My Lords, the Government are fully aware of the acute pressures that families across the UK are under due to the rising cost of living. This is why we have brought forward this important Bill to your Lordships’ House.
A series of global economic shocks have led to price rises unseen in the UK for decades. As a result, families up and down the country are seeing their budgets squeezed, with many struggling to make ends meet. That is why we have decided to provide more than £15 billion of further support, targeted at those in greatest need. This is on top of the £22 billion announced previously, bringing the Government’s support for the cost of living to more than £37 billion this year. This £37 billion includes the means-tested and disability additional payments for which the Bill makes provision, as well as a one-off increase of £300 to the winter fuel payment for pensioner households, a non-repayable £400 discount in their energy bill this autumn for domestic electricity customers in Great Britain—the UK Government are working to ensure that the people of Northern Ireland receive the equivalent of this support as soon as possible—and a £150 non-repayable rebate on council tax bills for all households in bands A to D in England, to name only a few measures we have taken.
Although we as a Government have always been open about the fact that we cannot cover every situation or solve every problem, we are committed to going further to provide support to relieve the financial pressure people are facing. Taken together, this £37 billion package will provide at least £1,200 of additional support for the majority of households least able to afford the rising cost of living. The Bill before the House today builds on that commitment and will enable us to make additional payments targeted to those on the lowest incomes. It legislates for two additional payments which form part of our wider package to support families with the cost of living. The first is a direct cost of living payment of £650, split into two separate payments of £326 and £324, which will go to more than 8 million people receiving means-tested benefits. The second is a £150 payment to disabled people on a qualifying disability benefit. This will be paid on top of the cost of living payment for people who are eligible, and is estimated to benefit 6 million disabled people. Both new payments will be delivered by the UK Government to eligible households across the UK.
My Lords, I welcome the much-needed additional support that this Bill offers and the recognition that the social security system represents the obvious mechanism for providing it, despite concerns that are raised about the nature of the support. I am grateful to the Minister and the Minister for Welfare Delivery for the very helpful briefing that they provided last week.
At last, the Government are responding to the fact that the cost of living crisis is hitting those on benefits and pensions hardest, not least because the differential impact of inflation means that they face an even higher inflation rate than the rest of us—an estimated 10% or so for the bottom tenth of the population, according to the Institute for Fiscal Studies and the Resolution Foundation. The latest package, of which this Bill is a part, is progressive in its impact. Nevertheless, there is a “but”; I am sure that the Minister would be surprised if this were not the case.
My concerns stem in large part from the decision to provide one-off payments rather than increase benefit rates themselves so that they reflect the actual inflation rate instead of the 3.1% recorded last September. I understand and accept that there are technical difficulties when it comes to uprating benefits other than universal credit—although many stakeholders do not—but, if the Government had not delayed in bringing forward this package, would an autumn uprating really not have been possible? Even now, is it really the case that a decision to increase benefits in May could not be implemented in the autumn instead of a second lump sum payment?
Can the Minister explain how it was technically possible to uprate benefits twice in 1975, in April and November, in response to high inflation—a point made in the Commons but studiously ignored by the Minister there? Can she also tell us, in a subsequent letter if not now, exactly how long it would take if all the stops were pulled out to uprate universal credit, the legacy benefits that it replaces, the other benefits covered by the Bill and the other benefits not covered, in particular the carer’s allowance and contributory benefits? How long are we going to allow “computer says no” to drive policy?
My Lords, this Bill is clearly welcome. It is a good thing that cost of living payments can be made to those who most need them, so the policy is a good one. There are obviously a number of ways that this could be addressed—some potentially more effective than others—but anything that helps is to be welcomed.
However, there is a “but”—like the noble Baroness, Lady Lister, I have a “but”, and it is one that she has already mentioned. My concern is how the Bill will affect those self-employed whose earnings fluctuate from month to month, including many creative professionals; I am grateful to Equity for its briefing on this. The particular concern here is for those who did not receive a universal credit payment in the qualifying month and therefore will not be eligible for the cost of living payment because of low and irregular incomes. Can the Government ensure that the £650 cost of living payment be made to those whose entitlement to universal credit has been reduced to zero because of the minimum income floor?
There has been concern from the self-employed sector about the reintroduction of the minimum income floor after its welcome suspension during the pandemic. Of course, I am not trying to address that in relation to the Bill, but I ask the Government to acknowledge the effect of the MIF on the cost of living payment and reassess how fairly some self-employed—and, indeed, employed—workers will be treated. Despite the recent fall in the number of self-employed, the Government should acknowledge better the trend towards increasing self-employment in the longer term: currently, 15% of the workforce and 35% of the creative industries, which, pre-pandemic, were the fastest-growing sector of the economy and second in importance only to the financial sector.
