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House of Lords

Tuesday, 19 March 2013.

2.30 pm

Prayers—read by the Lord Bishop of Bristol.

UK: Ageing Population

Question

2.37 pm

Asked By Lord Filkin

To ask Her Majesty’s Government whether they will publish their assessment of the implications of the ageing of the United Kingdom’s population and their response to those implications; and, if so, when.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): We welcome the committee’s report on the ageing population that was published last week. We will consider its recommendations carefully and respond in due course. Effective reform of public services is critical if we are to meet the needs of an ageing population and ensure long-term sustainability. We have put in place an ambitious programme of reform across a wide range of government policy areas, including pensions, health, social care, housing and employment.

Lord Filkin: I thank the Minister for his reply. As the House may know, the committee found that our society and Government were woefully underprepared for this major social change. To focus the supplementary question on health, out of courtesy to my colleague, the report found a massive increase in demand and cost driven by the increase in long-term conditions. In the committee’s view, this posed perhaps the biggest challenge the NHS has ever had to face. Will the Secretary of State set out his assessment of these challenges and what he proposes to do about them?

Earl Howe: My Lords, we know that to adapt and respond to future need, the health and care system needs to change. The conclusions of the noble Lord’s report correlated in many ways with our own analysis in this respect. The challenges that the report sets out create an opportunity for the NHS and local authorities to innovate and explore new ways of working together to meet the needs of their local populations better and to optimise the use of resources, which is of course critical. We think the NHS and local authorities are best placed to understand the opportunities that exist in their areas, and we are committed to supporting them in that regard.

Lord Mawhinney: My Lords, will my noble friend undertake to intercede with the usual channels so that your Lordships’ House can have an early and full debate on the report from the Select Committee on Public Service and Demographic Change, given the

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highly significant consequences that would flow if the committee, of which I was a member, even got it half right?

Earl Howe: My Lords, I can say to my noble friend that I will certainly do that, because this is a very important report. I thank not only the noble Lord, Lord Filkin, but all members of the committee, who worked extremely hard to prepare a very well thought out set of conclusions.

Baroness Greengross: My Lords, does the noble Earl agree that social care has been the poor relation for so many years and that we need integration as soon as possible with health and housing? To achieve that, would he commit to the Government mandating integration and earmark sufficient funds so that this care can be a reality as soon as possible for older people with chronic conditions?

Earl Howe: My Lords, I very much agree with the noble Baroness. It is our ambition that people should receive high-quality, integrated, person-centred services that deliver the best outcomes to the service user. Making the service as a whole more efficient is the other benefit of integrating service. There is no single definitive model of integration. Some localities are further advanced than others in thinking about new ways of delivering it. We are developing the concept of pioneers to support the rapid dissemination and uptake of lessons learnt across the country, but we want to encourage local experimentation as much as we can to allow local areas to provide integrated care at scale and pace.

Baroness Jolly: My Lords, there are several common themes between the report from the noble Lord, Lord Filkin, and his group, and that of the scrutiny committee of the draft Care and Support Bill, which was published today. One of those themes is the funding of personal care, which has to be shared between the individual and the state. As recommended by the Dilnot commission, will the Government invest in an awareness campaign to inform people of this situation and the importance of planning ahead?

Earl Howe: I am sure my noble friend is right that there is a job of work to do to inform people about the new arrangements that we are bringing in to implement the Dilnot recommendations. My right honourable friend the Chancellor’s announcement at the weekend confirms that we will introduce a cap on care costs and extend the means test upper capital threshold at the earlier date than previously announced, namely on April 2016. The reason for the change in date is to bring it into line with changes to single-tier pensions. We will need to disseminate this information sooner than we would otherwise have done.

Baroness Bakewell: My Lords, when I was appointed the voice of older people in 2009, these issues were already well appreciated. It is now 2013. This is an excellent report from the House committee, which everyone recognises, but I am afraid that it joins many

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other reports on my shelf that have been published since 2009. Will the noble Earl please tell me why he thinks change is so slow?

Earl Howe: My Lords, change is an increasing imperative, at least in my judgment, at local level. I talk not only to professionals in the health service but to local authorities, which will very soon be charged with looking in the round at the needs of patients and service users in their area. They know that with the financial constraints that are upon us, services need to change in order to remain sustainable and affordable. That will be a very strong driver to ensure that some of these very good recommendations are driven forward at pace.

Lord Hunt of Kings Heath: My Lords, the Opposition warmly welcome the report. I am sure that it will be influential in the way we develop policies in the future. I was interested in the noble Earl’s response when he talked about public sector reform. Does he agree that the overwhelming message of the report is the need for a fully integrated health and social care system? Is he not as worried as I am that the changes in the NHS that he is introducing on 1 April will in fact lead to a disintegrated system in which, instead of co-operation and integration, competition will become the name of the game?

Earl Howe: No, I do not agree with that. We have always said that competition is but one tool in the armoury of commissioners. It is not a panacea by any means. As for disaggregation, I see the opposite at local level. Health and social care, public health and patient organisations are getting together for the first time to break down silo barriers and the traditional divisions that have existed.


Homeopathy

Question

2.46 pm

Asked By Lord Taverne

To ask Her Majesty’s Government why the Department of Health removed from the NHS Choices website the advice that there was no good quality evidence to show that homeopathy was more successful than placebo.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, NHS Choices consults the Department of Health as necessary to ensure the consistency of its information with government policy. A recent review of the homeopathy web pages led to a change in the way the evidence was presented. Following concerns that the changes were unclear, NHS Choices has further clarified this information.

Lord Taverne: My Lords, I am delighted to hear that the passage has been restored. However, it is disturbing that inquiries made under the Freedom of Information Act revealed that officials deleted the passage as it stood in response to lobbying by a charity

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founded by the Prince of Wales. They seemed to be more concerned not to offend that formidable lobbyist than to listen to the advice of their Chief Medical Officer, who declared in a recent statement to a House of Commons Select Committee:

“I am perpetually surprised that homeopathy is available on the NHS”.

I have only recently learnt that a BBC South West programme found that Prince Charles’s favourite pharmacy has been selling sugar pills as vaccines against some serious diseases. I am sure that my noble friend, to whom I could not give notice of this point, will look into the matter. Will he assure the House that the policy of the Department of Health is to promote evidence-based medicine and not treatment based on nothing but water?

Earl Howe: My Lords, I shall certainly look into the particular matter raised by my noble friend. The change in the way the information was presented on NHS Choices was as a result of a formal review, which happens automatically to all NHS Choices pages every 24 months. The page on homeopathy reached the formal 24-month review point in January 2011. The policy of NHS Choices is to provide objective and trustworthy information and guidance on all aspects of health and healthcare, and the page on homeopathy does exactly that.

Lord Walton of Detchant: My Lords, more than 10 years ago I chaired an inquiry conducted by your Lordships’ Select Committee on Science and Technology into the field of complementary and alternative medicine. We examined the evidence in favour of homeopathy, accepting that certain well qualified doctors believed in its use. However, at the time we did not discover any convincing research evidence to suggest that it was better than placebos. Over the centuries, many medicines have been used that have been shown to be no better than placebos. Therefore, has the time not come when it is appropriate for the Government to recognise that, in the light of recent research, there is no evidence whatever to support the continued use of homeopathy in the NHS?

Earl Howe: My Lords, we have been consistently clear that no treatments should be arbitrarily rationed on cost grounds. The NHS constitution sets out that patients have a right to expect local decisions on the funding of drugs and treatments to be made rationally following a proper consideration of the evidence. More importantly in this context, it is the responsibility of the NHS to make decisions about commissioning and funding of healthcare treatments and not for Ministers to second-guess that process.

Lord Winston: My Lords, perhaps I may be permitted to help the Minister. Many years ago, there was a very interesting study in Wales of a placebo-controlled trial that showed that, whatever was given, the best chance of a treatment working, placebo or not, was whether the doctor who was giving the medicine actually believed in it. Does the same apply for homeopathy and the Secretary of State?

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Earl Howe: My Lords, the best way I can answer the noble Lord is to refer him to the page on NHS Choices that explicitly refers to the placebo effect. As he will know, the 2010 House of Commons Science and Technology Committee report on homeopathy said that homeopathic remedies perform no better than placebos. It is important to emphasise that message. On the other hand, many people have found benefit from homeopathic medicines and, in a way, that is their privilege and right.

Baroness Gardner of Parkes: My Lords, is the Minister aware that homeopathy started at a time when the one treatment they gave people was to bleed them? It was effective because they did not bleed them and allowed them to recover normally; I was on the board of the Royal London Homeopathic Hospital for a good many years, where I learnt that. Does the Minister not think that, faced with a situation where antibiotics have been used too casually, it is time to look at what we should not be taking? Does he think it important that patients should have the right to whatever treatment they choose provided that homeopathy does not allow them to escape proper diagnosis for cancer or some other tragic condition, which could be overlooked if it is not combined with ordinary medicine?

Earl Howe: My noble friend makes an important point. We are clear in recommending that patients should talk to their GPs before stopping any treatment that has been prescribed by a doctor in favour of homeopathy and before they start taking homeopathic remedies. It is important that people understand that homeopathy may not be effective in many situations.

Baroness Corston: My Lords, given that many GPs ask for training in homeopathy and become homeopaths using both conventional and homeopathic medicine, and speaking as someone who personally uses homeopathic remedies, will the Minister ensure that the views of people such as the noble Lord, Lord Taverne, with which we are all familiar, are not given such credence within the National Health Service that those who wish to use homeopathic remedies do not have that choice?

Earl Howe: My Lords, I take the noble Baroness’s point. Again, we have consistently said, in this and in other areas, that clinical responsibility for an individual’s health condition rests with their GP, who must therefore be able to justify clinically any treatment to which he or she refers someone. As she said, there are GPs who have a speciality in homeopathy. We recommend that a patient who is interested in homeopathic treatment should go to such a GP.

Visas: Chinese Visitors

Question

2.54 pm

Asked By Lord Lee of Trafford

To ask Her Majesty’s Government what is their assessment of the effect of current visa restrictions on visitors from China to the United Kingdom for tourism and commerce.

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Lord Lee of Trafford: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as chairman of the Association of Leading Visitor Attractions.

The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach): There has been continued and significant growth in Chinese visitors coming to the UK, demonstrating that we support growth through the visa system. In 2012, UKBA processed almost 300,000 visa applications from Chinese nationals, and the number of visas issued to Chinese nationals increased by 7% in the year to December 2012.

Lord Lee of Trafford: The reality is that between 2004 and 2011, while the United States saw a growth in Chinese visitors of over 400%, we managed just over 50%. Overall, the United Kingdom’s share of Chinese tourism has declined by one-third during the past 10 years.

Turning to non-tourism activities, is the Minister aware that, for example in our superyacht-building sector, the chief executive of the British Marine Federation said recently:

“Chinese tourist restrictions are a straitjacket on the UK marine industry which is harming businesses, sapping the economy, and costing local jobs”.

The president of Sunseeker said:

“Sunseeker’s Chinese clients and potential buyers are having extreme difficulty in obtaining a visa to visit the UK, being laborious at best and often declined”.

When is the Home Office going to get real and stop disadvantaging UK tourism and UK commerce?

Lord Taylor of Holbeach: My Lords, my noble friend is quite right to exhort us to greater effort, but he should be well aware of the work that is being done through our network of BritAgents throughout China and indeed our partnership with British Airways, which is opening a new route from Chengdu to London this year. This partnership and the way in which we are building our relationship with Chinese visitors are proving successful. Indeed, the most recent International Passenger Survey data revealed a 24% increase in the number of Chinese visitors in 2012 compared with 2011.

Baroness Liddell of Coatdyke: My Lords, is the Minister aware that the most recent World Economic Forum analysis of tourism competitiveness showed that Britain’s visa regime has gone from 22nd to 46th? Not only that, we are 139th out of 140 for the charges at our airports and on tickets because of our old friend air passenger duty. Last week, we had the debacle around Brazilian visas added to the current difficulties with Chinese visas. There are people out there desperate to come to Britain. They spent £18.7 billion in Britain last year, 4% more than the year before. Why are we making it so difficult for them?

Lord Taylor of Holbeach: I am afraid that I cannot agree with the noble Baroness. She paints a pretty dismal picture, but I do not recognise that from the reality. Of the applicants for visas, 97% are processed within 15 days and of those, 96% are successful.

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Having sought the opinion of Chinese visitors, 90% are very satisfied with the service provided by the visa service.

Lord Tanlaw: My Lords, I have just completed an extended tour of Singapore, Taiwan, Hong Kong and China, where I have a manufacturing interest. Is the Minister not aware that there is a lot of resentment and disappointment with this country because of the difficulty with visas? It is also affecting inward investment to this country. Is he aware of that? It is affecting the number of students who are coming here. Students are going to Australia and America instead. This thing is real, as the noble Lord, Lord Lee of Trafford, has said. Will something be done about it?

Lord Taylor of Holbeach: We are trying to make the visa application process as customer-friendly as we can. The form itself is available in Chinese so that applicants can complete it in Chinese and online. We are dealing with a real issue. Either we have visa controls or we do not. I am sure that this House would not suggest to Her Majesty’s Government that we drop visa controls. Indeed, we review visa controls, but for China we require them. The most important thing is that we have a system in place that reflects the interests of this country in protecting its borders and the interests of those who want to come here. They will be welcome for business, tourism and indeed for study.

Lord Geddes: In his first Answer to my noble friend Lord Lee, the Minister gave statistics for the number of visas issued. To what extent was that split between those from Hong Kong and those from mainland China?

Lord Taylor of Holbeach: There are no visas for Hong Kong or for Taiwan.

Baroness Smith of Basildon: My Lords, I am disappointed that the Minister sounds extraordinarily complacent on this issue. He has heard from all sides of the House that there is a serious problem, and it is not the case that people are saying there should be no visas. It seems that we are making matters extraordinarily difficult for people from China and, as we have heard, from Brazil who would contribute to the economy of this country. Does the Home Office or any other part of government undertake an economic assessment of the impact these visa regulations are having?

Lord Taylor of Holbeach: My Lords, there are no visas for Brazil, and there is no plan to introduce them. That decision was made last week, and an announcement was made to that effect.

I am not complacent about this issue. I see the enormous potential of tourism and commercial links with China. I think it is a very important area of activity. However, as I explained in my answers to noble Lords, we need to maintain a visa system for our own border security. Having decided that we need to put one into place, and I am very pleased to hear that

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the noble Baroness, Lady Smith, agrees with that decision, the task is to try to make sure that the processing is as straightforward and easy as possible.

