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Baroness Hollis of Heigham: My Lords, we are pleased that the uprating of the standard benefits is in line with inflation. However, as we review the Government's stewardship of the welfare state over not just the past year but over this Parliament we can see little else to welcome.
As was said by my right honourable friend Mrs. Harman in another place yesterday, since 1992 and the last general election, the cost of social security has risen by £15 billion, inevitably crowding out expenditure on investment and education which is where we prefer that money to be. That growth is not so much, as the Secretary of State likes to claim, because of the increasing number of elderly or disabled--they account for about half that growth--but because of the increase in unemployment and its knock-on effects. Of that £15 billion growth since Mr. Lilley became Secretary of State, £8 billion is due to the direct and indirect costs of unemployment--not demography but poverty. The size of the DSS budget is a sign not of government generosity but of the Government's economic failure. It is widely accepted--I doubt whether there is much difference between the Minister and ourselves on this--
that benefits alone cannot make people comfortably off. Only access to a working wage, if one is of working age, will do that.I have studied the figures that Mr. Lilley put in the Library, on which he bantered with the shadow Secretary of State. I tell the Minister that they misrepresent the position. The difference between us is this. Mr. Lilley's figures counted only the direct cost of unemployment benefit and little of the knock-on consequences for the DSS, including money spent on lone parents, disability and in-work benefits.
We have seen a growth of £15 billion in DSS expenditure under the stewardship of Mr. Lilley. At least half of that is due to poverty and economic failure. And why? Because the DSS is spending money on keeping people out of work rather than helping them into work; we have seen a growth in youth unemployment and long term unemployment. In addition, other groups marginal to the labour market which would like to work are being squeezed out when labour is abundant; they include the partially sick and disabled. They are not able to find the work they would like. Because such groups are not sustained by the minimum wage, when we help them into the labour market the taxpayer ends up subsidising the exploitative employer by wage subsidies.
In consequence not only has money spent directly on unemployment benefit, income support and JSA for the unemployed risen, as we would expect, but so have the associated benefits of housing benefit and council tax benefit for those out of work, as the Minister knows well. Equally, sickness and disability benefits have risen in part. I emphasise "in part" because in a difficult labour market those men who are middle aged with a manual background and in poor health, who nonetheless want to work and could do some work, lose out in the competition for jobs. We can add to that the fact that the wages of the poorest have been cut since the ending of the wages boards, which effectively set a minimum wage for a large swathe of the poorest paid industries. We have seen that wages have fallen and jobs have been lost simultaneously. In consequence in-work benefits have soared and with that the need for related housing benefit and council tax benefit.
Add to that the fact, for which the Minister claimed credit a few moments ago, that 90 per cent. of the jobs created since 1979 have been part-time and/or temporary and need to be shored up by a whole array of DSS benefits if they are to provide enough to live on, and it is not surprising that unemployment, directly or indirectly--I refer to its effect on the labour market--has contributed to the burgeoning cost of the welfare state. I shall not use the term "blossoming" that a Tory MP used yesterday.
As Keynes said--and we would do well to remember it--look after unemployment and the budget will look after itself. He could have been speaking about this Government's DSS policies.
In consequence, the Government are caught in the most almighty tangle. Because unemployment and underemployment--they require in-work payments--directly and indirectly have added some £8 billion to the
DSS bill, the Government have responded in two ways. One path is regrettable; the other to which I shall come later is deplorable.I refer to the regrettable response from Government. As a way of capping budget, the Government have tried to target benefit on those financially most in need. And because the Minister and his department did not get their heads around the problem, the Government targeted that budget in the simple minded way of extending means testing at the expense of insurance-based budget benefits. A third of all benefit expenditure is now means tested compared with about only 10 per cent. a few years ago. JSA has a six months rather than a 12 months insurance or contributory base. Housing benefit now subsidises the individual rather than the same money being invested in building new property.
I ask the Minister for once not to use the knee-jerk, ready made, stale phrases about not subsidising bricks and mortar but instead subsidising the individual. I ask him to think, as I know he can. The same money spent by the DoE on new social housing is investment, creates jobs and adds to the stock of decent homes in this country. Because the supply is increased, rents are lower and less housing benefit is needed to afford it. It is all very virtuous. But cut housing investment and for every pound saved, 75p is spent on housing benefit. What is the result? Productive investment is converted into dead end unproductive revenue spend. Rents rise and families need more housing benefit to pay a rising rent on the same property. The only beneficiary is the landlord. Everyone else, including the taxpayer, is the loser.
