Second Reading

Before I call the Secretary of State to move the Second Reading debate, I inform the House that the amendment has been selected.

I beg to move, That the Bill be now read a Second time.

The Bill, which stands in my name and that of my right hon. and hon. Friends, is about the renewal of what I believe is a principled welfare state based on affordability, integrity and fairness. For the convenience of the House, let me explain that I intend briefly to run through the features of the Bill, and I will then open up the debate to take interventions and deal with the amendment.

This Government inherited from the previous Government an unsustainable and costly system, and a welfare state that I believe delivered poor social outcomes, trapping people in dependency, as well as a poor deal for Britain’s taxpayers. My opposite number, Mr Byrne, needs no reminder of that as it was he who, when we arrived in government, told us that there was no money left. That was the result of a recession that was later discovered by the Office for Budget Responsibility to be deeper and sharper than anyone thought. The original estimate—

rose —

I will give way in a moment. I am in the business of having the right hon. Gentleman justify his own position so I will be happy to give him a chance, but let me finish this point. The previous Government originally claimed that the shrinkage in the economy was 5.8%. In fact, as the OBR later pointed out, at 6.3% the shrinkage was deeper than we had ever seen before—the biggest shrinkage in the economy since world war two.

I am grateful to the Secretary of State for giving way so early in the debate. Will he confirm to the House that on his watch the welfare bill has risen nearly £14 billion higher than anticipated?

I am glad that the right hon. Gentleman raises that point because a huge part of that is spending on pensions. He will know that we are spending more on pensions and provide a better deal for pensioners than his Government ever did. Until this Bill, the Government continued to raise welfare payments in line with inflation; this is the first time that we propose not to do so. That will take effect through the uprating order that should be laid before Parliament later this month. The Bill provides that discretionary working age benefits and tax credits will be uprated by 1% for a further two years in the tax years 2014-15 and 2015-16, if prices have risen by at least 1%. The schedule to the Bill sets out the benefit payments and tax credits in question, which are listed in full in the explanatory memorandum. By providing for those changes in legislation, we can provide certainty for taxpayers, the markets and claimants.

A number of exceptions to the Bill are not included, and a number of benefits remain outside the scope of the Bill. We are maintaining our commitment to the triple lock so that the basic state pension will rise by 2.5%. In April 2013, pensioners will see an increase of £2.70 on last year—far more than the derisory 75p that Labour gave them in 2000—and I stress again that we introduced the triple lock to guarantee that. Crucially, we are also protecting disabled people and carers. Benefits to cover the added costs faced by these groups will continue to be linked to price inflation.

Several hon. Members:

rose —

I will give way in a moment. That includes carer’s allowance, disability living allowance, and new personal independence payments, as well as premiums paid to disabled people receiving working age benefits such as the disability additions in tax credits, and the support group component of employment and support allowance.

Several hon. Members:

rose—

Sheila Gilmore was first.

The Secretary of State has stated that benefits have been raised in line with inflation, but he did not say that tax credits— 2,000 people who are affected by the Bill are in work and receiving benefits such as tax credits—have not been increased for the past two years. In fact, they have been frozen.

It is interesting that the hon. Lady raises that point, because under the Labour Government, tax credits absolutely boomed. In 2005, there were increases of 58%. Overall, there were 340% increases in tax credits, 70% of which goes to child tax credits. The hon. Lady says that tax credits should continue to rise, but she can make that argument in due course.

Will the Secretary of State admit that the social security budget is going up on his watch because unemployment is rising faster than his colleague expected?

Never let a good fact get in the way of a good argument. Unemployment is falling, youth unemployment is falling, more women are in work than ever on her watch, and long-term unemployment is flattening out. The reality, therefore, is that we have better employment figures—there are 1 million new private sector jobs, which outweighs the public sector jobs we have had to get rid of. The reality is that the rate of unemployment, at 7.8%, is better than the EU average and better, almost for the first time, than the United States of America.

It is significant that the Secretary of State has just admitted for the first time that welfare spending on his watch is rising £14 billion higher than projected. Will he go a step further and confirm his understanding of the OBR figures that show that the claimant count is forecast to rise by a third of a million more than anticipated over the next few years? Will he admit that, yes or no?

I should remind the right hon. Gentleman that the claimant count was forecast to rise but has fallen throughout all those forecasts. I know it is inconvenient for the Opposition, who would rather unemployment rose than fell, but unemployment is falling. Many countries in Europe would give their eye teeth for the employment figures in this country.

On disabled people, paragraph 24 of the Secretary of State’s impact assessment, which has just been published, states:

“Nevertheless, despite this protection…those households where someone describes themselves as disabled, (under the DDA definition) some of whom will not be eligible for a disability benefit, are more likely to be affected than those where there is not a person” in that category.

There are two good reasons for that. First, families in which there is some disability are often more likely to include people who have claims on other benefits. Some of those will be affected by the change.

Will the right hon. Gentleman give way?

No. That is exactly the reasoning behind what the impact assessment says. The second reason is that, as part of employment and support allowance, the support group is protected. However, people who are described in the terms of the Bill as qualified under the Disability Discrimination Act 1995 and are not in the support group will find that they will be affected by the 1% increase. Therefore, by and large, the benefits for those who are disabled and qualified as disabled, and for those in receipt either of support payments in ESA, disability living allowance or the premiums in many other benefits, are being uprated in line with inflation—[ Interruption. ] May I finish? The only benefit that is not being uprated in line with inflation is ESA for those not in the work-related activity group. Some of those with disability will be affected because many in their households will be on other benefits. That is the reason.

rose —

I think I have dealt with that particular point and will move on—[Hon. Members: “No!”] All right, I will give way to the hon. Gentleman again.

I thank the Secretary of State for giving way, but I am not clear about what he has just said. Will he confirm his impact assessment, which states that

“despite this protection …those households where someone describes themselves as disabled, (under the DDA definition) some of whom will not be eligible for a disability benefit”— this is the crucial point—

“are more likely to be affected than those where there is not a person who describes themselves as disabled”?

Does he agree?

I have just told the hon. Gentleman that the reality is that someone in those households is more likely to be on benefits, but particularly ESA. Let me remind him and the Labour party that they introduced the changes to the work capability assessment and ESA. The Government inherited, modified and improved those measures, but they are part of the reason why that is in the impact assessment.

Will the Secretary of State give way?

No. I have dealt with the hon. Gentleman’s point. The truth is that the Labour party is not only against the Bill but against what the Labour Government introduced just before the last election and the work capability assessment. Labour Members have opposed £80 billion of changes and reductions in every single vote and every single motion. I have dealt with his point. They must decide what they are in favour of when it comes to reducing the deficit; otherwise, they will be a laughing stock.

Is not the bottom line that it is very difficult to justify 20% increases in benefits when earnings for hard-pressed families have gone up by only about 10%?

