Low-income and Vulnerable Consumers

Baroness Lister of Burtersett Excerpts

Thursday 6th November 2014 Lords Chamber

[Baroness Lister of Burtersett (Lab)]

My Lords, I welcome this debate, and I am grateful to my noble friend Lord Whitty for initiating it. I will start with a quotation from a recent book, Austerity Bites, by the journalist Mary O’Hara:

“If there was one word to capture the mood during the months that I travelled the country, it was ‘fear’. I talked to people afraid of cuts that had yet to be fully felt, of losing their home, of disability benefits being snatched away, of being unable to take care of their children or sick or elderly relatives, of essential local services being eliminated—and of their mental health deteriorating. The more the shockwaves of austerity were absorbed, the more initial fears about what might happen mutated into a daily dread about how to survive”.

That daily dread is not being felt by the privileged, who have enjoyed big pay rises and bonuses during this time of austerity, and many of whom have also enjoyed tax cuts.

I will focus my remarks on the effects of social security cuts in particular, which, to add insult to injury, have all too often been justified in terms that vilify the benefits system and those who have to rely on it. In addition to the specific cuts that I will talk about, the real value of a number of benefits received by people of working age is being steadily eroded, as my noble friend Lord Whitty explained. This has been justified by Ministers in the name of fairness as between those in and out of work, even though overall the cuts affect more people in work than out of it—the so-called hard-working families. The Chancellor has signalled a further £12 billion in cuts should the Conservatives form the next Government.

Research published this week by the Joseph Rowntree Foundation demonstrates how the real cut in living standards for consumers affected is greater because of the impact of differential inflation rates in recent years. This means that, in the words of researchers at the Institute for Fiscal Studies:

“Recent inflationary trends have disproportionately affected those in poverty”.

In other words, their living standards have been cut by even more than the cut in benefits implies. A companion JRF report points out that it is harder for low-income consumers to shop around or switch suppliers, partly because they often lack access to what it calls “enabling goods”, such as internet access, which advantage better-off consumers.

The best known of the benefit cuts is what the noble Lord, Lord Best, was the first to dub the “bedroom tax”. The UN Special Investigator on Housing has warned that it could constitute a violation of the human right to adequate housing. The justification—to free up larger accommodation in the social rented sector—is looking rather threadbare, with only 4.5% of affected tenants having downsized within the first six months, according to the Government’s own review. But, they say, this is a good start. I dread to think what a bad start would look like. The review also revealed that nearly three in five had cut back on what they deemed to be household essentials in order to meet the shortfall.

According to the New Policy Institute, about two-thirds of those hit by the bedroom tax have also had their council tax benefit cut following so-called localisation, with a 10% cut in funding imposed on those of working age and their families. The institute estimates that this year 2.34 million low-income families will pay on average £149 a year more in council tax than under the old council tax benefit scheme. Advice agencies are already reporting that council tax arrears have become their largest debt inquiry category.

In case these cuts were not sufficient to reduce the living standards of people on benefit, those deemed to be receiving too much money are now subject to a benefit cap. This means that in many cases families are paying the price for a long-term policy—pursued, I acknowledge, by successive Governments—of encouraging higher rents and subsidising them through housing benefit. Research by the Centre for Economic and Social Inclusion has shown that the cap is causing “uncertainty, distress and hardship” as families cut back on essentials, run up debts or fall back on discretionary or charitable support. Finding work has just not been a feasible solution for many of them. The main losers are children, particularly in larger families, which means there is a disproportionate impact on some minority ethnic groups; according to initial government monitoring, 80% of those affected are women, including some carers.

Growing numbers of people claiming jobseeker’s allowance and employment and support allowance are also being affected by an increasingly punitive benefits sanctions regime. The annual number of sanctions has almost doubled under the coalition. Food banks have identified sanctions as one of the main reasons for people needing their services. Worse still, there have been reports of people who have been sanctioned stealing food in order to survive.

Children have been among those worst hit by the benefit cuts, as already stated by my noble friend Lady Crawley. An impact assessment of tax benefit changes and cuts in public services carried out for the Office of the Children’s Commissioner found that families with children have been disproportionately hit, particularly those on lower incomes. As a result, child poverty is expected to increase significantly over the next few years. This analysis led to the conclusion that the best interests of children are not being treated as a primary consideration in line with the UN Convention on the Rights of the Child.

