Welfare Benefits Up-rating Bill

Lord Kirkwood of Kirkhope Excerpts

Monday 11th February 2013 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, it is a pleasure to follow the noble Lord, Lord Touhig, who is an expert in his field and brings an interesting Welsh dimension, as does my noble friend Lord German, to this important debate. It has been an excellent debate so far, reflecting the rising level of apprehension that exists in the country about what the future holds, particularly for the low-income, working-age households that the Bill particularly affects.

I am in some difficulty with the Bill because, at the risk of sounding pedantic, I do not even agree with the title. The Bill’s Short Title is “Welfare Benefits Up-rating Bill”. The Long Title is “To make provision relating to the up-rating of certain social security benefits”. I have argued this etymological, perhaps pedantic, point before. There is a world of difference between statutory social security entitlements and welfare benefits. Welfare benefits were things that we inherited from our American cousins. They have nothing whatever to do with the statutory provision that we in the United Kingdom have enjoyed for the past 20 years.

I agree with noble Lords who made powerful speeches about the kind of language that we use to frame the debate. It is not just “drivers” and “skivers”, but goes more fundamentally to the point that since Section 150 of the Social Security Administration Act 1992, which the Bill seeks to amend, we have always had uprating. I was there when that Act was cast. It put the uprating debate beyond short-term party-political arguments. It stated that there were entitlements that gave people on various benefits a stake in creating the wealth of our country. That is a very important element in the social cohesion that we have enjoyed in this country to date. We are at risk of setting a very bad precedent with the Bill by disrupting this for a three-year period.

My noble friend Lady Stowell made a powerful but, I think, Treasury-influenced speech with important points that cannot be ignored.

We need to try to have a more measured, long-term public discussion about what is going on. The public are ignorant about the facts of social security, and I mean that in the polite sense of the word. They are just untutored about what is going on. They are frightened to death by some of the gross figures because we always talk about cash as snapshot cash figures—and the quantities are truly frightening for anybody who does not know anything about it—instead of talking about percentage shares of the wealth of the country and the long-term longitudinal dimension to some of this debate, which tracks what families do in the course of a life, and looks at people going in and out of work and the contributions they have made through the national insurance contribution system, or what is left of it.

We should and could have a much more informed debate about what we think we can afford. If Britain is a poorer country, as I believe it is—I do not know for how long it is going to be poorer, but it is certainly not going to go back to sustainable levels of growth in the near future—we have to ensure that the country knows what that means for the future. It is an ageing society. We are all living longer and that is a success story, but we have to pay for that, too. We are talking not just about health costs but about costs across the whole public policy area. That debate is not happening to the qualitative level and the political extent that it should. That is the first point I wanted to make.

My second point concerns something that one or two colleagues have mentioned. On top of everything else, this Bill worries me. I could be persuaded that for the next 12-month period there is a case for looking at the uprating of benefits, and I would certainly want to engage in that. However, I am deeply worried that this is on top of everything else. I would like to think that I have been studying this as long as anybody, but I have no idea what the next five years are going to hold, particularly for low-income working-age families. The point that was powerfully made by the noble Baroness, Lady Hollis, was that the cumulative effect of all this has not been analysed by anybody. I would argue—and I think that the people sitting behind the Minister would probably say this—that the situation has been changing so fast that it has been impossible to pin down a cumulative analysis of what has been going on. I agree with her that this has to be done.

I want to make a connection between what the noble Baroness was saying and what my noble friend Lord German was saying, because he said something important with which I fundamentally agree: these cuts now have to stop. Between now and 2015, I will stand shoulder to shoulder with my noble friend Lord German, particularly in relation to low-income working-age households, in arguing that there should be no more cuts after this. Anything else would be to risk poverty and deprivation on a scale that we underestimate at our peril. If my noble friend Lord German and I get our way and stop any future change beyond this Bill, we could get on and do the arithmetic that the noble Baroness, Lady Hollis, is suggesting. Perhaps it is calculus, not arithmetic. If we do not do that, we will all be arguing blind. I certainly do not know what the full consequences will be of everything that has happened to date, and I do not think that that is safe. I want to come back to that in my final point.

I want to make one other point about fairness. I think the noble Lord, Lord Adebowale, made it earlier. There is a qualitative impact to these cuts as well as a quantitative one, particularly for low-income working-age households. The noble Lord said this powerfully; he has more experience in the front line than I have. The impact of a 1% cut for somebody in the lower two deciles of income is much more profound than for others. It does not matter what the cash effect is; it is the impact.

Another matter that deeply concerns me but that has not been drawn out enough is the residual level of unsecured debt that these households are carrying—estimates just shy of £6,000 on average. It worries me that this is what we are putting into households across the United Kingdom with an average unsecured debt of £6,000. The impact question has a qualitative as well as a quantitative effect.

In closing, I want to try to promote an amendment to this Bill because, as we have been saying, an inflation risk has been introduced in a way that we have never seen before. This Bill imposes a 1% uprating in 2014-15, regardless of inflation. I am sure that we all trust the Office for Budget Responsibility; I am not an economist, but it seems to me that their forecasts have been pretty dodgy in terms of some of the metrics in the economy in the past. If they are not right about a 2.6% increase in CPI, and a 2.2% increase the year after, in 2014, anything in excess of that will increase these cuts.

Nobody in this room can tell me what that increase will be. I have done these metrics but will get them checked before Committee, because my arithmetic is not great, but if inflation were to be 2% more than the OBR’s current forecast over the next two years, the savings in 2015-16 increase from £1.9 billion to £4.7 billion. Who can put their hand on their heart and say that they know that we are not going to face this kind of inflationary increase? With food costs, fuel costs and rent costs, some families will certainly experience a 2% increase over the OBR estimate. I do not know how widespread that will be, but some of them will face that, so it is just not safe for us as legislators. I know there might be some issues of financial privilege in some of this, but I think it is possible to amend this Bill in a way that says that in Clauses 1 and 2, subsection (1) shall be disapplied if inflation goes higher than 3% or 4%. I do not know. That is a political decision, and we will have to think about that.

Let me make it clear that I am not trying to take away the power of the Government eventually—as long as they stay within the envelope of the OBR’s estimates—to seek the automaticity of the 1% increase that is suggested in this Bill. However, if it goes anywhere above that, they have to default back and argue the case year by year using the 1992 Section 150 provisions. I think that would be a modest amendment. It would give people like me some comfort to know that there was some protection for these low-income households in future.

I say to colleagues, having been thinking about this carefully over the weekend, that if we do not do that there are next to no other circumstances in which it would be safe to introduce this Bill the way it stands at the moment. It will impose an inflation risk that is a one-way bet for the Chancellor, because if it goes up he gets more savings, and if it does not he gets the savings in any case. Therefore, we have to think carefully about this in Committee. I will happily participate in any discussions around an amendment of that nature in order to ensure that we give some protection to some of these families in future.