Welfare Benefits Up-rating Bill

Marcus Jones Excerpts

Monday 21st January 2013 Commons Chamber

[Caroline Lucas]

If the hon. Gentleman made a distinction between the overall benefits bill and pensions, he might find that he had a rather different set of figures before him.

It is not true that the Government are doing this to be fair. The measure is an unnecessary, spiteful and counter-productive attack on the poor. It is unnecessary because it is ludicrous to blame the unemployed and the low-paid for the deficit and to elicit from them the highest price for paying it off when high earners are receiving tax breaks. As the Government well know but conveniently forget, the culprits behind the entire financial crisis were the bankers on their very high incomes, many of whom do very well from over-generous tax relief on pension contributions and will benefit from the tax cut that is being granted to the highest earners with the abolition of the 50p rate. I welcome the Opposition’s amendment on the latter point.

The measure is spiteful because the Government insist on suggesting that it is somehow unfair that benefits have gone up by 20% when they know very well that 20% of very little is very little, and that in cash terms the average annual increase for those on jobseeker’s allowance over the past five years has been just £2.37—that is hardly the life of Riley that Ministers are pretending. Again and again they frame the debate around misleading percentages instead of the reality of hard cash increases that are far lower for people on benefits than for those in work.

[Mr Marcus Jones (Nuneaton) (Con)]

The hon. Lady talks about reality. The reality that the country faces is that we are running a huge deficit year on year and have been doing so for some years. Will she say a little about that? Can she say how she proposes to pay for the policy she advocates and how much it would cost?

[Caroline Lucas]

I am grateful for the hon. Gentleman’s intervention, and yes, I can tell him how much it would cost: about £7.3 billion, according to the Library.

[Mr Jones]

rose—

[Caroline Lucas]

The hon. Gentleman has asked me a question, so he should let me answer it; I am very happy to do so. We face a number of choices, and the key thing is where we decide that the axe is going to fall. His Government would like the axe to fall on the poorest and most vulnerable; I would prefer that it fell on those with the broadest shoulders. That is the difference between us. It is also important to say that his Government’s policies are draining demand out of the economy and making the deficit worse. If I were in his shoes, I would be looking to see why my own Government’s policies are exacerbating the deficit, not making it better. If we looked for some alternatives, we might find a more positive way forward.

[Mr Jones]

rose—

[Caroline Lucas]

I have let the hon. Gentleman intervene once, and I think that is probably enough.

The policy is also counter-productive. [Interruption.] Perhaps the hon. Member for Nuneaton (Mr Jones) would like to listen to this, because it addresses his point. Such a measure is counter-productive because, first, if money is taken from people who are only just surviving, they will experience more crises that the state will then have to step and pay for; and secondly, if money is put into the pockets of the poorest, they will spend it into the economy and thus address the deficit that we are trying to deal with.

--- Later in debate ---

[Toby Perkins]

Let me make more progress before I let hon. Members intervene again.

One issue I have raised previously in the context of the Bill is housing benefit changes. Last week, I met Chesterfield borough council officials to discuss the impact of the bedroom tax, which will hit people across Chesterfield in April. The council knows it faces a time bomb as people who cannot afford to pay their rents are told that there is a shortage of smaller properties for them to move to. Many of those people are at the back end of their working careers, and are either not working or in part-time employment. The council is budgeting for a situation in which around a third of them will fall into arrears—their housing-related benefits will be reduced and they will no longer have enough to pay their rents—and the Government are increasing the discretionary payment to allow councils to meet the costs of some who fall into that situation, which is a totally illogical policy. People who have been council house tenants for many years will fall behind, and the Government will give money to councils to bail them out. At the same time, the Government will hit them on housing and council tax benefit, and on tax credits. They are saying, “Those payments have already been cut, but they will now be increased by less than the rate of inflation.”

