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House of Lords

Monday, 25 February 2013.

2.30 pm

Prayers—read by the Lord Bishop of Liverpool.

Media and Creative Industries: Equality


2.36 pm

Asked By Baroness Benjamin

To ask Her Majesty’s Government what steps they are taking to ensure cultural diversity and promotion of equality in the media and creative industries.

Baroness Stowell of Beeston: My Lords, the Government are committed to ensuring that equality is promoted in the media and creative industries in line with duties set out in legislation, including the Equality and Communications Acts. However, we do not have a role in influencing the content or output of these sectors, which must remain independent of government. Nevertheless, Ministers maintain a regular dialogue on issues relating to diversity and equality. Most recently, that has included increasing the media coverage of women in sport and the representation of disabled people.

Baroness Benjamin: My Lords, I thank my noble friend. As Danny Boyle demonstrated in the Olympic opening ceremony, diversity throughout the creative industries is incredibly influential in how modern Britain is portrayed and represented. Unfortunately, at present there is no pan-industry system of monitoring diversity to hold television or other creative sectors accountable and ensure that they attract, retain and increase talent from a range of different backgrounds. What measures are in place to ensure that the creative industries are employing and fulfilling their diversity responsibilities, and does my noble friend agree that standardised monitoring would provide valuable data? Will she work with PACT, UK Music and others in identifying how such measuring systems could be introduced?

Baroness Stowell of Beeston: My Lords, my noble friend raises an important point. We all want to see ourselves reflected in the media and for that reflection to be accurate in its portrayal. The Government certainly welcome the work by PACT, the Creative Diversity Network and broadcasters to devise a common system for monitoring diversity onscreen and offscreen. We understand that discussions are progressing well between these groups to consider how to standardise a system of diversity monitoring across the industry, and that the first pan-industry measurements are expected to be collected by the end of this year. However, we believe that it is absolutely right that the industry lead this initiative itself. While we look forward to hearing about this system and its results, we have no plans at present to mandate it because we believe most fundamentally in the independence of the media.

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Baroness King of Bow: My Lords, I declare an interest as Channel 4’s diversity executive. Further to the earlier Question, I wondered if the Minister was aware of the lack of social diversity in terms of social mobility and social background in the media. Will she support broadcasters that are going out beyond non-traditional backgrounds, and particularly beyond non-media hubs, to find young people from those backgrounds who are not so much involved in the media industry at present?

Baroness Stowell of Beeston: I share the point that the noble Baroness has raised. I am aware that the BBC, which is the main public service broadcaster, has the largest responsibility to ensure that it is reaching out to new people in terms of its workforce. There are a couple of schemes that the noble Baroness may or may not be aware of. A BBC apprenticeship scheme has recruited over 50 apprentices in the past 18 to 20 months, 30% of whom were from the black and minority ethnic communities. The BBC’s work experience scheme has ensured since January 2011 that 60% are from BME backgrounds, and of those 21% have secured paid work at the BBC. The latter scheme has been recommended for an award for extending diversity in the workplace.

The Earl of Clancarty: My Lords, do the Government accept that cultural diversity in the creative industries will have significant roots in school education? If so, will the Minister say what they are doing to encourage every child, whatever their background, to have the best possible education in art and design subjects?

Baroness Stowell of Beeston:The noble Earl raises an important point about how we can ensure that people’s aspirations at school are broadened and increased to include areas which might not be most obvious to them. I certainly support that. I do not have a specific response to the noble Earl on his question, but I will see whether I can follow up in writing.

Baroness Gardner of Parkes: My Lords, following the question from the noble Baroness, Lady King, I wonder if the Minister is aware that not only the young but also the old need to be cared for. Is she aware that the media, and particularly the BBC, are very short of women over 50 at the moment? Does she not think that it is time that that was brought under control a bit more?

Baroness Stowell of Beeston: As I said in response to the first question, it is important for all of us to see ourselves reflected in the media, whether that means people who come from the area that we come from or people who are of a similar age. The most important point is that the broadcasters themselves should acknowledge the issue and take action. I was certainly heartened when the last director-general of the BBC was willing to acknowledge that there was a problem and took steps to improve the situation.

Baroness Scotland of Asthal: My Lords, does the Minister not think it would be a real contribution if the GREAT campaign, which has had such a success,

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were to include diversity as one of the issues that we celebrate in this country and promote to others to emulate?

Baroness Stowell of Beeston: The noble and learned Baroness raises a very interesting point and I would find it hard to disagree with what she suggests. I will certainly take back that recommendation to the department.

Baroness Thornton: The issue of older women in the media has already been raised by the noble Baroness, Lady Gardner, and she is quite right. I am sure that this House appreciates that the new generation of older women in the media does not fancy the idea of being written off and regarded as past it when they are 60, 50 or even 40. Can the Minister go into more detail about how the Government intend to monitor this situation and what they intend to do about it?

Baroness Stowell of Beeston: The system of monitoring that I referred to in answer to my noble friend Lady Benjamin’s Question, which the broadcasters are in discussion about at the moment, will include age as well as ethnic diversity. It is up to the broadcaster to gather that information and to make it transparent. We share the principle of transparency, which is why we have introduced the Think, Act, Report initiative about diversity in the workplace more generally.

Republic of Ireland: Aids to Navigation


2.43 pm

Asked By Lord Berkeley

To ask Her Majesty’s Government what progress they have made in discontinuing their funding for the Republic of Ireland’s aids to navigation.

Earl Attlee: My Lords, the Department for Transport in the UK and the Department of Transport, Tourism and Sport in Ireland work together to support the Commissioners of Irish Lights’ Republic of Ireland self-funding endeavours. The process remains on course for completion in 2015-16, and in preparation the Commissioners of Irish Lights continues to reduce its headcount and to introduce new operational and commercial initiatives.

Lord Berkeley: I thank the Minister for that positive Answer. In fact, it is the first positive answer that the ship-owners who bring their ships into UK ports have had for 90 years, because this has been going on for 90 years. Why successive Governments have failed to make this negotiation in all that time escapes me. I am very grateful to the Minister, but can he confirm that, with or without the Commissioners of Irish Lights sorting out its financial problems, payments from the UK to the Irish Government for these lights will stop in 2015-16?

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Earl Attlee: My Lords, I know that it took a long time to achieve this agreement, which is down to my honourable friend Mike Penning, who secured agreement with the Irish Government. The noble Lord asked when transfer payments would stop. That is a bit of a complex question. If a Commissioners of Irish Lights vessel works in UK waters as part of the co-operation between the various lighthouse authorities, there will of course be a transfer payment. It is a little complicated to say exactly when any transfer payments will stop; they may never stop. The main thing is that we will, by 2016, no longer support the Irish lights.

Lord Bradshaw: Does the noble Lord acknowledge that the situation in Ireland has been going on for 90 years? Further, will he confirm that if the Scottish Government vote for independence, the cost of the Scottish lights will be transferred to that Government?

Earl Attlee: My Lords, it is interesting to note that the Atkins report, commissioned by this Government in 2010, recommended that we retain the Northern Lighthouse Board and Trinity House to provide lights in Scotland and England respectively. We have no intention of changing those arrangements.

Lord Clinton-Davis: My Lords, what contingencies exist for aids to navigation in the EU, Britain and Ireland? Will the Minister address that issue?

Earl Attlee: My Lords, I am not quite sure what the noble Lord is getting at, but it is important to understand that the specification for aids to navigation would, I imagine, come under IMO auspices rather than EU auspices.

Lord Greenway: My Lords, in commending the Commissioners of Irish Lights on reducing its costs, can the Minister confirm that after 2015-16 the joint strategic board set up by the Atkins report will continue the interoperability arrangements for ships, as exist at the moment?

Earl Attlee: The noble Lord raises an extremely important point. One of the ways in which we have managed to reduce unnecessary expenditure is through the work of the joint strategic board to set the modalities so that assets can be shared and facilities are not duplicated.

Lord Brooke of Sutton Mandeville: My Lords, does my noble friend recognise that, for some of us, the fact that there was continued collaboration between the United Kingdom and the Republic of Ireland on lifeboats, lighthouses and the Ordnance Survey throughout the Troubles was a bright light in a darkened world? Furthermore, does he recognise that the reconstruction of the Ballyconnell Canal, 80% of which was paid for by the Irish Government—both of us being helped by the European Union—has had a powerful effect on tourism on our side of the border in Lough Erne?

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Earl Attlee: My Lords, I agree that there has been surprising co-operation between the Republic of Ireland and the UK Government over many years. It is important to understand that the general lighthouse authorities will continue to co-operate around the coasts of the UK and the Republic of Ireland.

Lord Davies of Oldham: My Lords, the House will of course welcome the optimistic and accurate position which the noble Earl has reflected. However, the urgency of the situation ought not to be underestimated. General shipping costs are going up 11% this year on these dues. For shorter crossings and ferries, they are going up by 43%. People have ways of avoiding these costs, such as by putting into other ports if costs continue to escalate. I therefore hope that, in the time before the full Irish payments come in, increases in costs are kept to an absolute minimum.

Earl Attlee: My Lords, throughout this process, all GLAs have managed to reduce their operating costs, which is a great benefit to the shipping industry. We will shortly determine the light dues for 2013-14, but there is already a commitment from the Government that in cash terms they will not go up. One of the beauties of light dues is that they are quite a difficult tax to avoid. It is pretty obvious when you take a big ship into a harbour.

Lord Lexden: The Atkins report, to which the Minister has referred, although written largely in impenetrable jargon contained at least one clear recommendation. It stated:

“The UK and Irish Governments should consider additional sources of revenue including a charge on leisure sailors, charges on passengers, cars landed and cargo”.

Are such changes being considered?

Earl Attlee: My Lords, one obvious target for increased revenue for the General Lighthouse Fund would be small pleasure craft. The difficulty is that it would be uneconomic to collect that revenue because the amounts would be relatively small, whereas a large merchantman would pay several thousand pounds on each visit to a port.

Energy: Prices


2.51 pm

Asked By Lord Touhig

To ask Her Majesty’s Government what discussions they have had with energy providers about recent increases in prices.

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma): My Lords, my department has regular discussions with energy providers about a range of market issues. We are determined to help consumers to get their energy bills down through a range of measures to reduce energy inefficiency and increase energy security. We know that increasing global demand is driving up energy prices and that this will continue. That is why,

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through the Green Deal, we are hoping to help consumers to use less energy and, through the electricity market reform measures being introduced in the Energy Bill, we are providing the right environment for investment in key energy infrastructure.

Lord Touhig: My Lords, energy bills have gone up by more than £300 since this Government came to office. When the energy companies announced their most recent price hikes, they blamed rises in wholesale prices, yet research shows that they have more than trebled their profits. Will the Government look at the relationship between wholesale and retail prices so that we can be sure that British people are not being ripped off by these energy companies which, by today’s standards, might not be the unacceptable face of capitalism but most certainly are the unacceptable face of greed?

Baroness Verma: My Lords, energy prices have been going up over quite a period of time. In fact, the period 2004 to 2010 saw a doubling of gas prices, which was under the previous Administration. We know that global prices are going up and that demand has grown because of emerging economies. That is why this Government are determined that we should have a diverse mixture of energy that we can control in our own country ourselves.

Lord Howell of Guildford: My Lords, the Government are right to focus on every possible means of curbing our horribly high energy bills and costs. However, has the Minister noticed that the United States of America is achieving substantially lower energy costs as well as lower carbon emissions and is attracting a great deal of new investment back into the United States? Will she give us some encouragement that the same kind of policies will be pursued as far as possible in this country?

Baroness Verma: My noble friend is absolutely right, but America is a very different place from the United Kingdom. Through our diverse mix of energy sourcing and our usage of traditional energy supplies, we are determined to give our consumers the best possible deal that they can get. However, to reflect on the point I made earlier, global prices are going up because emerging economies have a greater demand on them.

Lord Wigley: My Lords, have the Government given any consideration to the earlier payment of winter fuel allowance so that recipients can not only better plan their fuel expenditure but can also buy earlier in the year when prices are cheaper?

Baroness Verma: My Lords, it is an interesting option, which I think I will take back to the department. Through the Energy Bill and through the ECO the Government are reaching out to the most vulnerable families and tackling as early as possible the issue of those who need support. We are doing that and helping 2 million households at the current time.

Lord Tomlinson: My Lords, does the Minister accept that part of the reason for the increase in energy prices is the devaluation of sterling? Our failure to keep our

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AAA rating is bound to have a continuing effect on the devaluation of sterling and therefore feed though into increases in the price of imported fuels, particularly those based on petroleum, which are all designated in American dollars.

Baroness Verma: My Lords, the noble Lord will be pleased to know that today the oil and gas industry report sets out some very positive figures, showing that investment is increasing in the UK and that we are able to provide security and supply of energy in our own country. Of course, we are going through a difficult time, but that should come as no surprise to the party opposite because they were the instigators of it.

Lord Teverson: My Lords, when my noble friend the Minister talks to energy companies, will she also take into consideration people who are not the normal suspects? People who live in rural areas have to pay a lot of money for bottled gas and heating oil, which come from a limited range of local suppliers. They are the people with the highest energy costs. Will she talk to those sectors to make sure that rural residents get a much better deal as well?

