My Lords, I thank the noble Baronesses, Lady Sherlock and Lady Lister, and the noble Lord, Lord McKenzie, for these amendments. I will first set out why we believe a four-year freeze of certain social security benefits, child benefit and elements of working tax and child tax credits is necessary.
In total, measures to freeze benefits and tax credits are projected to contribute £3.5 billion of the £12 billion welfare savings the Government are committed to by 2019-20. The Government need to make these savings to reduce the deficit and to manage welfare spending. Spending on welfare increased by 54% in real terms between 1999 and 2010, and tax credit expenditure
more than trebled over the same period. Despite the progress made in the last Parliament to increase incentives to work and reduce reliance on benefits, there is still more to do.
Some 7% of global expenditure on social protection is spent in the UK, despite the fact that the UK has only 1% of the world’s population. Between 2008 and 2015, average earnings rose by 12%, and the minimum wage increased by 17%. At the same time, benefits such as jobseekers’ allowance increased by 21% and the individual element of child tax credit rose by 33%. The benefit freeze will begin to reverse this trend. However, we are clear that we must continue to protect the most vulnerable. That is why we ensured that certain benefits are exempted from the freeze, such as pensioner benefits, benefits which contribute to the additional costs of disability and care, and statutory payments.
Concerns have been raised about the level of benefit rates after three years of 1% rises, to now be followed by four years of the freeze. Successive Governments have always sought to strike a balance between the needs of claimants and affordability, and I can reassure noble Lords that when introducing this freeze we have had due regard to these issues, but we believe we have struck a balance that protects certain key benefits and generates the savings I have set out.
There are no cash losers with this policy, and the continued growth in wages will help to mitigate the impact of the freeze for working families. The OBR expects wage growth to reach 3.9% by 2020. Around 30% of households will face a notional loss but, as I have said, the other things we are doing in the broader economy should go some way to mitigate it, and I will go through a couple of them in a second. We have also fully assessed the Bill’s impacts on equality and the wider budget meeting our obligations, as set out in the public sector equality duty.
The purpose of the amendments is to replace the freeze with a duty on the Secretary of State to review those benefits, having regard to inflation and the national economic situation. This Government’s overall approach is to give a level of certainty to taxpayers, employees and benefit claimants. As well as setting out the four-year freeze, we have also set out a clear plan to raise the national living wage to £9 an hour by 2020, to increase the tax-free personal allowance to £12,500 by the end of the decade and to double the free childcare available for working parents of 3 year-olds and 4 year-olds to 30 hours a week, which is worth £5,000 a year. The amendments would take away the certainty that we are attempting to implement, and for that reason we cannot support them.
The noble Baroness asked what happens after the four-year period.