Social Security (Additional Payments) (No. 2) Bill

Karen Buck Excerpts

2nd reading
Tuesday 21st February 2023 Commons Chamber

[Ms Karen Buck (Westminster North) (Lab)]

These continue to be some of the hardest times in recent living memory for so many of our fellow citizens. Few have been entirely immune. Millions are struggling, but for far too many, these hard times have brought them close to, or even into, destitution.

Given the importance of energy prices to the cost of living crisis, the fall in the price of wholesale gas futures over recent months is immensely welcome, but let us not imagine that this crisis is about to come to an end. Forecasts consistently suggest that this is, at best, the end of the beginning, not the beginning of the end, not least as consumers face a rise in their costs as the energy price guarantee gap is raised this year, with no continuing energy bills support scheme to cushion the blow.

The Resolution Foundation estimates that working-age household incomes have fallen by an average of 3% this year, but will fall by an average of 4% next year—the biggest single fall since 1975. As food inflation hits 16.7%, food banks, such as those run by the Trussell Trust and the Independent Food Aid Network, are overwhelmed by demand. This week, IFAN said:

“Our fasted growing client group are working people on low wages who cannot make ends meet.”

We have had references today from several Members, including my right hon. Friend the Member for Hayes and Harlington (John McDonnell), about the rise of in-work poverty. IFAN went on to say:

“The majority have always managed on a low income.”

It said that they

“know how to budget and to live frugally, but, with costs rising, there simply isn’t enough money in their pockets. It’s soul destroying.”

This weekend, we heard that the Co-op store group has resorted to putting packets of formula milk behind the counter as a security measure, as though they were precious stones in a Mayfair jeweller’s. We have seen the impact of these price rises devastating families and pensioners. We have seen that a quarter of people on means tested benefits now report food insecurity, even with the special payments that were made last year—that compares with just 4% in food insecurity before covid. We have seen how costs have risen this year, driven by energy costs, but we have seen them being felt in the weekly food shop just as acutely.

We understand how much of this is attributable to factors beyond our control. We know that the catastrophic shocks that the economy experienced, first from covid and then from the energy price spike, were felt most severely by those least able to withstand them. As we debated just two weeks ago in this House, most working age benefits where uprating was not fixed by statute were not fully uprated over a period of seven years from 2013 to 2020, with nominal increases limited to 1%. or with rates frozen altogether.

Child benefit, which was uprated only once between 2010 and 2019, lost a fifth of its value between 2010 and 2022. The value of jobseeker’s allowance and employment and support allowance fell by 12.5% in real terms. The value of universal credit, the Government’s flagship benefit, fell by 12% in value between 2013 and 2022.

However, the extreme vulnerability experienced by so many of our fellow citizens is not just because of what has happened within the social security system. It is because of sluggish wage growth and the failure to protect workers in insecure employment. It is because of the failure to prepare this country for energy price rises by investing in home insulation and renewable energy, or by extending the energy price guarantee into the summer when prices may actually be falling. It is because of the failure to build new homes—especially affordable homes—and to protect those who are being hit by spiralling private sector rents. It is because of over a decade’s neglect of the childcare sector, which is seeing providers fold, costs escalate and too many parents forced to consider whether work is even a realistic option in the face of their childcare bills.

Of course, we do not oppose the payments; they are welcome so far as they go, but one-off provision of that kind is not, and can never be, the answer to the deep cost of living crisis stalking the country, with in-work poverty at record levels and destitution wrecking the physical and mental health of far too many people. Emergency responses, inevitably somewhat rough and ready, are never going to be able to take into account the full range of individual circumstances, not least household size, which determines additional need. In this short but important debate, we have also had reference to how people with nil awards are treated, the impact of cliff edges on incomes, and anomalies linked to qualifying periods.

