I beg to move, That the Bill be now read a Second time.
The cost of living challenge facing many families right now is being driven by forces beyond their control. The aftershocks of covid on global supply chains, and Putin’s invasion of Ukraine, have caused a hike in prices and a spike in bills, particularly for energy costs. As a result, household budgets are being stretched further than at any time in recent memory, so just as we did during covid, the Government are stepping up at this challenging time to help families who are feeling the strain. It is because we got the big calls right that we have the fiscal firepower to take decisive and direct action to help millions of people across the country.
Although we have always been clear that the Government cannot cover every situation or solve every problem, we are providing financial support to every household to help relieve some of the pressures that people are under, and to help them cut costs across their household expenditure. Approximately four in five households—all those living in band A to band D homes—are receiving a £150 discount on their council tax, with millions already benefitting from the money landing in their bank accounts, and all households that are domestic energy customers will get £400 towards their energy bills this autumn, in the form of a grant with nothing to repay. We are, however, principally targeting help at those who need it most, helping ease the squeeze for those on low and fixed incomes, who we know spend a higher than average proportion of their income on energy.
There is an issue with people who live in park homes—I have a few sites in my constituency—because the energy rebate does not make it through to them. Are the Government looking at innovative ways of addressing the issues faced by those individuals and households?
My understanding is that the Secretary of State for Business, Energy and Industrial Strategy, my right hon. Friend Kwasi Kwarteng, is aware of that particular channel. I am led to believe that a solution is being developed so that people will benefit from that cost even if they do not receive the money directly, because a lot of park home owners do not pay their energy bills directly. I know that my right hon. Friend is aware.
Returning to what we are doing to help people, we are providing a direct cost of living payment of £650—split into two payments of £326 and £324—to over 8 million families who already get help through means-tested benefits. This includes people on universal credit, income-based jobseeker’s allowance, income-related employment and support allowance, income support, working tax credit, child tax credit and pension credit—both guarantee and savings credit recipients. On top of that, we are providing a £150 payment for approximately 6 million people with disabilities who are on qualifying benefits, and giving 8 million pensioner households an additional £300 alongside their winter fuel payment. Combined, that is extra support of at least £1,200 this year for the majority of households that are least able to absorb rising costs, which takes our total support package to £37 billion.
I just want to check one point. At the moment, about 150,000 working-age people who receive universal credit have their benefits limited by the benefit cap. Am I right to say that these additional payments are not constrained at all by the level of the benefit cap?
Yes, that is the case. I was planning to cover that later. For the record, I will still make that point.
Our household support fund administered through local authorities in England and the money given to devolved Administrations are further avenues for people to seek help with the cost of essentials. From October, the Government are adding an additional £500 million to the fund, extending support through the winter. That equates to an additional £421 million in England and £79 million for the devolved Administrations, and that will take total funding for this UK-wide household support to £1.5 billion.
One group of people who receive universal credit and are in some difficulty are those who lose some of their universal credit because they received a universal credit advance for the first five weeks. Some 92,000 households in that situation in Wales are getting about £60 a month less, and that comes to a total of about £5 million being denied to them. I hope that the Secretary of State is prepared to reconsider her position on that. Obviously, that is not in the Bill, so she has taken a decision in the short term, but I press her to reconsider.
The hon. Gentleman is incorrect in saying that money is denied to people. The whole point of receiving an advance is that there is phasing and, instead of receiving 12 payments in a typical calendar year, 13 payments are made. We extended that recently so that people can choose whether to have 25 payments over 24 months. It is not a case of people being denied.
The Social Security (Additional Payments) Bill before the House is a short Bill of 11 clauses that gives us the powers necessary to administer payments to families on means-tested and disability benefits. As one-off new benefit payments, they will be delivered by the UK Government to eligible households right across the United Kingdom in England, Wales, Scotland and Northern Ireland. The timing of such payments will vary, starting with the first payment of £326 for DWP means-tested benefit claimants from
People not eligible in time for the first £326 payment because they were not getting a qualifying benefit in the month before the announcement may get the second £324 payment if they have a qualifying entitlement to a benefit in the month before the next eligibility date. We have deliberately not included the next eligibility date in the Bill to try not to change claimant behaviour. Instead, there is the power to set a date through regulations.
Those on qualifying disability benefits will get their £150 as a single payment from September. Where eligibility for any of these cost of living payments is found retrospectively—for example, someone who had applied for personal independence payment but not yet been awarded it—people will still receive that disability cost of living payment; it will just be at a later date.
In opening, the Secretary of State alluded to the fact that 6 million disabled people would qualify for the additional disability support payment of £150. Does she acknowledge that some disabled people—particularly those in receipt of disability living allowance, PIP or attendance allowance—who no longer qualify for the warm home discount since her Government changed the rules, will lose out? In effect, they have taken away £150 through the warm home discount, and the additional £150 really does not do anything to meet the extra costs for people who have already lost out.
The warm home discount is not relevant to the Bill, but I understand the point. It is the policy of my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy, but I do not know that the intention was—[Interruption.] I am trying to answer the hon. Lady’s question. My understanding of the policy rationale is that because PIP is not means-tested—it is not income-based—a decision on warm home discount eligibility was made to include many more households on the basis of income rather than PIP eligibility. I am sure that she will welcome the fact that we have included £150 in this legislation.
These one-off tax repayments do not count towards the benefit cap and will not affect existing benefit awards. They will provide a budget boost for millions of the lowest-income households right across the United Kingdom.
No, I will not.
This Government have supported and continue to support those most in need. I am proud of our record of lifting people out of poverty.
Anyone listening to Opposition parties could be forgiven for thinking that poverty was going up. The fact is that in 2021 there were 1.2 million fewer people in absolute poverty, before housing costs, than when we came into government in 2010. Between 2019-20 and 2020-21, every measure of poverty, whether absolute or relative, saw a reduction in poverty. In terms of statistics, on absolute poverty, our preferred measure, the number of working-age people in poverty is down by 100,000, the number of children in poverty is down by 200,000, and pensioner poverty is down by 200,000.
We know from the latest available data that for most families the best way out of poverty is through work.
I will not take any further interventions from the hon. Gentleman, because he has already intervened. I am sure that if he wants to contribute to this debate he will have put in to speak.
In 2019-20, children in households where all adults were in work were about six times less likely to be in absolute poverty than children in a household where nobody works. That is why our economic priority during the pandemic was to protect, support and create jobs through the furlough scheme and the many other measures we took as part of our plan for jobs.
The Secretary of State will of course know that her figures on absolute poverty and relative poverty are disputed by the various stakeholders who work in this field. One of the issues that is concerning people with regard to poverty is the failure to uprate benefits this year along the lines of this year’s levels of inflation. She has rightly said that pensions and benefits such as disability benefits and universal credit—and, hopefully, the minimum income guarantee and pension credit—will rise in line with inflation this September. She is coming under some pressure on that now. Can she give us a guarantee that she will not resile from that position?
The right hon. Gentleman may not be aware that I cannot make any declaration about the rises in benefits; I can only point to our policy in terms of, for example, the triple lock for pensioners. That is because I am required by law to undertake a review of the benefits once a year and I have not yet done so. I am sure that he will judge us on past performance, especially in following the regular legislation.
The unemployment rate is now below the low level we saw before the pandemic—close to the lowest since 1974—and we have more people on payrolls than ever before, but we are not resting on our laurels, particularly with a record number of vacancies in the labour market. We want people to get into work and to boost their incomes, which is why we launched the Way to Work scheme, quickly connecting claimants with employers looking to fill vacancies. Having turbo-charged jobcentres into super, almost dating, agencies in the way that they match people looking for work to people offering work, I am confident that we will achieve our target to move half a million people into jobs by the end of the month. There are hundreds of thousands more people benefiting from a pay packet, along with the prospect of a better job tomorrow and a future career.
Will the Secretary of State confirm that the payments in this Bill, to almost 25,000 of my constituents, are on top of the support that has already been put in place, with the £1,000 that families will benefit from through the taper rate, the living wage rise and the £330 that most of those in work will get through raising the national insurance threshold, meaning that tens of thousands of people in North West Durham will be better off as a result of these changes and showing that we are providing support now, just like we did during the pandemic, during the cost of living issues due to international factors such as Russia’s invasion of Ukraine?
My hon. Friend is right to point out the additional measures. I do not know exactly how many people in his constituency will be affected, but I rely on his excellent local knowledge as a great constituency MP. Absolutely—I am setting out additional measures to those that he has outlined.
