House of Lords
Monday, 25 February 2013.
Prayers—read by the Lord Bishop of Liverpool.
Media and Creative Industries: Equality
My Lords, the Government are committed to ensuring that equality is promoted in the media and creative industries in line with duties set out in legislation, including the Equality and Communications Acts. However, we do not have a role in influencing the content or output of these sectors, which must remain independent of government. Nevertheless, Ministers maintain a regular dialogue on issues relating to diversity and equality. Most recently, that has included increasing the media coverage of women in sport and the representation of disabled people.
My Lords, I thank my noble friend. As Danny Boyle demonstrated in the Olympic opening ceremony, diversity throughout the creative industries is incredibly influential in how modern Britain is portrayed and represented. Unfortunately, at present there is no pan-industry system of monitoring diversity to hold television or other creative sectors accountable and ensure that they attract, retain and increase talent from a range of different backgrounds. What measures are in place to ensure that the creative industries are employing and fulfilling their diversity responsibilities, and does my noble friend agree that standardised monitoring would provide valuable data? Will she work with PACT, UK Music and others in identifying how such measuring systems could be introduced?
My Lords, my noble friend raises an important point. We all want to see ourselves reflected in the media and for that reflection to be accurate in its portrayal. The Government certainly welcome the work by PACT, the Creative Diversity Network and broadcasters to devise a common system for monitoring diversity onscreen and offscreen. We understand that discussions are progressing well between these groups to consider how to standardise a system of diversity monitoring across the industry, and that the first pan-industry measurements are expected to be collected by the end of this year. However, we believe that it is absolutely right that the industry lead this initiative itself. While we look forward to hearing about this system and its results, we have no plans at present to mandate it because we believe most fundamentally in the independence of the media.
My Lords, I declare an interest as Channel 4’s diversity executive. Further to the earlier Question, I wondered if the Minister was aware of the lack of social diversity in terms of social mobility and social background in the media. Will she support broadcasters that are going out beyond non-traditional backgrounds, and particularly beyond non-media hubs, to find young people from those backgrounds who are not so much involved in the media industry at present?
I share the point that the noble Baroness has raised. I am aware that the BBC, which is the main public service broadcaster, has the largest responsibility to ensure that it is reaching out to new people in terms of its workforce. There are a couple of schemes that the noble Baroness may or may not be aware of. A BBC apprenticeship scheme has recruited over 50 apprentices in the past 18 to 20 months, 30% of whom were from the black and minority ethnic communities. The BBC’s work experience scheme has ensured since January 2011 that 60% are from BME backgrounds, and of those 21% have secured paid work at the BBC. The latter scheme has been recommended for an award for extending diversity in the workplace.
My Lords, do the Government accept that cultural diversity in the creative industries will have significant roots in school education? If so, will the Minister say what they are doing to encourage every child, whatever their background, to have the best possible education in art and design subjects?
The noble Earl raises an important point about how we can ensure that people’s aspirations at school are broadened and increased to include areas which might not be most obvious to them. I certainly support that. I do not have a specific response to the noble Earl on his question, but I will see whether I can follow up in writing.
My Lords, following the question from the noble Baroness, Lady King, I wonder if the Minister is aware that not only the young but also the old need to be cared for. Is she aware that the media, and particularly the BBC, are very short of women over 50 at the moment? Does she not think that it is time that that was brought under control a bit more?
As I said in response to the first question, it is important for all of us to see ourselves reflected in the media, whether that means people who come from the area that we come from or people who are of a similar age. The most important point is that the broadcasters themselves should acknowledge the issue and take action. I was certainly heartened when the last director-general of the BBC was willing to acknowledge that there was a problem and took steps to improve the situation.
The issue of older women in the media has already been raised by the noble Baroness, Lady Gardner, and she is quite right. I am sure that this House appreciates that the new generation of older women in the media does not fancy the idea of being written off and regarded as past it when they are 60, 50 or even 40. Can the Minister go into more detail about how the Government intend to monitor this situation and what they intend to do about it?
The system of monitoring that I referred to in answer to my noble friend Lady Benjamin’s Question, which the broadcasters are in discussion about at the moment, will include age as well as ethnic diversity. It is up to the broadcaster to gather that information and to make it transparent. We share the principle of transparency, which is why we have introduced the Think, Act, Report initiative about diversity in the workplace more generally.
Republic of Ireland: Aids to Navigation
My Lords, the Department for Transport in the UK and the Department of Transport, Tourism and Sport in Ireland work together to support the Commissioners of Irish Lights’ Republic of Ireland self-funding endeavours. The process remains on course for completion in 2015-16, and in preparation the Commissioners of Irish Lights continues to reduce its headcount and to introduce new operational and commercial initiatives.
I thank the Minister for that positive Answer. In fact, it is the first positive answer that the ship-owners who bring their ships into UK ports have had for 90 years, because this has been going on for 90 years. Why successive Governments have failed to make this negotiation in all that time escapes me. I am very grateful to the Minister, but can he confirm that, with or without the Commissioners of Irish Lights sorting out its financial problems, payments from the UK to the Irish Government for these lights will stop in 2015-16?
My Lords, I know that it took a long time to achieve this agreement, which is down to my honourable friend Mike Penning, who secured agreement with the Irish Government. The noble Lord asked when transfer payments would stop. That is a bit of a complex question. If a Commissioners of Irish Lights vessel works in UK waters as part of the co-operation between the various lighthouse authorities, there will of course be a transfer payment. It is a little complicated to say exactly when any transfer payments will stop; they may never stop. The main thing is that we will, by 2016, no longer support the Irish lights.
My Lords, it is interesting to note that the Atkins report, commissioned by this Government in 2010, recommended that we retain the Northern Lighthouse Board and Trinity House to provide lights in Scotland and England respectively. We have no intention of changing those arrangements.
My Lords, in commending the Commissioners of Irish Lights on reducing its costs, can the Minister confirm that after 2015-16 the joint strategic board set up by the Atkins report will continue the interoperability arrangements for ships, as exist at the moment?
The noble Lord raises an extremely important point. One of the ways in which we have managed to reduce unnecessary expenditure is through the work of the joint strategic board to set the modalities so that assets can be shared and facilities are not duplicated.
My Lords, does my noble friend recognise that, for some of us, the fact that there was continued collaboration between the United Kingdom and the Republic of Ireland on lifeboats, lighthouses and the Ordnance Survey throughout the Troubles was a bright light in a darkened world? Furthermore, does he recognise that the reconstruction of the Ballyconnell Canal, 80% of which was paid for by the Irish Government—both of us being helped by the European Union—has had a powerful effect on tourism on our side of the border in Lough Erne?
My Lords, I agree that there has been surprising co-operation between the Republic of Ireland and the UK Government over many years. It is important to understand that the general lighthouse authorities will continue to co-operate around the coasts of the UK and the Republic of Ireland.
My Lords, the House will of course welcome the optimistic and accurate position which the noble Earl has reflected. However, the urgency of the situation ought not to be underestimated. General shipping costs are going up 11% this year on these dues. For shorter crossings and ferries, they are going up by 43%. People have ways of avoiding these costs, such as by putting into other ports if costs continue to escalate. I therefore hope that, in the time before the full Irish payments come in, increases in costs are kept to an absolute minimum.
My Lords, throughout this process, all GLAs have managed to reduce their operating costs, which is a great benefit to the shipping industry. We will shortly determine the light dues for 2013-14, but there is already a commitment from the Government that in cash terms they will not go up. One of the beauties of light dues is that they are quite a difficult tax to avoid. It is pretty obvious when you take a big ship into a harbour.
The Atkins report, to which the Minister has referred, although written largely in impenetrable jargon contained at least one clear recommendation. It stated:
“The UK and Irish Governments should consider additional sources of revenue including a charge on leisure sailors, charges on passengers, cars landed and cargo”.
Are such changes being considered?
My Lords, one obvious target for increased revenue for the General Lighthouse Fund would be small pleasure craft. The difficulty is that it would be uneconomic to collect that revenue because the amounts would be relatively small, whereas a large merchantman would pay several thousand pounds on each visit to a port.
My Lords, my department has regular discussions with energy providers about a range of market issues. We are determined to help consumers to get their energy bills down through a range of measures to reduce energy inefficiency and increase energy security. We know that increasing global demand is driving up energy prices and that this will continue. That is why, through the Green Deal, we are hoping to help consumers to use less energy and, through the electricity market reform measures being introduced in the Energy Bill, we are providing the right environment for investment in key energy infrastructure.
My Lords, energy bills have gone up by more than £300 since this Government came to office. When the energy companies announced their most recent price hikes, they blamed rises in wholesale prices, yet research shows that they have more than trebled their profits. Will the Government look at the relationship between wholesale and retail prices so that we can be sure that British people are not being ripped off by these energy companies which, by today’s standards, might not be the unacceptable face of capitalism but most certainly are the unacceptable face of greed?
My Lords, energy prices have been going up over quite a period of time. In fact, the period 2004 to 2010 saw a doubling of gas prices, which was under the previous Administration. We know that global prices are going up and that demand has grown because of emerging economies. That is why this Government are determined that we should have a diverse mixture of energy that we can control in our own country ourselves.
My Lords, the Government are right to focus on every possible means of curbing our horribly high energy bills and costs. However, has the Minister noticed that the United States of America is achieving substantially lower energy costs as well as lower carbon emissions and is attracting a great deal of new investment back into the United States? Will she give us some encouragement that the same kind of policies will be pursued as far as possible in this country?
My noble friend is absolutely right, but America is a very different place from the United Kingdom. Through our diverse mix of energy sourcing and our usage of traditional energy supplies, we are determined to give our consumers the best possible deal that they can get. However, to reflect on the point I made earlier, global prices are going up because emerging economies have a greater demand on them.
My Lords, it is an interesting option, which I think I will take back to the department. Through the Energy Bill and through the ECO the Government are reaching out to the most vulnerable families and tackling as early as possible the issue of those who need support. We are doing that and helping 2 million households at the current time.
My Lords, does the Minister accept that part of the reason for the increase in energy prices is the devaluation of sterling? Our failure to keep our AAA rating is bound to have a continuing effect on the devaluation of sterling and therefore feed though into increases in the price of imported fuels, particularly those based on petroleum, which are all designated in American dollars.
My Lords, the noble Lord will be pleased to know that today the oil and gas industry report sets out some very positive figures, showing that investment is increasing in the UK and that we are able to provide security and supply of energy in our own country. Of course, we are going through a difficult time, but that should come as no surprise to the party opposite because they were the instigators of it.
My Lords, when my noble friend the Minister talks to energy companies, will she also take into consideration people who are not the normal suspects? People who live in rural areas have to pay a lot of money for bottled gas and heating oil, which come from a limited range of local suppliers. They are the people with the highest energy costs. Will she talk to those sectors to make sure that rural residents get a much better deal as well?
My noble friend raises a very important point. Though the Green Deal and through collective purchasing we are trying to help those areas where it would be far more beneficial to be able to buy collectively. Economies of scale and greater purchasing power will give them a better choice of where they can buy and what they can buy.
My Lords, did the Minister read Mr Christopher Booker’s article in yesterday’s Sunday Telegraph, which revealed that last Monday all our 4,300 wind turbines put together produced a paltry 31 megawatts compared with the 2,200 megawatts that we get from a single conventional plant? What are the Government going to do about future back-up for this situation, and when are they going to abandon this mad wind turbine policy, which will put millions into fuel poverty?
My Lords, I did not read the article. I am afraid that I was curled up in bed with the flu. However, I will take the noble Lord’s word for it that it was an interesting article. As I have said persistently and consistently at the Dispatch Box, we need a good energy mix, and wind will be part of that mix.
My Lords, during this cold weather, many people are being forced to make very difficult decisions in their budgeting, especially because of the high energy prices. Does the Minister agree that the best way to bring prices down is to ensure that we have a genuinely competitive market in energy? Will she comment on whether the Energy Bill that will come to this House later in the year will be amended to introduce genuine competition in the generation of electricity, splitting it from the retail and therefore enabling us to get real competition to bring prices down?
The noble Baroness is right that the Energy Bill will be coming here and we will have some great discussions on its contents. She is also right that we need to have greater competition in the marketplace to be able to drive prices down for the consumer. But we do not want to stifle competition. Therefore, we need to support the markets in being able to have open and fair competition rather than dictate to the industry on how it should be supplier of it.
My Lords, there are some 1,381 more midwives in the NHS than there were in May 2010, and there are a record 5,000 in training. The Government have committed to ensuring that the number of midwives matches the needs of the birth rate. Most women already have choice and one-to-one maternity care, and we are working closely with the Royal College of Midwives to ensure that personalised, one-to-one maternity care is available for every woman across the country.
My Lords, I thank my noble friend for that very encouraging reply. I suspect that every single Member of your Lordships’ House has been touched by a midwife. They are a remarkable and very committed profession. Is my noble friend aware that although there is what the Royal College of Midwives describes as a tipping point in the increase in the number of midwives attending women in labour, the real crisis is in postnatal care, where new mothers require advice, support and help in cherishing and feeding their newborn baby? Is he also aware that this requires continuity of a midwife? He has just told us that continuity is being carried through, but a recent survey shows that 40% of new mothers always see a different midwife. How does he propose that we put this situation right?
My Lords, women should expect to have one-to-one care from a midwife during labour, birth and immediately after birth, and to continue to have the support of their midwife after the birth. This is especially important for those women who are susceptible to, or have, depression during pregnancy or postnatal depression. My noble friend is absolutely right about continuity. This depends on each woman having an individualised postnatal plan of care, taking into account her circumstances. To assist the NHS, the department has asked the National Institute for Health and Clinical Excellence to develop a quality standard for postnatal care, which it is anticipated will be published in July this year.
My Lords, my noble friend may have had a chance to look at the report published today by the Refugee Council and Maternity Action on the deficiencies in the support for pregnant asylum seekers. Will his department hold discussions with the Home Office on amendments to the guidance for those women to make it compatible with NICE guidance on the maternity care of women with complex social factors? Will the department and the UK Border Agency jointly look into the negative impact of the current dispersal and relocation policies on the healthcare of women asylum seekers?
My noble friend raises a number of complex and important issues. My department provides approximately £1 million a year for health assessments of asylum seekers in UKBA initial accommodation in England. The aim of the health assessment is to identify and address immediate healthcare needs, including pregnancy, and to recognise ongoing and non-urgent care needs for attention in the dispersal areas. The use of experienced health teams and interpreting services to record medical history also avoids more expensive arrangements at GP-registration stage later on. My officials met Maternity Action on 19 February to discuss the report’s recommendations and were assured that the maternity care provided by NHS midwives was appropriate and in accordance with NICE guidelines. Following that meeting, officials have briefed the Home Office.
My Lords, the fact that Edge Hill University, for example, had nearly 900 applications for 22 midwifery places shows considerable enthusiasm for acquiring this skill. However, experience shows that many midwives withdraw during training or the early years of practice. Has the Minister any statistics on such withdrawals and does he know any of the reasons for them?
My Lords, as regards the statistics on trainees who drop out, I am advised that the average rate is around 22%, which is quite high, but that can be for a number of reasons. I am, however, encouraged by the statistics that I have on the number of commissions that are currently in train across the country. On conservative assumptions, this year and next, we should see about 1,900 midwives emerging from training.
My Lords, how many midwives are familiar with the minority languages that are spoken by British women in areas such as Leeds and Bradford? Are there sufficient numbers who know the local language, rather than having a general notion which does not really suit the language that the women are speaking?
The noble Baroness raises another important point. This will be a particular issue for the local education and training boards, which we are setting up under the auspices of Health Education England, to get a local feel for the needs of patients in an area. The language skills of midwives will be a very important ingredient of that.
My Lords, in the light of the original Question of the noble Baroness, Lady Cumberlege, would the Minister advise the House as to whether NICE will be asked to produce guidelines based on what it believes is needed or based on the current shortfall in midwives? If it is based on the current shortfall, we will suffer the same problems.
As I mentioned, we are doing our best to address the shortfall in the number of midwives in training. However, NICE has been asked to produce a quality standard that will be a benchmark against which the quality and outcomes of midwifery practice can be judged.
Partnerships (Prosecution) (Scotland) Bill [HL]
Clause 2: Arbitration service for defamation and related civil claims against members of Independent Regulatory Board
1: Clause 2, page 2, leave out lines 11 and 12
My Lords, I will be brief in moving this amendment. It has the support of the noble Lord, Lord Puttnam, who apologises for not being in his place today. He is in the Far East on a long-arranged trip as one of the Prime Minister’s trade envoys there. He entirely supports my proposals. I also have the support of the noble and learned Baroness, Lady Scotland, a former Attorney-General; my noble and learned friend Lord Mackay, a former Lord Chancellor, and, according to the Times, a “Conservative source” has also given it a grudging approval. I am not entirely sure what a “Conservative source” is, but, of course, I always believe the Times.
As I understand it, it also has the support of the press, which perhaps is most significant of all. During the past months, those of us who have supported Leveson have been subjected to a campaign of vilification, being compared to Mugabe, Castro, Putin and any other dictator that you can think of. When we have spoken or written in favour of Leveson, we have been attacked in reports such as the one that appeared in the Daily Telegraph in November with the neutral headline,
“MPs tainted by scandal among group backing an end to free press”.
I looked down to see, slightly to my surprise, that among the little photographs at the bottom was my own photograph. The caption said:
“Lord Fowler: during 15 years as a government minister, he had plenty of run-ins with the left-wing press, particularly when he announced job losses and spending cuts in the NHS in the 1980s”.
That explains why I have had, according to them, this deep-seated antipathy towards the press, in spite of the fact that I was chairman of two regional newspaper groups after that time. Of course, it is doubtless made particularly painful for me by the fact that all my succeeding Health Secretaries have been carried shoulder high down Whitehall by representatives of the British Medical Association. So, it is not entirely surprising that some of us want to move on from this bitter debate and enter the calmer fields of gay marriage.
The trouble is that when the press have a genuine point, people tend to say, “Here they go again”. Here, as my amendment seeks to make clear, they do have a genuine point. I should make it clear that my amendment in no way challenges or changes my backing for the support generally for Clause 2 and for an arbitration service, as proposed by Lord Justice Leveson. Although a great deal has been written about this particular clause, all too often it has missed out the overall purpose, which is to provide a low-cost remedy for the public and the press without the expense of going to law. That is the essence of what it is saying: for the public to pursue a defamation case, as it stands at the moment, means certain cost and a very uncertain result. My amendment questions whether the two lines at the end of Clause 2 are necessary to bring that aim about. I do not believe that they are and I say that for two reasons.
First, as I made clear, I am a supporter of the Leveson report but it seems to me that the words at the end of Clause 2 go beyond what Leveson himself proposed. Referring to the proposed independent self-regulatory body, Leveson says:
“I also suggest that it considers offering a purely voluntary pre-publication advice service to editors who want support on how the public interest might be interpreted in a specific case before a decision is reached on publication”.
I think that the words at the end of the clause are fairly tentative and certainly go beyond the words in the amendment that,
“the court shall take into account whether a defendant first sought advice”.
Furthermore, as it stands, it gives the impression that we who support Leveson are all concerned with pre-publication controls when that is certainly not the case, and nor has it ever been the case. The authors of this clause might claim quite reasonably that they are also conferring an advantage on newspapers as well as on the public. Nevertheless, the false impression remains, and it would be a vast pity if the beneficial intent of the clause was to be harmed in this way and in so doing give ammunition to those who say that the supporters of Leveson are about statutory control, which I repeat and underline has never been our cause.
The second reason I tabled the amendment is that the whole idea of some kind of pre-publication check is anathema to most journalists. I emphasise that I am talking about working journalists. Remember that the NUJ, as opposed to the proprietors, is in favour of Leveson; it is not against it. It is against the kind of provision that I am seeking to amend for the good reason that in any story of any controversy there will always be people out there who want to stop the story, or at least take the guts out of it. I learnt that very early on as a young journalist. I had been advised to show a series of articles that I had written to the man who had given me access to the story. When I met him, he was furious about what I had written. Very obviously, so that I could see it clearly, a letter of protest to my editor was set out on his desk. Happily, the editor took no notice, but I have never shown an article in advance to any body or person since.
It is most important that the House should recognise that often there is very great pressure not to publish but to keep things secret and out of the public gaze. Noble Lords should recognise how sensitive an issue that is to journalists. I also wonder whether there is an analogy with the BBC’s pulled report on Jimmy Savile. It was an important story killed off not by the reporter or reporting staff but after it got into the equivalent of the checking process, with the result that ITV last week received the award for the scoop of the year from the Royal Television Society at a ceremony that both the Minister and I attended.
My major point is that the two lines at the end of Clause 2 are not necessary and, above all, give an entirely wrong impression to the public of what the clause is trying to do and of the beneficial impact and effect that it could have. I said at the start that the amendment had the support of a wide range of individuals, and, in varying degrees, of two political parties. The only party that has not proclaimed its position is the Liberal Democrats. It may be just my luck that this debate will be replied to by a Liberal Democrat Minister. However, as always, I am an optimist in these things. My noble friend and I are old allies who have fought a number of causes together, and my hope is that the alliance will hold good on this amendment. I beg to move.
My Lords, I hope that it will be for the convenience of the House if I intervene now to put the debate in context. I confirm that my noble friend Lord Fowler and I have been close allies in many battles for press freedom over the decades, and I assure him that this reply comes from a government Minister.
My noble friend’s amendment seeks to remove from the amendment of the noble Lord, Lord Puttnam, which was agreed on Report, a section that goes beyond Leveson in requiring the courts to take account of pre-publication advice from the new regulator in considering whether to avoid exemplary damages.
When we debated the main amendment on Report, I was clear that our objective in respect of Leveson must be to achieve a cross-party endorsement of a solution that works in parliamentary and legislative terms, and has general public support. On Report, I promised that a draft royal charter would be published. This has now been published. It illustrates one example of how a recognition body might be constituted to underpin the tough system of self-regulation for the press that Lord Justice Leveson recommended.
The draft charter is under active consideration in the cross-party talks, and it is important that we allow the talks to progress and reach their conclusion. I have made clear my reservations about the amendment of the noble Lord, Lord Puttnam, being shoe-horned into the Defamation Bill. I do not propose to rehearse the arguments today. The Puttnam amendment is now part of the Bill, which should now be returned to the Commons.
The amendment of my noble friend Lord Fowler is welcome in so far as it will remove an element of the Puttnam amendment that went further than Lord Justice Leveson recommended. No one wants to see Leveson implemented more than I do, but the tripartite talks are the key to achieving that objective, not the Bill as now amended. We should continue to allow the parties the space to agree the most appropriate solution within the tripartite talks.
In so much as he is amending a clause that we do not consider to be effective and which pre-empts what I hope will be a successful outcome to those tripartite discussions, the amendment of the noble Lord, Lord Fowler, makes an unacceptable position marginally better. I shall not ask noble Lords to vote against the amendment, although the overall position will remain that we believe the amendment to be unacceptable.
I shall say that again slowly. I am looking at my words. Basically, I am suggesting that the House should pass the amendment and that the Government will not oppose it. The amended Bill will then go to the Commons for consideration and will come back at ping pong for what I suspect will be a lively debate. However, by then the tripartite talks might have succeeded—I sincerely hope they will have—and my Defamation Bill, which I think unamended is perfectly formed, could then be passed by this House. Those are my recommendations.
Amendment 1 agreed.
Clause 6 : Publication on matters of public interest
2: Clause 6, page 3, line 36, leave out “believed” and insert “decided”
My Lords, I still feel that the words I moved at an earlier stage are better than those of the Government but, as both sides wish to give effect to what was said in the Flood case, there is not that much between us. In the circumstances, I shall not move my amendment.
Amendment 2 not moved.
Bill passed and returned to the Commons with amendments.
Welfare Benefits Up-rating Bill
Committee (1st Day)
Relevant document: 14th Report from the Delegated Powers Committee.
