Pensions and Social Security

Stephen Lloyd Excerpts

Wednesday 13th February 2013 Commons Chamber

[Steve Webb]

My hon. Friend is right that placing the housing element in a single benefit—the pension credit—rather than it being a separate claim through a local authority will reduce administrative costs and increase take-up as well.

On disability benefits, this year the coalition will ensure that those who face additional costs because of their disability and who have perhaps less opportunity to increase their income through paid employment will see their benefits increased by the full value of CPI. Therefore, disability living allowance, attendance allowance, carers allowance and the main rate of incapacity benefit will all rise by the statutory minimum of 2.2% from April 2013, as will the employment and support allowance support group component and those disability-related premiums paid with pension credit and with working-age benefits.

[Stephen Lloyd (Eastbourne) (LD)]

Will the Minister make it absolutely clear for the record that, despite some noise in the media, disability benefits are all going up by the higher rate?

[Steve Webb]

Yes. My hon. Friend is right. The specific benefits for the extra costs of disability are all rising by the full 2.2%.

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[Stephen Timms]

I think the hon. Gentleman is asking me a question about the administration of the Labour party on which, I am afraid, I am unable to assist him.

It is worth reflecting on the history of the triple lock. In its first year, it was announced but not actually implemented. If it had been implemented, it would have produced, from the Government’s point of view, an embarrassingly small pension increase. The Minister, sensibly, chose to override it and instead apply a larger increase that in that year was in line with RPI. At its first outing, therefore, it failed. In its second year—last year—it was actually implemented, and delivered an increase in line with CPI, along with working-age benefits. This year it is being applied again, and for the first time it is delivering something better than CPI uprating—a point made by the Minister.

The increase in CPI, as measured last September, was 2.2%, and the uprating amount in line with the triple lock is 2.5%. So that is it: in comparison with the CPI uprating, which until recently was the Government’s policy for working-age benefits, the triple lock has delivered a higher pension by a paltry 0.3%. Of course, if it had been applied in the first year, it would have been less than the CPI uprating. The triple lock has delivered a higher pension of 0.3% over three years—a rather derisory achievement. It is clear that the triple lock has been something of a damp squib. Of course, if it was something other than a damp squib, the Chancellor would have vetoed it long ago.

[Stephen Lloyd]

I have a lot of respect for the right hon. Gentleman’s honesty generally, and in particular in this area. Will he therefore agree with me that it is unfortunate that the Government in which he served as a Minister did not have a triple lock, otherwise pensioners all those years ago would not have received an uprate of only 75p?

[Stephen Timms]

Had the previous uprating RPI mechanism been in place, there would have been a larger pension increase this year and last year than has been delivered. I am grateful for the hon. Gentleman’s comments about my honesty, so let me pay a tribute to him. As a man who is also frank, he will recognise that the last Government did an enormous amount, particularly through the introduction of pension credits, to reduce the extent of pensioner poverty. In the past, pensioners were always more likely to be poor than the population as a whole, but that ceased to be the case under the policies of the last Government. Indeed, pensioner poverty was halved, as my hon. Friends have said.

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[Stephen Timms]

My hon. Friend is right. There was dramatic progress on reducing child poverty but, as I shall explain in a moment, all that ground will sadly be lost under the current Government’s policies. Those policies are hitting the disabled because, as the Minister said, although disability living allowance is being raised in line with the consumer prices index, employment and support allowance is not. On Second Reading of the Welfare Benefits Up-rating Bill the Secretary of State said that he was protecting people in the ESA support group. In fact he is not and, as the Minister confirmed, their benefit will be uprated by less than inflation—I know the hon. Member for Eastbourne has taken a close interest in that matter. Those people will see their income rise by less than inflation; they will have a real-terms cut.

As we have discussed, child poverty will rocket. The Institute for Fiscal Studies, where the Minister once had the task of compiling the statistics on child poverty, was already predicting on the basis of Government policies an increase in child poverty of 400,000 by 2015 and 800,000 by 2020.

[Stephen Lloyd]

I appreciate the right hon. Gentleman’s generosity in giving way. He mentioned the Institute for Fiscal Studies. Does he agree with its director, Paul Johnson, who said that

“the 1% uprating of welfare would start to put benefits back in line with earnings after welfare has grown twice as much as wages in recent years.”?