It is worth pointing out to my hon. Friend that, when the Opposition originally heard about the Bill, the shadow Chancellor and my opposite number—the shadow Secretary of State—entertained the idea that what was wrong with the Bill was that it was affected too many people who were in some kind of work through working tax credit. The speculation was that, somehow, they would be prepared to support, or not oppose, measures on those not receiving working tax credit. I notice that there is no mention of that position in the amendment, because they have been clobbered by their left and by the trade unions, their paymasters. Instead, there is a rag-bag amendment expressing opposition to a variety of things, which bears no relation to their previous position. There they go again, denying where they are.

The real question for the shadow Secretary of State and the shadow Chancellor, before they intervene again, is this: having opposed every single reduction to the deficit, what exactly would they do to cut it? They have not a single answer.

We have just heard that one justification for capping benefits at 1% is that, allegedly, benefits have risen significantly more than wages. In that case, would it not be wise for the Government to introduce a measure so that benefits do not increase by more than average wage inflation?

As I have said, the Bill is about trying to bring that fairness back into the welfare payments process. As my hon. Friend Charlie Elphicke has said, the reality is that in the period since the recession, payments for those in work have risen by about 10% and payments for those on benefits have risen by about 20%. We are trying to get a fair settlement back over the next few years. Eventually, benefits will go back on to inflation.

We do not know—the Secretary of State is probably more clairvoyant than I am—what food price inflation will be in, for example, 2016. We are being asked to predict what the circumstances will be in the context of the rather arbitrary figure of 1%. I simply urge my right hon. Friend to keep an open mind, and to have a means by which we will uprate that is fair to both benefit recipients and those in work.

I accept the point about fairness—that was my point—but the reality is that the Bill is also about getting the overall welfare bill down and in kilter. As I have said on the radio and again today, the key is that we must reduce the deficit—that is at the heart of the measure. The Liberal Democrats joined us in the coalition. I should remind the hon. Gentleman that the No. 1 priority we face is reducing the deficit that Labour left us—the biggest deficit on record of any Government since the second world war. That is the reality, but Labour Members are in denial, so I will move on.

The reality is that affordability—

Several hon. Members:

rose —

I will give way in a minute—I want to make progress and I have been quite reasonable in giving way.

First and foremost, under Labour public spending spiralled out of control—[ Interruption. ] Yes, it did. That left behind the UK’s largest ever peacetime deficit, and interest payments running at £120 million a day—[ Interruption. ] It is interesting that as soon as I speak about what Labour Members left behind, they go into denial. They try and shout me down because they do not like the sound of it. The reality is—

Several hon. Members:

rose —

I will give way in a minute. The reality is that the shadow Chancellor and the former Chief Secretary deny that they left a problem. It was a nightmare, and they should apologise and tell us what they would do to put it right.

I am grateful to the Secretary of State for giving way again: he is being typically generous. No doubt he, like me, will have looked at the DWP benefit expenditure tables, which show that spending on out-of-work benefits between 1996-97 and 2009-10 did not rise, but fell by £7.5 billion. That is why Lord Freud said that Labour’s record in getting people back to work was “remarkable” and noted that Labour had tackled the long-term dependency on unemployment benefits that it had inherited from the Tories in 1997.

I notice that the right hon. Gentleman is very careful to avoid telling the House how much Labour spent on tax credits as well. The important point that Labour Members need to realise is that of the total bill for tax credits, 70% had no involvement with work at all. Child tax credits had no work agreement on them whatever. The reality is that Labour spent

340% more on tax credits, 58% before the 2005 election and 29% before the last election, in the hope of buying votes to get it out of difficulty. The result was that the debt we had to pay off was costing us £30,000 every single minute. That is what we had to pay as a result of that expenditure—

Will the Secretary of State give way?

I am not giving way to the right hon. Gentleman again. I keep reminding him that he is the man who, when he left office, admitted that there was no more money left. He should apologise for that. Labour has opposed the £80 billion of savings that we have proposed. When he gets up again, he needs to tell the House what Labour would do to reduce the deficit and where it would find the savings. If he answers that question, I will give way to him.

My right hon. Friend the shadow Chancellor has set out far more about the difficult decisions that we would make than the Chancellor ever made. We have said that uprating of benefits should be slower; that there should be a two-year cap on contributory ESA; that there should be a reduction in disregards in tax credits; that there should be a benefit cap in different parts of the country; and that no one in this country should be allowed to live a life on welfare and languish for more than two years on JSA. The best way to bring the welfare bill down is to get people into work, not give them a failed Work programme.

I remind the right hon. Gentleman again that we are getting people into work. Unemployment is lower than it was when we took office, youth unemployment is lower and we are getting more people into work. He said that he was in favour of the cap. That is very interesting, because he voted against the cap. He says that he is in favour of a number of issues, but he voted against the Welfare Reform Act 2012. He is against universal credit and the housing benefit changes. He has not agreed to any of the changes that we have made.

The overall bill for welfare rose by 60% between 1997 and 2010—

Is not the philosophical underpinning of this debate our wish to create a hand-back society, not a hand-out society? Is not cutting taxes on lower earners the best way to help those on low earnings, rather than recycling their hard-earned money through the benefits system?

That is exactly the point. Labour Members think that helping people is about trapping more and more people in benefits. It is interesting that under the tax credits system, nine out of 10 families with children were eligible for tax credits, in some cases those with more than £70,000 in earnings. What a ridiculous nonsense they created.

Labour’s system was riddled with fraud and error. HMRC had to write off £4 billion in fraud and error payments and will probably have to write off another £4 billion, so £8 billion has been lost. This Bill is about finding savings of £1.9 billion, but as a result of tax credits Labour lost probably nearly £8 billion. That is the record of the last Government. They should apologise for the mess they left us in.

I appreciate the Secretary of State’s generosity in giving way.

I welcome the Secretary of State’s confirmation that pensions will not be detrimentally affected by the Bill. Can he confirm that in actual cash terms there will be an increase in benefits?

That is correct. That is exactly what this Bill sets out. That will also be the case this year.

I wish to take the Secretary of State back to the point made by my hon. Friend Derek Twigg about disabled people. We have now gone from the Secretary of State saying that there is a blanket protection for disabled people to him acknowledging in the impact assessment that some disabled people will be affected by these changes. Given that recognition in the impact assessment, can he tell the House how many disabled people his Department estimates will be affected by these changes?

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. All the disabled premiums in JSA and so on are also protected. I do not know where Labour Members think they are going with all these points, because the reality is that they are basically opposed to absolutely everything. They would spend more money, they would tax more and they would borrow more, and the people who would suffer would be the British people who would have to pick up the bill. That is the reality.

I was making an important point about fraud and error. In essence, more than £10 billion was lost, and we do not even know how much was overspent, because Labour would not collect the figures. Writing off those debts wastes taxpayers’ money. To put this in perspective, the Bill sets out what we are doing at the moment to raise £1.9 billion, but that money could have been raised without difficulty had Labour’s system been better and more efficient.