Clause 1 : Up-rating of certain social security benefits for tax years 2014-15 and 2015-16
1: Clause 1, page 1, line 4, leave out “by 1%”
My Lords, I support Amendment 1, which seeks to ensure that the Government have flexibility to increase benefits in 2014-15 and 2015-16 taking account of the level of inflation at the time. The amendment does not seek to impose a particular percentage increase in benefits in any year. It simply seeks to avoid the straitjacket imposed by the Bill as it stands.
Amendment 1 covers all the benefits and claimant groups referred to in Schedule 1. It would therefore leave open the possibility of a Government deciding to protect a particular group, perhaps disabled people or children. This amendment has become particularly pertinent in the light of the downgrading of the British economy by the ratings agency Moody’s at the end of last week, along with the anticipation of yet more quantitative easing and the expectation that in these circumstances we will have more inflation year by year. That inflation comes on top of a level of inflation which is already above 1%, which is vital to this set of amendments and, indeed, to the Bill.
This Bill has to be considered in context. As noble Lords know very well, last year’s Welfare Reform Act has already capped benefits and imposed the bedroom tax so that an increasing percentage of everyone’s rent will be paid out of their personal allowance, leaving them with the most pathetically small amount of money to cover food, heating, clothing and other necessities. Also, the Government have already changed the basis of annual welfare benefit increases from the RPI to the CPI. This is absolutely crucial because that measure alone, before this Bill, is expected to save £5.8 billion a year. Such savings can be achieved only through imposing the most incredible hardship on many of the most vulnerable people in this country. The proposed limiting of upratings to an increase of 1% will be an increase in the consumer prices index, not the retail prices index, so it is not even going to cover an inflation rate of 1%. That is how bad it is. It is the compounding of the previous Welfare Reform Act with this Bill that is so deeply shocking to many of us.
The cumulative impact of all these changes and the proposed 1% uprating limit is not yet fully understood even by the experts in the field, let alone by its victims. But it is not surprising that there is deep concern in those organisations which have to work with vulnerable people, including the CAB service. It is worried stiff about its clients and the capacity of the bureaux to cope with what is going to be an unimaginable flood of people in desperate circumstances. The Government are breaking the long-standing link between annual incremental increases in benefits and prices. Once lost, it will be very difficult to restore it. Indeed, it is difficult to imagine that happening for decades. That is how serious this is. It is not just one little part of a Bill; it is actually historic because it changes the whole way we look at increases in welfare benefits.
Has the Minister undertaken an impact assessment on this Bill, including an estimate of the likely cost of increased mental breakdowns and the resulting impact on mental health services? Has the Minister assessed the costs arising from the result of increased crime rates and the impact on the criminal justice system, and from the impact of increased homelessness on local authorities? Also, I refer to the overall impact on communities of what I fear we will see in terms of increased unrest. It is very difficult to believe that we will not experience unrest in communities that are profoundly hit by the combination of all these changes—not just arising from this Bill, but from a combination of everything that is being done. I would be grateful if the Minister would reply to this question: has the impact of this Bill, combined with the previous Bill, been fully assessed in terms of services and costs? If these implications have not yet been estimated, does the Minister agree that that must be done before implementation of this Bill?
I want to challenge the Government’s rationale for this uprating Bill—that welfare benefit increases must take account of the public sector pay freeze and the low level of pay increases across the economy in recent years. Citizens Advice is right to argue that a 1% increase means something very different to somebody on an average wage from what it means to somebody on welfare benefits. A 20% increase in out-of-work benefits in the period 2007-12 resulted in an average annual increase in income of only £2.37 per week. A lower percentage increase, of 15%, in public sector pay during the same period provided an average increase in income for public sector workers more than five times greater. It was a lower percentage but a much greater increase in actual terms.
What matters for families is how many pounds’ increase they have, not some airy-fairy percentage; they want the pounds. Public sector workers had on average an increase of £12.40, compared with the benefits average of £2.37. I accept that it would not be fair to enable those on benefits to leap ahead of those on low public sector wages in absolute terms, but there is no danger of that happening. Does the Minister agree?
My final point takes us back to the debates we had about direct payments of rent to landlords and the payment of benefits weekly rather than monthly. You could say that that is irrelevant to this Bill; I do not think that it is. I am grateful to the noble Lord, Lord Freud, for explaining to me that he has done a lot of work since the previous Act and those earlier debates, and that built into the system now are exceptions to try to protect particularly vulnerable people; in other words, by enabling some peculiarly vulnerable people to be paid more regularly and to have their rent paid direct to landlords. I am referring to the noble Lord, Lord Freud, because I had a meeting with him recently, and I know he has real concerns about some groups, particularly those with mental health problems, and how on earth they are going to cope with these reforms.
Perhaps the Minister will spell out the exceptions for the benefit of this House. It would be helpful to know how broad or narrow these exceptions are going to be. Undoubtedly, exceptions to the requirement for monthly payments and ending the direct payment of rent to landlords will help but, whatever amendments may be agreed to this Bill, would it not be wise to put on hold altogether, for a period of perhaps three years, the changes to the frequency of welfare payments and the direct payments to landlords? Such concessions would be relatively cost-free but would make a very big difference to people’s capacity to cope as they find their tiny incomes declining in real terms month by month.
In two years’ time the Government can measure the extent of the inevitable increases in rent and council tax arrears, homelessness and other social consequences. When that evaluation has taken place, a decision could then be made on a rational basis about whether it is remotely sensible to implement the other provisions of the previous Welfare Reform Act. I do not expect the Minister to respond to these points today but would be grateful if she could write to me with the response before Report.
My Lords, somewhat to my surprise, I find my name on this amendment, so perhaps I should say a few words. I do not want to repeat all the arguments that were advanced at Second Reading and I do not have a lot to add to the very eloquent speech that we have just heard from the noble Baroness, Lady Meacher, but there are a couple of points I would like to make.
The first is the economic argument. I said at Second Reading that it did not really make any sense, at a time when the economy was flat-lining, to withdraw additional purchasing power from a section of the community that was most likely to spend it: those on welfare benefits. With every day that goes by and the economic news piles up about the dire condition of the British economy, the stronger this argument gets. The Minister did not respond adequately to that argument at Second Reading. I would be grateful if the Government gave further serious consideration to the force of that argument, which is genuine and considerable.
The Bill will cause real hardship for disabled people, carers and children. Disabled people are said to be protected but, as we showed at Second Reading, the protection accorded disabled people is partial. There is some protection for those in the support group receiving employment and support allowance, and disability living allowance is exempted from the 1% cap, but those receiving employment and support allowance in the work-related activity group and other disabled people receiving other benefits do not receive protection from the 1% cap. It cannot therefore be said that disabled people are fully protected, nor are carers.
Above all, children are not protected. Disabled children in this country are already disproportionately likely to live in poverty. Approximately 40% of all disabled children—about 320,000—live in poverty, compared with a poverty rate of 30% across all children. Nearly a third live in severe poverty—where a family’s income is less than 40% of the national average. Under universal credit, which will begin to come into effect later this year, parents of disabled children can receive a benefit called the disabled child addition. This will replace the current disabled child tax credit, but, under universal credit, the support available for disabled children who do not receive the high rate of DLA care component will be cut by half, from £57 a week under the disabled child tax credit to £28.52. The Bill will mean that the value of this benefit will increase at a significantly slower rate, by just 1% as opposed to in line with the CPI, which is currently running at 2.7%. As a result of the Bill, parents of disabled children receiving the lower disabled child addition of universal credit will lose £25.21 a year, or £75.63 over the three years during which the 1% cap is intended to operate. I would be grateful if the Minister could reflect further on the hardship that will be caused to all these groups and have second thoughts about the universal application of the 1% cap.
My Lords, I shall speak to Amendment 1 in this group and to the other amendments that we have in it: Amendments 6A, 9 and 10A. I am grateful to my noble friend Lady Hayter for moving the amendment in my absence and apologise to the noble Baroness, Lady Meacher, for missing the very start of what was a powerful presentation.
Amendments 1 and 9 would remove the reference to 1% in Clauses 1 and 2 and hence remove the 1% cap on the uprating of relevant sums and amounts. Amendments 6A and 10A would delete the prohibition on uprating such sums and amounts under the annual uprating of benefits and tax credits. We fully intend these amendments to undermine and negate the purpose of the Bill, which we consider to be unnecessary, misdirected and contributing to the continuing economic failure of this Government, a failure all too evident from last week’s downgrading of our AAA credit rating by Moody’s.
Let me be clear from the outset on Labour’s position: we will make no commitment now on spending or tax for the next Parliament and will set out our spending plans at the time of the next election. However, right now we would uprate in line with inflation—I shall come on in a moment to how the Government can plug the hole in their increasingly fragile finances.
This Bill is unnecessary because if this Government misguidedly wish to plough on with this capping on uprating, they could simply use the annual uprating process. The Bill provides no certainty for taxpayers because there is no certainty on claimant numbers, except perhaps the prospect of them increasing, given the Government’s economic failure. As for the markets, it is frankly untenable to suggest that by locking those amounts, which account for less than 0.1% of government spending, into legislation they will be assured and comforted. It does not seem to have cut any ice with the rating agencies. The certainty of a real terms cut in support cannot be welcomed by claimants, especially when they have no certainty about the level of the real cut.
We all know why the Bill was brought forward. We made our position clear at Second Reading and I do not propose to revisit the issue in Committee. The Bill is misdirected on several counts. It does nothing for jobs. Indeed, by withdrawing real resources from low-income families, which of necessity have the highest marginal consumption rates, it is damaging demand. It ignores the IMF warning that the fiscal stabilisers should be allowed to operate. Its justification is supposed to be that there needs to be some correction for the fact that benefits have been uprated at a faster rate than earnings over the past five years—essentially, that those out of work have done better than those in work. It is perverse, therefore, that two-thirds of those hurt by the Bill are in work, taxing the very strivers whom the Government claim to be supporting. Indeed, specifically included in the cuts is in-work support, such as working tax credit, SSP, SMP and paternity pay, as well as in and out of work benefits such as housing benefit, the very support that enables individuals to sustain employment and manage work and family responsibilities.
It is not only those in work who are having their living standards cut. The Government are failing to honour their pledge to protect the most severely disabled. If they still hold to their obligations under the Child Poverty Act, they are drifting further away by pushing a further 200,000 children into poverty. Worst of all, at a time when the Bill will reduce the living standards of the very poorest, they are rewarding those with the highest incomes, including 8,000 millionaires, with a generous tax cut. The contrast could not be greater: a £2,000 a week tax cut for some, 71p a week if you claim JSA.
By leaving the inflation risk with claimants, the Bill creates greater risk for the poor and uncertainty about their real incomes. The 2012 Autumn Statement cites energy and fuel prices as remaining a potential source of risk over the coming years. It estimates that inflation will be higher in 2013 and 2014 than originally announced due to rises in domestic energy prices and food commodity prices—the very costs that hit the poorest hardest. We see today the reaction of the currency markets to our credit rating downgrade: a weakened sterling, which will put further pressure on prices.
Uncertainty is compounded by there still being no cumulative impact assessment for the raft of benefit and tax credit changes that have been introduced so far by the Government. The IFS, in its 2013 green budget, analysed the effect of the 2013-14 tax and benefit changes. It concludes:
“This broad pattern of tax giveaways and welfare takeaways”—
its own terminology—
“means that the changes, on average, reduce net incomes towards the bottom of the income distribution and increase net incomes in the middle and upper parts of the distribution”.
It states that the below-inflation uprating is the predominant cause of losses in the bottom half of the income distribution and that the reduction of the top rate of tax from 50% to 45% produces the gain for the richest.
That juxtaposition speaks volumes about the priorities of this Government: the rich need more to motivate them; the poor need to feel the lash of cuts to inspire them. This pattern is not new. Looking at the overall position since 2010, apart from the richest decile it is a fact that the poorest have lost the greatest percentage share of their income in the cause of fiscal consolidation. This analysis is consistent with the detailed briefings that we have all received from a range of authoritative sources. They tell us that 68% of those affected by the Bill are actually in work, 30% of all households that will be hit will lose on average £156 a year, two-thirds of those households are families with children, 71% of households affected are at or below average income, and two-thirds of those affected are women.
Our opposition to the Bill is clear: the Bill locks in cuts to real incomes through to April 2016. We argue that the normal uprating process should operate, with annual Statements laid before and debated by Parliament. We will hear the cries from the Minister asking what we would do. Clearly, one matter that should be addressed to get the social security budget down is getting more people into work. Despite claims to the contrary, the Government are failing on jobs. Long-term unemployment and long-term youth unemployment are up on the year. The Work Programme is little short of a disaster and continues to fail the hardest to help. Some 1.4 million part-time workers would like to be working full time. This is why we have proposed a new initiative to get people into work and a compulsory job guarantee for the long-term unemployed, and we have costed a scheme that over the course of a year would help more than a quarter of a million people into work, paid for by restricting on a tapered basis pension tax relief for those earning more than £150,000.
We will continue to argue for the reversal of the proposed tax handout to the very rich. We heard the Minister at Second Reading suggest that the saving that this would produce would be “illusory” because the rich would order their affairs to make sure that the will of the Government was defeated. Indeed, the HMRC analysis suggests that some would do this by forestalling and deferring, whereby income fell into a lower tax period, converting income into more favourably taxed capital. Have we not already had reports about income being deferred into next year? However, the Government do not have to acquiesce in this and accept the Starbucks approach to tax compliance. If they believed in tackling tax avoidance, they could secure the revenues that reversing this tax cut could generate.
There are alternatives. The country does not need the Bill. It needs growth, jobs and fairness in sharing the burden of fiscal consolidation. This Bill will contribute none of this.
My Lords, I speak on behalf of the minorities and the moral economy of kin. For minorities who have been in this country for a very long time, it is the family who has given support and sustenance to those who are unemployed and suffering. That is normally done by people who are employed but in marginal jobs—hand-based employment such as catering—essentially by stretching the resources of the family unit in order to include the extended family.
Unfortunately, with the kind of cuts proposed at this stage, the extended resources of the family will no longer be able to help. My fear is that those of the younger generation who are likely to be serving in the restaurant with their dads or working with their mums by knitting or producing shirts and so on will now join the ranks of disaffected young people, and then be branded as home-made terrorists. It is a dangerous precedent. We really need to nurture the moral economy of kin because it is these families who offer support, but on this kind of income and with these kinds of cuts they will simply be unable to do so.
My Lords, perhaps I may pick up on some points made by the noble Lord, Lord McKenzie. I have the highest respect for the noble Lord, Lord Low, and nothing would give me greater pleasure than to vote for the amendment. There is a problem, however, in that we cannot afford to vote for the amendment. The noble Baroness who has just spoken talked about cuts. We are not talking about cuts but about not having increases. It is true that there might be cuts because of inflation, but if we go down the road proposed by the noble Lord, Lord McKenzie, inflation will be even higher and the cuts will be more severe. It was Lord Callaghan who pointed out, as a Labour Prime Minister in the 1970s—sometimes I feel that we have gone back to the 1970s; even the Daleks made an appearance in Westminster last week—that inflation is the father and mother of unemployment.
It is really quite extraordinary for the noble Lord, Lord McKenzie, to make so much of the rating agency’s downrating of the UK from AAA status. I do not know whether he has read what the rating agency had to say about why that downrating was being made. It was because the agency believed that the Government would not be able to meet the targets that they had set, and which the Opposition are constantly urging us to abandon. The noble Lord talked about the impact of the sliding pound and of inflation, which is a consequence of not meeting these targets. On the idea that finding money out of thin air will not hurt the poorest hardest in the long term, because of the inflation that would be created and the impact it would have on the pound, the hard reality is that we simply cannot afford to do what the noble Lord, Lord Low, would ask of us.
It is the cheapest of cheap politics to keep going on about millionaires being given a subsidy. First, that assumes that the state is entitled to their money and that it can spend that money better than they can; and, secondly, that if they spend it by investing or buying goods it will not generate wealth and prosperity in the economy, while somehow a state bureaucracy involved in spending money and taking it by force through an Administration will get better value and growth. That is a delusion which we happily abandoned in the 1970s when we abandoned rates of income tax at 98% and discovered that the consequence of cutting taxes to 40% was that the rich ended up paying a higher proportion of tax than in the past. Already we are seeing that the proportion of tax paid by the very rich is falling and the proportion paid by the poorest is rising. That is not as a consequence of the recent measures made by my right honourable friend the Chancellor in his Budget but as a consequence of the politically inspired 50% tax, which the previous Government introduced as some kind of political gesture to try to create division between the parties.
We can all make speeches saying that we would like to have more money available for those who are poorest but if we were to follow the prescriptions of the noble Lord, Lord McKenzie, and his party—in so far as we can work out what their prescriptions are—the effect would be higher inflation, higher interest rates and higher unemployment, with those who are poorest in our country being the most disadvantaged. It would not be the rich or the people in the public sector but those who are unemployed, while the prospects for new jobs would be reduced.
I say to my noble friend that she is right to press ahead and, I hope, to reject this amendment. It is not because we do not care about those who are most vulnerable in our society but precisely because we do that we want an economic policy that will deliver the wealth that is necessary to pay the bills. The truth is that we are in this mess because the previous Labour Government spent money on welfare that was based on an unsustainable bubble. That is why we now have the problem. It is very regrettable that noble Lords opposite should seek to make party politics out of this issue while not acknowledging the very heavy burden of responsibility they carry for having brought this situation about and the real courage being shown by my right honourable friend the Secretary of State in bringing forward this Bill. It is trying to bring into effect a welfare system that will be within our means and will recognise the need to encourage those who have the greatest need.
It is very fashionable to blame the previous Government for our predicament but does the noble Lord accept that the banks have to carry perhaps 90% of the burden of responsibility, and that the banking crisis started in the United States—not even in this country? In fact, if there was a weakness, it was in the degree of regulation. My understanding is that the previous Conservative Administration opposed even the level of regulation that this country had. This is therefore not a party political issue; it is about banking, and this country has been deeply wounded by the banking crisis.
The other question for the noble Lord is whether he accepts, as Lord Maynard Keynes argued rather powerfully, that if you are in a terrible state of recession the best way to get yourself out of it is to generate growth. That means that you should not be withdrawing demand from the economy in this incredibly irresponsible way. What the Government are doing is very worrying.
I am most grateful to the noble Baroness. I disagree with the idea that leaving money, as Gladstone would have put it, to fructify in the pockets of the people is withdrawing money from the economy, and that somehow the state would spend that money more effectively.
As to her particular question about whether I accept that all this difficulty was caused by the banking crisis, no, I do not. I think that the banking crisis was caused by the monetary policy being pursued by the previous Government by targeting inflation. The noble Baroness seems surprised by this, but the fundamental causes of the financial crisis were the huge financial surpluses that were being built up—I hesitate to stray too far from the amendment—in China and the Middle East, which kept interest rates low, and an inflation-targeting policy being pursued by the Bank of England that meant that they were very low interest rates. As a result, the banks tried to go for yield. The banks were certainly at fault in devising packages that they thought would reduce risk and give a higher return, and it is certainly true that regulators such as the FSA should have been on to this.
However, the fundamental point is that while Labour were in charge they did nothing about that; indeed, they revelled in it. We were told that they had abolished boom and bust, and that they had come up with a new paradigm. That is why that Labour Government, even at the height of the boom, with huge revenues coming in and house prices and asset prices going through the roof, did nothing except collect the tax. Instead of putting the tax away for a rainy day, what did they do? They spent it on welfare that they could not afford, and when the boom collapsed there was a sudden gap in the market that my right honourable friend is now having to deal with. So let us not rewrite history here; let the Labour Party take responsibility for what it did in government.
The fact is that under both Governments we have been living beyond our means. We have been spending about 10% more than we earn, and we have been saving nothing. We need to save 10%. The consequence of that is that our living standards will fall unless we are able to create growth, and you do not create growth with the state taking more and more from the productive part of the private sector. According to the OECD, close to 50% of our GDP is being spent by the Government. We used to define communist countries as those where more than 50% of the state’s production was spent by the Government.
I say to my noble friend on the Front Bench that this is not an easy amendment to oppose—of course it is not—but she is absolutely right to do so because it is in the long-term interests of the most vulnerable people in our country that we stick to this policy and do not go further down the road that has brought us to this mess. If we travel down that road, it will mean that the hardship endured by the most vulnerable will be all the greater.
My Lords, I had not planned to speak to these amendments but I have been stung into doing so by the remarks of the noble Lord, Lord Forsyth. I am going to keep my powder dry for later amendments. First, he started by saying that this is not a cut. Of course it is. He then had to concede that if you do not uprate benefits in line with inflation, you are cutting benefits. Do not tell the mother who has to struggle that this is not a cut—it is.
Secondly, the noble Lord said that we cannot afford to uprate benefits in line with inflation. This is about choices—particularly, as the right reverend Prelate the Bishop of Leicester made clear at Second Reading, moral choices. We can afford to protect people living in poverty from inflation.
I will not make the contrast with millionaires because the noble Lord said that it was a cheap contrast. I will simply make the contrast with a policy of which the coalition Government are very proud—that of uprating tax allowances by more than inflation. As Gingerbread, I think, pointed out to us, this is the least effective way of targeting resources on people in poverty. A much more effective way of helping them is by inflation-proofing their benefits. There is a choice. The choice was made to increase tax allowances by more than inflation, which is of no help to people too poor to pay tax, including people in work too poor to pay tax; of minimal help to people on means-tested benefits, because they lose some of it; and of greatest help to higher-rate taxpayers. That was a choice. It was believed to be all right because we could afford it, but we cannot afford this.
Is the noble Baroness not leaving out an important ingredient? The reason why that choice is made is because by cutting the tax burden and encouraging people to save to invest and to work harder you create the wealth that is needed to create the welfare state. That is the difference. The noble Baroness seems to think that it is a fixed cake and that whatever happens it is impossible to increase the size of the cake and thereby make more money available for those in greatest need.
I do not want to get into a great debate about the economics of this, but are people in low-paid work who are getting tax credits not contributing to the wealth of the country in the same way? They are affected just as much as people on so-called welfare, which I prefer to call social security. The economic case was made by the noble Lord, Lord Low, and the noble Baroness, Lady Meacher. This is not about the state taking money out of the productive economy and somehow filing it away somewhere; this is about the state redistributing money to people who are more likely to spend it and to spend it in local communities, thereby helping to boost economic growth at the time we need it. I do not believe there is an economic case. I do not accept the crocodile tears that are being shed by someone who is prepared to support a Bill that will hurt people in poverty the most.
I, too, was not intending to speak on this amendment, but I was spurred to by my noble friend Lord Forsyth of Drumlean. I rise to add to some of the points and to reinforce some of the questions that he has about this. I followed this debate quite closely at Second Reading, and I thought that the position then argued by the noble Lord, Lord McKenzie of Luton, was that the Opposition opposed the 2013-14 and 2014-15 limits but had not yet reached a position on 2015-16. Presumably by supporting this amendment, they are now making the position that they do not agree and would therefore reverse the policy as it affects 2015-16, which is £1.9 billion. I may have got that wrong, and I am very happy to sit down if the noble Lord wants to intervene to correct me.
I shall clarify for the noble Lord that we made our position clear in respect of 2013-14, which is not in the Bill but is dealt with by regulations in the normal way. We made it clear that we will make no tax or spending commitments in respect of the next Parliament, which would include the latter part of 2015-16. As for 2014-15, we think that removing this cap would enable the normal process to take place so that there can be an assessment in the normal course about what is happening to inflation and the state of the economy in that year. I hope that has clarified the position. That has not changed since we debated this at Second Reading.
The noble Lord is saying that the Official Opposition do not intend to make any pledges, which is interesting because I thought I heard last week that there was a proposal for a mansion tax and that that would be funded by other means. I thought that was a specific spending commitment beyond 2015-16.
