I was going to say that because Amendment 21, which inserts housing benefit and personal allowances into a different part of the schedule, and Amendment 5, which places a duty to uprate by at least prices, are reliant on Amendment 13, I will speak to the amendments in this group as if Amendment 13 were assumed. I hope that makes sense. Hopefully, we are all following each other in respect of these different amendments.
Noble Lords have already outlined the effects that the amendments would have on the Bill. In broad terms, the legislation would revert to the existing annual exercise of discretion by the Secretary of State. To remove these benefits and payments from the Bill would reduce savings by around £800 million in 2015-16: that is, around £600 million that year from removing universal credit, which would increase over time as more households moved to universal credit; around £160 million that year from removing working tax credits; and, under Amendment 13, around £60 million that year from removing housing benefit and personal allowances—in total, an £800 million reduction in the Bill’s savings in the final year, which is about 40% of the Bill’s savings .
I have to disagree with the right reverend Prelate and say that it would simply not be affordable to give up those savings. If we look at the two years of the Bill together, we are talking about a loss of £1.1 billion in savings. As I have said before, none of these decisions
is easy, but we have to recognise that if we do not take the savings that this Bill provides in the way it does, this money will have to be found elsewhere.
While I am talking about general matters, it might be worth responding to a point made by the noble Lord, Lord McKenzie, either just now or in an earlier debate—I cannot remember—about the wide range of changes that the Government are introducing in welfare reform. The noble Baroness, Lady Hollis, is not in her place, but she also made the point in an earlier debate. We are making a lot of changes to the welfare system. We absolutely believe in those changes; we think that we are doing the right thing and that those changes will result in a much more effective system. It is safe for me to say that in broad terms most of those changes have received support from the House. There has been recognition on all sides that the welfare system as it stood needed to be reformed. As we move into 2013-14, a lot of those changes will be implemented, so it will no longer be a discussion in theory; it will be real in practice. Of course, as we go through the implementation phase, we will ensure that all changes are implemented in a way that we designed them to be made and that they have the effect and the outcomes that we set out in the legislation. This is not something that we will not be closely involved in to make sure that things operate in the way that we intended.
While talking about general issues, it is perhaps worth responding to points raised about cumulative impacts and assessments. I know that my noble friend Lord Newby referred to this in his response to the first group of amendments, but the matter having been raised again it is worth making a couple of points. The Government introduced a new system of greater transparency around impacts and we publish the impacts of government policy every time there is a fiscal event. The last time we did this was in the Autumn Statement. That cumulative impact includes information about changes to all tax, welfare and public spending policy that can be modelled since the June Budget of 2010.
So far that analysis has not included universal credit, and a separate analysis shows that 75% of the gains from universal credit goes to the bottom 40% of the income distribution. It is worth adding that the IFS has acknowledged that the effects of reforms, such as those to DLA and housing benefit, cannot be precisely modelled, but as I say we are producing quite a lot of information. It is there and publicly available, but let us not forget that all those assessments are against the previous Government’s plans for this period—this Parliament, had they come into power—and we have acknowledged that those plans were not affordable. We are assessing something against a benchmark that we have already acknowledged we cannot afford.
A key principle of this Bill is the certainty that it gives as part of the Government’s fiscal plans. I have said that before, and said then that I hoped noble Lords would not tire of me saying it. I will not tire of saying it to the House as it is important. By taking these benefits out of the Bill and thereby restoring the annual exercise of discretion in relation to prices, the amendments would undermine the key principle of certainty. Amendments 4 and 5, if taken with the others, would make it a requirement to uprate universal
credit, working tax credit elements and housing benefit personal allowances by at least prices. I am not sure whether that is the intention, but the amendments would take us further than existing legislation, while not giving a firm commitment to addressing the deficit that the Bill provides .
Noble Lords have talked about the inclusion of in-work benefits and questioned whether these should be included. We cannot escape the fact that some working households will be affected. I am not seeking to suggest for one moment that they will not. Tax credits, for example, account for around £30 billion of expenditure this year. Tax credit spending rocketed under the previous Government by an extraordinary 340% compared with the benefits they replaced. Eligibility for tax credits was extended to nine out of 10 families with children, so it would be unrealistic to exclude the benefits received by working people from these decisions that we are taking. For my part I think people understand that. There is a general recognition that this element of spending could not be excluded, particularly when those in work are facing tight restrictions, if not freezes, to their own pay.
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The Government have, however, taken real steps to support working families with the cost of living. The noble Baroness, Lady Meacher, who sadly is not in her place, talked about families being really concerned about the money they receive rather than percentage increases in this, that and the other. I absolutely agree, and that is why it is important when debating these changes that we also make sure that we take account of the other measures that the Government have introduced that provide some benefit to families. For instance, in the Autumn Statement we announced a further increase to personal tax allowance, and taken together, increases to the personal allowance brought in since this Government came to power will benefit 24.5 million individuals, providing a real terms gain of £443 for the most basic taxpayers in the next financial year. These changes will take 2.2 million individuals with low incomes out of tax altogether.
We should not knock important measures such as fuel duty and the fact that we cancelled the January fuel duty increase. That means that pump prices are about 10% per litre lower than they would have been had that measure been implemented. We have also provided an extra £450 million to help freeze council tax bills in England, which means that somebody in a band D home will save up to about £72 on a 5% rise in council tax. All those measures mean that an average working family will be £125 better off next year and better off on average no matter where they sit on the income distribution scale.
The Government believe that work is the best route out of poverty. Noble Lords have said this in today’s debate, which is a point that we all agree on. Universal credit lies at the heart of coalition policies to combat child poverty and transform the lives of those who most need our help. The simplicity of universal credit means that people will clearly understand the improved work incentives it creates, allowing them to keep more of their income when they find a job or increase their
earnings. That simple point should never be underestimated. I find the benefits system a complete minefield to understand, and the changes that we are introducing are incredibly important. More than 3 million people will gain from universal credit, with an average gain of about £168 a month, and we estimate that up to 300,000 more people will enter work as a result of the introduction of universal credit through improved financial incentives alone.
At this point, I should respond to one of the questions that the right reverend Prelate the Bishop of Leicester asked about work allowances. Committing to uprate the work allowances goes beyond the legacy system that saw no routine increases to the less generous disregards. It is also worth responding now to a point made by the noble Baroness, Lady Howe of Idlicote, who referred to statutory maternity pay. We will be debating that later on as there is a group of amendments specifically about that. She talked about the impact on women. There was quite a lively discussion online on the Mumsnet website about statutory maternity pay. One of the points made on the blog that was echoed by quite a lot of people is that for those who are in a relationship or marriage, their husband or partner benefits from maternity pay just as much as they do because all their household income is pooled. We undermine the intelligence of people if we argue that people are not clear about the impact of what we are doing and manage their finances in the strict way that the noble Baroness suggested.
Finally, I turn to housing benefit personal allowances. I should make it completely clear that the Bill does not uprate every aspect of housing benefit by 1% over the period in question. It uprates by 1% the housing benefit personal allowance. This figure is used in the calculation of housing benefit. I refer noble Lords to our previous debate. The personal allowance is a block of money that is consistent across all benefits. For single people it is £71 a week. That is what the Bill refers to when it talks about housing benefit.
As housing benefit is particularly complicated, I will make two things clear. For those who continue to satisfy the income test for all income-related benefits, including housing benefit, their eligible rent will continue to be covered by housing benefit, as it is now. There will be no change for them. Secondly, work will continue to pay for those on housing benefit. Renters in low-paid work will still be better off than they would be on out-of-work benefits .