Social Security (Additional Payments) Bill

Stephen Timms Excerpts

2nd reading
Wednesday 22nd June 2022 Commons Chamber

[Dr Coffey]

My understanding is that the Secretary of State for Business, Energy and Industrial Strategy, my right hon. Friend the Member for Spelthorne (Kwasi Kwarteng), is aware of that particular channel. I am led to believe that a solution is being developed so that people will benefit from that cost even if they do not receive the money directly, because a lot of park home owners do not pay their energy bills directly. I know that my right hon. Friend is aware.

Returning to what we are doing to help people, we are providing a direct cost of living payment of £650—split into two payments of £326 and £324—to over 8 million families who already get help through means-tested benefits. This includes people on universal credit, income-based jobseeker’s allowance, income-related employment and support allowance, income support, working tax credit, child tax credit and pension credit—both guarantee and savings credit recipients. On top of that, we are providing a £150 payment for approximately 6 million people with disabilities who are on qualifying benefits, and giving 8 million pensioner households an additional £300 alongside their winter fuel payment. Combined, that is extra support of at least £1,200 this year for the majority of households that are least able to absorb rising costs, which takes our total support package to £37 billion.

[Sir Stephen Timms (East Ham) (Lab)]

I just want to check one point. At the moment, about 150,000 working-age people who receive universal credit have their benefits limited by the benefit cap. Am I right to say that these additional payments are not constrained at all by the level of the benefit cap?

[Dr Coffey]

Yes, that is the case. I was planning to cover that later. For the record, I will still make that point.

Our household support fund administered through local authorities in England and the money given to devolved Administrations are further avenues for people to seek help with the cost of essentials. From October, the Government are adding an additional £500 million to the fund, extending support through the winter. That equates to an additional £421 million in England and £79 million for the devolved Administrations, and that will take total funding for this UK-wide household support to £1.5 billion.

--- Later in debate ---

[Sir Stephen Timms (East Ham) (Lab)]

I am very pleased that the Bill is in front of us. The Select Committee has been clear in the past few weeks that, without a big measure on this kind of scale, low-income families would be in very serious trouble indeed in the coming months. I echo the tribute that has just been paid by the hon. Member for Aberdeen North (Kirsty Blackman) to Jack Monroe and her campaigning on this. She gave very compelling evidence to the Select Committee at our meeting on 9 March.

The package that has come forward has been widely welcomed. We put out a call for evidence on the cost of living in May. In response, the Joseph Rowntree Foundation said that,

“the package provided much-needed support for households, which will protect many of them against rising costs over the coming year.”

Citizens Advice welcomes the targeted support to low-income households and hoped that it would

“start to reverse the worrying trends we have seen in our data, including record-breaking food bank referrals.”

Unlike the previous announcements, this May package is properly targeted on low-income families, as it needed to be. The Resolution Foundation described it as offsetting

“the poor targeting of previous announcements.”

It also described it as “serious redistribution”. It is, I think, a serious response to a serious problem. I also welcome the Chancellor’s change of heart over the windfall tax to fund some of the help that is needed.

However, we need to be clear: the reason the Bill is needed is that the system for social security uprating has failed. It is a long-standing system. There is nothing new about the way it is done, but the unforeseen burst in inflation means that it simply has not worked this year. On this occasion, the decision has been taken to replace adequate uprating with ad hoc payments from the Treasury, which will certainly help us through the next few months. We need now to rethink the uprating system to make sure that it does not let us down again.

[Jonathan Ashworth]

I have a question for my right hon. Friend, the Chair of the Select Committee. Is he aware that, in 1976, the then Social Services Secretary, Barbara Castle, came to the House and uprated benefits and pensions for a second time in a year—there was a cost of living crisis then as well. The policy of the then shadow Secretary of State, Norman Fowler, was that uprating should take place twice a year. I wonder whether the Select Committee will consider the arguments that were made in the 1970s.

[Sir Stephen Timms]

My right hon. Friend makes a very important point. The Select Committee will certainly be looking at that. We are conducting an inquiry later this year on the question of the level of benefits, and the issue of how benefits should be uprated will certainly feature. I am intrigued to learn that the Secretary of State was able to do that in the 1970s given that we have been told that the IT systems in the 2020s cannot cope with it. I am certainly interested in seeing more on that.