The growing pressures on low-income families have also been linked by the president of the Association of Directors of Children’s Services to a big increase in child referrals to local authorities. Similarly, in their foreword to the State of the Nation 2014 report for the Social Mobility and Child Poverty Commission, Alan Milburn and the noble Baroness, Lady Shephard, warned that:

“The impact of welfare cuts and entrenched low pay will bite between now and 2020. Poverty is set to rise, not fall. We”—

they—

“share the view of those experts who predict that 2020 will mark not the eradication of child poverty but the end of the first decade in recent history in which absolute child poverty increased”.

We heard in the earlier debate today that women, too, have been among the main losers from cuts in benefits and services because they rely on them more heavily. As the main day-to-day managers of poverty, they suffer in particular as consumers, and their job will be made that much harder with the payment of universal credit monthly. According to a House of Commons Library analysis, women have borne nearly four-fifths of the impact of tax benefit changes. The Fawcett Society has warned that overall the impact of cuts spells,

“a tipping point for women's equality”,

leading to,

“a society in which women’s voice and choices are diminished, where women’s access to employment, justice and safety are undermined and where women become more, rather than less, dependent on the state or their families for support”.

They and their families are also becoming more reliant on charity in order to get by, as seen most starkly in the huge rise in the numbers turning to food banks, which was discussed movingly by the right reverend Prelate the Bishop of Norwich.

Let us stop and think what this reliance on food banks means. Let us think how we would feel if we had to rely on food banks. Professor Elizabeth Dowler, who co-authored the review of food aid for Defra, observed:

“Not having enough food is … an issue of private shame. … And it is an issue of private suffering. If you are not getting enough food, or the right kind of food, you absorb the misery yourself. The cost is embodied by you. It is your body that becomes unhealthy”.

A letter to the British Medical Journal about a year ago warned that growing food insecurity could turn into a “public health emergency”. Private shame made public becomes even harder to bear.

A similar tale is told by a more recent Joseph Rowntree study of social housing tenants, which found:

“Cutbacks in support make people on low incomes, in work and out, more vulnerable to debt, at risk of eviction and short of essentials, so they rely on food banks and other emergency support”.

Unfortunately the abolition of the discretionary social fund and the transfer—not ring-fenced—to local authorities of the budget that used to pay for crisis loans and community care grants has reduced the emergency support available, with particular implications for survivors of domestic violence.

Another group disproportionately affected is disabled people. Just Fair has warned that the combined effect of a number of changes on disabled people is,

“very likely to compromise their enjoyment of the right to independent living”.

Disability activists have led demands for a cumulative impact assessment of the cuts’ effects. The Government say that that is too difficult to do—but while of course it would be difficult, a report for the Equality and Human Rights Commission has shown that it is “feasible and practicable”, and its initial results confirm the disproportionate impact on low-income disabled people, as well as on women and children. I would very much welcome the Minister’s response to that question of a cumulative impact assessment that is being called for increasingly widely.

No doubt the Government’s response will be that such cuts were necessary in the face of the deficit—caused mainly, I note, by the financial crash. This is not the place to argue the rights and wrongs of deficit reduction, but it is the place to point out that by choosing to fund what I believe is about three-quarters of it through spending cuts and only a quarter through tax rises, the Government have ensured that those with the narrowest, not the widest shoulders bear most of the pain.

The policy of progressively raising personal tax allowances while at the same time cutting the real value of child benefit is no answer, despite the arguments of the noble Baroness, Lady Noakes. It is of no help to those in or out of work whose incomes are too low to pay tax, of whom over three-fifths are women, according to the Women’s Budget Group. Moreover, as universal credit is introduced, even low-income taxpayers will receive only part of the gain enjoyed by others, because the rest will be clawed back through reductions in the credit. For a Government so keen on targeting, this is a wasteful and regressive use of resources—or, as the Joseph Rowntree Foundation put it,

“an incredibly expensive and inefficient way of helping low-income working households”.

The evidence of the harmful cumulative impact of cuts is mounting. People of working age on low incomes, particularly women and disabled people—in and out of work—are suffering. Children are suffering. Is this the kind of society in which we want to live?