It is also worth pointing out that, for many of the people Labour Members talk about, universal credit will improve their income dramatically. I have some very good examples of that. Under universal credit, a typical one-earner couple who have two children and rent their home will be £61 better off—including the changes today. A one-earner family with an income of £20,000 and two children will see a net gain of at least £34 a week. That will be a big boost for them and was not taken into consideration in the IFS figures.

The reality is that there is an issue about fairness, which we touched on just now. We should bear in mind that 70% of all households will not be affected by this legislation. Many of our constituents are taxpayers picking up the bill for all these costs, including the deficit and borrowing that the last Government left us. Over the last five years, following the recession, the gap has grown between what people in employment have been earning and what those on welfare have been getting. Those in work have seen their incomes rise half as quickly as those on out-of-work benefits—10% compared with 20%. That is not fair to taxpayers. Returning fairness to the system is critical, and it is one area that Labour refuses to acknowledge. Under the previous Government, taxes rose, borrowing rose and the deficit rose—and they left those bills for the next generation to pay. It is our job to get that under control. These are not decisions taken lightly or easily, but we have to take them and they are in denial.

The shadow Chancellor likes to sound off from a sedentary position. He likes to give it out but does not like to take it. I remember only a few weeks ago that he went around the studios complaining that we were too mean to him. If he does not like it, then he should stop making sedentary interventions.

Will the Secretary of State confirm that inflation can be particularly tough on people on low incomes who face small increases? Will he reassure people in the country that the Government and the future Governor of the Bank of England will be dedicated to getting inflation down, so that the value of benefits is not eroded more?

Exactly. Mortgage rates are a critical component of what a household spends each year. Under Opposition plans, if interest rates had to rise because of their messy borrowing and spending, every 1% would cost another £1,000 on a typical mortgage. What have also done as a coalition, which we should be proud of and on which our coalition partners were very keen, is raise the tax threshold. That is taking more than 2 million people out of tax—people who were paying tax under the previous Government. That is serious help and an improvement of £165 a week for the average family.

I want to ask the Secretary of State about the people who are moving into low-paid work. Of the increase in employment in the past year, only 20% has been for full-time work, and so 80% has been for people who are by definition in part-time, and therefore probably low-paid, work. How will they benefit when he is capping the in-work benefits increase by just 1%?

I will make two points to the hon. Lady. First, the vast majority of people who take part-time work choose to take part-time work. In all the studies we have—I am happy to let her have them; they are in the public domain—only 17% or 18% say that they did not want a part-time job, and wanted a full-time job, so she should not decry those who take part-time work. My second point is that that is why we are bringing in universal credit. Universal credit is about in-work and will be a huge support to those in part-time work, starting this year. The trouble with the tax credit system, which the Opposition are defending despite the fraud, the over-payments and the massive error, is that it lodged people into little silos where they could not move up, out of those hours. If a job moved from 16 hours to 17 or 18 hours, people did not do it because they could not afford to do it. Large numbers of lone parents, as she knows only too well, would rotate out of that and crash back out of work, because the job moved on and they could not stay with it.

The reality is that we are reforming the welfare system to make it better and easier for people who are in part-time work to have improved incomes. That is a part of this overall welfare programme that will deliver an efficient and even-handed system. It is right that the 1% applies across the board, including the tax credit system. As I said earlier about the overall numbers of people affected, of those working households, 20% of all households are affected by the Bill. If tax credits and child benefits were excluded, as the Opposition have prescribed, we would see a requirement to find a further £1.5 billion—yet another amount of money which they cannot say how it would be found. When in denial, like those on the other side of the House, one just votes against everything. A constructive Opposition would give us a proposal on how they would save that money.

The Secretary of State has used the word “denial” twice. In previous Budgets and autumn statements, the Government talked about and acknowledged measured child poverty. However, in the most recent autumn statement and in the Bill, there is no mention of child poverty. Will he admit that under these plans child poverty in our country will go up and that that will come at a cost to us all?

I will say two things about child poverty. First, we want to ensure that the figures published concern the years that this measure covers, and the year in which I will be introducing secondary legislation. The figures will be published next week in time for the debate—the Committee stage will be on the Floor of the House and everybody who is here today can take part.

Secondly, child poverty was calculated based on the median income line, and the previous Government lost control of it. Tax credits rocketed because they were chasing a moving line. As upper incomes rose, so did average earnings, and that is why they had to spend so much money. I remind the hon. Lady that they missed their targets in 2010 by 600,000 children in poverty. Since we have come in, the figures published this June show that child poverty fell by 300,000. I am not going to stand here today and try to claim credit for that fall. The figure fell because we saw the biggest fall in earnings for many years. Does that mean that because earnings fell child poverty has been solved? No, it does not. That is why we are consulting on a better way to measure child poverty.

The Secretary of State brandishes the figure of a 20% increase in benefits in the past five years. In cash terms, jobseeker’s allowance has gone up from just £59.15 in 2007 to £71 in 2012. In other words, in each of those past years JSA has gone up by just £2.50. Is it not the truth that this is a mean and miserable piece of legislation from a mean and miserable Government?

I hear the hon. Lady’s point; I have to say that I do not agree with her. Benefits have risen, but if she would like to talk to those who are in employment on lower incomes in her constituency she would find that many have seen absolutely no rise in their incomes at all, and some even less than that.

On that point, I was approached by a member of Manchester constabulary in my advice surgery recently. He said, “How can you justify putting out-of-work benefits up by 5.2% last year, when I have had a pay freeze and I risk my life every day?” Is that not the nub of the argument? People who are in work have to be treated fairly.

I agree with my hon. Friend. I want to make some progress because he is absolutely right. The reality that Labour will not face up to is that the programme it has put forward is hugely costly.

I want to deal with the programme that Labour put forward in the past week, which I think is in the amendment before the House. I looked at it and it seemed very familiar. I remembered something, looking back over the past 10 years. I went back and had a look at the programme that the shadow Chancellor and his then boss, the then Labour Prime Minister Mr Brown came up with. [ Interruption. ] I seem to recall that they came up with a programme called StepUp. Ed Balls was an adviser at the time. [ Interruption. ] Well, he was certainly very close to him. Is he now denying—[ Interruption. ] Well, there we have it finally: he no longer wants to have the former Prime Minister as his friend. More than that, from his sedentary position, he will probably deny that, late in the hour while the then Prime Minister was troubled and in difficulty, he did not come by taxi or by car to consult him and help him out. A denial of a friend is pretty cheap, and I think we will remember that.

The reality is that the StepUp programme, on which the Opposition have clearly based this new programme, was piloted in 20 areas between 2002 and 2004. It was never rolled out nationally, and I want to quote from the evaluation report. The StepUp programme was all about giving paid employment to people who had been out of work for some two years. The report stated:

“StepUp produces a very modest improvement in job entries…but this is below the level of statistical significance.”