That is deeply regrettable. The Government's own research last year on the take-up of means tested benefit shows that, with the exception of housing benefit, where there is automatic delivery to those in council housing, the take-up figure on those means-tested benefits is about three-quarters. One in four of those entitled do not claim. Those who claim find themselves caught in a benefit trap of dependency created by the Government's own means testing, because if every benefit is means tested they face a marginal tax rate of 97p in the pound if they move into work. Unless they can get a particularly well paid job, it is not worth doing so. How many of the Minister's friends would work at a marginal tax rate of 97p in the pound? Yet that is what we ask the poorest in our society to do. The consequence of means testing is that we trap people into dependency.
The second consequence is that, because such benefits are not just means tested but family means tested, we pull the wife in part-time work out of work because for every pound out of 10 that she earns he loses benefit, so she does not work. Yet we all know that the only way he is likely to get a job is not through the Jobcentre or dead-end government training schemes but because she is in the labour market and knows that a vacancy is coming up. It is because of that pattern that we have developed into a work rich/work poor society in which married women work only when their husbands are in work because only they can afford to; and they do not work when their husbands do not work because they cannot afford to. That is the society which family means testing has created.
The result is that while in three families in five both husband and wife work, in one family in five of working age neither parent works; and the result for them and their children is calamitous.
The third consequence of means testing is that those men in the twilight decade of their 50s who are pushed out of the labour market but are too young to draw a pension have to survive increasingly on means tested benefits like JSA because they are no longer eligible for the invalidity benefit, using up any savings that they may have. That means that in that twilight decade the unemployed, the semi-employed, the temporarily unemployed or the seldom employed enter their old age with no cushion. They therefore face old age on benefit as well. They carry the poverty of their unemployment with them from their working life into their old age. So the more the Government seek to curb DSS expenditure by shifting it on to a means-tested basis, the more DSS expenditure they are likely to incur in the longer term. Everyone is trapped--not just the claimant and his family, but the Government and the taxpayer as well. All of this is regrettable, and we shall try to sort it out. The only way to sort out the problem is to encourage people back into work.
I accept, indeed welcome, that, belatedly, the Government are coming up with various schemes--for instance, earnings top-up, Parents Plus and the like. We support such schemes--not surprisingly since many of them were proposed in the 1994 Borrie Report. But, as they are not underpinned by a minimum wage, they will ultimately not be cost-effective either for individuals or for taxpayers.
I had hoped that the Government might avoid reiterating the stale stuff about the minimum wage. If the Minister will just think, as I know he can, he will realise that if Labour had done what the Minister is now doing, he and his Right-wing think-tanks would be the first to tell us that we were throwing taxpayers' money at landlords and employers who should be paying the market wage and charging the market rent, not, instead, paying a low wage on one hand and a high rent on the other because they know that both will be artificially subsidised by the Government.
Of course there is a place for in-work benefits to help those who are marginal to the labour market, and a place for housing benefit to help the poorest afford decent housing. But the Government have abused the role of in-work benefits and housing benefit. The DSS bill reflects the cost of their failure. All of that is regrettable. It is the price that we have paid for moving away from an insurance base to a means-tested system.
I now turn to the second way in which the Government have sought to cut the DSS budget--and the cuts are indeed deplorable. This uprating incorporates two of the most disastrous, and I shall refer to a third. It continues an attack on lone parents; it seeks to cap housing benefit for single people under 60; and it continues to remove benefits from asylum seekers.
The Government propose to cut the one-parent benefit, though this requires primary legislation for it ever to be enacted. I am baffled by the Government's
attitude to single parents. On the one hand they blame them for the burgeoning DSS bill. It is perfectly true that some £10 billion of DSS expenditure goes to lone parents. Yet on the other hand, at least until the eleventh hour, the Government have failed to work with the grain of choice of single parents; that is, as soon as childcare and after-school arrangements are in place, like everyone else, lone parents want to work. They want the money; they want the company; they want a life--and rightly so. If the Government had spent less time abusing lone parents at the party conference and more time over the past 15 years devising constructive paths for them to move out of poverty and dependency, the world for lone parents, their children and, incidentally, the taxpayer would have been a better place.However, in this uprating, by simultaneously cutting future lone-parent benefit and therefore making it harder to spring the dependency trap, the Government have simply ensured that children will inherit not only their mother's poverty but quite possibly her dependency and unemployment.
