Welfare Benefits Up-rating Bill

Lord Low of Dalston Excerpts

Tuesday 19th March 2013 Lords Chamber

We are asked today to sign off this further three-year cut affecting the poorest, the ultimate real size of which we cannot be certain of—and this the day before a Budget that may well visit yet further cuts. I urge noble Lords to prevent this from happening.

[Lord Low of Dalston]

My Lords, I have put my name to this amendment and will briefly signify my support. There is not a lot that I can add to the comprehensive account given by the noble Lord, Lord McKenzie. The only point I would stress was made by somebody on television last night—that we now live in an environment where inflation is considerably higher than we were used to in the first decade of this century. We understand that the new Governor of the Bank of England advocates that the inflation target should be allowed to float free. We are in an environment where inflation is set to hover around 3.5% or higher with no prospect of it reducing. In these circumstances, to cap the increase in benefits at 1% is simply unjustifiable. I support the amendment moved so comprehensively by the noble Lord.

[Lord Forsyth of Drumlean]

My Lords, there is no one in this Chamber who would not like to see support for those on low incomes and families to be increased. What was striking when the noble Lord proposed this amendment was that, apart from a vague suggestion that it might be possible to find the money by pursuing tax evaders, there was no indication of where the £3 billion needed to provide uprating in line with inflation—assuming the Government’s forecasts are correct—could be found. That is deeply irresponsible and it is particularly irresponsible of an Opposition who will not say what they would do in government. In other words, while it is not their responsibility, their line is “You should spend the money”, but when it might be their responsibility, they are not prepared to say what they would do. That is completely dishonest politics.

We have a dangerous position in our country, partly caused by the present Government constantly harping on about how they have reduced the deficit by a quarter. According to a poll carried out by ITN and a separate poll by the Centre for Policy Studies, which may not be quite so objective, when asked the question, “Do you think by the end of this Parliament the national debt will have gone up by £600 billion, be just the same, or will have gone down by £600 billion?” only 6% got the answer correct: that it will have gone up by £600 billion. So here we are, living in a country where we have to make difficult decisions—this Bill is an example of having to make difficult decisions—and where the vast majority of people believe that the Government are cutting debt, when in fact all the Government are doing is reducing the amount by which the debt is increasing. I will wager that when we have a debate at the end of this Parliament and come the next election, the Opposition will pursue the same kind of irresponsible tactics which we see in this amendment. They will say, “The Government were elected to reduce the debt, but the debt has gone up by 50%. If we had been in government, it would have been different”. That is the politics of it.

Let us look at it from the point of view of people on low incomes—working or non-working—faced with inflation. If we follow the prescriptions contained in this amendment, the consequence will be that the pound will sink still further. The consequence of the pound sinking still further is that the energy and fuel costs that the noble Lord, Lord McKenzie, spoke of will go up. So how does it help people who are struggling to say “Your benefits will go up by inflation” if at the same time you pursue policies which will result in higher inflation and higher debt and leave an even bigger problem to solve at the end of the day, which will be solved on the backs of the poor?

The noble Lord said that the Government are handing out a tax-free benefit to the very rich. I remind him that when his party were in government, people on very high incomes were paying less in marginal rates of tax than they are now. I also remind him that the effect of cutting the top rate of tax from 50% to 45% will be, as has been proved over and over again in countries around the globe, that the revenue to the Treasury will go up. Although the noble Lord and his party quite rightly point to the excesses in the City arising from bonuses, and so on, they seem to forget that 52% of those obscene bonuses come back in tax and national insurance. Actually, it is more, because there is an employers’ contribution of 12%, so 64% of those bonuses come back to the Treasury in revenues.

The name of the game here is to increase revenues to the Treasury. Then we will be in a position to do something about welfare. We are now in this difficult position and my noble friend is having to take this painful legislation through the House. The Opposition should recognise that that is a consequence of their period in government. The noble Baroness shakes her head. While they were in government, welfare benefits went up by 60% in real terms.