Baroness Verma: My noble friend raises a very important point. Though the Green Deal and through collective purchasing we are trying to help those areas where it would be far more beneficial to be able to buy collectively. Economies of scale and greater purchasing power will give them a better choice of where they can buy and what they can buy.

Lord Pearson of Rannoch: My Lords, did the Minister read Mr Christopher Booker’s article in yesterday’s Sunday Telegraph, which revealed that last Monday all our 4,300 wind turbines put together produced a paltry 31 megawatts compared with the 2,200 megawatts that we get from a single conventional plant? What are the Government going to do about future back-up for this situation, and when are they going to abandon this mad wind turbine policy, which will put millions into fuel poverty?

Baroness Verma: My Lords, I did not read the article. I am afraid that I was curled up in bed with the flu. However, I will take the noble Lord’s word for it that it was an interesting article. As I have said persistently and consistently at the Dispatch Box, we need a good energy mix, and wind will be part of that mix.

Baroness Worthington: My Lords, during this cold weather, many people are being forced to make very difficult decisions in their budgeting, especially because of the high energy prices. Does the Minister agree that the best way to bring prices down is to ensure that we have a genuinely competitive market in energy? Will she comment on whether the Energy Bill that will come to this House later in the year will be amended to introduce genuine competition in the generation of electricity, splitting it from the retail and therefore enabling us to get real competition to bring prices down?

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Baroness Verma: The noble Baroness is right that the Energy Bill will be coming here and we will have some great discussions on its contents. She is also right that we need to have greater competition in the marketplace to be able to drive prices down for the consumer. But we do not want to stifle competition. Therefore, we need to support the markets in being able to have open and fair competition rather than dictate to the industry on how it should be supplier of it.

Health: Midwives


2.59 pm

Asked By Baroness Cumberlege

To ask Her Majesty’s Government, in the light of the continuing increase in births, what is their response to the recent report by the Royal College of Midwives, which states that there is a shortage of around 5,000 midwives.

Baroness Cumberlege: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In so doing, I declare an interest as a fellow and vice-president of the Royal College of Midwives. My other interests are in the Lords register.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, there are some 1,381 more midwives in the NHS than there were in May 2010, and there are a record 5,000 in training. The Government have committed to ensuring that the number of midwives matches the needs of the birth rate. Most women already have choice and one-to-one maternity care, and we are working closely with the Royal College of Midwives to ensure that personalised, one-to-one maternity care is available for every woman across the country.

Baroness Cumberlege: My Lords, I thank my noble friend for that very encouraging reply. I suspect that every single Member of your Lordships’ House has been touched by a midwife. They are a remarkable and very committed profession. Is my noble friend aware that although there is what the Royal College of Midwives describes as a tipping point in the increase in the number of midwives attending women in labour, the real crisis is in postnatal care, where new mothers require advice, support and help in cherishing and feeding their newborn baby? Is he also aware that this requires continuity of a midwife? He has just told us that continuity is being carried through, but a recent survey shows that 40% of new mothers always see a different midwife. How does he propose that we put this situation right?

Earl Howe: My Lords, women should expect to have one-to-one care from a midwife during labour, birth and immediately after birth, and to continue to have the support of their midwife after the birth. This is especially important for those women who are susceptible to, or have, depression during pregnancy or postnatal depression. My noble friend is absolutely

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right about continuity. This depends on each woman having an individualised postnatal plan of care, taking into account her circumstances. To assist the NHS, the department has asked the National Institute for Health and Clinical Excellence to develop a quality standard for postnatal care, which it is anticipated will be published in July this year.

Lord Avebury: My Lords, my noble friend may have had a chance to look at the report published today by the Refugee Council and Maternity Action on the deficiencies in the support for pregnant asylum seekers. Will his department hold discussions with the Home Office on amendments to the guidance for those women to make it compatible with NICE guidance on the maternity care of women with complex social factors? Will the department and the UK Border Agency jointly look into the negative impact of the current dispersal and relocation policies on the healthcare of women asylum seekers?

Earl Howe: My noble friend raises a number of complex and important issues. My department provides approximately £1 million a year for health assessments of asylum seekers in UKBA initial accommodation in England. The aim of the health assessment is to identify and address immediate healthcare needs, including pregnancy, and to recognise ongoing and non-urgent care needs for attention in the dispersal areas. The use of experienced health teams and interpreting services to record medical history also avoids more expensive arrangements at GP-registration stage later on. My officials met Maternity Action on 19 February to discuss the report’s recommendations and were assured that the maternity care provided by NHS midwives was appropriate and in accordance with NICE guidelines. Following that meeting, officials have briefed the Home Office.

The Lord Bishop of Ripon and Leeds: My Lords, the fact that Edge Hill University, for example, had nearly 900 applications for 22 midwifery places shows considerable enthusiasm for acquiring this skill. However, experience shows that many midwives withdraw during training or the early years of practice. Has the Minister any statistics on such withdrawals and does he know any of the reasons for them?

Earl Howe: My Lords, as regards the statistics on trainees who drop out, I am advised that the average rate is around 22%, which is quite high, but that can be for a number of reasons. I am, however, encouraged by the statistics that I have on the number of commissions that are currently in train across the country. On conservative assumptions, this year and next, we should see about 1,900 midwives emerging from training.

Baroness Afshar: My Lords, how many midwives are familiar with the minority languages that are spoken by British women in areas such as Leeds and Bradford? Are there sufficient numbers who know the local language, rather than having a general notion which does not really suit the language that the women are speaking?

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Earl Howe: The noble Baroness raises another important point. This will be a particular issue for the local education and training boards, which we are setting up under the auspices of Health Education England, to get a local feel for the needs of patients in an area. The language skills of midwives will be a very important ingredient of that.

Baroness Farrington of Ribbleton: My Lords, in the light of the original Question of the noble Baroness, Lady Cumberlege, would the Minister advise the House as to whether NICE will be asked to produce guidelines based on what it believes is needed or based on the current shortfall in midwives? If it is based on the current shortfall, we will suffer the same problems.

Earl Howe: As I mentioned, we are doing our best to address the shortfall in the number of midwives in training. However, NICE has been asked to produce a quality standard that will be a benchmark against which the quality and outcomes of midwifery practice can be judged.

Partnerships (Prosecution) (Scotland) Bill [HL]


3.06 pm

Report received.

Defamation Bill

Third Reading

3.06 pm

Clause 2: Arbitration service for defamation and related civil claims against members of Independent Regulatory Board

Amendment 1

Moved by Lord Fowler

1: Clause 2, page 2, leave out lines 11 and 12

Lord Fowler: My Lords, I will be brief in moving this amendment. It has the support of the noble Lord, Lord Puttnam, who apologises for not being in his place today. He is in the Far East on a long-arranged trip as one of the Prime Minister’s trade envoys there. He entirely supports my proposals. I also have the support of the noble and learned Baroness, Lady Scotland, a former Attorney-General; my noble and learned friend Lord Mackay, a former Lord Chancellor, and, according to the Times, a “Conservative source” has also given it a grudging approval. I am not entirely sure what a “Conservative source” is, but, of course, I always believe the Times.

As I understand it, it also has the support of the press, which perhaps is most significant of all. During the past months, those of us who have supported Leveson have been subjected to a campaign of vilification, being compared to Mugabe, Castro, Putin and any other dictator that you can think of. When we have spoken or written in favour of Leveson, we have been

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attacked in reports such as the one that appeared in the

Daily Telegraph

in November with the neutral headline,

“MPs tainted by scandal among group backing an end to free press”.

I looked down to see, slightly to my surprise, that among the little photographs at the bottom was my own photograph. The caption said:

“Lord Fowler: during 15 years as a government minister, he had plenty of run-ins with the left-wing press, particularly when he announced job losses and spending cuts in the NHS in the 1980s”.

That explains why I have had, according to them, this deep-seated antipathy towards the press, in spite of the fact that I was chairman of two regional newspaper groups after that time. Of course, it is doubtless made particularly painful for me by the fact that all my succeeding Health Secretaries have been carried shoulder high down Whitehall by representatives of the British Medical Association. So, it is not entirely surprising that some of us want to move on from this bitter debate and enter the calmer fields of gay marriage.

The trouble is that when the press have a genuine point, people tend to say, “Here they go again”. Here, as my amendment seeks to make clear, they do have a genuine point. I should make it clear that my amendment in no way challenges or changes my backing for the support generally for Clause 2 and for an arbitration service, as proposed by Lord Justice Leveson. Although a great deal has been written about this particular clause, all too often it has missed out the overall purpose, which is to provide a low-cost remedy for the public and the press without the expense of going to law. That is the essence of what it is saying: for the public to pursue a defamation case, as it stands at the moment, means certain cost and a very uncertain result. My amendment questions whether the two lines at the end of Clause 2 are necessary to bring that aim about. I do not believe that they are and I say that for two reasons.

First, as I made clear, I am a supporter of the Leveson report but it seems to me that the words at the end of Clause 2 go beyond what Leveson himself proposed. Referring to the proposed independent self-regulatory body, Leveson says:

“I also suggest that it considers offering a purely voluntary pre-publication advice service to editors who want support on how the public interest might be interpreted in a specific case before a decision is reached on publication”.

I think that the words at the end of the clause are fairly tentative and certainly go beyond the words in the amendment that,

“the court shall take into account whether a defendant first sought advice”.

Furthermore, as it stands, it gives the impression that we who support Leveson are all concerned with pre-publication controls when that is certainly not the case, and nor has it ever been the case. The authors of this clause might claim quite reasonably that they are also conferring an advantage on newspapers as well as on the public. Nevertheless, the false impression remains, and it would be a vast pity if the beneficial intent of the clause was to be harmed in this way and in so doing give ammunition to those who say

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that the supporters of Leveson are about statutory control, which I repeat and underline has never been our cause.

The second reason I tabled the amendment is that the whole idea of some kind of pre-publication check is anathema to most journalists. I emphasise that I am talking about working journalists. Remember that the NUJ, as opposed to the proprietors, is in favour of Leveson; it is not against it. It is against the kind of provision that I am seeking to amend for the good reason that in any story of any controversy there will always be people out there who want to stop the story, or at least take the guts out of it. I learnt that very early on as a young journalist. I had been advised to show a series of articles that I had written to the man who had given me access to the story. When I met him, he was furious about what I had written. Very obviously, so that I could see it clearly, a letter of protest to my editor was set out on his desk. Happily, the editor took no notice, but I have never shown an article in advance to any body or person since.

3.15 pm

It is most important that the House should recognise that often there is very great pressure not to publish but to keep things secret and out of the public gaze. Noble Lords should recognise how sensitive an issue that is to journalists. I also wonder whether there is an analogy with the BBC’s pulled report on Jimmy Savile. It was an important story killed off not by the reporter or reporting staff but after it got into the equivalent of the checking process, with the result that ITV last week received the award for the scoop of the year from the Royal Television Society at a ceremony that both the Minister and I attended.

My major point is that the two lines at the end of Clause 2 are not necessary and, above all, give an entirely wrong impression to the public of what the clause is trying to do and of the beneficial impact and effect that it could have. I said at the start that the amendment had the support of a wide range of individuals, and, in varying degrees, of two political parties. The only party that has not proclaimed its position is the Liberal Democrats. It may be just my luck that this debate will be replied to by a Liberal Democrat Minister. However, as always, I am an optimist in these things. My noble friend and I are old allies who have fought a number of causes together, and my hope is that the alliance will hold good on this amendment. I beg to move.

The Minister of State, Ministry of Justice (Lord McNally): My Lords, I hope that it will be for the convenience of the House if I intervene now to put the debate in context. I confirm that my noble friend Lord Fowler and I have been close allies in many battles for press freedom over the decades, and I assure him that this reply comes from a government Minister.

My noble friend’s amendment seeks to remove from the amendment of the noble Lord, Lord Puttnam, which was agreed on Report, a section that goes beyond Leveson in requiring the courts to take account of pre-publication advice from the new regulator in considering whether to avoid exemplary damages.

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When we debated the main amendment on Report, I was clear that our objective in respect of Leveson must be to achieve a cross-party endorsement of a solution that works in parliamentary and legislative terms, and has general public support. On Report, I promised that a draft royal charter would be published. This has now been published. It illustrates one example of how a recognition body might be constituted to underpin the tough system of self-regulation for the press that Lord Justice Leveson recommended.

The draft charter is under active consideration in the cross-party talks, and it is important that we allow the talks to progress and reach their conclusion. I have made clear my reservations about the amendment of the noble Lord, Lord Puttnam, being shoe-horned into the Defamation Bill. I do not propose to rehearse the arguments today. The Puttnam amendment is now part of the Bill, which should now be returned to the Commons.

The amendment of my noble friend Lord Fowler is welcome in so far as it will remove an element of the Puttnam amendment that went further than Lord Justice Leveson recommended. No one wants to see Leveson implemented more than I do, but the tripartite talks are the key to achieving that objective, not the Bill as now amended. We should continue to allow the parties the space to agree the most appropriate solution within the tripartite talks.