The Bill will deliver one-off additional payments responding to the challenges faced by people in every part of our country over the coming months. I thank the usual channels and the House more broadly for agreeing that it can make its necessary progress today. Its provisions are intentionally straightforward and will enable a straightforward approach for claimants, with no complicated forms, no bureaucracy and nobody having to make an additional claim, as payments will automatically go into people’s bank accounts.
The actions in the Bill will boost the budgets of millions of stretched families in every part of the United Kingdom, helping them through the cost of living challenge. I commend it to the House.
Let me begin by being clear with the Secretary of State: we do not intend to divide the House. We understand that the Government need to put in place the architecture to make these arrangements swiftly. None the less, we want to put on the record a number of points, on which I hope Ministers will provide some clarity in their response to Second Reading and throughout proceedings today.
Like many Members, the message that I am hearing up and down the country could not be clearer: for many of our constituents, these are the toughest times that anyone can remember. More than a decade of underwhelming economic growth has meant that today the cost of living is skyrocketing and pay packets are failing to keep pace with inflation. By next April, wages will be worth £2,000 less in real terms than in 2020, with real pay in the UK falling at the fastest rate for 20 years, leaving household finances stretched to breaking point. Prices are up in the shops and the cost of petrol is through the roof. Energy bills are sky-high, and the lifting of the price cap later this year means that they will increase further. Families everywhere are saying, “Enough is enough!” It should be no surprise that today’s statistics show a 12% increase in those with council tax arrears.
The Secretary of State took great care to explain why she is taking action to help those in need now, and the measures are welcome as far as they go, but the House has to understand that the future is bleak: energy market expert Cornwall Insight is warning that the energy cap could rise by a further £1,000 in October; inflation is at 9.1% today, with worse on the way; the cost of living will rapidly rise further; pensioners will see the value of their pensions and savings attacked by inflation; and working families will be left desperate to protect the value of their wages from the ravages of inflation—and the edict of Ministers tells them to take a pay cut.
Ministers hope that interest rates and tax increases will dampen demand in the economy, and thereby slow economic output. Pain today and pain tomorrow is their policy to get inflation under control, even though the Office for Budget Responsibility warned, following the spring statement, that we are heading for the biggest fall in living standards since the 1950s, with more children set to be pushed into absolute poverty. Labour was clear that taking no action following the spring statement would have amounted to the wilful impoverishment of many of our constituents—a price that we never believe is worth paying. We therefore proposed a windfall tax on North sea gas and oil producers to help families and pensioners, and we are pleased that after some months the Government finally listened to our representations.
We recognise the extra support that the Government are allocating today, but in reality this legislation—important though it is—is a short-term sticking plaster because of a series of long-term policy failures to grow our economy sufficiently, and to address the longer-term problems and hardship that have been growing over the last 10 years due to attacks on social security and unfair pay settlements.
The hon. Gentleman anticipates a point I am going to make, which is why now is a good moment to turn to the specifics of the Bill. I want to raise a number of points that I hope Treasury Benchers will address throughout proceedings this afternoon, particularly regarding how the Bill impacts on four groups: the self-employed on universal credit; disabled people and carers; pensioners; and larger families.
First, on the self-employed who claim universal credit, the minimum income floor will reduce universal credit payments for some self-employed people to zero. Could the Minister clarify, in responding to the debate, whether self-employed universal credit claimants whose UC payments are zero purely because of the minimum income floor will be entitled to these cost of living payments?
Secondly, on how this impacts on disabled people, the disability charity Sense has warned today of the increasing numbers of disabled people pushed into debt as a result of the rising cost of living. Those on the Treasury Bench must surely understand that many disabled people have needs that make heating and electricity to power equipment particularly central to their wellbeing, so that economising on energy can bring severe hardship.
As my hon. Friend Marsha De Cordova raised a few moments ago, disabled people on non-means-tested benefits will get £150 as a minimum, and indeed those on means-tested benefits will get the £650. I appreciate that the Secretary of State says this is a responsibility of the Business Secretary, but Ministers did recently change the rules on the warm home discount scheme so that 290,000 people on disability living allowance, PIP and attendance allowance are no longer eligible.
For people on PIP, that means that the Government are giving £150 to them after it was taken off them through the changes to the warm home discount scheme. This is robbing Peter to pay Paul, and it suggests that one hand of Government does not know what the other hand of Government is doing. How can that be justified?
My right hon. Friend is making an excellent point, and he probably articulated it even better than I did. Does he also agree with me that the whole premise of DLA, PIP and attendance allowance is to help meet some of the extra costs faced by disabled people? The Secretary of State has stated that this is a different Department—it is BEIS—but she must none the less acknowledge the purpose of these benefits, and taking away one payment and giving some money back with another is actually going to leave nearly 300,000 disabled people worse off.
My hon. Friend is absolutely right. I can assure her that she speaks with an eloquence on these matters that I rarely muster, and I thought she put her points powerfully.
Even though many disabled people have been given an additional £150, for many of them that will not cover the additional cost of inflation when applied to disability-related benefits. For example, for those on universal credit, the supplement for someone unable to work or engage in work-related activity rose by about £240 a year less than if it had been uprated in line with the consumer prices index. In addition, someone receiving the daily living component of PIP is worse off by £185 on the standard rate and by £274 on the enhanced rate as a result of the sub-inflation upratings later this year.
That is one of the reasons why many people out there are particularly concerned that the Secretary of State—I understand that, in legislation, she has to review these matters—and the Government may well resile from their commitment to inflation-increase benefits and pensions this September.
Equally, the hon. Gentleman who sits for a Welsh constituency that I cannot remember, and I am not sure I can pronounce it either—[Interruption.] Jonathan Edwards raised carer’s allowance, and people claiming carer’s allowance will not get any extra support. Carers often have higher energy bills because of their caring responsibilities, yet people in receipt of carer’s allowance—remember that they provide care for at least 35 hours a week and earn less than £132 a week—are likely to be hit hard without additional support. Why were carers left out of this package?
Thirdly, I want to talk about pensioners. We have 2 million pensioners in poverty, and the number is rising. The Prime Minister promised that pensions would keep pace with wages and prices, but, without any thought as to how hard pensioners are finding it to make ends meet, Ministers broke that promise by removing the so-called triple lock. That meant a real-terms cut of about £500 in the basic state pension—the biggest real-terms cut, I believe, for about 50 years. I was pleased to see Ministers commit to honouring the triple lock for next year, but we can see the pressure Ministers are coming under and we hope the Secretary of State does not break that promise for the next financial year.
We also need clarity from Ministers on whether the standard minimum guarantee of pension credit will be uprated in line with the consumer prices index in September. Pensioners on pension credit will receive the £650, as the Secretary of State knows, but pension credit uptake is not what it should be. If we could drive up the uptake of pension credit, Loughborough University estimates than an extra 440,000 retirees could be lifted out of poverty. With approximately 850,000 pensioners not claiming pension credit, a huge number are set to miss out. Failing to do more to increase pension credit uptake could mean that two thirds of the poorest pensioners will not get the extra £650.
I recognise that the Minister for Pensions and Financial Inclusion—Guy Opperman, who is not in his place—has been leading a campaign to drive up the uptake and has even been ballroom dancing with Len Goodman. However, the Bill’s impact assessment, which the Government have published today, shows that 1.4 million pensioners are benefiting, but in the second round it is estimated that 26,000 fewer payments will be made to pension credit recipients. Can the Secretary of State or the Minister responding to the debate—the Under-Secretary of State, David Rutley—explain why that is and what it says about the success, or otherwise, of the Government’s pension credit take-up campaign?
Families with children are poorly served by flat rate payments. Families in the bottom half of the income distribution with two or more children spend twice as much on food, essential household goods and services, clothing, footwear and transport. Families with three or more children are likely to spend an additional £500 on energy, but the support on offer is not adjusted for size of family.
We recognise that the cost of living payment, combined with the £150 council tax rate, will provide £1,200 for working-age households in receipt of means-tested benefits. However, that will not cover the whole increase in energy bills, especially as further large increases in the price cap, perhaps of £1,000, are expected in October. Nor will it provide much mitigation of the wider price food rises.
