Social Security Benefits Up-rating Order 2014

Lord Kirkwood of Kirkhope Excerpts

Monday 3rd March 2014 Grand Committee

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I am pleased to follow my noble friend Lord German, who asked some pertinent questions. I want to take a slightly different approach and put these uprating orders into the context of a longer timescale. As I think we all know, changes to upratings will generate more savings for the department over the middle to longer term than any other single change, so it is important for Parliament to stay abreast of what is going on.

My first point is about process. In the old days—he says, reverting immediately to nostalgic mode—this used to be a huge debate. My noble friend the Minister will know, because he was there and was briefly a Minister, that the uprating order was a big event then, when we were spending millions, not billions as now. There was a full Chamber in the House of Commons and those numbers were keenly contested. It has now come to this, at the fag end of a late Monday, with the Minister and two or three lonely survivors discussing these very important matters. We must make sure that the parliamentary process is maintained because the scrutiny of these matters is important.

The process which we now have is a bit confusing to me. The Minister is absolutely right that the Welfare Benefits Up-rating Act 2013 basically takes out the working-age benefits from consideration this afternoon. I do not think that is for all time coming but I am not sure. I assume that the 2013 Act will render it nugatory to discuss working-age benefits until that Act falls away, after its third year. Presumably we will then go back to the uprating system as before. I am also a bit nervous about losing sight of tax credits and child credit Treasury-type benefits, which in the old days were also all subsumed into the one comprehensive debate.

I am even more confused about the annually managed expenditure proposals which the Chancellor has been talking about. I am always suspicious about Chancellors talking about social security department business as, in my experience, they invariably make a hash of it. I would stiffen the Minister’s resolve to resist these territorial ambitions from the Treasury, which are very hard to contain. I can see some heads nodding, so I am obviously on a strong point there.

The point that I am making is a simple one. In Parliament, we should insist on being able to have proper opportunities in good time to look at the comprehensive changes being made, even though they are getting more complicated, so that we can satisfy ourselves that at least we know what is going on and can make the best points to the Minister and his future heirs and successors. I am fearful that this is becoming so piecemeal that it is getting difficult to do. That is my first point and I suspect that the Minister will not disagree with it.

I would like to know what the additional costs of these orders are. They are basically pension-orientated. I have nothing whatever to say about the Guaranteed Minimum Pensions Increase Order. I have never had anything to say about that order; it goes on and it goes up, and that is fine. However, my impression is that there is £3 billion or so involved in increased spend and I would like to know to what extent, over the period of this order, that is derived from an increased caseload. In the middle to longer term, the demographics will obviously change regarding the proportion of the population. There will be more and more pensioners, so we will have more and more trouble paying for them, which is perhaps part of the answer to the important question that my noble friend Lord German asked. I would not mind being copied into any answer that he gets because it is a very important question. However, the caseload is bound to increase, so if that number increases, the costs will get bigger as the numbers get higher. I understand this, perhaps, more than most. As of the fiscal year 2014-15, we spend £211,000 million each year, every year, which is a serious sum of money. We really need to make sure that we understand how we are spending it and that we get control and make it as effective as we can. I should like to know the cost of these orders, just to keep track of the expenditure.

The Section 150 duty on the Secretary of State in the Social Security Administration Act 1992 is that he considers and reviews, and, in a kind of Delphic way, the answer comes out as CPI. I hope that the Minister would be able to give me some reassurances, after some of the evidence coming out from the archbishop, now cardinal, and the powerful intervention that he made about destitution. I do not think that he is right to say that the entire safety net has been withdrawn, but he is a serious man, and the Church of England and other churches are beginning to pick up the fact that some serious things are emerging in their localities. I think that they are correct about that, although I would not go as far as to say that the safety net was being removed. But that evidence is the kind of thing that I would hope somebody in Parliament would put in the box for the Secretary of State when he did the annual review.

There are other political issues as well. People like myself cannot understand why universal benefits for pensioners, in these circumstances when austerity is upon us, are not in the mix and being considered as possible savings. The fact that I get a winter fuel allowance is not appropriate to the financial circumstances that we are in. That is the kind of thing which I hoped the review would have looked at.

I was very struck by the Barnardo’s report just before last Christmas about the emergency food services now being used. The Minister and I have both watched these issues for a long time but I have never seen evidence as cogent as that—750,000 families. The emotional cost of rolling up and asking for food must be enormous. That is new and it cannot be ignored.

