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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The trouble with a second Brexit referendum

A new vote risks coming too soon for Remainers. But there is an alternative. 

In any given week, a senior political figure will call for a second Brexit referendum (the most recent being David Miliband). It's not hard to see why. EU withdrawal risks proving an act of political and economic self-harm and Leave's victory was narrow (52-48). Had Remain won by a similar margin, the Brexiteers would have immediately demanded a re-run. 

But the obstacles to another vote are significant. Though only 52 per cent backed Brexit, a far larger number (c. 65 per cent) believe the result should be respected. No major party currently supports a second referendum and time is short.

Even if Remainers succeed in securing a vote, it risks being lost. As Theresa May learned to her cost, electorates have a habit of punishing those who force them to polls. "It would simply be too risky," a senior Labour MP told me, citing one definition of insanity: doing the same thing and expecting a different result. Were a second referendum lost, any hope of blocking Brexit, or even softening it, would be ended. 

The vote, as some Remainers note, would also come at the wrong moment. By 2018/19, the UK will, at best, have finalised its divorce terms. A new trade agreement with the EU will take far longer to conclude. Thus, the Brexiteers would be free to paint a false picture of the UK's future relationship. "It would be another half-baked, ill-informed campaign," a Labour MP told me. 

For this reason, as I write in my column this week, an increasing number of Remainers are attracted to an alternative strategy. After a lengthy transition, they argue, voters should be offered a choice between a new EU trade deal and re-entry under Article 49 of the Lisbon Treaty. By the mid-2020s, Remainers calculate, the risks of Brexit will be clearer and the original referendum will be a distant memory. The proviso, they add, is that the EU would have to allow the UK re-entry on its existing membership terms (rather than ending its opt-outs from the euro and the border-free Schengen Area). 

Rather than publicly proposing this plan, MPs are wisely keeping their counsel. As they know, those who hope to overturn the Brexit result must first be seen to respect it. 

George Eaton is political editor of the New Statesman.