Many of the new jobs created under the coalition have been low-skilled, low-paid, and insecure. (Photo:Getty)
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Low wages and high prices, not laziness, are driving up the social security bill

Low wages and rising prices are pushing up the cost of in-work benefits. Labour will raise wages and keep the cost of social security down.

Britain needs a responsible and fair social security system that works for working people. One that rewards contribution, and protects those who cannot work or cannot earn enough to support themselves and their families. To deliver those aims, our system needs to be affordable.

But under David Cameron, low pay and high housing costs are pushing up the welfare bill, meaning that despite changes such as the cruel and unfair Bedroom Tax, the Tories have spent £25 billion more than planned over this parliament.

Housing Benefit makes up the second largest area of social security spending after pensions. Under the Tories, spending has risen over the parliament to reach £24 billion this year, a rise of £1.5 billion on 2010.

A toxic combination of low pay, a crisis in housebuilding, and rising rents plays a key part in explaining this rise, with the number of people forced to rely on housing benefit to pay the rent rising by over 440,000 since 2010 – clear evidence of the Tories’ failing plan.

And because of the mismanagement of the benefits system under Iain Duncan Smith, there’s also been a surge in housing benefit overpayments due to fraud and error, adding an extra £470 million to welfare spending. Overpayments now represent six per cent of total spending on housing benefit, the highest level since records began.

This can’t go on. As Ed Balls has said, will need to make tough choices to get the deficit down. Today, in our interim Zero-Based Review of the Department for Work and Pensions spending, Labour is setting out a plan to control the housing benefit bill and ensure that we can deliver a sustainable social security system.

We have listened to the independent Work and Pensions select committee and will consult on how to use data from credit reference agencies and the payments industry to make sure the information provided by people claiming housing benefit is correct.

And we will give councils back the fraud investigation powers that this government wants to take away. Just bringing error and fraud levels down to the levels seen under the last Labour Government would save the taxpayer £1 billion over the next five years, and we will set a target to save at least that amount

Labour will also take action to bring down the high cost of rents – which is pushing up the housing benefit bill – by building at least 200,000 more homes a year by 2020, and introducing stable tenancies with predictable rent rises.

At the same time we will tackle low pay which is forcing more and more working people to rely on housing benefit because they can’t afford to pay the rent. A Labour government will raise the minimum wage to at least £8 an hour by 2020 and giving tax rebates to firms who pay their staff a Living Wage so they can pay the rent.

We will deal with the rising costs of temporary accommodation and turn around a system that is trapping thousands of families in, poor quality hostels and B&Bs, while costs continue to rise. And we will reward councils that negotiate lower rents with landlords, by letting them keep these savings so that they can build more affordable homes.

Labour has a better plan to ensure we have a social security system that is fair and affordable, and that works for working people. 

Rachel Reeves is shadow Secretary of State for Work and Pensions. Chris Leslie is shadow Chief Secretary to the Treasury.

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Debunking Boris Johnson's claim that energy bills will be lower if we leave the EU

Why the Brexiteers' energy policy is less power to the people and more electric shock.

Boris Johnson and Michael Gove have promised that they will end VAT on domestic energy bills if the country votes to leave in the EU referendum. This would save Britain £2bn, or "over £60" per household, they claimed in The Sun this morning.

They are right that this is not something that could be done without leaving the Union. But is such a promise responsible? Might Brexit in fact cost us much more in increased energy bills than an end to VAT could ever hope to save? Quite probably.

Let’s do the maths...

In 2014, the latest year for which figures are available, the UK imported 46 per cent of our total energy supply. Over 20 other countries helped us keep our lights on, from Russian coal to Norwegian gas. And according to Energy Secretary Amber Rudd, this trend is only set to continue (regardless of the potential for domestic fracking), thanks to our declining reserves of North Sea gas and oil.


Click to enlarge.

The reliance on imports makes the UK highly vulnerable to fluctuations in the value of the pound: the lower its value, the more we have to pay for anything we import. This is a situation that could spell disaster in the case of a Brexit, with the Treasury estimating that a vote to leave could cause the pound to fall by 12 per cent.

So what does this mean for our energy bills? According to December’s figures from the Office of National Statistics, the average UK household spends £25.80 a week on gas, electricity and other fuels, which adds up to £35.7bn a year across the UK. And if roughly 45 per cent (£16.4bn) of that amount is based on imports, then a devaluation of the pound could cause their cost to rise 12 per cent – to £18.4bn.

This would represent a 5.6 per cent increase in our total spending on domestic energy, bringing the annual cost up to £37.7bn, and resulting in a £75 a year rise per average household. That’s £11 more than the Brexiteers have promised removing VAT would reduce bills by. 

This is a rough estimate – and adjustments would have to be made to account for the varying exchange rates of the countries we trade with, as well as the proportion of the energy imports that are allocated to domestic use – but it makes a start at holding Johnson and Gove’s latest figures to account.

Here are five other ways in which leaving the EU could risk soaring energy prices:

We would have less control over EU energy policy

A new report from Chatham House argues that the deeply integrated nature of the UK’s energy system means that we couldn’t simply switch-off the  relationship with the EU. “It would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks,” they argue. “A degree of continued adherence to EU market, environmental and governance rules would be inevitable.”

Exclusion from Europe’s Internal Energy Market could have a long-term negative impact

Secretary of State for Energy and Climate Change Amber Rudd said that a Brexit was likely to produce an “electric shock” for UK energy customers – with costs spiralling upwards “by at least half a billion pounds a year”. This claim was based on Vivid Economic’s report for the National Grid, which warned that if Britain was excluded from the IEM, the potential impact “could be up to £500m per year by the early 2020s”.

Brexit could make our energy supply less secure

Rudd has also stressed  the risks to energy security that a vote to Leave could entail. In a speech made last Thursday, she pointed her finger particularly in the direction of Vladamir Putin and his ability to bloc gas supplies to the UK: “As a bloc of 500 million people we have the power to force Putin’s hand. We can coordinate our response to a crisis.”

It could also choke investment into British energy infrastructure

£45bn was invested in Britain’s energy system from elsewhere in the EU in 2014. But the German industrial conglomerate Siemens, who makes hundreds of the turbines used the UK’s offshore windfarms, has warned that Brexit “could make the UK a less attractive place to do business”.

Petrol costs would also rise

The AA has warned that leaving the EU could cause petrol prices to rise by as much 19p a litre. That’s an extra £10 every time you fill up the family car. More cautious estimates, such as that from the RAC, still see pump prices rising by £2 per tank.

The EU is an invaluable ally in the fight against Climate Change

At a speech at a solar farm in Lincolnshire last Friday, Jeremy Corbyn argued that the need for co-orinated energy policy is now greater than ever “Climate change is one of the greatest fights of our generation and, at a time when the Government has scrapped funding for green projects, it is vital that we remain in the EU so we can keep accessing valuable funding streams to protect our environment.”

Corbyn’s statement builds upon those made by Green Party MEP, Keith Taylor, whose consultations with research groups have stressed the importance of maintaining the EU’s energy efficiency directive: “Outside the EU, the government’s zeal for deregulation will put a kibosh on the progress made on energy efficiency in Britain.”

India Bourke is the New Statesman's editorial assistant.