In so much as he is amending a clause that we do not consider to be effective and which pre-empts what I hope will be a successful outcome to those tripartite discussions, the amendment of the noble Lord, Lord Fowler, makes an unacceptable position marginally better. I shall not ask noble Lords to vote against the amendment, although the overall position will remain that we believe the amendment to be unacceptable.

I shall say that again slowly. I am looking at my words. Basically, I am suggesting that the House should pass the amendment and that the Government will not oppose it. The amended Bill will then go to the Commons for consideration and will come back at ping pong for what I suspect will be a lively debate. However, by then the tripartite talks might have succeeded—I sincerely hope they will have—and my Defamation Bill, which I think unamended is perfectly formed, could then be passed by this House. Those are my recommendations.

Amendment 1 agreed.

Clause 6 : Publication on matters of public interest

Amendment 2

Tabled by Lord Taverne

2: Clause 6, page 3, line 36, leave out “believed” and insert “decided”

Lord Taverne: My Lords, I still feel that the words I moved at an earlier stage are better than those of the Government but, as both sides wish to give effect to what was said in the Flood case, there is not that much between us. In the circumstances, I shall not move my amendment.

Amendment 2 not moved.

Bill passed and returned to the Commons with amendments.

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Welfare Benefits Up-rating Bill

Committee (1st Day)

Relevant document: 14th Report from the Delegated Powers Committee.

3.22 pm

Clause 1 : Up-rating of certain social security benefits for tax years 2014-15 and 2015-16

Amendment 1

Moved by Baroness Hayter of Kentish Town

1: Clause 1, page 1, line 4, leave out “by 1%”

Baroness Hayter of Kentish Town: My Lords, I beg to move Amendment 1 in the name of my noble friend Lord McKenzie of Luton.

Baroness Meacher: My Lords, I support Amendment 1, which seeks to ensure that the Government have flexibility to increase benefits in 2014-15 and 2015-16 taking account of the level of inflation at the time. The amendment does not seek to impose a particular percentage increase in benefits in any year. It simply seeks to avoid the straitjacket imposed by the Bill as it stands.

Amendment 1 covers all the benefits and claimant groups referred to in Schedule 1. It would therefore leave open the possibility of a Government deciding to protect a particular group, perhaps disabled people or children. This amendment has become particularly pertinent in the light of the downgrading of the British economy by the ratings agency Moody’s at the end of last week, along with the anticipation of yet more quantitative easing and the expectation that in these circumstances we will have more inflation year by year. That inflation comes on top of a level of inflation which is already above 1%, which is vital to this set of amendments and, indeed, to the Bill.

This Bill has to be considered in context. As noble Lords know very well, last year’s Welfare Reform Act has already capped benefits and imposed the bedroom tax so that an increasing percentage of everyone’s rent will be paid out of their personal allowance, leaving them with the most pathetically small amount of money to cover food, heating, clothing and other necessities. Also, the Government have already changed the basis of annual welfare benefit increases from the RPI to the CPI. This is absolutely crucial because that measure alone, before this Bill, is expected to save £5.8 billion a year. Such savings can be achieved only through imposing the most incredible hardship on many of the most vulnerable people in this country. The proposed limiting of upratings to an increase of 1% will be an increase in the consumer prices index, not the retail prices index, so it is not even going to cover an inflation rate of 1%. That is how bad it is. It is the compounding of the previous Welfare Reform Act with this Bill that is so deeply shocking to many of us.

The cumulative impact of all these changes and the proposed 1% uprating limit is not yet fully understood even by the experts in the field, let alone by its victims. But it is not surprising that there is deep concern in those organisations which have to work with vulnerable people, including the CAB service. It is worried stiff

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about its clients and the capacity of the bureaux to cope with what is going to be an unimaginable flood of people in desperate circumstances. The Government are breaking the long-standing link between annual incremental increases in benefits and prices. Once lost, it will be very difficult to restore it. Indeed, it is difficult to imagine that happening for decades. That is how serious this is. It is not just one little part of a Bill; it is actually historic because it changes the whole way we look at increases in welfare benefits.

Has the Minister undertaken an impact assessment on this Bill, including an estimate of the likely cost of increased mental breakdowns and the resulting impact on mental health services? Has the Minister assessed the costs arising from the result of increased crime rates and the impact on the criminal justice system, and from the impact of increased homelessness on local authorities? Also, I refer to the overall impact on communities of what I fear we will see in terms of increased unrest. It is very difficult to believe that we will not experience unrest in communities that are profoundly hit by the combination of all these changes—not just arising from this Bill, but from a combination of everything that is being done. I would be grateful if the Minister would reply to this question: has the impact of this Bill, combined with the previous Bill, been fully assessed in terms of services and costs? If these implications have not yet been estimated, does the Minister agree that that must be done before implementation of this Bill?

I want to challenge the Government’s rationale for this uprating Bill—that welfare benefit increases must take account of the public sector pay freeze and the low level of pay increases across the economy in recent years. Citizens Advice is right to argue that a 1% increase means something very different to somebody on an average wage from what it means to somebody on welfare benefits. A 20% increase in out-of-work benefits in the period 2007-12 resulted in an average annual increase in income of only £2.37 per week. A lower percentage increase, of 15%, in public sector pay during the same period provided an average increase in income for public sector workers more than five times greater. It was a lower percentage but a much greater increase in actual terms.

3.30 pm

What matters for families is how many pounds’ increase they have, not some airy-fairy percentage; they want the pounds. Public sector workers had on average an increase of £12.40, compared with the benefits average of £2.37. I accept that it would not be fair to enable those on benefits to leap ahead of those on low public sector wages in absolute terms, but there is no danger of that happening. Does the Minister agree?

My final point takes us back to the debates we had about direct payments of rent to landlords and the payment of benefits weekly rather than monthly. You could say that that is irrelevant to this Bill; I do not think that it is. I am grateful to the noble Lord, Lord Freud, for explaining to me that he has done a lot of work since the previous Act and those earlier debates, and that built into the system now are exceptions to

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try to protect particularly vulnerable people; in other words, by enabling some peculiarly vulnerable people to be paid more regularly and to have their rent paid direct to landlords. I am referring to the noble Lord, Lord Freud, because I had a meeting with him recently, and I know he has real concerns about some groups, particularly those with mental health problems, and how on earth they are going to cope with these reforms.

Perhaps the Minister will spell out the exceptions for the benefit of this House. It would be helpful to know how broad or narrow these exceptions are going to be. Undoubtedly, exceptions to the requirement for monthly payments and ending the direct payment of rent to landlords will help but, whatever amendments may be agreed to this Bill, would it not be wise to put on hold altogether, for a period of perhaps three years, the changes to the frequency of welfare payments and the direct payments to landlords? Such concessions would be relatively cost-free but would make a very big difference to people’s capacity to cope as they find their tiny incomes declining in real terms month by month.

In two years’ time the Government can measure the extent of the inevitable increases in rent and council tax arrears, homelessness and other social consequences. When that evaluation has taken place, a decision could then be made on a rational basis about whether it is remotely sensible to implement the other provisions of the previous Welfare Reform Act. I do not expect the Minister to respond to these points today but would be grateful if she could write to me with the response before Report.

Lord Low of Dalston: My Lords, somewhat to my surprise, I find my name on this amendment, so perhaps I should say a few words. I do not want to repeat all the arguments that were advanced at Second Reading and I do not have a lot to add to the very eloquent speech that we have just heard from the noble Baroness, Lady Meacher, but there are a couple of points I would like to make.

The first is the economic argument. I said at Second Reading that it did not really make any sense, at a time when the economy was flat-lining, to withdraw additional purchasing power from a section of the community that was most likely to spend it: those on welfare benefits. With every day that goes by and the economic news piles up about the dire condition of the British economy, the stronger this argument gets. The Minister did not respond adequately to that argument at Second Reading. I would be grateful if the Government gave further serious consideration to the force of that argument, which is genuine and considerable.

The Bill will cause real hardship for disabled people, carers and children. Disabled people are said to be protected but, as we showed at Second Reading, the protection accorded disabled people is partial. There is some protection for those in the support group receiving employment and support allowance, and disability living allowance is exempted from the 1% cap, but those receiving employment and support allowance in the work-related activity group and other disabled people receiving other benefits do not receive protection from the 1% cap. It cannot therefore be said that disabled people are fully protected, nor are carers.

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Above all, children are not protected. Disabled children in this country are already disproportionately likely to live in poverty. Approximately 40% of all disabled children—about 320,000—live in poverty, compared with a poverty rate of 30% across all children. Nearly a third live in severe poverty—where a family’s income is less than 40% of the national average. Under universal credit, which will begin to come into effect later this year, parents of disabled children can receive a benefit called the disabled child addition. This will replace the current disabled child tax credit, but, under universal credit, the support available for disabled children who do not receive the high rate of DLA care component will be cut by half, from £57 a week under the disabled child tax credit to £28.52. The Bill will mean that the value of this benefit will increase at a significantly slower rate, by just 1% as opposed to in line with the CPI, which is currently running at 2.7%. As a result of the Bill, parents of disabled children receiving the lower disabled child addition of universal credit will lose £25.21 a year, or £75.63 over the three years during which the 1% cap is intended to operate. I would be grateful if the Minister could reflect further on the hardship that will be caused to all these groups and have second thoughts about the universal application of the 1% cap.

Lord McKenzie of Luton: My Lords, I shall speak to Amendment 1 in this group and to the other amendments that we have in it: Amendments 6A, 9 and 10A. I am grateful to my noble friend Lady Hayter for moving the amendment in my absence and apologise to the noble Baroness, Lady Meacher, for missing the very start of what was a powerful presentation.

Amendments 1 and 9 would remove the reference to 1% in Clauses 1 and 2 and hence remove the 1% cap on the uprating of relevant sums and amounts. Amendments 6A and 10A would delete the prohibition on uprating such sums and amounts under the annual uprating of benefits and tax credits. We fully intend these amendments to undermine and negate the purpose of the Bill, which we consider to be unnecessary, misdirected and contributing to the continuing economic failure of this Government, a failure all too evident from last week’s downgrading of our AAA credit rating by Moody’s.

Let me be clear from the outset on Labour’s position: we will make no commitment now on spending or tax for the next Parliament and will set out our spending plans at the time of the next election. However, right now we would uprate in line with inflation—I shall come on in a moment to how the Government can plug the hole in their increasingly fragile finances.

This Bill is unnecessary because if this Government misguidedly wish to plough on with this capping on uprating, they could simply use the annual uprating process. The Bill provides no certainty for taxpayers because there is no certainty on claimant numbers, except perhaps the prospect of them increasing, given the Government’s economic failure. As for the markets, it is frankly untenable to suggest that by locking those amounts, which account for less than 0.1% of government spending, into legislation they will be assured and comforted. It does not seem to have cut any ice with the rating agencies. The certainty of a real terms cut

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in support cannot be welcomed by claimants, especially when they have no certainty about the level of the real cut.

We all know why the Bill was brought forward. We made our position clear at Second Reading and I do not propose to revisit the issue in Committee. The Bill is misdirected on several counts. It does nothing for jobs. Indeed, by withdrawing real resources from low-income families, which of necessity have the highest marginal consumption rates, it is damaging demand. It ignores the IMF warning that the fiscal stabilisers should be allowed to operate. Its justification is supposed to be that there needs to be some correction for the fact that benefits have been uprated at a faster rate than earnings over the past five years—essentially, that those out of work have done better than those in work. It is perverse, therefore, that two-thirds of those hurt by the Bill are in work, taxing the very strivers whom the Government claim to be supporting. Indeed, specifically included in the cuts is in-work support, such as working tax credit, SSP, SMP and paternity pay, as well as in and out of work benefits such as housing benefit, the very support that enables individuals to sustain employment and manage work and family responsibilities.

It is not only those in work who are having their living standards cut. The Government are failing to honour their pledge to protect the most severely disabled. If they still hold to their obligations under the Child Poverty Act, they are drifting further away by pushing a further 200,000 children into poverty. Worst of all, at a time when the Bill will reduce the living standards of the very poorest, they are rewarding those with the highest incomes, including 8,000 millionaires, with a generous tax cut. The contrast could not be greater: a £2,000 a week tax cut for some, 71p a week if you claim JSA.

By leaving the inflation risk with claimants, the Bill creates greater risk for the poor and uncertainty about their real incomes. The 2012 Autumn Statement cites energy and fuel prices as remaining a potential source of risk over the coming years. It estimates that inflation will be higher in 2013 and 2014 than originally announced due to rises in domestic energy prices and food commodity prices—the very costs that hit the poorest hardest. We see today the reaction of the currency markets to our credit rating downgrade: a weakened sterling, which will put further pressure on prices.

Uncertainty is compounded by there still being no cumulative impact assessment for the raft of benefit and tax credit changes that have been introduced so far by the Government. The IFS, in its 2013 green budget, analysed the effect of the 2013-14 tax and benefit changes. It concludes:

“This broad pattern of tax giveaways and welfare takeaways”—

its own terminology—

“means that the changes, on average, reduce net incomes towards the bottom of the income distribution and increase net incomes in the middle and upper parts of the distribution”.

