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 can London’s mothers escape the poverty trap?

Despite its booming jobs market, London’s poverty rate is high. What can be done about it?

Why are mothers in London less likely to work than their counterparts across the country, and how can we ensure that having more parents in jobs brings the capital’s high child poverty rates down?

The answers to these two questions, examined in a new CPAG report on parental employment in the capital, may become increasingly nationally significant as policymakers look to ensure jobs growth doesn’t stall and that a job becomes a more much reliable route out of poverty than it is currently – 64 per cent of poor children live in working families.

The choice any parent makes when balancing work and family life is deeply personal.  It’s a choice driven by a wide range of factors but principally by what parents, with their unique viewpoint, regard as best for their families. The man in Whitehall doesn’t know best.

But the personal is also political. Every one of these personal choices is shaped, limited or encouraged by an external context.   Are there suitable jobs out there? Is there childcare available that is affordable and will work for their child(ren)? And what will be the financial gains from working?

In London, 40 per cent of mothers in couples are not working. In the rest of the country, the figure is much lower – 27 per cent. While employment rates amongst lone parents in London have significantly increased in recent years, the proportion of mothers in couples out of work remains stuck at about 12 percentage points higher than the rest of the UK.

The benefits system has played a part in increasing London’s lone parent employment rate. More and more lone parents are expected to seek work. In 2008, there was no obligation on single parents to start looking for work until their youngest child turned 16. Now they need to start looking when their youngest is five (the Welfare Reform and Work Bill would reduce this down to three). But the more stringent “conditionality” regime, while significant, doesn’t wholly explain the higher employment rate. For example, we know more lone parents with much younger children have also moved into jobs.  It also raises the question of what sacrifices families have had to make to meet the new conditionality.  

Mothers in couples in London, who are not mandated to work, have not entered work to the same level as lone parents. So, what is it about the context in London that makes it less likely for mothers in couples to work? Here are four reasons highlighted in our report for policymakers to consider:

1. The higher cost of working in London is likely to play a significant role in this. London parents are much less likely to be able to call on informal (cheaper or free) childcare from family and friends than other parts in the country: only one in nine children in London receives informal childcare compared to an average of one in three for England. And London childcare costs for under 5s dwarf those in the rest of the country, so for many parents support available through tax credits is inadequate.

2. Add to this high housing and transport costs, and parents are left facing a toxic combination of high costs that can mean they see less financial rewards from their work than parents in other parts of the country.

3. Effective employment support can enable parents to enter work, particularly those who might have taken a break from employment while raising children. But whilst workless lone parents and workless couples are be able to access statutory employment support, if you have a working partner, but don’t work yourself, or if you are working on a low wage and want to progress, there is no statutory support available.

4. The nature of the jobs market in London may also be locking mums out. The number of part time jobs in the capital is increasing, but these jobs don’t attract the same London premium as full time work.  That may be partly why London mums who work are more likely to work full time than working mums in other parts of the country. But this leaves London families facing even higher childcare costs.

Parental employment is a thorny issue. Parenting is a 24-hour job in itself which must be balanced with any additional employment and parents’ individual choices should be at the forefront of this debate. Policy must focus on creating the context that enables parents to make positive choices about employment. That means being able to access the right support to help with looking for work, creating a jobs market that works for families, and childcare options that support child development and enable parents to see financial gains from working.

When it comes to helping parents move into jobs they can raise a family on, getting it right for London, may also go a long way to getting it right for the rest of the country.