The Government’s qualifying rules ignore the very nature of payment to creative professionals, which is often irregular and cannot be equated directly with salaried work. To ask people to change their behaviour work-wise to accommodate benefits such as these does not take into consideration the fundamental character of much creative work. There should instead be an acknowledgement by the Government of the need to be both realistic and fair in their rule-making. They should accept the validity of the self-employment work structure for creative professionals and others. This is on top of the fact that claimants are in any case being assessed on a past period—that is, the month until 25 May—so it is not something they can do anything about even if they had been able to; I believe that they should not be asked to.
My Lords, I should first explain that my noble friends Lady Kramer and Lady Janke, who normally speak on these issues, are unable to attend today so your Lordships have me instead.
This is a small and, in a sense, relatively modest Bill that we do not oppose—indeed, we cannot oppose it due to its nature as a money Bill. We have heard some really knowledgeable input from the noble Baroness, Lady Lister, and the noble Earl, Lord Clancarty, who made important points on the subject of children and families with children and about the self-employed, particularly those working in the creative sector. I hope that the Minister will take those on board.
As we heard from the Minister, the Bill implements some of the cost of living support that was announced by the Chancellor in his emergency Statement—specifically, the £650 support for households in receipt of means-tested benefits, which comes in two instalments, as the Minister set out, and the £150 for recipients of non-means-tested disability benefits.
The Bill does not include the other support mentioned by the Minister, presumably because it is not needed from a legislative perspective. As I intend to suggest later, it also does not include many of the measures that the Chancellor should have announced in the light of the situation that the country finds itself in today. Even as we debate here today, the economy is the major concern on everyone’s radar, especially with the official rate of inflation predicted to reach double digits very soon. Then, as well as the worry of inflation, households are facing the highest tax burden in 70 years. The typical family will see a hit of £1,200 a year thanks to the Conservative Party’s tax rises. I hardly need to remind the Minister that the UK is in very difficult territory.
At the heart of all this is a much wider endemic issue that needs to be at the front of our minds when we debate an issue such as this. I am going to presume that the Minister would describe herself as a capitalist; I describe myself as a capitalist as well. However, for the UK to be a successful capitalist country, its citizens need either to have capital or to have a reasonable expectation that they will obtain it. Yet, in Conservative Britain today, it is quite clear that the gap between those with capital, and therefore a stake in the economy, and those who stand little or no chance of ever acquiring it is getting wider every day.
My Lords, I thank the Minister for her introduction to the Bill and all noble Lords who have spoken. I thank my noble friend Lady Lister for halving the length of my speech by her excellent analysis. I would be really interested to hear the Minister’s response because, as a critique of what has happened to families with children, there are many questions that the Government have to answer, and I really hope that she will take the time to do it properly. There can be few Members of this House who know more about child poverty than my noble friend Lady Lister. When she makes a critique like that, it needs to be listened to.
These are the toughest times that most British people alive now will have had to live through. By next April, wages will be worth £2,000 less in real terms than just in 2020. Real pay in the UK is falling at the fastest rate for 20 years. Inflation is over 9% and rising. Fuel prices are skyrocketing and we are warned that the energy cap could rise by as much as another £1,000 in October. People are more desperate than they have been in a very long time.
Following the Spring Statement, the OBR warned that we were heading for the biggest fall in living standards since the 1950s, with more children set to be pushed even into absolute poverty. It was to avoid this catastrophe that Labour proposed a windfall tax on North Sea gas and oil producers to help families and pensioners. I am delighted that, after some months—indeed, after many months of ridiculing the policy—the Government have adopted it. If the Minister wants other ideas on how the Government should change their mind, I look forward to her having a chat with me and I can gladly supply her with some in future.
We recognise the extra support that the Government are now allocating, and these measures are welcome as far as they go. However, I share my noble friend’s concern that help is once again being given by a series of one-off payments, rather than addressing the underlying problem, which is the inadequacy of the social security system. I know that Ministers know that the welfare state is not fit for purpose because, when the pandemic hit and millions of people were flowing on to benefits, they had to add £20 a week to universal credit because they knew people could not manage. Once millions of people could see that, they would realise the system was not fit for purpose. However, that £20 was taken away just as inflation started to rise and now millions of people are struggling to feed and clothe their children and pay their bills. Why has it taken us so long to get to today? The pandemic may have been a shock overnight but the rise in prices was not—we have seen this coming. As the chair of the Work and Pensions Committee said when this Bill was debated in another place,
I thank all noble Lords for their contributions to the debate today. I hope we agree that this package of support will make a significant difference to families up and down the country, notwithstanding the points that have been made.
As I said earlier, the Government are committed to going further to provide support to relieve the financial pressures families are facing. The measures announced by my right honourable friend the Chancellor will provide an estimated millions of low-income households with £1,200 of one-off support in total this year to help with the cost of living, with all domestic electricity customers receiving £400 through the energy bills support scheme. This Bill will give us the necessary powers to deliver the additional payments set out in this package to families on the means-tested and qualifying disability benefits which we have been debating today.
