Welfare Benefits Up-rating Bill

Lord Wigley Excerpts

Monday 11th February 2013 Lords Chamber

[Lord Wigley]

My Lords, I am delighted to follow a number of long-standing colleagues with whom I have campaigned on these issues over many years. I, too, voice my concern about this Bill, which will result in real-terms cuts in support for thousands of low-income people, including, despite government claims to the contrary, up to 1 million disabled people, particularly those endeavouring to work.

If the Bill goes through unchecked, the increase in welfare benefits will be 1% while CPI inflation stands at 2.7% and RPI inflation at 3%. As the noble Lord, Lord Kirkwood, mentioned, inflation may well increase substantially. This will lead to real-terms cuts during the next three years in payments to support those who are working and contributing to the economy. They are the very “hard-working families” so beloved of the spin doctors of those who want to underpin the concept of the deserving poor—deserving, apparently, of just 1% uprating. I cannot see how this will contribute to promoting a work ethic or allow working people to participate in a savings culture.

I shall refer to figures relating mainly to Wales, although I realise that the arguments will apply to many other areas, too. The effect of the measures in Wales will be disproportionally greater, since incomes per head in Wales are substantially lower than average incomes in England. Figures released before Christmas show that GVA per head in Wales stands at 75.2% of the UK average, so cuts to in-work benefits for the low-paid will hit Wales proportionately harder.

According to the most recent DWP data, as at 1 December last year, more than 125,000 families in Wales were receiving working tax credits. This comprises some 93,000 families receiving both working tax credits and child tax credits, and 32,000 families receiving just working tax credits. The 2011 census records that in my home area, the Gwynedd local authority area, 9,200 families were receiving one or more elements of tax credits out of the total 52,000 households. This means that 17.5% of all households were in receipt of tax credits. These people generally spend their money within their own local areas. The Welsh economy is made up overwhelmingly of small businesses. These working tax credit reductions will mean that demand is further sucked out of local economies as people have, in real terms, less money to spend.

The uprating will also hit those seeking work. The Government may intend this real cut as furthering workforce discipline, surmising that, as benefits will be even lower, so people will be prepared to take any job. In this, they are fundamentally mistaken. Many unemployed people, particularly in Wales, are seeking work in vain because the economic policies of the Government are failing. There are some parts of the west Wales and the valleys area whose GVA per head is only 65% of the UK average, with 21 unemployed people chasing every vacant job. Putting the morality of this on one side for a moment, starving people back into work has no prospects of success if the jobs are just not there.

If we are to combat this, boosting skills alone will not cut it; we must also tackle the demand side of the economy. We have to make sure that there is real work out there for people to do. The Government's Work Programme, allegedly designed to take people off benefits and into work, was utterly ineffective throughout the UK, but Wales recorded the worst figures, with the Department for Work and Pensions saying that only 1,380 of the 42,380 people on the programme entered long-term employment—a success rate of only 3%. In Wales, 77,377 people are looking for work and claiming jobseeker’s allowance, while just 20,310 vacancies are posted in jobcentres. This means that, across Wales, there are on average four people chasing every empty job

We are facing a vast increase in the number of the working poor—people who are now resorting to the food banks to feed their families. If this Government were serious about ensuring that work pays, they should legislate to ensure that work really does pay more in wages so that people do not have to resort to benefits to make ends meet. Legislating to uprate the minimum wage to the recommended living wage would be a good start, and I commend the points made by the noble Lord, Lord Bates, earlier in this debate.

It has been estimated that the private sector in the UK is sitting on a cash stockpile of as much as £700 billion, because it does not have the confidence to invest. Getting this prospective investment to create economically productive jobs is the challenge which the Government have so far failed to address successfully.

In Wales, although most economic powers are not devolved, we can take some steps to improve the situation. My own party, Plaid Cymru, recently successfully negotiated with the Welsh Government to secure £40 million of funding towards 10,000 new apprenticeship training places in Wales as part of a budget deal. We are also pressing for a new procurement policy that could create several thousand jobs through sourcing public sector contracts domestically. Such an approach might be beneficial also for the deprived parts of northern England which, like Wales, are suffering from ineffective economic policies.

Wales needs job-creating levers to improve our economy, not handouts and workfare. That is why it is essential that the powers recommended by part 1 of the Silk commission are implemented as soon as possible. Real work and training is what is needed, not temporary workfare schemes to take people off unemployment figures for six months. At the very least, the Government must make sure that increases in benefit rates reflect rises in the cost of living. Otherwise, this proposed cut will deepen inequality, increase poverty and further dampen the economic prospects of poorer areas.

--- Later in debate ---

[Lord Wigley]

I am listening carefully to what the noble Baroness says. Surely she would not uproot families—families with children in schools and with support mechanisms around them in south-east England—and move them to Merthyr Tydfil or Middlesbrough, where they have no links at all.

[Baroness Gardner of Parkes]

I do not know that I agree. I arrived in this country and knew nothing about it. I had no job or anything else. Particularly if you have come from another country, it really does not much matter where you settle provided that you have the school that you want. Wales has always had a marvellous reputation for literacy, and I am quite sure that the schools would be good there. You want to be able to live in a safe, clean environment. Again, Wales is a beautiful country. I am a New South Welshman myself.

I do not want to be frivolous in this very serious debate. The one thing that we all have in common in this Chamber tonight is that none of us wants to see restrictions on anything. However, we just have to be realistic and look at the common sense of it. If we do not have the money to afford things, we cannot attempt to do it. It is all very well to think that you can do everything for everyone. I read in the statistics, which I think someone else quoted, that there was a 60% welfare increase under the previous Government between 2003 and 2010. Every household had to pay more than £3,000 a year to meet that extra increase of 60%, and the fact that we went too far and spent too much then is of course catching up with us now. It would be lovely if these things did not happen. However, this has happened and we have to try to put a stop on it, at least to be sure that we do not go on for ever.

The noble Lord, Lord McKenzie, spoke early on about how we denigrate people as being workshy. Again, when I was in dental practice we had only a very poor catchment area near us because the only way people could get to work was by bus. There was absolute overemployment in the country, but we would go to the jobcentre and get nice young people to come and start work. We made the mistake originally of giving them keys to the surgery. That was a big mistake because most of them did not last a week. Then you would phone and say, “Where is Joanie? We were expecting her at work”, and someone would say, “Oh no, she never gets out of bed before midday. We can’t do anything with her”. So this is not a new problem. There have always been people who did not want to work, but there are others who do. That is the tragedy today; plenty of people desperately want to work but cannot find the work, as the noble Lord, Lord Wigley, suggested about Wales. It really is a major problem.

However, the more difficult the world and the more difficult these situations, the more we have to address them. We cannot go on believing that it will all work out all right in the end, just keep your fingers crossed. I was very impressed with the speech by the noble Lord, Lord German. I have never heard him speak before, but he clearly understands all the technical terminology, which I cannot claim to understand at all. The noble Lord said that at the moment all these taxes hit the richest hardest. That is true, because they are paying the biggest bit. Someone else, who I think was on the other side—no, it was that marvellous noble Lord in the back row here. I cannot pronounce his name; it is a bit too difficult for me—