Lord Bill McKenzie of Luton, Shadow Work and Pensions Minister Speech to House of Lords, Second Reading of Welfare

Benefits Up-rating Bill 11 February 2013

My Lords we thank the noble lady Baroness Stowell for her explanation of this Bill. This is a bad Bill which shouldnt see the statute book, and we have much to do at Committee. The Chancellor of the Exchequer has said that it is in his terms shirkers who will be affected by these cuts to tax credits and benefits. And of course uprating by less than the rate of inflation is a real terms cut. However analysis now shows that 2/3rds of those affected by this Bill are actually in work, striving to rise above poverty levels and support their families. The Childrens Society shows that up to 40,000 soldiers, 300,000 nurses, and 150,000 teachers will lose out as a result of this Bill. And despite what we are told disabled people are not properly protected; it penalises working mothers; punishes children, trapping them in poverty. 2/3rds of those hit by cuts to tax credits and benefits are women. There could not be a more stark example of this governments values to know that at the same time as they are introducing this Bill they are seeking to give 8000 millionaires an average tax cut of 2000 per week. Compare this to 71p per week for someone on JSA. This Bill should not proceed while these tax cuts are to be implemented. This Bill is anyway entirely unnecessary. If government are so determined to uprate most benefits and tax credits by just 1% then they can do it by way of the annual uprating process, precisely as they are doing for 2013/14. Those affected by this Bill are having to shoulder the burden of the governments economic failure. Their failure on jobs and growth. As the 2012 Autumn Statement made abundantly clear with a shrinking economy last year and growth forecasts downgraded again for this year, next year and every year up to 2016 the government are failing also on tackling the deficit and debt. The Chancellor has been forced to announce that he will not meet his fiscal rule to get the debt down by 2015 with the result that the government is borrowing a staggering 212 billion more than it planned. There are nearly 1 million young people out of work and the claimant count is forecast to be 275,000 a year higher in 2015. The OBR expects the economy to be 3.6% smaller in 2016/17 than it thought just a year ago. But still the government will not change course. Nothing in this Bill will help growth and jobs. Nothing in this Bill will help build a stronger economy. Everything in this Bill will contribute to depressing demand and putting more pressure on hard pressed public services. There is no recognition that low income families have high marginal consumption rates so restricting their income will impact very directly on demand in our economy. So the poorest are being asked again to bear more of the burden.

The IFS say this will include 7 million working households who they calculate will lose on average 165 a year. Taken together with other changes in the last Autumn Statement the real income of a one earner family will reduce in real terms by over 500 by 2015/16. The governments own impact assessment shows that the average loss in income is higher for those families in the lower deciles than those in the higher deciles. Those at the very bottom lose 4-5 per week. Those at the top, 12. As USDAW put it in their briefing, this Bill is another blow to working families. Compared to a CPI uprating the Bill will cost a working families on modest incomes nearly 800 per year. And we know from the Minister herself Esther McVey that it will result in an extra 200,000 children being pushed in to poverty on top of the 800,000 the IFS already estimate to arise from the coalitions policies. This is why we will demand the government produce a comprehensive assessment of the effects of this Bill on child poverty. Any claim that increases in the personal tax allowances will compensate low income working families for such losses is not true. Many will not reach the tax threshold being in part time jobs at the minimum wage. For those that do the tapering away in housing benefit and council tax support will negate much of the suggested advantage. But of course what we still do not have from this government is a cumulative impact assessment of all the changes made to tax credits and benefits since May 2010, an issue so brilliantly pressed by my noble friends Baronesses Hollis and Sherlock in a recent debate. And when introducing this Bill there was not a scintilla of recognition by the Minister about how much the living standards of the poor have already suffered under this government. No recognition either of the Tsumani of cuts which are about to engulf hundreds of thousands of our fellow citizens in the form of the bedroom tax and local Council Tax Support Schemes. We are told that it is necessary to legislate for the 1% restriction to provide certainty for the taxpayer, the markets and claimants. These are entirely specious assertions. Taxpayers will not have certainty about the costs of social security without knowing claimant numbers which of course are heavily dependent on the growth this government has failed to deliver. As for the markets, to argue that they will take fright in respect of the amounts involved if you have just declared your intentions to uprate by 1% rather than enshrine it in legislation for 2 years in circumstances where your public sector net debt is heading north of 1.4 trillion is frankly ludicrous. In any event the market knows full well how determindly brutal you can be when it comes to cuts. When it comes to claimants I am sure that most would forgo the certainty of a 1% increase a maximum of 1% - for the prospect of a fair review on an annual basis. Because what this Bill is doing is to place inflation risks with the most vulnerable members of society. Inflation just 3 years out is difficult to predict and should it (contrary to current expectations) dip below 1% then the government can pocket the benefit. But is the government really saying that whatever the level of inflation, say , in year three it would allow any level of cut to be visited on the nations strivers. The justification for the 1% is that benefits have been rising at a faster rate than earnings over the last few years but this means those families receiving in work benefit are getting a double blow. But if you look at a longer trend as the DWPs data illustrates average earnings have risen at a much faster rate than benefits. However the reality is that this Bill is not about shoring up the markets. It is about trying to shore up the dwindling political standing of the government. It is about trying to foster a political climate a

party political dividing line which says that recipients of tax credits and social security benefits are feckless and workshy who stay in bed while others go out to work for a living. They the government of course are only for the latter.

That any government should seek to prey of the lives of poor people in this way for party advantage is disgraceful but the ploy is anyway unravelling. Of some 14 million working age households with someone in work strivers in anyones language around half are disadvantaged by this Bill. But it is not only people in work who are strivers. What about a lone parent struggling on income support to nurture a young child to be part of a responsible future generation. Or someone on income support because they devote every waking hour to care for someone, saving the state hundreds of thousands of s over the years. Or someone on JSA who has been made redundant through no fault of their own, desperate to get back into work. These are strivers too. Any claim that disabled people are being fully shielded from the cuts in this Bill are of course false. Disabled people in the Work Related Activity Group by definition those found not fit for work will have their ESA uprating capped at 1% , losing according to the Disability Benefits Consortium 87 a year. Those in the Support Group fare little better with the support component being out of scope but the core component being subject to the cap. This at least we will seek to address in Committee. Of course disabled people will not only miss out on this basis. Other benefits which disabled people are disproportionately likely to rely on, such as housing benefit will be restricted. We will also seek in committee to reverse the real terms cut in Statutory Maternity Pay. It would reverse just part of the losses that working women are suffering from cuts to maternity pay, pregnancy support and tax credits. My Lords, this is a wretched Bill with the wrong priorites. It does nothing for jobs which is why we will press that it not enter into force until a compulsory jobs guarantee be introduced focussed on the long term unemployed and paid for by restricting pension tax relief on high earners. The injustice at the heart of this Bill is another attack on the poor including those individuals and families who subsidise all of us because of their working for low wages mean we all benefit from cheaper goods and services. They should not be treated in this way. My Lords, if the government has its way on this Bill it will mean another spur to poverty, more foodbanks, more pay day loans, more households having to choose between heating and eating, more despair for those striving to do the right thing. We have a duty to stop it. ENDS