In fact, each of those jobs would have ended up costing £10,000—a massive cost for a very small regard. When they did it—[Interruption.] Wait a minute. When they did it—[Interruption.] They do not want to hear about it. They made a bogus announcement and now they do not want to hear how useless it is. The work prospects of under-25s in the pilot got worse as a result of this programme.

Here is what happened. The Opposition were in a hurry during the Christmas recess, worried about being attacked for having no proposals, so the shadow Chancellor said, “Oh, I remember something we did under the man who used to be my friend, but is no longer my friend. I remember we had this programme.” So they decided to put that out and propose raiding pensions savings yet again to pay for a bogus programme. If anyone thinks for one moment that it would help anybody at all, let me tell them that it is more than a joke—it is pathetic. And it is pathetic that they have done it to try to get themselves off the hook.

Has my right hon. Friend pondered this question? The Government are trying to ensure that the social security net works for people who need social security. When does he think that Labour decided that they were not interested in social security, only in bribing the electorate?

It is in its DNA, so I am not sure when it started, to be honest. The tax credit system was out of control, as I said earlier on, because Labour was chasing a figure it could never reach, and as a result its spending was enormous.

In conclusion—

rose —

No, I want to conclude. The right hon. Gentleman will have plenty of time to speak.

rose —

Okay, I will give way in a second.

I want to remind the Opposition of what they have done. They have opposed £83 billion-worth of savings this Parliament. That is equivalent to adding another £5,000 of debt for every working family in the country. We hear much about taxing the rich, yet, in this Parliament, the richest will pay more in tax than in any single year of the previous Government—more tax on capital gains, more stamp duty—they will be less able to avoid and evade tax and they will pay more when they take out their pension policies.

We hear much about the bankers’ bonus tax, but Labour would have spent that money 10 times over. This is its great bankers’ bonus tax of £2.3 billion. Let us think about it very carefully. It would have overspent that to the sum of £25 billion—through reversing the VAT increase, more capital spending, reversing tax credit savings and reversing the child benefit savings. We are talking huge sums of money.

The Secretary of State has the temerity to criticise proposals we launched on Friday, when he is presiding over a Work programme that is literally worse than doing nothing. He stands before the House justifying the position of his Government, which is that it is possible to spend a life on welfare, but we say that is wrong. The way to bring welfare spending down is to get people into jobs, and when there are no jobs we invest in creating them.

Our record on getting people into jobs is better than theirs. The difference is that Labour spent taxpayers’ money like drunks on a Friday night, with no care or concern for how effective it was. The work experience programme achieves what the future jobs fund did, but at a fraction of the cost. The Work programme is getting more people into work than the flexible new deal programme.

rose —

No, I will not give way to the hon. Gentleman. I think he has a few apologies to make before I give way.

This was Labour’s legacy in government: 5 million on out-of-work benefits, one in five households with nobody working and 2 million children living in workless families—a higher proportion than in any other EU country. In opposition, they have learned nothing. Today’s amendment shows—if Members can be bothered to get to the end of it without falling asleep—that Labour would spend more, tax more and borrow more and let the next generation pick up the bill. The Bill is about picking up the pieces, sorting out the deficit and being a responsible Government.

I beg to move,

That this House
declines to give a Second Reading to the Welfare Benefits Uprating Bill because it fails to address the reasons why the cost of benefits is exceeding the Government’s plans;
notes that the Resolution Foundation has calculated that 68 per cent of households affected by these measures are in work and that figures from the Institute for Fiscal Studies show that all the measures announced in the Autumn Statement, including those in the Bill, will mean a single-earner family with children on average will be £534 worse off by 2015; further notes that the Bill does not include anything to remedy the deficiencies in the Government’s work programme or the slipped timetable for universal credit;
believes that a comprehensive plan to reduce the benefits bill must include measures to create economic growth and help the 129,400 adults over the age of 25 out of work for 24 months or more, but that the Bill does not do so;
further believes that the Bill should introduce a compulsory jobs guarantee, which would give long-term unemployed adults a job they would have to take up or lose benefits, funded by limiting tax relief on pension contributions for people earning over £150,000 to 20 per cent;
and further believes that the proposals in the Bill are unfair when the additional rate of income tax is being reduced, which will result in those earning over a million pounds per year receiving an average tax cut of over £100,000 a year.

It is good to see the Secretary of State fronting the Bill today and to see the Economic Secretary to the Treasury in his place. Where, however, is the Chancellor? It is a disgrace that he is not here in person. Where is he?

The Chancellor told me earlier he was in Berlin making a speech—a long-term commitment —but he will be back in plenty of time for the winding-up speeches, and he is looking forward to hearing Labour make as much of a mess of it at the end as at the beginning.

I think it is surprising that the Chancellor is talking to people in Germany, rather than to MPs in the House about the disastrous consequences of his policies.

We know that the Chancellor and the Secretary of State do not see eye to eye on much, but they are jointly and severally liable for the mess and the haemorrhaging of the welfare budget that the Bill seeks to staunch. The Chancellor’s disappearance is a hallmark of the contempt that has been shown for the House today. The impact assessment for the Bill was published at noon. It makes radically different assumptions from the policy costings set out by the Chancellor last year. And now the Government propose to ram the Bill through the House in just one day of debate. They are terrified of scrutiny and exposure. It is turning into a hit and run on working families, and frankly we should not stand for it.

The Chancellor should have shown up, because the Bill is about clearing up the consequences of his failure. His reputation as a maker of recessions is now pretty well established. Every time he has come to the House, he has been forced to downgrade growth yet again, and since he took office he has battered the life out of the recovery that Labour left him in 2010. He is the first Chancellor for 35 years to preside over a double-dip recession. History will not judge him well.

But the Chancellor has a partner in crime: the Secretary of State, the man who has become the Comical Ali of the Government, the only man in the DWP who thinks that everything is fine and hunky-dory—a man who would put Dr Pangloss to shame. Every time he comes to the House, he comes with words of reassurance: everything on his watch is going according to plan. He blithely assures us that the Work programme is fine. We are told that universal credit is completely and utterly on track—not a hiccup to be heard—and that the benefit cap will definitely start in May. The only problem is that he is living in a fantasy land of his own, because everything is not okay, everything is not on time and everything is certainly not on budget. We were promised a Work programme bigger than any yet know to man. So big it could be seen from space. This is a programme that is so effective it is literally worse than doing nothing. It works so well that just three out of 100 people who passed through it passed into sustained jobs. It is a disaster.

Then, of course, we have universal credit—a policy that is now proceeding so smoothly that, it is fair to say, it has earned widespread support and praise from right the way across Government. Members of the Cabinet—perhaps even those sharing a building with the Economic Secretary—are now so impressed that they are telling anyone who will listen at the Daily Mail and elsewhere that it is a “disaster waiting to happen” and that the IT is “nowhere near ready.” The Secretary of State has so much grip on this project that the Prime Minister himself invited him to pack his bags and clear on out of the Department—a vote of confidence that I know rang around Caxton house, because senior officials are now leaving the Department as fast as they can.