My second point picks up on one from the noble Baroness, Lady Meacher, who made a thoughtful contribution. We overwhelmingly agree that the most effective way to alleviate poverty and raise standards is to create jobs. I would have thought that there would be some recognition that the Government’s record on that has been quite reasonable. We would of course like it to be very much better, but contrary to some other countries that are wrestling with the same problems our unemployment rate continues to fall. We now have the highest level of private sector employment in our history and a million new private sector jobs since the last election. That suggests that moves to reform taxation and stimulate the economy are beginning to have some effect, and that they are the best way of tackling this.
We have an Urgent Question coming up on the rating agency decision: the noble Lord, Lord McKenzie, and the noble Baroness, Lady Meacher, referred to this. I was reading through the decision and thinking of making a contribution to the Urgent Question, which I will not now do having secured the Floor in this debate. Moody’s statement,
“explains that the UK’s creditworthiness remains extremely high … because of the country’s significant credit strengths”,
chief among which are,
“a strong track record of fiscal consolidation and a robust institutional structure”.
That is quite interesting. In fact, going beyond that, we are again warned about what could happen to the country’s inflation and the cost of borrowing if the country were to be downgraded again.
Further down, on what could move the rating up or down, Moody’s statement says that,
“downward pressure on the rating could arise if government policies were unable to stabilise and begin to ease the UK’s debt burden during the multi-year fiscal consolidation programme”.
So there is a case for fiscal consolidation. There needs to be a recognition that the Government’s policies of raising tax thresholds and increasing employment are beginning to have some effect.
Notwithstanding that, I come to a point of agreement, which I made at Second Reading: no one on any side of the House is cheering on this measure. It is an economic necessity. It is certainly not something that anyone takes pleasure in.
My Lords, although I am delighted to support these amendments, believing the Bill to be yet another attack by the coalition on the poorest and those in the squeezed middle, I confess to feeling more than a little hard done by being obliged to speak at all to the amendments in this group. The reason for this is that a draft amendment in my name was refused as not being in scope. The draft amendment was to the commencement part of the Bill, on page 2 at line 38, and says:
“Except that no commencement shall take effect until the Secretary of State is satisfied that legal help is available for all claimants who seek legal advice on the validity of the decision on their benefit entitlement”.
At first sight, it sounds as relevant to the Bill as other amendments that grace this Marshalled List, but there it is. My amendment has for some reason ended up on the wrong side of the line. It is not for me to speculate on whether any part of government was asked its view as to the status of my amendment, but I venture the opinion that it may be something of a relief to the Government that my amendment does not stand to be debated or to be voted on at a later stage.
However, I would argue that the principle behind it clearly is relevant to this group of amendments. It could be called a pursuit of justice or, to put it the other way around, the avoidance of unfairness. Because the concentration is rightly on the measures themselves, what is so often left out of the arguments about welfare reform, whether in relation to this Bill or the regulations that we were debating before our half-term break—in this case, the 1% uprating—is what potential real remedy the citizen will be left with if the department’s decision is wrong. Surely the fact that it is wrong in many cases is not in question. We all know that, with the best will in the world, decisions made by the department are often wrong and very much to the disadvantage of those who want to claim them.
For a long time, this has not been a pressing problem. For those requiring legal advice on their benefit entitlements, legal aid has been available—if, of course, these people came within the criteria for legal aid, and many did. For a small amount of legal aid, quality advice has been available, having the effect of both stopping—this is important in cost terms—hopeless claims and establishing good claims where appropriate. It is a system that worked. Putting it at its highest, it has allowed access to justice for all. At a slightly lower level, it has meant that tribunals have not been faced with an impossibly large number of cases, many of which should never have been brought in the first place. It has cost a fraction of the total legal aid budget and is paid to lawyers who are not by any standards well paid. Yet from 1 April, as a deliberate act of government policy, this legal help will no longer be available for anyone in cases relating to welfare benefit entitlements, whether under this Bill or under the regulations and the larger Act passed by Parliament last year.
Thus, people will not be able to get the advice to which they are entitled. Their access to justice will be gone. The department will get away with wrong decisions and tribunals will be overburdened with what I can only describe as rubbish cases—all to save £25 million per year on welfare benefit advice. Perhaps I may remind the House and this Committee that that is one-tenth—I repeat, one-tenth—of the amount set aside by the Department for Communities and Local Government so that there can be weekly rather than fortnightly collections of rubbish. Is this really a proper sense of priorities for a time of austerity?
Further, everyone who knows anything about this agrees that this is not likely to be a saving at all in the end. The state—I fear that it will be the department as much as any other department and perhaps the Treasury—will eventually have to pick up the pieces when things get much worse than they need to. What does the Minister, for whom I have a high regard, have to say about this? What does he say to those who under this Act will not be able to query a wrong decision about their entitlement? They will not be able to do that because they will not be entitled to legal aid for legal advice as to whether a mistake has been made. How can the Minister or any Government justify this either in terms of common decency, which should appeal to this House and normally does, or even under the rule of law?
I support the non-existent amendment of my noble friend Lord Bach as it is key to the changes that we are having. We should not be discussing this Bill in isolation from the Welfare Reform Act that preceded it. They represent a package of cuts and changes that will bear very heavily on 5 million to 7 million people in this country—no light measure.
To follow my noble friend, it is worth reminding the House of what we discussed at Second Reading about the number of changes that will affect people who are receiving benefits, even though many of them are in work. Those changes will happen to them all at once. We will see a new structure of benefits, brought together in universal credit—that is a structure that I welcome—but it will be accompanied, as in this Bill, and in reducing benefit inflation to CPI, by serious cuts, which many benefit claimants will think is simply an error by the department. They will go frantic with concern in trying to rectify them. That is the second change.
The third change that we are going to see is to the new patterns of payment. For example, tenants of social housing who currently have their housing benefit paid directly to the landlord will now have it paid to themselves, looped through a bank account. Very often, given other pressures of finance, debts and so on, they may be in real difficulties in making that money over to the landlord at the end of the month. So there is a new pattern of payment, with which tenants must become familiar. They will also have monthly payment of benefit, when many of them have been used to weekly or fortnightly payments, and the payment will go to a single earner or person in the household and not split. Again, that is a major change.
All those changes—the new structure, the cuts, the new method of payment direct to tenants, and the monthly payments—will be handled by an IT system, when we know that 20% to 30% of the tenants wishing to claim benefit have no familiarity with IT at all. So what will they do? What they have always done is to seek legal advice from Citizens Advice, which in the past has been funded very substantially by the Lord Chancellor’s Department. CABs have received some 40% of their funding from the Lord Chancellor’s Department, but that has been cut, and they are now 40% short. As a result, those same people facing this sequence of changes, some of which I support, like universal credit, and some of which I deplore, will make their bids for benefit on the basis of an IT system, with which they are not familiar, instead of a paper trail. Where do they go? They cannot go to the traditional advice centres because the legal aid money that sustained them has been withdrawn in the worst, most foolish and most indecent economy of which I can conceive. I declare my interest as a chair of a housing association. I am having to appoint paid professionals to do the welfare advice, to be paid for out of increased tenants’ rents, which hitherto was provided by the skilled but unpaid volunteers of the CABs, which represented a real commitment to the big society to which we all give lip service and which, I fear, is too seldom observed in this House.
My noble friend is absolutely right that this is a foolish way to proceed and I regret very much that we were not allowed to debate this properly. I speak with some concern because, as a departmental Minister for eight years, I was responsible for tribunals before they went over, via Leggatt, to a generalised tribunal system. I sat in on those tribunals for DLA and other benefits. My noble friend is exactly right—I could see within five minutes whether the person coming before the tribunal had or had not received prior legal advice. If they had not, the appeal or discussion at tribunal took five times as long, with the chairman, as they were then called—now judge—trying to tease out the issues and establish whether it was a bona fide case, whether they could take it further and even whether the person was claiming against the right benefit. In some cases, they were complaining about an incapacity benefit when it should have been DLA, and I felt like jumping up and saying, “You’ve got the wrong benefit here—let’s start again”.
That is the situation here. We are transferring the pressure of the problem away from the point that is most approachable, accessible and value for money—local services in the community funded by legal aid—to the tribunal process itself and merely distributing the pressure over a longer time, at greater cost, with greater inaccessibility and greater difficulty for everyone to understand. That is a huge folly and, like my noble friend, I beg the Government, even at this late stage, to reconsider.
My Lords, at the risk of repeating arguments made in earlier debates, I remind the Committee of the context of the Bill. This country is still recovering from the most damaging financial crisis for generations. When this Government came to power, the state was borrowing £1 in every £4 that it spent. Even before the recession, the UK had the highest structural deficit in the G7 and between 1997 and 2010 welfare spending increased by some 60% in real terms. Welfare spending now accounts for more than a quarter of government spending: that is, more than £200 billion. The £1.9 billion of savings enabled by this Bill in 2015-16 is a necessary part of helping to reduce public spending, tackle the deficit and secure the economic recovery.
Amendments 1 and 9, spoken to by the noble Lord, Lord McKenzie, would remove the 1% uprating figure in the Bill in Clause 1 and Clause 2. The effect of these amendments would be to give the Government discretion over benefit levels on an annual basis in much the same way as under existing legislation. As I have already explained, we believe it is vital that we set out credible plans for the longer term. The Bill is needed to enable us to set out our uprating policy over several years so that we can be sure we will deliver those £1.9 billion worth of savings.
My speaking notes at this point said that this amendment would completely undermine that core purpose of the Bill. I was relieved, but not surprised, that the noble Lord, Lord McKenzie, used that very word to define the effect of these amendments. He said that the amendments would undermine and, indeed, negate the core purpose of the Bill. They would, and so a vote for these amendments would be equivalent to a vote against the Bill at Second Reading. I note that the amendments, while removing the 1% figure, do not suggest an alternative uprating metric. If we assume that the noble Lord’s intention is that we operate in line with the CPI, this would obviously not deliver the savings we are talking about. I remind the Committee that the £1.9 billion worth of savings that this Bill will generate in 2015-16 are equivalent to the salaries of about 45,000 nurses and about 40,000 teachers, so these are not negligible amounts, as some noble Lords have suggested, and the savings would have to be found somewhere else.
As I say, the amendments undermine the purpose of the Bill and, frankly, demonstrate a fundamental difference of opinion between the two sides of the House on how we deal with the current economic situation. The Government believe that the main priority is to get spending under control, reduce the deficit and restore growth. The Bill helps us to achieve that. At the same time, we are implementing policies that make a real difference to people’s lives—people of the most modest means. Let me name just a few of them: universal credit; the pupil premium; reform of early years education; tackling problem debt; and lifting people out of paying income tax through raising the personal allowance. We believe that these policies are vital if we are to have a real and sustainable impact on poverty over the medium to longer term. We cannot simply focus on increasing incomes through welfare payments, lifting people just above the poverty line.
The noble Baroness, Lady Meacher, asked me a number of questions about the impact assessment. I remind the Committee that we published a detailed impact assessment for the Bill, which includes details of the impact by family type, and have made public details of the impacts on relative child poverty. She asked whether we could delay the changes until we had a broader impact assessment that covered the impact on mental health, crime and, I think she said, social unrest. As regards the impact on crime, it seems to me that the noble Baroness is being completely unrealistic to believe that such an impact can be measured with any degree of precision. At the start of the downturn, most commentators believed that crime rates would rise substantially. If one had taken the average view of people in the know, that is what one would have put in an impact assessment. The truth is that crime rates have not risen substantially. They have fallen. I obviously welcome that. I make that point only to make the more general point that, while one can make an impact assessment that covers some things with a reasonable degree of precision, on other things—on crime, for example—it is impossible to do what the noble Baroness wants. That is why the impact assessment is couched in the terms that it is.
The noble Baroness asked about exceptions or exemptions from direct payment. We are not setting out the exemptions in the regulations because they will be based on individual needs and assessments. Individuals will work with an adviser via Jobcentre Plus. There will be personal budgeting support, which will contain two elements: money advice, to help people who cannot manage monthly payments, and alternative payment arrangements, which include rent paid direct to landlords, more frequent payments and payments split between partners. These will be undertaken on an individual basis.
I do not really want to get involved in a long macroeconomic discussion. I would like to get involved in one, but perhaps I might simply refer the noble Baroness to the letter from the noble Lord, Lord Desai, in the Financial Times last week. It seemed to explain extremely carefully and clearly why this downturn is not like the typical Keynesian downturn that we have seen in the past. I would commend that letter to all noble Lords who are looking for a primer on why the Government are following the line that they are.
I thank the Minister for attempting to respond to some of my questions. Perhaps I may return to the one on the impact assessment. The Minister referred to the crime issue and I accept that we have had a long-term decline in crime. However, I am not sure that that makes it impossible to look at the increase in the amount of crime among benefit recipients; that is something precise worth looking at. Moreover, I do not think that that negates the possibility of looking at the amount of mental breakdown among benefit recipients. Again, that is one of my main concerns, having been involved in mental health services for 25 years. I fear that there will be quite a dramatic increase in mental breakdown and an incredible impact on a very tight psychiatric service. In particular, in-patient beds have been cut over many, many years. It would be helpful if he could look at that.
I think that the difficulty—and I may be wrong—in terms of mental health is that the noble Baroness is very worried about what might happen. She may be right and she may not be right, but it is difficult to model—in the way required in an impact assessment—that kind of change which has not happened. As far as I am aware—she will know much more than I do—you cannot go back and say, “This is what happened in the past”, which would give us the kind of experience that would enable us to say in an impact assessment, which is a very specific thing, that these outcomes are predicted with any degree of certainty.
I will talk to officials about this. I realise it is a potential problem. However, I still maintain that while there are some things that can be relatively clearly enumerated in an impact assessment, some other things are very difficult to the point that the value of attempting the exercise is relatively low.
I am sorry for standing up again but I want to clarify the point; otherwise we will be left with a misunderstanding. I was saying in my speech that it would be helpful to have an impact assessment of what has happened in, say, two years’ time. I agree that we cannot look at these things prospectively, so I want to clarify that. I am suggesting postponing implementation until an impact assessment can be undertaken in real terms.
Will the Minister acknowledge that there is abundant evidence that incidences of crime and mental illness are significantly higher in more unequal societies? Given that the tendency of the policies in the Bill will be to exacerbate inequality, is not the noble Baroness, Lady Meacher, well justified in her anxiety, and should not the Government be taking great care to examine the potential impact of these policies?
My Lords, I have read The Spirit Level as well, but one of the best ways of dealing with inequality in society is to increase the proportion of people in work and to increase opportunities for people to get into work. I will come on to that later.
The noble Lord, Lord Forsyth, in a way answered the point of the noble Lord, Lord Low, about spending more money now. That is the argument. We get back to a macroeconomic point that if one spends a lot of borrowed money now, it will generate the kind of growth that will get us out of our difficulties. The Government reject the argument that we are in a position where we can spend our way out of recession, and it is as simple as that.
My Lords, I just want to clarify that I am not arguing for a splurge in spending. I am not advocating that the Government should spend more. My point is rather that the Government—I am sure that the noble Lord, Lord Forsyth, for whom I also have great respect, would not agree with me—should not pursue an economically counterproductive policy of withdrawing purchasing power from the economy.
My Lords, we and the noble Lord will simply have to agree to differ on that. The noble Lord, Lord McKenzie, repeated some of the arguments made about millionaires and the huge tax boost that they allegedly got. He did not mention that the Budget changes announced last year affecting millionaires and those on very substantial means would generate five times as much income as the 45p tax rate. It is simply untrue to claim that the Budget measures last year mean that millionaires as a group are paying, and will be paying, less tax this year and next than they have in the past. Equally, it is simplistic and false to argue that there is a sort of mechanical problem with HMRC, or an inability of HMRC to collect money from millionaires. Millionaires are extremely clever at avoiding tax. All the evidence from the Office for Budget Responsibility and the work that it did demonstrates why the 50p tax rate simply would not generate anything like the amount of money that was originally envisaged. Indeed, it said that it was quite possible that the 50p tax rate would mean less money being collected than would otherwise be the case.
I am most grateful to my noble friend. Have we not had a spectacular example this very day of how cutting taxes can result in huge increases in revenue? The Chancellor’s decision to reverse his plan to increase the tax on the oil industry has resulted in the £25 billion of investment reported today, with huge implications for future revenue and employment.
My Lords, that is an extremely good point. It demonstrates that there is no simplistic relationship between tax rates and the amount of tax collected. In some cases there is and in some there is not. The trick of government is to understand the difference between the two. Frankly, I do not believe that the Opposition have reached that point.
The noble Lord also talked about tax avoidance and conflated wealthy people avoiding tax and the situation relating to Starbucks. On the question of Starbucks and profit shifting, the Government, along with the French and Germans, have started a process with the OECD—something that the previous Government never did—to change the basic global accounting rules so that we can get to the bottom of corporations that are shifting their profits to low-tax jurisdictions. This holds the prospect of being successful in the medium term, but whatever it does it will have no impact on the effectiveness of the Government’s treatment of individuals. As we have debated many times in recent months at Question Time, the new focus that HMRC is putting on going after people who are avoiding and evading tax is generating many billions of pounds more in income. While the previous Government cut the number of HMRC people working on compliance by 10,000, this Government have already increased it by 2,500 and will increase it further.
I was very taken by the comments of the noble Baroness, Lady Afshar, on extended families. In the past year, employment has increased by more than 500,000 and I am unaware of any differential effect on the minority ethnic communities such that small firms in those communities have been shedding jobs disproportionately. Perhaps they have, but I have not seen any evidence. One of the more welcome developments of the past year, which has surprised a lot of commentators, is that hundreds of thousands more people are in work, and this increase in employment has taken place disproportionately in regions other than London and the south-east. There has been a slight rebalancing of employment prospects, and regions such as Yorkshire and the Humber, which I know, have done remarkably well in difficult economic times. I completely support the noble Baroness’s view about the moral economy of kin, but I question whether what has happened in recent months has undermined it to the extent that she suggested.
Finally, the noble Lord, Lord Bach, implied—very gently; I know that he did not really mean it—that the Government might have influenced what amendments were considered to be in scope of the Bill. He knows, as we all know, that the Government have no power to determine what is in scope of the Bill.
Of course I did not imply that for a moment—and I think that the Minister knows that. However, when there is some doubt about whether an amendment is in scope, there would be nothing wrong in the authorities asking both the Government and the person who might be tabling the amendment for their thinking on the issue. The decision is of course for the authorities and nobody else, but there would be nothing wrong in inviting the views of, for example, an experienced Bill team, as I am sure the Minister has backing him. I was not suggesting for a moment that the Government could use their influence, as the Minister put it, to decide for the authorities, which will make the decision themselves, as always. My point was that if the amendment had been allowed in, I suspect that the Government might have been in trouble in a vote at a later stage Bill. That was all that I was saying.
I am extremely sorry if I misunderstood the noble Lord.
In conclusion, I repeat that the amendments in this group would mean that the Bill would not deliver on its purpose of enabling the Government to set out clear and certain plans to control welfare spending and help secure the economic recovery. That is why they should be resisted.
My Lords, perhaps I may wind up on behalf of my noble friend, who moved Amendment 1 on my behalf. I thank the Minister for his range of responses. I emphasise that, yes, we believe the amendment would negate the Bill, but it would not prevent the Government doing what they wanted to, given a chance, over a three-year period. However, we believe that it is wrong to lock in a real-terms cut for three years. Effectively, it is for two years, given that the first year is by way of regulation.
On issues of tax, the Minister, in response to the Second Reading debate, said that a 50% tax rate would not garner the revenue we believed because people would order their affairs. Ordering their affairs, as set out in some detail in the HMRC publication that looked at this issue, would involve switching income from one year to another. It is quite possible that, as we speak and draw to the end of the current tax year and move towards, possibly, a 45% tax year, a great deal of income will shift from this year into next year. Will the Minister say whether he thinks this is okay and acquiesces with it, or whether it is a matter that the Government should address in some form? If you simply sit back, clever and well resourced people will reduce their tax liabilities as fully as they can. However, it does not inevitably have to be that way, particularly when the people who will pick up the burden of that avoidance are at the very low end of the income scale.
I take the argument that the noble Lord is making about 50p down to 45p. I am puzzled therefore as to why, during the entire period of the previous Government, who were in power from May 1997 until April 2010, the top rate was 50p. It reduced to 45p only on 6 April 2010. If it was an overriding cause of concern and a belief of the Government of that time, in which he served as a distinguished Minister, surely they would have kept the rate at that level and not proposed reducing it.
We are addressing the policies of this Government. We can spend all our time debating what previous Governments have done but we are addressing this Government’s determination to raise the revenue that they can from a 50% rate, rather than give what is a huge tax cut to a minority of people in our country at a time when people at the other end of the income scale are being asked to bear a real additional burden. That is what we are complaining about and we believe that the Government can and should do something about it.
There have been a range of powerful contributions to this debate. I agree entirely with my noble friends Lord Bach and Lady Hollis about this collection of things that are going on, particularly at the moment. New benefits, new structures and new payment details are being introduced in circumstances in which it is difficult for people to access good advice, to get justice when they wish to challenge, or even to understand the system with which they are faced.
The noble Lord, Lord Bates, referred to fiscal consolidation. Yes, we all agree about fiscal consolidation: the issue is how you go about it. We all agree about the importance of work and getting people into work, but it is how you go about it. The problem is that the Government have not produced the goods. Every time George Osborne presents a Budget or an Autumn Statement, the OBR revises growth downwards. Indeed, the latest GDP figures show that there has been no growth this year. The issue is not about whether we believe growth is the right way forward; it is about how you get it—and this Government have not delivered on that.
As to their impact on benefit spending, the Government’s failure to get Britain back to work is sending the social security bill up by something like £13.6 billion more than expected. Long-term unemployment is up by 55.7% this year. That is a manifestation of government failure in getting people into work and on growth in the economy. Borrowing has risen by 10% so far this year and it looks as though the Chancellor will miss his target to get the national debt falling by 2015.
On our record on benefits, I would say to the noble Lord, Lord Forsyth, that real-terms expenditure on out-of-work benefits fell by £7.45 billion under the previous Labour Government between 1996-97 and 2009-10, while real spending on out-of-work benefits in 2006, at something like £38 billion, was at its lowest point in 15 years. You do not have to take my word for Labour’s record on benefits. An analysis was made of the Labour Government’s record on welfare reform and it was found that they had made “strong progress” in their welfare-to-work agenda. Policies such as Welfare to Work, the New Deal and Jobcentre Plus were all a success. It was the noble Lord, Lord Freud, who came to that judgment.
I am most grateful to the noble Lord. I am a bit puzzled because he said in answer to my noble friend Lord Bates that we were discussing the policies of this Government, not the last one. He is a little selective. However, given what he has described—an economy which is not growing at all—how on earth does he expect to fund the increase in benefits that he says he is in favour of? That is the crux of the matter. It is not about where we would like to be or how the world might be different, the fact is that the economy is not growing. If the economy is not growing, how is it possible to expand the welfare budget?
I was talking about the last Labour Government in response to points that the noble Lord himself made earlier on. On growth, I would outline that there is one particular proposal that we in the Labour Party have been working on—the long-term jobs guarantee, and we have explained how it could be funded by, yes, restricting tax relief for the wealthiest in terms of pension contributions. It would get people into work, get them spending, and take them off benefits and welfare support. That is the way to do it. Perhaps I can turn this back to the noble Lord. The approach the Government have undertaken has simply failed to deliver growth; it is not happening. Everyone knows that and it does not need me to expound on it. The Government have failed to deliver.
It is because of that that we are challenging this burden of a real-terms cut. The noble Lord said that it is not a cut, but of course it is a cut in real terms because it is a cut in people’s living standards. It is also a cut that we do not know the magnitude of over the life of this Bill, which is why we object to it so strongly. We do not know what the rate of inflation is going to be in two years’ time. We can speculate on the impact of the downgrading of our credit rating, but getting growth in the economy and thus providing more employment is certainly more likely to impact in a positive way. That is what we would argue for and plan for. It is making the people at the bottom end of the income scale pay for the failure of this Government that we object to. This Bill is the wrong way to deal with benefits uprating. There is a tried and tested way that has operated for many years which is open to the Government rather than locking it down and forcing people into a real-terms cut in their living standards.