[Stephen Crabb]

The right hon. Gentleman is making an interesting and important point about how we do upratings. I urge him not to get drawn too far down the path of looking at the system in the 1970s, which was in very different circumstances. There is an issue about the timing of uprating and the figures that are used to calculate it, but the bigger practical issue is the different IT systems and the plethora of different benefits that are still in play. Does he agree that we need to find a way to rationalise and simplify them?

[Sir Stephen Timms]

That would help—just modernising the old systems would help, and I will say something about that in a moment.

We are getting ad hoc payments from the Treasury to tide us over. The Secretary of State rightly spelled out to the Committee the downsides of one-off ad hoc payments such as those that the Bill enables. In oral evidence in February last year, she told the Committee that there were higher risks of fraud attached to one-off payments and that they can make it difficult for claimants to budget effectively—both quite telling points. She said that one-off payments were not

“one of the Department’s preferred approaches”

for providing that financial support. She noted:

“There are some challenges about fraud”

and that there would be difficulties if people claiming tax credits received a one-off payment and then moved to universal credit shortly afterwards. On the question of what might work best for claimants, she told us:

“Previous experience would be that a steady sum of money would probably be more beneficial to claimants and customers, to help with that budgeting process.”

I think she is right; it is not ideal for the Treasury to provide lump sums instead.

Why was proper uprating not done in this case? The Chancellor pointed out that legacy benefits cannot be quickly uprated because they are run on antiquated IT systems, as the right hon. Member for Preseli Pembrokeshire (Stephen Crabb) referred to, so uprating takes several months. The Chancellor told us that that was why he was unwilling simply to uprate benefits: it could have been done quickly for universal credit, as we discovered in the pandemic, but not for legacy benefits.

In an earlier debate, I recall the shadow Secretary of State, my right hon. Friend the Member for Leicester South (Jonathan Ashworth) brandishing a document from an IT company, perhaps Oracle, about the front end that it had built for the Department’s legacy systems, which it said enabled changes to be made to them more quickly. I wonder whether the Minister, in closing, could tell us the truth behind that claim about the front end that had been provided. I know that the Department has certainly commissioned such front ends for the legacy systems over a long time, so I am interested to know why, notwithstanding what that brandished document said, it is apparently still the case that uprating takes four or five months. Are front ends in place? Why have they apparently not made faster changes possible?

In our June 2020 report on the Department’s response to coronavirus, the Select Committee recommended an increase in the speed with which changes could be made to legacy benefits. We said:

“People will be claiming legacy benefits until at least September 2024, the Government’s most recent estimate for completing the rollout of Universal Credit. It is simply not tenable for the Department to continue to operate antiquated systems that prevent Ministers from making timely changes to the rates at which legacy benefits are paid. We recommend that the Department work to increase the speed with which changes can be made to legacy benefit rates.”

In its response in September that year, the Department said that it

“recognises the need to be able to respond to events flexibly which is why we are investing in Universal Credit which is more agile than the systems that support legacy benefits.”

While substantial numbers of people depend on legacy benefits, the Government surely need to keep the systems that support those benefits fit for purpose. They are clearly not fit for purpose at the moment, and that ought to be addressed.

[Kirsty Blackman]

On that note, the new systems that we have created in Scotland under Social Security Scotland are doing exactly what the right hon. Gentleman asks. It has the ability to make those extra payments, because we set up the systems. Does he agree that the Government need to just invest to sort that out for many thousands of people?

[Sir Stephen Timms]

It certainly does need to be done. I am pleased to tell the hon. Lady that on Monday the Select Committee will visit Social Security Scotland and that our vice-chair, the hon. Member for Amber Valley (Nigel Mills), who is in his place, will be part of that group. We look forward to that visit.

The reason why benefit uprating has not worked this year is, of course, the six-month gap between September, when the inflation figure forms the basis of uprating for the following year, and April, when increases take effect. In response to our call for evidence on the cost of living, the Joseph Rowntree Foundation called on the Government to

“commit to a much shorter timeframe for annual uprating between measuring inflation and uprating accordingly, to ensure benefit uprating genuinely reflects inflation for the year in question.”