Now, of course, we have the news that the benefit cap—which Lord Freud told the other place would absolutely, definitely, without question be introduced nationwide in April—will be introduced in just four London boroughs. This is a record of chaos, delay and impending disaster, and today the Government are inviting millions of working families in this country to pay to clean it up.

I thank the right hon. Gentleman for giving way. I am sorry to drag him back to the Bill, but what would he say to the police officer in my constituency—the right hon. Gentleman heard my earlier intervention—who said, “Is it fair that people out of work have seen their benefits go up by 5.2% when my salary’s been frozen and I risk my life every day to keep people safe in this country?”? That is what this Bill is about; will the right hon. Gentleman please answer that question?

I want incomes to rise faster than benefits. That is why I think it was wrong that the hon. Gentleman voted for a three-year freeze in tax credits, which has hit 7,700 of his constituents. He must answer to them after today’s debate. Why is he supporting a huge tax cut for millionaires when 7,500 people in his constituency are seeing a freeze on their tax credits and a squeeze on them in the years to come?

To respond to the issues raised by Government Members, I point out that a lady on £72 a week in jobseeker’s allowance came to my surgery on Friday. She is being expected to pay £9.60 because of a loss of housing benefit because of the imposition of the bedroom tax. What do Government Members have to say to her?

Once upon a time—back in 2004 and 2005—when the Secretary of State was making speeches about poverty, he said that the way to judge the Conservative party was on how its policies worked for the poorest communities in the country. What many people will be asking after today’s debate is: what happened to that man?

The right hon. Gentleman is perhaps not willing to address the issues put to him by Government Members, but I wonder whether he will address the question raised by a former Cabinet colleague of his, Jacqui Smith, who said earlier this week that Labour canvassers

“who’ve knocked on doors recently” have

“been told the problem for Labour is…they think we caused the deficit and they’re not…convinced we know how we’ll solve it.”

How would he respond to her?

I spoke to the former right honourable Member for Redditch yesterday and I set out—[ Interruption. ] Absolutely. I set out the substance of today’s debate and said that we have a choice between the Tory way and the Labour way to bring down welfare spending. The Tory way is to hit working families; the Labour way is to help people work.

I share the concern about the Bill’s impact on public service workers. Has my right hon. Friend seen—I am sure he has—the research published over the weekend by the Children’s Society? It shows that 40,000 soldiers will see their household incomes cut if the Bill goes through, along with 300,000 nurses, 150,000 primary school teachers and 9,300 of my constituents, which is why I will be voting against it today.

My hon. Friend is already speaking very eloquently in the House. Some 40,000 soldiers, 300,000 nurses and 150,000 primary and nursery school teachers will be hit by this Bill. I suggest to the House that they are making a much bigger contribution to the health and well-being of this country than the Chancellor of the Exchequer, who is accusing them of being the people whose blinds are closed in the morning.

We have seen the failure of the Work programme. In my constituency, unemployment is now 10% higher than a year ago. One person in the area telephoned BBC Tees this morning and said that he had £130 a week for himself, his wife and three children. He cannot get a job and all he has to look forward to is an increase of £1.30—enough to buy a loaf of bread. Does my right hon. Friend agree that we need to show compassion to such families, rather than giving millionaire earners a tax break of £2,000 a week?

What we need from this Government is the right combination of compassion and competence, and right now we see neither.

We were told that this Bill was about fairness. How can it be a fair when a young mother in my constituency on jobseeker’s allowance is expected to live on £56.24 a week? She will lose £12 a week through the empty room tax and £9 a week in council tax. That leaves her with £35 a week to pay for heating, water and food. How is she going to survive? How can that be fair?

My hon. Friend is exactly right. What her constituents need is a job, but what they are not getting from the failed Work programme is any prospect at all of work.

On inflation uprating, which is at the heart of this Bill, there is a widespread belief that housing benefit for private rented accommodation will rise in April by CPI. The Department has done little to dispel that understanding, but in Rotherham, as my right hon. Friend might be aware, the rate for a three-bedroom home is set to be cut by 3% in cash terms. Is not this, like the Bill, another harsh, half-hidden cut to the help that those in work and those out of work need to meet the cost of household bills?

My right hon. Friend is absolutely right. He is also right that the Department’s incompetence in proceeding with some of these reforms means that many of the changes risk costing more than they save. That is why Ministers have been forced to delay implementation of the benefit cap, about which they made such a fuss last year. Now we see that it will be implemented in just four London boroughs, because the Government do not know how it will work in practice.

Does the right hon. Gentleman think it right and fair that benefits should have gone up by 20% at the same time that average earnings have gone up just by 10%?

I repeat: there are 6,800 people in the hon. Gentleman’s constituency on tax credits—we have rehearsed these figures before, because he is an assiduous attender of social security debates. I want incomes to go up faster than benefits. That is why it is so important that tax credits are protected. He has to accept that he has voted for a freeze in tax credits for the 6,800 of his constituents who enjoy them. Today he is proposing to vote for a further squeeze, at a time when millionaires are being given a tax cut. I just do not understand how he will justify that to the good residents of Dover.

The right hon. Gentleman refers to 6,700 people in the constituency of my hon. Friend Charlie Elphicke. While he is bandying statistics around, he might be interested to know that there are 38,000 people in work who have benefited from the increase in the tax threshold. The way to raise incomes is not to have inflation of state support but to get people back into work where they can keep more of their own income.

The hon. Gentleman knows as well as I do—he is a numerate man and he understands the figures involved in this debate—that the personal allowance does not compensate for the whack that has been delivered to most working families in this country. The House of Commons Library says they will be £280 a year poorer by next year and the Institute for Fiscal Studies says they will be £534 poorer by 2015-16. He has to get real about the impact of his Government’s policies, because they are hurting 7,000 of his constituents.

I am grateful to the right hon. Gentleman for giving way again. However difficult these decisions are, if we look more closely at the numbers, we see that he is not highlighting the fact that people earning £50,000 or £60,000—which most people would consider a good income—are included in his figures for tax credits. That is disingenuous and merely a reflection of the trap and the legacy of the shadow Chancellor’s former friend, Mr Brown.

That is complete nonsense. This Government are taking £14 billion out of tax credits and the Bill proposes to take another £4 billion. That will hurt 7,000 of the hon. Gentleman’s constituents, at a time when millionaires are being given a tax cut. I simply do not understand how he can justify that, either in this House or on the streets of Enfield.

Several hon. Members:

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I am going to make a tiny bit of progress once I have given way to my hon. Friend Ian Lucas.

