Welfare Benefits Up-rating Bill

Lord Low of Dalston Excerpts

Monday 11th February 2013 Lords Chamber

[Lord Low of Dalston]

My Lords, it feels presumptuous to rise after a powerful speech such as that, but I shall try to do my best.

This miserable little Bill is not only mean-spirited and out of touch; it, or rather the spin surrounding it, is misleading, not to say dishonest. Moreover, the whole enterprise is misconceived. It is out of touch in the way it perpetuates the relentless attack on welfare, which is depicted as an aberration in social policy, to put it no higher, that needs to be reversed instead of as a mark of a civilised society acknowledging its obligation with increasing prosperity to look after its less fortunate members. Recipients of welfare are demonised as battening on society, and crude cutting is mystified in the rhetoric of helping people off benefits and into work.

The Bill’s justifications are misleading in their use, not to say their creation, of five myths. First is the myth that there is a radical separation between those on welfare and those in work, but many of the benefits that will be pegged by this Bill go equally to those on welfare and those in work: tax credits, for example. The second is that benefits have risen twice as fast as pay. They may have if you pick your dates correctly, but everyone knows that historically wages have risen considerably faster than benefits, which are pegged to the rate of inflation.

The third myth is that percentage, as opposed to cash, increases are a fair reflection of these things. I think that a caller to “Any Answers?” on the radio got this right when he pointed out that a 1% increase on the national average wage of £500 a week amounts to £5: a worthwhile sum. However, 1% on jobseeker’s allowance of £71 amounts to only 71p. That is as much of an insult as Gordon Brown’s 75p increase in the old age pension.

Fourthly, there is the myth that any shortfall in benefits is made up for by the increase in personal tax allowance. This applies only to those in work, of course. Anyway, as Citizens Advice has shown, capping the uprating of benefits will swamp any gain from the increase in the personal tax allowance, certainly for low-income households.

The fifth myth is that the most vulnerable are protected, but you do not protect the poor by cutting welfare since it is the poor who rely on welfare. You only have to look at the treatment of disabled people, whom the Government maintain they are protecting under the Bill, to see the essential dishonesty of the Government’s propaganda. Here, I declare my interest as having a connection with a number of disabled people’s organisations, which are mentioned in the register.

Disabled people are certainly vulnerable. They have experienced a drop in income of £500 million since the emergency Budget of 2010. The Government have already reduced the measure by which benefits are uprated from the higher RPI to the lower consumer prices index. Some benefits for disabled people and carers, such as disability living allowance, the support group component of employment and support allowance and disability-related tax credits are exempted from the reduced uprating. This acknowledgment that disabled people need additional protection is welcome. However, notwithstanding the Government’s claims, the Bill will still mean a real-terms cut in vital support for many disabled people. DLA will continue to rise by inflation, but this is not the case with employment and support allowance.

Following a work capability assessment, people who are unable to work can be placed in either the support group or the work-related activity group. Many disabled people are being placed in the work-related activity group. For them, the Bill will cap the uprating of this benefit to 1%. This will mean in effect that households in the work-related activity group receiving ESA will be £87.65 a year worse off. Furthermore, disabled people who are placed in the support group, meaning that their impairment or condition is such that they are not expected to look for work, have been given only limited protection from the reduced rate of uprating. The ESA that disabled people in the support group receive is made up of a core payment with an additional support group component. Only this additional component will continue to rise by inflation, with the core element rising by only 1%. This means that, overall, disabled people in the support group will see their ESA payments rise by just 1.4% rather than inflation. This will mean that a disabled person in the support group of ESA will be £62.76 a year worse off.

The real-terms loss of financial support that disabled people receiving ESA will face compounds a situation where disabled people are disproportionately more likely to live in poverty than non-disabled people. The problems of living on a low income are then compounded by the extra disability-related costs. When these are included in the measurement of poverty, the proportion of households with a disabled member living in poverty doubles to almost 50%. The Government’s impact assessment recognises that the Bill will impact on disabled people. It states that households where someone describes themselves as disabled are more likely to be affected than those where no person describes themselves as disabled—34% of households as against 27%.

For disabled people who also rely on other benefits, such as housing benefit, the reduced rate of increase will impact on the financial support they need to live. Despite assurances that disability benefits will be protected and continue to increase by inflation, disabled people claiming ESA, housing benefit or any other benefit not specifically for disabled people will see a real-terms cut to the amount of financial support that they receive.

The Bill will also reduce the rate at which the lower tier of the disabled child addition of universal credit increases. Disabled children in the UK are already disproportionately likely to live in poverty. Approximately 40% of all disabled children—about 320,000—live in poverty, compared with a poverty rate of 30% across all children. Nearly one-third live in severe poverty, where a family’s income is less than 40% of the national average. Under universal credit, which will begin to come into effect later this year, parents of disabled children can receive a benefit called the disabled child addition. This will replace the current disabled child tax credit.

Under universal credit, the support available for disabled children who do not receive the high rate of the DLA care component will be cut by one-half, from around £57 a week under the disabled child tax credit to £28.52. Furthermore, the Bill will mean that the value of this benefit will increase at a significantly slower rate—by just 1%—as opposed to in line with the consumer prices index, which is currently 2.7%. As a result of the Bill, parents of disabled children receiving the lower disabled child addition of the universal credit will lose £25.21 a year or £75.63 over the next three years.

Finally, the Bill is misconceived because, with the economy flatlining, it does not make sense to take purchasing power out of the hands of a section of the population that is most likely to spend what it has. The fiscal squeeze is set to tighten in 2013-14 compared with 2012-13, and the IMF is warning that planned cuts may need to be scaled back if growth does not build momentum by early 2013. Talk of growth, such as we heard in this House a fortnight ago, is largely beside the point while the level of demand in the economy is still so low. In these circumstances, the last thing we need is a further reduction in the level of demand. It even undermines the automatic stabilisers.

If the Government are to be as good as their word on the protection of disabled people, at a minimum the whole amount of ESA needs to be uprated in line with inflation for those in the work-related activity group, as well as the support group, and not just the additional support group component. Disabled people should be exempt from the reduced uprating of other benefits, such as housing benefit. I invite the Minister to respond positively to this proposal in the winding-up speech, before I start drafting amendments for Committee.