It states that the below-inflation uprating is the predominant cause of losses in the bottom half of the income distribution and that the reduction of the top rate of tax from 50% to 45% produces the gain for the richest.

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That juxtaposition speaks volumes about the priorities of this Government: the rich need more to motivate them; the poor need to feel the lash of cuts to inspire them. This pattern is not new. Looking at the overall position since 2010, apart from the richest decile it is a fact that the poorest have lost the greatest percentage share of their income in the cause of fiscal consolidation. This analysis is consistent with the detailed briefings that we have all received from a range of authoritative sources. They tell us that 68% of those affected by the Bill are actually in work, 30% of all households that will be hit will lose on average £156 a year, two-thirds of those households are families with children, 71% of households affected are at or below average income, and two-thirds of those affected are women.

3.45 pm

Our opposition to the Bill is clear: the Bill locks in cuts to real incomes through to April 2016. We argue that the normal uprating process should operate, with annual Statements laid before and debated by Parliament. We will hear the cries from the Minister asking what we would do. Clearly, one matter that should be addressed to get the social security budget down is getting more people into work. Despite claims to the contrary, the Government are failing on jobs. Long-term unemployment and long-term youth unemployment are up on the year. The Work Programme is little short of a disaster and continues to fail the hardest to help. Some 1.4 million part-time workers would like to be working full time. This is why we have proposed a new initiative to get people into work and a compulsory job guarantee for the long-term unemployed, and we have costed a scheme that over the course of a year would help more than a quarter of a million people into work, paid for by restricting on a tapered basis pension tax relief for those earning more than £150,000.

We will continue to argue for the reversal of the proposed tax handout to the very rich. We heard the Minister at Second Reading suggest that the saving that this would produce would be “illusory” because the rich would order their affairs to make sure that the will of the Government was defeated. Indeed, the HMRC analysis suggests that some would do this by forestalling and deferring, whereby income fell into a lower tax period, converting income into more favourably taxed capital. Have we not already had reports about income being deferred into next year? However, the Government do not have to acquiesce in this and accept the Starbucks approach to tax compliance. If they believed in tackling tax avoidance, they could secure the revenues that reversing this tax cut could generate.

There are alternatives. The country does not need the Bill. It needs growth, jobs and fairness in sharing the burden of fiscal consolidation. This Bill will contribute none of this.

Baroness Afshar: My Lords, I speak on behalf of the minorities and the moral economy of kin. For minorities who have been in this country for a very long time, it is the family who has given support and sustenance to those who are unemployed and suffering. That is normally done by people who are employed

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but in marginal jobs—hand-based employment such as catering—essentially by stretching the resources of the family unit in order to include the extended family.

Unfortunately, with the kind of cuts proposed at this stage, the extended resources of the family will no longer be able to help. My fear is that those of the younger generation who are likely to be serving in the restaurant with their dads or working with their mums by knitting or producing shirts and so on will now join the ranks of disaffected young people, and then be branded as home-made terrorists. It is a dangerous precedent. We really need to nurture the moral economy of kin because it is these families who offer support, but on this kind of income and with these kinds of cuts they will simply be unable to do so.

Lord Forsyth of Drumlean: My Lords, perhaps I may pick up on some points made by the noble Lord, Lord McKenzie. I have the highest respect for the noble Lord, Lord Low, and nothing would give me greater pleasure than to vote for the amendment. There is a problem, however, in that we cannot afford to vote for the amendment. The noble Baroness who has just spoken talked about cuts. We are not talking about cuts but about not having increases. It is true that there might be cuts because of inflation, but if we go down the road proposed by the noble Lord, Lord McKenzie, inflation will be even higher and the cuts will be more severe. It was Lord Callaghan who pointed out, as a Labour Prime Minister in the 1970s—sometimes I feel that we have gone back to the 1970s; even the Daleks made an appearance in Westminster last week—that inflation is the father and mother of unemployment.

It is really quite extraordinary for the noble Lord, Lord McKenzie, to make so much of the rating agency’s downrating of the UK from AAA status. I do not know whether he has read what the rating agency had to say about why that downrating was being made. It was because the agency believed that the Government would not be able to meet the targets that they had set, and which the Opposition are constantly urging us to abandon. The noble Lord talked about the impact of the sliding pound and of inflation, which is a consequence of not meeting these targets. On the idea that finding money out of thin air will not hurt the poorest hardest in the long term, because of the inflation that would be created and the impact it would have on the pound, the hard reality is that we simply cannot afford to do what the noble Lord, Lord Low, would ask of us.

It is the cheapest of cheap politics to keep going on about millionaires being given a subsidy. First, that assumes that the state is entitled to their money and that it can spend that money better than they can; and, secondly, that if they spend it by investing or buying goods it will not generate wealth and prosperity in the economy, while somehow a state bureaucracy involved in spending money and taking it by force through an Administration will get better value and growth. That is a delusion which we happily abandoned in the 1970s when we abandoned rates of income tax at 98% and discovered that the consequence of cutting taxes to 40% was that the rich ended up paying a higher proportion of tax than in the past. Already we are seeing that the proportion of tax paid by the very rich

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is falling and the proportion paid by the poorest is rising. That is not as a consequence of the recent measures made by my right honourable friend the Chancellor in his Budget but as a consequence of the politically inspired 50% tax, which the previous Government introduced as some kind of political gesture to try to create division between the parties.

We can all make speeches saying that we would like to have more money available for those who are poorest but if we were to follow the prescriptions of the noble Lord, Lord McKenzie, and his party—in so far as we can work out what their prescriptions are—the effect would be higher inflation, higher interest rates and higher unemployment, with those who are poorest in our country being the most disadvantaged. It would not be the rich or the people in the public sector but those who are unemployed, while the prospects for new jobs would be reduced.

I say to my noble friend that she is right to press ahead and, I hope, to reject this amendment. It is not because we do not care about those who are most vulnerable in our society but precisely because we do that we want an economic policy that will deliver the wealth that is necessary to pay the bills. The truth is that we are in this mess because the previous Labour Government spent money on welfare that was based on an unsustainable bubble. That is why we now have the problem. It is very regrettable that noble Lords opposite should seek to make party politics out of this issue while not acknowledging the very heavy burden of responsibility they carry for having brought this situation about and the real courage being shown by my right honourable friend the Secretary of State in bringing forward this Bill. It is trying to bring into effect a welfare system that will be within our means and will recognise the need to encourage those who have the greatest need.

Baroness Meacher: It is very fashionable to blame the previous Government for our predicament but does the noble Lord accept that the banks have to carry perhaps 90% of the burden of responsibility, and that the banking crisis started in the United States—not even in this country? In fact, if there was a weakness, it was in the degree of regulation. My understanding is that the previous Conservative Administration opposed even the level of regulation that this country had. This is therefore not a party political issue; it is about banking, and this country has been deeply wounded by the banking crisis.

The other question for the noble Lord is whether he accepts, as Lord Maynard Keynes argued rather powerfully, that if you are in a terrible state of recession the best way to get yourself out of it is to generate growth. That means that you should not be withdrawing demand from the economy in this incredibly irresponsible way. What the Government are doing is very worrying.

Lord Forsyth of Drumlean: I am most grateful to the noble Baroness. I disagree with the idea that leaving money, as Gladstone would have put it, to fructify in the pockets of the people is withdrawing money from the economy, and that somehow the state would spend that money more effectively.

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As to her particular question about whether I accept that all this difficulty was caused by the banking crisis, no, I do not. I think that the banking crisis was caused by the monetary policy being pursued by the previous Government by targeting inflation. The noble Baroness seems surprised by this, but the fundamental causes of the financial crisis were the huge financial surpluses that were being built up—I hesitate to stray too far from the amendment—in China and the Middle East, which kept interest rates low, and an inflation-targeting policy being pursued by the Bank of England that meant that they were very low interest rates. As a result, the banks tried to go for yield. The banks were certainly at fault in devising packages that they thought would reduce risk and give a higher return, and it is certainly true that regulators such as the FSA should have been on to this.

However, the fundamental point is that while Labour were in charge they did nothing about that; indeed, they revelled in it. We were told that they had abolished boom and bust, and that they had come up with a new paradigm. That is why that Labour Government, even at the height of the boom, with huge revenues coming in and house prices and asset prices going through the roof, did nothing except collect the tax. Instead of putting the tax away for a rainy day, what did they do? They spent it on welfare that they could not afford, and when the boom collapsed there was a sudden gap in the market that my right honourable friend is now having to deal with. So let us not rewrite history here; let the Labour Party take responsibility for what it did in government.

The fact is that under both Governments we have been living beyond our means. We have been spending about 10% more than we earn, and we have been saving nothing. We need to save 10%. The consequence of that is that our living standards will fall unless we are able to create growth, and you do not create growth with the state taking more and more from the productive part of the private sector. According to the OECD, close to 50% of our GDP is being spent by the Government. We used to define communist countries as those where more than 50% of the state’s production was spent by the Government.

I say to my noble friend on the Front Bench that this is not an easy amendment to oppose—of course it is not—but she is absolutely right to do so because it is in the long-term interests of the most vulnerable people in our country that we stick to this policy and do not go further down the road that has brought us to this mess. If we travel down that road, it will mean that the hardship endured by the most vulnerable will be all the greater.

4 pm

Baroness Lister of Burtersett: My Lords, I had not planned to speak to these amendments but I have been stung into doing so by the remarks of the noble Lord, Lord Forsyth. I am going to keep my powder dry for later amendments. First, he started by saying that this is not a cut. Of course it is. He then had to concede that if you do not uprate benefits in line with inflation, you are cutting benefits. Do not tell the mother who has to struggle that this is not a cut—it is.

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Secondly, the noble Lord said that we cannot afford to uprate benefits in line with inflation. This is about choices—particularly, as the right reverend Prelate the Bishop of Leicester made clear at Second Reading, moral choices. We can afford to protect people living in poverty from inflation.

I will not make the contrast with millionaires because the noble Lord said that it was a cheap contrast. I will simply make the contrast with a policy of which the coalition Government are very proud—that of uprating tax allowances by more than inflation. As Gingerbread, I think, pointed out to us, this is the least effective way of targeting resources on people in poverty. A much more effective way of helping them is by inflation-proofing their benefits. There is a choice. The choice was made to increase tax allowances by more than inflation, which is of no help to people too poor to pay tax, including people in work too poor to pay tax; of minimal help to people on means-tested benefits, because they lose some of it; and of greatest help to higher-rate taxpayers. That was a choice. It was believed to be all right because we could afford it, but we cannot afford this.

Lord Forsyth of Drumlean: Is the noble Baroness not leaving out an important ingredient? The reason why that choice is made is because by cutting the tax burden and encouraging people to save to invest and to work harder you create the wealth that is needed to create the welfare state. That is the difference. The noble Baroness seems to think that it is a fixed cake and that whatever happens it is impossible to increase the size of the cake and thereby make more money available for those in greatest need.

Baroness Lister of Burtersett: I do not want to get into a great debate about the economics of this, but are people in low-paid work who are getting tax credits not contributing to the wealth of the country in the same way? They are affected just as much as people on so-called welfare, which I prefer to call social security. The economic case was made by the noble Lord, Lord Low, and the noble Baroness, Lady Meacher. This is not about the state taking money out of the productive economy and somehow filing it away somewhere; this is about the state redistributing money to people who are more likely to spend it and to spend it in local communities, thereby helping to boost economic growth at the time we need it. I do not believe there is an economic case. I do not accept the crocodile tears that are being shed by someone who is prepared to support a Bill that will hurt people in poverty the most.

Lord Bates: I, too, was not intending to speak on this amendment, but I was spurred to by my noble friend Lord Forsyth of Drumlean. I rise to add to some of the points and to reinforce some of the questions that he has about this. I followed this debate quite closely at Second Reading, and I thought that the position then argued by the noble Lord, Lord McKenzie of Luton, was that the Opposition opposed the 2013-14 and 2014-15 limits but had not yet reached a position on 2015-16. Presumably by supporting this amendment, they are now making the position that

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they do not agree and would therefore reverse the policy as it affects 2015-16, which is £1.9 billion. I may have got that wrong, and I am very happy to sit down if the noble Lord wants to intervene to correct me.

Lord McKenzie of Luton: I shall clarify for the noble Lord that we made our position clear in respect of 2013-14, which is not in the Bill but is dealt with by regulations in the normal way. We made it clear that we will make no tax or spending commitments in respect of the next Parliament, which would include the latter part of 2015-16. As for 2014-15, we think that removing this cap would enable the normal process to take place so that there can be an assessment in the normal course about what is happening to inflation and the state of the economy in that year. I hope that has clarified the position. That has not changed since we debated this at Second Reading.

Lord Bates:The noble Lord is saying that the Official Opposition do not intend to make any pledges, which is interesting because I thought I heard last week that there was a proposal for a mansion tax and that that would be funded by other means. I thought that was a specific spending commitment beyond 2015-16.

My second point picks up on one from the noble Baroness, Lady Meacher, who made a thoughtful contribution. We overwhelmingly agree that the most effective way to alleviate poverty and raise standards is to create jobs. I would have thought that there would be some recognition that the Government’s record on that has been quite reasonable. We would of course like it to be very much better, but contrary to some other countries that are wrestling with the same problems our unemployment rate continues to fall. We now have the highest level of private sector employment in our history and a million new private sector jobs since the last election. That suggests that moves to reform taxation and stimulate the economy are beginning to have some effect, and that they are the best way of tackling this.