Finally—and I think that this is more hidden—the impact on local authorities’ service provision is beginning to be bigger than I have ever seen before in my past experience. That is characterised perhaps by the local welfare assistance fund, which I think the Local Government Association was right to complain that the Government seemed to be withdrawing funding from. These are the kinds of things which I hope the Minister will be able to tell me were thought through carefully in the department before the Secretary of State discharged his duty under the 1992 Act, because they are bits of evidence that are more cogent than I have seen in the recent past—and I have a longer list, but I shall spare him.

I am a member of the council of the Institute for Fiscal Studies, and I want to make a point about the 2.7% and CPI. I guess that the Government had no option but to go for CPI, because RPI is not appropriate any more—if discredited is too strong a word—and I can understand that. But there are problems with CPI in how it differentially impacts on low-income and high-income families. My speech will be a lot shorter, if the Minister says that he will read, or get somebody in his department to read, the IFS Green Budget of February 2014. Chapter 6 of that document says that,

“the average price level faced by households in the bottom quintile rose by 7.1 percentage points more than that faced by households in the top quintile between 2007-08 and 2013-14”.

That is a long stretch and 7.1% is a big figure. That is at page 126, in chapter 6 of the IFS Green Budget 2014. That figure struck me.

The other side of the question, looking at inflation, is on page 138 under the heading “Group specific inflation rates”. It states:

“Figure 6.10 shows that inflation rates since the recession have tended to be higher than average for low-income households … The average rate of inflation experienced by low-income households over the period 2008–09 to 2013–14 was 3.4%, compared with 2.4% for high-income households”.

These are snapshot quotes and you need to read the whole chapter to get the sense of the work that has been done by Oxford Economics, which did this work. This is very compelling evidence that it is dangerous just to go from mean average figures of inflation and prices because they impact differentially on different households and in different proportions of spend within family budgets, because lower-income people spend a lot more money on energy, food and the like than they do on mortgage interest payments. If I can have an agreement that somebody will read chapter 6, I will go on to my next point.

Although there is only a glancing reference in these regulations to universal credit and personal independence payments—it is the first time we have seen uprating orders for those two benefits and I wish them both well—the Minister and I both know that there is some controversy and uncertainty about the programmes and timetables for implementation for these benefits. I am sure that that will become clear during the period of the duration of these orders. Can the Minister say anything, even if it is in writing, about the timetable for it? The press comments and indeed the ministerial comments that have been made about the Atos origin contract for PIP understandably have caused a lot of uncertainty.

I have always believed that we have a problem in this country with the capacity of professional occupational health specialists. The Government are suffering from that, and any Government suffer from it. If you do not have the professionals—and it is a very skilled thing to do properly—any company, Atos or otherwise, will struggle to carry the weight of these hugely important and very onerous contracts. Can the Minister give us any comfort about the upratings contained in these orders as it relates to the personal independence payment and the timetable for dealing with Atos? Similarly, there are uprating elements in these orders about universal credit. If the Minister could give us any comfort on the timetable for universal credit and the ICT contract, that would be very welcome.

Finally, I noticed in the Explanatory Memorandum—they are always very instructive and helpful for these things, and I pay tribute to the poor people who have to write them—that the deductions for service charges on housing benefits for energy charges is 7.7% in the year to September 2013. I understand what service charges are and what rental agreement deductions are in housing benefit, and that they are not new. However, 7.7% is a big percentage. It might not be much—a couple of pounds—but that is a big change. I was grateful that the Explanatory Memorandum took the trouble to point it out to us. I hope that the Minister will take that back and satisfy himself that that is not an outlier figure as regards 2.7% increases here and there. Particularly when energy costs have gone up so dramatically over the recent past—there have been some quite significant increases—7.7% is striking. If the Minister can go away and satisfy himself that that is not a relative punitive increase in a deduction, I would be very grateful.

My main concern is that Parliament, over the distance, is able to track low-income households in particular. As we go into fiscal consolidation—I am sure we will and I hope we do, the sooner the better—differentially, as incomes go up the thrust in controlling the benefits spend keeps benefits down. Incomes go up and the difference gets too great. As parliamentarians—and I know that my noble friend takes an interest in these things—we are bound to make sure that we do everything we can to protect the poor.