Welfare Benefits Up-rating Bill

Lord Low of Dalston Excerpts

Tuesday 5th March 2013 Lords Chamber

On Amendments 14 and 19, will the Minister look again at the effects the restriction on child benefit and child tax credit will have on the Government’s aim to move children out of poverty? Will he consider the disincentive to seek work involved in the reduction of child benefit? Will he look at other ways to raise the £0.9 billion that the removal of these caps would cost by placing responsibility on those of us who can afford to pay it rather than on those who cannot? I beg to move.

[Lord Low of Dalston]

My Lords, the amendments would remove the benefits paid on behalf of children from the scope of the Bill because that disproportionately hits children and families. That is why I have added my name to them. Where 30% of all households are affected by the Bill, nearly nine out of 10 families with children are affected, including 19 out of 20 lone-parent families.

In total, the Children’s Society has estimated that about 11.5 million children are affected by the Bill. As the right reverend Prelate explained, Amendments 14 and 19 would together remove child benefit and child tax credit from the scope of the Bill. That is made particularly necessary by the fact that child benefit has already been frozen for three years before the measures contained in the Bill take effect. That means that child benefit will increase by only 2% over the course of half a decade. Over the same period, prices as measured by CPI will have risen by more than 16%. I say that that justifies the removal of child benefit from the scope of the Bill but, in truth, it would be unjustifiable not to remove it.

These benefits are paid to working families from all walks of life, as well as non-working families. The Children’s Society’s benefits uprating cap impact calculator shows that a couple with two children with one earner working as a primary school teacher and earning £600 a week would lose £424 a year by 2015. A couple with three children and one earner, a corporal in the Army, say, earning £619 a week, would lose £552 a year by 2015, so we can see the impact of having extra children.

As we have heard, Amendment 17 would remove the 1% uprating cap from the lower child disability addition under universal credit. That is particularly justified by the fact that rates of support for children in that group are already intended to be halved under universal credit. At present, families with a disabled child for whom they are in receipt of some level of disability living allowance, may be entitled to receive support through the disability element of child tax credit, currently worth £57 a week. Under universal credit, that support is to be provided through disability additions within household benefit entitlements, but it is proposed to cut that support in half to just £28 a week. That change will affect all families with a disabled child unless the child is receiving the higher rate of care component of disability living allowance or is registered blind.

The review of the noble Baroness, Lady Grey-Thompson, Holes in the Safety Net, of the impact of universal credit on disabled people and their families surveyed 1,400 families with disabled children about changes to support under universal credit. The evidence received suggested that, for those likely to be affected by the cut, the impact could be disastrous. Two-thirds of those likely to be affected said that if they received £30 a week less in benefits for their disabled child, they would have to cut back on food. At this point, I cannot resist asking: if the Minister shares other noble Lords’ disappointment at the greater resort to food banks, what does that say about her view of the government policy that she is supposed to be defending, as it is government policy that is leading to people’s greater resort to food banks?

Returning to the review of the noble Baroness, Lady Grey-Thompson, more than half of those surveyed said that the changes would lead to them getting into debt, more than one in 10 that they might even need to move home. One parent told the inquiry:

“My child would have little quality of life and would lose much of the social interaction he needs. It would be like a prison sentence”.

Another simply expressed their desperation, saying:

“This would have such a huge impact on us I really don’t know what we would do”.

The Bill will further compound that cut. For a family with one disabled child, the impact of the change in uprating would be about £42 a year. It should be noted that that impact is on top of changes to the uprating of other benefits received by the family.

The Children’s Society estimates that the cost of uprating the lower child disability addition would be only £2.4 million in 2014-15 and £4.2 million in 2015-16. All this hardship for such a paltry saving. The disproportionate impact of the Bill on children cannot be overstated or justified. It is not the first time that austerity measures have had a disproportionate impact on children and families. In fact, as the noble Baroness, Lady Sherlock, told us, the Institute for Fiscal Studies found last year that, even with universal credit fully in place, taking together all the tax and benefit measures introduced or to be introduced between the beginning of 2011 and April 2014, families with children will lose a higher proportion of their income than either pensioner households or working-age households without children across the whole income distribution.

We have heard a lot this afternoon about the measurement of child poverty, but the IFS estimate of a growth in the number of children living in poverty of 400,000 between 2011 and 2015 and 800,000 by 2020, has been referred to more than once. The noble Lord, Lord Newby, said that we cannot set too much store by such predictions because we do not know what direction government policy may take. All I know is that the last time I heard, the Government intended to take a further £10 billion out of welfare. The Bill can only serve to increase the level of child poverty. Indeed, as the noble Lord, Lord Newby, acknowledged, it will add 200,000 to the number of children in poverty; 100,000 of them will be in working households.

Children do not have a vote. If they did, it is impossible to believe that they would be voting for the Bill as it stands.

[Baroness Grey-Thompson]

My Lords, my name is also attached to all three amendments in this group. I thank the right reverend Prelate the Bishop of Ripon and Leeds for explaining the amendments.

First, I will cover Amendments 14 and 19 together. Households with children are much more likely to be affected by the Bill than households without children. Many families with children will be affected even when someone is working full time. A single person or couple with children obviously have much greater costs than those without dependent children. For this period of their life, the income they need to meet the basic living costs of their household is clearly greater. That means that the amount someone can be earning and still need extra financial support from benefits and tax credits stretches much higher up the income scale than for those without children.

The level of childcare costs and of rents—especially in the private rented sector— combined with the lack of a living wage means that people who can only find work at or near the minimum wage cannot escape from needing that extra financial support, for however much time they work. If they work more hours, they need more help with childcare. Many are already struggling to manage.

For example in a local paper in the north-east of England, where I live, Pauline Chambers, chief executive of Sedgefield and District citizens advice bureau in County Durham, said that the team had encountered levels of hardship not seen for 21 years. Telephone inquiries have increased by 100 per cent in the last two months, with many people struggling to pay for basic food and utilities. That view is repeated up and down the country. Julia Cornelius, manager of Luton CAB was quoted in a different paper. She said:

“Every day we see people who are struggling to keep a roof over their heads or put food on the table as wage squeezes, price rises and benefit cuts wreak havoc on household budgets”.

Those in work and on benefits gain little from their earnings increasing. A single person earning £250 a week who receives a £2.50 rise in their earnings will keep about £1.70 of the increase after deductions for tax and national insurance. If they have children, and so need to rely on benefits and tax credits, they will reduce as their income rises, so they will be left with a net gain of 10p from a rise in earnings of £2.50.