[Mr Marcus Jones]

A thread running through the hon. Gentleman’s speech is how we help the lowest paid. Does he agree that the coalition Government are helping the lowest paid in his constituency, because in April 3,880 of his constituents will be lifted out of income tax altogether, like 3,168 people in my constituency?

[Toby Perkins]

I welcome any measure that makes people better off, but the hon. Gentleman is entirely wrong if he thinks those being lifted out of tax are the lowest paid—they are not. Many who are earning less than them will get no benefit from the increase in the tax threshold. The people being lifted out of tax are not the lowest paid, although I recognise that they are on modest incomes.

--- Later in debate ---

[Helen Goodman]

No, I will not. The hon. Gentleman will have a chance to make his own speech. Many hon. Members have given way to him in the course of the debate.

The Chancellor of the Exchequer has broken another promise he made in 2011. He said:

“I also want to protect… those who, through no fault of their own, have lost jobs and are trying to find work”.—[Official Report, 29 November 2011; Vol. 536, c. 802.]

He is patently failing to protect those people. By definition, people on statutory sick pay, statutory maternity pay, statutory paternity pay or statutory adoption pay are not going out to work, but they, too, are seeing their incomes fall, and that is at a time when they have new children coming into the family and need more support.

[Mr Marcus Jones]

The hon. Lady talks about the difficult decisions the Government are having to make, but she does not acknowledge the fact that from the time the Government came into office to 2016, the child element of working tax credit will actually go up by £470 in cash terms.

[Helen Goodman]

The hon. Gentleman is absolutely right, but the point I am trying to make is that we have to look at the cumulative impact of all the changes. If he looks at the tax and benefits micro-simulation model produced by Her Majesty’s Treasury, he will see that everybody in the bottom half of the distribution is a loser, but those people between 50% and 80% in the distribution are gainers. Therefore, he can understand that although the change to child tax credit—we will discuss it under the next group of amendments—might be very welcome, it is not doing the business because of the severity of the Government’s other reductions.

The hon. Gentleman has raised the issue of child poverty, and there is one specific question I wish to ask the Minister and that I hope—

--- Later in debate ---

[Mr Reid]

Well, we did not hear any policy from the hon. Lady. I can only assume that she still follows the previous Government’s borrow-and-spend policies.

I support amendment 10, rather than the Labour party’s “empty space” policy. Amendment 10 would have benefits increase in line with the increase in average earnings.

The tax increases under this Government have quite rightly fallen most heavily on those with high incomes, who are paying a far higher proportion of their income in tax than under the previous Government—let us take, for example, the increase in capital gains tax. If there were a Liberal Democrat Government and not a coalition Government, the well-off would be paying far more tax—a mansion tax, for example. The Government have also helped people in low-paid jobs by increasing the personal allowance, which I hope will be raised to £10,000 before the end of this Parliament. The work done by the Minister of State, my hon. Friend the Member for Thornbury and Yate (Steve Webb) on universal credit will also help people on low incomes. Pensioners have also been protected from the cuts, because of the triple-lock guarantee, and my hon. Friend is introducing the new single-tier pension—another major achievement.

The group of people we are discussing this evening, whose incomes would be cut by clause 1, are those in receipt of working-age benefits, but not disability benefits. Coalition is all about negotiations and reaching compromises. It is important to note what would be happening to welfare benefits if we had a Conservative Government and not a coalition. We know from statements in the public domain that a Conservative Government would propose a benefits freeze, not a 1% increase, and that the cuts would apply to all benefits, not just those listed this evening. Such a freeze would last for several years—not just three years, as under the coalition Government’s policy—and child benefit would be awarded only for the first two children in the household. These are all policies that a Conservative Government would introduce, but which the coalition is not. We also know, as was made evident earlier—certainly from the cheers on the Conservative Benches behind me—that a Conservative Government would reduce the top rate of tax to 40%, not leave it at 45%. Liberal Democrats in government have achieved a great deal in lessening the impact on welfare benefits uprating, compared with a purely Conservative Government.