I am grateful to my right hon. Friend. What Government Members do not seem to understand is that the whole rationale for this Bill is the need to address their failure to deliver on the economic promises they made when they first came into government. The Bill is necessary only because the Government have failed economically.

My hon. Friend is absolutely right. When the Chancellor came to the House back in December, he was forced to admit that somehow, for some reason, growth had eluded him once again—it had got away. He brought forward a package of measures that was so focused on generating jobs that the Office for Budget Responsibility looked at it and revised the claimant count for the forecast period, not down but up by 300,000. The OBR also spelled out how much this was going to cost us: it is an eye-watering figure. The heroic efforts of the Chancellor and the Secretary of State to get the claimant count down over the next few years is costing us £6 billion in higher welfare bills, and today’s Bill shows us exactly who is going to pick up the tab.

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I shall give way to people who were here at the start of the debate, rather than to those who have wandered in late. This is an important debate. The point that I want to make, before I give way to Margot James, is that we are learning today who is being asked to pick up the bill for this catastrophic economic failure. It is not Britain’s richest citizens, who are now so hard pressed and under the cosh that they are being given a tax cut. From next year, millionaires will have £107,000 more to help them to heat their swimming pools. It is not Britain’s millionaires who are picking up the tab; it is Britain’s working families. The measures in the Bill are a strivers’ tax, pure and simple.

Is the right hon. Gentleman going to acknowledge the 1 million extra jobs that have been created since 2010? Will he also acknowledge that the number of people claiming tax credits escalated to an unsustainable level under his Government? The country cannot afford to have 50% of the population either claiming tax credits or in receipt of benefits. That is unsustainable.

I look forward to coming to Stourbridge and helping to explain to the 6,500 people there who are on tax credits that their Member of Parliament thinks that the money they are getting is unsustainable. I happen to think that those 6,500 people, whom the hon. Lady has just dismissed, need every pound of the tax credits that Labour delivered when we were in office.

I should like to bring the right hon. Gentleman back to the Bill, and to tell him that when he votes against it tonight, £1.9 billion a year will go missing. Will he compare that £1.9 billion a year with the £3 billion a week that Labour was borrowing during its last year in office?

I would contrast that money with the £3 billion a year that the Chancellor is giving away to Britain’s richest citizens, in a tax cut that will kick in next year, at a time when the Government are cutting tax credits and when Britain’s working families are under pressure. How can the hon. Gentleman possibly justify that, either here or to his constituents?

I would be grateful if the right hon. Gentleman will now acknowledge that all the OBR’s latest figures show that, under this Government, the wealthiest are paying more in tax than in any single year under his Government.

Like me, the Secretary of State will no doubt have seen table 2.1 of the Budget, published in March 2012, which clearly shows that in 2014-15, the cost of the tax giveaway will be £3.4 billion. How can he possibly justify that at a time when he is hitting Britain’s working families? Will he justify it now?

I asked the right hon. Gentleman a simple question—[ Interruption. ] Actually, the shadow Chancellor should leave the right hon. Gentleman alone for a second; I think he has a brain in his head. Don’t listen to him; his advice to the last Prime Minister was hopeless. I want to ask Mr Byrne a simple question. Here are the figures: the wealthiest in Britain are paying more in tax under this Government than in any single year under the last Government. Does he agree with that?

We put the top rate of tax up. It is this Government who are cutting it, at a cost of £3.4 billion a year. How can the Secretary of State possibly justify the choices made by his right hon. Friend the Chancellor, a man who has supported him hilt and sword? How can the Secretary of State justify giving away £3.4 billion to Britain’s richest citizens in a tax giveaway when he is hurting Britain’s working families? Justify it now!

Does the right hon. Gentleman agree or disagree that the OBR figures show that, under this Government, we are raising more in tax from wealthy people than in any single year under the last Government? Will he now admit that?

I am saying that we should be raising more from Britain’s richest citizens, not giving them a £3.4 billion tax cut to heat their swimming pools while Britain’s working families are being punished. Let us be clear about the effects of the Bill.

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I will give way to the hon. Gentleman, even though he could not be bothered to get here for the beginning of the debate, but let me first ask him how he can justify giving away £3.4 billion to Britain’s richest citizens while taking money away from Britain’s working families. Justify that now!

My question to the right hon. Gentleman is about the honesty with which he delivered his message in 2010, in which he told us that there was no money left and wished us good luck. Will he show the same honesty now and acknowledge that we are taking more from the wealthiest in this country in every year of this Parliament than was taken in the 13 years of the Labour Government? That is the honesty we require from him. Yes or no, please?

I think that, at a time like this, those with the broadest shoulders should be carrying the biggest load. I also thought that, once upon a time, the Conservatives agreed with that principle. I seem to remember hearing that once in a debate.

rose —

I will give way to the hon. Lady, who I believe made an important intervention yesterday about the tone of this debate and about how we should not reduce it to a basic division between Britain’s shirkers and strivers. I hope that she will say more about that today.

I certainly feel that the tone of this debate is important, and that we should not be talking about shirkers. I do not believe that people on welfare benefits are shirkers. Having made that clear statement, I would like to ask the right hon. Gentleman this question: for how many days did the Labour Government apply the top rate of tax when they were in office?

I know that the hon. Lady is new to the House—[ Interruption. ] I will seek to answer her question as soon as those on her own Front Bench calm down a little. I think that she would acknowledge that the economics and the politics of this Parliament are very different from those in the last three Parliaments. There was an important principle at the heart of the debate—namely, that those with the broadest shoulders should bear the biggest load. That is why, when Labour was in power, we put up the top rate of tax. We knew that, as part of the plan to bring the deficit down, those with the broadest shoulders should bear the biggest load. That is why we put up the top rate of tax, and that is why we object to the Chancellor of the Exchequer cutting it and giving £3.4 billion to Britain’s richest citizens when he is taking money from Britain’s working families.

Dr Wollaston was right yesterday, and she is right today. This debate should not polarise people in work against people who are out of work. However, the right hon. Gentleman must realise that those of us who lived through the last Labour Government saw the rich doing better, the bonuses getting higher, the bankers exploiting people more and the pensioners not getting the link with earnings that Labour promised but never delivered. This is a difficult decision, but the Government have got the balance right in these difficult times. I hope that, by the end of this Parliament, they will be vindicated through many more people being in work and many fewer being on benefits.

I respect the passion with which the right hon. Gentleman made that intervention, but would he mind intervening once again and telling me whether he thinks a top-rate tax cut is the right priority for Britain’s hard-pressed working families?

No, I do not think that it is the right priority, but it was part of a package deal that will leave the richest paying more than they did under Labour, that will bring the top rate down to 45% when it was only 40% in 12.5 years of the Labour Government, and that will bring in a rise in the tax threshold to £9,440 for ordinary people in my constituency and the right hon. Gentleman’s this year. In this place, we make balanced choices. This is a reasonable balanced choice to get the economy out of the mess that he and his colleagues have clearly admitted they left us in.

