Social Security Benefits Up-rating Order 2018

Lord Kirkwood of Kirkhope Excerpts

Tuesday 27th February 2018 Grand Committee

I would be very grateful if the Minister could touch on those points and, if she cannot because of time constraints today, I will be more than happy for her to write to me explaining exactly what the Government’s strategy is here.

[Lord Kirkwood of Kirkhope (LD)]

It is a pleasure to follow the noble Baroness, Lady Primarolo, who did some excellent work on child poverty when she was a Treasury Minister, and I agree with everything she has said. I am pleased to join with the noble Baroness, Lady Lister, in that my reason for being here is that my public last year discovered that I was not here either. So here I am—but I am escaping the hour and a half of the consideration of the Secondary Legislation Scrutiny Committee by being here, and I have more friends in this Committee than I have upstairs.

I have not had a chance to say this, but I am very pleased to welcome the Minister to the Dispatch Box; I was dismayed by the wholesale shift of the ministerial team at the DWP recently—the only bright spot was that she survived. But I make a serious as well as a flippant point. With a change of that scale at a stage like this, in the middle of all sorts of huge policy changes, and—I am going to mention it once, because every meeting is allowed to mention it only once—the EU withdrawal process, it is very difficult to be confident that any Minister, no matter how engaged and diligent, can really grasp the full complexities of this subject area. It makes my heart sink when I think about exactly what the chances are facing the department, but I am pleased that the Minister is here. I know that she will make a contribution and listen carefully to today’s debate.

I award the DWP employee of the month prize to Mr Ben Pugh who at paragraph 7.7 of the draft Explanatory Memorandum to the statutory instrument came up with this marvellous sentence, which I shall keep as a special uprating debate moment:

“These amounts will therefore be increased by 3.0085%—the difference between £159.55 and £164.35 as a percentage of £159.55, taking account of the rounding of the new full rate to the nearest 5p”.


I think the paperwork we are presented with in consideration of these orders is becoming less useful. The noble Baroness, Lady Lister, asked a couple of really pertinent questions which would be much more relevant to understanding where we have been and where we are going, in terms not just of the spend that we have seen in the past but the affordability of what is going on, and a comparison. Anybody who has a Twitter account can see that the Resolution Foundation is drop-dead marvellous at putting these things in graphs—it makes them so much clearer and so much starker. Admittedly, the Government’s opening statement concentrated on the welcome additions to the pensions, the disability premium and all the rest, at 3%. I think they are right to do that and it is very welcome, but when you look at some of the disparities in the other spendings and you factor in the cuts, caps and freezes, some of these situations are much easier to understand if seen visually.

This is not making the Government’s job any easier but I make a plea that in future, we have an intelligent discussion about affordability, even if it is one of the little round tables that we often have and the Minister is kind enough to arrange. That is what I am driving at, because I am very nervous. In terms of the demographic change, I do not think we can afford the triple lock. I am not saying that it is my party’s policy to abolish it but if I have my way, it will be, because after 2020 the thing becomes impossible to sustain if you look at the economic picture over 20 years.

The Office for Budget Responsibility Welfare Trends Report was very instructive about the fragility, if I can put it that way, of the basis of universal credit. At the end of the day this will be a £60,000 million spend, covering 7.7 million households across the country. If the OBR cannot say one way or the other whether this is going to work properly—it is a very interesting report if that is what it is saying—that has to be taken into account in considering these orders, because we are setting the policy for the next few years. It is something we need to think more carefully about. We need to try to get better value for the spend we are making in these orders.

One of my most recent visits to universal credit—it is something I am thinking more clearly about and organising some extra visits, with the Minister’s help—led me to think about our ability to support families, not just with money but with signposting and warm handovers. There is a big difference between the two, but that can and should develop so that we are not just offering people a guarantee of 3% or whatever it is. We need to get better value for money by, for example, liberating the ability of people who are recently retired and are still relatively healthy: the longevity bonus, if you like. We need to take a community approach and offer them some incentives, to operate alongside families with chaotic lifestyles.

We need a long-term plan. Before the end of 2020, I would like us to structure a social protection system that is open about what percentage of the national wealth should be devoted to it. Then, if the economy goes up, we all enjoy the benefits; if it goes down, I think people would be prepared to accept that that is the way the world works. That is much fairer than imposing cuts, caps and freezes between now and 2019-20. The evidence indicates that low-income households will be assessed in a much harsher context than I have seen in my time in public life. I am older than I look and I have been round the block, but, seriously, come 2020, that will be the result if the benefit freeze is allowed to continue. The evidence is clear. My two colleagues earlier referred to their takes on this issue. We have the IFS, the Joseph Rowntree Foundation and the End Child Poverty coalition. The United Kingdom is blessed with an experienced and trusted research community that can be relied upon to carry out this work.