I have given illustrations of the figures. We should talk in figures and not in speculation. I have given the figures that 97% of visa applications are processed within 15 days and that our charge of £81 compares with the £126 it costs a UK citizen for a visa to go to China. We try to keep our service as competitive as possible, and it is right to do so.


Bank of England: Monetary Policy

Question

3.02 pm

Asked by Lord Barnett

To ask Her Majesty’s Government whether they intend to give more powers over monetary policy to the Bank of England.

Lord Newby: My Lords, the Bank of England Act 1998 already gives powers of operational responsibility for monetary policy to the independent Monetary Policy Committee of the Bank of England. The Act requires the Treasury to specify the objectives of the MPC at least once every 12 months. The Chancellor set the remit for the MPC at Budget 2012 to target inflation of 2%, as measured by the 12-month increase in the consumer prices index.

Lord Barnett: My Lords, there have been widespread reports that the Chancellor was looking at that remit with the possibility of changing it. I appreciate that it may have been only a Lib Dem Budget leak but is it true and, if so, what does he propose to do about that kind of leak? Does the Chancellor, as has been said, believe in a looser monetary policy, and has he told the new Bank governor that that is what he wants him to do?

Lord Newby: My Lords, as the noble Lord will be aware, it is Budget Day tomorrow. That is the day on which the Chancellor will re-express the remit for the Monetary Policy Committee. I am afraid the noble Lord will have to wait for 24 hours.

Lord Higgins: Does my noble friend agree that there is sometimes confusion between interest rate policy and monetary policy? Can he say what the Government’s policy is in relation to their own actions and those of the Bank of England as far as the quantity of money is concerned?

Lord Newby: My Lords, as I said in my original Answer, operational responsibility for monetary policy is a matter for the independent Monetary Policy Committee of the Bank of England, not for the Treasury.

Lord Peston: My Lords, bearing in mind that Section 19 of the Bank of England Act 1998 gives reserve powers to the Treasury to give directions to the Bank of

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England, am I right that those powers have never been used? I am pretty sure that I am right. Does it not follow that the failure—despite the fact that the Act says that this is the MPC’s objective—to hit the inflation target for three years without the slightest sign that it will be hit for the next two years, coupled with monetary easing, is down to the MPC?

Lord Newby: My Lords, inflation has been higher than the 2% target for a number of years. The MPC has taken the view that the target would be met in the medium term and that, because the principal reasons for inflation did not include excessive domestic demand and are therefore less capable of being moderated by increases in our own interest rates, it was wiser to “see through” the temporary increase in inflation above 2% but to work, as the MPC has, on the basis that, in the medium term, inflation would indeed come down to 2%.

Baroness Kramer: My Lords, Paul Tucker has floated the notion that the Bank of England could charge banks for holding reserves at the Bank as an incentive to get them to lend to the real economy. Is that an issue that has been actively discussed with the Treasury and what is the Government’s view?

Lord Newby: My Lords, again, that is a matter for the Bank of England. To the extent that the Chancellor—and the Treasury—wishes to change the way in which the Bank of England operates, he will have an opportunity tomorrow to set out what any changes might be.

Lord Eatwell: My Lords, from what the noble Lord has said, the Treasury has clearly been content with the policy pursued by the Monetary Policy Committee over the past three years. Is the noble Lord also content with the impact of that policy on pensioners’ annuities?

Lord Newby: My Lords, the Government’s view is that it is in the long-term interests of everybody, including pensioners and families, that we deal with the deficit and get growth going on a sustainable basis. In the short term, the Bank has taken the view that to keep within the inflation target and, subject to that, to support the economic policy of the Government, including their objectives for growth and employment, it should keep interest rates low.

Lord Vinson: My Lords, does the noble Lord agree that many people increasingly feel that the brief given to the American Fed, which is rather wider than the brief given to our Monetary Policy Committee, would be advantageous? Instead of looking solely at inflation, it would enable the Monetary Policy Committee to examine the effect of high interest rates on the rate of exchange. The pound has been kept higher than its purchasing power parity for years and, as a result, we have a huge trading deficit. A trading nation really ought to look seriously at its rate of exchange, which ought to be one of the factors that a new remit should cover.

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Lord Newby: My Lords, when the previous Government established the independent Monetary Policy Committee, they decided not to follow the remit given to the Fed. No Chancellor since 1997 has decided to change that remit.

Lord Hughes of Woodside: My Lords, has the Minister noticed that the Deputy Governor of the Bank of England has floated the idea that banks should be entitled to charge negative interest on savings? Even the new Governor of the Bank of England, when he was in Canada, was apparently within days of allowing such a policy. This would be immensely damaging to savers. Will he put this to rest, immediately and unequivocally, and say that there is no possibility of the Government sanctioning any such idea?

Lord Newby: My Lords, an awful lot of ideas have been floated recently but the key remit for the Bank of England is set by the Chancellor. Within that, the Bank has operational independence on how it follows that remit. The remit has not changed but the Bank of England, with or without a new governor, always looks at questions in the general area of monetary activism.

Representation of the People (Election Expenses Exclusion) Order 2013

Motion to Approve

3.09 pm

Moved by Lord Wallace of Saltaire

That the draft order laid before the House on 30 January be approved.

Relevant document: 19th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 12 March.

Motion agreed.

Welfare Benefits Up-rating Bill

Report

3.10 pm

Clause 1 : Up-rating of certain social security benefits for tax years 2014-15 and 2015-16

Amendment 1

Moved by Lord McKenzie of Luton

1: Clause 1, page 1, line 4, leave out “by 1%”

Lord McKenzie of Luton: My Lords, I will also speak to Amendments 5, 7 and 10 in this group. These amendments stand in my name and in those of my noble friend Lady Sherlock, the noble Lord, Lord Low of Dalston, and the right reverend Prelate the Bishop of Leicester. I say at the start that we view the amendments as consequential on Amendment 1, and

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we are advised that should these amendments be carried, they do not pre-empt a discussion on the subsequent amendments on the Marshalled List.

Amendments 1 and 7 would remove the reference to 1% in Clauses 1 and 2, and hence would remove the 1% cap on the uprating of the relevant sums and amounts. Amendments 5 and 10 would delete the prohibition on uprating such sums and amounts under the annual uprating of benefits and tax credits. As we explained in Committee, we fully intend these amendments to negate the fundamental purpose of this Bill, which is to lock in real-terms cuts to a range of benefits for the two years to March 2016. This follows on from the equivalent cut for next year, which has been implemented by statutory instrument.

The uprating of benefits and tax credits should proceed in accordance with the existing statutory framework, whereby the Secretary of State is required each year to review the rates of various benefits and tax credit components to see whether they have retained their value in relation to the general level of prices. There is no general requirement to fully uprate, but there is an obligation to assess on the basis of up to date information on the cost of living.

On these grounds alone, the Bill is completely unnecessary. If the Government are intent on three years of cuts by 1% uprated, they can use existing mechanisms, just as they have for 2013-14. They would then at least retain some flexibility to revisit the policy, especially if inflation were to surge above currently expected levels. If the Bill stands, there is no certainty about the level of real cuts that have been imposed on some of the most vulnerable people in our country.

The government assertion that committing these cuts to primary legislation is crucial to giving confidence to the markets has no credibility. It is frankly untenable to suggest that by locking into legislation these estimated benefit savings, which amount to less than 0.1% of government spending, the markets will be assured and comforted. It does not seem to have cut any ice with the rating agencies.

Let me reiterate Labour’s position. We will make no commitment now on spending or tax for the next Parliament, and we will set out our spending plans at the time of the next election. However, right now, we would uprate in line with inflation. I will come in a moment to how the Government can plug the hole in their increasingly fragile finances.

This Bill is misdirected on several other counts. We are told by the Secretary of State that cutting benefits and tax credits is necessary in advance of universal credit, as a contribution to fiscal consolidation. However, it does nothing for the deficit or borrowing. Indeed, by withdrawing real resources from low-income families, which of necessity have the highest marginal consumption rates, it is damaging demand. It ignores the IMF warning that the fiscal stabilisers should be allowed to operate. Just last week, the FT joined an increasing chorus of those pointing out that fiscal tightening could raise the debt ratio in the short term, as fiscal gains are partly wiped out by the decline in output.

We also had the spectacle of the Prime Minister being rebuked by the OBR for asserting that the Government’s debt-reduction programme had not affected

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growth. Its justification is supposed to be that there needs to be some correction for the fact that benefits have been uprated at a faster rate than earnings over the past five years: essentially, that those out of work have done better than those in work. It is perverse, therefore, that some two-thirds of those hurt by the 1% restriction are those who are actually in work.

Looking at percentages rather than cash amounts is misleading. One per cent of a small number is a very small number. Indeed, specifically included among the cuts are in-work support such as working tax credits, SSP, SPL and maternity pay, as well as in and out of work benefits such as housing benefit: the very support that enables individuals to sustain employment and manage work and family responsibilities. We are told that the Government are committed to eradicating child poverty, and of course we would accept that child poverty is not only about income levels, but improving income and relative income is an essential component of tackling poverty, and matters are being made worse by this Bill, with another 200,000 children being drawn into poverty. Compared with CPI uprating, this Bill and the 2013-14 order mean that 30% of all families are affected, losing on average £156 a year.

3.15 pm

Worst of all, at a time when this Bill is reducing the living standards of the very poorest, the Government are rewarding those with the highest income, including some 8,000 millionaires, with a generous tax cut. The contrast could not be greater: a £2,000 a week tax cut for some; a 71p a week rise if you claim JSA.

By leaving inflation risk with claimants, this Bill is creating greater risk for the poor and uncertainty about their real incomes. The 2012 Autumn Statement cited energy and fuel prices as a source of potential risk over the coming year. It estimated that inflation would be higher in 2013 and 2014 than originally announced due to rises in domestic energy prices and food commodity prices: the very costs that hit the poorest hardest. Sterling has fallen some 8.5% against the dollar since the start of the year, pushing up import prices. All these matters will now affect the incomes of the poorest, and they are things that they have no way of influencing. They are being cut further adrift from the mainstream of society.

Uncertainty is compounded by there still being no cumulative impact assessment for the raft of benefit and tax credit changes that have been introduced so far by this Government, including council support changes and the bedroom tax, which are about to become a horrible reality. The IFS has analysed the effect of the 2013-14 tax and benefit changes in its 2013 Green Budget, concluding that the,

“broad pattern of tax giveaways and welfare takeaways means that the changes, on average, reduce net incomes towards the bottom of the income distribution and increase net incomes in the middle and upper parts of the distribution”.

It states that below-inflation uprating is the predominant cause of the losses in the bottom half of the income distribution and the reduction of the top rate of tax from 50% to 40% the main gain for the richest. So the rich need more to motivate them and the poor need less.

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Our opposition to this Bill is clear. We oppose it locking in indeterminate cuts to real incomes through to April 2016. We argue that the normal uprating process should operate and have been clear that, right now, we would support uprating by inflation. We will continue to argue for the reversal of the proposed tax handout to the very rich. We heard the Minister at Second Reading and in Committee suggest that the saving that such a reversal would produce would be illusory because the rich would order their affairs to make sure that the will of the Government was defeated. We would maintain that the Government do not have to acquiesce in this. If they believe in tackling tax avoidance, they could secure the revenues that reversing this tax cut should generate. We are told by the Secretary of State that other countries have cut benefits. Well, so has this country. We have had cuts to contributory ESA, cuts to DLA, cuts to housing benefit, cuts to council tax support, cuts to child tax credits, cuts to tax credits and now cuts in this Bill, yet we still have no growth and debt continues to rise.

We are asked today to sign off this further three-year cut affecting the poorest, the ultimate real size of which we cannot be certain of—and this the day before a Budget that may well visit yet further cuts. I urge noble Lords to prevent this from happening.

Lord Low of Dalston: My Lords, I have put my name to this amendment and will briefly signify my support. There is not a lot that I can add to the comprehensive account given by the noble Lord, Lord McKenzie. The only point I would stress was made by somebody on television last night—that we now live in an environment where inflation is considerably higher than we were used to in the first decade of this century. We understand that the new Governor of the Bank of England advocates that the inflation target should be allowed to float free. We are in an environment where inflation is set to hover around 3.5% or higher with no prospect of it reducing. In these circumstances, to cap the increase in benefits at 1% is simply unjustifiable. I support the amendment moved so comprehensively by the noble Lord.

Lord Forsyth of Drumlean: My Lords, there is no one in this Chamber who would not like to see support for those on low incomes and families to be increased. What was striking when the noble Lord proposed this amendment was that, apart from a vague suggestion that it might be possible to find the money by pursuing tax evaders, there was no indication of where the £3 billion needed to provide uprating in line with inflation—assuming the Government’s forecasts are correct—could be found. That is deeply irresponsible and it is particularly irresponsible of an Opposition who will not say what they would do in government. In other words, while it is not their responsibility, their line is “You should spend the money”, but when it might be their responsibility, they are not prepared to say what they would do. That is completely dishonest politics.

We have a dangerous position in our country, partly caused by the present Government constantly harping on about how they have reduced the deficit by a quarter. According to a poll carried out by ITN and

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a separate poll by the Centre for Policy Studies, which may not be quite so objective, when asked the question, “Do you think by the end of this Parliament the national debt will have gone up by £600 billion, be just the same, or will have gone down by £600 billion?” only 6% got the answer correct: that it will have gone up by £600 billion. So here we are, living in a country where we have to make difficult decisions—this Bill is an example of having to make difficult decisions—and where the vast majority of people believe that the Government are cutting debt, when in fact all the Government are doing is reducing the amount by which the debt is increasing. I will wager that when we have a debate at the end of this Parliament and come the next election, the Opposition will pursue the same kind of irresponsible tactics which we see in this amendment. They will say, “The Government were elected to reduce the debt, but the debt has gone up by 50%. If we had been in government, it would have been different”. That is the politics of it.

Let us look at it from the point of view of people on low incomes—working or non-working—faced with inflation. If we follow the prescriptions contained in this amendment, the consequence will be that the pound will sink still further. The consequence of the pound sinking still further is that the energy and fuel costs that the noble Lord, Lord McKenzie, spoke of will go up. So how does it help people who are struggling to say “Your benefits will go up by inflation” if at the same time you pursue policies which will result in higher inflation and higher debt and leave an even bigger problem to solve at the end of the day, which will be solved on the backs of the poor?