Let me spell it out. We know that there will be another rise in gas and electricity prices, possibly of £800 to £1,000, for a family who have already faced an increase of £850. That family will therefore need to find at least £1,650. They will get the council tax deduction of £150; they will get the energy bill loan, turned into a grant, of £400; and they will get £650, paid in two instalments, supposedly to cover the year ahead. That is £1,200 in total, which will still leave them £450 worse off because of the energy price rises this year. As that comes on top of last October’s £20-a-week cut in universal credit, that family’s standard of living will be down by £1,450 on last year—£28 a week. That is even before we take into account the food shopping bill, which Kantar has today predicted will go up by at least £380. The Governor of the Bank of England has warned of “apocalyptic” increases in food prices.
Surely more Government action is needed. Ministers will retort that they are helping families to find employment; employment should indeed be the best defence against the rising cost of living, but under this Government, 8 million people in work are in poverty and are picking up food parcels for their families because of low pay and family circumstances. Some 2 million working families are on universal credit and have suffered similar losses to those who are out of work: they have lost the £20 uplift, they faced a real-terms cut in universal credit in April, and their wages are being outpaced by inflation, even after the national living wage increase.
I recognise that the Minister will respond that the Chancellor has reduced the UC taper rate and increased the work allowance, and that those with the highest earnings who qualify for universal credit gain the most from the reduced taper. However, for those with very low earnings, the gains are much less than the losses elsewhere. A lone parent with two children would lose £1,200 if they were not working, but would lose £1,300 if they were working 10 hours, nearly £700 if they were working 20 hours and £400 if they were working 30 hours. These families have already lost substantial amounts, and the package that the Chancellor has announced does not make up for it. Those examples are not exceptional. They will have a familiarity to every Member who speaks to their local food bank or citizens advice bureau. The problem is that the flat payment system takes no account of family size or special needs.
I hope the Minister addresses those points this afternoon, because we need more than quick fixes to protect the living standards of our constituents and tackle the chronic injustices of poverty. We entered the living standards crisis not just on the back of years of underwhelming economic growth, but after years of cutting, freezing and restricting access to social security, which left us with a threadbare system and an explosion in food bank, baby bank, bedding bank and fuel bank usage. The real-terms value of out-of-work benefits is the lowest for years. We have seen the pernicious two-child policy, caps on support, inadequate help with housing and council tax, and real-terms cuts to universal credit—real-terms deductions to the amount that people on universal credit are forced to grapple with.
That is why child poverty is rising on its way to 5 million, with half a million more children destitute and 500,000 children going without a decent bed at night. The outcry from our communities forced the Government to take short-term action, but we need a long-term plan to rebuild social security, grow the economy, raise living standards, and defeat child and pensioner poverty, so that the victims of poverty can participate fully in society. That is what I am determined to build.
Thank you for calling me so early in the debate, Madam Deputy Speaker; it is a great privilege.
There will be no surprise that I welcome this Bill, which will help millions of families during these very difficult times. The Labour party thinks that the only way to help families is to just keep increasing benefits, but working-class people in places such as Ashfield are a bit more savvy than that. They realise that we make families better off by increasing opportunities through the job market, and education and training, which leads to promotion and better job prospects.
For the purposes of this debate, we need to go back in history a bit, to the end of the ‘90s, when Tony Blair came into government and introduced something called the tax credit system. Although at the time it seemed an incredibly kind thing to do, we are now feeling the unintended consequences. It has damaged businesses and damaged the prospects of millions and millions of people throughout the UK. I will give the House a good example.
A friend of mine refused to work more than 16 hours for over 10 years because she was a single parent. However, that backfired when her daughter got to 18 and my friend lost all her tax credits, her child benefit and her child support. Now we have a lady in her 40s who has, overnight, just lost half her weekly income, and she is stuck in a low-skilled, low-paid, minimum-wage job. She has never upskilled, despite her employer wanting her to upskill for years and years, so she has missed out on that career development, which could have led to a better job and less dependency on benefits, all because she did not want to work more than 16 hours a week.
This Government are trying to fix things like that with the universal credit taper, which will now allow people like my friend to work more hours and get a better paid job without it affecting their income as much as it would have affected hers all those years ago. That is the way to tackle poverty and help to people achieve their goals, but what Labour did is trap people—millions of people—into just having 16-hour—[Interruption.] Opposition Members can shake their heads and chunter away, but it is true. I know hundreds of people in Ashfield who were trapped in 16-hour-a-week jobs, and what good has it done them, years later? Ten years later, they are still in a minimum-wage or living-wage job, they have not upskilled and they have not moved any further, and they lose all their benefits when their children leave school. That is not progress.
The answer that the Labour party had, when all these people were stuck in 16-hour jobs and we could not get them to work a full-time job, was simple: open the floodgates and import cheap foreign labour, which is what happened. Twenty years later, we have a failed migration policy and a failed benefits policy, which has led to millions of people being trapped in a poverty cycle. We have spent the last 12 years trying to put right this mess and it is not easy when people are trapped in a poverty cycle —[Interruption.] Lots of Members on the Opposition Benches are grinning, but I will crack on.
Our benefits system in the UK is very generous—[Interruption.] It is generous. I will give an example. If my friend was a single parent now, living in Ashfield with two children and working 16 hours a week on the living wage, she would be getting £18,000 a year in universal credit and £6,000 or £7,000 a year in wages, which is an income of about £24,000 a year. She would not be paying any income tax, which is a bonus. To have that sort of income, a person would have to earn about £30,000 a year, which is a good wage in Ashfield.
If the hon. Gentleman thinks that is very generous, how does it compare with benefits systems across the EU, for example, that are significantly more generous?
I will tell the hon. Lady what is generous: a single parent, like my friend and I were all those years ago, getting £24,000 a year for working 16 hours a week. [Interruption.] The hon. Lady can shake her head, but I think that is a pretty generous payment. That person would not be paying any income tax. Come to Ashfield and ask if £24,000 net is a good income. It would be a struggle to find people who are earning that sort of income so, yes, it is a generous income.
As we level up the country, we need to level up the skills of people who are trapped in this life of benefit dependency caused by the Labour party—I will stick to my words. In the meantime, this caring Government realise that families need extra support, which is why we are providing £37 billion to support families. Remember this is taxpayers’ money. There is no magic money tree, so hard-working people are having to pay for this.
This Bill will ensure swift action by providing the power to make two cost of living payments of £650 to 8 million households throughout the UK. This is real, targeted help for real, vulnerable people. The £200 rebate on energy bills has been doubled to £400, and it is now a grant, so it will not be paid back. The living wage is up, the national living wage is up, the universal credit taper rate is up and national insurance has been cut, so 70% of those who pay national insurance will pay less and more than 2 million people will pay no national insurance at all. We are doing all we can to ensure we help to keep people’s head above the water by spending more than £80 billion on universal credit and legacy benefits, which now represent 3.8% of our GDP.
We cannot keep asking the hard-working taxpayer to put their hand in their pocket to pay more and more. We must all do our bit. Although I welcome that the Bill will get immediate support to families, we must all work hard to make sure every single person in this country has the chance to support themselves. The benefits system should be there to help people in their hour of need; it should not be a way of life.
If it were left to Labour, everyone would be sat at home feeling sorry for themselves, but I am different. I want people to have a good job, to earn more money and to enjoy the fruits of their labour.
It is a pleasure to speak for the SNP on the Social Security (Additional Payments) Bill. The Chancellor announced this uprating a number of weeks ago, having dragged his feet for so long. He announced the energy loan at the Budget, after announcing it earlier in the year, with a “Ta-da! Look at this! This is wonderful. We are giving you all this.” It was never sufficient. We called immediately for the energy loan to be a grant and for it to be increased.
The big announcement at the Budget was, “Hey, look, you can have cheaper solar panels!” That does not help my constituents, who are literally unable to buy food. We called for these changes then, and the Chancellor waited and waited until the end of May to make this announcement.
It has been a few weeks since the end of May, and we saw this Bill only last week. Parliamentarians have been able to scrutinise this Bill for only one week. The Government, or the Secretary of State, may say that this is because the Bill is so complicated, but they had weeks beforehand in which to decide what it would look like, and they have had weeks since the announcement in which to present it and give us an opportunity to see it. We should not be doing this in a single day. I appreciate that there is a tight timescale and that the Bill must be put through now in order for the payments to be made; what concerns me is the time during which we have not been able to scrutinise it effectively.