Of course, no one has the ability to foretell the future but all the indicators suggest that this situation will get a whole lot worse before it gets better. I do not think that it is sensible merely to tackle this from year to year and stick with policies crafted when inflation was 1%. It is now 3% and we are told that local authorities are contemplating putting up council tax by 6%. That just will not work. The End Child Poverty campaign has said that the poverty premium is now £1,700 a year for some households in some parts of the United Kingdom. That is a much higher figure than I have ever seen, so this is all pointing in the wrong direction. It is not safe to leave this freeze in place without thinking very carefully about where it is going and what we are going to do at the end of it. My honest opinion is that public opinion will not put up with the consequences of the current policy if it continues to 2020 and 2022.

I know that the Minister will think about this issue sensitively and carefully and will use her influence as one of the most senior Ministers in the DWP to twist people’s arms. I hope that she will kick down the door of the Treasury to try to inject a bit more realism with regard to what the department is facing. If she does not, the consequences will be picked up by low-income households and children living in poverty, as we heard earlier. They do not deserve that. We as legislators should pay more attention to putting these things right before they get too out of hand.

[Lord Jones (Lab)]

My Lords, I thank the Minister for her exposition, which was, as ever, very precise, and welcome my noble friend on the Opposition Front Bench. I also welcome both these orders. The triple lock is welcomed by millions of people. Looking at the complexity of these two orders and at the long list of the Committee’s business today, I might be forgiven for expressing the personal view that perhaps they should have been taken on the Floor of the House. We have discussed a huge range of benefits in a short period of time. We have had a short debate, yet the issues are huge, the moneys are mighty and they all relate to the citizenry—our people. All of us want better things for the people of our nation.

In Part 2, the DLA is increased by £2.50 a week. That is surely welcome, but will the Minister say why the increase could not have been bigger, given the difficult times that are experienced by so many people, who are just getting by or not even getting by? Part 2 also refers to bereavement benefits and the bereavement support payment. The latter is not to be increased. Will the Minister, in the fullness of time, say why not? Surely that is worthy of an increase.

--- Later in debate ---

[Baroness Buscombe]

This has been a really lively and interesting debate. It is right that I emphasise that these orders are not about the benefit freeze and a fair number of other issues raised by noble Lords. However, having said that, I shall attempt to do my best to reply to noble Lords.

I have some news, also, for the noble Lord, Lord Kirkwood. He was here last year. Indeed, there are some similarities in his speech. I have to say that some aspects of it I have enormous sympathy with, so I shall come to that, and I welcome his contribution to this debate.

I shall cut straight to the issues of benefit freeze. It is not a cut—it is a freeze—and it is part of a package of welfare reforms designed to incentivise work, which we know is the best route out of poverty. I want to talk about the things that we have done that are really positive, because I fear that if one listened just to noble Lords opposite one would have a sense that somehow everything is going completely wrong—but that simply is not the case. However—and I shall come to this again in a few minutes—the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Sherlock, touched on the issue of affordability, which is a really tough and prescient one. Indeed, it has exercised my mind and thoughts since I arrived at the Department for Work and Pensions, given the huge sums of money that we are spending on welfare. We are spending more on pensions alone than we are spending on education and defence put together—£100 billion a year out of a total government budget of £750 billion. That is a huge proportion. Yes, there are some really difficult choices; it is all about choices—so are we making the right ones? We believe that we are, but we will have disagreements, of course. Indeed, there will be disagreements not only across the House but in another place as well, which is entirely laudable. But as the noble Lord, Lord Kirkwood, said, all of us need to keep thinking in terms of the future sustainability of the welfare system which really looks after those who are most in need.

The benefit freeze is part of a package of welfare reforms that are designed to incentivise work, which is the best route out of poverty. We have brought in 30 hours a week of free childcare for working families in England, cut income tax for 30 million people and provided the lowest earners with their fastest pay rise in 20 years through the national living wage. So yes, that is one choice that that we have made, but we have to support those who are earning and those on low wages to the best of our ability. We see that welfare reform is working. The employment rate is at a near record high and there are fewer households where no one is in work than at any time since comparable records began. However, I will say, 14.5% of all households in the UK are still workless, which is far too many.