The additional payments policy, a flat-rate payment triggered simply by whether people are in receipt of means-tested benefits, is cruder than it needs to be. When this was discussed last year, it would not have been beyond the capability of Government to take into account actual household size in setting entitlements, or to sort out some of the other anomalies—all of which were debated when we discussed special payments a few months ago. Let us speed this essential help to households in need, of which there are so many, but let us not pretend that this is the very best that could have been done.

Social Security (Additional Payments) (No. 2) Bill

Karen Buck Excerpts

Committee stage
Monday 6th March 2023 Commons Chamber

[The Chairman of Ways and Means (Dame Eleanor Laing)]

I call the shadow Minister.

[Ms Karen Buck (Westminster North) (Lab)]

I, too, welcome you back to the Chair, Dame Eleanor.

We continue to support the additional payments covered by this Bill because they will deliver much-needed support to households facing the greatest cost of living crisis we have seen for decades, but we also continue to recognise the limitations inherent in any policy of one-off, flat-rate payments and the extra limitations of the approach taken here.

One of the problems that the additional payments are intended to address is the six-month lag between the value of social security benefits and real-world prices, which can lead to long-term impacts on the real value of benefits when inflation is high. That problem became critical in the winter of 2021, when it became obvious that annual inflation would reach over 10% by the time benefits were uprated by only 3.2% in the following April, using inflation data running up to the previous September.

We are still dealing with the consequences of the 2021 uprating decision. As the Institute for Fiscal Studies explains,

“in April 2023, the annual uprating of benefits will merely take them back to around the level they were at a year earlier—the shortfall that opened up between September 2021 and April 2022 will still remain unplugged.”

This means that the real value of benefits will be 6.2% lower in April 2023 than before the pandemic, and astonishingly, based on current forecast inflation, benefits will not return to their pre-pandemic level until 2025.

This problem was completely predictable well over a year ago—a year in which the Government could surely have applied themselves to coming up with a better solution than the one before us today. The approach of one-off, flat-rate payments could just about be justified last year by the international situation and the suddenness of the energy price surge, but that does not apply this year.

We know that one-off payments are a crude substitute for ensuring that social security benefits retain their real value. But even accepting the one-off approach, this Bill, while undoubtedly necessary, will lead to rough justice and, in some cases, poor value for money. It does not even attempt to relate payments to need; it sets qualifying conditions and arbitrary reasons; and it creates an arbitrary cliff edge in support based on whether people are receiving a penny of qualifying benefits.

Some households will be shielded from the impact of inflation—indeed, some will be more than protected—but, as these flat-rate payments take no account of household size and composition, which is one of our most fundamental concerns, there is huge variation in the protection that families in different circumstances will receive.

As the IFS has shown, in general it is those without children who are best protected, and larger families and households with disabled members who lose out most. Forty per cent. of families with three or more children, but only about 3% of those without children, would have been better off with a timely uprating of benefits. Seventeen per cent. of households receiving a disability benefit would have been better off had benefits been uprated in real time.

It is obvious that the flat-rate approach is inherently inequitable and poorly targeted, and it is hard to see how it can be justified given the time the Government have had to devise a better solution. That is further compounded by the qualification conditions, which insist that households must have received a positive award of a qualifying benefit within the month leading up to the qualifying dates. One of the issues that universal credit is supposed to address is fluctuating incomes, but fluctuations in income from month to month, the norm for many lower-income families, are simply ignored by this Bill.

The cliff edge in entitlement is well illustrated by the large number of households, an estimated 850,000, that would be better off by reducing their earnings to qualify for universal credit so that they can benefit from the additional payments. Families on earnings low enough to qualify for universal credit face losing up to £900 if they have a marginal increase in earnings just enough to take them out of receiving UC. It is therefore perfectly reasonable for colleagues to demand a full Government analysis of the distributional and public health impacts of this Bill.

This Bill falls short of what might reasonably have been expected from a Government who had plenty of time to come up with a better solution, but we want this money to go into people’s pockets as quickly as possible in what is, for millions, a deepening personal and family financial crisis, which is why we are not seeking to oppose or delay today’s proceedings.