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Moved by

[Lord Low of Dalston]

3: Clause 1, page 1, line 5, at end insert—
“(1A) Any mandatory 1% up-rating stipulated in subsection (1) shall not apply—
(a) to any components of the employment and support allowance (including personal allowances);(b) to sums specified in regulations under section 10(3) of the Welfare Reform Act 2012 in respect of an amount to be included under section 10(2) of that Act.”

[Lord Low of Dalston]

My Lords, Amendment 3 would remove from the 1% uprating cap all aspects of the employment and support allowance, including the personal allowance component, the support group component for those in the support group and the work-related activity group component for those placed in the work-related activity group, which I may shorten to the WRAG as “the work-related activity group” is a bit of a mouthful and I do not wish to take up too much of your Lordships’ time—no more time, at any rate, than I need to. Paragraph (b) of the amendment would also remove the child disability addition under universal credit from the cap.

The Government have given the impression that disabled people are protected from the restriction of benefit increases to 1%, but this is not the case. Some disability benefits are protected—notably disability living allowance—but that does not mean that disabled people are protected from the restrictions introduced by the Bill as a whole. The only disabled people who are protected are those who receive no benefits other than the disability living allowance. The impact assessment makes clear that households where someone describes themselves as disabled are more likely to be affected than those where there is not a person who describes themselves as disabled: 34% of households as against 27%.

Even some benefits specifically targeted at disabled people are not protected. This applies particularly to employment and support allowance. ESA is paid at two different levels according to whether claimants are placed in the support group, meaning that their impairment or condition is such that they are not expected to look for work, or the WRAG. Both groups receive a personal allowance of £71 a week but those in the support group receive a support group component which is paid at a higher rate than the comparable component paid to those in the WRAG.

The Government have given the impression that those in the support group are protected from the 1% uprating cap but, in truth, only their support group component of £34 a week is protected: rather less than one-third of their benefit. This means overall that disabled people in the support group will see their ESA payments rise by only 1.4% rather than by inflation, not a lot better than if increases in the whole of their benefit were capped at 1%. As a result, a disabled person in the support group will be £62.76 a year worse off. Capping increases in their benefit at 1% will mean that households receiving ESA in the work-related activity group will be £87.65 a year worse off.

However, it is worse than this. Although some disability benefits and some disability elements and components may be protected, disabled people may lose out overall because of the complex interaction of different benefits and components. Disabled people do not only receive disability benefits; they have children and rent houses, and so they are not immune from restrictions in the uprating of children’s benefits, housing benefit and so on.

If a claimant in the support group does not have any other income, they are also likely to be entitled to housing benefit and council tax benefit. If they have children, they will also be entitled to child benefit and child tax credit. It can be seen that protecting the support group component protects only a small proportion of their overall benefit. For example, a lone parent who is in the support group and has two children will have lost £18 a week or almost £1,000 per year by 2015 compared with their position in 2011, simply due to uprating changes.

The amendment is essential if the Government are to fulfil their pledge to protect disabled people from the 1% uprating cap. A third of disabled people in the UK were found to be living in poverty before the global economic crisis. Disabled people routinely experience higher living costs associated with their disability, on things such as equipment, personal assistance and special diets, for example. In Committee, the Minister said that ESA for those in the WRAG group is intended to be a short-term benefit:

“Those who are placed in the work-related activity group are there because they have been found able to prepare for work”.—[Official Report, 25/2/13; col. 881.]

However, that does not make sense in terms of work incentives. People’s impairments often make it very difficult for them to work. Where this is not the case or the difficulties can be overcome, discriminatory attitudes in the workplace can present insurmountable barriers. In the current state of the economy, there just are not the jobs.

Finally, as we know, the work programme, by which the Government set such store, is just not working. In Committee, the Minister questioned the rationale for including the personal allowance in the amendment and for not subjecting it to the 1% cap. She said that treating the personal allowance differently from that in other parts of the benefit system would add an element of complexity and undermine the coherence of the system as a whole. That strikes me as a comparatively technical objection. If that is her principal concern, I ask her to look at the position again with me before Third Reading to see if we cannot find a way of achieving the purpose of the amendment without giving rise to the technical difficulties to which the Minister pointed.