There were a huge number of questions, which I shall endeavour to answer. There are some where I will have to write and the answers will be much better if I do so, so I hope noble Lords will accept that.
The noble Baronesses, Lady Lister and Lady Sherlock, asked why we are not uprating benefits. The one-off cost of living payment will enable timely direct transfers, ahead of the next uprating review of benefits and pensions, which will commence in the autumn, with any change in rates being payable from April 2023. This will help to support households most in need in managing increased costs. Our cost of living policy will also provide a payment of £650, as we have already said, whereas uprating the same benefits by 9% from April 2022 would be worth, on average, only £530. These payments will be tax-free, will not count towards the benefit cap and will not have any impact on existing benefit awards. This approach will allow households to retain the full value of the payments they receive. There is no need for people to fill out complicated forms, as we have tried to reduce bureaucracy.
I am sorry to interrupt the Minister. Clearly, we cannot amend this legislation but I think it is accepted across the House that there is nothing in here for children. Can she take that message back to her colleagues in government and could they look at other ways they might be able to help children during this period?
I am always happy to take things back to the department and am quite prepared to do that. I may need a little more information from the noble Baroness, but I am sure that will be forthcoming.
The next review of the benefit cap has been raised. As all noble Lords will know and as we have said many times, our statutory duty is to review the levels of the cap at least once in every five years and this will happen at the appropriate time. The current unusual economic period, with potentially counterintuitive and shifting trends, will need to be considered in the context of any decision in respect of the review.
The noble Baronesses, Lady Lister and Lady Sherlock, raised their concern about those who receive two lots of earnings in one universal credit period not being eligible. We anticipate that the vast majority of people entitled to one of the qualifying benefits will receive their first payment. Because of a change of circumstance, however, some may not qualify. Again, we have deliberately kept the rules simple and, unfortunately, it is not possible to distinguish those who have a permanent increase to their earnings from those whose earnings temporarily fluctuate. If a UC claimant’s income subsequently falls, these claimants will return to having a positive award after the cut-off date and may be eligible for the second cost of living payment, worth £324.
The noble Baronesses also raised a point about people who become eligible later. Where a person is found to be eligible for a qualifying social security benefit or tax credit payment but did not receive a payment, a retrospective payment will be made automatically. This could occur if a claimant successfully challenges the DWP’s decision on their social security benefit entitlement.
The noble Baroness, Lady Lister, and the noble Lord, Lord Fox, asked why we are excluding those in receipt of the carer’s allowance from the cost of living payment. Nearly 60% of working-age people on carer’s allowance will get a one-off payment as they are on means-tested or disability benefits. Carer’s allowance recipients will benefit from the £400 per household with a domestic energy supplier, provided through the energy bills support scheme.
I thank the Minister for giving way. On the concern I raised about the minimum income floor and fluctuating incomes, can the Government keep an eye on this? It would be very helpful if the noble Baroness could promise to do that. She says that it is very simple, but maybe it is too simple for this particular problem. If the Government could keep a close eye on that, it would be helpful.
I am very happy to go back to the department and request that. I am not in a position to commit to doing it, but I will go back and write to the noble Earl with the outcome of those discussions.
Another important point that the noble Baroness, Lady Lister, raised was about how we are making customers aware of these payments. We are working on an extensive communications plan. There will be digital advertising, social media and display materials such as posters and leaflets for jobcentres and stakeholder premises.
The noble Baronesses, Lady Lister and Lady Sherlock, raised the issue as to whether the household support fund is sufficient. Local authorities in England have ties and local knowledge to best determine how this support should be provided to their local communities. They have the discretion to design their own local schemes within the parameters of the grant determination and guidance to the fund. We are going to publish new guidance for local authorities for this latest extension of the household support fund ahead of the fund going live at the start of October.
The noble Earl, Lord Clancarty, asked about low-income and self-employed people. We accept that earning patterns can vary substantially and it would be impossible to choose qualifying dates that work for every person on UC. However, a second qualifying date certainly reduces the risk that those with non-standard pay periods on UC miss out on a cost of living payment altogether.
The noble Lord, Lord Fox, raised the point about whether the Government are putting up taxes during the cost of living crisis and whether taxes should actually be reduced. The actions the Government have taken to return the public finances to a sustainable path post Covid mean that we are in a strong position to respond to the cost of living challenge. The Government’s goal is to reform and reduce taxes. The Chancellor’s Spring Statement set out the Government’s tax plan, which includes reducing the tax burden on working families by increasing the threshold at which people start paying NI contributions—a tax cut worth over £330 for a typical employee—and by cutting fuel duty by 5p for 12 months. The tax plan also shares the proceeds of higher growth with working people across the country by cutting the basic rate of income tax by one percentage point to 19% from April 2024, saving more than 30 million people £175 per year on average.