I suspect that we will have another round of this argument on Report because it is the fundamental part of our objection to the Bill, but in the mean time, I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
Economy: Credit Rating
My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Chancellor of the Exchequer.
“Mr Speaker, this decision is a stark reminder of the debt problem built up over the past decade and a warning to anyone who thinks that we can run away from dealing with those problems.
I can report that we have not seen excessive volatility in the markets today: 10-year government gilts are broadly flat—trading at around 2.16%—within the trading range of the past week and near the very lowest rates of borrowing in our history. The FTSE 100 is currently up by about 35 points. The credit rating is an important benchmark for any country but this Government’s economic policy is tested day in, day out, in the markets—and it has not been found wanting today. Families and businesses see the benefit of that in those very low interest rates.
If we accept the outcome of the rating agency decision, we must accept the reasons given for that decision. Moody’s points to the combined impact of what it describes as the ‘slow growth of the global economy’ and the necessary ‘domestic public- and private-sector deleveraging process’—in other words, the process of winding down the huge debts that built up in our society over the past decade.
That is the environment we are operating in, dealing with the very high deficit and debt trajectory this country had coming out of the financial crisis, made more difficult by the economic environment abroad. For on the same day as the rating decision, the latest European forecasts showed the eurozone deep in recession and growth in key economies such as France and Germany weaker than ours.
Crucially, Moody’s says that the UK’s creditworthiness remains ‘extremely high’ because of our ‘highly competitive, well-diversified economy’ and a ‘strong track record of fiscal consolidation’—what it calls the ‘political will’ to ‘reverse the UK’s debt trajectory’. Its message to this Government and this Parliament is explicit: the UK’s rating could be downgraded further if there is a ‘reduced political commitment to fiscal consolidation’.
You will not get that reduced commitment from this Government. We will go on delivering on the economic plan that has brought the deficit down by a quarter and helped create a million private sector jobs, and which continues to secure very low interest rates not just for the Government but for families and businesses in the country.
Ultimately, that is the choice for Britain: we can either abandon our efforts to deal with our debt problems and make a difficult situation very much worse, or we can redouble our efforts to overcome our debts, make sure that this country can earn its way in the world and provide for our children a very much brighter economic situation than the one we inherited from our predecessors. That is what I am going to do—and that is what this Government are going to do”.
My Lords, that concludes the Statement.
My Lords, the Conservative Party manifesto said:
“We will safeguard Britain’s credit rating”.
When that rating was maintained immediately after the 2010 election, the Chancellor said:
“That is a big vote of confidence … in the coalition government’s economic policies”.
Does the Minister not feel embarrassed to have to come here this afternoon to eat all the Chancellor’s words, and does he not accept that this downgrade shows that the Government’s economic strategy has failed, in their own terms? Will he confirm that Moody’s says that the main driver of its decision to downgrade is the weak growth of the British economy? When does he expect growth to return to the 1.8% level of 2010?
At the 2010 Conservative Party conference, George Osborne said that a credit downgrade would put Britain “on the brink”, as he referred to:
“The lost jobs. The cancelled investment. The businesses destroyed. The recovery halted”.
Since all these things have now come to pass, is it not time to change course?
My Lords, if I may be very specific about Moody’s expressed reasons for the downgrade, it is due to the,
“slow growth of the global economy and the drag on the UK economy from the ongoing domestic public- and private-sector deleveraging process”.
The noble Lord is absolutely right that we are growing far more slowly than was anticipated. That is a phenomenon of being highly constrained in a global economy that has had severe problems. Every other piece of advice implicit in Moody’s explanation for this downgrade tells us that the most critical thing is to continue with the path of fiscal consolidation.
My Lords, does my noble friend accept that we were supposed to have this Urgent Question much earlier in our proceedings, and that if this does not happen the Whips should rise and say what is going on?
As far as the substance is concerned, does my noble friend agree that it is absolutely crucial that the Government should continue with their existing policy? The reality is that they have not managed to reduce the deficit as fast as we would have liked. The Labour Party is saying that the reduction is being done too quickly and by too much, but clearly the reason why we have had this reassessment of our position is that it has not been done as quickly as international opinion might feel would have been appropriate.
If we are going to take this attitude, it is essential that aggregate demand should be maintained. In that instance, a further increase in quantitative easing would be appropriate. However, we are in some danger of having economic management split between an unaccountable Monetary Policy Committee and the Treasury. Perhaps this point also should be taken into account.
I thank my noble friend for those observations. As for the timing of the Statement, I think that it was simply a matter of the earlier session not finishing on time. I, too, have been here for an hour and a quarter ready to talk about this Question.
On the economic substance, my noble friend raises a number of extremely important points. I do not think that we can evaluate the current economic situation in terms of a direct trade-off between growth and fiscal consolidation. The essence of the situation that we find ourselves in is that fiscal consolidation is an absolute prerequisite for recovery and for the confidence of the markets which allows us to borrow to finance this extremely high deficit. My noble friend is right that an array of other policy weapons is available to prosecute a growth agenda. That includes multiple supply-side reforms to make our economy more efficient, and the Government are fully embarked on those. An activist monetary policy plays an important part, but—I agree—within a constraint of managing very carefully any inflationary risk.
My Lords, the Statement makes it clear that there is the very real danger of further demotion if growth is not achieved. Have Moody’s or any of the other exalted bodies that are our lords and masters in this connection given any indication of at what point a failure to achieve acceptable growth will make possible a further and calamitous demotion?
Interestingly, Moody’s has established that the outlook is stable. That means that it would not anticipate a further ratings change in the next 12 to 18 months—unlike the situation with the US and French economies, where the outlook is deemed to be negative because they are not perceived to have the same political will to drive down the deficit. The focus of the ratings agencies is much more to do with the management of our debt and driving down the deficit than directly with growth. Growth gives you the fuel to help manage down the debt, which is their primary concern.
My Lords, is not the situation even worse than intimated by the noble Lord, Lord Higgins? We have a state of affairs in which the markets are totally confused by the position taken by the Governor of the Bank of England and the Monetary Policy Committee and in which the Chancellor of the Exchequer has been found abjectly wanting by the witness whom he most insistently prayed in aid. What prospect is there of the Government getting a grip on this sliding situation?
The noble Lord exaggerates the confusion or nervousness of the markets. My interpretation of the markets is that there is very little volatility at the moment; the markets have taken this situation entirely in their stride. The market variable that has shifted the most is the exchange rate, where sterling has moved back to a range where it was trading before the eurozone crisis. The risk that has gone out of the eurozone sector has enabled the euro to strengthen; and the risk that was inherent in the US so-called “cliff” situation did not materialise, which has allowed the dollar to strengthen relative to sterling. I do not think that the markets are doing anything other than continuing to reward this Government’s focus on fiscal consolidation, which is why we are borrowing at these incredibly cheap rates.
My Lords, perhaps I can pursue an issue which my noble friend talked about: policy weapons which can be used to promote growth in a sustainable way. The Government have acknowledged that infrastructure is one of those policy weapons and that moving decision-making locally is another. I wonder whether now is the time to remove some of the constraints which the Government—the Treasury—have put on tax increment financing for local government, so that it can use that challenge to increase growth locally. At the moment, the restrictions that have been put on TIF by the Government will have the effect that very few schemes will come forward.
I thank my noble friend for bringing a very constructive perspective on ways in which we can address some of our supply-side problems in the short term. Investing in infrastructure and devolving spend to the regions, where they have a clearer grip on the projects necessary for local growth, is one thing that we should be pursuing. I know that my right honourable friend the Chancellor will be making some announcements in the Budget with respect to following through the recommendations of my noble friend Lord Heseltine.
My Lords, can the Minister enlighten us as to what will be the Government’s response to the failure of their deficit reduction plan? That is the reason why we have had the downgrade: because the deficit is not being reduced as was hoped. Do the Government agree with the Secretary of State for Business, Innovation and Skills, who says, “No more cuts”, or will they accept the advice of the No Turning Back group, and say that what we need are more cuts in spending so that we can have more cuts in taxes? Does the Minister agree that this is a Government without a strategy to face this looming crisis?
The noble Lord identifies some of the trade-offs that we have to tread carefully between. I think that the Government have an extremely clear economic strategy. Not everybody necessarily agrees with it, but the strategy could not be clearer. It is to demonstrate to the markets that we absolutely have control of the public finances, to reform our financial system, to ensure that we have the right kind of activist monetary policy and to ensure that, right through the economy, we introduce real microeconomic reforms that can unleash the productive capacity of the economy. That is an extremely clear strategy. It has been prosecuted with consistency through the life of the Government.
Moody’s is entirely supportive of government policy, which is to focus on reducing the deficit. It has merely demonstrated that because of the slow growth in the world economy and the huge debts with which we started this process, it is taking longer than we would all hope.
Welfare Benefits Up-rating Bill
Committee (1st Day) (Continued)
2: Clause 1, page 1, line 5, at end insert—
“(1A) In the case of employment and support allowance receivable by claimants of the support component of the allowance (who receive both personal allowance and support components) the mandatory 1% uprating stipulated in subsection (1) shall not apply to any components of the employment and support allowance (including personal allowance and support components) receivable by them.”
My Lords, this is a focused amendment concerning disabled people who are in the support group for the purposes of the employment and support allowance. Noble Lords will recall that in the main phase of ESA an individual will receive a personal allowance and an additional support component. Those are currently £71 and £34.05 respectively. They will increase to £71.70 and £34.80 under the Social Security Benefits Up-rating Order 2013. This is an increase of 1% for the personal allowance but a CPI increase of 2.2% for the additional component. We will have the opportunity to debate the regulations shortly, although, of course, they cannot be amended. Under income-related ESA, other premiums may be applicable, such as the enhanced disability, severe disability and carer’s premiums. Of course, the final amount of any payment depends also on the income, if any, of the claimant.
So far as the Bill is concerned, for those in the support group, the support component and the premiums are outwith the maximum 1% cap, and we support this. However, that is not the case for the personal allowances for a single lone parent and couple, and it is this injustice that we are seeking to rectify. In doing so, we are placing reliance on the commitment made by the Secretary of State for the DWP. On 8 January 2013, he said:
“I stand by what we said originally, and I say it again: in this Bill we have protected people on disability living allowance, as well as people in the support group on ESA”.—[Official Report, Commons, 8/1/13; col. 194.]
That is not the case. Noble Lords will recall that those in the support group are those with the greatest challenges who are deemed neither fit for work nor work-related activity. They are not generally in a position to improve their financial background by way of accessing the labour market and I believe it is generally accepted that they experience higher living costs. The amendment would not represent a hugely expensive change to the Bill, but this is fundamentally about an issue of fairness and insisting that Ministers carry out their promises.
Amendment 3 stands in the name of the noble Lord, Lord Low. I will perhaps offer our view on that amendment when I reply on my amendment. I beg to move.
My Lords, I support the amendment moved by the noble Lord, Lord McKenzie, to which I have added my name, but I rise principally to speak to Amendment 3, which is in my name alone and provides that the 1% uprating should not apply to benefits paid to claimants in the work-related activity group.
The amendment is essential if the Government are to fulfil their pledge to protect disabled people from the 1% uprating cap. Only disabled people are in the work-related activity group. The assessment process ensures that non-disabled people do not qualify. A recent DWP study tracking those receiving ESA over 18 months revealed that three-quarters of recipients were undergoing regular treatment for a health condition, including a stay in hospital for some. ESA for those in the work-related activity group is paid in two parts—the main component, which is equivalent to jobseeker’s allowance and worth about two-thirds of the total benefit, and the work-related activity group component, which is worth the other third. Many disabled people are being placed in the work-related activity group. Capping increases in their benefit at 1% will mean that households receiving ESA in the work-related activity group will be £87.65 a year worse off. The Government’s proposals to exempt from the 1% cap the support group component for those placed in the support group mean that less than a third of ESA payments for less than half of disabled people receiving ESA will be protected. That is what the amendment of the noble Lord, Lord McKenzie, would achieve, but it would address the shortfall only for the quarter of a million disabled people in the support group.
The most recent DWP figures show that there are 360,000 disabled people in the work-related activity group who also need protection. This amendment would achieve that. One third of disabled people in the UK were found to be living in poverty before the global economic crisis. Disabled people routinely experience higher living costs associated with their disability on things such as equipment, personal assistants and special diets. Disabled people experience the same increases in general living costs as everyone else: food inflation is running at 4.5% and travel inflation at 7%. Unfortunately, disabled people were not able to catch up financially during better economic times. We should not allow them to slip further behind as a result of this Bill; rather, we should ensure that the Government’s objective of protecting disabled people is fully delivered.
My Lords, I support Amendment 2, moved by the noble Lord, Lord McKenzie, to which I added my name, and Amendment 3, spoken to by the noble Lord, Lord Low. The Minister, the noble Lord, Lord Freud, consistently argued during the passage of the Welfare Reform Bill that there were two fundamental principles to the Government’s welfare reform provisions. One was to make sure that people in work had an incentive to remain in work and that those out of work had an incentive to move into work. The second principle was that the money available, however much there was available, should be focused as far as possible on those in greatest need. Throughout the debates on the previous Bill, I found myself very much in agreement with those two principles. It seemed to me that if money is short, at least one should abide by those two principles. That seemed very reasonable.
I find myself therefore confused that in this Bill those two principles appear to be breached. It does not seem that you are focusing on those in greatest need if there is an impact that reduces in real terms the living standards of people who are severely disabled. You are certainly not increasing the incentive to work if you reduce the benefit of people who have not a chance in hell of returning to work. We know that a lot of people who in any normal view of things would not really be able to work have been put into benefit categories such as jobseeker’s allowance, where they are expected to work, although they would regard this as being beyond their wildest dreams, much as they might like to. That is not the point that I wanted to make; I simply want to ask the Minister how she squares the provisions of this Bill with the principles so eloquently and consistently laid out by the noble Lord, Lord Freud.
My Lords, at Second Reading I said that this Bill had some rough edges, and the amendment moved by the noble Lord, Lord McKenzie, is directed at one of those rough edges. Can my noble friend the Minister tell the House whether a deliberate step was taken to exclude the personal allowance part of the support group to meet the budgetary requirements? Was this matter overlooked in the discussion that may have taken place on the principle espoused both in this House by the noble Lord, Lord Freud, and by the Secretary of State in the other place that those who are unable to do something to help themselves should not be penalised in this way? That is why the example of DLA and PIP has been given.
It may be, though, that in the words of the noble Lord, Lord McKenzie, people are generally not able to access the labour market. Can my noble friend the Minister tell us what the actual cost would be of reinstating the non-1% cap on the personal allowance part of the support group, given that people are in the support group because they obviously need support and cannot do things for themselves? That is the nature of the word. Has the department given any thought whatever to finding ways of ensuring that what is clearly not in the spirit of the statements made about providing for people who cannot help themselves will be carried through, if perhaps in some other way than by the amendment proposed by the noble Lord, Lord McKenzie? In other words, is there another way of dealing with this apart from using the methodology provided in the noble Lord’s amendment?
My Lords, I support both these amendments. I have a question concerning Amendment 2. Like the noble Baroness, Lady Meacher, I am slightly confused; I had understood that the rationale for not including, say, pensioners in the Bill was that that group could not be expected to make up the difference through paid work. Therefore, and in a sense this follows on from the noble Lord’s question, why are disabled people in the support group affected, albeit not as much as some other groups? According to the Disability Benefits Consortium, a person in the support group will be £138 per year worse off by 2015. That is a considerable sum for someone living on benefits, and of course the personal allowance element is larger than the element that is protected. Why does that principle of excluding groups that the Government expect to go into the labour market to somehow protect themselves not extend to people in the support group who, by virtue of being in that group, are not expected to look for paid work?
My Lords, I am grateful to all noble Lords who have contributed to this debate. It is probably worth my summarising that the two amendments we are talking about seek to make changes to the ESA. Amendment 2 would remove from the Bill the 1% increases in the personal allowance for those in the support group, while Amendment 3 relates to those in the work-related activity group.
I understand why noble Lords have tabled these amendments and raised the points that they have in this debate. We all want to protect those who are furthest from the labour market, or who have additional costs because of disability, and that is what the Government are doing.
On the points raised by the noble Baroness, Lady Meacher, referring to the principles outlined by my noble friend Lord Freud during the passage of the Welfare Reform Act, I am clear that those principles—that we will target welfare spending to those most in need and ensure that we do not do anything to disincentivise people from pursuing work—remain intact via this Bill. We are prioritising those in greatest need.
It is right to say that there will still be some effects among disabled people through the Bill because we are including the personal allowance for both types of ESA as well as the additional element for those in the work-related activity group. However, we are ensuring that all those benefits that are paid specifically to cover the additional costs associated with disability are not included in the Bill. For example, the disability living allowance and the attendance allowance are protected, as are the disability premia in benefits such as income support, ESA, JSA and housing benefit, and we have excluded the disability elements of tax credits from the Bill.
In many cases, the basic rate of ESA is just one element of the total package of benefits received. Many people on ESA are also in receipt of other benefits, such as DLA, to which I have just referred, and housing benefit. It is worth noting that around 65% of people in the support group also claim DLA. The point I am trying to make here is that ESA is not the only benefit that most people are relying on. People in the support group receive a component worth £34.80 a week, as has already been said, and they are also automatically entitled to the enhanced disability premium of £14.80 a week if eligible for income-related ESA. We should not forget that some people will be eligible for the severe disability premium or the carer premium. All these are protected, like the support component. Income-related ESA households where a member of the couple is over pension age also receive a pensioner premium to ensure that the rate of benefit is the equivalent of the pension credit rate. This rate is also uprated as normal.
My noble friend Lord German asked in particular about the personal allowance aspect of ESA and why it is included in the Bill. It is important for me to be clear that the personal allowance is there to provide basic support. It is designed to meet the basic needs of all those on out-of-work income-related benefits. The personal allowance is consistent across all benefits which relate to those of working age. There is a standard amount. For single people, it is currently £71 a week. It is important that I am clear that this rate is common across all claimants who receive ESA, JSA, income support and housing benefit and reflects the fact that they perform a similar function of providing basic support for everyday needs. They do not reflect disability or the additional costs of disability, so therefore it is right that they are set at a standard rate. That is the rationale for including the personal allowance in this Bill and for the personal allowance to be subject to the 1% cap on annual increases. Treating one personal allowance rate differently from that in other benefits would mean that there would be no clear level of income at which state support is set and at which access to other help would be available across a wide range of services. It would also introduce an element of complexity in terms of the coherence of the benefit system which would introduce new challenges and be likely to add further costs to the running of the overall system.
As has been acknowledged, the support group component is protected, so it is not included in the Bill. It is the component element of ESA which differentiates the need based on the effects of a disability or a condition. That particular component relates to the effects of a specific disability. The support group component is paid in recognition of the fact that more severely disabled people are less likely to be able to increase their income by moving into work and may have additional needs. Therefore we pay those in the support group a higher increase than those in the work-related activity group.
It is worth making the point that for those in the work-related activity group, ESA is not like the old incapacity benefits that usually led to people being in receipt of that benefit for a long period. This is intended to be a short-term benefit for those in this group. Those who are placed in the work-related activity group are there because they have been found able to prepare for work. As such, they will be referred for appropriate support, training and provision to ensure that they get the help they need. ESA for people in that group is intended to be a short-term benefit and we expect these claimants to be closer to the labour market and be in a better position to prepare for work. Therefore, while they may not be looking for work immediately in receipt of that benefit, they have some ability to affect their own incomes. That is why it is right that the annual increase for those in the work-related activity group should—unlike that for those in the support group—be fully within the scope of the Bill.
In his opening remarks, the noble Lord, Lord McKenzie, again referred to the alternative option of the Government bringing forward annual orders rather than introducing the Bill. It is important for me to stress heavily that a central purpose of the Bill, in addition to achieving savings, is to provide certainty. I will say that regularly throughout the passage of the Bill; it is an important aspect of what we are doing. I know that the noble Lord seeks to undermine that, but it is central to what we are trying to do. It is important that we recognise the long-term benefits of providing that certainty; that is how we retain the credibility of the Government’s fiscal policy.
The point I am making, which the noble Lord is clear about, is that the Bill still provides annual increases in benefits, but at a reduced rate for some elements of those benefits. We are doing this in the way that we propose because it adds to the certainty. As I told the noble Lord when we were outside the Chamber, the IMF was very clear that to anchor market expectations, policymakers need to specify adequately detailed medium-term plans for lowering debt ratios, which must be backed by binding legislation or fiscal frameworks. This is part of what we are doing, and why it is important.
As I have said, despite the economic situation, which we have already discussed today at some length, we have found the resources to fund a 1% increase in working-age benefits and, in doing so, protected the incomes of disabled people as far as we can—especially those elements which are provided to cover the additional costs of disabled people.
The noble Lord, Lord McKenzie, said that it would not be hugely expensive to accept these amendments and to make this change. It is important that I make it clear to the Committee that accepting these amendments would mean a loss of £340 million in savings, which we would have to find elsewhere. Those in the work-related activity group are deemed able to prepare for work and, as such, are better placed to be able to improve their income levels. Therefore, we believe it right that the component is also within the scope of the Bill.
Personal allowance rates are common across the working-age benefit system, as I have already said, reflecting the fact that they perform the same function: to provide basic support for everyday needs. Accepting these amendments would therefore break away from that model and would create additional complexity in the benefits system. Our proposals are proportionate. Although I understand the concerns and points that have been raised in the debate—please believe me, I do—what is being proposed here is fair. I therefore ask the noble Lord to withdraw his amendment.
Are the Government more concerned about certainty for the Government or certainty for the claimant? If the Government are concerned about certainty for the claimant, would it not be better to say that benefits would be uprated to the extent of 1% or 2% less than inflation, for example? That way, the claimant would know that they would not have a cut in their income of more than 1% or 2% a year. That would provide a level of certainty for the claimant, whereas it seems that the Bill is after certainty for the Government. Is that correct?
I think I am right in saying that the noble Baroness was not here at Second Reading when I laid out the purpose of the Bill and its wider context. In response to her question, my point is that this proposal is about certainty, so that in the long-term it will result in a better future for everyone. It is also about taking measures now which are difficult and will affect people but which have the sole purpose of helping us to achieve a stronger economy so that in future years all of us will benefit. That is what I mean when I talk about certainty.
My Lords, as the Minister will recall, that is not exactly what the impact analysis said nor exactly what she said at the pre-meeting on this Bill, which was very helpful. I am sure that we all appreciated it. She made the point that it was about certainty for the markets, certainty for the Government and certainty for the claimants. Many of us pressed her on the fact that certainty for the Government, the markets or the claimants depended not just on what the level of inflation would be but also on what the number of claimants would be in order to get some estimate of what spending would be. The Government had no way at all of forecasting two out of the three factors that went into giving themselves some comfort about their uncertainty.
The point that I was making at Second Reading and continue to make is that certainty is a means to an end. It is through certainty for the Government, certainty for the markets and certainty in these measures that we will achieve a stronger economy. That is what I am talking about.
My Lords, this simply will not give you certainty. The whole of the impact analysis brief was a set of mythological language. This will not do what the Government claim. I understand that they are seeking to cut possible expenditure demands but to say that this is about certainty is simply an abuse of language, if I may say so.
My Lords, I thank all noble Lords who have spoken in favour of Amendment 2: the noble Lord, Lord Low, the noble Baroness, Lady Meacher, and my noble friend Lady Lister. From the Minister’s response it seems that this is all about a better future for everyone, and that seems to encompass a rather strange load of decisions. My noble friend Lady Lister asked a question which I do not believe was answered. She raised the comparison with pensioners who are being protected—and we support that because they are not so readily in a position to make up their income by accessing the labour market. However, people are in the support group because they are not expected to be able to be in, or are some distance from, the labour market.