The second limb of the amendment would remove the 1% uprating cap from the lower child disability addition under universal credit. The right reverend Prelate also spoke about that. This part of the amendment is particularly necessary given that rates of support for children in this 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 this support in half to just £28 a week. This change will affect all families with a disabled child unless the child is receiving the high-rate care component of the DLA or is registered blind.

In Committee, I spoke about the evidence in the Holes in the Safety Net review from the noble Baroness, Lady Grey-Thompson, of the impact of universal credit on disabled people and their families. I will not repeat the detail now but, in a word, it was that the effects would be disastrous. The Institute for Fiscal Studies estimates a growth in the number of children living in poverty of 400,000 between 2011 and 2015 and 800,000 by 2020. The Minister said in Committee that we cannot set too much store by such predictions because we do not know what direction government policy will take. But government policy seems to follow only a one-way direction of travel in this regard. We do know that the Government intend to take a further £10 billion out of welfare. The upshot of that can be only one thing: more child poverty. This measure can only serve to increase that; indeed, the Government have acknowledged that it will add 200,000 to the numbers of children in poverty—100,000 of them in working households.

The Children’s Society estimates that the cost of removing child disability addition from the cap would be just £2.4 million in 2014-15 and £4.2 million in 2015-16. In the scale of public expenditure, that is a trifling sum and I really hope that the Government see their way to thinking again on this aspect of my amendment at least.

The case for the amendment is compelling. It seeks to do no more than the Government already claim to have done by exempting from the cap a particularly vulnerable group among those who receive benefits—disabled people—and I hope that the House will support it. I beg to move.

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I believe that our proposals are proportionate and fair. I recognise, of course, that there are people who are affected by the changes that we are making here, but I hope that I have been able to demonstrate that, when seen in the wider context, we are also providing comprehensive support to people who are disabled, which is right and which we will continue to do. I hope, therefore, that the noble Lord, Lord Low, feels able to withdraw his amendment.

[Lord Low of Dalston]

I am grateful to all those who have spoken and to the Minister for her full reply. A fair amount of the discussion has been taken up with where we are going to get the money. It is certainly not my job to answer for the Opposition as to where they would get the money from, but I would say here that without wanting to open up a general discussion again on the management of the economy, especially at this stage of the debate, I do take the view that you can borrow your way out of a recession. This is a paradox, of course, and it is not clear how it is the case at first blush. However, running a national economy, where one person’s expenditure cut is a cut in someone else’s income, is different from running a domestic economy.

There is a clear difference of view here with those on the Benches to my left. I am not an economist but I would ask people to accept that there is a very respectable and quite populous strand of opinion that supports the proposition that I have just enunciated. It is not so self-evidently barmy, as was suggested earlier in the debate, to say that the Government would be able to meet the cost of these amendments by borrowing more. There is respectable opinion to support that. To those who say that the Government are already more in debt and borrowing more than they would like to be, I simply say that there is no reason why they should not borrow a bit more. If the amount of extra borrowing that they are engaging in is still not achieving lift-off for the economy, they just have to borrow a bit more until they do. I know that that will not commend itself to this side of the House, but it is a respectable point of view and it is the position that I take.

We have been asked about the cost of the amendment. As the noble Lord, Lord McKenzie, has said quite clearly, that obviously depends on a range of factors. One of those factors is certainly the rate of inflation. Therefore, it cannot be precisely quantified. In any case, the question about what we would do to get the extra money is answered by what I have already said in response to the Minister. A more pertinent question than how one would find the money is when one would find the money. The answer of the noble Lord, Lord McKenzie—a year at a time—is perfectly reasonable. Labour is prepared to say that it would uprate at the rate of inflation in the first year that we are talking about.

The only other thing I want to say in response to the Minister is that the Government have essentially been peddling a myth when they say that they are protecting disabled people in this Welfare Benefits Up-rating Bill. They are only partially doing so. The Government ought to be straight with the British people. I repeat: they are only partially protecting disabled people. It is because I believe that the Government should deliver on their pledge to fully protect disabled people with this benefits uprating measure that I have brought this amendment to the House. It is also why I ask the House to support it, and why I would like to test the opinion of the House.