My Lords, I am delighted to follow a number of long-standing colleagues with whom I have campaigned on these issues over many years. I, too, voice my concern about this Bill, which will result in real-terms cuts in support for thousands of low-income people, including, despite government claims to the contrary, up to 1 million disabled people, particularly those endeavouring to work.
If the Bill goes through unchecked, the increase in welfare benefits will be 1% while CPI inflation stands at 2.7% and RPI inflation at 3%. As the noble Lord, Lord Kirkwood, mentioned, inflation may well increase substantially. This will lead to real-terms cuts during the next three years in payments to support those who are working and contributing to the economy. They are the very “hard working families” so beloved of the spin doctors of those who want to underpin the concept of the deserving poor—deserving, apparently, of just 1% uprating. I cannot see how this will contribute to promoting a work ethic or allow working people to participate in a savings culture.
I shall refer to figures relating mainly to Wales, although I realise that the arguments will apply to many other areas, too. The effect of the measures in Wales will be disproportionally greater, since incomes per head in Wales are substantially lower than average incomes in England. Figures released before Christmas show that GVA per head in Wales stands at 75.2% of the UK average, so cuts to in-work benefits for the low-paid will hit Wales proportionately harder.
According to the most recent DWP data, as at 1 December last year, more than 125,000 families in Wales were receiving working tax credits. This comprises
some 93,000 families receiving both working tax credits and child tax credits, and 32,000 families receiving just working tax credits. The 2011 census records that in my home area, the Gwynedd local authority area, 9,200 families were receiving one or more elements of tax credits out of the total 52,000 households. This means that 17.5% of all households were in receipt of tax credits. These people generally spend their money within their own local areas. The Welsh economy is made up overwhelmingly of small businesses. These working tax credit reductions will mean that demand is further sucked out of local economies as people have, in real terms, less money to spend.
The uprating will also hit those seeking work. The Government may intend this real cut as furthering workforce discipline, surmising that, as benefits will be even lower, so people will be prepared to take any job. In this, they are fundamentally mistaken. Many unemployed people, particularly in Wales, are seeking work in vain because the economic policies of the Government are failing. There are some parts of the west Wales and the valleys area whose GVA per head is only 65% of the UK average, with 21 unemployed people chasing every vacant job. Putting the morality of this on one side for a moment, starving people back into work has no prospects of success if the jobs are just not there.
If we are to combat this, boosting skills alone will not cut it; we must also tackle the demand side of the economy. We have to make sure that there is real work out there for people to do. The Government's Work Programme, allegedly designed to take people off benefits and into work, was utterly ineffective throughout the UK, but Wales recorded the worst figures, with the Department for Work and Pensions saying that only 1,380 of the 42,380 people on the programme entered long-term employment—a success rate of only 3%. In Wales, 77,377 people are looking for work and claiming jobseeker’s allowance, while just 20,310 vacancies are posted in jobcentres. This means that, across Wales, there are on average four people chasing every empty job
We are facing a vast increase in the number of the working poor—people who are now resorting to the food banks to feed their families. If this Government were serious about ensuring that work pays, they should legislate to ensure that work really does pay more in wages so that people do not have to resort to benefits to make ends meet. Legislating to uprate the minimum wage to the recommended living wage would be a good start, and I commend the points made by the noble Lord, Lord Bates, earlier in this debate.
It has been estimated that the private sector in the UK is sitting on a cash stockpile of as much as £700 billion, because it does not have the confidence to invest. Getting this prospective investment to create economically productive jobs is the challenge which the Government have so far failed to address successfully.
In Wales, although most economic powers are not devolved, we can take some steps to improve the situation. My own party, Plaid Cymru, recently successfully negotiated with the Welsh Government to secure £40 million of funding towards 10,000 new apprenticeship training places in Wales as part of a
budget deal. We are also pressing for a new procurement policy that could create several thousand jobs through sourcing public sector contracts domestically. Such an approach might be beneficial also for the deprived parts of northern England which, like Wales, are suffering from ineffective economic policies.
Wales needs job-creating levers to improve our economy, not handouts and workfare. That is why it is essential that the powers recommended by part 1 of the Silk Commission are implemented as soon as possible. Real work and training is what is needed, not temporary workfare schemes to take people off unemployment figures for six months. At the very least, the Government must make sure that increases in benefit rates reflect rises in the cost of living. Otherwise, this proposed cut will deepen inequality, increase poverty and further dampen the economic prospects of poorer areas.
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