How MPs are trying to protect the poor from Osborne's welfare cuts

Lib Dem rebels table amendment to Welfare Uprating Bill calling for benefits to increase in line with average earnings, rather than Osborne's 1 per cent.

The coalition's Welfare Benefits Uprating Bill, which will enshrine in law George Osborne's plan to cap benefit increases at 1 per cent for the next three years (a real-terms cut), returns to the Commons today for its report stage and third reading.

Earlier this month, when MPs voted on the bill for the first time, I gave four reasons why it deserved to be defeated: it will force even more of the poorest families to choose between heating and eating; it will damage the economy by reducing real incomes; low wages aren't a reason to cut benefits (contrary to the government's claims) and there are fairer ways to reduce the deficit.

In view of such objections, opposition MPs have tabled a large number of amendments to the bill to protect the poorest. Here's a summary of the key proposals.

Labour: cancel 1% rise and offer a jobs guarantee to the long-term unemployed

Labour has called for the reference to a "1% rise" to be removed from the bill, suggesting that it believes benefits should continue to be increased in line with the Consumer Price Index.

In addition, reflecting its argument that the best way to reduce the benefits bill is to increase employment, it has called for the government to introduce a jobs guarantee for the long-term unemployed. The amendment reads:

This Act will not come into force until a guarantee has been introduced that anyone who has been in receipt of jobseeker's allowance for two years will be offered a job suitable to their circumstances paying at least the rate of national minimum wage for 25 hours per week together with job-search support.

Highlighting the coalition's decision to cut the top rate of income tax from 50p to 45p this April, a move worth an average of £107,500 a year to the UK's 8,000 income-millionaires, Labour has also tabled an amendment stating that "This Act will not come into force if, on or before 6 April 2013, the highest rate of income tax is reduced from 50%."

Lib Dem rebels: increase benefits in line with earnings

Six Lib Dem MPs, including Charles Kennedy and Andrew George (both of whom abstained at second reading) have tabled an amendment calling for benefits to increase in line with earnings, rather than 1 per cent. Since average earnings are forecast by the Office for Budget Responsiblity to rise by 2.2 per cent this year, 2.8 per cent in 2014 and 3.7 per cent in 2015 this would shield the incomes of the poorest from inflation, which is expected to increase at a slower rate than earnings from 2014.

It's also a neat way of skewering the government's complaint that benefits will increase by more than wages this year.

Green Party, SNP and Plaid Cymru: increase benefits in line with RPI inflation

Caroline Lucas, Hywel Williams (Plaid Cymru) and Dr Eilidh Whiteford (SNP) have signed an amendment calling for benefits to rise in line with the Retail Price Index (RPI), rather than 1 per cent. After Margaret Thatcher's government broke the link between benefits and earnings in 1980, welfare payments were calculated using this measure. But in his "emergency Budget" in June 2010, Osborne announced that benefits would instead be increased in line with the Consumer Price Index, rather than the (generally higher) RPI (see James Plunkett's Staggers blog on the coalition's "£11bn stealth cut"), a move that will cost the poor hundreds of pounds by the end of the spending period.

Based on the OBR's forecasts for RPI, benefits would rise by around 3 per cent this year, 2.6 per cent next year and 3.1 per cent in 2015 under this proposal. But since earnings are expected to outstrip inflation from 2014, a more progressive option would be to stipulate that, depending on which is highest, benefits will either increase in line with RPI or average earnings.

Update: Caroline Lucas has been in touch to say that she agrees that benefits should either rise in line with earnings or inflation, depending on which is higher. She added: "Essentially was trying to table amdt which Lab might have supported (ie RPI) - but ideally earnings shd be there too".

George Osborne leaves 11 Downing Street on January 7, 2013 in London, England. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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