However, my main concern about the measures in the Bill—this echoes concerns raised by the right hon. Member for Wokingham (Mr Redwood) and others who have spoken—is that committing the country to a 1% increase for three years now, before we know what inflation will be when the increase comes into effect, could end up being harmful to people on low incomes, because we have absolutely no idea how much world fuel and food prices will rise in those three years. I recognise the strength of the argument that benefits for people out of work should not rise at a higher rate than the earnings of those in work, which is why amendment 10 proposes to increase such benefits by the same percentage as the rise in average earnings over the previous year. Amendment 10 would be a fair compromise between the need to cut the deficit and the need to provide a safety net for those dependent on welfare benefits.

There has been a lot of talk about scroungers and curtains being drawn. I entirely reject such rhetoric. It is important to note that strong sanctions are available for those receiving jobseeker’s allowance. For example, people can lose their jobseeker’s allowance for up to three years if they do not apply for a job that their adviser tells them about, do not accept a suitable job offer, leave a job voluntarily, lose their job because of misconduct or do not take part in a compulsory Work programme. Therefore, sanctions are indeed available.

I represent a very rural constituency. It is important to point out that prices on islands or remote parts of the mainland are higher than in most of the rest of the country, and that people on jobseeker’s allowance in remote areas who are finding it difficult to get a job in the area in which they live are on very low incomes. We should not commit ourselves to only a 1% increase for the next three years, because we do not know what will happen to prices during that time.

[Mr Marcus Jones]

Would my hon. Friend acknowledge that if we had applied the logic that he is now advocating over the last five or six years and pegged benefits to wage rate inflation, the people he is talking about—the people he is trying to help—would be far worse off?

[Mr Reid]

A lot depends on where we start. If we are talking about rises matching prices or wages, it all depends on the starting point—if we pick a different starting point, we get a different result.

I was talking about the next three years. We know what the rise in average earnings was last year, so obviously we know what the rise in benefits would be in 2013-14. We do not know what it would be in 2014-15 or 2015-16, but setting the increase to the rise in average earnings, rather than a fixed rate of 1%, would mean that as the economy gradually grew, the level of growth in the economy would be paid to those on benefits, as well as those in work. That is a better approach than having a fixed rate of 1% for three years.

No Government have control over world food and energy prices. At Prime Minister’s questions last week I raised this potential problem when I asked the Prime Minister what contingency plans the Government had for benefit increases, should food and energy prices rise by more than expected. He answered by pointing to the good work being done by my right hon. Friend the Secretary of State for Energy and Climate Change to ensure that energy companies put people on the lowest available tariffs. That will indeed be a big help to people on low incomes, but if energy prices rise by more than expected, the lowest tariff will rise by more than expected too. After I heard the Prime Minister’s answer, I am afraid that I was left to form the conclusion that the Government have no contingency plans for a scenario in which prices rise by more than expected. I hope that when my hon. Friend the Minister replies to this debate, he will be able to reassure me on that point. I hope there is a plan B, in case world prices go up by more than expected.

Setting future increases to the increase in average earnings would address the legitimate argument that out-of-work benefits should not rise faster than earnings and would help to cut the deficit. For example, if the CPI figure were used for 2013-14, benefits would increase by 2.2%. If average earnings were used, they would increase by 1.6%, saving half the amount that a 1% increase would save. It is also important to point out that cutting public spending on its own will not eliminate the deficit. We need to grow the economy as well. All the economic research indicates that money put into the pockets of people on low incomes is far more likely to be spent straight away than it would be by those on higher incomes. Not increasing welfare benefits by the rate of inflation will have an impact on shops and other businesses, as well as the recipients themselves.

To sum up, linking benefit increases to average earnings is much fairer all round and avoids committing ourselves to a fixed figure unnecessarily far in advance. I hope that the Committee will support amendment 10, and I hope that you will allow it to be put to a vote, Mr Amess.