The noble Baroness, Lady Lister, referenced the Resolution Foundation saying that inequality is projected to rise to record levels in the coming years. We simply do not believe that that is the case. There are choices. We have to make difficult choices and believe that we should focus our spending on those who need it most.

On the question raised by the noble Baroness, Lady Lister, of the burden falling on the poorest, Her Majesty’s Treasury published a cumulative distributional analysis alongside the Budget in November 2017, showing the impacts on household income of tax, welfare and public expenditure changes implemented or planned to be implemented since the 2010 general election. This analysis shows that the state is highly redistributive. On average, the 10% of households with the lowest incomes receive more than four times as much support in spending as they contribute in tax, while the 10% of households with the highest incomes contribute more than five times as much in tax as they receive in spending.

The noble Baroness, Lady Primarolo, asked whether we will lift the freeze on working tax credits, child tax credits and child benefit. I respond by simply saying that the Treasury is responsible for these benefits and it announced the 2018-19 rates at the same time as the Budget in November 2017. The noble Baroness talked a lot about children and families. We are committed to supporting families and tackling the root causes of child poverty and disadvantage. If you are a child growing up in a household where no one is in work you are almost twice as likely to fail at all stages of your education than if you lived in a working family. Children in households where no one is in employment are five times more likely to be in poverty than those in households where all the adults work. Nearly three-quarters of children from families where no one has been in employment moved out of poverty when their parents entered full-time work. That is why we are supporting parents to find and stay in work.

We have made the childcare element of universal credit more generous. Parents on universal credit can now claim back up to 85% of eligible childcare costs, compared with 70% in working tax credit, a change that is benefiting 500,000 working families. This Government are investing record amounts in childcare. By 2019-20 we will be spending more than £6 billion per year to support working families in this way. For families who face additional, complex barriers to finding work, we set out our framework for action when we published our strategy, Improving Lives: Helping Workless Families in April. I can tell noble Lords that we are doing a huge amount of work on this in the department. As I said earlier, the number of households where no one is working is actually at a record low: it is 954,000 households lower than it was in 2010, which means 608,000 fewer children in such households than seven years ago. We believe we are on the right trajectory. On a before-housing-costs basis, there are now 200,000 fewer children living in absolute poverty than in 2010.

I want to confirm for the noble Baroness, Lady Primarolo, that inflation is not at 4%; it is actually at 3%. Indeed, that is something that I double-checked with our researchers at the department. The noble Baroness, Lady Lister, asked for figures on the poverty rate since 2010 and the impact of the benefit freeze. We do not actually have those figures but the benefit freeze is part of a package of welfare reforms designed to incentivise work and support working families, including, as I have said, increasing the national living wage, reducing income tax and, of course, the rollout of UC. I will write to the noble Baroness with those figures.

[Lord Kirkwood of Kirkhope]

Is there any programme to evaluate the work-incentive point? Of course it is a perfectly obvious point and it may be working, but the only place where the data can be found is in the department. Is the department doing any work that will evaluate whether the powerful work incentive point that she has just made is actually making a positive difference?

[Baroness Buscombe]

Yes. Work is being done and I am very conscious of the fact that we should be talking more about that. We have been saying that work pays— I prefer to say that work transforms lives. The noble Lord is right. We need to do more to articulate our belief and the reasons why we are confident that we are right and that work transforms lives. It relates hugely to outcomes. It is not a simple, overnight back of the envelope matter, but we are working on it.

The noble Baroness, Lady Primarolo, asked about targets for child poverty. The income-related targets set out in the Child Poverty Act 2010 have been replaced by two new statutory measures of parental worklessness and children’s educational attainment. This will drive continued action on the areas that can make the biggest difference to children’s outcomes now and in the future. The noble Baroness also asked whether the Government would lift the freeze on working tax credits. The answer is that the Treasury is responsible for working tax credits.

The noble Lord, Lord Kirkwood, made his point with feeling, and I can only say that we are working hard and thinking about our policies going forward. The huge question is affordability. We are spending £95 billion—that is, ninety-five thousand million pounds—a year on benefits for people of working age. For how long is that sustainable? Our department accounts for 25% of the whole of the Government’s budget, which in terms of expenditure is now the size of Chile or similar, I understand. The noble Baroness, Lady Lister, referred to some overseas organisation, saying that we are behind the curve in terms of our expenditure. I simply do not recognise that, in terms of how much other countries are spending or of the choices that they have made. For example, are they paying the similar amount of 0.7% of their national income, which is what we are paying, on overseas aid?