Several hon. Members:

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Order. Interventions, even when invited, need to be relatively brief.

At least the right hon. Gentleman is honest, unlike that lot on the Conservative Benches. We will leave it to the voters of Bermondsey to decide whether the package that he secured, which punishes so many hard-working families in his constituency, was or was not a good one.

Several hon. Members:

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I shall give way to my hon. Friend Clive Efford, but then I will make some progress.

The argument coming from the Government Benches is wholly founded on misinformation, particularly in respect of the claim that the Government have created 1 million jobs in the private sector. Is my right hon. Friend aware that, according to the Office for National Statistics, 196,000 of those jobs are due solely to the reclassification of sixth-form colleges and further education colleges?

My hon. Friend is right: sometimes things are not all that they seem to be.

Several hon. Members:

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I will give way later, but I want to move the debate on a little. It is time that we debated who is going to be hurt by the Bill. Yesterday, the Institute for Fiscal Studies did us a great favour in setting out for the first time that a total of 7 million working families will be hit by the Bill—half the working families in Britain. As we heard from Nick de Bois, some on the Treasury Bench like to cry, “Don’t worry, don’t panic; working people are going to be compensated by the rises in the personal allowance.” That is simply not true. The IFS is very clear about that: the real income of a one-earner working family is going to be £534 a year less by 2015-16.

The Children’s Society, as one of my hon. Friends mentioned earlier, has spelt out clearly what this means for many of Britain’s working families. A second lieutenant will lose £552 a year, and there are 40,000 soldiers in the same position; and a lone parent nurse will lose £424 a year, as will a primary school teacher. These are not people who have their blinds closed in the morning, yet these are the people who will be hurt by the Bill.

I know the Chancellor thought he was being clever. I know that he was, as Sarah Teather said, playing the politics of the playground and looking for a dividing line. We are right to ask what that means for the average Conservative constituency. It means that an average of 6,000 families in Tory-held constituencies will be worse off—a number that I noticed was bigger than the Tory majority in 107 seats. I just mention that in passing. Why should a second lieutenant, a nurse or a primary school teacher, or 6,000 residents of an average Tory constituency, be asked to pay for this Government’s failure to get people back to work? This is a strivers’ tax pure and simple: it does nothing to create new jobs or remedy the deficiencies of the Work programme; it does nothing to sort out the chaos in universal credit; it does nothing but punish working families that are now losing £9 billion of support under this Government.

Is there not another real problem? In many constituencies where there is profound deprivation and low-income families have even less money coming in to spend every week, we will see further depression in the local economy, more shops closed and fewer people in jobs, so that we will never be able to refloat the economy. Is not the greatest scandal of all the fact that working people in our constituencies—people in jobs—are using food banks to feed their children?

My hon. Friend speaks eloquently, and his remarks cut to the quick of the values now on show in this Government. Once upon a time—the Secretary of State will well remember this—he said:

“Conservative policies have to work for Britain’s poorest communities and every policy must be measured by that standard.”

That is what the right hon. Gentleman said on 28 June 2004, so let us weigh up the impact of this Bill on Britain’s communities. It will mean child benefit rising by 20p a week, maternity allowance by £1.37 and jobseeker’s allowance by 72p, while the income of a millionaire will go up as a result of the tax cut by £2,058 a week. How can he possibly justify that? He cannot. He knows that the Chancellor was in search of a dividing line on welfare and that he has obliged the Secretary of State to kiss goodbye to 10 years of campaigning to turn the Tory party into one that gave a monkey’s about poverty.

Does my right hon. Friend agree that child poverty in London remains stubbornly high, and that this Bill will make matters worse? My constituency has the highest level of child poverty, and this Bill will lead to more poverty across cities such as London and around the country.

Many unemployed people in my hon. Friend’s constituency are young people. These are the people who need a jobs guarantee backed by a tax on bankers’ bonuses.

Of course we welcome the Labour party’s last-minute pre-election conversion to increasing tax for wealthy people. The right hon. Gentleman will have heard in my intervention on my right hon. Friend the Secretary of State my sincere misgivings and my wish to encourage him to review this rather arbitrary 1% cap and perhaps to find ways of relating it to average wages. Bearing in mind that the welfare budget is—

Order. It was only a few moments ago, I remind the hon. Gentleman, when I said interventions on a speech needed to be brief and should not become a speech in their own right.

I am grateful for the intervention because I think the hon. Gentleman, like us, is concerned that in our country today a food bank is opening every three days, and that 5 million people may resort to payday loans this year in order to balance the books for the end of the month. The Sun on Sunday this weekend, in an article carried next to the one by the Secretary of State, said that a quarter of mums are now turning off heating so that they have enough money to feed the kids. Is that the kind of country that we are becoming, because the

Saint of Easterhouse has now become the punch bag of the Treasury? Once he talked about broken Britain; now he is presiding over breadline Britain because he keeps losing his battles with the Treasury.

In view of that and given that the welfare budget is £220 billion, does the right hon. Gentleman believe that it is something that needs a long hard look at? Particularly in a time of austerity, where does he believe the savings can be made within that budget?

I have been very clear about where I think the savings can be made. I just think it is wrong that we are giving £3 billion in a tax giveaway to Britain’s richest citizens.

Several hon. Members:

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Let me deal first with the hon. Gentleman’s intervention. I think it is wrong that millionaires will get an extra £2,058 a week next year, in 2013-14, when child benefit is going up by 20p a week. I simply cannot see how that can be justified and I do not think that tax cut should go through.

Several hon. Members:

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I shall give way a couple more times, but then I want to conclude.

The right hon. Gentleman is right to say that the public do not want false distinctions between strivers and shirkers and he is equally right, I think, to believe that people will see through those who pretend to care when they do not have the money to show that they care. In his more lucid moment, he explained that the Government had no more money left, so would he accept that one answer might be to push forward with ideas such as the living wage, and will he advise us, on the basis of his own research on a living wage, what impact it would have on the long-term benefits needs in the country?

I suspect the hon. Gentleman feels that very keenly, as 7,500 people in his constituency are on tax credits. I think that the best way to bring the welfare bill down is by getting people into work. The tragedy with the Bill is that it fails the Ronseal test set out by the Prime Minister yesterday. It does not do what it says on the tin. We are told that this Bill is all about reducing welfare spending. Actually, if we put tax credits to one side, the welfare bill for the period covered by this Bill will not rise by 1%; it is going to go up by 4%. It will go up by £8 billion because the Secretary of State is doing so little to get people back to work.