The noble Lord said that the Government are handing out a tax-free benefit to the very rich. I remind him that when his party were in government, people on very high incomes were paying less in marginal rates of tax than they are now. I also remind him that the effect of cutting the top rate of tax from 50% to 45% will be, as has been proved over and over again in countries around the globe, that the revenue to the Treasury will go up. Although the noble Lord and his party quite rightly point to the excesses in the City arising from bonuses, and so on, they seem to forget that 52% of those obscene bonuses come back in tax and national insurance. Actually, it is more, because there is an employers’ contribution of 12%, so 64% of those bonuses come back to the Treasury in revenues.

The name of the game here is to increase revenues to the Treasury. Then we will be in a position to do something about welfare. We are now in this difficult position and my noble friend is having to take this painful legislation through the House. The Opposition should recognise that that is a consequence of their period in government. The noble Baroness shakes her head. While they were in government, welfare benefits went up by 60% in real terms.

Baroness Hollis of Heigham: To pensioners.

Lord Forsyth of Drumlean: Yes, the noble Baroness, Lady Hollis, makes the point that a large percentage went to pensioners, but I do not hear from the opposition Front Bench a cry that we should cut the benefits to

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pensioners to avoid this position. The very fact that she says that from a sedentary position indicates that she accepts that.

Whatever the merits of how the money was distributed, it went up by 60%. One pound in every £4 which this Government are spending—by the way, that is money which we have not got because we are having to borrow £150 billion every year to make that expenditure—is going to welfare. To argue that it is not necessary to constrain welfare expenditure in those circumstances is, frankly, totally irresponsible. It is the worst kind of politics.

The noble Lord seeks to present people on this side of the House as uncaring and unconcerned about the poor whereas, actually, if you are concerned about people who are hard up, you want to make sure that the costs of living for them and the stoppages in their pay packet are reduced to as low a level as possible. If we follow those prescriptions of continuing to spend money we have not got, of continuing to pay more in welfare than people are gaining in increased incomes in the private sector, that is the road to Carey Street and to undermining our whole welfare system of support.

The truth is that while Labour was in office, it was paying tax credits to people on up to £50,000 a year. It was a policy deliberately designed to create a client state, and it was a policy funded on the back of a bubble created by holding down interest rates. It was irresponsible economics and it was irresponsible public expenditure. A responsible Government, faced with the windfall tax revenues that they had, would have put some aside for a rainy day. Now we find ourselves with a huge, exploded welfare budget and difficult decisions that need to be taken.

I hope that the House will reject the amendment which, while we all appreciate the sentiment, would actually do down those who are hardest up in our society and having the most difficulty. The noble Baroness shakes her head. It is the consequence of spending money which we did not have.

Lord Harris of Haringey: My Lords, I hesitate to give the noble Lord a lesson in economics, but the problem that the Government currently face is a complete absence of growth. Further cuts in welfare benefits will make that worse. One thing that you can say for certain is that the people on the lowest incomes will spend that money and that that money will then feed into the economy, therefore doing something about the growth problem that the Government have exacerbated by what they have done in the past few years.

3.30 pm

Lord Forsyth of Drumlean: I do not think that was a lesson in economics but a lesson in magic. If that is the case, why do we not just double welfare benefits? People will spend even more, the economy will grow and everything will be fine. The noble Lord nods his head in agreement. As an individual or as a household, you cannot continue to spend more than you earn without getting into the kind of problems that we have seen among people who have taken out payday loans.

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This is the payday loan approach to government. You have a big debt, so you take out another one. You pay a higher rate of interest on it but you hope that somehow you will be able to pay it back. In the end you are able to pay only the interest. At the moment the Government are printing money to fund their expenditure requirements. That is quantitative easing. In 1997 the Bank of England held no government bonds. Now it holds 27% of the entire bonds in issue. When interest rates rise, those bonds will fall in value. How will the difference in value be made up? That will be a cost for the taxpayer. Our level of borrowing now, which will have gone up by 50% by the end of this Parliament, will have to be financed and that will come out of the future welfare budget.

The noble Lord is describing a way of robbing our children of their living standards and creating a bigger problem for the next generation to meet the needs of those who are most vulnerable. This is a way of making it more expensive to create the safety net that we all support. This is not a lesson in economics but in the kind of fantasy approach to politics that got us into this position in the first place. That is why the Government are right to persevere with this legislation. Indeed, they have been very reasonable in their approach. They have tried to protect the most vulnerable and have agreed to increase welfare payments by 1%. This is extraordinary, given that we have an economy that is not growing at all.

Lord Harris of Haringey: Exactly.

Lord Forsyth of Drumlean: The noble Lord seems to think that the reason why the economy is not growing is that the state is not large enough. How big does he want to the state to be? It is already taking nearly 50% of everything created by the Government and spending it, and that is not enough because they have to borrow on top of that.

If levels of taxation are high, which they are, and levels of regulation are high, we will not get the growth that is required. We need to constrain public expenditure to make room for the private sector to create wealth. Once we have a bigger cake, everyone can have a bigger slice, but if we try to proceed in this way we will end up with a smaller cake and those dependent on welfare benefits will be cruelly cheated. They will find their living standards destroyed by inflation, higher costs and the inability of the Government to finance the kind of programmes that Members opposite are prepared to say now that they would support, although they are not prepared to say so at a general election.

Lord King of Bridgwater: My Lords, I agree with a particular point that my noble friend has made and would like to add that the Bill has come forward on an especially interesting day. I refer to Cyprus. The warning is on the packet. There has been a certain amount of calm around, as though we had come through all our problems and were moving steadily forward into calm waters, and as though the eurozone was secure. The financial markets, with the euro increasing in value, may have had that illusion. However, it has all been blown away. I have not heard any recent news; I do not know whether there has been a decision yet about

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what Cyprus will do. We should remember that, at the moment, there is a very real risk. Clearly, people have been caught in Cyprus. If Portugal, Spain and Italy decide that this will be the European practice, people there may find that their savings and funds in their banks are not as secure as they had been assured they were. After all, everyone thought that there was a clear undertaking that below a certain level, around €100,000, their own bank accounts were at no risk. If that changes, we face a very serious situation.

There is complacency around, as I picked up from an article today by the chief economist of HSBC, as though with just a bit of going forward and a bit more luck we will be back on the old growth train and in the business that we were in before. What has been exposed is that over many years we have been living on borrowed money, on a construction boom in the financial services area and on public expenditure. Now that those have to be constrained, suddenly people are turning around and saying, “How, as a country, are we going to earn our living in future?”. We are finding that we have slipped in the leagues. In one of our most successful areas of overseas earnings, defence expenditure, we have now slipped a place and China has overtaken us. China is now taking away a number of the markets that our manufacturers used to serve extremely well. It is said that we hope to sell Typhoon to Oman, the UAE and one or two other countries, but the point has been made that its successor will be made in America, and that will be the end of one of our most successful overseas earnings. When you see where we earn our living in the world, we are not in a happy place.

That is why I very much agree with my noble friend Lord Forsyth. All of us in this House would like to say, “Let’s increase benefits. Let’s deal with all the hard cases and see how we can give people more money”. Look at the situation in Ireland, where benefits have been cut by, I think, 10%. There has been talk of cuts today but in fact we are taking about how big an increase the Government should impose, not an absolute cut in the amount. Other countries in Europe are cutting by 6%, 10% or 12% the actual amount that people are getting—what hardship that must represent.

This is not a pleasant speech to make. It is much more popular to say, “Let’s have some more benefit”. I say this against a background of a new situation that has suddenly come upon us: if this House—the unelected House of Lords—decides today to cut right through one of the decisions made as part of the prudent financial planning to find our way out of the problems that we are in, and if that triggers a loss of credibility in our national approach and the Government’s approach to tackling those serious problems, it will really be a problem for people on benefits if there is a run and we then find that the low interest rates that the Government have enjoyed for their substantial borrowing no longer apply.

I agree with my noble friend on this point. There is an illusion that somehow we are reducing our debt. We are not; we are reducing the rate at which the debt is increasing. One of the blessings that we have had is that at least we have been able to borrow at an extremely low rate because we had some credibility. If the House of Lords today kicks away one of the planks that help

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to shore up the credibility of a Government who have a plan to try to deal with our problems, and if those international interest rates are then demanded of the Government and the country when we try to borrow money, the problems that we will incur for all our people could be vastly greater. Look at the tragedies that exist now, such as the unemployment rates in Spain, which is 50% in certain age groups.

We have held things together so that we have a lower unemployment rate than the eurozone countries. There is so much that we have to hang on to. This is a dangerous time. I say seriously to your Lordships: do not tamper at this stage with this very difficult situation, at a time when we are least able to face it and when it could quite seriously endanger our whole economic structure. I do not think that people understand what a mess the world is in at present. There is a huge amount of complacency around. We are not by any means out of the woods yet, and it is our duty to ensure that we hold firm.

I intend to support my right honourable friend Iain Duncan Smith, whose commitment to this area I think we all admire enormously. He is doing the best that he can. He is agreeing to an increase in benefits for the most deserving people in this country, but not as large an increase as they might have hoped to see. That is the only realistic approach that can be taken at this time.

The Lord Bishop of Leicester: My Lords, I have lent my name in support of this amendment, and I am happy to speak in support of it.

This debate is about who should bear the greatest weight of the burden imposed by the Government’s need to reduce debt. I hope that the noble Lords, Lord King and Lord Forsyth, might consider accepting an invitation from me to come to the city of Leicester to explain to our local Child Poverty Commission why it is in the interests of children in poverty that they should become poorer at the moment because that will serve the national interest regarding debt, and that this House is working in their interests by reducing the uprating of their income to 1%, however much inflation rises. They might accept an invitation to explain that also to the unemployed and to voluntary associations in Leicester, which anticipate a tsunami of difficulties such as homelessness and dependence on food banks. They can come to listen to the response to this Bill from those who are dependent on benefits through no choice of their own, who can explain what that is like and how much harder it will get in the years ahead.

If the purpose of this Bill is to control welfare costs, this is not the right way to go about it. The key to reducing the benefit bill is to change the circumstances that lead many people to need benefits, such as the absence of job opportunities, too much short-term, low-paid work, the shortage of affordable housing, and expensive, patchy childcare. We should be focusing on those issues, not cutting benefits in real terms, which simply creates hardship without addressing the underlying issues.

This Bill is both unnecessary and ill conceived. It will harm the most vulnerable in our society and do nothing to promote work incentives. I have heard

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nothing at Second Reading, in Committee or today to make me change my view that this Bill ideologically shrinks the welfare state regardless of desperate need. Nor does it change my view that we are heading for a US-style welfare system that is dependent on food banks and hostels. We know that we can do better than this, we must do better than this, and we should amend the Bill.

Lord Deben: My Lords, I do not think that anyone could claim that I was other than at the wet end of the Conservative Party. I am perfectly prepared to say that. However, I have to speak after the right reverend Prelate because he has expressed exactly what the problem with Britain is: we are to spend money that we do not have on people who are in need, at a rate we cannot afford. That is not at all a Christian comment. In the end, we have to live within our means. For those of us who were brought up in the difficulties of a poorly paid Anglican parsonage, the first lesson that we learnt was to spend within our means.

I disagree with my noble friend Lord Forsyth, who said that the previous Government were not responsible. They are responsible, because they spent the money that was there and which could now be available for what we need. We were put in this position by the party opposite because it had the best inheritance of any Government, but it spent it and borrowed on top of it. I cannot find a single speech from any right reverend Prelate from that time that warns the Government of the dangers of spending money that they did not have, borrowed in a way that could not be repaid.

3.45 pm

I believe in an old sermon of my father’s, which distinguished between love and sentiment because “love” is a very tough word. It does not pretend there is an easy way out of the problems with which we are faced. Love says that we have to do this in a way that safeguards the future and does not merely deal with the present problem. People sometimes talk as if those of us on this side of the House do not know the problems with which we are faced. Many of us have worked for years, trying to deal with those problems and being concerned about the poor. We have found, though, that you have to be honest. The reason we have to cut in this way—not cut, but cut the addition that might otherwise have been paid—is simply because we live in a country that has spent more than it has earned for so long that it can no longer go on doing it.

I have to say to the right reverend Prelate, who did not provide an answer, that the answer is not to make things worse. All the things he is asking for are being done at the same time. Those are precisely the Government’s policies for getting the economy moving. I beg him not to pretend to people that there is another means of dealing with these matters. If we do what he proposes, in two, three or four years’ time we will not be talking about decreases in increases but about the very cuts in welfare benefits that are happening in the rest of Europe. We are talking as though we are nothing to do with the rest of Europe. Some of my colleagues on this side of the House sometimes talk about that far too much. We are in exactly the same

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position, except that we have so far weathered this storm better because we have a Government who have behaved more sensibly right from the beginning. I beg the right reverend Prelate not to pretend to the world that there is a simple answer. The only answer is this tough one and I am amazed that it has not had to be tougher. Nobody can go on living on debt. I leave the House with the comment made by my noble friend: this proposal from the right reverend Prelate and the party opposite is a payday loan approach, and that is what is so serious about it.

Lord German: My Lords, in his speech moving the amendment, the noble Lord, Lord McKenzie, made it perfectly clear that it would break the Government’s policy proposal. There was no indication given of how much the benefit bill should rise, though the noble Lord, Lord McKenzie, indicated his preference. However, that is not what is in front of the House. If the amendment were to be passed there would be no proposal as to how much it should rise: 0.5%, 1.5%, 2%, 3% or whatever. Neither does the amendment offer any solutions: it does not offer any ameliorations, it does not seek any exemptions. However, Her Majesty’s Opposition say no to a 1% cap on working-age benefits, yet support a 1% cap on public sector workers’ pay. It is quite strange. I sometimes wonder whether we are living in a parallel universe where the economy is healthy, where there have not been any fundamental economic shocks and where Cypriots can get all their money out of their banks.

However, it is not like that and the Bill is not set in the sort of financial vacuum that some Members seem to think it is. I accept that borrowing is higher than it ought to be, though I wish it were less. I know that we have had to borrow in order to maintain the essence of our welfare state and I agree that growth is critical. However, in these tough times the Government have to take difficult decisions. These decisions are, no doubt, uncomfortable but it could have been worse. As I said at Second Reading, there were lots of things on the table for discussion which could have made this a much tougher prospect for us. As it stands, this is our biggest budget—the budget where we spend £1 in every £4 of government money—and, despite all previous efforts, it is still growing as a proportion of total government spend. Therefore, no matter what we may think, this budget has to make its contribution to helping to put our finances back on a sound footing.

