My Lords, it is a pleasure to move the amendment on the Order Paper to insert a new clause after Clause 2, entitled “Annual report to Parliament”. It will give my noble friends on the Front Bench some comfort, perhaps, if I tell them that this is a probing amendment. This is a case of once bitten, twice shy.
However, it is important to spend some time reviewing the context in which the Third Reading of this important Bill takes place, particularly against the background of our not having had the advantage of having the Budget Statement available to us when we were on Report. We are now better informed in terms of the updated projections that have been done by the Office for Budget Responsibility, which inform this debate directly. I cannot resist the temptation to say to my noble friend that we are also better informed on CPI in that, as we were speaking on Report last week, the BBC was reporting that the February monthly figure for inflation had ticked up by 0.1% from 2.7% to 2.8%. Admittedly, that is two points away from the magic 3% that I was using in an amendment—as it happens, unsuccessfully—to try to get some inflation protection for people on benefits.
I mention that merely in passing. I will not go back to discussing what we did on Report because I would be out of order to do so, but it illustrates the point that inflation can be capricious. It is a difficult thing to forecast. Some commentators who know more about it than I do were saying that, for example, the recent weakness of sterling, which has dropped by 7% in recent days, increases the risk of inflation, and so does the new monetary policy framework that Mark Carney, the Governor-designate of the Bank of England, is going to work with. We therefore need to look at the Bill carefully.
This amendment is a rather clichéd parliamentary device, as an annual report to Parliament is the last thing I could get the clerks to accept as being in order. However, it gives us time to reflect on the full-blown consequences of this Bill as we launch it on to the statute book. I still have some deep concerns, which are not merely around the question of the reduced household budgets of low-income working-age families. As I said in Committee, the Bill sets a very dangerous precedent for future Governments. If you believe, as I do, in the value of social protection then implicit in that is your understanding that temporary or maybe even long-term benefit recipients are also entitled, over the longer term, to have a share in the national wealth of the country. We all know that that national wealth is stagnating and we are in difficult times; I understand that perfectly well. However, since 1992—and
I stress that date, which is a long time ago—we have had the absolutely implicit foundation of an understanding across party divides: an acceptance that the uprating formula would be sacrosanct.
These are exceptional times. Certainly, if the Government had said, “For the forthcoming 12-month period, 1% is all we can afford”, as they did, I am perfectly willing to consider that. I am sure that other noble Lords are, too. On the savings in this Bill, colleagues may have an advantage over me because I am just off a train from the Siberian north and I have not had a chance to look at the new impact assessment—I assume that one exists—on the new costs of the Bill. Obviously the OBR’s estimates for inflation have changed from 2.6% and 2.2% to 2.8% and 2.4%. Again, there is an inflation uplift, which will adjust, in the Treasury’s favour, the savings that the Bill will make. The Bill covers two years of uprating but not this immediate year’s uprating, so an extra £500 million will be saved in the coming year. Of course, housing allowance, which is a different category of benefit, is not covered in the Bill so the totality of the savings is not reflected in the impact assessment, and last week’s impact assessment has been adjusted because of the OBR’s more recent and accurate estimates of inflation.
3.15 pm
My first reason for suggesting an annual report to Parliament is that this Bill is different. It interrupts a well established tradition of how we deal with uprating benefits. If we start to consider this as a conventional way of doing things, it will be very tempting for future Treasury and DWP Ministers to look in this direction for savings. Again in passing, we learnt from the Budget last week that the Treasury—lo and behold—is beginning to look at annually managed expenditure, which is the demand-led part of the benefit system. How you put an envelope around a demand-led service is a complete mystery to me. Between now and the July comprehensive spending review announcements, we will look to the Government Front Bench—either the Treasury or the DWP, or both in concert—to assuage the fears that some of us have about the announcement that we had the advantage of hearing in the Budget last week.
