are currently consulting on a wider definition. As I set out two weeks ago, and repeat today, this Government remain committed to eradicating child poverty. We believe that income will remain an important part of any new measure on child poverty, but focusing our resources on benefits alone is not enough. We have to take action to tackle the root causes of poverty, some of which I have described today.

I also take this opportunity to mention, as an example of what the Government are doing to support children and families in work with children, the announcement made today by the Prime Minister and Deputy Prime Minister concerning increasing eligibility for support to five times as many families as is currently the case through a new tax-free childcare scheme. Families where the parents are in work will be able to claim 20% of their childcare costs—equal to the basic rate of income tax—up to £6,000. The scheme will be phased in from the autumn of 2015. More than 2.5 million hard-working families will be eligible to benefit from these new proposals, compared with existing schemes offered by fewer than 5% of employers. Families on tax credits will be eligible to receive support for 70% of their childcare costs, and we have already committed an additional £200 million in universal credit, helping 100,000 more working families.

Today’s announcement of that further £200 million of additional support in universal credit will provide working families with the equivalent of 85% of their childcare costs where the lone parent or both parents pay income tax. That additional support will improve incentives to work and ensure that it is worth while for low and middle-income parents to work up to full-time hours. It will be phased in from April 2016 when childcare support moves from tax credits to universal credit. Together, these proposals will help to ensure that working families are not held back by the costs of childcare. They will remove disincentives to work for many mothers and provide flexibility and support for businesses to generate employment.

I hope I have been able to provide some reassurance that, although we are taking difficult decisions on welfare, they are necessary decisions. We are prioritising limited resources so that they go to measures that help families with children as well as those who aspire to work hard and get on. I therefore ask the right reverend Prelate to withdraw his amendment.

[The Lord Bishop of Ripon and Leeds]

My Lords, I am grateful to all those who have taken part in this debate and, indeed, to the Minister for his extended response to the discussion. I am grateful to the noble Baroness, Lady Sherlock, for her support and for the information that 200,000 children will be in absolute poverty as a result of the Bill. We have also recently had information from the Trussell Trust about the number of children who are now being fed through food banks.

I thank the noble Lord, Lord Forsyth, for his contribution, but this is not simply a variation on the previous amendment. For one thing, it would cost only half as much at £0.9 billion, rather than the £2 billion to £3 billion which has been mentioned in relation to the whole Bill.

There have been a number of suggestions—not just from me but from a collection of other people—as to how this money could be raised. At an earlier stage in our discussions on the Bill, I made suggestions and the noble Lord, Lord Newby, responded that they were indeed possibilities but not ones that fitted in with the Government’s current priorities. That is a perfectly fair response but it is not fair to say that taxing the winter fuel allowance or dealing differently with things such as free television licences, tax relief on pension contributions, national insurance contributions or employer pension costs and so on are not possible. They are possibilities. I was not quite sure what—

--- Later in debate ---

[Baroness Hollis of Heigham]

My Lords, I would have thought that the right reverend Prelate’s point was that we are facing political choices, not ones of financial necessity. We can make choices here and we are choosing instead to go after poor children.

[The Lord Bishop of Ripon and Leeds]

I thank the noble Lord and the noble Baroness for the answers they have given each other on this. It really is not my duty, as a Prelate in this House, to give the church’s view on exactly how the money should be raised. It is a task to say that there are alternatives and, indeed, to make suggestions as to how the money might be raised. There is no policy on exactly how it should be and I do not think that it would be for me to try to produce the solution to what we are doing. There are alternatives. I do not believe that they should be placed on children.

[Lord Deben]

I wonder whether the right reverend Prelate will understand this point. He is making specific remarks as to how we should spend the money. Is it not reasonable to say that he should take the responsibility for making specific suggestions as to how we should save the money?

[The Lord Bishop of Ripon and Leeds]

My Lords, I have made a number of specific suggestions as to ways in which this money could be provided from elsewhere. My basic point continues to be that it should not be raised by putting the pressure on children and their families. I am grateful to the Government—and to the noble Lord, Lord Bates, for raising the matter—for the child tax credit increase of £180 in 2011. It has to be said that that was, at the time, only the first of two announced upratings. The second, of £110, never happened because of the economic state in which we find ourselves. That above-inflation increase in child tax credit did something to ameliorate the pressure put on those in most difficulty, particularly children, by various other provisions made over the past few years.

I am grateful, too, for the announcements that the Minister has made this afternoon. However, one could say that if 20% of childcare is to be covered, that still means that those receiving that childcare need to find the other 80% in order to get the 20%. I absolutely agree with the Minister when he speaks of the need to tackle root causes and to make sure that more people are in work. I commend any efforts of any Government which lead in that direction.

However, these amendments are about children and we have moved much more widely in our discussion of them. I am still stuck with the statistic that the decrease in income for a couple without children will be 0.9% over the five years, but for a couple with two children it will be 4.2%. It is the differential between those two figures that we need to tackle. I recognise that attempts have been made to tackle them but they have been stubbornly unsuccessful so far. In view of the various things that the Government do for children—I certainly accept that they have a concern for children—I am sorry that they cannot accept the amendment. In the light of that, I wish to test the opinion of the House.