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Low-income Families: Benefits Freeze

Volume 801: debated on Monday 13 January 2020


Asked by

To ask Her Majesty’s Government what assessment they have made of the impact on low-income families of the four-year freeze in working age and children’s benefits.

My Lords, the benefit freeze was designed to put welfare on a sustainable footing, incentivising work and making welfare fairer. We conducted a number of assessments at the time of the Welfare Reform and Work Act in 2016; it was estimated that 30% of households would be affected by the policy, but that no one should take a direct cash loss as a result of the freeze. We have continued to monitor the impact of our policies through publications such as the annual release on households below average income. The latest available stats show that the number of people in absolute poverty in 2017 and 2018 was lower than in 2010. The benefit freeze will come to an end in April 2020, benefiting more than 10 million people.

My Lords, welcome as the end of the freeze—as required by law—is, it will do nothing to restore the significant losses suffered by millions in poverty, which are, on average, nearly £400 this year for families with children. Those losses have contributed to increased homelessness, reliance on food banks, and general poverty and hardship. Will the Minister, who I know cares about such matters, therefore undertake to press on the Chancellor the case for an above-inflation increase as a tangible and immediate way of making good the Prime Minister’s “one nation” election pledges to level up and help those reliant on food banks with the cost of living?

I understand the points that the noble Baroness has raised—you cannot argue with them. One of the major contributing factors was that inflation was twice what we thought it was going to be. It is no excuse, but that was it. I am touched that she thinks I can influence the Chancellor; I will have a really good go and keep her posted. My door is open to talk about this further.

My Lords, over a decade ago the Joseph Rowntree Foundation proved that the tax credits approach to child poverty had run out of steam. How are this Government following the evidence on the root causes of child poverty, which include family breakdown?

My noble friend makes a point about tax credits. While I have no doubt that they did a lot of good, some of their ramifications caused difficulty, in that we had an annual rather than a monthly reconciliation, as we are trying to have under universal credit. I believe that the monthly reconciliation under universal credit, while not perfect, is much better than waiting until the end of the year. On child poverty and family breakdown, obviously there are families who have great difficulty fiscally, and we have to try to help them, but the evidence shows that helping parents to move into and remain in work is the best option for moving them out of poverty. We want to see child poverty fall and remain determined to tackle it. My door is open for further discussion on this; I will do anything I can to move things forward.

My Lords, is the Minister aware that in August 2018, two-thirds of those who had benefits cut were single parents? Single parents in the bottom 20% income bracket will have lost 25% of their 2010 income by 2021-22. Ending the benefit freeze will not restore this, and half of the total number in single- parent families are in poverty. Does the noble Baroness agree that children in single-parent families are doubly disadvantaged as a result of government policies? What plans do the Government have to end this glaring injustice and to ensure that these children get a fair deal?

Again, I understand the points that the noble Baroness makes. We can all recall incidents in our families—I can in my own; my niece is a single parent, and life is a challenge at the best of times. The benefit cap levels were put in place to try to restore some fairness to the system. Due to the election taking place, the levels were not reviewed in the last Parliament, but there remains a statutory duty to look at them, which will be done at an appropriate time.

My Lords, the benefit freeze was not a reform but a straightforward cut: it simply cuts the value of certain benefits every single year, year on year, for five years. The result is that the welfare state, the point of which is to support children and families when the parents cannot earn money, is now providing a record low level of benefits compared to average wages. The basic JSA of £73 a week is just 14% of average earnings, according to the Resolution Foundation. When Beveridge started his system, the figure was 27%. We cannot have a welfare state in which, if you find yourself unable to work, you are literally thrown on to the scrapheap and become dependent on food banks. Therefore, if the Prime Minister, as he said, believes that austerity was the wrong choice, is not the logical step to accept that, since these cuts should not have been made, they should now be made good?

I would not want to contradict the noble Baroness—I have the greatest respect for her—but I think the Prime Minister said that austerity must stop, and that it was necessary at the time. I do not want to go over all those arguments again. In the eight years following the financial crisis and leading up to the benefits freeze, jobseeker’s allowance grew by 21%, whereas median earnings grew by only 12%. We want a welfare state that works for people and enables them to have a decent way of life, but the legacy benefit system was unsustainable, and I am afraid we have taken very difficult decisions to try to balance it out and to make work pay for people. I know that the noble Baroness does not agree with me, but we now have more people in work than we have ever had—

I can answer that one too. While noble Lords will not want me to read out a shopping list of things we have done—I know that it does not go down well—I will mention three things: reducing UC debt deductions from 40% to 30%, increasing the national minimum wage and cutting income tax. I am assured by officials that that has put another £2 billion per annum into people’s pockets.

My Lords, in the coming years, the main driver in increasing child poverty will be the two-child limit. Low-income families are particularly detrimentally impacted by this. It is predicted that, by 2023-24, this policy will tip 300,000 children into poverty. What plans do Her Majesty’s Government have to stem the rising child poverty levels caused by current policies, primarily the two-child limit?

The right reverend Prelate has been absolutely consistent on the issues around this particular benefit. I was delighted that he could come to our office to talk about them; he put the case to the Minister for Welfare eloquently. We have to keep on, okay? I stand by the right reverend Prelate in doing that. We must also keep on looking at other benefits to make sure that we make life better.