Finance (No. 2) Bill

Seema Malhotra Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

I wanted to make that point and express my own gratitude to those who help in the voluntary sector, and to remind people what clause 5 and the other clauses are really about. They are about families struggling in trying and difficult circumstances through no fault of their own. I know that the Minister is a very decent man, and I urge him to rethink and lobby his colleagues, particularly the Chancellor, who, I am afraid, has a bit of a habit of dashing in with some very warm words but could perhaps look further at some of the detail. Families need that help at this difficult time.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op) [V]]

[Inaudible.]

[The First Deputy Chairman]

We are having some difficulty hearing Seema Malhotra, I am afraid. Do you want to try again, Seema?

[Seema Malhotra]

[Inaudible.]

[The First Deputy Chairman]

I think what we should probably do is go to our next speaker and come back to Seema. We will go now to Sir John Redwood.

--- Later in debate ---

Similarly, given that deep economic inequalities persist between white and black, Asian and minority ethnic people and their households, we have to ensure that our tax system is not a driver of racial injustice. Unfortunately, the pay gap between white and black and Asian communities is entrenched in the UK approach to tax, which on the whole favours higher earners. To tackle this inequality in our society we need to look at addressing the fact that, as previous research has shown, top earners are overwhelmingly white and male and more likely to be based in London and the south-east. We need to address those inequalities sooner rather than later.

[Seema Malhotra [V]]

In my limited remarks, I want to support the arguments made by my hon. Friend the Member for Ealing North (James Murray), and to speak in support of Labour’s new clause 23, to which I have added my name, seeking an equality impact assessment of the measures in the Bill that affect family incomes. This includes the impact of specified sections of the legislation on households at different levels of income, on people with protected characteristics, and across the regions and nations of the UK.

About 700,000 people have lost their jobs since February last year, and many more families have seen a drop in their household income. Over 39,000 are now on universal credit in Hounslow alone, and we have seen a huge rise in the use of food banks. There is no doubt about the importance of financial inclusion at this time. The Financial Inclusion Commission, on which I sit, has highlighted how there are now millions more people facing economic hardship as a result of the covid-19 pandemic. However, the UK entered the crisis with half its population financially vulnerable: 12 million categorised as financially struggling or generally on low incomes, and 13 million as financially squeezed. Covid has laid bare existing weaknesses, vulnerabilities and structural inequalities, and StepChange research shows that 10% of people say they will certainly or probably be unable to pay for essentials in the next 12 months.

We know child poverty, already extremely high, is rising, so it is inexplicable, when the Government themselves have said in the Budget report that the

“economic impact of restrictions has not been felt equally”,

that they have not themselves published an impact assessment. It should not be for the Opposition to table this vital amendment. It seems that instead of taking action to boost our community recoveries, the Conservatives are choosing to reward families up and down the country for their sacrifices with council tax hikes, the freeze to the personal allowance from next April a whole year before corporation tax rises kick in, a real-terms pay cut for key workers and cuts to universal credit later this year, a move now even opposed 100 Tory MPs.

Even when the Chancellor has done the right thing, such as extending furlough, as Labour called for, these moves need to be underpinned by a strong social security system that provides support when people need it. People need to be protected from financial exclusion and families need a clear route out of financial difficulty when they are struggling. The Chancellor could also look at how Sadiq Khan is working to promote financial inclusion through partnership with the financial sector, social enterprises and credit unions, and at his plans for a new team dedicated to economic fairness.

But instead of economic fairness, what we know is coming is the £20-a-week cut to universal credit for millions of families within six months, just when the OBR predicts that unemployment will peak. It is a cut that takes out-of-work support to its lowest levels since the 1990s. That is why Labour has also called for urgent social security measures, including converting universal credit advances to grants instead of loans, ending the five-week wait, suspending the benefits cap and uprating legacy benefits to match the increase in universal credit. About 2.2 million people on legacy benefits have been deprived of the uplift, and given that three quarters of those claimants are disabled and on employment and support allowance, this has created a two-tier social security system that has left many struggling to cope. Evidence from the Disability Benefits Consortium found that 67% of disabled claimants have had to go without some essential items at points during the pandemic.

Minority ethnic communities have been hardest hit by both the health and economic crisis. The Resolution Foundation found that, at the end of last year, unemployment among young black graduates had risen to 34%, up from 22% before the pandemic, and almost three times that of young white graduates during the same period. StepChange research also shows that those from an ethnic minority are twice as likely, compared with the GB average, to say that they have experienced hardship, borrowed to make ends meet or have run down savings.

In conclusion, the Chancellor is hitting families up and down the country, with a quadruple hammer blow of council tax rises, cuts to universal credit, real pay cuts for key workers and the freeze to the personal allowance. If the Chancellor wants to work for a fairer Britain and build a more inclusive and financially inclusive economy, he needs to know who his policies are helping and who they are not. That is why we need an impact assessment, as called for in new clause 23, and the Government should support it today.

[Rebecca Long Bailey (Salford and Eccles) (Lab) [V]]

I speak to oppose clause 5 stand part, and in support of amendments 2, 3 and 4 in the name of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and others, as well as amendments in the name of my hon. Friend the Member for Streatham (Bell Ribeiro-Addy) and amendments from the Labour Front Bench.

The Chancellor committed to doing whatever is necessary to support people and businesses through the coronavirus pandemic. I want to believe him, but the £20 a week covid uplift to universal credit will be cut just at the time when the OBR has predicted that unemployment will peak. There has been no uplift at all, as we have heard, in covid support for those on legacy benefits or affected by the benefit cap. At the same time, an equivalent cut in working tax credit for households that have not yet made the move to universal credit will be imposed.

Further councils, whose budgets have been decimated over recent years, will be forced to increase council tax by up to 5%, pressuring household budgets even further, so the Bill is already sorely deficient in honouring the Chancellor’s original promise. However, in clause 5—the proposal to freeze the personal tax allowance—the promise is sadly contradicted entirely. The reality of the clause is that, if there is wage inflation over the next five years, someone earning just under the threshold now, for example, who then receives an inflationary pay increase for 2022-23 will start to pay tax.

As the Resolution Foundation has found, the poorest fifth of households are twice as likely to have seen their debts rise rather than fall during the crisis, so taking some of those lowest earners beyond the personal allowance threshold as their wages might slightly increase with inflation could result in their financial devastation. I therefore supported calls to remove clause 5, or at the very least for the Government to compromise and delay the changes.

I will also briefly mention clause 32 on self-employment income support. I do not disagree with the sentiment of the clause but, as the Government know, the support still does not go far enough. More than 2 million remain excluded from any Government support at all and, as I have repeatedly told this House, some have sadly taken their own lives as a result. I once again urge the Government to provide an immediate emergency grant to those affected, install new monthly arrangements while restrictions remain in place in complete parity with the extension of the coronavirus job retention scheme and the self-employment income support scheme, and remove the hard edges to eligibility criteria. Finally, they should backdate payments for a full and final settlement to deliver parity and fairness for those excluded from meaningful support.