20 of 29 shown
Social security is a transferred matter in Northern Ireland. However, this Bill will legislate for the whole of the UK in the absence of a fully functioning Assembly and Executive. This approach has been agreed by the caretaker Minister for Communities in Northern Ireland, who has also laid a Written Statement confirming this position. The timing of both payments will differ. For the cost of living payment, the first payment of £326 for households claiming a DWP means-tested benefit will be paid from 14 July, with the second payment of £324 coming in the autumn. Payments to those claiming tax credits only will be paid later to avoid duplication. Those not eligible for the first payment in time may become eligible for the second payment if they receive a qualifying benefit in the month before the next eligibility date.
We have intentionally excluded the second eligibility date from the Bill to prevent increasing fraudulent applications for benefits and fraudulent reporting of changes of circumstances. The Secretary of State will lay further regulations to specify the eligibility date for the second payment; however, it will be no later than 31 October. For the disability payment, those on a qualifying disability benefit will be paid from September. Where eligibility at the qualifying date for any of these payments is established beyond the expected payment dates, people will still receive the cost of living or disability payment, albeit at a later date. Both payments are tax free and will not count towards the benefit cap or affect existing benefit awards.
For families who miss out on this additional support but still find themselves in additional need, the Government are providing an additional £500 million to help households on top of what has been provided since October 2021, bringing total funding for this support to £1.5 billion. In England, an additional £421 million will be used to extend the household support fund from October 2022 until March 2023. Also, the Barnett formula will provide around £79 million to the devolved Administrations.
This deliberately straightforward Bill, stretching to only 11 clauses, will enable us to get support to families in need swiftly and without the need for additional bureaucracy. No one eligible for these additional payments will need to fill out any forms to claim them and payments will be made automatically. We have deliberately kept the rules for these payments as simple as possible because this is the only way of ensuring that we can develop the systems and processes required to deliver them at pace.
I know that many of your Lordships take a particular interest in delegated powers, of which this Bill makes provision for two. The first allows the Government to set a second eligibility date for the second part of the cost of living payment; the second is to facilitate the existing overpayment and recovery procedures for the qualifying benefits, to be applied to the cost of living payment. These are powers to allow for the effective administration of the payments, particularly to protect the public purse. I note that, in its report, the DPRRC raised no concerns for the Government to respond to.
This Bill will make a real difference in easing the stresses being felt by people up and down the country by supporting them on the rising cost of living at this most challenging time, and doing so simply and swiftly. I commend it to the House.
A key group to lose as a consequence of the decision to make lump sum payments rather than uprate benefits is families with children—especially larger families because payments will not be differentiated according to family size. Thus, according to the Resolution Foundation, the average amount gained from the Bill by families with three or more children is less than that received by those with no children because the latter are more likely to receive a disability benefit. Yet spending on essentials is significantly affected by family size. The foundation suggests that fuel spending among families with three or more children is likely to go up by over £500 more than for those without children. It calculates that, had benefits been uprated by 9.5% in October, larger families would have received more than £100 more on average than they will from the May support package.
In the Commons, the Minister emphasised that the payments are targeted at “those in greatest need”, as did our Minister. This is true and commendable, up to a point, but it ignores children—especially those in larger families, who are already at a significantly disproportionate risk of poverty, including deep poverty. This greater risk has grown over the past decade thanks mainly to government social security policies, including the two-child limit and the benefit cap. It is welcome that the payments covered by the Bill will be disregarded for the purposes of the cap. Nevertheless, as the chair of the Work and Pensions Committee pointed out in the Commons, it is high time that the level of the cap, which has not changed since it was established six years ago, is subject to the review required by statute. The Minister’s response to him was that it would be reviewed “at the appropriate time”. Can the Minister tell us when the appropriate time will be, as many would argue that it is already high time?
A growing body of evidence shows how much families with children generally are suffering. Just last week, the Childhood Trust reported that the mental health of children living in poverty is already suffering as a result of the cost of living crisis. Hungry, Anxious and Scared is how it summed it up. It quoted Charlotte, aged nine:
“Your emotions just drown and the only emotion that’s left is sad”.
That made me feel pretty sad and actually very angry. When the Chancellor was questioned by the Treasury Select Committee about the lack of additional support for children, he rather sidestepped the question but acknowledged that no analysis has been done of the package’s impact on child poverty. However, we were told by the Minister for Welfare Delivery last week that the lack of differentiation for families with children was due to technical reasons.
There is a pattern here that suggests an underlying disregard for the needs of children. The welcome universal credit uplift during the worst of the pandemic did not include any uplift in the allowances for children. It was only thanks to Marcus Rashford that action was taken on school meals at the height of the pandemic, and now the Government refuse to extend free school meals to all children on universal credit despite the recommendation in the independent national food strategy and the calls from teachers and others—although I do applaud its extension to all qualifying families with no recourse to public funds. According to analysis of government data by the Child Poverty Action Group, of which I am the honorary president, over one in three—more than 800,000—children in poverty do not qualify for free school meals.