We have an Urgent Question coming up on the rating agency decision: the noble Lord, Lord McKenzie, and the noble Baroness, Lady Meacher, referred to this. I was reading through the decision and thinking of making a contribution to the Urgent Question, which I will not now do having secured the Floor in this debate. Moody’s statement,

“explains that the UK’s creditworthiness remains extremely high … because of the country’s significant credit strengths”,

chief among which are,

“a strong track record of fiscal consolidation and a robust institutional structure”.

That is quite interesting. In fact, going beyond that, we are again warned about what could happen to the country’s inflation and the cost of borrowing if the country were to be downgraded again.

Further down, on what could move the rating up or down, Moody’s statement says that,

“downward pressure on the rating could arise if government policies were unable to stabilise and begin to ease the UK’s debt burden during the multi-year fiscal consolidation programme”.

So there is a case for fiscal consolidation. There needs to be a recognition that the Government’s policies of raising tax thresholds and increasing employment are beginning to have some effect.

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Notwithstanding that, I come to a point of agreement, which I made at Second Reading: no one on any side of the House is cheering on this measure. It is an economic necessity. It is certainly not something that anyone takes pleasure in.

Lord Bach: My Lords, although I am delighted to support these amendments, believing the Bill to be yet another attack by the coalition on the poorest and those in the squeezed middle, I confess to feeling more than a little hard done by being obliged to speak at all to the amendments in this group. The reason for this is that a draft amendment in my name was refused as not being in scope. The draft amendment was to the commencement part of the Bill, on page 2 at line 38, and says:

“Except that no commencement shall take effect until the Secretary of State is satisfied that legal help is available for all claimants who seek legal advice on the validity of the decision on their benefit entitlement”.

At first sight, it sounds as relevant to the Bill as other amendments that grace this Marshalled List, but there it is. My amendment has for some reason ended up on the wrong side of the line. It is not for me to speculate on whether any part of government was asked its view as to the status of my amendment, but I venture the opinion that it may be something of a relief to the Government that my amendment does not stand to be debated or to be voted on at a later stage.

However, I would argue that the principle behind it clearly is relevant to this group of amendments. It could be called a pursuit of justice or, to put it the other way around, the avoidance of unfairness. Because the concentration is rightly on the measures themselves, what is so often left out of the arguments about welfare reform, whether in relation to this Bill or the regulations that we were debating before our half-term break—in this case, the 1% uprating—is what potential real remedy the citizen will be left with if the department’s decision is wrong. Surely the fact that it is wrong in many cases is not in question. We all know that, with the best will in the world, decisions made by the department are often wrong and very much to the disadvantage of those who want to claim them.

For a long time, this has not been a pressing problem. For those requiring legal advice on their benefit entitlements, legal aid has been available—if, of course, these people came within the criteria for legal aid, and many did. For a small amount of legal aid, quality advice has been available, having the effect of both stopping—this is important in cost terms—hopeless claims and establishing good claims where appropriate. It is a system that worked. Putting it at its highest, it has allowed access to justice for all. At a slightly lower level, it has meant that tribunals have not been faced with an impossibly large number of cases, many of which should never have been brought in the first place. It has cost a fraction of the total legal aid budget and is paid to lawyers who are not by any standards well paid. Yet from 1 April, as a deliberate act of government policy, this legal help will no longer be available for anyone in cases relating to welfare benefit entitlements, whether under this Bill or under the regulations and the larger Act passed by Parliament last year.

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Thus, people will not be able to get the advice to which they are entitled. Their access to justice will be gone. The department will get away with wrong decisions and tribunals will be overburdened with what I can only describe as rubbish cases—all to save £25 million per year on welfare benefit advice. Perhaps I may remind the House and this Committee that that is one-tenth—I repeat, one-tenth—of the amount set aside by the Department for Communities and Local Government so that there can be weekly rather than fortnightly collections of rubbish. Is this really a proper sense of priorities for a time of austerity?

Further, everyone who knows anything about this agrees that this is not likely to be a saving at all in the end. The state—I fear that it will be the department as much as any other department and perhaps the Treasury—will eventually have to pick up the pieces when things get much worse than they need to. What does the Minister, for whom I have a high regard, have to say about this? What does he say to those who under this Act will not be able to query a wrong decision about their entitlement? They will not be able to do that because they will not be entitled to legal aid for legal advice as to whether a mistake has been made. How can the Minister or any Government justify this either in terms of common decency, which should appeal to this House and normally does, or even under the rule of law?

4.15 pm

Baroness Hollis of Heigham: I support the non-existent amendment of my noble friend Lord Bach as it is key to the changes that we are having. We should not be discussing this Bill in isolation from the Welfare Reform Act that preceded it. They represent a package of cuts and changes that will bear very heavily on 5 million to 7 million people in this country—no light measure.

To follow my noble friend, it is worth reminding the House of what we discussed at Second Reading about the number of changes that will affect people who are receiving benefits, even though many of them are in work. Those changes will happen to them all at once. We will see a new structure of benefits, brought together in universal credit—that is a structure that I welcome—but it will be accompanied, as in this Bill, and in reducing benefit inflation to CPI, by serious cuts, which many benefit claimants will think is simply an error by the department. They will go frantic with concern in trying to rectify them. That is the second change.

The third change that we are going to see is to the new patterns of payment. For example, tenants of social housing who currently have their housing benefit paid directly to the landlord will now have it paid to themselves, looped through a bank account. Very often, given other pressures of finance, debts and so on, they may be in real difficulties in making that money over to the landlord at the end of the month. So there is a new pattern of payment, with which tenants must become familiar. They will also have monthly payment of benefit, when many of them have been used to weekly or fortnightly payments, and the payment will go to a single earner or person in the household and not split. Again, that is a major change.

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All those changes—the new structure, the cuts, the new method of payment direct to tenants, and the monthly payments—will be handled by an IT system, when we know that 20% to 30% of the tenants wishing to claim benefit have no familiarity with IT at all. So what will they do? What they have always done is to seek legal advice from Citizens Advice, which in the past has been funded very substantially by the Lord Chancellor’s Department. CABs have received some 40% of their funding from the Lord Chancellor’s Department, but that has been cut, and they are now 40% short. As a result, those same people facing this sequence of changes, some of which I support, like universal credit, and some of which I deplore, will make their bids for benefit on the basis of an IT system, with which they are not familiar, instead of a paper trail. Where do they go? They cannot go to the traditional advice centres because the legal aid money that sustained them has been withdrawn in the worst, most foolish and most indecent economy of which I can conceive. I declare my interest as a chair of a housing association. I am having to appoint paid professionals to do the welfare advice, to be paid for out of increased tenants’ rents, which hitherto was provided by the skilled but unpaid volunteers of the CABs, which represented a real commitment to the big society to which we all give lip service and which, I fear, is too seldom observed in this House.

My noble friend is absolutely right that this is a foolish way to proceed and I regret very much that we were not allowed to debate this properly. I speak with some concern because, as a departmental Minister for eight years, I was responsible for tribunals before they went over, via Leggatt, to a generalised tribunal system. I sat in on those tribunals for DLA and other benefits. My noble friend is exactly right—I could see within five minutes whether the person coming before the tribunal had or had not received prior legal advice. If they had not, the appeal or discussion at tribunal took five times as long, with the chairman, as they were then called—now judge—trying to tease out the issues and establish whether it was a bona fide case, whether they could take it further and even whether the person was claiming against the right benefit. In some cases, they were complaining about an incapacity benefit when it should have been DLA, and I felt like jumping up and saying, “You’ve got the wrong benefit here—let’s start again”.

That is the situation here. We are transferring the pressure of the problem away from the point that is most approachable, accessible and value for money—local services in the community funded by legal aid—to the tribunal process itself and merely distributing the pressure over a longer time, at greater cost, with greater inaccessibility and greater difficulty for everyone to understand. That is a huge folly and, like my noble friend, I beg the Government, even at this late stage, to reconsider.

Lord Newby: My Lords, at the risk of repeating arguments made in earlier debates, I remind the Committee of the context of the Bill. This country is still recovering from the most damaging financial crisis for generations. When this Government came to power, the state was borrowing £1 in every £4 that it spent.

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Even before the recession, the UK had the highest structural deficit in the G7 and between 1997 and 2010 welfare spending increased by some 60% in real terms. Welfare spending now accounts for more than a quarter of government spending: that is, more than £200 billion. The £1.9 billion of savings enabled by this Bill in 2015-16 is a necessary part of helping to reduce public spending, tackle the deficit and secure the economic recovery.

Amendments 1 and 9, spoken to by the noble Lord, Lord McKenzie, would remove the 1% uprating figure in the Bill in Clause 1 and Clause 2. The effect of these amendments would be to give the Government discretion over benefit levels on an annual basis in much the same way as under existing legislation. As I have already explained, we believe it is vital that we set out credible plans for the longer term. The Bill is needed to enable us to set out our uprating policy over several years so that we can be sure we will deliver those £1.9 billion worth of savings.

My speaking notes at this point said that this amendment would completely undermine that core purpose of the Bill. I was relieved, but not surprised, that the noble Lord, Lord McKenzie, used that very word to define the effect of these amendments. He said that the amendments would undermine and, indeed, negate the core purpose of the Bill. They would, and so a vote for these amendments would be equivalent to a vote against the Bill at Second Reading. I note that the amendments, while removing the 1% figure, do not suggest an alternative uprating metric. If we assume that the noble Lord’s intention is that we operate in line with the CPI, this would obviously not deliver the savings we are talking about. I remind the Committee that the £1.9 billion worth of savings that this Bill will generate in 2015-16 are equivalent to the salaries of about 45,000 nurses and about 40,000 teachers, so these are not negligible amounts, as some noble Lords have suggested, and the savings would have to be found somewhere else.

As I say, the amendments undermine the purpose of the Bill and, frankly, demonstrate a fundamental difference of opinion between the two sides of the House on how we deal with the current economic situation. The Government believe that the main priority is to get spending under control, reduce the deficit and restore growth. The Bill helps us to achieve that. At the same time, we are implementing policies that make a real difference to people’s lives—people of the most modest means. Let me name just a few of them: universal credit; the pupil premium; reform of early years education; tackling problem debt; and lifting people out of paying income tax through raising the personal allowance. We believe that these policies are vital if we are to have a real and sustainable impact on poverty over the medium to longer term. We cannot simply focus on increasing incomes through welfare payments, lifting people just above the poverty line.

The noble Baroness, Lady Meacher, asked me a number of questions about the impact assessment. I remind the Committee that we published a detailed impact assessment for the Bill, which includes details of the impact by family type, and have made public details of the impacts on relative child poverty. She asked whether we could delay the changes until we

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had a broader impact assessment that covered the impact on mental health, crime and, I think she said, social unrest. As regards the impact on crime, it seems to me that the noble Baroness is being completely unrealistic to believe that such an impact can be measured with any degree of precision. At the start of the downturn, most commentators believed that crime rates would rise substantially. If one had taken the average view of people in the know, that is what one would have put in an impact assessment. The truth is that crime rates have not risen substantially. They have fallen. I obviously welcome that. I make that point only to make the more general point that, while one can make an impact assessment that covers some things with a reasonable degree of precision, on other things—on crime, for example—it is impossible to do what the noble Baroness wants. That is why the impact assessment is couched in the terms that it is.

The noble Baroness asked about exceptions or exemptions from direct payment. We are not setting out the exemptions in the regulations because they will be based on individual needs and assessments. Individuals will work with an adviser via Jobcentre Plus. There will be personal budgeting support, which will contain two elements: money advice, to help people who cannot manage monthly payments, and alternative payment arrangements, which include rent paid direct to landlords, more frequent payments and payments split between partners. These will be undertaken on an individual basis.

I do not really want to get involved in a long macroeconomic discussion. I would like to get involved in one, but perhaps I might simply refer the noble Baroness to the letter from the noble Lord, Lord Desai, in the Financial Timeslast week.It seemed to explain extremely carefully and clearly why this downturn is not like the typical Keynesian downturn that we have seen in the past. I would commend that letter to all noble Lords who are looking for a primer on why the Government are following the line that they are.

Baroness Meacher: I thank the Minister for attempting to respond to some of my questions. Perhaps I may return to the one on the impact assessment. The Minister referred to the crime issue and I accept that we have had a long-term decline in crime. However, I am not sure that that makes it impossible to look at the increase in the amount of crime among benefit recipients; that is something precise worth looking at. Moreover, I do not think that that negates the possibility of looking at the amount of mental breakdown among benefit recipients. Again, that is one of my main concerns, having been involved in mental health services for 25 years. I fear that there will be quite a dramatic increase in mental breakdown and an incredible impact on a very tight psychiatric service. In particular, in-patient beds have been cut over many, many years. It would be helpful if he could look at that.

Lord Newby: I think that the difficulty—and I may be wrong—in terms of mental health is that the noble Baroness is very worried about what might happen. She may be right and she may not be right, but it is difficult to model—in the way required in an impact assessment—that kind of change which has not happened.

