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Inflation: Families

Volume 820: debated on Wednesday 16 March 2022


Asked by

To ask Her Majesty’s Government what assessment they have made of the impact of inflation on the real terms value of the benefits received by families with children.

My Lords, by convention, the September inflation figure is used to uprate benefits. Any fluctuations year on year smooth out over time. In 2022-23, we will spend an extra £2.6 billion on benefits for people of working age, following the annual uprating exercise. We are providing £12 billion this year and next to help with the cost of living. In addition, we recently announced support worth £9.1 billion to help households with rising energy costs next year.

I thank the Minister for her Answer. By now, we are aware that the cost-of-living crisis will hit every one of us, but the Joseph Rowntree Foundation, Child Poverty Action Group, Resolution Foundation and New Economics Foundation all agree that it is going to hit families with children hardest, particular those with more than two children. They will see a real-terms cut in their benefits this year. There are further warnings of inflation of over 10% for the poorest families if the Ukrainian conflict continues and there are no plans for further mitigation from the Government. In this climate, can the Minister point us to parameters that demonstrate the ongoing apparent success of the two-child limit or does she agree that now is the time simply to scrap it?

My Lords, the Government understand people’s concern about pressure on household budgets and are taking action to help. We are working closely and monitoring the situation with the Bank of England. The Government are also putting in place policies to help families and individuals to meet the rising costs of living, such as increasing the national living wage and cutting the taper rate in universal credit. I am sorry to disappoint the right reverend Prelate, but we have no plans to change the two-child policy.

My Lords, ONS research shows that many are cutting back on basics in the face of the cost of living crisis, but what about parents struggling on inadequate benefits, the real value of which is set to fall by over 4% over the coming year? Many of them are already cutting back to the bone and cannot wait for next year’s smoothing. What are they supposed to do if the Government refuse to act on the growing calls for an additional increase in benefits?

My Lords, the Government are spending £6.6 billion this year in increasing benefit rates: £2.6 billion on working-age benefits and £4 billion on pension benefits. I agree that the uprating order was only 3.1%, but we have increased other rates, as I explained to the right reverend Prelate. We will continue to monitor it and, if necessary, will look in further detail.

My Lords, the right reverend Prelate’s Question raises the problem of cash flow. When inflation is climbing, as it is now, families are lagging behind the curve. What are the Government doing to help them with this negative cash flow at present? Also, the obvious way to increase income is to progress in work, including by moving into more skilled work. What are the Government doing to fill skill vacancies?

My noble friend is absolutely correct. As I said, we are providing support of around £20 billion this financial year to help families with the cost of living. The most important thing must be to get people into work. Our expanded multimillion-pound Plan for Jobs is continuing to target tailored support so that universal credit claimants, including those already in work, can access the support they need. As my noble friend says, this includes skills development. It is really important to get people into work in the first place but also for them to progress in those jobs and earn more for their families.

My Lords, this below-inflation increase to social security is, in real terms, a disaster for the poorest and most desperate people in our society; there is no doubt at all about that. Can the Minister explain why the Government are once again attacking the poor, making them even poorer while the rich are getting richer in our country and society today?

My Lords, as I have said before, we are looking after the poor. We are investing in increasing benefits and, as we heard on 3 February, giving an energy bills rebate. We are giving £144 million of discretionary funding to local authorities and giving a council tax rebate to people in bands A to D, which is 80% of households in this country. The Government are doing everything they can and will continue to monitor the situation for people who need our help.

My Lords, the Minister talks about the importance of getting people into work, yet the maximum reimbursement for childcare has been frozen since 2005. The cost of childcare has doubled since then. Currently, in 99% of local authorities the cap does not cover a full-time place for a child under two, and in 9% of authorities it does not cover even a 25-hour part-time place. What plans do the Government have to review the reimbursement of childcare costs for parents and people on benefits?

The noble Baroness brings up an extremely important point. To get back into work, many families need good and affordable childcare. Universal credit claimants can claim up to 85% of their registered childcare costs each month, compared with 70% of those with tax credits. In England we are also giving 15 hours a week of free childcare to all three and four year-olds and to disadvantaged two year-olds, doubling to 30 hours a week for the working parents of three and four year-olds if they are claiming benefits. We have also introduced tax-free childcare and, if a universal credit claimant requires emergency help in the period before they get their first pay cheque, we have a non-refundable flexible support fund.

My Lords, inflation is a malign and silent thief that, as we have heard from all sides, hits the poorest hardest. Beyond the obvious mechanisms of raising interest rates and switching off the printing presses, there are none the less things that Ministers can do to alleviate the cost of living crisis. We can bring down food prices by lifting tariffs, we can make it easier to build homes and, not least, we can cancel the planned rise in national insurance. Does my noble friend the Minister think that there are levers that the Government could be pulling now to mitigate the impact of this terrible scourge on the poorest people?

The question my noble friend asks is probably a little above my pay grade. I will go back to the point that the Government are closely monitoring the situation with the Bank of England and will be looking at all these issues as we go forward.

My Lords, the Government’s decision to cut the universal credit uplift has left hundreds of thousands of extra children in poverty. Following Labour’s lead in reducing the taper rate to allow those on low incomes to keep more of what they earn is indeed a welcome step, but what else are the Government doing to make up for the biggest ever cut to social security, as well as tax hikes and a cost of living crisis?

My Lords, our long-term focus for all families remains on continuing to support parents into work and to progress in work. This approach is based on clear evidence of the importance of parental employment. That is where we are putting our investment. Particularly where parents are in full-time employment, it substantially reduces the risk of poverty and improves the long-term outcomes for children. In 2019-20, a child in a home where all adults were working was around six times less likely to be in absolute poverty.

My Lords, I thought the Question from the right reverend Prelate the Bishop of Durham was about the value of the benefits received by families with children, which is where the greatest need is. The Answer he got was that the Government had no plans. What are the reasons for it?

I am sorry; I did not quite understand the question. We have no plans to change the two-child policy. I will look in Hansard and, if that is the wrong answer, I will make sure the noble and right reverend Lord gets a written answer.

The Minister has told us now six times that she is monitoring the situation. That is precisely the problem. What is needed is action, not watching or observing. I well recall a Scotland-England game many years ago where the Scotland goalkeeper, Frank Haffey, monitored the ball going into his net nine times. The point is that he was supposed to stop the ball going into the net. Can the Minister get the Government to do something other than Frank Haffey-ing?

My Lords, not long ago, on 3 February, the Government did indeed do something about the cost of living when they announced significant financial support of up to £350 per household to help with energy costs, as well as the energy bills rebate and £144 million of discretionary funding to local authorities. That is action, not just monitoring; but the monitoring is important.