If the Government really cared about hungry children, they would have found a way to boost their financial support and at the very least would have extended free school meals and also put more money into free school breakfasts as called for by Magic Breakfast. The Treasury has, understandably, highlighted the progressive vertical distributional impact of its latest package of support, but nowhere has it shown the horizontal distributional impact as between those with and without children, which also matters. Can the Minister explain why the Government time and again ignore children when it comes to financial matters?
The Secretary of State has herself previously warned that one-off payments are less helpful from a budgeting perspective than a steady stream of money—a point made also by charities such as Sense and CPAG. One consequence is less security. Another consequence of making lump-sum payments linked to entitlement on a specific date is the much steeper cliff-edge that it creates, adding to the insecurity created by often fluctuating incomes and circumstances among those on low incomes. What estimate has been made of the numbers who might become eligible for one of the qualifying benefits in the period until next April when they are next uprated but who do not qualify for the payments in the Bill because they were not entitled to a qualifying benefit at the specified times? Anyone who, say, starts claiming benefit because they have lost their job or become ill after the second cut-off date will get nothing at all. This seems like very rough justice.
Even rougher justice is the issue raised by my noble friend Lady Sherlock in last week’s briefing, and by MPs, where someone has not qualified for UC in the specified month because of the way their wages are paid. Has thought been given to the suggestion made by Nigel Mills MP that the qualifying period be extended to two months? Another group who are victims of rough justice is low-income self-employed people who do not receive UC during the qualifying period solely due to the operation of the minimum income floor. Equity has challenged the response to this point in the Commons, and I ask the Government to reconsider the exclusion of this group.
Just to follow up on the briefing meeting, the Minister for Welfare Delivery promised to let us know how payment will be made to the small number of people without a bank account. Is the Minister able to tell us today? For the record, can she confirm that all recipients will be informed individually as soon as possible after payment has been made so that they know why this extra payment has appeared in their account?
I have emphasised the failure to help children; I am also very concerned about the exclusion of carer’s allowance. I realise it is not a means-tested benefit and that some recipients will qualify via a means-tested benefit they are claiming but, according to Carers UK, there are several hundred thousand carers in receipt of carer’s allowance who do not receive means-tested benefits and many of them are facing serious financial stress. Carer’s allowance is lower than other equivalent benefits. Many carers face additional costs associated with caring. Why, therefore, could not the disability payments have been devised in such a way as to include carers? Nine out of 10 carers surveyed by Carers Trust earlier this year said that they feel ignored by the Government. The exclusion of carer’s allowance from the Bill’s qualifying benefits will only reinforce this sense of being ignored and, of course, many of those affected will be women who also bear the main burden of budgeting in low-income families. It is also not clear why the qualifying disability benefits do not include contributory employment and support allowance—an example of the downgrading in importance of contributory benefits. Can the Minister please explain why it is not included?
When announcing the package, the Chancellor acknowledged that small numbers will fall between the cracks and gave the example of those in receipt of housing benefit not also claiming other benefits but—“fear not”—they can claim help from the additional £0.5 billion that is being put into the local authority household support fund from October. The problem is that those raising concerns about, for instance, children in poverty—not exactly a small group—excluded carers or low-income self-employed people are also being directed to the fund. I fear it is the loaves and fishes approach to policy-making, which we have seen all too often. While the fund has provided much needed help to some, it is discretionary and cash-limited and, as such, is no substitute for weekly payments as of right. What will be done to direct excluded groups in need to the fund, what monitoring of the fund’s use is taking place and what happens if a local authority runs out of money, as we know they do? Can the Minister also tell us whether any thought has been given to the calls from stakeholders, including the Lloyds Bank Foundation, for the suspension of deductions from benefits, at least until next April when benefits are uprated?
This brings me to my final point—which I am sure will be a great relief to noble Lords. I welcome the confirmation that, subject to the Secretary of State’s review, benefits and pensions will be uprated next April in line with this September’s inflation rate, although claimants will face a long, hard winter before that. I hope the Government will ignore the siren voices arguing against such inflation-proofing. The Chancellor concluded his Statement by noting the need to put the measures into context. We need to do the same, but it is a rather different context to that highlighted by the Chancellor. Overall, working-age and children’s benefits have been reduced by approaching £40 billion a year as a result of freezes and cuts since 2010. The latest OBR Welfare Trends Report notes that the
“decline in the real value of unemployment-related benefits … even excluding the effects of the removal of the … £20-a-week uplift … represents the largest fall since annual uprating began half a century ago”.
As the Covid Realities research demonstrates, the reality of life on a low income is one of perpetual crisis. This Bill represents no more than a temporary salve to mitigate the crisis, welcome as it is. We now need a commitment to a review of how benefits are uprated, as called for by the chair of the Work and Pensions Committee and others. Ad hoc one off-payments and discretionary local authority support do not provide the security that those on low incomes desperately need and that the social security system ought to provide.
