My Lords, I shall speak to Amendments 4, 5, 16, 18, 20 and 21, which are in my name, and I am grateful to other noble Lords for adding their names to some of them. These amendments seek to make two key changes to the Welfare Benefits Up-rating Bill. The first is to ensure that universal credit rates, including work allowances, are uprated with inflation. This will protect the future value of benefits for low-income families while also achieving most of the short-term savings required as part of the Government’s deficit reduction strategy. Secondly, the amendments seek to ensure that work will always pay and that all working families are able to afford a minimum, decent standard of living.
I turn first to those amendments which seek to ensure that universal credit is removed from the scope of the Bill. I have tabled them for four key reasons. First, the baseline amounts for universal credit have only just been established by the Government. It surely is reasonable that these are now increased with cost of living. Secondly, the majority of households protected in this way in the long term would be working households. The measure would promote work incentives, about which I will say more in a moment. Thirdly, the measure would protect 6.7 million children from some level of impact once universal credit is fully introduced. Finally, the cost of the change would be relatively low over the next two years as a result of limited levels of migration to universal credit.
A number of benefits have been substantially revised as part of the introduction of universal credit. For example, the lower disability addition for children, comparable to the disability element of child tax credit, has been halved in value. Personal allowances for those aged under 25 have been changed so that lone parents under 25 will no longer receive the same rate of personal allowance as single adults aged over 25. The severe and enhanced disability premiums present in the current benefits system are being removed. These are major changes to the system and, since we have only just established a new baseline for support provided through the welfare system, it is surely reasonable that that support should be increased to keep pace with rises in the cost of living to ensure that the situation for families remains comparable over time. Inclusion of universal credit in the Bill amounts to a
cut to the new scheme before it is even introduced. This surely cannot make sense. At this stage, we do not yet know what the impact of these changes to the structure of support will be. We should at least wait and see what the implications of these changes are before initiating cuts to them.
So how much will this cost? With my proposal, the Government can still make savings, but they can also help to ensure that the success of universal credit is not undermined. Based on a migration rate of 10% of claimants by the end of 2014-15 and 30% of claimants by the end of 2015-16, the additional cost of removing universal credit from the scope of the Bill would be £90 million in 2014-15 and £510 million in 2015-16. This would mean that the Bill would still make savings of £810 million in 2014-15 and £1.2 billion in 2015-16. In fact, since many households migrated across will have a lower entitlement under universal credit and so receive transitional protection, the costs may be significantly lower than this. Does the Minister agree that, having only just set the rates of support for universal credit, it would be reasonable to increase these in line with cost of living?
Secondly, I turn to work incentives. A key objective of the current welfare system and of the future system in the form of universal credit is to ensure that work incentives are maintained. The Government rightly identify work as an important way for families to lift themselves out of poverty, and we all accept that. However, this can succeed only if the right work incentives are provided through in-work benefits and tax credits. The Government estimate that around half of the total number of households affected by the Bill are working households—a total of 3.25 million working households, including working families from all walks of life.
The impact will be reflected in children in poverty in working families. The Government have admitted that they expect it to push 100,000 more children in working families below the poverty line. The amendments in this group in my name explicitly safeguard work incentives. The amendment ensures that the allowances provided through working tax credit, personal allowances within housing benefit and work allowances in universal credit are increased in line with prices. Doing so explicitly improves work incentives and ensures the principle that work pays.
Working tax credit will be affected by this Bill as it stands. It is notable that the basic and 30-hour elements of working tax have already faced a three-year freeze, from 2011-12 to 2013-14. This means that, in total, these elements will increase by just 2% over the course of half a decade, a period in which prices have risen by eight times as much. On top of this freeze, as a result of the Bill, a lone parent working 30 hours per week would receive the basic, lone parent and 30-hour elements of WTC and, as a result, they will have a WTC entitlement which is up to £132 per year lower.
The amendments also seek for the personal allowances within housing benefit to be increased in line with inflation. The personal allowance rates for adults are included within the scope of the Bill. This will mean that households moving into paid work keep less of their earnings before additional earnings are withdrawn from their housing benefit entitlement.
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Finally, with the passing of the welfare Act last year, the future of the welfare system is focused through the universal credit. A key aim of this credit is to promote work incentives through work allowances, but it is notable that these work allowances are not mentioned within the Bill. Failure to increase these in line with inflation will have a very substantial impact on the actual value of the allowances. For example, the higher work allowance—the rate provided to households not claiming for help with housing costs—for a lone parent family is £734 per month, worth up to £477 per month for working families. The Children’s Society have calculated that, were this uprated in line with inflation, this would be expected to be £770 by 2015-16, worth up to £500 per month for working families. As a result, failure to uprate work allowances within universal credit would cost working lone parent families £23 per month, in the value of this allowance alone. Does the Minister agree that in-work benefits and tax credits help to ensure that work always pays? Secondly, will she confirm that the reason that the work allowances within universal credit are not included within the scope of the Bill is that the Government intend to increase them at least in line with inflation?
In conclusion, the Bill as it currently stands seriously fails to protect working families, and will cast children into poverty. It simply does not go far enough to promote work, so that work always pays, particularly for the lowest earning working families. My amendments go some way to mitigate these deficiencies, and I beg to move .