Lloyds Bank Foundation told us that the Government should

“consider uprating benefits in line with inflation in the autumn to ensure they more accurately reflect the true cost of living.”

That sounds like what was done in the 1970s. The Legatum Institute also suggested reducing the delay between CPI measurement and the application of uprating as well as introducing a mid-year uprating review. Citizens Advice called for a more sustainable, responsive uprating approach, which means

“addressing the lag between benefit uprating decision-making and implementation and the exclusion of the benefit cap from wider uprating.”

It says that while the one-off payments to be made under the Bill

“are more generous…for some households than if uprating had been brought forward”,

there are problems. For example, as we were reminded by my right hon. Friend the shadow Secretary of State, the one-off payments are the same amount regardless of family size. They also have cut-off dates, which risks arbitrarily excluding people from support.

Flat-rate payments being irrespective of family size appears to be pretty unfair to larger families. Overall, the package is somewhat more generous than early benefit uprating would have been, but it is less generous for larger families. The justification for that is not clear.

The North East Child Poverty Committee told us that

“a flat-rate £650 payment for all households on means-tested benefits, regardless of household size, additionally fails to recognise the clear link between family size and essential outgoings, with many larger families (already at much greater risk of poverty, a situation compounded by the two-child limit) facing intolerable financial pressures as a result of rising household bills.”

I will make one final point. One great advantage of the Chancellor’s package for low-income families, compared with a straightforward benefit uprating—I was grateful to the Secretary of State for confirming this—is that the benefit cap does not apply. It is striking that when it appears that the headline rate of social security benefits is likely to be raised by perhaps 10-plus per cent. next year, there is no indication at all about the benefit cap being lifted at all. That means that the growing number of families whose benefit has been capped will receive no increase in their income at all at a time when inflation is likely to be over 10%.

In evidence to the Select Committee, the Child Poverty Action Group Told us that

“the Government has made a welcome commitment to increase benefits in April 2023 in line with prices. However, not all price-related elements of the system are included in the annual uprating exercise and the benefit cap means a substantial minority of claimants—an estimated 150,000—will see no increase at all and face another real terms cut to their benefits.”

At a time when inflation is so high, surely at least the level of the benefit cap must be reviewed. Will the Minister give us any encouragement that it will be, ahead of April next year? For now, and in the context of the Bill, it is welcome, and quite a significant precedent, that the benefit cap will not apply to these additional payments.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Work and Pensions (David Rutley)]

I thank those who have contributed to this debate. I echo the points made by my right hon. Friend the Secretary of State to stress the importance of this urgent legislation to support people up and down the country. The sharp increase in the cost of living is a challenge shared across the globe due to the aftershocks of covid on global supply, amplified by Russia’s unacceptable invasion of Ukraine. This Bill is the flagship component of our bold package of cost of living additional payments which have been designed to help people to cope with increased costs.

We are grateful for the support of Opposition Front Benchers in facilitating the speedy progress of the legislation. It is vital that these payments get to the people who need them. I am also very grateful for the contributions that have highlighted that these are a serious response to serious challenges, such as those made by the Chair of the Select Committee, the right hon. Member for East Ham (Sir Stephen Timms), as well as by my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) and my hon. Friend the Member for Amber Valley (Nigel Mills).

The support provided through this Bill is timely and comprehensive, and we are taking significant steps and targeting resource to support those in greatest need. The spirit of this Bill is in line with the approach that the Government have taken since the start of the pandemic, which has been shown to deliver for the people of this country in challenging times. We will continue to work hard to help people on low incomes get the support that they need.

We have worked hard through the vaccine roll-out, through the dedication of amazing people, to reopen society, and our economy has responded positively. There are record numbers of people in payroll employment, unemployment is just 3.8%, which is around the lowest level since the 1970s, and there are 1.3 million vacancies, which we are working diligently with employers and communities to fill. My hon. Friend the Member for Ashfield (Lee Anderson) will be pleased to know that, given his focus on work.

