A lot depends on where we start. If we are talking about rises matching prices or wages, it all depends on the starting point—if we pick a different starting point, we get a different result.
I was talking about the next three years. We know what the rise in average earnings was last year, so obviously we know what the rise in benefits would be in 2013-14. We do not know what it would be in 2014-15 or 2015-16, but setting the increase to the rise in average earnings, rather than a fixed rate of 1%, would mean that as the economy gradually grew, the level of growth in the economy would be paid to those on benefits, as well as those in work. That is a better approach than having a fixed rate of 1% for three years.
No Government have control over world food and energy prices. At Prime Minister’s questions last week I raised this potential problem when I asked the Prime Minister what contingency plans the Government had for benefit increases, should food and energy prices rise by more than expected. He answered by pointing to the good work being done by my right hon. Friend the Secretary of State for Energy and Climate Change to ensure that energy companies put people on the lowest available tariffs. That will indeed be a big help to people on low incomes, but if energy prices rise by more than expected, the lowest tariff will rise by more than expected too. After I heard the Prime Minister’s answer, I am afraid that I was left to form the conclusion that the Government have no contingency plans for a scenario in which prices rise by more than expected. I hope that when my hon. Friend the Minister replies to this debate, he will be able to reassure me on that point. I hope there is a plan B, in case world prices go up by more than expected.
Setting future increases to the increase in average earnings would address the legitimate argument that out-of-work benefits should not rise faster than earnings and would help to cut the deficit. For example, if the CPI figure were used for 2013-14, benefits would increase by 2.2%. If average earnings were used, they would increase
by 1.6%, saving half the amount that a 1% increase would save. It is also important to point out that cutting public spending on its own will not eliminate the deficit. We need to grow the economy as well. All the economic research indicates that money put into the pockets of people on low incomes is far more likely to be spent straight away than it would be by those on higher incomes. Not increasing welfare benefits by the rate of inflation will have an impact on shops and other businesses, as well as the recipients themselves.
To sum up, linking benefit increases to average earnings is much fairer all round and avoids committing ourselves to a fixed figure unnecessarily far in advance. I hope that the Committee will support amendment 10, and I hope that you will allow it to be put to a vote, Mr Amess.