The key issue is that payments such as these are intended to go to those in need. Self-employed people in the hospitality and entertainment sectors are among those who are poorly paid, at least partly down to the fact that they are among the last to come out of the pandemic and are now being hit by another crisis: the cost of living crisis. As Equity points out, missing out on these payments will have a devastating impact on many entertainment professionals. Young people just starting out—for example, those coming to the end of a start-up period—and those from diverse backgrounds will be among the significant number who may be affected in this way.
I appreciate that this is a money Bill and that it would have been frowned on to have introduced an amendment to the Bill in Committee and disrupted proceedings for the day, but I ask the Government to do everything they can to address this concern and provide a solution to a problem that is ultimately one of fairness.
Worse than that—never mind savings and capital—while the top 10% of the country’s earners tighten their grasp on our economy, an increasing number of citizens are slipping below the subsistence line. It is not just global shocks that have caused that to happen, as the Minister put it. The slide was already happening, then Covid came and made it worse, and now inflation is rapidly increasing the number of people in economic peril and the pace with which, in some cases, they are traveling towards destitution. Proud families who never dreamed that they would find themselves in trouble are now struggling to pay the bills.
At the last election, the Conservative Party successfully campaigned on the idea that there are specific geographic areas that have been economically left behind. Although that is undeniably true, the party’s careful selection of particular towns and cities skirts over the underlying issue: the ever-widening income gap across the whole of our country. Although that gap is somewhat defined by geography, it is far more complex than that, being caused by demographics, educational opportunities and—let us face it—who your parents are.
That ever-widening gap is the real challenge at the heart of many issues that we are seeing in the UK today. So what is the modern Conservative take on it? While one part of the Government is signalling for the EU cap on already huge banker bonuses to be lifted, another department is seeking to limit public sector pay increases to one-third or one-quarter of the rate of inflation. Clearly this Government are not even trying to address the gulf between the richest and the rest of our country; in fact, it seems to look like the opposite.
When it comes to acknowledging the need to arrest the pain inflicted on the poorest in society, the Bill takes a few small steps in the right direction. However, as the noble Baroness, Lady Lister, eloquently expressed, it is a completely inadequate response to the cost of living crisis. It fails to reinstate the £20-per-week universal credit cut, which would have provided households on universal credit with an additional £1,000 a year. It fails to cut the main rate of VAT to 17.5% for one year, which would have put an average of £600 in the pocket of every UK household while lowering inflation and, importantly, helping our high streets, giving them a much-needed boost and increasing economic growth. A similar VAT cut in 2008 was found to increase retail sales by 1% and increase aggregate expenditure by nearly one-quarter of 1%.
The Bill also fails to consider repealing the national insurance rise and freezing the income tax thresholds. These are unfair tax rises that are making the cost of living crisis worse for millions of families across the UK. It fails to support rural communities concerned with rising fuel prices through the rural fuel duty relief scheme, which was promoted today by the newly elected MP for Tiverton and Honiton. It also fails to include those claiming the carer’s allowance from the list of benefit recipients qualifying for additional support.
Furthermore, provisions in the Bill allow for payments to be made in two instalments. By paying all the support on 14 July, the day of the first instalment, the Government could have supported people who need assistance more immediately. Perhaps the Minister would concede that, given the increase in the rate of inflation, the second payment should be accelerated as well.
It has been a pleasure to speak, briefly, in this short debate. I am looking forward to the Minister’s explanation of how the ever-widening income gap will be addressed in the second half of this Parliament. Most of all, I am looking forward to the Minister explaining how the Bill even scratches the surface when, across the country, thousands of honest, hard-working families are slipping ever deeper into poverty.
Following the by-election defeats inflicted on the government party last week, the current Prime Minister, Boris Johnson, said:
“We’re now facing pressures on the cost of living … spikes in fuel prices, energy costs, food costs—that’s hitting people. We’ve got to recognise there is more we’ve got to do.”
What is this “more” and when will it be done? Or, as is usually the case, is the Prime Minister’s statement merely empty words with no substance, no policy and no prospect of implementation?
“the decision has been taken to replace adequate uprating with ad hoc payments from the Treasury”.—[Official Report, Commons, 22/6/22; col. 897.]
The Government should have put in place a broader package of support through our social security system. It has been established that one-off packages, with heavily simplified eligibility, lead both to increased fraud and to the kind of rough justice we have heard about. We have heard about rough justice for children. Can the Minister really justify a scheme that gives the same amount to a single person on benefits as to a couple with three children when their energy, food, clothing and other costs are so radically different? 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, but there is no recognition of this. The social security system acknowledges things such as family size up to a point, but this does not and cannot. Does the Minister accept that this is rough justice?