[Stephen Timms]

It would be particularly interesting to see a revised child poverty forecast from the Institute of Fiscal Studies, which I expect to appear before the Budget. We now know—as I say, these figures had to be dragged out of reluctant Ministers—that this order plus the Welfare Benefits Up-rating Bill will increase the number of children growing up below the poverty line by 200,000, including 100,000 in working families.

[Stephen Timms]

My hon. Friend is absolutely right, and we are talking about a large group of people. Indeed, the hon. Member for Eastbourne and I were on the radio together when somebody rang in whose total income was £71 a week. She was going to get an increase of 70p a week as a result of this order and she asked, “How am I supposed to manage?” To their credit, the hon. Gentleman and his friend from the Conservative party, the hon. Member for Camborne and Redruth (George Eustice), could not give her an answer.

[Stephen Lloyd]

I recollect that radio programme. I am sure the right hon. Gentleman will accept that the point was that surviving on £70 a week is a challenge for anyone in any circumstances, with or without a benefit uprate.

[Stephen Timms]

The hon. Gentleman is absolutely right, but what was clear from that contributor was the despair at the prospect of a rise of only 70p a week. At a time when inflation is running at more than 2% and is likely to increase, according to the Bank of England inflation report published today, that is a very alarming prospect indeed.

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[Stephen Timms]

I will give the hon. Gentleman the answer I gave a few moments ago. We think there would have been a reasonable case for the Government to make a temporary change to the uprating methodology, from RPI—the previous methodology—to CPI, but unfortunately they did not do that. They came up with a proposal for a permanent change to the methodology, using CPI only, but now they are not even sticking to that and have reduced the figure further to 1%.

What if inflation rises sharply in the next few years? The Governor-designate of the Bank of England has suggested that there should be greater flexibility in the inflation target used by the Monetary Policy Committee. If inflation rises sharply, the consequences for working families—for strivers, struggling to get by at the moment and lumbered with a 1% rise hard-wired into law for next year and the following two years—do not bear thinking about. The Bank of England inflation report published today places a probability of 39% on inflation being over 3% before the end of this year. The fan chart shows possible figures of 5%. What would the consequences be for people who will see a 1% rise in their incomes for the next three years if inflation rose in that way?

Why are the Government doing this? Why have the siren voices won this year? It is because the Government’s economic policy has failed. Let us look at the three years covered by this order and the Welfare Benefits Up-rating Bill. Compare the spending on unemployment benefits over those three years, which was predicted in the Budget last year, with the spending predicted in the autumn statement, just a few months later. The forecast spending on unemployment benefits over those three years went up, just between the Budget and the autumn statement, by the same amount that this order and the Bill will save over those three years. That is what is happening—the Government are clawing back the increase in unemployment benefits resulting from the failure of their policies from those who receive those benefits.

[Stephen Lloyd]

The right hon. Gentleman talks about the failure of the Government’s economic policies. Does he accept two absolute facts—that this is the worst economic recession since the great depression, and that since the general election the coalition Government have generated 1 million extra private sector jobs?

[Stephen Timms]

The hon. Gentleman is undoubtedly right that this is a very serious financial crisis, although I do not remember Government Members making that point before the election. I ask him to justify to the House why, on the very day that these measures will take effect, millionaires will all get a tax cut averaging more than £2,000 a week.

[Stephen Lloyd]

Under the coalition Government, people on higher incomes will pay more tax than they did during the entire 13 years—except for 30 days—of the Labour Government, during one of the strongest and most powerful booms we had had for 40 years. Can the right hon. Gentleman defend that record?

[Stephen Timms]

What would the hon. Gentleman say to the woman we spoke to on the radio, who will get a 70p per week rise as a result of this order? How would he defend to her the fact that the Government whom he supports will give a tax cut of £2,000 a week to everybody who earns more than £1 million a year? For me, that is completely indefensible, although he may have a defence—

[Stephen Lloyd]

Does the right hon. Gentleman accept that the IFS and other bodies have said that under the coalition’s tax policies the wealthier will actually pay more tax than they did before?

[Stephen Timms]

It is the people at the bottom who are being clobbered by this measure, and that is clear from the analysis. The hon. Gentleman has not defended the tax cut—I do not blame him as I do not think it can be defended that millionaires should get this enormous tax cut on the very day that people such as the woman on the phone to us on Radio 5 Live will get a 70p per week rise.