My other concern about process involves the money motion. It is drawn as tightly as possible. No doubt when we reach the Committee stage the Government will say what they say in every Finance Bill Committee: “All the amendments are about having reports. All the Opposition want are reports, rather than any actual changes to the Bill.” However, such a tight money motion makes it impossible for us effectively to put forward the asks that we have and to make it clear that this is wholly insufficient and that there are massive changes that we want to introduce.
Nevertheless, I congratulate the House on the fact that we are actually debating spend. That is very exciting—it is wonderful—because we never debate spend. We get the estimates for five days a year, or is it three? For a handful of days a year, we are allowed to debate those. To be fair, we are now allowed to debate spend, but it does not happen. We have the Budget, and then we have the Finance Bill. The Finance Bill is entirely about taxation: it is not about spend. We do not get the opportunity to debate and scrutinise spend properly, so it is very nice to get the chance to do so today—albeit with a money motion that is so unbelievably restrictive that we cannot put forward any amendments that make any sense or assist our constituents in any way.
Before I proceed, I want to thank Chris Mullins-Silverstein and Linda Nagy, who have been incredibly helpful in putting stuff together very quickly to enable me to make a speech that makes sense—or, I hope, largely makes sense.
This is the situation in which we find ourselves. As we heard from Jonathan Ashworth, in October, energy bills will be up by £1,500 for the average household, which is far more than the amount that the Government propose to provide for people—and that is before we take into account the other increases that we are seeing. According to the Office for National Statistics, pasta is up by 50%, bread by 16% and rice by 15%. I pay tribute to Jack Monroe for the huge amount of work she has done on the “Vimes Boots” index, which allows inflation to be measured not just in the way in which it has historically been measured, but in a way that relates to how people shop—the people at the lowest end of the income spectrum, who count every single penny in the supermarket to work out whether they can possibly afford what they have put in their baskets. Inflation for those lowest-income families has increased by significantly more than inflation for the families who are earning more. It is even worse for disabled householders, who are seeing even more significant increases in energy bills, and the same goes for pensioners.
I was delighted to hear Lee Anderson suggest that things are very generous. He cannot have the same inbox as me. According to my inbox, things were dire before Brexit, dire before covid, and dire before the massive increase in inflation that we are seeing now, and they have only got worse. The fact is that the impact of Brexit has increased our food prices. Less migration means less money for the Government to spend, while net migration reduces net public sector debt and increases the amount that the Government have to spend. The former Chancellor George Osborne’s Red Books make that explicit. It is clear that he was seeking to crack down on migration, and that doing so would reduce the amount of money that the Government had to spend. It costs money for us to reduce migration. It means that we will have less to spend on people who stay here, who live here, who work here.
The announcement that this is a £37 billion package is genuinely a joke. In the Government’s calculation of the £37 billion, they have included the fuel duty changes. A significant number of my constituents, especially the poorest, do not drive. They are impacted by the price of supermarket vans having to drive around and small businesses’ costs increasing, but the fuel duty does not make a difference to their daily lives. They do not fill up their fuel tanks because they do not have fuel tanks. They cannot afford cars. So including the fuel duty rise in the £37 billion is ridiculous. Including the freeze on alcohol duty is one of the cheekiest things I have ever seen in this place, and I was here all the way through the Brexit debates. The Government cannot include an alcohol duty freeze and say that they are helping with the cost of living. “We are helping the poorest people to save money on their alcohol.” People who cannot afford pasta are not helped by freezing alcohol duty.
These things that are being included in the £37 billion are listed on the factsheet on the Government’s website, by the way. The £37 billion also includes lots of already planned stuff. It includes what has happened with national insurance, and it includes things that were put in place when the Government thought that increasing benefits by 3.1% in April 2020 was sufficient. It includes a massive chunk of that. The Government cannot stand up and realistically say that this is a £37 billion package, because it is not. These are not the positive changes that my constituents and people across Scotland and the UK want to see.
I am pleased to hear that disabled people are getting an additional amount of money. That is a good move by the Government, but it does not take into account the increased costs that disabled people are seeing, including the massive increase in scarcity affecting gluten-free diets, for example. More disabled people have specialist diets than people who will not get the £150 increase. Disabled people spend more time at home, and it is the same for pensioners. The increases that are happening for those two groups are not sufficient to cover the increases they are facing in their energy costs, particularly, and in specialist diet costs.
I am listening very carefully to the hon. Lady’s arguments, and she is making some important and useful points, but I have to disagree with her. She cannot honestly stand up here this afternoon and almost dismiss this enormous sum of expenditure that the Government are making by saying that it is not sufficient and that she wants more. Perhaps she could explain where all this extra resource is going to come from. I personally believe that the Chancellor of the Exchequer listened and took on board arguments that many of us were making earlier this year about the rising cost of living, and that he has done everything possible to make his pounds go as far as they can in providing relief to those on low incomes.
The Chancellor of the Exchequer did listen to the arguments that were made, and I absolutely welcome the fact that he came back and said, “What we did before was not enough.” I do not know if he actually said that, but he said that he was going to do more and bring forward more. I am pleased that we are discussing this today, and I am pleased that these increases are happening, but I am making the case that the additional payments that are being made do not cover the cost of living increases. I do not think they are sufficient. and I do not think they will assist our constituents who are already struggling. The right hon. Member asked where the money would come from. We have always said that the windfall tax should be applied more broadly than just to oil and gas companies. We have always said that it should be for all those who made excessive profits during covid. Why should the Amazons and the Sercos of this world get away with making so much money during the pandemic and not have the Government look at that?
The reality is that the UK Government do not have to run a balanced budget. That is how the UK Government budget works. The Scottish Government have to run a balanced budget by law; the UK Government do not. There is far more flexibility in the budget than the Chancellor explains. When he stood up on
The UK Government have failed in a number of places. For example, they have failed to keep the triple lock for pensioners. They failed to keep the universal credit lifeline. They failed to implement a pension credit take-up strategy. They failed to come forward with cost of living measures as early as they should have during the course of the Budget. They have failed to scrap the evil sanctions regime. They have failed to produce a strategy to tackle child property. They have failed to bring in a minimum child maintenance payment. They have failed to uprate benefits by anywhere close to inflation this year. They have failed to scrap the rape clause. They have failed to bring in a real living wage that people can actually live on. They have failed to bring forward the long-promised employment Bill. They have failed to end the Department for Work and Pensions vicious loans clawback.
In contrast, the SNP Scottish Government running that balanced budget is delivering for people in Scotland. In Scotland, we are mitigating the bedroom tax. We are doubling our game-changing Scottish child payment. We are uprating benefits by double the level that the UK Government are. We are paying carer’s allowance supplement to people who are carers. We are paying £200 child winter heating assistance to families with severely disabled children and young people. We are increasing our school clothing grant, which is not available across the board in England and is at the discretion of local authorities here. We are offering 1,140 hours of childcare to all eligible children, no matter their parents’ working status. We are providing five new benefits worth up to a maximum of more than £10,000 by the time a first child turns six. That is £8,200 more than that provided in England and Wales. We are also providing additional money for subsequent children that is significantly in excess of the amount being provided here.
I therefore have some calls for the UK Government. I would like the UK Government to now uprate all social security benefits by 10% and backdate that to April 2020. The Chancellor stood there and said that uprating benefits would be less than the additional payment he is making—I want him to do both. This is a sticking plaster. Giving this additional one-off payment does not solve things for next year. It does not undo the fact that this year’s increase was woefully insufficient.
I would like the UK Government to make an additional £25 a week uplift to universal credit and to extend that to all legacy benefits to undo the harm done by cancelling the £20 a week increase last year. I would like them to cancel the rape clause, the two-child limit and the bedroom tax. There is only so much mitigation that the Scottish Government can do within our balanced budget.
I would like the UK Government to produce a child poverty strategy and to make tackling child poverty a national mission, as it is in Scotland. I would like the UK Government to bring in the long-promised employment Bill. They promised 28 times that they would bring in an employment Bill in the Queen’s Speech, and no employment Bill appeared in the Queen’s Speech. I would like them to match Scotland’s commitment to dignity and respect for those claiming disability benefits. I would like them to bring in a real living wage and to scrap the ageism in the pretendy living wage.
From day one of the Chancellor’s energy loan, which he announced earlier this year, we called for it to be a grant, rather than a loan. In May, the Chancellor U-turned. He changed it from a loan to a grant and he increased it, like we had asked. Now, we must see a U-turn on the five-week wait for universal credit. We must see that payment become a grant for those who get universal credit. We must not see those payments being clawed back.