With all the work going on to help get people into work and progress in work, we recognise that people do need additional support in dealing with the cost of living challenges. That is why the Chancellor has set out his generous package, with another £15 billion of targeted support, which brings our total package to £35 billion this year alone. Of these additional payments, a particularly important one is the means-tested benefit that will provide a £650 one-off cost of living payment. It will be paid in two instalments to recipients entitled to qualifying means-tested benefits or tax credit. The first starts on 14 July and the second, of £324, later in the year. The hon. Member for Richmond Park (Sarah Olney) asked if there could be one payment. I understand the point she made, but we have consciously staggered the payments to help people on low incomes with their budgeting, which I hope she will welcome. The other important element of the Bill is providing disability cost of living payments of £150, which will go to 6 million people in the United Kingdom and will be paid in September.

We have deliberately kept the rules of the additional cost of living payments as simple as possible, because that is the way we can ensure that we develop the systems and processes required to make the payments at pace. I pay tribute to the hard work of officials across the Government to make that possible.

There are a number of contributions in the debate to which I need to respond. The benefit cap was raised by the right hon. Members for East Ham and for Leicester South (Jonathan Ashworth) and also by my hon. Friend the Member for Amber Valley. We have kept the payments very simple both for those receiving them and for Government systems. They are tax-free, they will not impact on benefit entitlement or the benefit cap, and they will be paid to people without the need for paperwork. They will be paid into people’s bank accounts.

The hon. Member for Aberdeen North (Kirsty Blackman) made points about uprating. Of course, as the Secretary of State said in her speech at the start of the debate, there will be an annual review of benefits and pensions for the tax year 2023-24, which will commence in the autumn as per convention.

Some hon. Members have highlighted the legacy systems and pensions, and asked why we cannot do uprating more frequently. I think we know that the legacy systems are not that agile. Of course, what we are trying to do and working very hard to do—recognising how flexible universal credit is and how resilient it has proven through the pandemic—is to move people through to universal credit by the end of 2024.

[Sir Stephen Timms]

I want to go back to what the Minister said about the benefit cap, and I welcome the point he made. Does he recognise that, in a very high inflation environment, there really is quite a compelling case for looking again at the level of the benefit cap for next year alongside the other benefit uprating matters?

[David Rutley]

There is a statutory duty to review benefit cap levels at least once every five years, and this will happen at the appropriate time. When the Secretary of State decides to undertake the review, she will consider the national economic situation and any other matters she considers relevant at that moment in time.

I reiterate that carer’s allowance is not a means-tested benefit. Nearly 60% of working-age people on carer’s allowance will get the cost of living payment as they are on means-tested benefits or disability benefits. Carer’s allowance recipients will benefit from the £400 per household universal support being provided to help with the cost of energy bills.

People who receive carer’s allowance may live in a household that will benefit from the Government’s support package. For example, they may live with someone who receives a means-tested benefit, a disability benefit or tax credits. If so, the household will benefit from the cost of living payment.

The hon. Member for Westminster North (Ms Buck) has asked me in a number of debates why this measure does not more fully reflect different family sizes and formations. The challenge is trying to get these payments out as fast as possible. To do that, we need to get the payments out to “single benefit units,” as they are described, and households. The important thing to highlight is that most low-income families will be able to receive the £150 council tax support and the energy bill support, on top of the work allowance taper and the increase in the national living wage.

It is not possible to distinguish between those who have a permanent increase in their earnings and those whose earnings are temporarily fluctuating. If a UC claimant’s income subsequently falls, they will return to having a positive award after the cut-off date, and they may be eligible for the second payment.

The right hon. Member for Leicester South talked about the minimum income floor, which ensures we do not prop up unproductive employment or self-employment indefinitely. There is a start-up period to protect newly self-employed people. Beyond that, having a minimum income floor is the right policy. If it means there is a nil UC payment, the claimant would not be entitled to the means-tested payment. However, they would get the £400 energy payment and the £150 council tax rebate, and they would potentially be eligible for the household support fund. It is worth recognising that there are paid employment opportunities out there, given the high level of vacancies.

We have heard about the take-up of pension credit, and I am sitting next to the expert, the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham (Guy Opperman).