Yesterday, there was a debate in the Moses Room in which the Government proposed a £2.545 billion reduction in the overall welfare spend for 2013-14. Her Majesty’s Opposition rejected this as “vicious” and “contemptible”. Today, we have before us in this Bill a budget proposal of £3.7 billion for the two years following, and that is also rejected by Her Majesty’s Opposition. Therefore, £6.245 billion of savings have been rejected in two days. Yesterday—I have not heard it yet today—I heard a vague assertion about tax avoidance, but it is my understanding that this Government are spending far more on tax avoidance than the previous Government did and putting far more effort into it. When she replies, perhaps the Minister can tell us how much success the Government have had compared with the previous Government.

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However, we are talking about £6.245 billion of savings and, in return, the Opposition are offering a tax rise. I refer to the issue of the 50% or 45% rate, which at Second Reading the Minister stated the OBR said would raise £100 million. If you slice that £100 million per annum off the total in cuts which have been rejected over the past two days, that means that there is still £6 billion to find, just to round up the figures. Therefore, we should reject these amendments because they offer no solutions beyond borrowing even more, raising taxes significantly or making deep cuts elsewhere in government expenditure, putting the burden of raising the money to repay it on my children and grandchildren.

This Bill would, in the end, save more than £3 billion a year. In their final year, the previous Government were spending £4 for every £3 they raised from the people of this country in tax. In comparison, this Bill saves £3 billion, but that should be compared with the last year of the Labour Government, when they were borrowing £3 billion a week. This is not a comfortable position in which we find ourselves and I would prefer it not to be happening. I share the aspiration for growth and I want to see our country back on track again. However, as the International Monetary Fund said in its World Economic Outlook last October, Governments need to create the right conditions for growth. It said:

“To anchor market expectations, policymakers need to specify adequately detailed medium-term plans for lowering debt ratios, which must be backed by binding legislation”.

That is what the Bill proposes today and that is what the amendment just does not do. As we cannot get an answer to whether higher taxes, lower spending or borrowing alternatives—or a combination of the three—is being proposed, I have no hesitation whatever in recommending to my noble friends on the Liberal Democrat Benches that these amendments, should the Opposition put them to a vote, should be rejected.

Lord Bates: My Lords, the noble Lord, Lord German, referred to the Opposition’s support for the cap on salary increases at 1%. I rise because I came across an interview that the shadow Chancellor, Ed Balls, gave when that policy was announced. This policy will impact on people with a salary above £21,000, below the benefit cap. When pressed on the “Today” programme about how he could justify limiting salary increases in the public sector to 1%, he said:

“And if people expect the Labour Party to say ‘We’ll just oppose’, we can’t do that. [It] would be irresponsible because the priority has got to be getting people into jobs rather than people being paid more”.

That is quite an interesting statement for the shadow Chancellor to make because, in my view, it very much reflects the purpose of this Bill and this amendment.

I do not think that my noble friends on the Front Bench have made life easy for themselves by making this a stand-alone Bill. It certainly should not be viewed that way. It needs to be viewed in the context of the introduction of universal credit, which will bring about benefits of £168 a month to 3 million families. That, because of the wage incentives and the attractiveness of work, will lead to an estimated 300,000 more people finding their way into employment. We need to be very

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clear that, in all of these measures, whether it be raising tax thresholds, universal credit or this Bill today, we are saying that the best route out of poverty is undoubtedly work.

The scale of the challenge we have in doing that is quite immense. Prior to the recession, unemployment in this country was around 1.62 million. It rose very sharply and when the party opposite left office the rate was 2.49 million. It continued on a trajectory up to 2.68 million. However, it has started to fall and has been coming down quite steadily for a few months and is now down to 2.5 million. The figures show that there are 1 million extra private sector jobs, and that is to be welcomed. Benefit changes that encourage growth and help people find their way into employment are surely things we ought to support.

It would also be nice to ask some of those who supported this amendment where they were last year when benefits were increased by 5.2% and salaries for the lowest paid went up by 1.7%. Where were their voices then? What is so compassionate about paying child benefit to people earning more than £50,000 or letting people earning up to £70,000 receive tax credits? We need to change the configuration so it is always in the interests of people to work and then we need to work to ensure that the jobs are there.

How do we create the jobs for that to happen? Clearly we need to get public spending under control so we can raise tax thresholds for individual workers and reduce corporation tax thresholds. We know that that creates employment the world over. That is why unemployment in this country is falling while in so many other countries it is rising. I understand the points that have been made quite seriously and the concerns that have been raised, but they are looking at this in isolation and, placed in context, this is undoubtedly a measure that in the years to come will reduce the levels of poverty in this country.

4 pm

Baroness Stowell of Beeston: My Lords, there have been some very powerful speeches in this debate. I am very grateful to all my noble friends for their contributions and for laying out so clearly and eloquently the economic case for this Bill and for what we seek to achieve. As they have been so clear, I will not repeat much of what they have said. However, I will start by making clear to your Lordships’ House that the amendments before us would, in simple terms, remove the commitment to a 1% uprating from the Bill. The noble Lord, Lord McKenzie, said in Committee:

“We fully intend these amendments to undermine and negate the purpose of the Bill”.—[Official Report, 25/2/13; col. 855.]

My noble friend Lord Newby said in reply that these are the sort of amendments that equate to,

“a vote against the Bill at Second Reading”.—[

Official Report

, 25/2/13; col. 866.].

It is important that we understand what these amendments seek to do.

As has been made clear by my noble friends, these are not decisions that we take lightly. I do not deny that they will have impacts on those who receive the benefits in question or that those impacts will not be easy. However, we have made a conscious decision to

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protect those benefits which reflect the additional costs that disabled people face, while also protecting pensioners through our commitment to the triple lock.

The right reverend Prelate the Bishop of Leicester is right to highlight those in need and I am glad that he does. It is important that we all remember and are conscious of the people affected by some of these changes. However, I ask him and all noble Lords not to forget that, as part of the Government’s wider reforms, we are prioritising resources towards measures and reforms that support families and help to change lives.

Let me name just a few of those measures. We are expanding early-years education to ensure that children have access to early education and to support parents in work. We are attaching additional funding to disadvantaged pupils through the pupil premium, which will rise to £2.5 billion a year by 2014-15. We have protected the schools and NHS budgets to ensure that these vital services continue to support families. More than £1 billion of investment will go into schools. We are introducing universal credit—a new, radically simpler benefit payment designed to ensure that work pays.

As my noble friend Lord Bates already has acknowledged, this last change is about transforming our welfare system. It will significantly increase the incentive that people have to work. Indeed, we estimate that it will lead to up to 300,000 more people moving into work. It is important that we focus on that point for a moment. As my noble friends have already indicated in their speeches, we must not look at the changes that we are discussing today in isolation; we must see them in the wider context of the changes that the Government are making. They reflect the fact that this Government’s focus is on how to help people off benefits and into work.

We need to be aware of the level of support that people can receive while they are on out-of-work benefits. For many, this is supposed to be a temporary state—an interruption between periods of work. By making the system simpler, by reducing the risks from people moving into work and by making work pay, we can reinforce that temporary nature and ensure that more and more people are moving into work. That is what we are seeking to achieve through universal credit and, as I have said, I ask noble Lords to bear these wider changes in mind when considering this Bill and all the amendments that we will debate today.

This Bill is a short-term change, made at a desperately difficult time, as we seek to rebalance the public finances. However, in our other reforms we have made a huge commitment to the long term, a commitment to changing lives through helping people back to work. Although we still have challenges in the labour market, the fact is that more people are moving into work already. Unemployment is falling. Private sector employment is up by more than 1 million since the election and the number of people employed is at its highest level ever.

We are continuing to provide for a 1% increase in these benefit rates. As my noble friends have said, this will mean that the value falls in real terms, which is not a decision that we take lightly, but it is an increase and we must compare this, as some of my noble friends already have, with what is happening elsewhere. Ireland has cut unemployment benefit by 4% a year for two years

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since 2010. Portugal has cut unemployment benefit by 6%. Spain has cut payments to people who are unemployed for more than six months by 10%. Let me remind noble Lords that the UK’s deficit in 2010 was larger—I repeat, larger—than the latter two countries. I am not saying that that justifies the measures we are discussing today; they are justified by the need to rebalance the public finances. However, it is, I hope, a reminder that these are very difficult times. The actions this Government have taken and continue to take to reduce the deficit are helping to secure economic recovery, but there are still tough decisions to make.

While this group of amendments seeks in simple terms to remove the 1% figure from the Bill, as many of my noble friends have already pointed out, it does not suggest an alternative. It should be noted that if the amendments before us were to pass, they would make it possible for the Government to increase benefits by any amount that they wanted in the years in question, without reference to prices or any specified factors, including uprating by less than 1%. Let us assume that the intention would be to upgrade in line with CPI. That would mean that the £3 billion in savings from the Bill would not be delivered. I appreciate that the decisions we have made in the Bill are not easy. We never claimed that they were. However, they are absolutely necessary. This was made clear by my noble friends, who made contributions that were much more powerful than I could have made.

Let us not forget that the central purpose of the Bill is to set out clear plans on uprating that deliver significant and vital savings that will help us on the road to economic recovery, along which we simply must travel if we are to preserve for the future the kinds of things that we value and from which we will all benefit: a stable economy, a growing labour market and opportunities for the next generation.

When the noble Lord, Lord McKenzie, moved the amendment, he said that all the amendments in the group were linked and were consequential one on another. Perhaps it is premature for me to make this point, but I will make it clear that in the Government’s view the amendments are not consequential one on another. If Amendment 1 is agreed, the Government will not oppose Amendment 5. However, we will oppose Amendment 7. It is important to make that clear.

I have made the case for seeing these changes in a wider context, and my noble friends have made powerful contributions about the wider economic context. It is clear that the changes, while painful, are necessary. Therefore I urge the noble Lord to withdraw his amendment.

Lord McKenzie of Luton: My Lords, I start by thanking the noble Lord, Lord Low, for his support for the amendments in this group. He made the very important point that we are potentially moving into a period of greater inflation. This point was made last week by the FT, which talked about the risks of stagflation in this country. I also thank the right reverend Prelate the Bishop of Leicester for his support. He posed the key question: how will making these people poorer help the national interest? What we heard from noble Lords who oppose the amendment did not help us on that point.

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I say to the Minister and to the noble Lord, Lord Bates, who prayed in aid universal credit, that it would be good to know that universal credit is on track because from everything we hear it is not. Even with universal credit as proposed, we know that something like 1.8 million people will have their benefits from work reduced in comparison to their current position.

I stress that the amendment challenges the locking-in over a three-year period of the restrictions on uprating. Uprating by less than the rate of inflation is a real-terms cut. We should recognise that it is a cut in people’s benefits. The fundamental proposition in the amendment is that these things should be looked at in the normal way on an annual basis by reference to what is happening to prices.

The noble Lord, Lord King, and the Minister said that other countries are cutting benefits. Benefits have been cut in this country, too. Council tax benefit, housing benefit, DLA, ESA and tax credits have been cut by something like £18 billion to date.

Lord Newby: Will the noble Lord confirm that no benefits in this country have been cut in cash terms, as they have widely been in the rest of Europe?

Lord McKenzie of Luton: Housing benefit is one such benefit. Council tax benefit has been dumped on local authorities with a 10% restriction on funding, which means that people’s support will be cut in cash terms. That is absolutely happening.

I say to the noble Lords, Lord King and Lord Forsyth, that it seemed that the mention of Cyprus was meant to lead us to a conclusion that bears no relation to reality. We are not dealing with a situation here that would take us anywhere close to the situation in Cyprus. We are talking about restrictions on uprating which, on the Government’s own figures, would amount to something like £1.9 billion.

Lord King of Bridgwater: The Government’s ability even to pay this level of benefit will partly depend on our ability to borrow enough money at low enough rates to continue the policy. Is the noble Lord not aware that there is a big shiver going through the eurozone about the financial situation? It has suddenly come back into the headlines. If it was thought at this moment that the Government were going to deviate from their previously planned approach—if it was voted down by your Lordships’ House—it would have a serious effect. Then the problems faced by some young people and people in poverty at the present time, as spoken to by the right reverend Prelate, could be seriously aggravated. Our job is to try to make the best we can of a very difficult situation.

Lord McKenzie of Luton: My Lords, of course we are aware of what is going on in Europe, and I shall come on to issues of borrowing in a moment. We are talking here about an amount that is less than 0.1% of total government expenditure. The noble Lord cannot seriously be arguing that taking our position rather than that of the Government would bring the whole edifice crashing down. That simply does not reflect reality.

19 Mar 2013 : Column 510

The problem that the Government have is that because they have failed to deliver growth in the economy there is a real risk—this is what is happening—that their austerity programme is making debt worse. This was again a point made in a very powerful article last week in the FT.

We have heard a great deal about the Labour Government’s record. When the Labour Government left office the economy was growing again and it was the austerity measures which choked off that growth. As to the Labour Government’s record on debt, before the international crisis hit, our debt levels were the second lowest in the G7, lower than when we came into office in 1997, I believe.

Lord Forsyth of Drumlean: I am following the noble Lord’s argument very carefully. If he is saying that we can get growth again by spending money uprating benefits in line with inflation, why will he not therefore make the commitment that a Labour Government would do that?

Lord McKenzie of Luton: My Lords, I make the commitment that we should review on the usual basis at each uprating period. No Government or Opposition immediately prior to a general election are going to pre-empt the programme they would have. The noble Lord knows that full well. He is making a silly political point.

There is a real risk that by cutting back you make the debt situation worse. It depends upon the multiplier. There have been some recent studies which suggest that it is made worse because the multiplier effect would mean that if you did not cut back you could create growth greater than the saving you are seeking to make. We shall hear from the Chancellor tomorrow about his view on borrowing for capital spend, for example. The relative merits of that depend upon the multiplier effect.

Ultimately, the argument in favour of the Government’s Bill as it stands is that it is locking in an unknown. You cannot know in year two or indeed the next year what the rate of inflation will be and you cannot know, therefore, the extent of the cut you are visiting on the poorest people in our country. That is what we object to in this Bill.