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As far as I am aware—she will know much more than I do—you cannot go back and say, “This is what happened in the past”, which would give us the kind of experience that would enable us to say in an impact assessment, which is a very specific thing, that these outcomes are predicted with any degree of certainty.

I will talk to officials about this. I realise it is a potential problem. However, I still maintain that while there are some things that can be relatively clearly enumerated in an impact assessment, some other things are very difficult to the point that the value of attempting the exercise is relatively low.

4.30 pm

Baroness Meacher: I am sorry for standing up again but I want to clarify the point; otherwise we will be left with a misunderstanding. I was saying in my speech that it would be helpful to have an impact assessment of what has happened in, say, two years’ time. I agree that we cannot look at these things prospectively, so I want to clarify that. I am suggesting postponing implementation until an impact assessment can be undertaken in real terms.

Lord Howarth of Newport: Will the Minister acknowledge that there is abundant evidence that incidences of crime and mental illness are significantly higher in more unequal societies? Given that the tendency of the policies in the Bill will be to exacerbate inequality, is not the noble Baroness, Lady Meacher, well justified in her anxiety, and should not the Government be taking great care to examine the potential impact of these policies?

Lord Newby: My Lords, I have read The Spirit Level as well, but one of the best ways of dealing with inequality in society is to increase the proportion of people in work and to increase opportunities for people to get into work. I will come on to that later.

The noble Lord, Lord Forsyth, in a way answered the point of the noble Lord, Lord Low, about spending more money now. That is the argument. We get back to a macroeconomic point that if one spends a lot of borrowed money now, it will generate the kind of growth that will get us out of our difficulties. The Government reject the argument that we are in a position where we can spend our way out of recession, and it is as simple as that.

Lord Low of Dalston: My Lords, I just want to clarify that I am not arguing for a splurge in spending. I am not advocating that the Government should spend more. My point is rather that the Government—I am sure that the noble Lord, Lord Forsyth, for whom I also have great respect, would not agree with me—should not pursue an economically counterproductive policy of withdrawing purchasing power from the economy.

Lord Newby: My Lords, we and the noble Lord will simply have to agree to differ on that. The noble Lord, Lord McKenzie, repeated some of the arguments made about millionaires and the huge tax boost that they allegedly got. He did not mention that the Budget changes announced last year affecting millionaires and those on very substantial means would generate

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five times as much income as the 45p tax rate. It is simply untrue to claim that the Budget measures last year mean that millionaires as a group are paying, and will be paying, less tax this year and next than they have in the past. Equally, it is simplistic and false to argue that there is a sort of mechanical problem with HMRC, or an inability of HMRC to collect money from millionaires. Millionaires are extremely clever at avoiding tax. All the evidence from the Office for Budget Responsibility and the work that it did demonstrates why the 50p tax rate simply would not generate anything like the amount of money that was originally envisaged. Indeed, it said that it was quite possible that the 50p tax rate would mean less money being collected than would otherwise be the case.

Lord Forsyth of Drumlean: I am most grateful to my noble friend. Have we not had a spectacular example this very day of how cutting taxes can result in huge increases in revenue? The Chancellor’s decision to reverse his plan to increase the tax on the oil industry has resulted in the £25 billion of investment reported today, with huge implications for future revenue and employment.

Lord Newby: My Lords, that is an extremely good point. It demonstrates that there is no simplistic relationship between tax rates and the amount of tax collected. In some cases there is and in some there is not. The trick of government is to understand the difference between the two. Frankly, I do not believe that the Opposition have reached that point.

The noble Lord also talked about tax avoidance and conflated wealthy people avoiding tax and the situation relating to Starbucks. On the question of Starbucks and profit shifting, the Government, along with the French and Germans, have started a process with the OECD—something that the previous Government never did—to change the basic global accounting rules so that we can get to the bottom of corporations that are shifting their profits to low-tax jurisdictions. This holds the prospect of being successful in the medium term, but whatever it does it will have no impact on the effectiveness of the Government’s treatment of individuals. As we have debated many times in recent months at Question Time, the new focus that HMRC is putting on going after people who are avoiding and evading tax is generating many billions of pounds more in income. While the previous Government cut the number of HMRC people working on compliance by 10,000, this Government have already increased it by 2,500 and will increase it further.

I was very taken by the comments of the noble Baroness, Lady Afshar, on extended families. In the past year, employment has increased by more than 500,000 and I am unaware of any differential effect on the minority ethnic communities such that small firms in those communities have been shedding jobs disproportionately. Perhaps they have, but I have not seen any evidence. One of the more welcome developments of the past year, which has surprised a lot of commentators, is that hundreds of thousands more people are in work, and this increase in employment has taken place disproportionately in regions other

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than London and the south-east. There has been a slight rebalancing of employment prospects, and regions such as Yorkshire and the Humber, which I know, have done remarkably well in difficult economic times. I completely support the noble Baroness’s view about the moral economy of kin, but I question whether what has happened in recent months has undermined it to the extent that she suggested.

Finally, the noble Lord, Lord Bach, implied—very gently; I know that he did not really mean it—that the Government might have influenced what amendments were considered to be in scope of the Bill. He knows, as we all know, that the Government have no power to determine what is in scope of the Bill.

Lord Bach: Of course I did not imply that for a moment—and I think that the Minister knows that. However, when there is some doubt about whether an amendment is in scope, there would be nothing wrong in the authorities asking both the Government and the person who might be tabling the amendment for their thinking on the issue. The decision is of course for the authorities and nobody else, but there would be nothing wrong in inviting the views of, for example, an experienced Bill team, as I am sure the Minister has backing him. I was not suggesting for a moment that the Government could use their influence, as the Minister put it, to decide for the authorities, which will make the decision themselves, as always. My point was that if the amendment had been allowed in, I suspect that the Government might have been in trouble in a vote at a later stage Bill. That was all that I was saying.

Lord Newby: I am extremely sorry if I misunderstood the noble Lord.

In conclusion, I repeat that the amendments in this group would mean that the Bill would not deliver on its purpose of enabling the Government to set out clear and certain plans to control welfare spending and help secure the economic recovery. That is why they should be resisted.

Lord McKenzie of Luton: My Lords, perhaps I may wind up on behalf of my noble friend, who moved Amendment 1 on my behalf. I thank the Minister for his range of responses. I emphasise that, yes, we believe the amendment would negate the Bill, but it would not prevent the Government doing what they wanted to, given a chance, over a three-year period. However, we believe that it is wrong to lock in a real-terms cut for three years. Effectively, it is for two years, given that the first year is by way of regulation.

On issues of tax, the Minister, in response to the Second Reading debate, said that a 50% tax rate would not garner the revenue we believed because people would order their affairs. Ordering their affairs, as set out in some detail in the HMRC publication that looked at this issue, would involve switching income from one year to another. It is quite possible that, as we speak and draw to the end of the current tax year and move towards, possibly, a 45% tax year, a great deal of income will shift from this year into next year. Will the Minister say whether he thinks this is okay and acquiesces with it, or whether it is a matter that the Government should address in some form? If you simply sit back, clever and well resourced people

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will reduce their tax liabilities as fully as they can. However, it does not inevitably have to be that way, particularly when the people who will pick up the burden of that avoidance are at the very low end of the income scale.

Lord Bates: I take the argument that the noble Lord is making about 50p down to 45p. I am puzzled therefore as to why, during the entire period of the previous Government, who were in power from May 1997 until April 2010, the top rate was 50p. It reduced to 45p only on 6 April 2010. If it was an overriding cause of concern and a belief of the Government of that time, in which he served as a distinguished Minister, surely they would have kept the rate at that level and not proposed reducing it.

Lord McKenzie of Luton: We are addressing the policies of this Government. We can spend all our time debating what previous Governments have done but we are addressing this Government’s determination to raise the revenue that they can from a 50% rate, rather than give what is a huge tax cut to a minority of people in our country at a time when people at the other end of the income scale are being asked to bear a real additional burden. That is what we are complaining about and we believe that the Government can and should do something about it.

There have been a range of powerful contributions to this debate. I agree entirely with my noble friends Lord Bach and Lady Hollis about this collection of things that are going on, particularly at the moment. New benefits, new structures and new payment details are being introduced in circumstances in which it is difficult for people to access good advice, to get justice when they wish to challenge, or even to understand the system with which they are faced.

The noble Lord, Lord Bates, referred to fiscal consolidation. Yes, we all agree about fiscal consolidation: the issue is how you go about it. We all agree about the importance of work and getting people into work, but it is how you go about it. The problem is that the Government have not produced the goods. Every time George Osborne presents a Budget or an Autumn Statement, the OBR revises growth downwards. Indeed, the latest GDP figures show that there has been no growth this year. The issue is not about whether we believe growth is the right way forward; it is about how you get it—and this Government have not delivered on that.

As to their impact on benefit spending, the Government’s failure to get Britain back to work is sending the social security bill up by something like £13.6 billion more than expected. Long-term unemployment is up by 55.7% this year. That is a manifestation of government failure in getting people into work and on growth in the economy. Borrowing has risen by 10% so far this year and it looks as though the Chancellor will miss his target to get the national debt falling by 2015.

On our record on benefits, I would say to the noble Lord, Lord Forsyth, that real-terms expenditure on out-of-work benefits fell by £7.45 billion under the previous Labour Government between 1996-97 and 2009-10, while real spending on out-of-work benefits in 2006, at something like £38 billion, was at its lowest

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point in 15 years. You do not have to take my word for Labour’s record on benefits. An analysis was made of the Labour Government’s record on welfare reform and it was found that they had made “strong progress” in their welfare-to-work agenda. Policies such as Welfare to Work, the New Deal and Jobcentre Plus were all a success. It was the noble Lord, Lord Freud, who came to that judgment.

4.45 pm

Lord Forsyth of Drumlean: I am most grateful to the noble Lord. I am a bit puzzled because he said in answer to my noble friend Lord Bates that we were discussing the policies of this Government, not the last one. He is a little selective. However, given what he has described—an economy which is not growing at all—how on earth does he expect to fund the increase in benefits that he says he is in favour of? That is the crux of the matter. It is not about where we would like to be or how the world might be different, the fact is that the economy is not growing. If the economy is not growing, how is it possible to expand the welfare budget?

Lord McKenzie of Luton: I was talking about the last Labour Government in response to points that the noble Lord himself made earlier on. On growth, I would outline that there is one particular proposal that we in the Labour Party have been working on—the long-term jobs guarantee, and we have explained how it could be funded by, yes, restricting tax relief for the wealthiest in terms of pension contributions. It would get people into work, get them spending, and take them off benefits and welfare support. That is the way to do it. Perhaps I can turn this back to the noble Lord. The approach the Government have undertaken has simply failed to deliver growth; it is not happening. Everyone knows that and it does not need me to expound on it. The Government have failed to deliver.

It is because of that that we are challenging this burden of a real-terms cut. The noble Lord said that it is not a cut, but of course it is a cut in real terms because it is a cut in people’s living standards. It is also a cut that we do not know the magnitude of over the life of this Bill, which is why we object to it so strongly. We do not know what the rate of inflation is going to be in two years’ time. We can speculate on the impact of the downgrading of our credit rating, but getting growth in the economy and thus providing more employment is certainly more likely to impact in a positive way. That is what we would argue for and plan for. It is making the people at the bottom end of the income scale pay for the failure of this Government that we object to. This Bill is the wrong way to deal with benefits uprating. There is a tried and tested way that has operated for many years which is open to the Government rather than locking it down and forcing people into a real-terms cut in their living standards.

I suspect that we will have another round of this argument on Report because it is the fundamental part of our objection to the Bill, but in the mean time, I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

House resumed.

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Economy: Credit Rating


4.49 pm

The Commercial Secretary to the Treasury (Lord Deighton): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Chancellor of the Exchequer.

“Mr Speaker, this decision is a stark reminder of the debt problem built up over the past decade and a warning to anyone who thinks that we can run away from dealing with those problems.

I can report that we have not seen excessive volatility in the markets today: 10-year government gilts are broadly flat—trading at around 2.16%—within the trading range of the past week and near the very lowest rates of borrowing in our history. The FTSE 100 is currently up by about 35 points. The credit rating is an important benchmark for any country but this Government’s economic policy is tested day in, day out, in the markets—and it has not been found wanting today. Families and businesses see the benefit of that in those very low interest rates.

If we accept the outcome of the rating agency decision, we must accept the reasons given for that decision. Moody’s points to the combined impact of what it describes as the ‘slow growth of the global economy’ and the necessary ‘domestic public- and private-sector deleveraging process’—in other words, the process of winding down the huge debts that built up in our society over the past decade.

That is the environment we are operating in, dealing with the very high deficit and debt trajectory this country had coming out of the financial crisis, made more difficult by the economic environment abroad. For on the same day as the rating decision, the latest European forecasts showed the eurozone deep in recession and growth in key economies such as France and Germany weaker than ours.