In respect of the WRAG, I think that the Government are generally drawing closer together the JSA group and the WRAG to blur that distinction. People in the WRAG were not expected to look for work. Yes, they were expected to be fit and were deemed to be fit for work-related activity, but there is a constant push by the Government to blur that distinction and ease them much more towards the JSA category, if that job is not being done, in any event, by the WCA and Atos.
The noble Lord, Lord German, asked whether this is a rough edge. It seems to me that it clearly is a rough edge—it has not been overlooked, and it is not being dealt with in any other way. It is a hit that people in the support group and the WRAG have got to take. It seems to me that this is incredibly mean-spirited. It just focuses on the support group—the people who are in the most difficult position and not able to access employment. The noble Baroness said that 65% of them were on DLA and acknowledged that DLA is outwith the Bill. What is the Minister’s understanding of the percentage of people in the support group who will end up on PIP rather than DLA?
In Amendment 3, the noble Lord, Lord Low, makes a broader case for removing ESA from the scope of the 1% restriction on uprating for those who are in the WRAG. It obviously goes further than our Amendment 2. We have made clear that the 1% uprating restriction should be removed in its entirety from all the relevant sums and amounts as defined, and we are grateful for the support of the noble Lord in that endeavour. If we are successful, the noble Lord’s amendment, and several others including our own, would fall by the wayside. Should we be unsuccessful we need to consider how we can at least move some way towards that objective.
As we have just discussed, we focused in our Amendment 2 on those in the support group. We did that because those affected are the most seriously disadvantaged—the furthest from the labour market—and because the Minister has made a commitment that this group would be protected. That commitment clearly is not being met. The noble Lord’s proposal that we should go further, beyond the support group, is entirely reasonable. Those in the WRAG are similarly judged under the WCA as not being fit for work although capable of work-related activity. But for those who seek work, we know that the prospects are not good. Not only do we have a work programme which is failing overall but there is at least anecdotal evidence to suggest that the hardest to help are not being properly supported. We have the shutting of Remploy factories, concerns over the looming bedroom tax, the restrictions on contributory ESA and the loss of the severe disability premium in universal credit. These have all added to the pressure on disabled people.
As the noble Lord, Lord Low, has said, the Bill will mean that people in the WRAG will be some £191 a year worse off by 2015. If we cannot carry the day on removing the 1% restriction across the board, we would look to support the noble Lord should he decide to pursue his line on Report. I beg leave to withdraw the amendment.
Amendment 2 withdrawn.
Amendment 3 not moved.
4: Clause 1, page 1, line 5, at end insert—
“(1A) The Secretary of State must, in each of the tax years ending with 5 April 2014 and 5 April 2015, make an order by statutory instrument increasing each of the relevant sums by no less than the general level of prices over the period under review and for the meaning of the “relevant sums” see paragraph 3 of the Schedule.”
My Lords, I shall speak to Amendments 4, 5, 16, 18, 20 and 21, which are in my name, and I am grateful to other noble Lords for adding their names to some of them. These amendments seek to make two key changes to the Welfare Benefits Up-rating Bill. The first is to ensure that universal credit rates, including work allowances, are uprated with inflation. This will protect the future value of benefits for low-income families while also achieving most of the short-term savings required as part of the Government’s deficit reduction strategy. Secondly, the amendments seek to ensure that work will always pay and that all working families are able to afford a minimum, decent standard of living.
I turn first to those amendments which seek to ensure that universal credit is removed from the scope of the Bill. I have tabled them for four key reasons. First, the baseline amounts for universal credit have only just been established by the Government. It surely is reasonable that these are now increased with cost of living. Secondly, the majority of households protected in this way in the long term would be working households. The measure would promote work incentives, about which I will say more in a moment. Thirdly, the measure would protect 6.7 million children from some level of impact once universal credit is fully introduced. Finally, the cost of the change would be relatively low over the next two years as a result of limited levels of migration to universal credit.
A number of benefits have been substantially revised as part of the introduction of universal credit. For example, the lower disability addition for children, comparable to the disability element of child tax credit, has been halved in value. Personal allowances for those aged under 25 have been changed so that lone parents under 25 will no longer receive the same rate of personal allowance as single adults aged over 25. The severe and enhanced disability premiums present in the current benefits system are being removed. These are major changes to the system and, since we have only just established a new baseline for support provided through the welfare system, it is surely reasonable that that support should be increased to keep pace with rises in the cost of living to ensure that the situation for families remains comparable over time. Inclusion of universal credit in the Bill amounts to a cut to the new scheme before it is even introduced. This surely cannot make sense. At this stage, we do not yet know what the impact of these changes to the structure of support will be. We should at least wait and see what the implications of these changes are before initiating cuts to them.
So how much will this cost? With my proposal, the Government can still make savings, but they can also help to ensure that the success of universal credit is not undermined. Based on a migration rate of 10% of claimants by the end of 2014-15 and 30% of claimants by the end of 2015-16, the additional cost of removing universal credit from the scope of the Bill would be £90 million in 2014-15 and £510 million in 2015-16. This would mean that the Bill would still make savings of £810 million in 2014-15 and £1.2 billion in 2015-16. In fact, since many households migrated across will have a lower entitlement under universal credit and so receive transitional protection, the costs may be significantly lower than this. Does the Minister agree that, having only just set the rates of support for universal credit, it would be reasonable to increase these in line with cost of living?
Secondly, I turn to work incentives. A key objective of the current welfare system and of the future system in the form of universal credit is to ensure that work incentives are maintained. The Government rightly identify work as an important way for families to lift themselves out of poverty, and we all accept that. However, this can succeed only if the right work incentives are provided through in-work benefits and tax credits. The Government estimate that around half of the total number of households affected by the Bill are working households—a total of 3.25 million working households, including working families from all walks of life.
The impact will be reflected in children in poverty in working families. The Government have admitted that they expect it to push 100,000 more children in working families below the poverty line. The amendments in this group in my name explicitly safeguard work incentives. The amendment ensures that the allowances provided through working tax credit, personal allowances within housing benefit and work allowances in universal credit are increased in line with prices. Doing so explicitly improves work incentives and ensures the principle that work pays.
Working tax credit will be affected by this Bill as it stands. It is notable that the basic and 30-hour elements of working tax have already faced a three-year freeze, from 2011-12 to 2013-14. This means that, in total, these elements will increase by just 2% over the course of half a decade, a period in which prices have risen by eight times as much. On top of this freeze, as a result of the Bill, a lone parent working 30 hours per week would receive the basic, lone parent and 30-hour elements of WTC and, as a result, they will have a WTC entitlement which is up to £132 per year lower.
The amendments also seek for the personal allowances within housing benefit to be increased in line with inflation. The personal allowance rates for adults are included within the scope of the Bill. This will mean that households moving into paid work keep less of their earnings before additional earnings are withdrawn from their housing benefit entitlement.
Finally, with the passing of the welfare Act last year, the future of the welfare system is focused through the universal credit. A key aim of this credit is to promote work incentives through work allowances, but it is notable that these work allowances are not mentioned within the Bill. Failure to increase these in line with inflation will have a very substantial impact on the actual value of the allowances. For example, the higher work allowance—the rate provided to households not claiming for help with housing costs—for a lone-parent family is £734 per month, worth up to £477 per month for working families. The Children’s Society have calculated that, were this uprated in line with inflation, this would be expected to be £770 by 2015-16, worth up to £500 per month for working families. As a result, failure to uprate work allowances within universal credit would cost working lone parent families £23 per month, in the value of this allowance alone. Does the Minister agree that in-work benefits and tax credits help to ensure that work always pays? Secondly, will she confirm that the reason that the work allowances within universal credit are not included within the scope of the Bill is that the Government intend to increase them at least in line with inflation?
In conclusion, the Bill as it currently stands seriously fails to protect working families, and will cast children into poverty. It simply does not go far enough to promote work, so that work always pays, particularly for the lowest earning working families. My amendments go some way to mitigate these deficiencies, and I beg to move.
I am happy to support these amendments and have added my name to most of them. The House owes a debt of gratitude to the right reverend Prelate the Bishop of Leicester for raising these points. I particularly support his concerns about lone parents. Over the whole systematic process of change, my concerns are getting greater and greater about the compounding effect of all these changes that we see in the social protection available in the United Kingdom. Lone parents, who are mainly women, are struggling already, and we need to watch their situation with great concern in future.
My heart absolutely sank when I saw that this Bill was being applied to universal credit, because universal credit should be the future; it is the architecture around which we as a country should and must have serious consideration about provision for low-income households. We need to have a discussion with people such as my noble friend Lord Forsyth of Drumlean as well, between now and the next election. I hope that there will be a grown-up discussion about how the United Kingdom, as a poorer country, accommodates some of these new pressures, and I am willing to engage in that to the best of my ability. However, what is wrong about applying these two years of locked-down 1% increases is that they risk prejudicing the whole new future, as I see it, of how we cope.
In my experience, the administrative cuts in the health service prejudiced the view of a lot of people towards some of the NHS reforms. My real fear is that people will not know that the cuts are being introduced by the uprating Bill and will think, in the early years of universal credit, when they are transitioned across into the new system, that they are being sold a pup. That will potentially damage the public’s understanding of what universal credit is about and that is a real shame. I understand perfectly well all the arguments that the noble Lord, Lord Forsyth, makes, and we have to put up with them in the best way we can, but we should have isolated universal credit for the reasons that I have explained.
Further, I do not think that we know how universal credit will work out when it is in steady state, and it will take a long time to get there. I come back to the costs that will be saved by applying this uprating Bill to universal credit because I am a bit confused about exactly what the Government think they are going to save. Therefore, I make my first complaint—it is another moan—with conviction. The noble Lord, Lord Freud, bless him, has worked very hard to try to get universal credit to stand up. I read a worrying story in the Financial Times, which said that the self-employed have not yet been told that there is a real-time HMRC system heading in their direction. Not many of them know about it. That is more than slightly worrying—it is very worrying, because the computer system is essential to that measure working sensibly. However, we must try to do the best we can to make it work in future.
Secondly—again, the right reverend Prelate was right to give this priority—one of the best elements of universal credit is the way it deals with what used to be known in the old language as income disregard. Some of us have fought for years to do something constructive about income disregard. It is a very intractable problem and universal credit has given us an opportunity to get hold of that and provide incentives to get into work. Universal credit does that, but the first thing that the Government do after bringing in this new progressive reform is to cap it at 1%. How that is supposed to meld with everything else that has been done in connection with the Work Programme makes no sense to me. It will save relatively small amounts of money in terms of the big picture savings that the Government are trying to lock in, but for the life of me it seems a counterproductive, silly cut to introduce and it compounds my first point in that it makes the universal credit system look worse than it is.
The right reverend Prelate the Bishop of Leicester made eloquent and important points about child poverty targets. I concur with everything that he said, so I do not need to elaborate on that. My final point is about costs because I am struggling to understand the savings that have been alluded to. I do not expect the Minister to be able to do this off the top of her head but it would be helpful to me if, before Report, I could be told what the universal credit cost savings are in this measure because I cannot make any sense of the impact assessment. I agree with the noble Baroness, Lady Hollis, that it is—
Indeed. I am looking at the Treasury Autumn Statement 2012, Table 2.1, which has a category headed, “Exchequer savings resulting from 1% uprating of benefits and tax credits”. This is over the three years, not just the two years in the Bill. The table also has a category headed, “Universal Credit: finalise disregards and increase by 1% for two years from 2014-15”. The figure given suggests that the saving for 2015-16 will be £640 million. However, my honourable friend Steve Webb, in a Written Answer to Stephen Timms on 13 February, identified universal credit additional savings as £20 million in 2014-15, £100 million in 2015-16 and £150 million in 2016-17. I am not sure how these figures relate to one another. I may be misreading the statistics and the tables may be drawn up using different bases, but between now and Report I would like to understand how these figures are worked out.
As the noble Baroness, Lady Hollis, said, the assumptions about how many people will be translated on to universal credit are best guesses, to put it mildly. I think the roll-out programme will take much longer, for the reasons that I explained earlier, and the story in the Financial Times compounds my anxieties in this regard. I think the figures that the right reverend Prelate gave of 10% of claimants being on universal credit by 2014-15 and 30% by 2015-16 are ambitious, to put it mildly, so can we have some greater clarity?
This is an important Bill. I understand the significance of the situation in which the Government find themselves. If I did not believe that before this weekend, all the financial circumstances of the past few days have confirmed the difficulty of the situation. However, before Report, we must try to get a better fix, in particular on the savings related to the universal credit inclusion in the Bill, because it is unclear to me. It is important and, from where I am sitting at the moment, I do not think that the savings are worth the candle. I would be much happier leaving universal credit out of the Bill. Let it be the future and let us all work on it, try to protect it and build on it in the best way we can. The Bill is a retrograde step as it affects universal credit, and I support these amendments for that reason.
My Lords, I want to say a very brief word about two groups—children and families. Before I do so, I congratulate the right reverend Prelate the Bishop of Leicester on his excellent briefing on these very important areas. I agree with a great deal of what the noble Lord, Lord Kirkwood, said.
We know that the Government are not on target to meet the Child Poverty Act commitment to eradicate child poverty by 2020. The right reverend Prelate referred to that. We are told by the Institute for Fiscal Studies that there can be almost no chance of eradicating child poverty, as defined in the Child Poverty Act, by 2020. It predicted that there would be an additional 500,000 children living in absolute poverty by 2015. However, that leaves out a further 200,000 children who will be pushed into relative income poverty. How on earth will this Bill help the Government to meet their commitments under the Child Poverty Act?
I am even more concerned about the disproportionate impact that all this is having on women. The Bill disproportionately affects women, including through the cap on child benefit payments and statutory maternity pay. Furthermore, those in low-paid work, who are more likely to be women, will lose the most. It is estimated that 300,000 nurses and midwives, 150,000 primary and nursery school teachers and 1.14 million admin workers and secretaries will be affected by the cap. Some 98% of child benefit payments are paid to women. Child benefit has already been frozen for three years, meaning that over five years there will be a total of a 2% increase; for the same period, CPI will have risen by 16%. Of different family types, lone parents, who are mostly women, as we know, will lose the most: £261 a year by 2015.
There we are: those in low-paid work will lose the most as a result of this Bill; 71% of the families affected are at or below average income. The IFS estimates that the combined impact of all the tax and benefit changes introduced between 2010 and 2015 will reduce the incomes of the poorest fifth of families with children by around 7%. Will that really do what the Government want to do? I get increasingly worried by all the evidence that is sent to us, and it is evidence from people who are working on a daily basis with the families about whom we are most concerned. I really hope that the Government will think again on some of these areas.
My Lords, I start by thanking the right reverend Prelate, the Bishop of Leicester, for these amendments. I hope he will understand that, should he press them to a vote tonight, he would present us with a little difficulty. I doubt that will come as a surprise. The difficulty is that the strictures under which we are operating mean that we cannot at this stage make commitments in respect of the next Parliament. Clearly, an uprating in the tax year beginning 5 April 2015 would operate in the subsequent year, which crosses that particular line.
Having said that, there is much to support and sympathise with in the case made by the right reverend Prelate and the noble Lord, Lord Kirkwood. We on this side wish universal credit well and hope that it will deliver that which is promised for it. However, we know that there are a number of teething problems; we think the Government have been right to extend the introduction way beyond the original intention. It therefore seems to me that very important questions have been raised about why we should at this stage include universal credit within these provisions. We on these Benches want to see everything outside this Bill; we think that would be the right way forward, but certainly the universal credit would be a start.
The issue of work incentives is very important. Although we probably do not espouse it often enough, I think we have a shared view around this Chamber about the importance of work, which is the route out of poverty for most people. It generally seems to be better for their health and well-being and all those things. Therefore, it is crucial that any measures such as this support the proposition that we should try to get people into work when they can work, and help them get closer to the labour market when they cannot.
The noble Baroness, Lady Howe, widened the debate to discuss the broader impact of this Bill on child poverty. The figure of 200,000 is the one that was identified by the Minister in the other place. That comes on top of IFS figures, which suggest that another 800,000 children are going into poverty as a result of measures since 2010—in a sense, reversing the gains of the past decade for children and women, too. Therefore, without being able to support the wording of the amendment formally tonight, there is much for us to reflect on and support in the right reverend Prelate’s proposals. I hope that between now and Report—particularly picking up the points made by the noble Lord, Lord Kirkwood—we could end up in a position where we were not only in sympathy but were marching through the same Lobby.
My Lords, we have covered a lot of ground with these amendments tabled by the right reverend Prelate the Bishop of Leicester. I will do my best to cover that ground. It is probably worth starting by noting some common issues raised by this group of amendments. They come under the headings of their impact on savings from the Bill, their impact on certainty—as I have already talked about—and the inclusion of in-work benefits. I will then refer to some of the points related to housing. Before I begin, however, I note that the right reverend Prelate has added his name to Amendment 13, which removes housing benefit and personal allowances from the schedule, but Amendment 13 is to be discussed later as part of a different group.
I should have said when I got up to speak that Amendment 13 was originally part of this group but unwittingly got moved to be grouped with two later housing benefit amendments in the names of my noble friends. I apologise to the right reverend Prelate for that.
I was going to say that because Amendment 21, which inserts housing benefit and personal allowances into a different part of the schedule, and Amendment 5, which places a duty to uprate by at least prices, are reliant on Amendment 13, I will speak to the amendments in this group as if Amendment 13 were assumed. I hope that makes sense. Hopefully, we are all following each other in respect of these different amendments.
Noble Lords have already outlined the effects that the amendments would have on the Bill. In broad terms, the legislation would revert to the existing annual exercise of discretion by the Secretary of State. To remove these benefits and payments from the Bill would reduce savings by around £800 million in 2015-16: that is, around £600 million that year from removing universal credit, which would increase over time as more households moved to universal credit; around £160 million that year from removing working tax credits; and, under Amendment 13, around £60 million that year from removing housing benefit and personal allowances—in total, an £800 million reduction in the Bill’s savings in the final year, which is about 40% of the Bill’s savings.
I have to disagree with the right reverend Prelate and say that it would simply not be affordable to give up those savings. If we look at the two years of the Bill together, we are talking about a loss of £1.1 billion in savings. As I have said before, none of these decisions is easy, but we have to recognise that if we do not take the savings that this Bill provides in the way it does, this money will have to be found elsewhere.
While I am talking about general matters, it might be worth responding to a point made by the noble Lord, Lord McKenzie, either just now or in an earlier debate—I cannot remember—about the wide range of changes that the Government are introducing in welfare reform. The noble Baroness, Lady Hollis, is not in her place, but she also made the point in an earlier debate. We are making a lot of changes to the welfare system. We absolutely believe in those changes; we think that we are doing the right thing and that those changes will result in a much more effective system. It is safe for me to say that in broad terms most of those changes have received support from the House. There has been recognition on all sides that the welfare system as it stood needed to be reformed. As we move into 2013-14, a lot of those changes will be implemented, so it will no longer be a discussion in theory; it will be real in practice. Of course, as we go through the implementation phase, we will ensure that all changes are implemented in a way that we designed them to be made and that they have the effect and the outcomes that we set out in the legislation. This is not something that we will not be closely involved in to make sure that things operate in the way that we intended.
While talking about general issues, it is perhaps worth responding to points raised about cumulative impacts and assessments. I know that my noble friend Lord Newby referred to this in his response to the first group of amendments, but the matter having been raised again it is worth making a couple of points. The Government introduced a new system of greater transparency around impacts and we publish the impacts of government policy every time there is a fiscal event. The last time we did this was in the Autumn Statement. That cumulative impact includes information about changes to all tax, welfare and public spending policy that can be modelled since the June Budget of 2010.
So far that analysis has not included universal credit, and a separate analysis shows that 75% of the gains from universal credit goes to the bottom 40% of the income distribution. It is worth adding that the IFS has acknowledged that the effects of reforms, such as those to DLA and housing benefit, cannot be precisely modelled, but as I say we are producing quite a lot of information. It is there and publicly available, but let us not forget that all those assessments are against the previous Government’s plans for this period—this Parliament, had they come into power—and we have acknowledged that those plans were not affordable. We are assessing something against a benchmark that we have already acknowledged we cannot afford.
A key principle of this Bill is the certainty that it gives as part of the Government’s fiscal plans. I have said that before, and said then that I hoped noble Lords would not tire of me saying it. I will not tire of saying it to the House as it is important. By taking these benefits out of the Bill and thereby restoring the annual exercise of discretion in relation to prices, the amendments would undermine the key principle of certainty. Amendments 4 and 5, if taken with the others, would make it a requirement to uprate universal credit, working tax credit elements and housing benefit personal allowances by at least prices. I am not sure whether that is the intention, but the amendments would take us further than existing legislation, while not giving a firm commitment to addressing the deficit that the Bill provides.
Noble Lords have talked about the inclusion of in-work benefits and questioned whether these should be included. We cannot escape the fact that some working households will be affected. I am not seeking to suggest for one moment that they will not. Tax credits, for example, account for around £30 billion of expenditure this year. Tax credit spending rocketed under the previous Government by an extraordinary 340% compared with the benefits they replaced. Eligibility for tax credits was extended to nine out of 10 families with children, so it would be unrealistic to exclude the benefits received by working people from these decisions that we are taking. For my part I think people understand that. There is a general recognition that this element of spending could not be excluded, particularly when those in work are facing tight restrictions, if not freezes, to their own pay.
The Government have, however, taken real steps to support working families with the cost of living. The noble Baroness, Lady Meacher, who sadly is not in her place, talked about families being really concerned about the money they receive rather than percentage increases in this, that and the other. I absolutely agree, and that is why it is important when debating these changes that we also make sure that we take account of the other measures that the Government have introduced that provide some benefit to families. For instance, in the Autumn Statement we announced a further increase to personal tax allowance, and taken together, increases to the personal allowance brought in since this Government came to power will benefit 24.5 million individuals, providing a real-terms gain of £443 for the most basic taxpayers in the next financial year. These changes will take 2.2 million individuals with low incomes out of tax altogether.
We should not knock important measures such as fuel duty and the fact that we cancelled the January fuel duty increase. That means that pump prices are about 10% per litre lower than they would have been had that measure been implemented. We have also provided an extra £450 million to help freeze council tax bills in England, which means that somebody in a band D home will save up to about £72 on a 5% rise in council tax. All those measures mean that an average working family will be £125 better off next year and better off on average no matter where they sit on the income distribution scale.
The Government believe that work is the best route out of poverty. Noble Lords have said this in today’s debate, which is a point that we all agree on. Universal credit lies at the heart of coalition policies to combat child poverty and transform the lives of those who most need our help. The simplicity of universal credit means that people will clearly understand the improved work incentives it creates, allowing them to keep more of their income when they find a job or increase their earnings. That simple point should never be underestimated. I find the benefits system a complete minefield to understand, and the changes that we are introducing are incredibly important. More than 3 million people will gain from universal credit, with an average gain of about £168 a month, and we estimate that up to 300,000 more people will enter work as a result of the introduction of universal credit through improved financial incentives alone.
At this point, I should respond to one of the questions that the right reverend Prelate the Bishop of Leicester asked about work allowances. Committing to uprate the work allowances goes beyond the legacy system that saw no routine increases to the less generous disregards. It is also worth responding now to a point made by the noble Baroness, Lady Howe of Idlicote, who referred to statutory maternity pay. We will be debating that later on as there is a group of amendments specifically about that. She talked about the impact on women. There was quite a lively discussion online on the Mumsnet website about statutory maternity pay. One of the points made on the blog that was echoed by quite a lot of people is that for those who are in a relationship or marriage, their husband or partner benefits from maternity pay just as much as they do because all their household income is pooled. We undermine the intelligence of people if we argue that people are not clear about the impact of what we are doing and manage their finances in the strict way that the noble Baroness suggested.
Finally, I turn to housing benefit personal allowances. I should make it completely clear that the Bill does not uprate every aspect of housing benefit by 1% over the period in question. It uprates by 1% the housing benefit personal allowance. This figure is used in the calculation of housing benefit. I refer noble Lords to our previous debate. The personal allowance is a block of money that is consistent across all benefits. For single people it is £71 a week. That is what the Bill refers to when it talks about housing benefit.