The UK Government have 85% of the powers on social security. They have all the powers that relate to energy, all the powers that relate to the minimum wage and all the powers that relate to national insurance. We are being failed time and time again by the UK Government. We have asked for these measures to be devolved. We have amended things for these measures to be devolved. We have voted for these measures to be devolved. We have called, at every opportunity, for devolution of employment law, for devolution of energy, for devolution over the minimum wage, and for devolution over national insurance. The UK Government refuse. The UK Government are continually refusing and clawing back powers from the Scottish Parliament—in their United Kingdom Internal Market Act 2020, for example. The Brexit Freedoms Bill is set to remove powers from this Parliament and centre it even more in the Executive than it already is. This is not the way to run a democracy.
People are struggling. Even with these payments on the horizon, people still struggle to see how they will get through the year. The only choice is for Scotland to become an independent country. Only by having the full powers of independence will we be able to protect people and help them through the cost of living crisis, in contrast to the UK Government who refuse to do so.
I am very pleased that the Bill is in front of us. The Select Committee has been clear in the past few weeks that, without a big measure on this kind of scale, low-income families would be in very serious trouble indeed in the coming months. I echo the tribute that has just been paid by Kirsty Blackman to Jack Monroe and her campaigning on this. She gave very compelling evidence to the Select Committee at our meeting on
The package that has come forward has been widely welcomed. We put out a call for evidence on the cost of living in May. In response, the Joseph Rowntree Foundation said that,
“the package provided much-needed support for households, which will protect many of them against rising costs over the coming year.”
Citizens Advice welcomes the targeted support to low-income households and hoped that it would
“start to reverse the worrying trends we have seen in our data, including record-breaking food bank referrals.”
Unlike the previous announcements, this May package is properly targeted on low-income families, as it needed to be. The Resolution Foundation described it as offsetting
“the poor targeting of previous announcements.”
It also described it as “serious redistribution”. It is, I think, a serious response to a serious problem. I also welcome the Chancellor’s change of heart over the windfall tax to fund some of the help that is needed.
However, we need to be clear: the reason the Bill is needed is that the system for social security uprating has failed. It is a long-standing system. There is nothing new about the way it is done, but the unforeseen burst in inflation means that it simply has not worked this year. On this occasion, the decision has been taken to replace adequate uprating with ad hoc payments from the Treasury, which will certainly help us through the next few months. We need now to rethink the uprating system to make sure that it does not let us down again.
I have a question for my right hon. Friend, the Chair of the Select Committee. Is he aware that, in 1976, the then Social Services Secretary, Barbara Castle, came to the House and uprated benefits and pensions for a second time in a year—there was a cost of living crisis then as well. The policy of the then shadow Secretary of State, Norman Fowler, was that uprating should take place twice a year. I wonder whether the Select Committee will consider the arguments that were made in the 1970s.
My right hon. Friend makes a very important point. The Select Committee will certainly be looking at that. We are conducting an inquiry later this year on the question of the level of benefits, and the issue of how benefits should be uprated will certainly feature. I am intrigued to learn that the Secretary of State was able to do that in the 1970s given that we have been told that the IT systems in the 2020s cannot cope with it. I am certainly interested in seeing more on that.
The right hon. Gentleman is making an interesting and important point about how we do upratings. I urge him not to get drawn too far down the path of looking at the system in the 1970s, which was in very different circumstances. There is an issue about the timing of uprating and the figures that are used to calculate it, but the bigger practical issue is the different IT systems and the plethora of different benefits that are still in play. Does he agree that we need to find a way to rationalise and simplify them?
That would help—just modernising the old systems would help, and I will say something about that in a moment.
We are getting ad hoc payments from the Treasury to tide us over. The Secretary of State rightly spelled out to the Committee the downsides of one-off ad hoc payments such as those that the Bill enables. In oral evidence in February last year, she told the Committee that there were higher risks of fraud attached to one-off payments and that they can make it difficult for claimants to budget effectively—both quite telling points. She said that one-off payments were not
“one of the Department’s preferred approaches” for providing that financial support. She noted:
“There are some challenges about fraud” and that there would be difficulties if people claiming tax credits received a one-off payment and then moved to universal credit shortly afterwards. On the question of what might work best for claimants, she told us:
“Previous experience would be that a steady sum of money would probably be more beneficial to claimants and customers, to help with that budgeting process.”
I think she is right; it is not ideal for the Treasury to provide lump sums instead.
Why was proper uprating not done in this case? The Chancellor pointed out that legacy benefits cannot be quickly uprated because they are run on antiquated IT systems, as Stephen Crabb referred to, so uprating takes several months. The Chancellor told us that that was why he was unwilling simply to uprate benefits: it could have been done quickly for universal credit, as we discovered in the pandemic, but not for legacy benefits.
In an earlier debate, I recall the shadow Secretary of State, my right hon. Friend Jonathan Ashworth brandishing a document from an IT company, perhaps Oracle, about the front end that it had built for the Department’s legacy systems, which it said enabled changes to be made to them more quickly. I wonder whether the Minister, in closing, could tell us the truth behind that claim about the front end that had been provided. I know that the Department has certainly commissioned such front ends for the legacy systems over a long time, so I am interested to know why, notwithstanding what that brandished document said, it is apparently still the case that uprating takes four or five months. Are front ends in place? Why have they apparently not made faster changes possible?
In our June 2020 report on the Department’s response to coronavirus, the Select Committee recommended an increase in the speed with which changes could be made to legacy benefits. We said:
“People will be claiming legacy benefits until at least September 2024, the Government’s most recent estimate for completing the rollout of Universal Credit. It is simply not tenable for the Department to continue to operate antiquated systems that prevent Ministers from making timely changes to the rates at which legacy benefits are paid. We recommend that the Department work to increase the speed with which changes can be made to legacy benefit rates.”
In its response in September that year, the Department said that it
“recognises the need to be able to respond to events flexibly which is why we are investing in Universal Credit which is more agile than the systems that support legacy benefits.”
While substantial numbers of people depend on legacy benefits, the Government surely need to keep the systems that support those benefits fit for purpose. They are clearly not fit for purpose at the moment, and that ought to be addressed.
On that note, the new systems that we have created in Scotland under Social Security Scotland are doing exactly what the right hon. Gentleman asks. It has the ability to make those extra payments, because we set up the systems. Does he agree that the Government need to just invest to sort that out for many thousands of people?
It certainly does need to be done. I am pleased to tell the hon. Lady that on Monday the Select Committee will visit Social Security Scotland and that our vice-chair, Nigel Mills, who is in his place, will be part of that group. We look forward to that visit.
The reason why benefit uprating has not worked this year is, of course, the six-month gap between September, when the inflation figure forms the basis of uprating for the following year, and April, when increases take effect. In response to our call for evidence on the cost of living, the Joseph Rowntree Foundation called on the Government to
“commit to a much shorter timeframe for annual uprating between measuring inflation and uprating accordingly, to ensure benefit uprating genuinely reflects inflation for the year in question.”
Lloyds Bank Foundation told us that the Government should
“consider uprating benefits in line with inflation in the autumn to ensure they more accurately reflect the true cost of living.”
That sounds like what was done in the 1970s. The Legatum Institute also suggested reducing the delay between CPI measurement and the application of uprating as well as introducing a mid-year uprating review. Citizens Advice called for a more sustainable, responsive uprating approach, which means
“addressing the lag between benefit uprating decision-making and implementation and the exclusion of the benefit cap from wider uprating.”
It says that while the one-off payments to be made under the Bill
“are more generous…for some households than if uprating had been brought forward”, there are problems. For example, as we were reminded by my right hon. Friend the shadow Secretary of State, the one-off payments are the same amount regardless of family size. They also have cut-off dates, which risks arbitrarily excluding people from support.
Flat-rate payments being irrespective of family size appears to be pretty unfair to larger families. Overall, the package is somewhat more generous than early benefit uprating would have been, but it is less generous for larger families. The justification for that is not clear.
The North East Child Poverty Committee told us that
“a flat-rate £650 payment for all households on means-tested benefits, regardless of household size, additionally fails to recognise the clear link between family size and essential outgoings, with many larger families (already at much greater risk of poverty, a situation compounded by the two-child limit) facing intolerable financial pressures as a result of rising household bills.”