Crucially, Moody’s says that the UK’s creditworthiness remains ‘extremely high’ because of our ‘highly competitive, well-diversified economy’ and a ‘strong track record of fiscal consolidation’—what it calls the ‘political will’ to ‘reverse the UK’s debt trajectory’. Its message to this Government and this Parliament is explicit: the UK’s rating could be downgraded further if there is a ‘reduced political commitment to fiscal consolidation’.

You will not get that reduced commitment from this Government. We will go on delivering on the economic plan that has brought the deficit down by a quarter and helped create a million private sector jobs, and which continues to secure very low interest rates not just for the Government but for families and businesses in the country.

Ultimately, that is the choice for Britain: we can either abandon our efforts to deal with our debt problems and make a difficult situation very much worse, or we can redouble our efforts to overcome our debts, make sure that this country can earn its way in the world and provide for our children a very much brighter economic

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situation than the one we inherited from our predecessors. That is what I am going to do—and that is what this Government are going to do”.

My Lords, that concludes the Statement.

4.52 pm

Lord Adonis: My Lords, the Conservative Party manifesto said:

“We will safeguard Britain’s credit rating”.

When that rating was maintained immediately after the 2010 election, the Chancellor said:

“That is a big vote of confidence … in the coalition government’s economic policies”.

Does the Minister not feel embarrassed to have to come here this afternoon to eat all the Chancellor’s words, and does he not accept that this downgrade shows that the Government’s economic strategy has failed, in their own terms? Will he confirm that Moody’s says that the main driver of its decision to downgrade is the weak growth of the British economy? When does he expect growth to return to the 1.8% level of 2010?

At the 2010 Conservative Party conference, George Osborne said that a credit downgrade would put Britain “on the brink”, as he referred to:

“The lost jobs. The cancelled investment. The businesses destroyed. The recovery halted”.

Since all these things have now come to pass, is it not time to change course?

4.53 pm

Lord Deighton: My Lords, if I may be very specific about Moody’s expressed reasons for the downgrade, it is due to the,

“slow growth of the global economy and the drag on the UK economy from the ongoing domestic public- and private-sector deleveraging process”.

The noble Lord is absolutely right that we are growing far more slowly than was anticipated. That is a phenomenon of being highly constrained in a global economy that has had severe problems. Every other piece of advice implicit in Moody’s explanation for this downgrade tells us that the most critical thing is to continue with the path of fiscal consolidation.

4.54 pm

Lord Higgins: My Lords, does my noble friend accept that we were supposed to have this Urgent Question much earlier in our proceedings, and that if this does not happen the Whips should rise and say what is going on?

As far as the substance is concerned, does my noble friend agree that it is absolutely crucial that the Government should continue with their existing policy? The reality is that they have not managed to reduce the deficit as fast as we would have liked. The Labour Party is saying that the reduction is being done too quickly and by too much, but clearly the reason why we have had this reassessment of our position is that it has not been done as quickly as international opinion might feel would have been appropriate.

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If we are going to take this attitude, it is essential that aggregate demand should be maintained. In that instance, a further increase in quantitative easing would be appropriate. However, we are in some danger of having economic management split between an unaccountable Monetary Policy Committee and the Treasury. Perhaps this point also should be taken into account.

Lord Deighton: I thank my noble friend for those observations. As for the timing of the Statement, I think that it was simply a matter of the earlier session not finishing on time. I, too, have been here for an hour and a quarter ready to talk about this Question.

On the economic substance, my noble friend raises a number of extremely important points. I do not think that we can evaluate the current economic situation in terms of a direct trade-off between growth and fiscal consolidation. The essence of the situation that we find ourselves in is that fiscal consolidation is an absolute prerequisite for recovery and for the confidence of the markets which allows us to borrow to finance this extremely high deficit. My noble friend is right that an array of other policy weapons is available to prosecute a growth agenda. That includes multiple supply-side reforms to make our economy more efficient, and the Government are fully embarked on those. An activist monetary policy plays an important part, but—I agree—within a constraint of managing very carefully any inflationary risk.

Lord Elystan-Morgan: My Lords, the Statement makes it clear that there is the very real danger of further demotion if growth is not achieved. Have Moody’s or any of the other exalted bodies that are our lords and masters in this connection given any indication of at what point a failure to achieve acceptable growth will make possible a further and calamitous demotion?

Lord Deighton: Interestingly, Moody’s has established that the outlook is stable. That means that it would not anticipate a further ratings change in the next 12 to 18 months—unlike the situation with the US and French economies, where the outlook is deemed to be negative because they are not perceived to have the same political will to drive down the deficit. The focus of the ratings agencies is much more to do with the management of our debt and driving down the deficit than directly with growth. Growth gives you the fuel to help manage down the debt, which is their primary concern.

Lord Marlesford: My Lords—

Lord Howarth of Newport: My Lords, is not the situation even worse than intimated by the noble Lord, Lord Higgins? We have a state of affairs in which the markets are totally confused by the position taken by the Governor of the Bank of England and the Monetary Policy Committee and in which the Chancellor of the Exchequer has been found abjectly wanting by the witness whom he most insistently prayed in aid. What prospect is there of the Government getting a grip on this sliding situation?

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Lord Deighton: The noble Lord exaggerates the confusion or nervousness of the markets. My interpretation of the markets is that there is very little volatility at the moment; the markets have taken this situation entirely in their stride. The market variable that has shifted the most is the exchange rate, where sterling has moved back to a range where it was trading before the eurozone crisis. The risk that has gone out of the eurozone sector has enabled the euro to strengthen; and the risk that was inherent in the US so-called “cliff” situation did not materialise, which has allowed the dollar to strengthen relative to sterling. I do not think that the markets are doing anything other than continuing to reward this Government’s focus on fiscal consolidation, which is why we are borrowing at these incredibly cheap rates.

Lord German: My Lords, perhaps I can pursue an issue which my noble friend talked about: policy weapons which can be used to promote growth in a sustainable way. The Government have acknowledged that infrastructure is one of those policy weapons and that moving decision-making locally is another. I wonder whether now is the time to remove some of the constraints which the Government—the Treasury—have put on tax increment financing for local government, so that it can use that challenge to increase growth locally. At the moment, the restrictions that have been put on TIF by the Government will have the effect that very few schemes will come forward.

Lord Deighton: I thank my noble friend for bringing a very constructive perspective on ways in which we can address some of our supply-side problems in the short term. Investing in infrastructure and devolving spend to the regions, where they have a clearer grip on the projects necessary for local growth, is one thing that we should be pursuing. I know that my right honourable friend the Chancellor will be making some announcements in the Budget with respect to following through the recommendations of my noble friend Lord Heseltine.

Lord Liddle: My Lords, can the Minister enlighten us as to what will be the Government’s response to the failure of their deficit reduction plan? That is the reason why we have had the downgrade: because the deficit is not being reduced as was hoped. Do the Government agree with the Secretary of State for Business, Innovation and Skills, who says, “No more cuts”, or will they accept the advice of the No Turning Back group, and say that what we need are more cuts in spending so that we can have more cuts in taxes? Does the Minister agree that this is a Government without a strategy to face this looming crisis?

Lord Deighton: The noble Lord identifies some of the trade-offs that we have to tread carefully between. I think that the Government have an extremely clear economic strategy. Not everybody necessarily agrees with it, but the strategy could not be clearer. It is to demonstrate to the markets that we absolutely have control of the public finances, to reform our financial system, to ensure that we have the right kind of activist monetary policy and to ensure that, right through the economy, we introduce real microeconomic

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reforms that can unleash the productive capacity of the economy. That is an extremely clear strategy. It has been prosecuted with consistency through the life of the Government.

Moody’s is entirely supportive of government policy, which is to focus on reducing the deficit. It has merely demonstrated that because of the slow growth in the world economy and the huge debts with which we started this process, it is taking longer than we would all hope.

Welfare Benefits Up-rating Bill

Committee (1st Day) (Continued)

5.03 pm

Amendment 2

Moved by Lord McKenzie of Luton

2: Clause 1, page 1, line 5, at end insert—

“(1A) In the case of employment and support allowance receivable by claimants of the support component of the allowance (who receive both personal allowance and support components) the mandatory 1% uprating stipulated in subsection (1) shall not apply to any components of the employment and support allowance (including personal allowance and support components) receivable by them.”

Lord McKenzie of Luton: My Lords, this is a focused amendment concerning disabled people who are in the support group for the purposes of the employment and support allowance. Noble Lords will recall that in the main phase of ESA an individual will receive a personal allowance and an additional support component. Those are currently £71 and £34.05 respectively. They will increase to £71.70 and £34.80 under the Social Security Benefits Up-rating Order 2013. This is an increase of 1% for the personal allowance but a CPI increase of 2.2% for the additional component. We will have the opportunity to debate the regulations shortly, although, of course, they cannot be amended. Under income-related ESA, other premiums may be applicable, such as the enhanced disability, severe disability and carer’s premiums. Of course, the final amount of any payment depends also on the income, if any, of the claimant.

So far as the Bill is concerned, for those in the support group, the support component and the premiums are outwith the maximum 1% cap, and we support this. However, that is not the case for the personal allowances for a single lone parent and couple, and it is this injustice that we are seeking to rectify. In doing so, we are placing reliance on the commitment made by the Secretary of State for the DWP. On 8 January 2013, he said:

“I stand by what we said originally, and I say it again: in this Bill we have protected people on disability living allowance, as well as people in the support group on ESA”.—[Official Report, Commons, 8/1/13; col. 194.]

That is not the case. Noble Lords will recall that those in the support group are those with the greatest challenges who are deemed neither fit for work nor work-related activity. They are not generally in a position to improve their financial background by way of accessing the labour market and I believe it is generally accepted that they experience higher living costs. The amendment

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would not represent a hugely expensive change to the Bill, but this is fundamentally about an issue of fairness and insisting that Ministers carry out their promises.

Amendment 3 stands in the name of the noble Lord, Lord Low. I will perhaps offer our view on that amendment when I reply on my amendment. I beg to move.

Lord Low of Dalston: My Lords, I support the amendment moved by the noble Lord, Lord McKenzie, to which I have added my name, but I rise principally to speak to Amendment 3, which is in my name alone and provides that the 1% uprating should not apply to benefits paid to claimants in the work-related activity group.

The amendment is essential if the Government are to fulfil their pledge to protect disabled people from the 1% uprating cap. Only disabled people are in the work-related activity group. The assessment process ensures that non-disabled people do not qualify. A recent DWP study tracking those receiving ESA over 18 months revealed that three-quarters of recipients were undergoing regular treatment for a health condition, including a stay in hospital for some. ESA for those in the work-related activity group is paid in two parts—the main component, which is equivalent to jobseeker’s allowance and worth about two-thirds of the total benefit, and the work-related activity group component, which is worth the other third. Many disabled people are being placed in the work-related activity group. Capping increases in their benefit at 1% will mean that households receiving ESA in the work-related activity group will be £87.65 a year worse off. The Government’s proposals to exempt from the 1% cap the support group component for those placed in the support group mean that less than a third of ESA payments for less than half of disabled people receiving ESA will be protected. That is what the amendment of the noble Lord, Lord McKenzie, would achieve, but it would address the shortfall only for the quarter of a million disabled people in the support group.

The most recent DWP figures show that there are 360,000 disabled people in the work-related activity group who also need protection. This amendment would achieve that. One third of disabled people in the UK were found to be living in poverty before the global economic crisis. Disabled people routinely experience higher living costs associated with their disability on things such as equipment, personal assistants and special diets. Disabled people experience the same increases in general living costs as everyone else: food inflation is running at 4.5% and travel inflation at 7%. Unfortunately, disabled people were not able to catch up financially during better economic times. We should not allow them to slip further behind as a result of this Bill; rather, we should ensure that the Government’s objective of protecting disabled people is fully delivered.

Baroness Meacher:My Lords, I support Amendment 2, moved by the noble Lord, Lord McKenzie, to which I added my name, and Amendment 3, spoken to by the noble Lord, Lord Low. The Minister, the noble Lord, Lord Freud, consistently argued during the passage of the Welfare Reform Bill that there were two fundamental principles to the Government’s welfare reform provisions.

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One was to make sure that people in work had an incentive to remain in work and that those out of work had an incentive to move into work. The second principle was that the money available, however much there was available, should be focused as far as possible on those in greatest need. Throughout the debates on the previous Bill, I found myself very much in agreement with those two principles. It seemed to me that if money is short, at least one should abide by those two principles. That seemed very reasonable.

I find myself therefore confused that in this Bill those two principles appear to be breached. It does not seem that you are focusing on those in greatest need if there is an impact that reduces in real terms the living standards of people who are severely disabled. You are certainly not increasing the incentive to work if you reduce the benefit of people who have not a chance in hell of returning to work. We know that a lot of people who in any normal view of things would not really be able to work have been put into benefit categories such as jobseeker’s allowance, where they are expected to work, although they would regard this as being beyond their wildest dreams, much as they might like to. That is not the point that I wanted to make; I simply want to ask the Minister how she squares the provisions of this Bill with the principles so eloquently and consistently laid out by the noble Lord, Lord Freud.

