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Social Security Benefits Up-rating Order 2011

My Lords, I should like to make a few comments at the end of what is always a very important annual occasion. There have been occasions in the past when colleagues in the House have not considered it appropriate to look at social security benefit uprating orders, but these orders are extremely important for the people whom they affect and it is right that we should spend time looking carefully at the provisions. I am not surprised that more colleagues do not participate in these debates, as they are extremely complicated, particularly this year when we are contemplating wholesale changes in the benefit system. It is particularly difficult to foresee the impact that some of these announced changes will bring in future. It would be helpful to receive some reassurance from my noble friend on the Front Bench on a couple of points. I agree with the comments that have been made about the pension provision. That is one area where substantial progress has been made, for which I am very grateful. I want to pick up an important point made by the noble Baroness, Lady Lister, who is probably the only person in this Chamber who has been doing uprating orders for longer than I have—she advised me about them when I was elected to the other place in 1983, which was not yesterday. She has a huge amount of experience and knowledge and she will be a great asset to this House in considering these issues in the future. She raised the point about freezing child benefit until 2014. Of course, that is against the background of deficit reduction. I defer to no one on the necessity to attack the important financial circumstances that we all face, but how will that affect the child poverty strategy? In the legislation that we passed in the dying days of the previous Parliament, the Child Poverty Act 2010, we set out the requirement for a child poverty strategy. I anticipate that that will be unleashed on us quite soon. These changes will have a dramatic impact on the staging posts of 2015 and 2020 in the child poverty strategy. Deficit reduction notwithstanding, I hope that the Government do not make these changes in a way that makes it impossible to get to a more comfortable place on child poverty by 2020. If that were the case, I would be very concerned. I think that redistribution is still necessary. The noble Baroness was absolutely right to say that this benefit was a tax allowance in the days before it was converted. It is extremely important that we keep the pressure up. People like me are uncomfortable about freezing child benefit. If the Government continue to freeze it, I shall be more than uncomfortable; I shall be very upset. A word of comfort about the fact that there is a child poverty strategy in gestation and about to be unleashed on us would send me home a happier bunny this evening. We shall return to the CPI/RPI debate, and at great length. For me, there is some conflicting evidence. My noble friend dealt with the substitution effect. I think that he is right about substitution and I concede that he is right about geometry and not arithmetic. However, I do not necessarily concede that, therefore, CPI is an appropriate measure. I think that the IFS is on his side when it comes to substitution but, on whether this is an inflation experience that is adequate and appropriate for the client group, it is on a different side of the argument. The press release that I have in front of me, dated August 2010, suggests that it believes that, "““only 23 per cent of benefit claimants are unaffected by increases in mortgage interest payments and council tax””." Therefore, the rest will be caught by the reduction. We cannot ignore that. I want to think about that more carefully and I shall study, with care, what my noble friend says about it, if not tonight then at another stage. I think that the jury is out. I think that he has won the argument about substitution but I do not think that that necessarily means that it is a safe measure in perpetuity. You only have to ask the Library not just about the short-term effects but also about the long-term effects to see that reductions in domestic household incomes are stark. Over a 20-year and a 30-year period, they are unconscionable. I hope that we in the coalition Government are not lashed to the mast on some of these things. If the CPI in the middle-to-longer term—five to 10 years—starts to pinch in a way that I think it may, I hope that we will be big enough to look again at whether it is an appropriate measure. My third point was picked up by the noble Baroness, Lady Lister. The important work that the Joseph Rowntree Foundation has done on minimum income standards demonstrates what people require to live a modest but adequate lifestyle. Some of the benefits to which she referred, and there are others, have been losing out consistently year in, year out. For example, some of the capital thresholds have been in place for a long while and are beginning to pinch in a serious way. That deserves attention. No one is suggesting that any Government are going to offer benefits at these levels immediately, but the work that has been done on minimum income standards is a measure of how far benefit rates are slipping behind year after year. It is not fair to ignore that at a time when financial distress is being faced by a lot of people. For example—and I could go on at great length about the differential impact of inflation on low-income groups—the Joseph Rowntree Foundation recently produced some work that reminded us that bus fares were nearly 60 per cent higher in 2009 than they were in 2000. Low-income families depend on buses. Little things like that are an important part of looking at the totality of what we are agreeing. We ought to bear in mind in these debates how they affect, in particular, the two lowest deciles of the income distribution. I shall make two other quick points. The first I have made every year for 23 years. The Government Actuary’s Department has certified the National Insurance Fund to be proof of the changes in these regulations. I remind colleagues that in 2010-11 the balance in the National Insurance Fund was £56 billion. We know that, in order to keep it safe from the requirement of a Treasury grant, the fund is required in law to have one-sixth of the expected spend safe in hand to look after emergencies, which is £13.8 billion. So we have £56.3 billion in the National Insurance Fund at a time of austerity when a lot of our families are suffering real, serious and continuing hardship. If you look at the GAD’s forecasts for the next five years, you see that by the time we get to 2015 there will still be £56.6 billion in the National Insurance Fund. I am not suggesting for a moment that we should be profligate and start raiding the National Insurance Fund, but there are occasions when we should be prepared to say that circumstances are so hard and there are households that are suffering such financial adversity that it may be time to look at making use of some of those funds to help some of those families through the difficult months and years ahead. Finally—and I agree that this is a bit of a cheap shot—the Public Accounts Committee report of 10 March points out yet again that the DWP’s annual accounts have been qualified for 22 years because of the amount of error and fraud. Of course, the Government have a strategy, which I welcome. It was set out in October 2010 and has put some money—£400 million or so between now and 2015—into reducing the cost of overpayments. Although that is important work, so is the £1.3 billion underpayment identified by the Public Accounts Committee year after year. Of course, this is a measure of complexity. If we get the benefit that we hope for from the universal credit moves proposed in the Welfare Reform Bill, that will perhaps lead to simplicity, which, as my noble friend said, would be welcome. However, surely we must do something about the recognised £1.3 billion underpayment. I know that my noble friend is on the case and is deeply, personally concerned about fraud, but will he give us an assurance that he will use his best offices to get that underpayment down just as fast as he wants to get the overpayments down between now and 2015? If he does that, certainly I for one would rest happy in my bed at night.