I will make one final point. One great advantage of the Chancellor’s package for low-income families, compared with a straightforward benefit uprating—I was grateful to the Secretary of State for confirming this—is that the benefit cap does not apply. It is striking that when it appears that the headline rate of social security benefits is likely to be raised by perhaps 10-plus per cent. next year, there is no indication at all about the benefit cap being lifted at all. That means that the growing number of families whose benefit has been capped will receive no increase in their income at all at a time when inflation is likely to be over 10%.
In evidence to the Select Committee, the Child Poverty Action Group Told us that
“the Government has made a welcome commitment to increase benefits in April 2023 in line with prices. However, not all price-related elements of the system are included in the annual uprating exercise and the benefit cap means a substantial minority of claimants—an estimated 150,000—will see no increase at all and face another real terms cut to their benefits.”
At a time when inflation is so high, surely at least the level of the benefit cap must be reviewed. Will the Minister give us any encouragement that it will be, ahead of April next year? For now, and in the context of the Bill, it is welcome, and quite a significant precedent, that the benefit cap will not apply to these additional payments.
It is vital that we provide additional support to those in receipt of disability and means-tested benefits who are covered under this Bill, but in itself it is not an adequate response to the depth and breadth of the cost of living crisis we are currently experiencing. The Chancellor is already hammering families with an £800 tax hike this year, more than wiping out measures in this Bill for those who will benefit from it. The national insurance rise and the freezing of income tax thresholds are unfair tax rises, making the cost of living crisis worse for millions of families across the UK by decreasing employees’ take-home pay. Households are facing the highest tax burden in 70 years; the typical family will see a hit of £1,200 a year through a combination of Conservative party tax rises and soaring energy prices, according to the Resolution Foundation. We welcome the Bill’s provision creating the £650 payment, but call for it to be paid in full in July instead of being paid in two instalments in July and October, because people need that support right now—although more support might still be required in the autumn.
The simplest way for the Government to help people right now would be to scrap the tax hikes to which I have referred. What we most want is an emergency VAT cut. Cutting VAT from 20% to 17.5% for one year would save families an average of £600; it would put money back into people’s pockets right now, boosting the economy and supporting struggling businesses. The Office for Budget Responsibility forecasts that the Treasury is due to take in an extra £8.6 billion in VAT due to inflation, which is £430 per family, so we think the Government could afford to fund that.
Cutting VAT would help to address spiralling inflation as well as keeping costs down for families. A similar VAT cut in 2008 boosted retail sales by about 1% and aggregate expenditure by 0.4%; that shows the difference it could make to struggling businesses right now. At the time of that same VAT cut in December 2008 inflation fell from 4.1% to 3.1%, and a similar saving right now could make a huge difference to struggling families.
In addition to the welcome targeted support announced in this Bill we would like the £20 uplift to universal credit restored. We accept all the arguments that that was an emergency measure, but this is also an emergency. The Government said at the time that higher wages are a better option than benefit increases, but we have seen just this week the tension caused between the historically high rate of inflation and the downward pressure the Government would like to maintain on employee wages, and this debate will be played out in many different circumstances across the summer and into the autumn. The Government’s argument that wage increases are the route to restoring household finances will come under considerable pressure, so I encourage them to think about that £20 a week uplift once more, because it would provide some of the poorest households on UC with an additional £1,000 a year, and we all know from our postbags what a difference that would make to the very poorest in our constituencies.
Much as we welcome the measures in the Bill, some of the most vulnerable groups in our society are not going to receive any additional support in facing the cost of living crisis thanks to these measures. The Government must look at that again. Several Members across the House have mentioned unpaid carers, and I want to add our contribution on that. They have once again been forgotten by the Government, who have provided no additional support despite the invaluable role unpaid carers play; it is difficult to calculate the additional pressures there would be on our care system if they did not play that role. As has been said, unpaid carers face additional costs as a result of their caring responsibilities. Those claiming carer’s allowance are being excluded from the list of eligible benefit recipients, leaving hundreds of thousands of unpaid carers, including 40% of working-age carers in receipt of carer’s allowance, without any additional support as a result of this Bill.
Millions of vulnerable adults and children depend upon the efforts of our country’s carers, yet as we see time and again, their voices are not being heard by the Government and again they are being excluded from support; they are being abandoned by the Government. The Liberal Democrats will keep championing the cause of unpaid carers, and I really impress on the Government the need to do more for those families.
Another issue that has been raised by a number of right hon. and hon. Members is families with multiple children in poverty. A flat-rate payment does not take into account the number of people in a household, which means that larger households, particularly those with more children, will face the squeeze much more severely. Of course, it is much more likely that a larger household will be made up of more children, so it is children who will suffer the most from having a flat-rate payment. Families in the bottom half of the income distribution with two or more children spend twice as much as equivalent families without children on food, essential household goods and services, clothing, footwear and transport, which leaves larger families in an especially vulnerable position when it comes to the level of inflation that we are seeing. The presence of younger children in a family exacerbates the prevalence of poverty due to the increased financial pressures that come with caring for a young child. Families with under-fives are therefore especially vulnerable.
My team recently met representatives of Little Village, a baby bank organisation that operates mainly in London. They told me that they are expecting to support an additional 1,000 families this year, and that they helped over 6,000 last year. Families cannot just go along to the baby banks; they have to be referred by education, health and social care professionals. These are only the families that have been identified by authorities as being most in need, so we know that the real impact of the cost of living squeeze on families with young children is likely to be much more widespread. Little Village staff told me that pregnant women are skipping meals in order to feed their toddlers, and that families are cutting toes out of their baby onesies to avoid having to buy new ones. This is what families are already having to do to deal with the cost of living crisis. The total number of children in poverty is predicted to rise to 5.2 million by 2023-24—an increase of 1.1 million children. We really need to do more to recognise the size of the households that are being targeted by some of this help.
I also want to mention rural communities and rising fuel prices. The Liberal Democrats want to see an expansion of the rural fuel duty relief scheme. It is currently available only in a handful of remote areas of the UK, but we know that the huge price rises in petrol across the country are having a disproportionate impact in areas where people cannot switch to public transport, particularly the most rural areas. The Government should immediately think about extending the rural fuel duty relief scheme where public transport options are limited, which would include Devon, Cornwall, Shropshire, Cumbria and some parts of Wales, and they should double the relief to 10p a litre. We are seeing real impacts on the rural economy because people are limiting how much they are driving, which affects not just local businesses and the rural economy, but young people accessing educational and employment opportunities. This is something that the Government really must address as a matter of urgency.
I want to take the opportunity to raise the case of my constituent Edna Price, who lost her right arm in a horrifying industrial accident some 45 years ago. Most of her income since then has come from her industrial injuries compensation fund, but this is not a qualifying benefit. For Edna, it causes a number of practical, everyday problems. The income that she earns from the fund is not large, but because it is income from that particular source, and not from pension credit or a qualifying source, she regularly misses out on some of the other, non-financial benefits that are offered to people who are on qualifying benefits. I have written to the Department about Ms Price’s case and would really welcome the opportunity to speak further to the Minister, because Edna will miss out again on this benefit, even though she already struggles to afford her fuel bills. I would very much welcome the opportunity to talk further to the Minister about how my constituent can potentially qualify for some of the other targeted benefits, to supplement her industrial injuries compensation.
I am pleased that the Chancellor is using the social security system to target this payment to households most at risk of hardship. I make the point again that it is a much more effective method than the use of council tax banding to calculate who is eligible for a rebate. In my constituency I think we have, out of all constituencies in the UK, the sixth-highest average house price, which causes residents who live in social housing in my constituency quite a few issues. They are on very low incomes, but the properties they live in often attract a high council tax band valuation, not least because the valuations were done back in the early ’90s on much narrower value bands than I think we would think about using if they were to be done again today.
Too many of my low-income constituents are living in houses that do not qualify for the council tax rebate, in particular those in a number of socially rented homes in the Kingston Borough part of my constituency. When they were valued back in 1991, they were assigned a market value based on the privately sold homes around them. I am thinking of a particular estate in north Kingston with very small homes that house particularly vulnerable people. Those homes have been valued too highly to qualify for the council tax help with fuel bills. If there is anything the Minister can say in summing up, or that we could hear in due course from the Chancellor, on how that could be addressed, I would be very grateful. I wrote to the Department on this issue back in March and I have not had a response. As I say, in a constituency like mine with high housing values, it is a big issue for my low-income constituents.
I would like to close by saying that we welcome the measure in the Bill, but there is still so much more to do and so much more that the Government can do not just in spending, but in thinking about the way they identify people in need of assistance. I welcome the opportunity to hear more about that in due course.