We could go on for ever in an economic debate, but I think it is time to test the opinion of the House.

4.14 pm

Division on Amendment 1

Contents 206; Not-Contents 275.

Amendment 1 disagreed.

Division No.  1

CONTENTS

Adonis, L.

Afshar, B.

Alton of Liverpool, L.

Anderson of Swansea, L.

Andrews, B.

Armstrong of Hill Top, B.

Bach, L.

Bakewell, B.

19 Mar 2013 : Column 511

Barnett, L.

Bassam of Brighton, L. [Teller]

Beecham, L.

Berkeley, L.

Best, L.

Bichard, L.

Bilston, L.

Birmingham, Bp.

Blood, B.

Boothroyd, B.

Borrie, L.

Bradley, L.

Bragg, L.

Bristol, Bp.

Brooke of Alverthorpe, L.

Brookman, L.

Brooks of Tremorfa, L.

Campbell of Surbiton, B.

Campbell-Savours, L.

Carter of Coles, L.

Chandos, V.

Christopher, L.

Clancarty, E.

Clark of Windermere, L.

Clarke of Hampstead, L.

Clinton-Davis, L.

Cobbold, L.

Collins of Highbury, L.

Corston, B.

Coussins, B.

Crawley, B.

Davies of Oldham, L.

Davies of Stamford, L.

Dean of Thornton-le-Fylde, B.

Derby, Bp.

Desai, L.

Donaghy, B.

Donoughue, L.

Dubs, L.

Eatwell, L.

Elder, L.

Elystan-Morgan, L.

Evans of Parkside, L.

Evans of Temple Guiting, L.

Evans of Watford, L.

Falkland, V.

Farrington of Ribbleton, B.

Faulkner of Worcester, L.

Filkin, L.

Foulkes of Cumnock, L.

Gale, B.

Gibson of Market Rasen, B.

Giddens, L.

Glasman, L.

Golding, B.

Gordon of Strathblane, L.

Gould of Potternewton, B.

Graham of Edmonton, L.

Grantchester, L.

Grenfell, L.

Grey-Thompson, B.

Grocott, L.

Hanworth, V.

Harries of Pentregarth, L.

Harris of Haringey, L.

Hart of Chilton, L.

Haskel, L.

Haworth, L.

Hayman, B.

Hayter of Kentish Town, B.

Healy of Primrose Hill, B.

Henig, B.

Hilton of Eggardon, B.

Hollick, L.

Hollins, B.

Hollis of Heigham, B.

Howarth of Breckland, B.

Howarth of Newport, L.

Howe of Idlicote, B.

Howells of St Davids, B.

Howie of Troon, L.

Hoyle, L.

Hughes of Stretford, B.

Hughes of Woodside, L.

Hunt of Chesterton, L.

Hunt of Kings Heath, L.

Irvine of Lairg, L.

Janner of Braunstone, L.

Jay of Paddington, B.

Jones, L.

Jordan, L.

Judd, L.

Kennedy of Southwark, L.

Kerr of Kinlochard, L.

Kidron, B.

King of Bow, B.

Kinnock of Holyhead, B.

Kinnock, L.

Kirkhill, L.

Knight of Weymouth, L.

Laming, L.

Lea of Crondall, L.

Leicester, Bp.

Levy, L.

Liddell of Coatdyke, B.

Liddle, L.

Lipsey, L.

Lister of Burtersett, B.

Listowel, E.

Low of Dalston, L.

McAvoy, L.

McDonagh, B.

Macdonald of Tradeston, L.

McFall of Alcluith, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

Mackenzie of Framwellgate, L.

McKenzie of Luton, L.

Maginnis of Drumglass, L.

Mallalieu, B.

Mar, C.

Martin of Springburn, L.

Masham of Ilton, B.

Massey of Darwen, B.

Maxton, L.

Meacher, B.

Mitchell, L.

Moonie, L.

Morgan of Drefelin, B.

Morgan of Ely, B.

Morgan of Huyton, B.

Morris of Aberavon, L.

Morris of Handsworth, L.

Morris of Yardley, B.

Moser, L.

O'Loan, B.

O'Neill of Clackmannan, L.

Patel of Blackburn, L.

Patel of Bradford, L.

Pendry, L.

Peston, L.

Pitkeathley, B.

Plant of Highfield, L.

Ponsonby of Shulbrede, L.

Prescott, L.

Prosser, B.

Quin, B.

Radice, L.

Ramsay of Cartvale, B.

Reid of Cardowan, L.

Rendell of Babergh, B.

Richard, L.

Richardson of Calow, B.

19 Mar 2013 : Column 512

Ripon and Leeds, Bp.

Robertson of Port Ellen, L.

Rogers of Riverside, L.

Rosser, L.

Rowlands, L.

Royall of Blaisdon, B.

St John of Bletso, L.

Sawyer, L.

Scotland of Asthal, B.

Sherlock, B.

Simon, V.

Singh of Wimbledon, L.

Smith of Basildon, B.

Smith of Finsbury, L.

Smith of Leigh, L.

Snape, L.

Soley, L.

Steyn, L.

Stone of Blackheath, L.

Taylor of Blackburn, L.

Taylor of Bolton, B.

Temple-Morris, L.

Thornton, B.

Tonge, B.

Touhig, L.

Triesman, L.

Tunnicliffe, L. [Teller]

Turnberg, L.

Turner of Camden, B.

Uddin, B.

Wall of New Barnet, B.

Warner, L.

Watson of Invergowrie, L.

West of Spithead, L.

Wheeler, B.

Whitaker, B.

Whitty, L.

Wilkins, B.

Williams of Baglan, L.

Williams of Elvel, L.

Wills, L.

Winston, L.

Wood of Anfield, L.

Worthington, B.

Young of Hornsey, B.

NOT CONTENTS

Aberdare, L.

Addington, L.

Ahmad of Wimbledon, L.

Alderdice, L.

Allenby of Megiddo, V.

Anelay of St Johns, B. [Teller]

Armstrong of Ilminster, L.

Arran, E.

Ashdown of Norton-sub-Hamdon, L.

Ashton of Hyde, L.

Astor of Hever, L.

Attlee, E.

Bates, L.

Berridge, B.

Bilimoria, L.

Black of Brentwood, L.

Blackwell, L.

Blencathra, L.

Bonham-Carter of Yarnbury, B.

Bottomley of Nettlestone, B.

Bowness, L.

Brabazon of Tara, L.

Bradshaw, L.

Bridgeman, V.

Brinton, B.

Brittan of Spennithorne, L.

Brooke of Sutton Mandeville, L.

Brougham and Vaux, L.

Brown of Eaton-under-Heywood, L.

Browne of Belmont, L.

Browning, B.

Burnett, L.

Butler-Sloss, B.

Byford, B.

Caithness, E.

Cameron of Dillington, L.

Campbell of Alloway, L.

Carswell, L.

Cathcart, E.

Cavendish of Furness, L.

Chadlington, L.

Chalker of Wallasey, B.

Chidgey, L.

Clement-Jones, L.

Colwyn, L.

Condon, L.

Cope of Berkeley, L.

Cormack, L.

Cotter, L.

Courtown, E.

Craig of Radley, L.

Craigavon, V.

Crathorne, L.

Crickhowell, L.

Curry of Kirkharle, L.

De Mauley, L.

Dear, L.

Deben, L.

Deech, B.

Deighton, L.

Dholakia, L.

Dixon-Smith, L.

Dobbs, L.

Doocey, B.

Dundee, E.

Dykes, L.

Eames, L.

Eaton, B.

Eccles of Moulton, B.

Eccles, V.

Eden of Winton, L.

Edmiston, L.

Erroll, E.

Falkner of Margravine, B.

Faulks, L.

Fearn, L.

Feldman, L.

Fellowes of West Stafford, L.

Fink, L.

Fookes, B.

Forsyth of Drumlean, L.

Fowler, L.

Framlingham, L.

Fraser of Carmyllie, L.

Freeman, L.

Freud, L.

Garden of Frognal, B.

Gardiner of Kimble, L.

Gardner of Parkes, B.

Garel-Jones, L.

Geddes, L.

German, L.

Glasgow, E.

Glenarthur, L.

Goodhart, L.

Goodlad, L.

Grade of Yarmouth, L.

Green of Hurstpierpoint, L.

Greengross, B.

Greenway, L.

19 Mar 2013 : Column 513

Griffiths of Fforestfach, L.

Guthrie of Craigiebank, L.

Hameed, L.

Hamilton of Epsom, L.

Hamwee, B.

Hanham, B.

Hannay of Chiswick, L.

Harris of Richmond, B.

Hastings of Scarisbrick, L.

Henley, L.

Heyhoe Flint, B.

Higgins, L.

Hill of Oareford, L.

Hodgson of Astley Abbotts, L.

Hogg, B.

Home, E.

Howard of Lympne, L.

Howard of Rising, L.

Howe of Aberavon, L.

Howe, E.

Howell of Guildford, L.

Hunt of Wirral, L.

Hurd of Westwell, L.

Hussain, L.

Hussein-Ece, B.

Hylton, L.

Inglewood, L.

James of Blackheath, L.

Jenkin of Kennington, B.

Jenkin of Roding, L.

Jolly, B.

Jones of Cheltenham, L.

Jopling, L.

Kakkar, L.

Kalms, L.

King of Bridgwater, L.

Kirkham, L.

Kirkwood of Kirkhope, L.

Knight of Collingtree, B.

Kramer, B.

Lamont of Lerwick, L.

Lawson of Blaby, L.

Lee of Trafford, L.

Lester of Herne Hill, L.

Lexden, L.

Lindsay, E.

Lingfield, L.

Linklater of Butterstone, B.

Liverpool, E.

Loomba, L.

Luce, L.

Lyell, L.

Lytton, E.

MacGregor of Pulham Market, L.

Maclennan of Rogart, L.

McNally, L.

Maddock, B.

Magan of Castletown, L.

Mancroft, L.

Mar and Kellie, E.

Marks of Henley-on-Thames, L.

Marland, L.

Marlesford, L.

Mawhinney, L.

Mayhew of Twysden, L.

Miller of Chilthorne Domer, B.

Miller of Hendon, B.

Montagu of Beaulieu, L.

Montgomery of Alamein, V.

Montrose, D.

Moore of Lower Marsh, L.

Morris of Bolton, B.

Moynihan, L.

Naseby, L.

Nash, L.

Neville-Jones, B.

Newby, L. [Teller]

Newlove, B.

Noakes, B.

Northover, B.

Norton of Louth, L.

O'Cathain, B.

Oppenheim-Barnes, B.

Palmer of Childs Hill, L.

Palmer, L.

Palumbo, L.

Parminter, B.

Patel, L.

Pearson of Rannoch, L.

Perry of Southwark, B.

Phillips of Sudbury, L.

Popat, L.

Powell of Bayswater, L.

Randerson, B.

Rawlings, B.

Razzall, L.

Redesdale, L.

Renfrew of Kaimsthorn, L.

Ridley, V.

Roberts of Llandudno, L.

Rodgers of Quarry Bank, L.

Rogan, L.

Roper, L.

Rotherwick, L.

Rowe-Beddoe, L.

Ryder of Wensum, L.

Sanderson of Bowden, L.

Scott of Needham Market, B.

Seccombe, B.

Selborne, E.

Selkirk of Douglas, L.

Selsdon, L.

Shackleton of Belgravia, B.

Sharkey, L.

Sharp of Guildford, B.

Sharples, B.

Shaw of Northstead, L.

Sheikh, L.

Shephard of Northwold, B.

Shipley, L.

Shrewsbury, E.

Shutt of Greetland, L.

Skelmersdale, L.

Slim, V.

Smith of Clifton, L.

Stedman-Scott, B.

Stephen, L.

Sterling of Plaistow, L.

Stewartby, L.

Stoneham of Droxford, L.

Storey, L.

Stowell of Beeston, B.

Strasburger, L.

Swinfen, L.

Taverne, L.

Taylor of Goss Moor, L.

Taylor of Holbeach, L.

Tebbit, L.

Thomas of Gresford, L.

Thomas of Swynnerton, L.

Thomas of Winchester, B.

Tope, L.

Tordoff, L.

Trees, L.

Trefgarne, L.

Trenchard, V.

Trimble, L.

True, L.

Trumpington, B.

Tugendhat, L.

Turnbull, L.

Tyler of Enfield, B.

19 Mar 2013 : Column 514

Tyler, L.

Ullswater, V.

Vallance of Tummel, L.

Verma, B.

Vinson, L.

Waddington, L.

Wade of Chorlton, L.

Wakeham, L.

Wallace of Saltaire, L.

Wallace of Tankerness, L.

Walmsley, B.

Walpole, L.

Walton of Detchant, L.

Warnock, B.

Wasserman, L.

Wei, L.

Wheatcroft, B.

Wilcox, B.

Willis of Knaresborough, L.

Willoughby de Broke, L.

Wilson of Dinton, L.

Wilson of Tillyorn, L.

Younger of Leckie, V.

4.30 pm

Amendment 2

Moved by The Lord Bishop of Ripon and Leeds

2: Clause 1, page 1, line 4, at end insert “save for the exclusions specified in section (Protecting children’s benefits and tax credits)”

The Lord Bishop of Ripon and Leeds: My Lords, I will also speak to the other amendments in this group. Amendments 2 and 8 are paving amendments for a new clause to protect child benefits and child tax credits from the effects of this Bill. The substantive amendment to which they refer is Amendment 11. This follows extensive discussion in Committee, and is designed to halt the disproportionately negative effects of the Bill on children and their welfare. Amendments 13, 14 and 15 are consequential, and no doubt the noble Baroness, Lady Meacher, will speak to her Amendment 14A.

The Bill affects 30% of all households. Of those with dependent children, it affects 87%. Of lone-parent households, it affects 95%. Conspicuously, 11.5 million children suffer as a result of this Bill. This is in addition to the effects that our austerity measures have already had on children. In 2012, the Institute for Fiscal Studies estimated that there would indeed be a reduction of 0.9% in real-terms income for all households from 2010 to 2016. For a couple with two children, that fall will already, without this Bill, be 4.2%: equivalent to a fall of £215 per year for a couple without children, or £1,250 for a couple with two children. This Bill adds to that discrepancy, and it is that which cannot be fair.