We welcome the belated moves in the past two years of the childcare disregard for family credit. But it is worth absolutely nothing for those who are on full family credit and need it most. We welcome Parents Plus, though we wish it had been introduced far earlier. It is too little, too late. Yet at the same time as recognising that lone parents need support and help to come back into work, the Government are cutting the lone-parent benefit which, precisely because it is not means-tested, can be carried as a modest dowry back into work. It is one of the very few benefits that do not trap a parent in dependency. So, lo and behold, the Government propose in future to remove it. Why? What on earth are the Government thinking of?
I hope that the Minister will not reiterate that we should not privilege lone parents over those who are married. That is like saying: we will not go for Job Match or other employment schemes for those who are not in the labour market, because we are otherwise privileging the unemployed over the employed. Why is it that the Government think straight when they deal with men, as most of the long-term unemployed are, and think bent when it comes to women, as most lone parents are? Why is it that lone parents act rationally, and want to work, and the Government act irrationally and remove the one benefit that helps them back into work? In any case, the reason married women can, and do, return to work is not that they have more moral fibre--as evidenced by the fact that they are and remain married--but because they have the support of their husbands and in-laws for childcare; and, as the husband is likely to be in work, the married woman faces no benefit penalty for doing so. In other words, married women do not need help to get back into work, and lone parents do. It is as simple as that, and the Government are removing one of the very few benefits that target help on lone parents without a means-testing penalty. It is batty.
The second, utterly disgraceful area of cuts is the limiting of housing benefit for those under 60 to shared accommodation. I find it hard to give voice to my anger. It will be bad enough for men who lose a job and who
may need to claim housing benefit and who will then probably lose their home as well. A third of a million single people currently live in accommodation that would not be adequately funded by housing benefit if they should lose their jobs. Each of those will now be at risk under these proposals.However, it is infinitely worse for women. They are more physically vulnerable and are at risk of abuse and assault. The middle-aged woman, the widow, the carer--poor, vulnerable and bereaved--will, from next October, if she loses her husband or her elderly parent, lose her home as well unless she has generous savings. She will be forced into the grubbiest, shabbiest and most dangerous housing on the market--a room in a house in multiple occupation, where she will share a soiled kitchen and a soiled bathroom possibly with ex-offenders, alcoholics and drug users. For women, it will be the stuff of nightmares. I know. I have inspected that kind of housing. I do not know how the Government can do this.
I wish briefly to touch on the third area of cuts; namely, removal of benefit from asylum seekers who apply in-country. The Government believed that if enough of them collapsed on the streets, it would deter the Nigerian or Somali from coming to Britain. The Government in the other place cruelly overturned our "three working days" amendment which would have saved some unnecessary suffering. Now, the courts have effectively overturned the rest of the Government's policy. In his reply, will the Minister please tell the House, on the assumption that any appeal to the House of Lords is lost, what the Government now estimate will be the net savings to public expenditure given that the DSS has exported its costs to local authorities and, in turn, the DoH is having to reimburse them? At the end of all this unfortunate churning, what will be the full cost to public funds, and what amount is estimated to be net government savings? We warned the Government that this would happen. They would not listen. So we have a burgeoning DSS budget--the sign of economic failure--which is subverting sound public finances.
Yet what has been the Government's response during the period of their stewardship? It has been to increase means-testing and to lock people on to benefit dependency; to support exploitative landlords and exploitative employers; to stigmatise and impoverish lone parents and asylum seekers; and to cap housing benefit by forcing vulnerable middle-aged women into insanitary, substandard and sometimes dangerous housing. It is a pretty record, is it not? That is how the Government have acted as steward for the welfare state. I hope that, if and when we introduce the uprating statement next year, we shall be able to show how we are renewing and rebuilding the welfare state.
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