Lord German: My Lords, at Second Reading I said that this Bill had some rough edges, and the amendment moved by the noble Lord, Lord McKenzie, is directed at one of those rough edges. Can my noble friend the Minister tell the House whether a deliberate step was taken to exclude the personal allowance part of the support group to meet the budgetary requirements? Was this matter overlooked in the discussion that may have taken place on the principle espoused both in this House by the noble Lord, Lord Freud, and by the Secretary of State in the other place that those who are unable to do something to help themselves should not be penalised in this way? That is why the example of DLA and PIP has been given.

It may be, though, that in the words of the noble Lord, Lord McKenzie, people are generally not able to access the labour market. Can my noble friend the Minister tell us what the actual cost would be of reinstating the non-1% cap on the personal allowance part of the support group, given that people are in the support group because they obviously need support and cannot do things for themselves? That is the nature of the word. Has the department given any thought whatever to finding ways of ensuring that what is clearly not in the spirit of the statements made about providing for people who cannot help themselves will be carried through, if perhaps in some other way than by the amendment proposed by the noble Lord, Lord McKenzie? In other words, is there another way of dealing with this apart from using the methodology provided in the noble Lord’s amendment?

5.15 pm

Baroness Lister of Burtersett: My Lords, I support both these amendments. I have a question concerning Amendment 2. Like the noble Baroness, Lady Meacher,

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I am slightly confused; I had understood that the rationale for not including, say, pensioners in the Bill was that that group could not be expected to make up the difference through paid work. Therefore, and in a sense this follows on from the noble Lord’s question, why are disabled people in the support group affected, albeit not as much as some other groups? According to the Disability Benefits Consortium, a person in the support group will be £138 per year worse off by 2015. That is a considerable sum for someone living on benefits, and of course the personal allowance element is larger than the element that is protected. Why does that principle of excluding groups that the Government expect to go into the labour market to somehow protect themselves not extend to people in the support group who, by virtue of being in that group, are not expected to look for paid work?

Baroness Stowell of Beeston: My Lords, I am grateful to all noble Lords who have contributed to this debate. It is probably worth my summarising that the two amendments we are talking about seek to make changes to the ESA. Amendment 2 would remove from the Bill the 1% increases in the personal allowance for those in the support group, while Amendment 3 relates to those in the work-related activity group.

I understand why noble Lords have tabled these amendments and raised the points that they have in this debate. We all want to protect those who are furthest from the labour market, or who have additional costs because of disability, and that is what the Government are doing.

On the points raised by the noble Baroness, Lady Meacher, referring to the principles outlined by my noble friend Lord Freud during the passage of the Welfare Reform Act, I am clear that those principles—that we will target welfare spending to those most in need and ensure that we do not do anything to disincentivise people from pursuing work—remain intact via this Bill. We are prioritising those in greatest need.

It is right to say that there will still be some effects among disabled people through the Bill because we are including the personal allowance for both types of ESA as well as the additional element for those in the work-related activity group. However, we are ensuring that all those benefits that are paid specifically to cover the additional costs associated with disability are not included in the Bill. For example, the disability living allowance and the attendance allowance are protected, as are the disability premia in benefits such as income support, ESA, JSA and housing benefit, and we have excluded the disability elements of tax credits from the Bill.

In many cases, the basic rate of ESA is just one element of the total package of benefits received. Many people on ESA are also in receipt of other benefits, such as DLA, to which I have just referred, and housing benefit. It is worth noting that around 65% of people in the support group also claim DLA. The point I am trying to make here is that ESA is not the only benefit that most people are relying on. People in the support group receive a component worth £34.80 a week, as has already been said, and they are also automatically entitled to the enhanced disability premium of £14.80 a week if eligible for

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income-related ESA. We should not forget that some people will be eligible for the severe disability premium or the carer premium. All these are protected, like the support component. Income-related ESA households where a member of the couple is over pension age also receive a pensioner premium to ensure that the rate of benefit is the equivalent of the pension credit rate. This rate is also uprated as normal.

My noble friend Lord German asked in particular about the personal allowance aspect of ESA and why it is included in the Bill. It is important for me to be clear that the personal allowance is there to provide basic support. It is designed to meet the basic needs of all those on out-of-work income-related benefits. The personal allowance is consistent across all benefits which relate to those of working age. There is a standard amount. For single people, it is currently £71 a week. It is important that I am clear that this rate is common across all claimants who receive ESA, JSA, income support and housing benefit and reflects the fact that they perform a similar function of providing basic support for everyday needs. They do not reflect disability or the additional costs of disability, so therefore it is right that they are set at a standard rate. That is the rationale for including the personal allowance in this Bill and for the personal allowance to be subject to the 1% cap on annual increases. Treating one personal allowance rate differently from that in other benefits would mean that there would be no clear level of income at which state support is set and at which access to other help would be available across a wide range of services. It would also introduce an element of complexity in terms of the coherence of the benefit system which would introduce new challenges and be likely to add further costs to the running of the overall system.

As has been acknowledged, the support group component is protected, so it is not included in the Bill. It is the component element of ESA which differentiates the need based on the effects of a disability or a condition. That particular component relates to the effects of a specific disability. The support group component is paid in recognition of the fact that more severely disabled people are less likely to be able to increase their income by moving into work and may have additional needs. Therefore we pay those in the support group a higher increase than those in the work-related activity group.

It is worth making the point that for those in the work-related activity group, ESA is not like the old incapacity benefits that usually led to people being in receipt of that benefit for a long period. This is intended to be a short-term benefit for those in this group. Those who are placed in the work-related activity group are there because they have been found able to prepare for work. As such, they will be referred for appropriate support, training and provision to ensure that they get the help they need. ESA for people in that group is intended to be a short-term benefit and we expect these claimants to be closer to the labour market and be in a better position to prepare for work. Therefore, while they may not be looking for work immediately in receipt of that benefit, they have some ability to affect their own incomes. That is why it is

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right that the annual increase for those in the work-related activity group should—unlike that for those in the support group—be fully within the scope of the Bill.

In his opening remarks, the noble Lord, Lord McKenzie, again referred to the alternative option of the Government bringing forward annual orders rather than introducing the Bill. It is important for me to stress heavily that a central purpose of the Bill, in addition to achieving savings, is to provide certainty. I will say that regularly throughout the passage of the Bill; it is an important aspect of what we are doing. I know that the noble Lord seeks to undermine that, but it is central to what we are trying to do. It is important that we recognise the long-term benefits of providing that certainty; that is how we retain the credibility of the Government’s fiscal policy.

Lord McKenzie of Luton: Can the Minister explain to me the certainty that is achieved for claimants on the real value of their benefits as a result of the Bill?

Baroness Stowell of Beeston: The point I am making, which the noble Lord is clear about, is that the Bill still provides annual increases in benefits, but at a reduced rate for some elements of those benefits. We are doing this in the way that we propose because it adds to the certainty. As I told the noble Lord when we were outside the Chamber, the IMF was very clear that to anchor market expectations, policymakers need to specify adequately detailed medium-term plans for lowering debt ratios, which must be backed by binding legislation or fiscal frameworks. This is part of what we are doing, and why it is important.

As I have said, despite the economic situation, which we have already discussed today at some length, we have found the resources to fund a 1% increase in working-age benefits and, in doing so, protected the incomes of disabled people as far as we can—especially those elements which are provided to cover the additional costs of disabled people.

The noble Lord, Lord McKenzie, said that it would not be hugely expensive to accept these amendments and to make this change. It is important that I make it clear to the Committee that accepting these amendments would mean a loss of £340 million in savings, which we would have to find elsewhere. Those in the work-related activity group are deemed able to prepare for work and, as such, are better placed to be able to improve their income levels. Therefore, we believe it right that the component is also within the scope of the Bill.

Personal allowance rates are common across the working-age benefit system, as I have already said, reflecting the fact that they perform the same function: to provide basic support for everyday needs. Accepting these amendments would therefore break away from that model and would create additional complexity in the benefits system. Our proposals are proportionate. Although I understand the concerns and points that have been raised in the debate—please believe me, I do—what is being proposed here is fair. I therefore ask the noble Lord to withdraw his amendment.

Baroness Meacher: Are the Government more concerned about certainty for the Government or certainty for the claimant? If the Government are

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concerned about certainty for the claimant, would it not be better to say that benefits would be uprated to the extent of 1% or 2% less than inflation, for example? That way, the claimant would know that they would not have a cut in their income of more than 1% or 2% a year. That would provide a level of certainty for the claimant, whereas it seems that the Bill is after certainty for the Government. Is that correct?

5.30 pm

Baroness Stowell of Beeston: I think I am right in saying that the noble Baroness was not here at Second Reading when I laid out the purpose of the Bill and its wider context. In response to her question, my point is that this proposal is about certainty, so that in the long-term it will result in a better future for everyone. It is also about taking measures now which are difficult and will affect people but which have the sole purpose of helping us to achieve a stronger economy so that in future years all of us will benefit. That is what I mean when I talk about certainty.

Baroness Hollis of Heigham: My Lords, as the Minister will recall, that is not exactly what the impact analysis said nor exactly what she said at the pre-meeting on this Bill, which was very helpful. I am sure that we all appreciated it. She made the point that it was about certainty for the markets, certainty for the Government and certainty for the claimants. Many of us pressed her on the fact that certainty for the Government, the markets or the claimants depended not just on what the level of inflation would be but also on what the number of claimants would be in order to get some estimate of what spending would be. The Government had no way at all of forecasting two out of the three factors that went into giving themselves some comfort about their uncertainty.

Baroness Stowell of Beeston: The point that I was making at Second Reading and continue to make is that certainty is a means to an end. It is through certainty for the Government, certainty for the markets and certainty in these measures that we will achieve a stronger economy. That is what I am talking about.

Baroness Hollis of Heigham: My Lords, this simply will not give you certainty. The whole of the impact analysis brief was a set of mythological language. This will not do what the Government claim. I understand that they are seeking to cut possible expenditure demands but to say that this is about certainty is simply an abuse of language, if I may say so.

Lord McKenzie of Luton: My Lords, I thank all noble Lords who have spoken in favour of Amendment 2: the noble Lord, Lord Low, the noble Baroness, Lady Meacher, and my noble friend Lady Lister. From the Minister’s response it seems that this is all about a better future for everyone, and that seems to encompass a rather strange load of decisions. My noble friend Lady Lister asked a question which I do not believe was answered. She raised the comparison with pensioners who are being protected—and we support that because they are not so readily in a position to make up their

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income by accessing the labour market. However, people are in the support group because they are not expected to be able to be in, or are some distance from, the labour market.

In respect of the WRAG, I think that the Government are generally drawing closer together the JSA group and the WRAG to blur that distinction. People in the WRAG were not expected to look for work. Yes, they were expected to be fit and were deemed to be fit for work-related activity, but there is a constant push by the Government to blur that distinction and ease them much more towards the JSA category, if that job is not being done, in any event, by the WCA and Atos.

The noble Lord, Lord German, asked whether this is a rough edge. It seems to me that it clearly is a rough edge—it has not been overlooked, and it is not being dealt with in any other way. It is a hit that people in the support group and the WRAG have got to take. It seems to me that this is incredibly mean-spirited. It just focuses on the support group—the people who are in the most difficult position and not able to access employment. The noble Baroness said that 65% of them were on DLA and acknowledged that DLA is outwith the Bill. What is the Minister’s understanding of the percentage of people in the support group who will end up on PIP rather than DLA?

In Amendment 3, the noble Lord, Lord Low, makes a broader case for removing ESA from the scope of the 1% restriction on uprating for those who are in the WRAG. It obviously goes further than our Amendment 2. We have made clear that the 1% uprating restriction should be removed in its entirety from all the relevant sums and amounts as defined, and we are grateful for the support of the noble Lord in that endeavour. If we are successful, the noble Lord’s amendment, and several others including our own, would fall by the wayside. Should we be unsuccessful we need to consider how we can at least move some way towards that objective.

As we have just discussed, we focused in our Amendment 2 on those in the support group. We did that because those affected are the most seriously disadvantaged—the furthest from the labour market—and because the Minister has made a commitment that this group would be protected. That commitment clearly is not being met. The noble Lord’s proposal that we should go further, beyond the support group, is entirely reasonable. Those in the WRAG are similarly judged under the WCA as not being fit for work although capable of work-related activity. But for those who seek work, we know that the prospects are not good. Not only do we have a work programme which is failing overall but there is at least anecdotal evidence to suggest that the hardest to help are not being properly supported. We have the shutting of Remploy factories, concerns over the looming bedroom tax, the restrictions on contributory ESA and the loss of the severe disability premium in universal credit. These have all added to the pressure on disabled people.

As the noble Lord, Lord Low, has said, the Bill will mean that people in the WRAG will be some £191 a year worse off by 2015. If we cannot carry the day on removing the 1% restriction across the board, we

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would look to support the noble Lord should he decide to pursue his line on Report. I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

Amendment 3 not moved.

Amendment 4

Moved by The Lord Bishop of Leicester

4: Clause 1, page 1, line 5, at end insert—

“(1A) The Secretary of State must, in each of the tax years ending with 5 April 2014 and 5 April 2015, make an order by statutory instrument increasing each of the relevant sums by no less than the general level of prices over the period under review and for the meaning of the “relevant sums” see paragraph 3 of the Schedule.”

The Lord Bishop of Leicester: 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.