It is true that we need particular concern for those in or on the verge of poverty. This Bill fails that test, too. For the poorest 20% of households, the IFS estimates to which I have referred suggest that the reduction in income is 7% from 2010 to 2016. In addition, 60% of the Bill’s savings come from those in the poorest third of our population, and 3% from those in the richest third. This will mean that, on the Government’s estimates, 200,000 more children will be in poverty, half of them in working families.

That in itself must make us pause to see what other ways there are to make the £0.9 billion savings which the child-related parts of this Bill are designed to produce in 2015-16. It is not for us today to declare what those alternatives should be. However, they do exist. Whether through reducing tax reliefs on pension contributions for the wealthy, or through introducing national insurance contributions on employer pension contributions, there are a number of different ways in

19 Mar 2013 : Column 515

which we could explore raising this money, which would not affect children in the ways in which this Bill does. We need to find a way for the burden of our fiscal challenges, so well described in the previous debate, to fall on those who, like me and many Members of this House, can afford to meet it, rather on than those who cannot. The noble Lord, Lord Newby, spoke in Committee of the importance of reviving the economy for the benefit of the future. That is absolutely right, but not at the expense of children’s needs now.

The major thrust of these amendments is to defend the nine out of 10 children in this country who are affected by the Bill. This effect is cumulative; it comes on top of the reductions already made. It has been argued that since many people are currently seeing wage increases of only 1%, benefits should also rise by only 1%. However, this Bill is an additional blow for those with children whose wages have increased by only 1%. Not only are their wages declining but, by this Bill, provision for their children will decline, too. These benefits affect those in work just as much as those who are not in work. None of the benefits referred to in these amendments is an out-of-work benefit. This is a transfer of the burden from all of us to those with children, and that increased burden on children cannot be right.

I continue to be particularly concerned at the continued gradual erosion of child benefit. The 1% cap comes after three years of the freezing of child benefit, so it is a cap on a figure that has already been reduced. From 2011 to 2015, the increase in child benefit will be 2%, rather than the estimated 16% of CPI over that period. Therefore, a couple with three children with one earner, such as a corporal in the Army, will lose £552 a year by 2015. A couple—one a childminder, let us say, earning £240 a week and the other a postal worker on £395 a week—with two children will lose £3.51 a week by 2015.

Child benefit has long been a crucial part of the support for families in our culture. That is particularly so for those on low wages. For very many families, child benefit is explicitly set aside to provide for children. Parents will struggle by making savings on their own lifestyle, sometimes even by going without meals themselves, but they will ensure that the child benefit that they receive is spent on their children. We owe it to the next generation to ensure that this element of our society, our children, is not disadvantaged, and certainly not disadvantaged by so much more than households without children.

In addition, child benefit plays a particular role in support of those in work because it acts as an earnings disregard in the calculation of housing and council tax benefits. Any reduction in child benefit is therefore a disincentive to returning to work. For a two-child family in work, on a low income and living in rented accommodation, the cut between 2010 and 2015 is not only the £4.80 a week in child benefit but an extra £4.10 in lost benefits. This working family on a low income therefore loses almost £9 a week.

I need to refer briefly to the third element in this package, that of the lower disability addition of universal credit. That is already being reduced from its current £57 a week to £28 a week under universal credit. Now it will be reduced further by this Bill. It seems extraordinary

19 Mar 2013 : Column 516

to reduce a benefit before it has even come into effect, especially when it provides for the needs of disabled children and their extra financial demands. These children need our support so they can live full and creative lives, and therefore benefit not just themselves but all of us. Children already contribute more than their fair share to our austerity burden. This Bill adds to their burden. I hope that we shall at least remove this extra pressure on them by accepting this amendment. I beg to move.

Baroness Sherlock: My Lords, I thank the right reverend Prelate the Bishop of Ripon and Leeds for introducing this amendment. I also congratulate him on continuing to press his concerns in this area after failing to receive any comfort at earlier stages of the Bill. I congratulate the Lords spiritual in general for being willing to stand up for what they believe, despite the inevitable volley of artillery that came their way the moment they dared to raise their heads above the cathedral parapet. It may be that we have them to thank for the extended interest in welfare benefits, which is much more than we see normally. I am delighted to see it.

As we have heard, this amendment would remove a number of children’s benefits and credits from the scope of the Bill. Since we on these Benches wish to remove all benefits and tax credits from the scope of the Bill, we are pleased to support it. We have heard at different points in the passage of this Bill that it has a disproportionate impact on families and children. The Government’s impact assessment shows that two-thirds of households affected are families with children. We also know that the Bill will have a direct effect on child poverty in Britain. Ministers have previously announced—as the right reverend Prelate noted—that this Bill alone will put a further 200,000 children into relative poverty.

In Committee, I asked the Minister to tell the Committee what the impact would be on the three other poverty measures in the Child Poverty Act. I got nothing back at all. Now the Child Poverty Action Group has dragged some information from the Government by means of the Freedom of Information Act—although it should not have had to use a FOI request to get it. I would have hoped the Minister could have told us the information when I asked for it in Committee. The Government have not yet offered a narrative assessment even of measures, for example, of material deprivation. However, they were forced to admit what would happen to the number of children in absolute poverty. In response to that FOI request, the DWP admitted for the first time that it estimates that around 200,000 more children in Britain will be pushed into absolute poverty by this uprating policy.

This is a shocking figure, which reveals the depth of what is wrong with this policy. It also removes the Government’s defence that the problem is with the relative poverty measure, rather than with the impact on children themselves. On the back of those figures, some new analysis for the Child Poverty Action Group by Landman Economics found that an increase of 600,000 children in absolute poverty is likely between 2010 and 2015, and that is net of any improvements as a result of universal credit.

19 Mar 2013 : Column 517

As we have heard at many stages of this Bill, too many parents go without to ensure that they can heat their homes and feed and clothe their children. As the costs of food and energy have soared, more parents spend more of their money on these basic costs. Yet vital support that they depend upon is being cut in real terms in order to hand a tax cut to the very richest. It is not only the Church of England that has come out against these priorities; Archbishop Peter Smith, vice-president of the Catholic Bishops’ Conference of England and Wales stated:

“It is unjustifiable that the poorest children, who often have no other safety net, will be left bearing the brunt of economic difficulties as a result of significant real-term cuts to social security”.

The archbishop noted something that many of us know: that like many other charities across the country, Catholic agencies supporting parents find themselves ever more confronted with parents unable to afford even basic essentials, such as healthy meals or warm clothes for their children. That would be exacerbated by this Bill.

The real shame is that so many of those families have no alternative way of reducing that problem. Most victims of this Bill are working families. The parents are already doing the right thing; they are out working. One of the real disappointments about the debates we have had is the failure to acknowledge that, far from this being something that penalises only people who are not working, it is in fact the very same people who have had below-inflation or no pay increases and who have struggled repeatedly to get out, get work and get hours, who are hit by these cuts to tax and benefit support.

The Bill is a completely inappropriate way to address the uprating of essential state support for families. We already have perfectly good mechanisms to uprate annually in the light of inflation and prevailing economic conditions. These are poor choices for the Government to be making. The families who will be hit are not responsible for the failure of the Government to get the economy growing again. They are just doing their best to manage in difficult times, but the Government are planning to cut the value of the help that they get from the state to fund a tax cut for people earning £1 million a year. We should not be doing this, and we on these Benches are pleased and proud to support the amendment.

4.45 pm

Lord Forsyth of Drumlean: My Lords, this amendment is simply a variation on the previous amendment. In the previous debate, we went through the arguments for why it is economically impossible to sustain inflation-related increases. I do not propose to repeat the arguments, but this amendment would result in exactly the same position, given that the exceptions proposed by the right reverend Prelate constitute a large part of the Bill. It is just a way of saying that, if one was going to make the same savings, one would have to make bigger reductions in the increases for everyone else, or else one would have to find the money. Once again, the right reverend Prelate did not tell us where the money would come from.

19 Mar 2013 : Column 518

Baroness Hollis of Heigham: He did, actually.

Lord Forsyth of Drumlean: I am happy to give way to him if he wants to explain where the money would come from, but I suspect not. A large part of his flock of the clergy will be recipients of benefits because of the wages that they are paid by the Church of England. Everyone is in the same boat here. The noble Baroness, Lady Sherlock, argues that somehow it is possible to find money which we have not got and that she is proud to support the amendment because of the reduction in the top rate of tax paid by those who she describes as millionaires. I remind her that those people are paying 5% more in tax than they did under her Government. I also remind her that the effect of cutting those high rates of tax has been to increase revenue and therefore to make it possible to do more in that respect.

Surely, by now, we have learnt that lesson. It is a cheap political argument to say that it is possible to create money out of thin air and that this Government want to protect the rich at the expense of the poor. If we want to help the poor, we have to get the economy growing again. The noble Baroness says that the economy is not growing because of this Government. The economy is not growing because of the burden of debt which she and her fellow members of the Labour Party ran up.

Lord McKenzie of Luton: The noble Lord keeps going on about debt. Is it not right that, because of the failures of the noble Lord’s Government, the lack of growth has meant that borrowing is now about £200 billion more than they planned when they came into being?

Lord Forsyth of Drumlean: I am utterly amazed by the noble Lord. He is now criticising us for spending £200 billion more than we planned, when part of that money is being used to provide the 1% uplift in benefits. Talk about wanting to have it both ways. On the one hand, he is criticising the Government for not borrowing enough, but now he is criticising the Government for borrowing more than we planned. The reason why we are having to borrow more than we planned is because of all the commitments made by the previous Government without a clue as to how they would fund them. That includes commitments on welfare. Welfare spending accounts for £1 in every £4 that the Government spend.

On the basis of the noble Lord’s criticism that we are spending £200 billion more, that would mean that £50 billion is going on welfare. In all the time that I have been involved in both Houses of Parliament, I have never seen a more irresponsible Opposition. It is not good enough for the right reverend Prelate to come to tell us that we need to do more to help working families with young children without explaining from where the money is to come or addressing the main problem.

Lord Griffiths of Burry Port: My Lords, I have taken no part in this debate so far. Has the noble Lord not suggested somewhere where the money can come

19 Mar 2013 : Column 519

from; namely, that people like us could pay it? If children would benefit I am prepared to pay it. Is he and are we?

Lord Forsyth of Drumlean: My Lords, I am grateful to the noble Lord, Lord Griffiths of Burry Port. I did not think that he was a bishop and I was addressing my remarks to the Bishops’ Bench, but I say to him that the burden of tax has gone up substantially, and the reductions in government expenditure have so far been quite limited. We are discussing not a cut in government expenditure but limiting the increase in government expenditure to 1%.

I have had several goes at persuading the right reverend Prelate to indicate where the money for his proposal might come from. One possibility might be for people to put wages up. If the Church of England were to put up its clergy’s wages, less would be claimed in benefits and more would be available for others, but that is not a practical proposition for the church because the church, like the Government, is faced with a financial crisis and has to live within its means. What is good for the church is good for the Government and is good for particular families.

The most irresponsible part of the arguments that have come from the Bishops’ Bench this afternoon is about what happens if inflation is allowed to let rip. I fear that that may be about to happen as we continue to print money and borrow. As the noble Lord, Lord McKenzie, pointed out, we are borrowing far more than we planned to meet our commitments and to be fair to the most vulnerable. What happens when inflation takes off? I remember the 1970s, when inflation was running at very high levels, at 20% and more, and interest rates were at 15% and more. Who suffered? Children, the poorest and families suffered. There is nothing Governments can do to protect them once inflation takes off.

We do not want to go back to that kind of society. It tried to cope with inflation by protecting people through indexation, but it was unable to keep up with it and the result was, as the then Labour Prime Minister put it so eloquently:

“Inflation is the father and mother of unemployment”.

Jim Callaghan said:

“We used to think that you could spend your way out of a recession, and now we know that you cannot”.

Those words were said as the Labour Government left in 1979, leaving another Tory Government to clean up the mess, just as we are doing now.

The right reverend Prelate’s amendment of course carries great emotional impact. We would all like to see working families with children have a higher standard of living, but the way to do that is to create the wealth that enables us to support those families and enables them to get the levels of income and employment that they need. You do not do it by shaving the edges of the currency, allowing inflation to take off and committing those families’ children as adults to a debt burden that, frankly, will be impossible to pay off. They would be paying the interest for the rest of their lives, and that would disadvantage their children. In rejecting this amendment, as I hope she will, my noble

19 Mar 2013 : Column 520

friend is speaking not just for our children but for our grandchildren, who are entitled to expect responsible government in these straitened times.

Lord Bates: My Lords, I support what my noble friend Lord Forsyth said. When the right reverend Prelate comes to respond to the debate, I would be grateful if he would comment on the following point. He made great play, and I do not underestimate this, of the effect and impact of limiting the uprating of child benefit and child benefits generally to 1%. According to Appendix 3 of the helpful Library note on the Bill, regarding the child tax credit element, in 2011-12 the child element of child tax credit increased by 11.1%, a significant sum. That followed significant increases of 13% in 2008-09 and 12.5% in 2004-05. If one is to argue that limiting that increase now to 1% would have a significant effect, if you take it as a snapshot, that may be the case, but if one looks over time, one has to factor in those significantly higher-than-inflation increases that have occurred in the child tax credit element in the past.

One of the problems with trading figures with regard to child poverty is that you get some curious results. One of the most notable is that in 2010 there were 300,000 fewer people in poverty because the recession had caused the median income to drop—in other words, children were said to have been pulled out of poverty not because anything had changed in their lives but because the rest of society had got poorer. We have to be clear about what we are arguing for when we talk about the interests of children, which of course should be paramount.

I turn again to a theme in the debate on the previous amendment: one cannot just take this in isolation. One needs to look at what the Prime Minister has announced today on childcare, for example, which will make a significant difference to people by enabling them to move into employment. One needs to look at the pupil premium or the raising of tax thresholds, which means that someone on the minimum wage has seen their tax bill halved under this Government. One has to look at these things in the round. Unlike the Opposition, we have ring-fenced the budget for the National Health Service, on which people significantly depend. Again, in the round, we need to get this absolutely correct.

I will react to the charge that somehow there is an easy pot at the other end of the income scale to be tapped into. As a result of this Government’s actions, the richest pay more tax on capital gains, more stamp duty on their homes and more tax on their pensions and are less able to evade tax than was the case before. These factors need to be borne in mind in the broad reach of these changes that I know when taken in cold, clinical isolation, one year at a time, without reference to trends over time, may allow one to draw one conclusion but should be placed in the proper context. I seem to recall from my youth the good theological concept of placing individual verses in context in order to understand their meaning, and one might think it was a good idea to place this one measure in the broader context in order to understand what the Government are doing to bring people out of child poverty, which we accept is significant. Other measures, such as limiting the

19 Mar 2013 : Column 521

proposed increases in fuel duty—another factor that has a big impact on the poorest in society, particularly those with families—and caps on rail fares and on council tax, all seek to address the issues.

