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Social Security Benefits Up-rating Order 2011

My Lords, I wish to speak particularly on the shift from the RPI to the CPI. The Minister in the other place acknowledged that no single index is perfect, and the noble Lord, Lord Freud, said something similar this evening. Given that, I argue that the criterion that we should use is which index best protects the living standards of some of the poorest members of our society. That is not the CPI. Typically, the CPI rises more slowly than the RPI—15 times in the past 20 years, according to the Minister in the other place—and, of course, that is why it represents a spending cut. We should not underestimate the significance of this shift, which is easy to do when we get caught up in technical jargon about geometric means and so forth. A 2008 Joseph Rowntree Foundation study concluded that uprating policies have big effects over time. This change will have a very damaging effect over time on the living standards of some of the poorest members of our society. As my noble friend Lord McKenzie has said, these are people for whom substitution is rather difficult because they have already substituted a lot in adapting to living on such low incomes. I do not want to get involved in debates about geometric means and so forth with the Minister; I want to stand back a step. Over the years, I have read many uprating debates. That is a rather sad occupation and I can see that not many people share my interest. I might be wrong but I cannot remember one debate in which people have stepped back and asked what for me is a fundamental question: are the benefits that we are uprating adequate in the first place? Therefore, I would like noble Lords to reflect on the question of benefit adequacy when we are considering the uprating of benefits. I want to focus on the adult jobseeker’s allowance and income support rate, because that is the rate that has been most neglected and because the failure to improve it in real terms has blunted the impact of the very welcome improvement in children’s rates under the previous Government. I will spare the Minister the trouble of pointing out that my own party’s Government contributed to the neglect of this rate because I am on record as having been critical of that neglect despite achievements in children’s benefit rates. A recent Joseph Rowntree Foundation paper said that a single person who is able to work and who has no dependent children will be living on £65.45 a week on current benefit rates. This money will have to cover all items of expenditure apart from housing costs, including food, clothing, water, heating, lighting and travel. The foundation says that it is therefore reasonable to ask how adequate this is as a basis on which to live. To help answer that question the foundation developed a minimum income standard—what ordinary people believe is needed not just to ensure food, warmth and shelter but sufficient resources to participate in society and to maintain human dignity, consuming the goods and services that are regarded as essential in Britain today. According to my colleagues in the Centre for Research in Social Policy at Loughborough University, the single adult income support/JSA rate is only 41 per cent of the minimum income standard. The Joseph Rowntree Foundation comments that while there is no suggestion here that benefits ought to be at the level of the minimum income standard, the sheer scale of the shortfall is indicative of the fundamental inadequacy of current levels. My colleague Donald Hirsch of the CRSP has calculated that this shortfall will increase significantly as a result of the switch to the CPI. He projects that the minimum cost of living index, which he constructed to uprate the minimum income standard, could rise by 9 to 18 per cent more than the CPI over the next decade. Another indicator is provided by the Marmot strategic review of health inequalities, to which I made a very minor contribution. This showed that the benefit rate of a single person is only 50 per cent of the poverty line and only 46 per cent for a childless couple. Marmot drew particular attention to the vulnerability of pregnant women living on benefit, and particularly of younger women under 25 who receive only £51.85 a week. The Marmot review called for a minimum income for healthy living to enable people to live a physically and mentally healthy life and as crucial to reducing health inequalities. Yet another indicator that illustrates the impact that uprating policies have is how benefits relate to average earnings. I was sent a graph by Professor Jonathan Bradshaw of York University that shows that the ratio of JSA for a single person to average earnings was in 2009 roughly half the equivalent of 40 years ago. I cannot help but reflect on the comparison between what we expect an adult on benefit to live on and what we in this House can claim. We expect a single adult to live for a week on not much more than a fifth of what we can claim for a day. I could not live on £65.45 a week and I wonder whether the Minister could. I draw attention to a benefit—child benefit—that will not be uprated in April because of the three-year freeze. I remind noble Lords that when child benefit was introduced in the late 1970s, it replaced child tax allowances as well as family allowances. At that time there was cross-party consensus that child benefit should be treated as akin to personal tax allowances in recognition of the impact of children on taxable capacity. That seems to have been forgotten by policy-makers. I cannot help but draw attention to it when the Government laud the fact that they are increasing personal tax allowances by more than the rate of inflation. Of course, that is no help to those who are too poor to pay tax, whereas increasing child benefit would help this group—families with children. I express my regret at the switch to the CPI because it will mean a further deterioration in the living standards that are achievable on benefits that are already inadequate for healthy living and for ensuring human dignity.