I am grateful, Mr Deputy Speaker. I was not planning to speak, but I have been tempted to say a few words.
There is a danger, in a debate where we have a quite a small audience, that we think that despite spending billions and billions of pounds, this is a small insignificant thing and not one of the biggest spending items the Government have tried to put through in rushed legislation in history. We should recognise that the Government have responded to a probably unprecedented crisis in a very generous and creative way. Those of us who have been wrestling with this issue for the last few months—almost the same crowd were here for the benefits uprating debate in February, pleading for more help and for a more generous uprating—would never have believed that we would see this level of support and ingenuity, given all the financial turmoil the country has been through in recent years. We must give the Government credit for what they have tried to do to help people through what we all hope is a relatively short-term blip, rather than a long-term, sustained problem.
With the £150 through council tax and the £200 loan via energy companies, that certainly seemed to be the original plan: we were hoping we could get people over a few months of a spike, and then things would get back to normal. We have to recognise now that that is not likely to be the case. We will have to have a much higher rise and one that is perhaps sustained for a longer period, unless some very happy events happen around the world and the situation starts to reverse more quickly than everybody seems to think.
For the next few months, the Government need to think about what they are trying to do and where they are trying to get to. The strategy may be to pass this money out on a one-off basis until next year’s upratings, which we hope will have taken into account inflation so that people with income from benefits and pensions will be able to match the raised outgoings and we will have solved the problem. However, I am not convinced that that will be the case if inflation remains at 9% or 10% for a long period. In April, we will be giving people inflation based on the year to September 2022. There could be another 5% of inflation before we get to March and we may well be back in this position in a year’s time.
Some clarity from the Government on the long-term plan would be helpful. We—the Select Committee and others—have been calling for a while for the Government to do some work to rebase benefits and ensure that key household compositions are provided with enough to meet the cost of living so that the increases will maintain that situation. Otherwise, there is a danger that in the next financial year, even with the uprating, people will get less than they had with this year’s benefits plus the one-offs. In that case, people would be worse off in a year’s time, even though their benefits would have gone up, because they would not have gone up by quite enough. We would be back in a similar crisis, needing more one-off payments in the next financial year—repeating those made in this financial year. That does not strike me as a long-term, sustainable way of running a welfare system.
Huge congratulations to the Government for what they have done in the legislation to get us—I hope—through this problem, but they now need to step back and work out the long-term, sustainable way of delivering welfare at a level that meets the essential living standards that we expect it to. I do not think we can get there through haphazard one-offs and increases that are not based on real-terms inflation at the time such provisions are made. A second uprating in a year may be one way of mitigating that. In fact, it would probably help the Government, because when benefits are uprated, there is often a taper, meaning that not everybody gets the full amount, which could result in a bit of cost saving. The Government could also make use of the taper to be more generous at the lower end of the earnings spectrum, with a higher base amount, and less generous at the higher end, accepting that some people would not get the full amount. We are asking not necessarily for huge amounts of extra spending, but for more targeted and better use of the systems that are in place.
It is interesting that in February we were told that the Government could not possibly use any inflation number that was less than six months old because the systems could not cope, yet we now appear to have managed to come up with some ideas in late May and will make the first payment to people about seven weeks later, in the middle of July. That suggests that when there is a will and desire, things can be done at less than six months’ notice. I hope that that will be built on when we get to next year’s uprating, when we could at least try to creep the inflation number from September to December, so that it is only three months out of date by the time we get there.
On ingenuity, the Government’s one-off help payments now involve: a payment by councils, reverse-engineering the council tax system; effectively a payment by energy companies for what was the loan and is now the gift; a payment through the welfare system; a payment through the tax credit system; and a payment that I think is the winter fuel allowance being increased for the year. That is quite a creative way of spreading the workload to make all those payments, but it produces a complicated system, whereby people do not really understand what help they have from who and why, and when they should have had it and if they have received the right amount.
Now that we have some more time to plan, if there are any future rounds—I hope we do not need them, but if we need them, we ought to have them—I would hope that we could find a way of such payments being made through one mechanism, or at least one for benefits and one for pensions. Having a multitude of mechanisms risks people missing out, because they just do not know who they should be checking with, or what they should be claiming and chasing.
It will be far more beneficial to my constituents if they get the first of these payments in the middle of July, as sadly many still have not had the £150 through the reverse running of the council tax system because the council still does not have the approved form to put on its website for people to fill in. That means it cannot make the payment to those who do not pay by direct debit; people still are not receiving the support we wanted them to have in April, and it will probably be a good few weeks before they get it.
There is much to welcome in the legislation. We should not be mealy-mouthed in our praise for the Government, as this is exceptional support at an exceptional time. I hope that we can do what we did through the pandemic: rush things out at the start, and then think them through and develop better systems if we have to do a re-run as the crisis continues.
This has been a short but useful debate. The Opposition will not oppose or seek to delay these payments, because any measure that puts money into the pockets of people on low incomes is to be welcomed, but it is important that we put on record some concerns about how the situation has come about.
The cost of living crisis hammering millions across the country comes on top of 12 years of a squeeze in living standards for people who have needed to draw on social security at various points to support their income. We went into the pandemic with child poverty rising for larger families, by the relative poverty measure; even by the absolute measure that the Government prefer, larger families are deeper in poverty. That is a consequence of years and years in which parts of the social security system such as tax credits and universal credit were either frozen or uprated by only 1%, even before we take into account the impact of the various caps and deductions.
As a result of the poor state of the social security system in 2020, the Government felt that they had to respond by introducing the £20 uplift, the impact of which can be seen from this spring’s poverty statistics. Of course, we want as many people as possible to do well in employment and receive a rise in real wages so that they do not have to draw on means-tested benefits, but many people need support, particularly families with children. When it is adequate, that support has a real and profound impact on child poverty.
Having lost the £20 uplift last autumn, we are in the midst of a sudden and dramatic surge in inflation: the CPI rate is now at 10 times the level of spring 2021. That has left a large proportion of the population struggling with their bills. In particular, those on the lowest incomes face the lived choice between eating, putting food on the table for their children, heating their homes when it is cold, covering their rent, putting school uniforms on their children’s back, and other essential costs. It remains true that if someone is on a low income, their costs are higher. We know, although it is not built into Government policy, that the poorest pay a premium for their goods and services, and they face the highest inflation. As a consequence of the changes in Government policy and the loss of the £20 uplift last year, the number of children living in poverty will be even higher when we measure it next year.
At every stage, the Government have been on the back foot and running to catch up—a point that my right hon. Friend Sir Stephen Timms, who chairs the Work and Pensions Committee, and Nigel Mills both made powerfully. When we debated the uprating, it was already in the context of rising inflation; we discussed the possibility of uprating benefits at a more up-to-date level that reflected real-world price rises, but it was found that that could not happen. There were a set of measures, including assistance with council tax, that were poorly targeted and difficult to administer. Weeks later, the Government had to come back with a larger package of measures than would otherwise have been required.
If the Government had been able to update social security this spring to be more in line with inflation, additional assistance would undoubtedly have been needed, but we would not have required the same level of emergency package. Importantly—this is the central point—pensioners and families would have had an income in their pocket, week by week, so that they could plan and manage their finances. That would undoubtedly have been a better way for households to cope with the rising crisis than having to manage one-off emergency payments from different sources. Many of those families, because they did not get that assistance in April, even though it is only a few months later when the first of these payments will be made, will have found themselves in debt—in financial difficulty—in the interim. The debt that families get into is itself expensive. There cannot be many Members who have not been dealing with constituents who have come to them because they are facing bailiffs at their door, or are caught in payments schemes that have left them struggling with very high repayments, because of the difficulties that they have got into.
It is simply not the case that one-off payments were the only way of delivering timely support to families on means-tested benefits. While welcoming, as I said, any support—and it is a large package of support that we are considering today—it is clear that this approach is still going to lead to a lot of rough justice that would have been mitigated had a broader package of support been put in place, when there was time, through the mainstream social security system.