We also need to recognise that child poverty has a wider set of causes than cash payment alone, and in many ways, we are focusing here on cash payment on its own. We need to place in context the fact that the children’s opportunities and their likelihood of being in poverty are affected primarily by the extent to which they live in a workless household. Therefore, all our efforts to get people into work should be welcome.

5 pm

A child may live in a family with problem debt. One would therefore think that noble Lords would welcome the measures that we are seeking to take to reduce indebtedness and to encourage people to live within their means, with universal credit being paid on a monthly basis so that people get used to being responsible. A child may live in poor housing or in a troubled area, have an unstable family environment or attend a failing school. His parents may not have the skills to get out and get the job that they need, or they may be in poor health. These are a broad range of issues that ought to be reflected in our debates about child poverty. In that context, I believe that in time, primarily through encouraging more people into employment, we will see the child poverty targets in the Child Poverty Act, which this Government signed up to and agreed to, achieved by their set target date of 2020.

Lord Newby: My Lords, the whole House can agree on one thing. We all want to support families with children and ensure that children in this country have the opportunity to fulfil their potential. We have been discussing how we attempt to achieve that in the extremely difficult economic times in which we live.

I will spare noble Lords my speaking notes on the economic context, as we have already had a full debate on that. The only point I make in passing, in respect of the Opposition’s policies on deficit reduction, is that they passed legislation saying that by the forthcoming financial year it would be illegal not to have halved the deficit. It is therefore particularly surprising that they seem to have had no plan at the time to do it and have given no indication since of how they might have done it.

However, I must remind noble Lords again of the baseline from which these savings are being made. Tax credit expenditure increased by 340% under the previous Government compared to the benefits they replaced. Eligibility for tax credits was extended to nine out of 10 families with children and tax credits and child benefit accounted for £42 billion this year, which is over 40% of working-age welfare expenditure.

I will give noble Lords one other piece of context. The latest OECD figures show that of all the developed countries the UK, along with Ireland, spends the highest proportion of its national income on family benefits. We are not a country that takes these things lightly or a country that has not given very high priority to supporting families. We believe that that is

19 Mar 2013 : Column 522

absolutely a right priority and we support families with children as much as we can in the circumstances. Child benefit and tax credits exist to do that. However, as we have said, we have to focus resources where they are needed most.

A number of noble Lords, including the right reverend Prelate the Bishop of Leicester and the noble Lord, Lord Bates, have mentioned that this Bill is only one of a large number of measures that the Government are taking which affect families with children, in particular poor families with children. The noble Lord, Lord Bates, referred to the pupil premium, which will cost the Government £2.5 billion by next year. This will be worth £900 per disadvantaged child—and that is £900 in hard times. We are extending flexible support for early education. Since 2010, all three and four year-olds have been entitled to 15 hours of free childcare and we are extending this to 260,000 disadvantaged two year-olds from this year. This is immensely important to these families and it will be worth around £2,900 a year for the poorest families who benefit—£2,900 extra per family. We have found these hugely significant sums of money by making reductions elsewhere, because we place such a large priority on the poorest families.

As the noble Lord, Lord Bates, said, we protected the schools budget and the NHS budget. We are spending £1.2 billion on capital expenditure in schools. However, as the noble Lord, Lord Forsyth, has said, one of the most important things we have to do is leave our children and grandchildren with a lack of deficit or a deficit that they can manage. The savings in the Bill attempt to begin to do that.

The first group of amendments would remove child benefit, child tax credit and the lower rate of disabled child addition in universal credit from the Bill. This would remove nearly half the savings from the Bill, which is around £900 million in 2015-16. I should like to make a further point on universal credit, although it has not been the subject of much debate in this group of amendments. I am sure we will be dealing with this important issue in more detail when we debate Amendment 3, to which my noble friend Lady Stowell will respond. Suffice it to say that part of the principle underlying the decisions we have taken on disability and universal credit is the need for simplicity and our desire to target support to the most severely disabled children.

The right reverend Prelate the Bishop of Ripon and Leeds referred to child benefit and expressed his concern that it had been frozen or taken away from the highest earners. What he did not say was that the Government have increased child tax credit by £180—more than inflation—to more than cover, in the first few years, the reduction in child benefit. Taking child benefit and child tax credit together, we have tilted the expenditure away from affluent families and put more of the cash into poorer ones. I think that is a sensible priority and I am surprised that he appears not to agree.

A number of noble Lords have talked about the impact of the Bill on child poverty. As has been pointed out, the Bill is forecast to increase the number of children in absolute poverty by 200,000 and the number in relative poverty by 200,000. For the avoidance of doubt and in answer to the point made by the noble Baroness, Lady Sherlock, my noble friend Lady Stowell

19 Mar 2013 : Column 523

wrote to the noble Lord, Lord McKenzie, copied to other noble Lords, on 13 March. Her letter contained the figure about absolute poverty so, far from seeking to avoid mentioning it, we chose to circulate it. I am not saying that absolute poverty is not something we should be extremely concerned about but the term does not mean what most people think of as absolute poverty. The definition of absolute poverty is 60% of the median income in 2010-11 uprated to take account of inflation. The 200,000 children mentioned in respect of absolute poverty are very largely the same as the 200,000 who are mentioned in terms of relative poverty. You certainly cannot add those two numbers together.

At previous stages of the Bill, we have discussed the definition of child poverty and the importance of tackling child poverty. We know that if we focus on the relative income line we get some very odd results. We have pointed out previously that in 2010 300,000 fewer children were said to have moved out of poverty, not because anything changed in their lives but because the rest of society got poorer. The estimate on the impact of this Bill does not take account of policies which would cause child poverty figures to move in the other direction, such as universal credit which is expected to lift up to 250,000 children out of poverty, depending on the effect of the minimum income floor. We take the issues of cash and poverty, as currently defined, very seriously, but we also think that we need a broader definition of child poverty. That is why the Government are currently consulting on a wider definition. As I set out two weeks ago, and repeat today, this Government remain committed to eradicating child poverty. We believe that income will remain an important part of any new measure on child poverty, but focusing our resources on benefits alone is not enough. We have to take action to tackle the root causes of poverty, some of which I have described today.

I also take this opportunity to mention, as an example of what the Government are doing to support children and families in work with children, the announcement made today by the Prime Minister and Deputy Prime Minister concerning increasing eligibility for support to five times as many families as is currently the case through a new tax-free childcare scheme. Families where the parents are in work will be able to claim 20% of their childcare costs—equal to the basic rate of income tax—up to £6,000. The scheme will be phased in from the autumn of 2015. More than 2.5 million hard-working families will be eligible to benefit from these new proposals, compared with existing schemes offered by fewer than 5% of employers. Families on tax credits will be eligible to receive support for 70% of their childcare costs, and we have already committed an additional £200 million in universal credit, helping 100,000 more working families.

Today’s announcement of that further £200 million of additional support in universal credit will provide working families with the equivalent of 85% of their childcare costs where the lone parent or both parents pay income tax. That additional support will improve incentives to work and ensure that it is worth while for low and middle-income parents to work up to full-time hours. It will be phased in from April 2016 when

19 Mar 2013 : Column 524

childcare support moves from tax credits to universal credit. Together, these proposals will help to ensure that working families are not held back by the costs of childcare. They will remove disincentives to work for many mothers and provide flexibility and support for businesses to generate employment.

I hope I have been able to provide some reassurance that, although we are taking difficult decisions on welfare, they are necessary decisions. We are prioritising limited resources so that they go to measures that help families with children as well as those who aspire to work hard and get on. I therefore ask the right reverend Prelate to withdraw his amendment.

The Lord Bishop of Ripon and Leeds: My Lords, I am grateful to all those who have taken part in this debate and, indeed, to the Minister for his extended response to the discussion. I am grateful to the noble Baroness, Lady Sherlock, for her support and for the information that 200,000 children will be in absolute poverty as a result of the Bill. We have also recently had information from the Trussell Trust about the number of children who are now being fed through food banks.

I thank the noble Lord, Lord Forsyth, for his contribution, but this is not simply a variation on the previous amendment. For one thing, it would cost only half as much at £0.9 billion, rather than the £2 billion to £3 billion which has been mentioned in relation to the whole Bill.

There have been a number of suggestions—not just from me but from a collection of other people—as to how this money could be raised. At an earlier stage in our discussions on the Bill, I made suggestions and the noble Lord, Lord Newby, responded that they were indeed possibilities but not ones that fitted in with the Government’s current priorities. That is a perfectly fair response but it is not fair to say that taxing the winter fuel allowance or dealing differently with things such as free television licences, tax relief on pension contributions, national insurance contributions or employer pension costs and so on are not possible. They are possibilities. I was not quite sure what—

5.15 pm

Lord Forsyth of Drumlean: I am most grateful to the right reverend Prelate. My criticism was that he did not say which of these he wanted to do. If the church’s position is that it wants to tax winter fuel benefits, please say so and say that the money from that could be used for this purpose. As for increasing taxes on pension contributions, he may not have noticed but the Government have already done that.

Baroness Hollis of Heigham: My Lords, I would have thought that the right reverend Prelate’s point was that we are facing political choices, not ones of financial necessity. We can make choices here and we are choosing instead to go after poor children.

The Lord Bishop of Ripon and Leeds: I thank the noble Lord and the noble Baroness for the answers they have given each other on this. It really is not my

19 Mar 2013 : Column 525

duty, as a Prelate in this House, to give the church’s view on exactly how the money should be raised. It is a task to say that there are alternatives and, indeed, to make suggestions as to how the money might be raised. There is no policy on exactly how it should be and I do not think that it would be for me to try to produce the solution to what we are doing. There are alternatives. I do not believe that they should be placed on children.

Lord Deben: I wonder whether the right reverend Prelate will understand this point. He is making specific remarks as to how we should spend the money. Is it not reasonable to say that he should take the responsibility for making specific suggestions as to how we should save the money?

The Lord Bishop of Ripon and Leeds: My Lords, I have made a number of specific suggestions as to ways in which this money could be provided from elsewhere. My basic point continues to be that it should not be raised by putting the pressure on children and their families. I am grateful to the Government—and to the noble Lord, Lord Bates, for raising the matter—for the child tax credit increase of £180 in 2011. It has to be said that that was, at the time, only the first of two announced upratings. The second, of £110, never happened because of the economic state in which we find ourselves. That above-inflation increase in child tax credit did something to ameliorate the pressure put on those in most difficulty, particularly children, by various other provisions made over the past few years.

I am grateful, too, for the announcements that the Minister has made this afternoon. However, one could say that if 20% of childcare is to be covered, that still means that those receiving that childcare need to find the other 80% in order to get the 20%. I absolutely agree with the Minister when he speaks of the need to tackle root causes and to make sure that more people are in work. I commend any efforts of any Government which lead in that direction.

However, these amendments are about children and we have moved much more widely in our discussion of them. I am still stuck with the statistic that the decrease in income for a couple without children will be 0.9% over the five years, but for a couple with two children it will be 4.2%. It is the differential between those two figures that we need to tackle. I recognise that attempts have been made to tackle them but they have been stubbornly unsuccessful so far. In view of the various things that the Government do for children—I certainly accept that they have a concern for children—I am sorry that they cannot accept the amendment. In the light of that, I wish to test the opinion of the House.

5.20 pm

Division on Amendment 2

Contents 221; Not-Contents 261.

Amendment 2 disagreed.

Division No.  2

CONTENTS

Adams of Craigielea, B.

Adonis, L.

Allenby of Megiddo, V.

Alton of Liverpool, L.

Anderson of Swansea, L.

Andrews, B.

19 Mar 2013 : Column 526

Armstrong of Hill Top, B.

Bach, L.

Bakewell, B.

Bassam of Brighton, L.

Beecham, L.

Berkeley, L.

Best, L.

Bichard, L.

Bilston, L.

Blackstone, B.

Blood, B.

Borrie, L.

Bradley, L.

Bragg, L.

Bristol, Bp.

Brooke of Alverthorpe, L.

Brookman, L.

Brooks of Tremorfa, L.

Campbell of Surbiton, B.

Campbell-Savours, L.

Carter of Coles, L.

Chandos, V.

Christopher, L.

Clancarty, E.

Clark of Windermere, L.

Clarke of Hampstead, L.

Clinton-Davis, L.

Cobbold, L.

Collins of Highbury, L.

Colville of Culross, V.

Corston, B.

Coussins, B.

Crawley, B.

Davies of Oldham, L.

Davies of Stamford, L.

Dean of Thornton-le-Fylde, B.

Derby, Bp.

Desai, L.

Donaghy, B.

Dubs, L.

Eatwell, L.

Elder, L.

Elystan-Morgan, L.

Evans of Parkside, L.

Evans of Temple Guiting, L.

Evans of Watford, L.

Falkland, V.

Farrington of Ribbleton, B.

Faulkner of Worcester, L.

Filkin, L.

Foster of Bishop Auckland, L.

Foulkes of Cumnock, L.

Gale, B.

Gibson of Market Rasen, B.

Giddens, L.

Golding, B.

Gordon of Strathblane, L.

Gould of Potternewton, B.

Graham of Edmonton, L.

Grantchester, L.

Grenfell, L.

Grey-Thompson, B.

Griffiths of Burry Port, L.

Grocott, L.

Hannay of Chiswick, L.

Hanworth, V.

Harris of Haringey, L.

Harrison, L.

Hart of Chilton, L.

Haskel, L.

Haworth, L.

Hayman, B.

Hayter of Kentish Town, B.

Healy of Primrose Hill, B.

Henig, B.

Hilton of Eggardon, B.

Hollick, L.

Hollins, B.

Hollis of Heigham, B.

Howarth of Breckland, B.

Howarth of Newport, L.

Howe of Idlicote, B.

Howells of St Davids, B.

Howie of Troon, L.

Hoyle, L.

Hughes of Stretford, B.

Hughes of Woodside, L.

Hunt of Chesterton, L.

Hunt of Kings Heath, L.

Hylton, L.

Irvine of Lairg, L.

Janner of Braunstone, L.

