Welfare Reforms and Poverty

Nia Griffith Excerpts

Monday 13th January 2014 Commons Chamber

[Nia Griffith (Llanelli) (Lab)]

The first question that we must ask ourselves is why we make social security payments to people. We make them because people have lost their jobs, which is a traumatic event in itself. We make them because of sickness or disability. We make them to people who are in work, but are on low incomes. Some 68% of those who are affected by the Government’s welfare cuts are in work, according to the Resolution Foundation. I will come back to those people in a moment. We make payments to prevent homelessness and to protect people from living in squalid, cold and damp conditions—conditions that will make them more susceptible to disease. We make payments to prevent malnutrition and the diseases that go with it. That is particularly important for children. Malnutrition in childhood not only affects those children in adulthood, but can affect their children. The difference in longevity between well-off areas and poor areas is well documented.

As my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) has explained clearly, we are one of the richest countries in the world and there are other ways in which we could get the deficit down. I will not spend time talking about food banks, other than to say that 50% of the people who are going to food banks are doing so because of mistakes, changes or delays in their benefits.

I want to focus on benefit rates, the Government’s policy on them and the effect that is having on people in Britain. To go back to the beginning, it is a bit of a misconception that UK benefit rates are based on a systematic estimate of minimum needs. Even from the start, back in 1948, benefit rates were a bit of a compromise between the actual needs and what was deemed to be affordable. Even by the time they were introduced, Rowntree had researched the fact that social need was an additional need to physical need. However, that was not recognised from the beginning. Although things were rather patchy until April 1975, in general, benefits increased in line with inflation. Since then, successive Governments have uprated benefits in line with inflation, mostly using the retail prices index until 2011. It is only from then onwards that we have seen the breaking of the link between inflation and the rates at which benefits rise.

Universal credit will be subject to annual review, but not to mandatory uprating. There is a huge danger that it will fall behind inflation. However, well before we get to universal credit, with its myriad problems, which are not helped by the sheer incompetence with which it is being introduced, the Government should be looking at the impact of the Welfare Benefits Up-rating Act 2013. Most working-age benefits have been limited to rises of 1% a year, and yet the costs of basic items such as food and energy—the very basics of life—are rising by significantly more. Even Government estimates suggest that there may be 200,000 more children in poverty, and the Child Poverty Action Group estimates that there could be 1 million more children in poverty by 2020.

Which benefits have been affected? Let us look at the list. The first is tax credits, which have a huge impact. We called the cut to tax credits the strivers’ tax, because it affects people who are desperately trying to make ends meet. Such people are often doing two or three jobs and patching together a few hours here and a few hours there. They are then told that they have to find more hours. Those hours simply are not available; otherwise they would be doing them.

I heard the most extraordinary statement from the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb) when we were talking about housing benefit and the bedroom tax. He came out with the absurd nonsense that two or three hours on the minimum wage would make up the £15 shortfall. Does he not understand how the system works? It is very complex and there are enormous differences depending on the family circumstances and who lives in the household, but essentially, if somebody who is getting housing benefit gets additional income, roughly 65% of it will go straight into a cut in their housing benefit. So in order to get an extra £15 a person effectively has to earn £45, and to get an extra £25 they effectively have to earn about £75. That does not take into account the transport costs to get to work and so on. That is a couple of days’ work at minimum wage at the absolute minimum, on top of the other work people are already doing—these are people who are in work.

The effect of the changes is catastrophic. What have we seen cut? Tax credits, pension credits, savings credits, the health and pregnancy grant, lone parent benefits, contributory employment and support allowance, disability living allowance and council tax benefit have all been cut, and there is the switch to CPI instead of RPI. Luckily, in Wales people have been cushioned for one year by the Welsh Government, but whether that can continue and is affordable is another matter. The impact of all those cuts together is absolutely catastrophic.

The other myth we often hear peddled is the fantastically high figures that, somewhere or other, a tabloid newspaper manages to find for housing benefit. That is because they take the example of one large family in a very expensive area of London, completely forgetting that the family does not receive that money—it goes straight into the pockets of a greedy landlord. That is one of the significant contributors to a high housing benefit bill.

As our shadow Secretary of State for Work and Pensions has said clearly, and has been quoted today as saying, we will get the benefit bill down. How will we do that? We will put people back to work, we will ensure that the national minimum wage keeps up with inflation and we will bring in measures to encourage employers to introduce the living wage, through tax breaks in the first year of its introduction. Frankly, we could make £3 billion of savings simply by helping people to earn more and pay more tax. They would then not need as much in the way of tax credits. We will have a house building programme that will put people into social housing at more sensible rents, thereby reducing the housing benefit bill. We have already seen how a two-bedroom house in the private sector can be far more expensive than a three-bedroom house in the social sector.

There is so much we could be doing. In this motion, we ask for a commission to look at the impact of poverty because we are very concerned that not just this generation but generations to come will be affected by the dreadful conditions and poverty we now see spreading across the UK.