Entitlement to the one-off payments is triggered by receipt of one of the means-tested benefits in the month leading up to one of the qualifying days. This means that people’s circumstances in just two months of the year are taken into account, so families who have the same income and face the same cost of living pressures over the course of the year could wind up being treated very differently depending on the point of the year at which they are dipping into an application for a means-tested benefit. Some will receive the initial support and some will not. The problem is that people’s circumstances change all the time, not just in two months of the year, and the numbers involved are very large. For example, every three months about 1 million people of working age leave employment, becoming unemployed or economically inactive. At the moment, an even larger number move into new employment. However, it is the scale of the churn rather than the net outcome that is important. Similarly, there are about 150,000 starts on universal credit every month, the great majority due to changes in family circumstances. With families moving on and off benefits the whole time, a one-off payment that is tied to just two dates in the year is inevitably a crude approach to matching funding to need.
I am particularly concerned about how people with fluctuating incomes will fare under this policy. The Bill provides that only people in receipt of a benefit payment of at least 1p in the month leading up to the qualifying day are entitled to the one-off payment, but universal credit is supposed to adjust to fluctuations in income on a monthly basis. Some people will be entitled to no payment in one month and payment in the next month, depending on their earnings. Indeed, one of the selling points of universal credit was that people would not have to make a new claim every time their earnings fluctuated above and below the cut-off level. It therefore seems inevitable that large numbers of people, employed and self-employed, with low and irregular incomes will be denied help under this policy in a completely arbitrary way.
The Government need to clarify what steps they intend to take to mitigate this risk. Is it really necessary to insist that only people who have actually received a payment in the month leading up to the qualifying day should receive help? Should all self-employed people whose universal credit is reduced to zero in one of those periods, solely due to the operation of the minimum income floor, be excluded from support? We have also heard about the limitations of these measures in terms of adjusting to family size. That is one of the critical ways in which delivering directly through universal credit, and indeed legacy benefits, was preferable and more sensitive to the needs of families.
Emergency and one-off measures such as those in this Bill have a place in exceptional circumstances, but they do not give people living desperately precarious lives the security they need. They do not, in many cases, match individual circumstances as the social security system does, however imperfectly. Any and all measures that help us to relieve hardship in these difficult times are welcome, but overall our social security system needs to be more fit for purpose, just as the wider economy needs to be more fit for purpose—more resilient and more productive, with decent and secure employment opportunities and investment in the future.
I thank those who have contributed to this debate. I echo the points made by my right hon. Friend the Secretary of State to stress the importance of this urgent legislation to support people up and down the country. The sharp increase in the cost of living is a challenge shared across the globe due to the aftershocks of covid on global supply, amplified by Russia’s unacceptable invasion of Ukraine. This Bill is the flagship component of our bold package of cost of living additional payments which have been designed to help people to cope with increased costs.
We are grateful for the support of Opposition Front Benchers in facilitating the speedy progress of the legislation. It is vital that these payments get to the people who need them. I am also very grateful for the contributions that have highlighted that these are a serious response to serious challenges, such as those made by the Chair of the Select Committee, Sir Stephen Timms, as well as by my right hon. Friend Stephen Crabb and my hon. Friend Nigel Mills.
The support provided through this Bill is timely and comprehensive, and we are taking significant steps and targeting resource to support those in greatest need. The spirit of this Bill is in line with the approach that the Government have taken since the start of the pandemic, which has been shown to deliver for the people of this country in challenging times. We will continue to work hard to help people on low incomes get the support that they need.
We have worked hard through the vaccine roll-out, through the dedication of amazing people, to reopen society, and our economy has responded positively. There are record numbers of people in payroll employment, unemployment is just 3.8%, which is around the lowest level since the 1970s, and there are 1.3 million vacancies, which we are working diligently with employers and communities to fill. My hon. Friend Lee Anderson will be pleased to know that, given his focus on work.
With all the work going on to help get people into work and progress in work, we recognise that people do need additional support in dealing with the cost of living challenges. That is why the Chancellor has set out his generous package, with another £15 billion of targeted support, which brings our total package to £37 billion this year alone. Of these additional payments, a particularly important one is the means-tested benefit that will provide a £650 one-off cost of living payment. It will be paid in two instalments to recipients entitled to qualifying means-tested benefits or tax credit. The first starts on
We have deliberately kept the rules of the additional cost of living payments as simple as possible, because that is the way we can ensure that we develop the systems and processes required to make the payments at pace. I pay tribute to the hard work of officials across the Government to make that possible.
There are a number of contributions in the debate to which I need to respond. The benefit cap was raised by the right hon. Members for East Ham and for Leicester South (Jonathan Ashworth) and also by my hon. Friend the Member for Amber Valley. We have kept the payments very simple both for those receiving them and for Government systems. They are tax-free, they will not impact on benefit entitlement or the benefit cap, and they will be paid to people without the need for paperwork. They will be paid into people’s bank accounts.
Kirsty Blackman made points about uprating. Of course, as the Secretary of State said in her speech at the start of the debate, there will be an annual review of benefits and pensions for the tax year 2023-24, which will commence in the autumn as per convention.
Some hon. Members have highlighted the legacy systems and pensions, and asked why we cannot do uprating more frequently. I think we know that the legacy systems are not that agile. Of course, what we are trying to do and working very hard to do—recognising how flexible universal credit is and how resilient it has proven through the pandemic—is to move people through to universal credit by the end of 2024.
I want to go back to what the Minister said about the benefit cap, and I welcome the point he made. Does he recognise that, in a very high inflation environment, there really is quite a compelling case for looking again at the level of the benefit cap for next year alongside the other benefit uprating matters?
There is a statutory duty to review benefit cap levels at least once every five years, and this will happen at the appropriate time. When the Secretary of State decides to undertake the review, she will consider the national economic situation and any other matters she considers relevant at that moment in time.
I reiterate that carer’s allowance is not a means-tested benefit. Nearly 60% of working-age people on carer’s allowance will get the cost of living payment as they are on means-tested benefits or disability benefits. Carer’s allowance recipients will benefit from the £400 per household universal support being provided to help with the cost of energy bills.
People who receive carer’s allowance may live in a household that will benefit from the Government’s support package. For example, they may live with someone who receives a means-tested benefit, a disability benefit or tax credits. If so, the household will benefit from the cost of living payment.
Ms Buck has asked me in a number of debates why this measure does not more fully reflect different family sizes and formations. The challenge is trying to get these payments out as fast as possible. To do that, we need to get the payments out to “single benefit units,” as they are described, and households. The important thing to highlight is that most low-income families will be able to receive the £150 council tax support and the energy bill support, on top of the work allowance taper and the increase in the national living wage.
It is not possible to distinguish between those who have a permanent increase in their earnings and those whose earnings are temporarily fluctuating. If a UC claimant’s income subsequently falls, they will return to having a positive award after the cut-off date, and they may be eligible for the second payment.
The right hon. Member for Leicester South talked about the minimum income floor, which ensures we do not prop up unproductive employment or self-employment indefinitely. There is a start-up period to protect newly self-employed people. Beyond that, having a minimum income floor is the right policy. If it means there is a nil UC payment, the claimant would not be entitled to the means-tested payment. However, they would get the £400 energy payment and the £150 council tax rebate, and they would potentially be eligible for the household support fund. It is worth recognising that there are paid employment opportunities out there, given the high level of vacancies.
Whatever we want to call him, he will take this forward with aplomb, that is for sure.
There was a serious question about why the number of means-tested benefit recipients will fall in the second cost of living payment period, and it is because the projections reflect mortality rates. However, they do not reflect the important work many of us are doing to raise awareness, so hopefully many more people will claim it.
I think I have now answered most of the questions. The hon. Member for Richmond Park asked about industrial injuries disablement benefit, on which I would be more than willing to talk to her separately. We should not underestimate the additional payments from the household support fund to help people with the cost of essentials. The Chancellor announced another £500 million in his latest statement, and it will be available from October 2022 to March 2023.
In England, the £421 million household support fund will be administered by local authorities, and the devolved Administrations will receive £79 million through the Barnett formula. Importantly, there will be new guidance to local authorities on this latest extension of the household support fund to reflect the fact that some people who are not able to secure these additional payments will be able to go to their local council to secure support.
Some household support funds ran out months earlier than expected. Does the Minister expect the new funds will be sufficient and will last as long as they are supposed to last?
The current tranche of household support fund is on top of all the other benefits we have talked about. As we have said, these are substantial additional support payments that are being made available, and the £500 million on top is there to help those people who have further needs with the cost of essentials. Further guidance will be made available.
We are working at unparalleled pace to get money into people’s pockets. It is vital that we meet the deadline for Royal Assent by
Question put and agreed to.
Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).
Further proceedings on the Bill stood postponed (Order, this day).