My Lords, I am grateful to the noble Baroness, Lady Lister, for moving this amendment and explaining her thinking. Of course, I recognise the serious issues that she and other noble Lords have raised during the course of this debate. I would not claim first-hand experience of living on benefits, so I do not bring to this debate any presumption about those on benefits finding what we are doing anything other than difficult, but is an inescapable fact that when setting benefit levels successive Governments have sought to strike a balance between the needs of claimants, maintaining work incentives and affordability.
Indeed, the current uprating legislation recognises this explicitly. The Social Security Administration Act 1992 requires the Secretary of State to make his annual review of benefit levels based on the increase in prices. He is then given discretion as to how to uprate certain benefits, having regard to the national economic situation and any other matters that he considers relevant. Parliament therefore requires the Secretary of State to take certain issues into account when considering the level at which the benefits in question are set. In bringing forward this Bill, we have considered these issues carefully and struck a balance between providing a cash increase, protecting certain key benefits and making necessary savings.
Benefit levels also have a significant bearing on work incentives. The complexity of the current system largely arises from successive Governments’ attempts to balance benefit income against work incentives. That is why universal credit is such an important measure as it applies a single set of rules focused on maintaining the incentive to take up work or more work. In response to some of the points made in this debate, I shall say something that I know is shared around the Committee. This Government believe that work is the best route out of poverty, and that is why we are focused on making sure that work pays.
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I think it was the noble Baroness, Lady Lister, who talked about how benefits could impact on people living in poverty. We believe it is misguided to try to
lift people over the 60% median income line through benefit increases alone. This does not change their lives or those of their children because it does not tackle the reason they find themselves in poverty in the first place. We accept that most benefit rates are below the 60% median income line that measures relative poverty but it has never been the intention to alleviate poverty through benefit payment.
Universal credit will channel more money to those at the bottom end of the income scale and will allow people to keep more of their own income as they move into work. We expect some 3.1 million households to gain from the move to universal credit, on average by about £168 a month. Around 75% of those gainers will be in the bottom 40% of the income distribution, and it is estimated that the change in financial incentives brought about by the introduction of universal credit will result in a net reduction in the number of workless people by up to 300,000.
My noble friend Lord Kirkwood, in his usual eloquent way, talked about the need to monitor the impact of the changes that we are making in this uprating Bill on those who are directly affected. I remind noble Lords of something that I said last week in Committee, which is that the Government recognise that very soon—from April this year—a lot of the changes that we talked about in theory during the passage of the Welfare Reform Act will be implemented. I want to reassure the Committee that the Government take very seriously their responsibility for monitoring the effects of the changes that will be implemented through the Welfare Reform Act. We have put in place a number of measures to make sure that there are no unintended consequences. The noble Lord, Lord Kirkwood, spent a lot of time on this and, because it is so important, I want to go through some of the issues.
First, it is worth reminding the Committee that we have a transitional protection that means that no one moving to universal credit will lose out in cash terms when they are migrated by the DWP. There is a discretionary housing payments fund, which has been in existence under previous Governments. Since 2001, the contribution to discretionary housing payments has been £20 million a year, whereas this Government have significantly increased that budget. We are investing £155 million for discretionary housing payments in the next financial year and up to £125 million the following year.