Does the Minister also accept that it is rough justice for people with fluctuating incomes, a point made by the noble Earl, Lord Clancarty, in a helpfully clear critique of the impact on people who are self-employed? As we have heard, this £650 payment comes in two parts. To be eligible for each, the claimants must be entitled to a minimum amount of benefit or tax credit in respect of an assessment period covering a specified date. However, the Minister often tells us how happy she is about universal credit coming in, because it is really flexible—it flexes to someone’s circumstance—yet she has designed a system that makes that a disadvantage. Universal credit is designed to flex month by month, so some people will be entitled to a payment one month but nothing the next because their income is lumpy in that way. If they are unlucky with how that falls, and they get nothing in the month in question, they will not get one penny from this system. That can even hit people whose earnings do not change at all, just because they happen to have two paydays within one universal credit assessment period—for example, the last Monday of the month. When that happens, the system thinks their pay has doubled, they earn too much, get no universal credit and, therefore, they will not be eligible for this. Given that the Government boast about the flexibility of universal credit, what are they going to do about these payments, to give support to those for whom that flexibility is taking away any chance of any support at all? I would be interested in hearing whether someone who is self-employed, who is simply getting nothing just because of the minimum income floor, will therefore be excluded entirely from the payments.
There is a different form of rough justice for some disabled people who have non-means-tested benefits. They will be eligible for the £150 payment. However, the Minister can tell the House, I am sure, that the Government are in the process of changing the rules specifically to debar 290,000 people who get DLA, PIP or attendance allowance from getting £140 off their energy bills through the warm home discount scheme—“Have £150 here, give me back £140 over there and have £10.” In these circumstances, the reason disabled people get these benefits, even though they are non-means tested, is to cover the extra costs of disability. That includes things such as higher energy bills and higher transport costs. Can the Minister explain why the Government are giving help with one hand while taking it away with the other? I would also be interested to hear a response to the query about carer’s allowance from my noble friend Lady Lister.
The Minister points to the household support fund—this is always the answer, the great catch-all, whenever we raise a question. I think loaves and fishes were mentioned. I have a great affection for loaves and fishes and like to see them extended. However, much as I admire some things the Minister says, I do not think she yet has the power to multiply loaves and fishes. The household support fund will be a fixed amount of money. I have been looking at the websites for some councils, and many have already made their allocations for the period April to September. They specify what is for; they are often small grants for particular purposes. For April to September, is more money coming in, will the guidance change and, if not, will anyone get any help then, even they miss out on these payments altogether in the first tranche in July? For the extra money in the period from October, will the government guidance say that the kind of people we have described who miss out on the payment because of rough justice should be able to get the full £650 from the household support fund? If so, will there be enough, and what will happen to all the other things it is supposed to be spent on as well?
On pensions, I am sure the Government now regret breaking their manifesto promise commitment to the triple lock, given what is happening to pensioner poverty. It is good that those on pension credit will be able to claim the £650, but—it is a small point—why does the impact assessment show fewer people on pension credit getting the second payment than the first? Is there something going on there that the Minister wants to explain? The impact assessment projects the case load, the number of people on pension credit who will get payments 1 and 2. The number getting payment 2 is slightly lower than payment 1. This was asked in the Commons but not answered, so I hope her officials—someone behind the scenes who I would not dream of referring to—have had the opportunity to read Hansard and will therefore be able to advise on the answer to this question.
Emergency and one-off measures have their place, but they really do not give people the security they need or match the increases in costs that people are facing on the ground. The truth is that we came into these cost of living increases after years of underwhelming growth and savage social security cuts, which left our system simply unfit for purpose. I will mention just the two-child limit, the benefit cap, the bedroom tax, inadequate help with housing and council tax, and repeated real-terms cuts to universal credit and legacy benefits, as detailed by my noble friend Lady Lister.
I am glad that the Government have finally been dragged, kicking and screaming, into recognising the extent of need out there. But we now need a long-term plan to rebuild social security, grow our economy, sort out our labour market and raise living standards so that we can lift people, from children to pensioners, out of poverty. Surely we can all agree with that.
Separately from the 2022-23 cost of living support package, benefit and pension rates are subject to an annual review. As mentioned by the Chancellor on 26 May, the uprating of benefits is a matter for the Secretary of State for Work and Pensions. Her annual statutory review of benefits for the tax year 2023-24 will commence in the autumn, when she measures inflation using the September consumer prices index. Following completion of her review, the Secretary of State’s decisions will be announced to Parliament in November. For the avoidance of any doubt, we are committed to the triple lock for the remainder of this Parliament.
The noble Baroness, Lady Lister, asked whether the uprating process will be adjusted in the future. The work of the department in 1975 was mainly undertaken by hand and on a claim-by-claim basis. It was therefore possible to uprate twice in one year, provided the trained manpower resources were available or could be secured. The department began to computerise the payments of benefits in the mid-1980s; we have indicated the constraints of the core IT systems in undertaking a mid-year uprating and the risk that would pose to payments. The Social Security Administration Act 1992 provides for a statutory annual review of uprating and is the basis on which Parliament has required successive Secretaries of State to act. The requirement is for one review each tax year.