As housing benefit is particularly complicated, I will make two things clear. For those who continue to satisfy the income test for all income-related benefits, including housing benefit, their eligible rent will continue to be covered by housing benefit, as it is now. There will be no change for them. Secondly, work will continue to pay for those on housing benefit. Renters in low-paid work will still be better off than they would be on out-of-work benefits.
I think I am clear that the Bill refers just to the personal allowance for housing benefit. If I am wrong, I will of course correct that.
As I said, if we were to change the personal allowance for housing benefit, we would introduce inconsistency to the way in which this part of in-work benefit is calculated. There would no longer be consistency between the different kinds of personal allowances that apply to different benefits. In addition to increasing the complexity of the system, this would lead to additional costs.
Before I conclude, I will respond to a question from my noble friend Lord Kirkwood, who asked about costing methodology. I confirm that costs have been modelled and presented in a way that is consistent with the Autumn Statement. I will be happy to provide further details to the noble Lord before Report.
The Government are supporting working households. One of the key ways in which we are doing that is by taking tough decisions to reduce public spending, reduce the deficit and restore economic growth. The amendments tabled by the right reverend Prelate the Bishop of Leicester, including Amendment 13, would reduce the savings of the Bill by about 40%—or £800 million—in 2015-16 alone. Not including in-work benefits in the Bill would be simply unaffordable. Therefore, I ask the right reverend Prelate to withdraw his amendment.
Perhaps I might ask the Minister about work allowances, which were referred to by the right reverend Prelate the Bishop of Leicester. The Minister’s response left me unsure whether, as time goes on, they will be increased in line with inflation. They are a major element of support for those who are in work.
My Lords, I am grateful to the Minister and to noble Lords who contributed to this debate. The noble Lord, Lord Kirkwood, underlined my concern about lone parents and reminded us that the effect of the Bill compounds the effect of so much other legislation that is going through at the moment. In particular he made the point that universal credit is the central architecture of welfare for the future and reminded us that, in his view, the savings are not worth the candle, and the effect of including universal credit in the uprating provisions will be to prejudice so much that is good about it. The noble Baroness, Lady Howe, passionately expressed her concern about more children being tipped into poverty, and about the very wide margin by which it is now clear we will miss the 2020 children in poverty targets. The noble Lord, Lord McKenzie of Luton, indicated that his party shared concerns about universal credit and work allowances.
I am grateful to the Minister for her response. She reminded the House that my proposals for excluding universal credit simply cannot be afforded. I hope she will hear that it is very clear that many people in this House doubt whether the argument that we cannot as a nation afford to provide enough to keep the poorest out of destitution sits at all comfortably with the House. I continue to have many concerns about restricting the uprating of benefits to 1%, especially for families, children and the many in work who receive benefits. As others have said, I hope that the Government will continue to reflect carefully on the direction of the Bill, and I look forward to their response on Report. In the mean time, I beg leave to withdraw the amendment.
Amendment 4 withdrawn.
Amendment 5 not moved.
6: Clause 1, page 2, line 2, at end insert—
“( ) Subsection (1) does not apply in relation to a tax year if, on the review in that tax year under section 150(1) of the Social Security Administration Act 1992, the Secretary of State determines that the general level of prices, measured by the Consumer Price Index, for Great Britain has increased by 3% or more over the period under review.”
My Lords, it is a pleasure to move Amendment 6, standing in my name and that of my good friend, the noble Baroness, Lady Lister of Burtersett. This is a probing amendment. It is something about which I feel very strongly. It is a modest proposal that does not seek to disrupt the certainty of which my noble friend made so much earlier in the course of these important debates. The amendment simply disapplies the 1% uprating in Clauses 1 and 2 in the event of inflation reaching 3% in 2014-15. In those circumstances, we would revert to the default position of the annual uprating mechanisms that we all know and love. We would achieve the savings without exposing clients on benefits in future to the risks of inflation above and beyond the government estimates on which the savings will be made.
It is important to remember that the Bill deals with two years of annual uprating. However, we must factor in to the totality of the situation we face the already accepted £505 million that the Autumn Statement estimated that the 1% uprating would yield in this current year. I am sure that we are all looking forward to the uprating statement later in the week. In addition, the saving from the 1% uprating of local housing allowance is being dealt with through separate legislation. Both these reductions have already been made for the current year, 2013-14. We must not forget the reductions this year, in addition to those of the two years for which the Bill provides.
What will the Government do if the OBR estimates are too low? We know that the Budget Statement is a few weeks away. No doubt the Office for Budget Responsibility will discharge its duty to make available to the Chancellor, and subsequently to the rest of us, its best evidence and estimates about the inflationary risks that we face. However, we all understand that the Bill is based on the CPI and inflation forecast of the OBR, which at the moment stands at 2.6% in September this year, to be followed by 2.2% in September 2014. Those are the estimates on which the savings of £1.2 billion in 2014-15 and £1.9 billion in 2015-16 are posited.
My colleagues have been as concerned as I have been over the past few days. I am no economist but I am now more nervous about inflationary pressures increasing. The Governor of the Bank of England designate, Mr Mark Carney, has already signalled that he might take a different view and so the strategy may change. If he goes for growth—I hope he will consider that seriously because it is an element of economic policy that we need to explore in the immediate future—it will almost certainly have inflationary consequences. The fall in the value of the pound and exchange rate concerns will all increase prices. I am a well known pessimist—I am rarely disappointed—and I think that things will get worse before they get better. Food and fuel prices, and rents in certain parts of the United Kingdom, particularly in London, will certainly increase. To be confident that the figures of 2.6% in September 2013 and 2.2% in September 2014 are going to stick is not a safe basis on which to establish this policy.
As I said at Second Reading, the way the Bill is contrived at the moment is a one-way bet for the Chancellor because he locks in his savings but banks everything else if inflation goes beyond 2.2% and 2.6%. I do not think that is fair. It produces government certainty but, sure as anything, it will produce uncertainty for the benefit claimants in 2014-15 and 2015-16 if inflation breaches the OBR’s estimates. The Government need a plan B to deal with the increasing risk that the price that will be paid by benefit cuts in future will be higher than the Government really need.
The value of the lost purchasing power of these benefits is very sensitive to inflationary increases and I asked the Library to look at what some of these measures would mean. It is difficult to make sense of tables in a speech because it is hard to speak in tables but if the OBR estimates for 2014 and 2015 increase by 1%, the savings will not be £1.1 billion and £1.9 billion but £1.8 billion and £3.3 billion. A 1% increase on the OBR estimates would change the cut in the value of the benefits from 4% to 6%. The next line in the table tells me that if the OBR estimates are underestimated by 2%—not 1%—in 2014 and 2015, the savings to the Chancellor will be £2.5 billion and £4.7 billion. That is a cut in the real value of benefits of 8%. I could go on—and, rather obviously, it would get worse—but we can all pay our money and take our choice about what the inflation rate will be. I have got a table, which is freely available, which shows its effect on the cuts in benefits.
There is no certainty of any kind about where inflation will come to rest in September 2014 and September 2015 and there is nothing in the Bill, as it stands, that gives any protection whatever to benefit claimants. For me, that risk is far too great. The purpose of the amendment is to try to get on the record—I will look at it very closely—the Government’s suggestions about what will happen if the OBR estimates are underestimates. I look forward to hearing from the Minister about that.
I was encouraged to receive support from a rather surprising direction. In Committee in the Commons, a Mr John Redwood—of whom noble Lords may have heard—argued that,
“every action should be taken to get inflation down. If inflation suddenly took off, this would become a much tougher and crueller policy than Ministers have in mind”.—[Official Report, Commons, 21/1/13; col. 66.]
I agree with Mr John Redwood.
My Lords, I am pleased to be able to support the noble Lord, Lord Kirkwood of Kirkhope, who, given his stance on these issues, has to be considered a noble friend. I am grateful to him for tabling the amendment, which I regard very much as a bottom line amendment as he put it, a modest amendment. Support for it does not in any way imply acceptance of an uprating of up to 2% less than inflation, which would still happen even if the amendment was passed. Citizens Advice has calculated various scenarios assuming 2.2% inflation and taking account of any gains from the rise in the tax threshold, regularly waved as a fig leaf by Ministers. These show that for some families, in or out of work, the net loss could be as high as around £13 a week by April 2015. This is an enormous sum to lose for someone on a low income. The amendment would not prevent these losses if inflation is less than 3%. It is a damage limitation exercise designed to ensure that benefit and tax credit recipients are not required to bear an even greater burden should prices rise by 3% or more.
I, too, was going to quote the right honourable John Redwood MP—perhaps an even stranger bedfellow. As he said, it is a tough and cruel policy—and it is. He said that if inflation did go up by more than expected it would be extremely difficult. It will be extremely difficult for those affected. Inevitably, I shall be making some of the arguments that the noble Lord, Lord Kirkwood, made in his powerful opening speech. I hope that this will be to reinforce rather than simply to repeat.
The Bank of England has predicted that inflation could peak at 3.2% in the second half of this year. Given that the 2014-15 uprating will be based on the previous September’s CPI rate—that is, the rate in the second half of this year—this could mean an increase in benefits and tax credits 2.2% below the actual inflation rate rather than the 1.2% below inflation upon which the impact assessment is based. As the noble Lord, Lord Kirkwood, said, given that the incoming Governor of the Bank of England is making noises about possibly easing inflation targets and the loss of the AAA rating’s impact on import prices, it is quite possible that the 2% inflation rate predicted as the basis of the 2015-16 uprating could also be an underestimate. Indeed, many economic commentators are talking about inflation remaining in excess of 2% for at least the next two years.
A more relaxed inflation policy may well make sense in terms of stimulating the economy, but we should not leave the poorest members of the community to bear the burden—hence this amendment. My colleague, Donald Hirsch of the Centre for Research in Social Policy at Loughborough University, has calculated the likely impact of the Bill on a two-earner couple with two children on combined low earnings of £20,000 a year and in receipt of child tax credit and child benefit. Over the next three years, if inflation is on target at around 2%, they will lose just under £300 a year in real terms. To repeat the point, that is a cut. If it runs at 3% a year over the period, they will lose as much as £500 a year.
When we talk about inflation rates with reference to benefit upratings, we must remember two things. First, the switch from the RPI to the CPI is already expected to significantly depress benefit rates over the long term. The House of Commons Library cites the OBR’s long-term assumption that the annual increase in the RPI will be 1.4% more than the CPI. The Library calculates that such a difference will result in benefits being worth, after 10 years, 86% of the amount they would have been had they continued to be uprated by the RPI. That is quite a big difference. Secondly, even the RPI does not provide an accurate measure of the impact of price rises on low-income recipients of social security benefits and tax credits at a time when the prices of the essentials upon which they spend a disproportionate share of their budget are rising faster than prices generally. Recent work by the IFS shows that the general trend in recent years has been for higher than average CPI inflation rates for those on low incomes. Again, Donald Hirsch has calculated the increase in the cost of a minimum basket of necessary goods and services between 2001 and 2011. This shows that someone whose benefits were uprated only by the CPI during that period would have a shortfall of around 11% as opposed to if they had been uprated by the cost of the minimum basket. He warns that,
“there is every reason to believe that similar trends, in which the cost of a minimum budget rises faster than general inflation, will continue in the future”.
Analysis of the global influence on prices suggests that a long-term increase in commodity prices will have a knock-on effect on essentials such as food, fuel and clothing, and could mean that someone on basic benefits in 2020 would be at least 20% worse off relative to the minimum requirements in 2000—and that is before taking account of the long-term effect of three years of legislated cuts in the real value of these benefits.
It is not surprising that the Office for National Statistics reported in December that spending is falling fastest among the poorest, with an average reduction of 9% on the previous year among the bottom 10%. A number of noble Lords argued at Second Reading and earlier today that it does not make economic sense from the perspective of stimulating growth to depress demand in this way among a group with a greater propensity to spend than to save.
In the Second Reading debate, the Minister responded to the concerns raised by a number of noble Lords about what will happen if inflation soars. I guess he was trying to be reassuring when he said:
“We will continue to monitor the rate of inflation closely … and the impact that it has on the cost of living for families. This will continue to be a key consideration for this Government’s policies in the future”.—[Official Report, 11/2/13; col. 553.]
If I were, say, the parent of a young disabled child and had little prospect of getting a job by 2016, I would not take much comfort from that assurance. I would want to know what the Government will do if their monitoring shows that inflation is on the rise and is having a highly damaging impact on the cost of living for low income families. The noble Lord, Lord Kirkwood, asked a very direct question: what will the Government do? I do not know whether the noble Lord who is to reply can give a more precise answer than simply that the Government will monitor the situation. In other words, I would want an element of certainty, which this amendment seeks to provide.
The need to provide certainty was a theme of the remarks from the Government Front Bench at Second Reading and has already been emphasised during this debate more times than any of us care to say. The point has already been made, but as the noble Baroness said, she will continue to repeat the point about certainty and we will continue to repeat our point about certainty. The Minister was concerned only about certainty for taxpayers and the markets and said nothing about certainty for those affected by the Bill. But they too are taxpayers, even if not all of them are direct tax payers.
The Minister said:
“We believe it is only right that we set out our plans in advance and give as much certainty as possible”.—[Official Report, 11/2/13; col. 553.]
However, as other noble Lords have said, in the face of the very real possibility that prices could rise by more than the anticipated 2% or so during the uprating periods covered by this Bill, the application of an arbitrary 1% cap, regardless of the actual rate of CPI inflation, provides total uncertainty for people living in poverty who will be affected by this legislation. That is a point that we have to repeat over and over again. At the very minimum, I believe that we have a responsibility to support the noble Lord, Lord Kirkwood, in order to inject a modicum of genuine certainty for those affected and a modicum of justice.
My Lords, we should be grateful to the noble Lord, Lord Kirkwood, and my noble friend Lady Lister for this amendment and the manner in which they have spoken to it. I start by reiterating that obviously our overall objective is to get rid of the 1% uprating cap throughout the Bill. Obviously, if we were successful, the protection that both speakers are seeking here would be unnecessary, but if we are not able to do that, we have to consider a range of mitigations to these cuts. The aspect identified by the noble Lord, Lord Kirkwood—the bearing of inflation risks much in excess of OBR forecasts—is certainly one that should concern us all. As it is, on the basis of the OBR forecast, by 2015-16 the 1% uprating will imply a real cut of some 4%. Depending on what happens to inflation, that real cut could be much higher. We have heard a range of figures from both speakers that could flow from that.
We need to recognise that these real cuts lower the base for whatever the uprating may be for the future. Studies point to the rate of inflation for what might be termed as essential items being higher than the overall rate, with essentials for this purpose including such items as food, heating, transport, fares and water charges. These are costs which are largely inescapable for low income households. The briefing we have had from USDAW records electricity prices rising by 3.9% and gas by 5.2% up to December 2012, with the poorest 10% of households spending 17% of their income on food, which rose by 3.8% in the period to December. As it stands, this Bill places the whole of the inflation risk on benefit and tax credit recipients, irrespective of the size of the risk. However, if inflation is less than 1% the Government can take the benefit of that and, if they so choose, uprate by less than 1%.
It was the noble Lord, Lord Kirkwood, and his noble friend Lord German who demanded of the Government at Second Reading that there should be no further cuts beyond those set out in the Bill. Of course they got a dusty answer from the Minister, but the problem is that we do not know the level of the real cuts which flow from this Bill because we do not know the rate of inflation. The point made by my noble friend Lady Lister is that inserting an upper rate of 3% should not be taken to imply that real cuts up to this level are acceptable, but that automatic cuts above that level are certainly not.
I hope that the noble Lord will not press his amendment at this stage—I think he said it was probing in nature—because we believe that the right course of action is to eliminate the 1% cap in its entirety. But if we are unable to do that on Report, the type of backstop being sought by this amendment is something which deserves our support—subject to only one exception, which is that the Minister can give assurances about how poor people are to be protected from inflation, a phenomenon over which they themselves have absolutely no control.
My Lords, the effect of Amendment 6 would be that if inflation as measured by the September CPI was to rise to 3% or above in 2014-15 or 2015-16, Clause 1 would not apply. Amendment 10 would do the same for Clause 2.
As I set out earlier today, a key purpose of the Bill is to deliver clear and credible plans for our public finances. It is only through having these plans that we can maintain confidence and keep interest rates at near-record low levels. We have clearly stated our intentions on uprating policy for the next three years, but the plans for 2014-15 and 2015-16 are made possible only by this Bill. Adding conditions to the Bill would remove that certainty and weaken the credibility of our plan to reduce public spending and tackle the deficit.
The Autumn Statement operating decisions were taken on the basis of the Office for Budget Responsibility’s CPI forecast. As the noble Lord, Lord Kirkwood, explained, the OBR does not forecast inflation to reach 3%. The CPI forecasts for the purpose of uprating in 2014-15 and 2015-16 are 2.6% and 2.2%. The Bank of England’s Monetary Policy Committee is committed to maintaining price stability, which is defined by the Government as an inflation target of 2% as measured by the 12-month increase in the consumer prices index. Inflation is forecast by the MPC and the OBR to be above the 2% target in the near term but is forecast to fall back towards the target in the medium term. The inflation target is not set by the Governor of the Bank of England. The inflation target is set under the terms of the Bank of England Act 1997 on an annual basis by the Chancellor, and that will continue to be the case whoever the Governor of the Bank of England is.
As I said at Second Reading, and as the noble Baroness, Lady Lister, helpfully reminded me, these are forecasts and targets. External factors and unforeseen events can produce a different outcome—on the upside or the downside. Nobody can say with absolute certainty what inflation is going to be two years from now.
My Lords, economists say all kinds of things. For every economist who says one thing, I guarantee that I can find you an economist who says the other thing. There will be a new inflation forecast from the OBR at the time of the Budget. It would be completely inappropriate for me to speculate on what that might say and I am certainly not going to do so today.
As I said at Second Reading—and I repeat—we will continue to monitor closely the rate of inflation and its impact on the cost of living for families and the wider economy, as we always do. Again, as I said at Second Reading, the Government have taken action in response to the changes in the cost of living, including cancelling the January fuel price rise, providing further funding for local authorities to freeze council tax and, of course, for virtually everybody in work, implementing the largest ever increase in the personal allowance in April 2013.
The Government believe that what really matters to families is the impact of our policies as a whole and this will continue to be a key consideration for our policies in the future. However, that does not mean that we believe that we should add conditions to the Bill, and I am certainly not going to agree to that this evening. People have seen very significant restraint in their pay across the private and public sectors without the comfort of a safeguard against increases in inflation. Noble Lords have said a lot about certainty today. The truth is that no one has certainty, whether they are in or out of work, about their future real income. As noble Lords know, many people in the public and private sectors have not been getting pay increases linked to inflation and have been falling behind in real terms. This is exemplified by the difficult decision we took to freeze public sector pay at a time when inflation was rising to 5.2%. It is also borne out by the fact that, according to the latest figures, over the past year average earnings have risen by only 1.3%—not very different from the increase that is being proposed in the Bill. This means that on the best available forecasts—those produced by the OBR in November last year—even with the effects of this Bill, by the end of the financial year 2015-16, out-of-work benefits will still have risen faster since the start of the financial crisis than if they had been linked to average earnings, which many noble Lords are concerned about.
It is vital that we set out clear and credible plans to reduce welfare spending, tackle the deficit and secure the economic recovery. Adding conditions to the vital savings delivered by this Bill would remove that certainty.
My Lords, I am very grateful to my noble friend. These are very difficult issues. I do not think that his response takes us any further forward from the Government’s position at Second Reading. I hope that he will do me the favour of reflecting carefully on what he has heard today. I am grateful to my noble friend Lady Lister for her wise counsel and support, as always.
I am seriously interested in this issue. I think it is a modest proposal. I will go away and think carefully about what my noble friend has said today but we may have to return to this at later stages of the Bill. On that basis, I beg leave to withdraw the amendment.
Amendment 6 withdrawn.
Clause 1 agreed.
7: After Clause 1, insert the following new Clause—
“Review of housing welfare benefits
(1) The Secretary of State must undertake a review of the current relationship between the amounts of housing welfare benefits in each local authority area and market rents in the same area during the relevant period.
(2) The relevant period in subsection (1) shall be each period of twelve months starting on 1 April 2013 and ending on 31 March 2016.
(3) A review under subsection (1) shall include an analysis of the effect of the levels of housing welfare benefits on the amount of private sector housing which is currently affordable by those in receipt of or entitled to such benefits.
(4) The Secretary of State shall cause to be published at twelve monthly intervals starting on 31 March 2014 a report of the evidence and conclusions of each review undertaken under subsection (1).
(5) The Secretary of State shall publish a response to each report under subsection (4) within three months of its due date, and shall take steps to amend the method used to uprate housing welfare benefits if there is shown to be a significant divergence between rent levels in the private rented sector and housing welfare benefits.
(6) In this section “housing welfare benefits” means housing benefit in the form of the local housing allowance or (as the case may be) the housing component of universal credit and “significant divergence” within the meaning of subsection (5) is to be defined in regulations.”
My Lords, as others have said, this is a modest amendment, so modest that I hope it is not only going to be acceptable to the Government but it might even be welcomed by them—you never know—as it only specifies how the firm undertaking given on 14 December 2011 by the noble Lord, Lord Freud, on Report of the Welfare Reform Bill will be followed through.
The noble Lord, Lord Freud, agreed:
“If it then becomes apparent that local allowance rates”—
that is, private sector HB—
“and rents are out of step, they can be reconsidered”.—[Official Report, 14/12/11; col. 1324.]
After I pressed him, he agreed to,
“change the word from ‘can’ to ‘will’”.—[Official Report, 14/12/11; col. 1325.]
So the substance of this amendment has already been agreed. This amendment is merely about process. The commitment made by the noble Lord, Lord Freud, needs to be embedded in primary legislation with follow-up regs so that we can have an agreed timetable and we can all enjoy what the Minister referred to as the certainty that would follow—certainty for the markets, should they be so interested, for the public, for the recipients and, above all, of course, for Parliament.
The noble Lord, Lord Newby, and the noble Baroness, Lady Stowell, did not have the considerable and extended pleasure of being active in the Welfare Reform Bill—how wise of them—so it might be helpful to them and the House if I retrace our steps a little. Why, first in Committee and then on Report, did we press for this review, which the noble Lord, Lord Freud, agreed to? The noble Lord, Lord Best, had already persuaded the noble Lord, Lord Freud, of the need for a high-powered independent review of the full housing implications of the Welfare Reform Bill for families. I pay tribute to the noble Lord, Lord Best, for persuading the Minister, and to the noble Lord, Lord Freud, for the open-minded, evidence-based way he responded, which was to agree to the review.
None the less, a partial and particular problem seemed to many of us to persist: the connection of the private rented sector—PRS—rents and local housing allowance; that is, LHA. Why? It is clear that we have three housing tenures—owner-occupation, PRS and social housing—but we have only one housing market and that housing market works effectively and efficiently only if there is a rough match between supply and demand, which there is not. We can all see that the housing market is currently in crisis.
Burdened with student debt and unable to build a deposit for owner-occupation while and because they are paying very high rents in the private rented sector, people in their 20s are now living in that sector not for five years but for 15. It is no longer tenure of transit but a permanent tenure of long stay. Rather like in the 19th century, when people consumed more potatoes whenever their price went up, as more people unable to afford to buy remain in the private rented sector, the more they push up demand and push up rents—which absorb more of their income and make it impossible for them to afford a deposit, move out and buy. So the higher the rent, the longer you stay in the private rented sector.