We need to be very careful about the Bill and to study its effects. Subsection (3) of the proposed new clause suggests studying the effects individually, benefit by benefit. It will otherwise be difficult to be confident that we know what the consequences really are. Again, I say in passing that I regret that there is no inflation protection in the Bill. The amendment seeks merely to monitor the impact of the Bill. What I am looking for from the ministerial Front Bench is, at the very least, some rock-hard assurances that this will be very carefully studied. I understand that everything is kept under review all the time, but this falls between two stools. I would have a lot more confidence if somebody took responsibility for the short-term and long-term monitoring of the Bill. Should it be a Treasury Minister, a DWP Minister or a joint Cabinet committee? Who or what will have the responsibility for getting up in the morning to check the consequences of the Bill carefully, month in and month out over the rest of the Parliament and the CSR period, and all the way through to 2020?
If you alter the baseline for an uprating system, as we have done in the Bill, you do it in perpetuity. There is no way in which the money can be won back, because the baseline is reduced and all the arithmetic is then calculated from a lower starting level. Over the next 10, 15, 20 and 50 years, the effects of this uprating will be felt. That is something about which we should be very careful.
The first period that I am concerned about is between now and the comprehensive spending review Statement that will be made in June or July. I think that we have a date for it. I hope that between now and then we will be able to think carefully about the consequences of the Bill. These things are difficult to see when you are up close and they are happening in front of you in real time. It is clear to me that, over this Parliament, one of the biggest differences that there will be between the previous Administration and this one by the time we get to 2015 is in the incidence of cuts on the working-age part of the benefit caseload. The previous Government invested quite a lot of money—some might say too much—on tax credits in order to try and make work pay. One can argue about that. However, what one cannot argue about is that by the time we get to 2015, one of the biggest changes that I anticipate seeing to the profile of public expenditure will be the relative reduction in the money that we are devoting to supporting working-age families. I have looked carefully at some of the Office for Budget Responsibility figures.
There is, of course, the very welcome policy of taking people out of tax. I agree with and can see the force of that. However, that does not help the lower two deciles of the household income distribution; people who are not getting into taxation levels with their annual household income or, indeed, people who are getting cycled into the threshold of income tax levels. If their household income increases and they get housing benefit, the income tax savings that they make for the household increases their income and they get penalised in their housing benefit. That will change when universal credit comes in. However, I do not think universal credit will start carrying the weight that some of us hoped it would as soon as we expected. I think that will be in 2017-18, which is a long time coming for those in the bottom two deciles of the household income distribution. Therefore, I am concerned about people in poverty—the people who are cycling in and out of part-time agency and temporary jobs. They are doing the best they can. The Work Programme is not picking them up yet. There is a potential problem that we need to monitor very carefully, as the amendment tries to do.
One point I make in passing concerns the reconsideration of measures of baseline poverty. I want to make a case for the Government to encourage in any way they can the continuation of the concept of minimum income standards, which are very important for two reasons. They are not levels of benefit that Governments can expect to pay to low-income households. They do two things. First, they measure the difference between what people take into their households by way of income, month in and month out, as against what the general public believe households of that composition need to live on a modest but adequate income. That tests public opinion about what people
need to live on much more accurately than some opinion poll questions about whether people are strivers or skivers, or any of the other emotional language that is used. Having minimum income standards is an important concept. Even if it is only through the academic work that has been valuably done by Jonathan Bradshaw and his colleagues in the past, I hope that minimum income standards will be part of the background to the annual report which the amendment seeks to introduce.
We need to look at and use some of the other evidence that we will get about households below average income, which will be published in June or July. I hope that that evidence will inform the discussion that will happen on the comprehensive spending review to make sure that we are making sensible arrangements and decisions for the following CSR period from 2015 to 2018. In addition, we should use an annual report to Parliament to work with our local authority colleagues, as this amendment suggests, to learn what they are doing by way of services for working-age families in their areas. My intelligence from local authorities is that they are already struggling to provide services in that department, and we need to rely on them, particularly in relation to changes in community tax benefit and the abolition of discretionary grants under the Social Fund, which was abolished, as noble Lords know—