The noble Baroness, Lady Lister, asked how long it will take to uprate all benefits, including UC and legacy benefits. I will need to write to her on that, which I will do and place a copy in the Library. She also asked about the flat rate of payments not tailored to circumstances. She said that this disadvantages children in large families and that the issue should have been solved by uprating benefits. The Government are committed to providing direct and timely relief to those who need it most through these one-off cost of living payments. Flat-rate payments are the quickest way to deliver support to those who need it most; they will allow us to make timely transfers to more than 8 million people and 6 million disabled people before the next benefit uprating in April 2023. As I have said, we have deliberately kept the rules as simple as possible. The Government are spending over £5 billion on qualifying means-tested benefits—around £2 billion more than the additional cost if the qualifying benefits increased in July 2022 to 9% higher than the previous year.
The noble Baroness, Lady Lister, who has been very busy, asked about the focus being on reforming UC and said that the two-child limit means that people do not receive enough money. Statistics from the Office for National Statistics show that in 2021, of all families with dependent children, 85% had a maximum of two in their family; for lone parents, this was 86%. The Government feel it is proportionate and fair to taxpayers to provide support through child tax credit and universal credit for a maximum of two children.
The noble Baroness, Lady Lister, asked why we are excluding those on contributory based benefits from receiving the one-off payment. Non-means-tested benefits are not eligible benefits in their own right, but low-income recipients can claim an eligible means-tested benefit alongside them. Contributory and new-style benefits were not included because people claiming these benefits may have other financial resources available to them. They may also benefit from other parts of the package of support, including the £400 per household domestic energy help. Claimants who require further financial assistance may be eligible for universal credit; if their claim is successful, they may then qualify for the second cost of living payment in the autumn.
The noble Baroness, Lady Lister, raised the important issue of children—and I agree with the noble Baroness, Lady Sherlock, about the knowledge and experience the noble Baroness has in this area. I am advised that this is an issue where we will need to write to the noble Baroness. We will probably need to have some continued communication to ensure that I answer her questions to the level and standard that she wishes.
The noble Baroness, Lady Lister, and the noble Earl, Lord Clancarty, asked about fluctuations in earnings. As I have said, we have deliberately kept the rules as simple as possible. I have said before that it is not possible to distinguish between those who have had a permanent and temporary increase. I do not think I can say more on that at this point.
On the minimum income floor, which was raised by the noble Baroness, Lady Lister, and the noble Earl, Lord Clancarty, it is the same thing: we have deliberately kept the rules as simple as possible. For those who are not eligible for this support, or families that still need additional support, the Government are providing the household support fund with an additional £500 million to help households on top of what has been provided. Since October 2021, the household support fund has gone up to £1.5 billion. In England, this will take the form of an extension to the household support fund backed by £421 million and administered by local authorities.
The noble Lord, Lord Fox, asked whether the cost of living payments are a sticking plaster. In total, the measures the Chancellor announced in May provide support worth £15 billion. Combined with other plans, as I have already said, this raises the money to support people during this cost of living crisis to £37 billion. This is more than or similar to the support in countries such as France, Germany, Japan and Italy. Importantly, around three-quarters of that total support will go to vulnerable households.
The noble Lord, Lord Fox, asked whether the Government were wrong to reduce the £20 uplift to universal credit. It was always to be a temporary measure, and it was a temporary measure. I do not think there is anything else I can say to noble Lords about that.
The noble Lord, Lord Fox, asked what we are doing to help people in rural areas. The boiler upgrade scheme has a budget of £450 million to support households in England and Wales to make the switch from fossil fuels to low-carbon heating. This helps people in rural areas transfer from fossil-based fuels to low-carbon heating with grants of £5,000 towards the cost of installing an air source heat pump, £6,000 toward the cost of a ground source heat pump and £5,000 for biomass boilers for properties not suitable for a heat pump, provided they are in a rural location and not connected to the gas grid. The home upgrade grant will provide upgrades to low-income rural households living off the gas grid in England to tackle fuel poverty and meet net zero. The Government have allocated £1.1 billion to the home upgrade grant over the next three years.
Again, the noble Lord, Lord Fox, asked why we are delaying half of the £650 to later in the year. Cost of living payments for those on means-tested benefits are deliberately being delivered in two payments to help support budgeting. This approach will also ensure that any newly eligible claimants can be paid the £324 payment even if they did not get the £326 payment and that all recipients of the second payment receive this closer to winter.
The noble Lord, Lord Fox, asked whether we were being more generous to those on means-tested benefits and said that £650 is not going to scratch the surface. The Government are providing over £15 billion in further support, as I have said. Three-quarters of it will go to low-income households. Each cost of living payment will be paid to 8 million people on a means-tested benefit. Millions of the lowest income households will get £1,200 of one-off support. I have said that the Secretary of State will use the CPI in September to decide on the uprating of benefits.
The noble Baroness, Lady Sherlock, asked what impact the cost-of-living crisis is having on poverty. The latest available—