Jay of Paddington, B.

Jones of Whitchurch, B.

Jones, L.

Jordan, L.

Judd, L.

Kennedy of Southwark, L.

Kerr of Kinlochard, L.

Kidron, B.

King of Bow, B.

Kinnock of Holyhead, B.

Kinnock, L.

Kirkhill, L.

Knight of Weymouth, L.

Laird, L.

Laming, L.

Layard, L.

Lea of Crondall, L.

Leicester, Bp. [Teller]

Levy, L.

Liddell of Coatdyke, B.

Liddle, L.

Lipsey, L.

Lister of Burtersett, B.

Listowel, E.

Low of Dalston, L.

McAvoy, L.

McDonagh, B.

Macdonald of Tradeston, L.

McFall of Alcluith, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

Mackenzie of Framwellgate, L.

McKenzie of Luton, L.

Maginnis of Drumglass, L.

Mallalieu, B.

Mar, C.

Martin of Springburn, L.

Masham of Ilton, B.

Massey of Darwen, B.

Maxton, L.

Meacher, B.

Miller of Chilthorne Domer, B.

Mitchell, L.

Montgomery of Alamein, V.

Moonie, L.

Morgan of Drefelin, B.

Morgan of Ely, B.

Morgan of Huyton, B.

Morris of Aberavon, L.

Morris of Handsworth, L.

Morris of Yardley, B.

Nye, B.

O'Loan, B.

O'Neill of Clackmannan, L.

Parekh, L.

Patel of Blackburn, L.

Patel, L.

Paul, L.

Pendry, L.

Pitkeathley, B.

Plant of Highfield, L.

19 Mar 2013 : Column 527

Ponsonby of Shulbrede, L.

Prescott, L.

Prosser, B.

Quin, B.

Radice, L.

Ramsay of Cartvale, B.

Reid of Cardowan, L.

Rendell of Babergh, B.

Richard, L.

Richardson of Calow, B.

Ripon and Leeds, Bp. [Teller]

Robertson of Port Ellen, L.

Rogers of Riverside, L.

Rosser, L.

Rowe-Beddoe, L.

Rowlands, L.

Royall of Blaisdon, B.

St Edmundsbury and Ipswich, Bp.

Sawyer, L.

Scotland of Asthal, B.

Sherlock, B.

Simon, V.

Smith of Basildon, B.

Smith of Finsbury, L.

Smith of Leigh, L.

Snape, L.

Soley, L.

Steyn, L.

Stone of Blackheath, L.

Taylor of Blackburn, L.

Taylor of Bolton, B.

Temple-Morris, L.

Thornton, B.

Tomlinson, L.

Tonge, B.

Touhig, L.

Triesman, L.

Truscott, L.

Tunnicliffe, L.

Turner of Camden, B.

Uddin, B.

Wall of New Barnet, B.

Walpole, L.

Warner, L.

Warnock, B.

Warwick of Undercliffe, B.

Watson of Invergowrie, L.

West of Spithead, L.

Wheeler, B.

Whitaker, B.

Whitty, L.

Wigley, L.

Wilkins, B.

Williams of Baglan, L.

Williams of Elvel, L.

Williamson of Horton, L.

Wills, L.

Winston, L.

Wood of Anfield, L.

Worthington, B.

Young of Hornsey, B.

Young of Norwood Green, L.

NOT CONTENTS

Aberdare, L.

Addington, L.

Ahmad of Wimbledon, L.

Alderdice, L.

Anelay of St Johns, B. [Teller]

Armstrong of Ilminster, L.

Arran, E.

Ashdown of Norton-sub-Hamdon, L.

Ashton of Hyde, L.

Astor of Hever, L.

Attlee, E.

Baker of Dorking, L.

Bates, L.

Berridge, B.

Bew, L.

Black of Brentwood, L.

Blackwell, L.

Blencathra, L.

Bottomley of Nettlestone, B.

Bowness, L.

Brabazon of Tara, L.

Bradshaw, L.

Bridgeman, V.

Brinton, B.

Brittan of Spennithorne, L.

Brooke of Sutton Mandeville, L.

Brougham and Vaux, L.

Brown of Eaton-under-Heywood, L.

Browne of Belmont, L.

Burnett, L.

Buscombe, B.

Butler-Sloss, B.

Byford, B.

Caithness, E.

Cathcart, E.

Cavendish of Furness, L.

Chadlington, L.

Chalker of Wallasey, B.

Chidgey, L.

Clement-Jones, L.

Colwyn, L.

Condon, L.

Cope of Berkeley, L.

Cormack, L.

Courtown, E.

Craig of Radley, L.

Craigavon, V.

Crathorne, L.

Crickhowell, L.

Curry of Kirkharle, L.

De Mauley, L.

Deben, L.

Deech, B.

Deighton, L.

Dholakia, L.

Dixon-Smith, L.

Dobbs, L.

Doocey, B.

Dundee, E.

Dykes, L.

Eames, L.

Eaton, B.

Eccles of Moulton, B.

Eccles, V.

Eden of Winton, L.

Edmiston, L.

Elton, L.

Falkner of Margravine, B.

Faulks, L.

Fearn, L.

Feldman of Elstree, L.

Feldman, L.

Fellowes of West Stafford, L.

Fellowes, L.

Fink, L.

Fookes, B.

Forsyth of Drumlean, L.

Fowler, L.

Framlingham, L.

Freeman, L.

Freud, L.

Garden of Frognal, B.

Gardiner of Kimble, L.

19 Mar 2013 : Column 528

Gardner of Parkes, B.

Garel-Jones, L.

Geddes, L.

German, L.

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5.35 pm

Amendment 3

Moved by Lord Low of Dalston

3: Clause 1, page 1, line 5, at end insert—

“(1A) Any mandatory 1% up-rating stipulated in subsection (1) shall not apply—

(a) to any components of the employment and support allowance (including personal allowances);

(b) to sums specified in regulations under section 10(3) of the Welfare Reform Act 2012 in respect of an amount to be included under section 10(2) of that Act.”

Lord Low of Dalston: My Lords, Amendment 3 would remove from the 1% uprating cap all aspects of the employment and support allowance, including the personal allowance component, the support group component for those in the support group and the work-related activity group component for those placed in the work-related activity group, which I may shorten to the WRAG as “the work-related activity group” is a bit of a mouthful and I do not wish to take up too much of your Lordships’ time—no more time, at any rate, than I need to. Paragraph (b) of the amendment would also remove the child disability addition under universal credit from the cap.

The Government have given the impression that disabled people are protected from the restriction of benefit increases to 1%, but this is not the case. Some disability benefits are protected—notably disability living allowance—but that does not mean that disabled people are protected from the restrictions introduced by the Bill as a whole. The only disabled people who are protected are those who receive no benefits other than the disability living allowance. The impact assessment makes clear that households where someone describes themselves as disabled are more likely to be affected than those where there is not a person who describes themselves as disabled: 34% of households as against 27%.

Even some benefits specifically targeted at disabled people are not protected. This applies particularly to employment and support allowance. ESA is paid at two different levels according to whether claimants are placed in the support group, meaning that their impairment or condition is such that they are not expected to look for work, or the WRAG. Both groups receive a personal allowance of £71 a week but those in the support group receive a support group component which is paid at a higher rate than the comparable component paid to those in the WRAG.

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The Government have given the impression that those in the support group are protected from the 1% uprating cap but, in truth, only their support group component of £34 a week is protected: rather less than one-third of their benefit. This means overall that disabled people in the support group will see their ESA payments rise by only 1.4% rather than by inflation, not a lot better than if increases in the whole of their benefit were capped at 1%. As a result, a disabled person in the support group will be £62.76 a year worse off. Capping increases in their benefit at 1% will mean that households receiving ESA in the work-related activity group will be £87.65 a year worse off.

However, it is worse than this. Although some disability benefits and some disability elements and components may be protected, disabled people may lose out overall because of the complex interaction of different benefits and components. Disabled people do not only receive disability benefits; they have children and rent houses, and so they are not immune from restrictions in the uprating of children’s benefits, housing benefit and so on.

If a claimant in the support group does not have any other income, they are also likely to be entitled to housing benefit and council tax benefit. If they have children, they will also be entitled to child benefit and child tax credit. It can be seen that protecting the support group component protects only a small proportion of their overall benefit. For example, a lone parent who is in the support group and has two children will have lost £18 a week or almost £1,000 per year by 2015 compared with their position in 2011, simply due to uprating changes.

The amendment is essential if the Government are to fulfil their pledge to protect disabled people from the 1% uprating cap. A third of disabled people in the UK were found to be living in poverty before the global economic crisis. Disabled people routinely experience higher living costs associated with their disability, on things such as equipment, personal assistance and special diets, for example. In Committee, the Minister said that ESA for those in the WRAG group is intended to be a short-term benefit:

“Those who are placed in the work-related activity group are there because they have been found able to prepare for work”.—[Official Report, 25/2/13; col. 881.]

However, that does not make sense in terms of work incentives. People’s impairments often make it very difficult for them to work. Where this is not the case or the difficulties can be overcome, discriminatory attitudes in the workplace can present insurmountable barriers. In the current state of the economy, there just are not the jobs.

Finally, as we know, the work programme, by which the Government set such store, is just not working. In Committee, the Minister questioned the rationale for including the personal allowance in the amendment and for not subjecting it to the 1% cap. She said that treating the personal allowance differently from that in other parts of the benefit system would add an element of complexity and undermine the coherence of the system as a whole. That strikes me as a comparatively technical objection. If that is her principal concern, I ask her to look at the position again with

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me before Third Reading to see if we cannot find a way of achieving the purpose of the amendment without giving rise to the technical difficulties to which the Minister pointed.

The second limb of the amendment would remove the 1% uprating cap from the lower child disability addition under universal credit. The right reverend Prelate also spoke about that. This part of the amendment is particularly necessary given that rates of support for children in this group are already intended to be halved under universal credit. At present, families with a disabled child for whom they are in receipt of some level of disability living allowance may be entitled to receive support through the disability element of child tax credit, currently worth £57 a week. Under universal credit, that support is to be provided through disability additions within household benefit entitlements. But it is proposed to cut this support in half to just £28 a week. This change will affect all families with a disabled child unless the child is receiving the high-rate care component of the DLA or is registered blind.

In Committee, I spoke about the evidence in the Holes in the Safety Net review from the noble Baroness, Lady Grey-Thompson, of the impact of universal credit on disabled people and their families. I will not repeat the detail now but, in a word, it was that the effects would be disastrous. The Institute for Fiscal Studies estimates a growth in the number of children living in poverty of 400,000 between 2011 and 2015 and 800,000 by 2020. The Minister said in Committee that we cannot set too much store by such predictions because we do not know what direction government policy will take. But government policy seems to follow only a one-way direction of travel in this regard. We do know that the Government intend to take a further £10 billion out of welfare. The upshot of that can be only one thing: more child poverty. This measure can only serve to increase that; indeed, the Government have acknowledged that it will add 200,000 to the numbers of children in poverty—100,000 of them in working households.

The Children’s Society estimates that the cost of removing child disability addition from the cap would be just £2.4 million in 2014-15 and £4.2 million in 2015-16. In the scale of public expenditure, that is a trifling sum and I really hope that the Government see their way to thinking again on this aspect of my amendment at least.

The case for the amendment is compelling. It seeks to do no more than the Government already claim to have done by exempting from the cap a particularly vulnerable group among those who receive benefits—disabled people—and I hope that the House will support it. I beg to move.

5.45 pm

Lord Brooke of Sutton Mandeville: My Lords, my noble friend Lord Deben is not in the Chamber, although I had a word with him outside. I am not sure that he was fair in asking the right reverend Prelate the Bishop of Ripon where he would find the money on the previous amendment. However, when we get into

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the guts of this amendment, it would be reasonable to expect the Official Opposition at that stage to explain where they would find it.

My memory goes back to Grand Committee on a couple of Bills in the final two years of the previous Government. They were held in the Moses Room; one was on housing and the other was on planning. I recall that the second one occurred in the very first week of the then Governor of the Bank of England—who is still the governor—who expressed anxiety that a recession was now becoming a real possibility. I asked why the Government, in their explanation of the text of the respective Bills on housing and planning, thought that future conditions would be like conditions in the past. I was told by both the Minister and knowledgeable government Back-Benchers in Grand Committee that I was not to worry my head about these things. There was no acceptance that the economic ice was beginning to thin and, specifically, I was told that the recession had not yet happened.

It was only later that I recalled a new year message in the 1950s or 1960s in the Observer by its essayist Paul Jennings in his weekly article. He explained that the new year had come in over a weekend and he had therefore had the opportunity to use the weekend to explore in his diary what the publishers thought he needed to know in the coming year, which they had not supplied in the previous one. It transpired that the answer was the thickness of ice. He explained that he was now in a position to tell the Observer’s readers that you required half an inch of ice to sustain a duck and an inch of ice to sustain an infant, going up in a series of categories until you reached 16 inches for a County-class locomotive and 24 inches for a regiment of foot. It was on reaching the statistic for a regiment of foot that Mr Jennings began to wonder how they knew. He imagined a scene in the Crimea when not much else was happening. The same young Mr Hemmings who took part in the film “The Charge of the Light Brigade” was riding up to Lord Raglan with the news that they had just lost another battalion of the Grenadiers.

If I move from that analogy to the departure of the previous Government, I recall that Mr Byrne, the Chief Secretary to the Treasury, left a note for his successor saying that there was no more money. As a message, that seems to me as daunting for a new Chief Secretary as the news to Lord Raglan that he had lost a battalion of the Grenadiers during what must have been the Crimean War. It is therefore reasonable to ask the Official Opposition where they would find the money for their support for this amendment. Indeed, perhaps the Official Opposition might express some regret for their mistakes in government and explain to the Bench of Bishops what went wrong in their economic policies.

In the same context as the intervention by the noble Lord, Lord Griffiths, I shall personally look forward in the hope that we will be able to come back to that subject on a future amendment, in which I would much enjoy joining with him.

Lord McKenzie of Luton: My Lords, we have added our names to this amendment moved so comprehensively by the noble Lord, Lord Low. It requires that all the

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components of ESA—the personal allowance and the additional component for those in the work-related activity group, as well as those in the support group—are taken outside the 1% cap on uprating. As we have heard, the amendment rightly includes provision for children to be made under universal credit, although it remains to be seen how much progress the faltering universal credit will have made by the time the Bill is spent.