The result is that we are building fewer than 100,000 houses this year—the lowest number for 30 years—at a huge cost both to those needing homes and to those needing construction-related jobs. We need 250,000 houses—two and a half times the number being built. New households are forming three times faster than new homes are being provided, so the existing stock, especially in the PRS, soars in price. Those seeking to move out and up into an occupation cannot do so; those seeking to move out and sideways into social housing cannot do so either as local authorities and housing associations have seen their building programmes devastated—as in my housing association, in which I declare an interest as its chair.
An increased number of prospective tenants entering the PRS push up their rents as a result. This has a double whammy on the LHA bill—higher rents, pushed up by the greater number of those who cannot buy, while those same higher rents and reduced access to social housing increase the housing benefit bill for the neediest. Just at the point when government, understandably, wants to bear down on HB costs, it finds its efforts destroyed by the shortage of housing supply in the market. I sympathise, but the Government’s folly lies in their response. Housing, like potatoes, is not a discretionary item—its consumption cannot be reduced except by illegal overcrowding in illegal slums—yet it is being treated by government as though it were rather like going to the cinema. People cannot choose not to have any housing unless they sleep rough or in cars or on cathedral doorsteps. They must live somewhere and must pay for it. The Government, instead of seeking to increase the supply of housing substantially—which is the only answer apart, possibly, from rent control—have chosen to drive down the HB bill by fixing it to below average rents.
Until now, HB has always been tied to real, actual rents, precisely because rents vary from place to place and by type of property. Local housing allowance was in each area placed at 50% of the median local rent and adjusted monthly—that is how sensitive it was to local rent levels—so that half the houses or properties in the private rented sector should be available and affordable to a tenant on HB. The Government have now brought that 50% figure down to 30%—that is, less than a third of properties will now be affordable—believing without any evidence, and we have pressed the Minister on that on many occasions, that this would press down HB and rents would fall. They have done so because they seem to think that it is a tenants’ market. They have no evidence for that, understandably, because the evidence does not exist, and because it has not been a tenants’ market—it is not and it will not be. If housing-benefit tenants dominated the private rented sector then we would have seen rents begin to fall during the past year. But they have not, and they do not, because tenants on HB are only 20% of the PRS, so they do not have the leverage that government attributes to them. Tenants are now being punished for the fallacies, failures and folly of government policy. Do you remember those notices in landlords’ windows: “No Irish, no blacks, no dogs, no DSS”? I do. Well, that is reappearing. According to the National Landlords Association, nine in 10 private landlords say that they are reluctant to accept HB tenants because they do not have to. With five to eight tenants after every flat, it is a landlords’ market, not a tenants’ market, which is why cutting HB will not do anything to help drive down the bill.
By tying HB to 30% instead of the 50% median, all government is doing is subsidising the landlords of the least salubrious, most squalid property. However, HB tenants will now, Lord of the Flies style, compete savagely to occupy that property. Complain and you are out.
That is bad enough, but we have a second whammy occurring. Not only is the proportion of PRS property available to HB tenants being nearly halved, but HB will no longer rise even sufficiently to meet their needs. HB will in future be tied to inflation—this year, CPI—and not as in the past to what is happening to rents. For the first time ever, in other words, HB is being detached from what is happening to real rents in the market, whether at 50% or 30%. In the past decade, however, PRS rents have risen in real terms by more than 11%. As rents in London are rising by 7% a year and by 3.4% elsewhere, and as CPI is currently running at 2.7%, then HB, which is supposed to cover 30% of available properties, will instead cover only 20% in about five years and perhaps 10% or less in 10 years. Shelter estimates that in a third of the country the private rented sector will be inaccessible to all would-be tenants on HB. A third of the country will become a no-go area for tenants on housing benefit.
It gets worse. Local housing allowance will be uprated by CPI this year—as the Minister said, the Bill does not cover it this year—but thereafter, for the next two years, it will be uprated under the Bill by only 1%. London rents are rising by 7%. The Government’s own impact analysis expects rents to rise overall by 4% while the benefits to fund it are rising by only 1%, and these are benefits fixed to only 30% of rent levels.
The result of this double whammy is an increase in the number of people needing housing benefit as rents soar and an increase in the number of people finding that even the housing benefit that they receive will not cover the ever smaller proportion of properties that they can access to rent. Rents will be too high, housing benefit too low and landlords too reluctant. What is the result? Either tenants will seek to make up the difference out of their benefit income, thus increasing severe child poverty, or they will not. If they do not, they may face eviction and end up homeless. If they have children, they may ultimately end up in bed and breakfast before—with the lack of available social housing—probably being recycled into the private rented sector for the same sorry cycle to be repeated another year down the line. As all the housing dominos fall over, misery cascades down the tenures, and the Government are choosing for this to happen because it is a policy choice—not a necessity but a policy choice.
Homelessness is already on the rise, having increased by 22% in the past two years, and so is rough sleeping, which is up 31% in the past two years. All this is happening before the indecent bedroom tax takes effect for some of the sorry occupants of the private rented sector. The Government may tell us that a third of the expected savings from all this will be recycled to help those areas with the highest rents, and that is welcome. However, as with the discretionary housing allowance, they will end up trying to cover gaps and holes in provision which I estimate will be five or 10 times larger than can be covered. Hence I offer this modest amendment.
The noble Lord, Lord Freud, accepted that that there could be a problem, though he argued that he expected the policy to work. However, he was open-minded enough to agree that there should and would be a review of what was happening to market rents and the adequacy or otherwise of local housing allowance to ensure safe and secure housing for those in need.
If rents and housing benefit diverge significantly, the Government must change the method of operating. That was the policy intent, and that was what the noble Lord, Lord Freud, accepted. I ask the Minister not whether the Government agree with the policy—they have already agreed the policy intent of this amendment—but how their delivery of the commitment of the noble Lord, Lord Freud, is to be secured. I beg to move.
My Lords, I shall speak to Amendment 12A, which entirely supports Amendment 7, so eloquently moved by the noble Baroness. In fact, I think that I prefer her speech to mine. However, my amendment has a slightly different take on the same set of issues, as it has been prepared by the Residential Landlords Association, which represents its member landlords. I have no interest to declare as a member of any landlords’ association, but I draw attention to other housing interests in the register.
It is important to note that the amendment’s call for a review of the impact of capping rent increases in local housing allowances at 1% next year, rather than at the consumer prices index level, comes from the landlord side as well as from those excellent bodies Shelter, Crisis and the others representing tenants. If the case made from the perspective of tenants does not win the argument, perhaps the points made by the landlord representatives will prove convincing.
Why is there a need for a special review of how rent increases in the private rented sector in comparison with increases in help with rent from local housing allowance are likely to work out in the years ahead? I suggest that there are two distinct reasons why the capping of local housing allowance at 1% per annum irrespective of levels of real rent increases in the marketplace is critical. First, the local housing allowance can represent half or even more of the total benefits received by those out of work and can represent most of the support which many of those in low-paid jobs receive from the state. That means that there are huge repercussions for tenants where a gap opens up between the actual rent that must be paid and the local housing allowance received to cover it. Cutting housing support means the tenant finding the money to meet the shortfall on the rent out of income intended for food, heating and other essentials.
High housing costs greatly increase the level of child poverty—the issue of concern to my noble friend Lady Howe. Department for Work and Pensions statistics analysed by the Joseph Rowntree Foundation this month show the child poverty rate in England at 19% before housing costs are factored in, but at 28% afterwards. Where housing costs are lower, that huge impact does not show up. In Scotland, for example, the child poverty rate is the same as for England excluding housing costs, at 19%. It rises to 21% when housing costs are taken into account, far short of the 28% figure for England because of England’s high housing costs. Help with housing therefore makes a very real difference to the number of households in relative poverty.
Not providing enough money to pay the rent for those who rely on income from benefits simply means a cut to the other benefits that they receive. For tenants in the private rented sector, the reduction in living standards in real terms resulting from the Bill could well be doubled: first, from the gap in direct help with income between 1% and whatever inflation turns out to be and, secondly, from the gap in housing help between 1% and whatever rent increases over the next three years turn out to be.
Secondly, there are consequences where support for housing costs is cut not only for those receiving benefits but for the housing market—the availability of accommodation. Obviously, it affects the attitude of landlords towards providing accommodation for those on modest incomes if they are subject to tough rent controls. In most parts of the UK, there are plenty of other people desperately keen to find a rented home—students, mobile single people who share, and, as we know from excellent new research by the Building and Social Housing Foundation, increasing numbers of working families with young children who would have bought a home in times past but now cannot afford the deposit and mortgage costs. The acute housing shortages in so many parts of England mean that landlords are most unlikely to reduce rents to assist those in receipt of local housing allowance. Rather, as the Residential Landlords Association survey cited by the noble Baroness, Lady Hollis, shows, landlords will avoid lettings where LHA rent controls could apply, and will go for lettings on the open market.
Gradually squeezing out that part of the rented sector puts more pressure on the social housing sector—housing associations and councils. Of course, that stock was diminished by right-to-buy sales of council housing. The building of social housing in the past 30 years has been at one-quarter of the level of the preceding 70 years. Now those landlords have massive waiting lists. There are consequences for the taxpayer if private landlords do not house lower-income households: the cost to local authorities of stacking families in temporary accommodation—hostels and bed and breakfast hotels. One London borough now has 2,320 families in temporary accommodation. In 2010, the figure was 610. That is an increase of more than 350% in less than three years, and expenditure will escalate wildly if we have to return to using those temporary solutions, including bed and breakfast hotels, at costs far higher than for private rented sector renting. I do not need to add that the social consequences for families of homelessness and having no fixed abode are horrendous.
As from April 2012, a cap on rent increases at the consumer prices index level was introduced in place of using the retail prices index or, indeed, the increase applicable in the wider market. That change came in combination with other restrictions on rents eligible for the local housing allowance. The noble Lord, Lord Freud, explained that the Government’s hope was that landlords would set rents that reflected those new constraints, but he made clear that the cap on rent increases at CPI levels would be for just two years initially and agreed, as the noble Baroness, Lady Hollis, explained, to review the position at that point to assess any impact on the rental market.
Sadly, although we are less than one year into the new regime, it is clear that the measures are not driving down rents. Rents have been rising in most areas by more than RPI inflation, despite the tough downward pressure on rents through LHA caps. It seems extremely unlikely that the Bill’s extension of the controls—not just to extend the limitation of increases to CPI levels beyond two years but to enhance the squeeze by the 1% limit, probably well under half the likely CPI increases—for three years makes a requirement for a thoroughgoing review much more significant.
The amendment, echoing the sentiments expressed by the noble Baroness, Lady Hollis, would ensure that that review will take place and that the Government will be encouraged thereby to act on the results. If present trends towards homelessness and, consequently, higher costs are revealed, the Government will have the mechanism to lift the 1% cap.
I have one last point. Can the Minister explain the Government’s intention in relation to the special case of London? We have been led to understand that one-third of the gains from the 1% cap on LHA payment increases are to be recycled to support the higher rent increases in the London area. We know that London rents have been increasing by twice the level of inflation—6.7% last year, for example—and excluding London from the 1% cap would ease pressures there. However, it would be more than helpful if the Minister could explain how this arrangement, which would of course make the housing position of the capital even further out of step with the rest of the country, be implemented in practice.
I am sure that we should take note when landlord groups and tenants’ groups are unanimous, and I look forward to hearing from the Minister on whether her department, not just to save tenants but to prevent further diminution in supply of accommodation, with its costly consequences, will be able to respond positively to my amendment.
My Lords, I wish to comment on the amendment, in which I find a lot to support, particularly the idea of a review. Before I do so, I owe the noble Lord, Lord McKenzie, an apology because in my earlier intervention I made a point about higher-rate tax and said that it had decreased, when of course it had increased. I apologise for impugning his tax-raising credentials. It was a low blow that was not intended. I take this opportunity to correct the record and hope that he might accept my apology.
This is an interesting amendment to consider because we are dealing with a significant crisis. There is no doubt that housing benefit itself needs to be focused on: how it has increased from roughly £11 billion, circa 1997, to a predicted £25 billion in 2015. Clearly, no one could sit in the Treasury, not have a view on that trend and not say that it needs to be looked at carefully.
My second point is that private rents have been increasing at an alarming rate when compared with the rest of the housing market. One needs to consider the increases, which, according to the National Housing Federation, have been something like 35% over the past three years. Over that same period, we have seen an 86% increase in the number of those claiming housing benefit, from 485,000 to 905,000. This is happening at a time when, outside certain sections of the London property market, house prices are actually falling. This is happening when interest rates are at historically low levels, and mortgage rates are at levels whereby 1.99%, two-year fixed rates are being offered. There are very low mortgage rates while house prices are falling, yet at the same time private rents are increasing by not only the rate of inflation but in many cases by twice the rate of inflation. It does not take a great economist—and I note that there are some in the Chamber—to work out that there might be some correlation between housing benefit and a potential inflationary effect on the private sector. I therefore understand that that is one of the issues that my noble friends would look at with some care.
I also note that one of the solutions to the problem is to ensure that there is a greater housing supply through housebuilding. This is an area on which I would pitch to my honourable friend in his pre-Budget purdah and ask him to reflect on how additional funds could be made available. I do not say that the Government have done nothing in that regard. They have put up £10 billion in guaranteed loans to try to stimulate the market, and they have introduced shared ownership schemes through FirstBuy and NewBuy to try and increase house purchase. That is an important element. We do not want, as a society and for the health of our society, to divert people into a life in private rented housing. We want to encourage people to have an ownership stake in society and to own their own home. For them to do that, there need to be enough homes coming on to the market.
There is a competition because, as people are coming on to the market and wanting to own their own home, investors who are experiencing low rates of return in other asset classes are finding, according to Rightmove, that there is a yield of 5.8% on private rented properties—the figure is 6.5% in London—which represents extraordinarily good value in the present market. Capital is therefore flowing into the buy-to-let market, rather than the build-to-buy market. There needs to be some step back from this approach and one needs to ask what is actually happening and how it all connects with changes in benefits.
We are, I assume, taking an approach whereby we believe that capping the local housing allowance and housing benefit will lead to a slowing down of the increases in rents. The noble Baroness is shaking her head, but that is the assumption. We have certainly seen how rents have increased when housing benefit and local housing allowance have increased. Perhaps we should test this out, but that is difficult because we are talking about affecting lots of very vulnerable people. However, there is a case to be looked at. Some annual or periodic review of how this is working and impacting on the housing market would be welcome, and I encourage that part of the amendment. I am delighted to note that my noble friend Lord Freud had been supportive of the idea, and I very much hope that my colleagues on the Front Bench will also be supportive.
Finally, perhaps I may take this opportunity to raise one further question about the way in which benefits are to be paid to the tenant rather than to the landlord. I know that various demonstration projects are undergoing trial in Edinburgh, Oxford, Shropshire, Southwark and Wakefield involving direct payment, and that they have some time to run, but I should be grateful if my noble friend in her response can provide some assessment of how they are going. There are some concerns that paying benefits directly to tenants, particularly when that may represent the largest component of their income, might put them in an invidious position, and some people might get into greater debt as a result. I know that such schemes are being trialled and I should be grateful for some comment from my noble friend on the Front Bench in her winding-up speech.
My Lords, this has been a good but short debate, as any debate around amendments of my noble friend Lady Hollis and the noble Lord, Lord Best, on housing would be. You cannot do better than that in your Lordships’ House. I am grateful to the noble Lord, Lord Bates, for his earlier comments. I thought that he had got it the wrong way round but was not quite sure whether I had misheard. I think that my problem is that I am not confident to challenge him; however, I am grateful for his clarification.
My noble friend and the noble Lord, Lord Best, are on the same page on this matter and we are happy to support the amendment, which calls for a review of housing welfare benefit, especially regarding the affordability of private sector housing. My noble friend and the noble Lord made a particularly powerful case in their analysis of the consequences of a growing divergence between levels of private sector rents and levels of support. We know and recognise why there is a growing divergence—the 30th percentile, the individual cap, CPI uprating, and now the proposed 1% cap. It will be made worse by direct payments when universal credit comes in. There are certainly causes of the pressure on rents, with growing numbers of households and insufficient new builds, but no evidence—indeed, quite the reverse—that the restrictions on housing support are driving rents in the opposite direction. It remains to be seen, as the noble Lord, Lord Bates, suggested, whether there will be any slowing down with the further ratcheting down of housing support.
Another consequence of the Bill is that there is a growing gap between rent levels and support. I think the noble Lord, Lord Best, made this point at Second Reading. That has to be met from income which is itself, as a result of this Bill, coming under increasing pressure because of the real-terms cuts. The amount of housing support in the private rented sector has been determined by family type and the rent distribution in the local area. In the future, the link will be with the historical levels of local rents; that seems a slightly illogical basis on which to build a sensible system. The demand of my noble friend and the noble Lord, Lord Best, for a review of the current and changing relationship between local market rents and levels for housing support is no more than a reasonable search for the data to monitor what is going on. We hope that, on the basis of the commitment that the noble Lord, Lord Freud, has already made, there will be no difficulty with this so far as the Minister is concerned.
I would like to pick up a point that the noble Lord, Lord Best, raised about the uprating for 2014-15 and 2015-16 at a maximum of 1%, which is being dealt with by orders under the Housing Act 1996. As I think has been stated, 30% of the saving under this measure, or £140 million, will be made available to help with particular pressures on affordability. The noble Lord, Lord Best, asked whether we can get some more information on that and I should be grateful if the Minister could give us some further detail. If £140 million represents 30% of the Government’s saving from this measure, I compute that the total gross saving—the total further amount being ripped out of support for housing—is something to the tune of £500 million.
I conclude by emphasising the point that has been made about what happens when there is pressure on the private rented sector and social housing, and who bears the consequences of that. There was a report in the Guardian on 18 February about the use of bed and breakfast to house homeless families beyond the legal time limit, which has risen by 800% since this Government took office. It said that,
“a third of the country’s councils”,
have unlawfully housed homeless families in bed and breakfast,
“for more than six weeks since government took office”,
“local authorities across England … spending on average up to £650 a week to keep people off the streets”.
The report went on to say:
“These emergency measures are expensive for the taxpayer. Councils are spending in some cases more than a thousand pounds a week to house people in hotels. Tory-run Wellingborough spent £1,961 in one week for a family. Lib Dem-controlled Eastleigh”—
it was written this side of Thursday—
“spent £1,932 for a family with seven children for a seven-day stay. Labour’s North East Derbyshire district council shelled out almost £700 for a week. Tory-run Dartford said it spent £616 for one week for a family of five”.
If there are consequences for the taxpayer, there will certainly be consequences for those individuals and families who have to endure bed and breakfast accommodation until we begin to get this housing policy right. The review that is requested by these amendments will be a step along the way and I would hope that the Government will fully support it and commit to delivering on it.
I thank noble Lords very much for this debate. I should say at the start that although Amendment 13 is caught in this group, as I covered quite a bit of it in the previous discussion I will not go over it again, except to say that since the noble Lord, Lord Best, referred to the personal allowance of housing benefit, it is worth me repeating this for clarity’s sake. First, eligible rent will continue to be wholly covered by housing benefit for those who continue to satisfy the income test for all income-related benefits, including housing benefit. Secondly, renters in low-paid work will still be better off than they would be on out-of-work benefits. Work will continue to pay. Although that relates to the previous discussion, I wanted to say that again because the noble Lord, Lord Best, had raised it.
I turn to Amendment 7, tabled by the noble Baroness, Lady Hollis, and Amendment 12A, tabled by the noble Lord, Lord Best. As they have explained, their amendments seek to specify how the Government should monitor and review the uprating of local housing allowance. It is probably worth my saying from the outset that, as noble Lords know, I am new to this policy area and on housing I very much bow to the long-term experience and expertise of the noble Baroness and the noble Lord. I know that they have a huge amount of knowledge in this area.
Noble Lords should be aware that the uprating of local housing allowance is not covered by this Bill. Reference has been made to that; it is made under separate secondary legislation, providing independent rent officers with a remit to set rates under specified rules. None the less, I will try to respond fully to the issues that these amendments cover. Now might be a good point for me to reconfirm a point that I made in response to the noble Baroness, Lady Hollis, about personal allowance in LHA. What I said to her in response to the previous debate is correct: the local housing allowance simply sets the local maximum for eligible rents, and calculation of housing benefit to meet that eligible rent is not part of the Bill.
Can the Minister help me on the point that she made slightly before saying that it was not covered by the Bill, et cetera? It is certainly the case, is it not, that housing benefit and local housing allowance in the forthcoming year will rise by CPI? It is not caught by the 1% figure that other benefits are but thereafter, for the following two years, it will be capped by 1%. Is the Minister saying that that will not happen, or that it will but that it will done through the route of looping it through advice or instructions to rent officers by regulations?
Absolutely; it is the second. I am not disputing the fact that it will be capped at 1% for 2014-15 and 2015-16, but that will not be done via this Bill. That is just a point of process.
As noble Lords will know, the total bill for housing benefit has doubled in cash terms over the past decade and if unreformed by 2014-15, it would cost us more than £25 billion. This is why we are taking a number of measures to reduce housing benefit expenditure, including limiting increases in the local housing allowance to 1% for two years from 2014-15, as we have just discussed. This change will make a crucial contribution to the essential deficit reduction strategy but it will do more than that. As the Government are a major player in the private rented market, it will also exert downward pressure on rents—a point made by my noble friend Lord Bates. Where rents are increasing rapidly, there should be no presumption that the taxpayer should pick up the bill.
Noble Lords referred to the need to monitor affordability of accommodation for benefit claimants during the period where the limits are in place. The noble Baroness, Lady Hollis, paid tribute to my noble friend Lord Freud and his response when this matter was discussed during the passage of the Welfare Reform Bill. I certainly agree with what she described; I also agree with his decision. That is why we have already put in place a strong monitoring and evaluation plan. I reassure noble Lords that this is in place in light of that discussion that took place during the passage of the Welfare Reform Bill. My noble friend has honoured his commitment made at that time.
The Government have introduced a number of changes to the way that local housing allowance rates are calculated, including a cap on rates.
I am sorry to interrupt the Minister again but, before she goes on, she is saying that she confirms that the noble Lord, Lord Freud, made the commitment and that that commitment is now in the process of being delivered by a current review. Is she referring to the original review that was established by the noble Lord, Lord Best, is she saying that the terms of reference of that original review have been extended or, thirdly, is she saying that there is a further review for this particular aspect in order to deliver the pledge made by the noble Lord, Lord Freud, that he would keep under review any possibility of significant divergence between market trends and housing benefit?
I hope that as I continue to respond to the debate I will answer the question that the noble Baroness has just asked.
We have commissioned a consortium, led by Ian Cole of Sheffield University, to carry out an independent review of these changes. The interim report is due to be published in spring this year and the final report in early 2014. In addition, to monitor the specific effects of LHA uprating we have put in place a process for publishing on an annual basis a comparison of local housing allowance rates and the 30th percentile of market rents.
The first annual publication of these data took place in November last year and was carried out independently by the rent officers who set LHA rates and collect the most authoritative data on market rents. The noble Baroness, Lady Hollis, asked for some evidence. The published data show that only one-quarter of LHA rates have been subject to the CPI limit and more than one in 10 rates have actually fallen in line with local rents, to answer the point that my noble friend Lord Bates raised. At this moment we are not seeing a general divergence between LHA rates and market rents.
The noble Lord, Lord Best, and the noble Baroness, Lady Hollis, referred to several different potential outcomes from the changes that we have made. A couple of things were proposed, suggested or estimated during the passage of the Welfare Reform Act, one of them being a suggestion that 42% of landlords would scale back on housing benefit tenants. The reality is that the housing benefit caseload has actually risen in London by 5% in, I think, the past year.
The noble Baroness, Lady Hollis, suggested that no properties would be available to benefit claimants. Private sector landlords are not turning away housing benefit claimants. Since April 2011, when we introduced our first reforms of the LHA, the PRS caseload, as I just said, increased, and that includes London and the south-east.
The noble Baroness also made reference to rent control and suggested that that might be the way forward. We absolutely dispute that; we say that it would not make more homes available at rents that people could afford. We experienced regulated rents in the private sector some decades ago and they shrank from 55% of households in 1939 to 8% by the late 1980s.
I was not recommending rent control. I was merely saying that if you are not going to increase the supply and rents continue to rise—and all the evidence is that they are—then that is one possibility. It is not one that I support because I would much prefer the Government increasing the supply of stock.
I think that I have just provided the noble Baroness with some evidence to show that rents are not actually increasing in light of the changes that we have made. Rents are actually coming down. We are having some success in downward pressure on rents.
We have taken care to retain some flexibility to react if problems with affordability emerge along with the need to take action should significant divergences emerge between LHA rates and market rents. We have set aside £140 million over two years from 2014-15 to help people most affected by the new 1% limit. The noble Lord, Lord Best, referred specifically to effects in London, and I can confirm that the funding that has been set aside will be there to address areas precisely such as London and the south-east. Our intention is to increase the local housing allowance rates by more than 1% in areas where rent increases are causing a shortage of affordable accommodation. Rather than specifying the details in legislation now, however, we plan to develop our approach in spring this year before making final details available in the autumn so that we can reflect the views of key stakeholders and take account of the most up-to-date evidence before making decisions.
My noble friend Lord Bates made the point that it is important to ensure that we reflect at all times that when we are talking about housing we are talking about people who are often very vulnerable; the fact that they are in this kind of housing means that we should be very conscious of the effect of our decisions. I hope that I have been able to reassure him that the measures that we are taking very much address that kind of concern, but we are committed to making savings from this measure until 2015-16. Subsequently, a future Government have the opportunity to reconsider the policy design in view of the balance between local housing allowance rates and market rents.
The noble Baroness, Lady Hollis, and my noble friend Lord Bates spoke about increasing the supply of housing. I shall respond to a few points on that. First, the Government have committed £4.5 billion, along with £15 billion of private investment, to deliver 170,000 new affordable homes over this spending review period. Almost 58,000 affordable homes were delivered last year. That is one-third more than the average delivery in the 10 years between 2000-01 and 2009-10. Secondly, the Government will provide up to £10 billion in debt guarantees to support private investment in the private rented sector and in new affordable housing. Thirdly, in last year’s Autumn Statement the Government announced a new local infrastructure fund of up to £474 million to support key projects. This includes accelerating delivery of large housing sites and enabling quicker disposal of surplus public land for new homes.
In the wider context of the changes that we are making to housing benefit, my noble friend referred to direct payments and how the trial is going in terms of its impact on claimants. I would say two things in response to that. First, these are very early days for the trial and it is too soon to give a properly informed response to that question. However, there are certainly no immediate signs of any serious problem. It is worth reminding the Committee that this change is part of the wider reforms of the welfare system where we are trying not only to help people to prepare and, for those who are out of work, return to work but to help people to take control of their own finances. While I understand the risks that people point to in making that change, we should not ignore the importance of ensuring that we give people the opportunity to have control of their own budgets. This is an important initiative.
I hope that I have addressed the points raised by the noble Baroness, Lady Hollis, on Amendment 7, and the noble Lord, Lord Best, on his Amendment 12A, and have demonstrated to all noble Lords that our existing plans show that we are ensuring that there is proper monitoring and review of the arrangements we have introduced, and that it is not necessary to include these in the Bill.
My Lords, I thank all noble Lords who have contributed to this small debate. The noble Lord, Lord Best, emphasised that housing benefit was a high-ticket item. He is right, so any percentage cuts to that benefit are highly significant in terms of the income as it affects tenant recipients. He also emphasised, and he was absolutely right to do so, the folly as well as the cruelty of sending thousands of families into higher cost temporary accommodation. I agreed with every word he said—I hope that that does not damn his speech.
I thank the noble Lord, Lord Bates, for a thoughtful contribution to the debate supporting the review. I am delighted that he agrees with the commitment of the noble Lord, Lord Freud, that such a review is desirable and necessary. Contrary to what the Minister was saying, he is right that private sector rents are alone among the housing triple tenures in rising fast. They are rising faster than inflation. That, as I tried to argue, means that it is impossible to leave that sector because by paying those higher rents you cannot afford to save for the deposit that takes you out of it. In turn, that raises rents still higher because nobody is leaving that sector but other people are trying to enter, which makes it even more impossible to leave it in the future. It becomes a vicious upward spiral in which people are trapped. The noble Lord, Lord Bates, is absolutely right that that is exactly what is happening. Poorer tenants are also faced with that higher increased pressure on rents with only housing benefit to help them cope with it, and that housing benefit is being cut three times over—first by being connected not to the 50th percentile of rents but to the 30th percentile, secondly by being capped by CPI for the forthcoming year instead of actual rent levels, and thirdly, in the subsequent two years, by a further cap of only 1%, which the Minister has confirmed to us. That means that more tenants will follow the desperately sad route that the noble Lord, Lord Best, emphasised.
As my noble friend Lord McKenzie said, quoting the Guardian article that I missed, that will mean more families with children being uprooted and spending longer periods in bed-and-breakfast accommodation. Many years ago, as a former chair of a housing committee, I saw how long it took those children, who were often traumatised by those events, to get over them. They had had to move home, move school and lose connection with their friends. At the age of seven or eight, they were reverting to bedwetting and the rest. That is what we are now going to be imposing on thousands more children because of the folly of this policy.
Finally, I come to the Minister’s comments. She emphasised that she thinks the policy is working and that according to her figures rents are already being driven down as a result. I listened carefully and I would very much like to see the evidence she has because it runs contrary to what the noble Lords, Lord Bates and Lord Best, and the National Landlords Association are saying; it runs contrary to my brief from Shelter and my experience of the housing market. It may be that the Department for Work and Pensions has a unique insight and extra special information denied to the rest of us, but it does not conform to what I know. Certainly it is the case that so far the CPI cap has applied for only something like 10 months of the current year. None the less, for the years thereafter—not next year, but two years thereafter—it is going to come down to 1%, so there is going to be an accelerating effect, a depression, on rent levels as a result of the rent benefit and housing benefit caps arising from the Government’s policy.
The Government are banking absolutely everything on the fact that by pressing and cutting down on HB, even though only 20% of those in the market have HB, you will reduce the overall level of rents and therefore tenants will not suffer. There is not a shred of evidence that I have seen or that has been offered tonight to support that contention. The Minister is gambling on the lives of children going into bed-and-breakfast accommodation in the ideological hope that 20% of those in the market can affect the rents that the other 80% will pay. They will not do it because landlords do not have to let, and they will not let, except those who have substandard accommodation that people who do not need housing benefit will avoid. That is a form of Russian roulette that none of us should be party to.
I hope that the Minister will write to me with her evidence because it does not conform to anything that I am aware of. In the light of that, I would like to reflect on what she has said and on what evidence she can send me. I will also reflect on whether what she is saying means that the Government are continuing adequately to keep under review the possible divergence that, from all the evidence we have, is already beginning to occur between rents and housing benefit. I beg leave to withdraw the amendment.
Amendment 7 withdrawn.
House resumed. Committee to begin again not before 8.55 pm.
Question for Short Debate
My Lords, what a pleasure it is to be able to introduce this debate. I shall start by saying how I got interested in anorexia and other eating disorders some while ago. It happened one Sunday when I got two newspapers—I was feeling flush at the time—and each had a colour supplement. On the front of one colour supplement there was a starving black teenager in Africa, emaciated and on the point of death, suffering from malnutrition. On the front of the other colour supplement there was a starving white teenager in the United States who looked identical in terms of her emaciated frame. It seemed to me that the dynamics of those two things must be completely different. In the first, there was a person dying from traditional starvation: not enough food to go around; in the second, there was someone dying in the middle of probably the first society in world history where there is far too much food to go around.
After that, I started looking fairly intensively at the history of anorexia and other eating disorders, especially bulimia. It is very interesting that there is a history. It goes back some way. We do not know the details, but anorexia seems to have been very uncommon historically and was mainly associated with fasting to death, especially female saints who fasted to death in pursuit of the greater glory of God. Bulimia has some analogues in history, but it was not even named until the 20th century. You can say that anorexia, bulimia and other eating disorders are essentially, in their mass form anyway, illnesses of our time. They started to spread rapidly in the 1960s and from beginnings in the industrial countries they then spread around the world.
As everyone knows, anorexia and bulimia are most frequent among teenage girls, but interestingly there is now a kind of extension through the lifecycle. There are children as young as seven who are already suffering from anorexia symptoms and there are cases of women in their 70s suffering from anorexia and bulimia combined. Male eating disorders have been called the hidden epidemic or silent epidemic. They are not out in the open to the same degree, although there is stigma associated with all forms of eating disorder. The latest stats we have on the UK suggest that one in five children in this country with a serious eating disorder is male, which is a substantial and seemingly growing proportion.
Anorexia may have a physical basis, but this cannot explain the spread of these phenomena. You find an interesting thing in some parts of the world where, in the same society, some people are starving to death from classical starvation in remote regions, and in the affluent cities people are starving from anorexia. It is a global phenomenon. This cannot be explained by physical reasons. Why did it happen?
I think that it is primarily because of the rise of supermarket culture; I do not simply mean the rise supermarkets themselves. Once you have the rise of supermarket culture, you have all forms of food available. You have to choose what to eat, and there is a sense in which everyone has to be on a diet, with a barrage of information about their bodies, their health and so forth. In the case of young women, as we know, they are also bombarded by images of what a desirable body is like. These are powerful images. We now see through the advent of the internet very young children picking up the image of the slim body as the embodiment of attractiveness. These two things come together and, like many other aspects of our culture, they develop an addictive, compulsive character. Anorexia is a compulsive cycle from which there is often no escape without specific medical and other help.
In our society we have a variety of food problems and problems with the relationship between food and the body. Therefore, anorexia and bulimia are the tip of the iceberg in terms of what has become normality. In our society, over 90% of women have been on a diet at some point in their lives. The figure for men is now over 50%. Interestingly, over 60% of women who have no history of weight problems are on a diet, which shows how extensive these characteristics are. We are dealing with a pervasive phenomenon in our society, rooted in a compulsive relationship to food. There is a sense in which, at the other end of the continuum, all of us have to wrestle with what to eat and drink in relation to our health.
Anorexia, as we know, can be treated. Bulimia can be treated but normally demands intensive treatment. About 20% of female anorexics who are diagnosed before the age of 20 die before the age of 40. It is a lethal affliction.
I ask the Minister four sets of questions. First, do the Government have a coherent policy on anorexia and eating disorders? If so, what is it? I found it difficult to locate, having been through the government websites. Do the Government recognise the connections between eating disorders and obesity? One linked factor is binge eating, which is characteristic of bulimia and some forms of obesity; all problems of the body, plainly.
Secondly, what are the Government doing about male eating disorders specifically? These still do not receive the same degree of attention as female eating disorders. One of the main agencies involved in analysing male eating disorders says:
“Nationwide, there is simply a massive deficit in programmes that specialise in men with eating disorders”.
Are the Government taking some steps to address this?
Thirdly, what is the Government’s attitude towards pro-anorexia and pro-bulimia websites? As the Minister doubtless knows, they have proliferated in recent times. They are connected with the social media whereby these ideas become propagated. Essentially, these websites argue that to be extraordinarily slim is a desirable thing, and they do so in a forceful way. The websites themselves can become addictive. There are many precepts and so forth on these websites, but I will mention just one. Supposedly, Kate Moss once said:
“Nothing tastes as good as skinny feels”.
You can see the lethal impact that that might have on a young person who is absorbed into these websites. Is there some way in which the Government can intervene to help control them and the impact they have, especially on young women and, as I have said, increasingly, young men?
Fourthly, what is the Government’s reaction to the case of Laura Willmott which has been extensively debated in newspapers this weekend? She suffered from anorexia and died recently aged 18. She was apparently making good progress under care. When she turned 18 she was treated as an adult and essentially fell through the system. A headline from one of the Sunday papers read:
“At 17 years and 364 days, she is a sick child. At 18 the NHS can watch her die”.
What is the Minister’s reaction to that?
My Lords, I express my appreciation for the noble Lord, Lord Giddens, obtaining this debate. I note that there have been a number of debates on this issue; there was a debate recently in Westminster Hall at the other end of the Building. It is something in which I have been interested for some time. It is almost 30 years since I first published a paper on anorexia nervosa. At that stage I was of course interested in the psychological aspects of things: in individual and family therapy, and cognitive behavioural therapy. The papers I was publishing were on zinc, trace elements and gastro-intestinal hormones in anorexia nervosa, trying to see if we could understand a little better this devastating disturbance and the other associated eating disorders to which the noble Lord has referred.
Of course, as the noble Lord rightly says, these disorders did not appear in the past century. In fact, the first description of the disorder was in this city by Doctor Morton in 1689. He described a patient he had treated five years earlier: a young lady who had a disorder if this kind and died after a few months. The name itself was described by William Gull in London in the late 1800s. It is not a recent phenomenon, but it has become much more pervasive.
What is really striking looking back over the past 30 and more years is how little has changed except for the prevalence of the disorder. Most of the ways we have of understanding and treating these disorders have not changed terribly much. We have not really come much closer to understanding in an evidence-based way what we are dealing with. We can see some of the resultant phenomena. I came to the conclusion with gastro-intestinal hormones, for example, that most of what we were seeing, which was not very clear anyway, was probably consequential. It is clear that when a young person’s—or even an older person’s—body weight gets down to a certain level, their capacity to judge their body image changes. They become impervious to any kind of psychological intervention. It is necessary to get their body weight up to a certain level. In the case of young women, their periods start to return and their thinking begins to change. This is not simply a psychological phenomenon. It is not simply a biological phenomenon.
As the noble Lord, Lord Giddens, has also indicated, there are also sociological aspects to this, which we can think and postulate about. I guess we do that a lot in your Lordships’ House. One of the difficulties is trying to ensure that we have research that takes us forward in understanding these things in a scientific way. That is one of the reasons why I was a little disappointed when my honourable friend Tessa Munt asked of another honourable friend, Paul Burstow, who was the Minister in February 2012, what the Government’s guidelines were for the prevention of eating disorders. What targets exist? What is the departmental budget for the prevention of eating disorders? The answer was that there are no specific targets in respect of the prevention of eating disorders. Nor has the department set aside a specific budget.
I find that disappointing because it seems clear to me that after decades, during which a good deal of research has been done, mostly in specific areas—people will take a biological approach or a psychological approach and a few perhaps even will take a sociological approach, although not very many—it is very difficult to get a multidisciplinary research project put together without substantial backing from the Government, a major foundation or whatever. That is why I am a little disappointed that resourcing does not seem to be coming forward from the department. I hope that my noble friend the Minister will be able to say that that is not true and that resourcing is available.
I am disappointed that it has not been possible to put together the kind of multidisciplinary approach to research, a bio-psycho-sociological approach, which might take us a little further forward. As the noble Lord has said, this is a difficult problem to get people out of and to understand. It has proved to be a very difficult problem on which we can make any progress at all. The figures tell us that it is getting worse.
My Lords, I, too, am grateful to the noble Lord, Lord Giddens, for introducing this topic for debate tonight. The simple definition of anorexia is a “lack or loss of appetite for food”. Too often, we hear of awful cases of anorexia nervosa. I will leave the discussion on that and on bulimia nervosa to other noble Lords. The noble Lord, Lord Alderdice, has given us a very good grounding in them.
Numerous medical conditions give rise to the loss or lack of appetite for food. I think immediately of the many people with CFS/ME who are too exhausted to chew and swallow food and must be tube fed, either nasally or by a tube connected directly to their stomach. I think, too, of young girls who have had a bad reaction to the human papilloma virus—HPV—vaccine and who suffer fatigue, feverishness and an acute loss of appetite, with the accompanying weight loss. Some other conditions, including viral infections, hormonal imbalances, neurodegenerative diseases and brain tumours, have in their initial stages been labelled as CFS/ME because they present with the extreme fatigue, pain, digestive problems and other symptoms associated with that condition.
From the reports that I have had, there are many people with genuine intolerances to foods and drugs whose symptoms are profound after eating. The symptoms, which may be diverse, are a reflection of a disturbance of the autonomic nervous system and may include nausea, vomiting, bloating, abdominal distension and diarrhoea. Because they occur after meals, these people try to ascertain which foods cause their problems and they assume a restricted diet. This can occur after, for example, gastro-intestinal infection or HPV vaccination. These people, instead of being respected, as all patients should for their observations of themselves, often find themselves castigated. They are wrongly diagnosed as being anorexic, forced into psychiatric facilities and made to eat those foods that they know have provoked their symptoms. Historically, the same fate befell people with coeliac disease until the 1940s, when researchers realised that their symptoms of diarrhoea and malabsorption were caused by wheat, which was accepted by the medical profession. Interestingly, during the war, they were given bananas instead of bread.
I am particularly concerned that young people, mostly girls, are wrongly being diagnosed with anorexia nervosa. Too frequently, their parents are accused of causing their child’s illness and care proceedings are initiated. Several youngsters have been obliged by social services to be confined in mental health units and are subjected to harsh “treatment” before their medical consultants realise that they do not have the condition. In other cases, the young person is blamed for failing to co-operate and not wanting to get well. I am sure that their prognosis would be much better if they were treated with more compassion.
The mother of one young girl wrote:
“After the HPV vaccine she lost three stones in three months. When admitted to hospital the professionals’ first concern was that she was anorexic or bulimic. I even tried to say that she normally loves her food and she actually eats more than normal. Before vaccination her attitude to food was positive. (Her worst nightmare was someone stealing the fridge). Whilst in hospital she was shadowed by a nurse 24 hours a day for seven days to check if she was really eating or making herself sick. The final conclusion was that she doesn’t suffer either from anorexia or bulimia”.
This child and her mother have now been abandoned to the nightmare of CFS/ME. She continued:
“After this diagnosis was made we were pretty much left on our own as there is no ME specialist covering our locality”.
Another mother wrote:
“After … vaccination and since becoming unwell her appetite has fluctuated massively. Some days she eats very little, other days she eats constantly. She suffers constant nausea and vomiting and has to eat what she feels will keep down, which isn’t the healthy choices she would have made. Eating disorders have been mentioned because she often vomits after eating but that is far from the truth. She still has a healthy attitude to food but her body is too broken to make it possible for her always to eat healthily”.
Another mother whose daughter suffered badly from CFS/ME wrote:
“She did not have the energy to eat food and sadly did not get the help she required. So when food is not eaten they assume she does not want to eat. They do not face the reality that she has not got the energy to eat. Therefore they put her into a psychiatric unit for eating disorders”.
I know that this young lady was discharged several months after being admitted in a worse condition than before she was admitted.
I cannot stress enough the importance of getting the diagnosis right, of listening carefully to the patient, of taking a proper history, and of ensuring that the right treatment is given early. Young lives can be ruined, family relationships destroyed and huge amounts of taxpayers’ money wasted when this is not done. I ask the noble Lord the Minister what measures are in place to ensure that these awful histories that I have been hearing for years are no longer repeated.
My Lords, the House is grateful to my noble friend Lord Giddens for bringing this desperately sad medical condition to our attention again this evening. While reliable statistics are a problem at the centre of this debate, and one that I shall return to, we understand from the National Institute for Health and Clinical Excellence that 1.6 million people in the UK are affected by an eating disorder, of which 11% are male, the vast majority being young women. Hearing and reading about the case studies of some of these young sufferers is a sobering experience. The self-loathing, hugely distorted body image and seeking after some control—any control—over their bodies, is enough to make one ashamed of the societal pressure that we have put on these mainly young people. The cycle of bingeing as a self-punishment for not losing enough weight, as they see it, is often accompanied by self-harming and, in extreme cases, a spiral into sectioning and force-feeding. Children, parents and the whole family are affected as the young person tries every device possible to starve themselves. Trust is replaced by fear and worry.
Why, we ask ourselves, should a significant proportion of our young people want to starve themselves in 21st century Britain in order to have some control over their lives? Is it the pressure put on them through advertising and the media to attain someone else’s idea of the perfect body? Is it the connections made by society between thinness, worth and value? Is bullying on the internet exacerbating the problem, and does the easy access to internet pornography reinforce a falsehood about the way young people, especially young women, should look? We should do all we can to reinforce young people’s confidence and sense of their worth. In a time of austerity, we should think once, twice and three times before applying cuts to young people’s services.
In conclusion, there is at present a lack of data detailing the number of people in the UK suffering from an eating disorder. Although the Department of Health provides hospital episode statistics, they include only those affected by eating disorders who are in-patients being given NHS treatment. Those figures leave out those being treated in the community, as out-patients and privately, and those who have not been specifically diagnosed with an eating disorder. Could the Minister ensure that the Department of Health conducts reliable surveys to provide us with accurate statistics in future? This condition can blight a young person’s life for years and years and, in extremis, kill them. We have to reinforce our work in this area and our commitment to our precious young people.
I congratulate the noble Lord, Lord Giddens, on initiating this debate. I agree with everything that has been said so far. This is an extremely important subject, which we should address more often, both in this House and in another place. In a very densely packed sentence in its College Report 170 of 2012, the Royal College of Psychiatrists said:
“Eating disorders are serious mental disorders with high levels of physical and psychological comorbidity, disability and mortality”.
It is not just a free-standing condition, in other words.
Anyone who has ever been close to a serious eating disorder knows that it can prove extremely debilitating to the whole family in which the sufferer lives. Indeed, it is an ordeal for families that can lead to permanent effects, even if the person concerned appears to recover, although there can be and sometimes is good recovery. If there is to be good recovery, it is vital that there should be early interventions, which must be the right ones—not just any intervention. In too many parts of the country, the wrong intervention is provided because the services needed for that person are simply not available. If a sufferer from anorexia needs cognitive behavioural therapy, it may damage them to give them drugs, and vice versa. It is a very subjective illness.
My perception of how the illness is treated throughout the United Kingdom is that it is very unevenly dealt with. For a number of years, I was a Member of another place for a constituency in rural Wales. Today, as then, the services available in rural Wales—in an area affected by its rurality—are far less clear and certain than in many urban areas.
In opening the debate, the noble Lord referred to the internet and I agree with him entirely about its effect. There are far too many sites on the internet that worship the slender. I am shocked, too—for I still sometimes see teenage magazines in my household—by the primacy given to thinness in magazines. These are everyday, perfectly respectable magazines, purportedly edited by responsible people. With my children, stepchildren and grandchildren, who regard me as quite a decent sort of shopper, especially if there is a credit card in my pocket, I sometimes go into well known clothing stores. Some barely have anything larger than a size 10, yet that is a very small size which probably truly fits a minority of young women in their undieting state. It seems shocking that we are not capable of addressing in a more realistic way the natural state of our young women and young men.
I also believe that there is a complete failure in outcome monitoring, as the Royal College of Psychiatrists has said. We would have more consistent services if we knew the results. We even talk about paying for prisons by results but we do not pay for psychiatric services by results. It seems to me that one way of disciplining the relevant providers of services would be to judge their results. If they do not perform properly, someone else is available to do the job. The principles applicable to child safeguarding standards, which include removing child safeguarding from local authorities in certain circumstances, should also be applied to psychiatric and psychological services, especially those affecting eating disorders.
There are some innovative ideas around which really are not all that innovative. In some respects, it is a case of returning to what happened in the past. However, I suggest to your Lordships that annual medical examinations of every schoolchild, up to and including year 11, could be introduced. Looking around the House, those examinations were certainly undergone by everybody who is here today. Very simple and rudimentary checks, such as weighing, measuring and looking at teeth and feet, tell you an awful lot about a young person, especially if the figures can be compared with those taken a year or a term ago. I do not understand why we have abandoned these rudimentary measures, apparently on the grounds of cost, when any cost-benefit analysis shows that this kind of examination saves a great deal of money further down the line.
Finally, I wish to say a word in favour of school nursing and school health services. They seem to have been abandoned in an awful lot of educational institutions, yet the rumour mill that takes children to the school nurse saves lives. I wish we could look at that more closely for the future. There is a great deal to do and we do not seem to be doing it.