The reality of the debate is that there is a Labour way to bring down welfare spending and there is a Tory way. The Tory way, aided and abetted by the Liberal Democrats, is to attack tax credits. The Labour way is to bring down welfare spending by getting people into jobs—jobs in which they will pay tax rather than sitting on the dole taking benefits. That is why we tabled our amendment. We think that it is right to introduce a bank bonus tax to get 100,000 young people back to work, and to reform pension tax relief to create a two-year limit on jobseeker’s allowance. We think that it is right to send the clear signal that anyone who can work must not, and will not, be allowed to languish or to live a life on welfare. That is the kind of tough-minded but fair policy that we now need.

We have heard many interventions from Government Members about the unsustainability of tax credits and top-up benefits for working families. According to the Government’s own impact assessment,

“households towards the bottom of the income distribution are more likely to be affected and have a slightly higher average change because they are more likely to receive the affected benefits.”

What does my right hon. Friend think is the reason for that statement?

I note that the impact assessment is based on assumptions very different from those that formed the basis of the Treasury costings in December last year. However, the Government cannot change the simple truth: this is a strivers’ tax pure and simple, and it will hit people on tax credits.

We oppose this strivers’ tax. We believe that welfare to work will not work without jobs, and the Bill does not create a single job. It creates a heck of a mess, and asks Britain’s working families to clear it up. I urge the House to oppose the Bill’s Second Reading, to strike a blow for Britain’s strivers, to send the Government back to the drawing board, and to demand from them a proper plan to get our country back to work.

Several hon. Members:

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Order. I remind all Members that there is a five-minute time limit on Back-Bench speeches.

Thank you for the opportunity to contribute to the debate, Madam Deputy Speaker.

If they read Hansard tomorrow, many of my constituents will be under the misapprehension that the last Labour Government were a great welfare-reforming Government, but one of the points that many others will make to me is that that left the legacy of welfare dependency that has corroded so much of our society. The simple reality is that the last Labour Government should have dealt with the issue of welfare reform when they had the opportunity to do so, between 1997 and 2010.

Research carried out recently by the Joseph Rowntree Foundation found that no such culture of worklessness existed, and that in fact there was a strong commitment to work among people throughout the country, including the 3,500 unemployed people in my constituency.

Where we have a culture in which it sometimes does not pay to take a job or to work more hours, we capture people in a culture of dependency.

How do we measure success? Is it about spending more and more money? Is it about spending money on welfare, constantly and consistently, or is it about results? I think that we on this side of the House believe that it is about results. In 1997, the number of households in which no one had ever worked was 184,000. That number was far too high. Given all the billions of pounds that were spent, we would expect it to have fallen considerably: perhaps by 10,000, perhaps by 50,000, perhaps by 100,000. So what happened? Did it increase or did it fall? It increased, and not by 10,000—

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Does the hon. Gentleman think that the number increased, or does he think that it fell? Perhaps he will tell the House.

If the hon. Gentleman is concerned about an increase in long-term unemployment, why will he not go through the Lobby with the Opposition in support of our amendment, which will guarantee jobs to people who are out of work for more than 24 months?

The hon. Gentleman is living in cloud cuckoo land. He will not answer the question that I asked. How many more families are there in which no one has ever worked? In fact, the number increased from 184,000 to 352,000 under the last Labour Government. Is that a legacy to be proud of? I think that Members on this side of the House would say that it is not.

My hon. Friend is making an excellent point about the legacy of the last Government. Perhaps he agrees with the economics editor of The Sunday Times, who wrote last week:

“It is hard to think of a period more conducive to control of welfare spending than the Blair years, 1997-2007.”

That too was an excellent point. What we have seen is total fiscal irresponsibility. The whole idea of the Labour party’s proposals is to trap more people in welfare, not to take them out of welfare.

My hon. Friend has made a very good point about Labour’s past record of fiscal irresponsibility, but what about its current record? Labour Members will vote for millionaires to receive child benefit.

I am afraid that the Labour party’s proposals on so many matters are completely inconsistent. The greatest shame is that there are no ideas coming from Labour Members. They have no ideas about how to deal with the legacy that they left, in relation to welfare reform or in relation to the many billions of pounds of debts with which they have saddled the country.

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I will happily give way to the hon. Lady if she explains to the House what she will cut. I assume that she will be voting for the amendment. Will she shut schools in her constituency? Will she close hospitals? Will she sack teachers? Will she get rid of nurses? I want to hear what the hon. Lady is going to do.

What I want to do is return the hon. Gentleman to the subject of the Bill. Does he agree with Disability Rights UK, which has said that 1 million disabled people will be affected by the 1% uprating, and that more disabled people will be living in poverty? Is he proud of that?

I am taking a lead from the Labour Front Benchers and touching on some of the reasons why we are in this position, and having to make highly difficult decisions. We are not scared to take difficult decisions, but perhaps if the Labour party had made some of the tough choices that we have made—if it had reformed welfare earlier, and had not trapped so many people in welfare dependency—the decisions that the present Government are having to make would be far, far easier.

I am afraid that the hon. Lady is not facing up to the reality, and nor is her party doing so. This Government are committed to giving a hand up, not a handout. What we want to see is people getting into work. What we want to see is people doing well, and not constantly depending on the state.

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I will make some more progress.

That is what we are hoping to do. That is what we are doing for our welfare reform, and that is what we are doing here today. We recognise that we cannot spend money that we do not have. It is a simple fact and we hope that eventually the Opposition will adopt such fiscal responsibility. We hope that during the afternoon they will suggest what they would cut if they vote in favour of their amendment.

No one wants to see a restriction on benefit increases, but we all have to face the reality of the country’s position. The coalition is dealing with that reality and with the mess that the Opposition left us. That is what we are getting on with and what we will deliver for this country.

Over the past hour and a half, the parties on the Government Benches have thrown various lines of argument into the mix, but possibly the most absurd is that the whole agenda and the Bill are about deficit reduction. That argument is already in tatters. We have seen the economic recovery deferred and a double-dip recession possibly turning into a triple-dip recession. The rate of reduction of unemployment has been so slow since 2010 that it will not return to pre-recession levels until 2019, and we have seen a systematic and structural increase in under-employment. It is no wonder that total expenditure on welfare, despite the protestations, has been going up.

Let us take one example about which there has been a great deal of sound and fury over recent years—the housing benefit bill. Over this comprehensive spending review period, this Government will spend £12 billion more on subsidising private tenants than was spent by the Labour Government during the previous CSR period, so let us not hear anything from the Government about their successes on welfare reform and reduction and our failure.

For the first time in decades we see more working than workless people in poverty—now a record 6.1 million. It is no wonder that the new head of the Secretary of State’s favourite think-tank, the Commission for Social Justice, told an interviewer:

“I would say we have missed in-work poverty”.

Yes, the commission did, and yes, the Government did, but rather than the Government facing the evidence, we have been subjected to a barrage of rhetoric about the people behind the closed curtains and the shirkers rather than the strivers.

Does my hon. Friend recognise that in half the workless households the adults are under 25, which is a reflection of the growth in unemployment among that age group?

That is correct; I recognise that figure. We have seen from the Bill and the debate behind it a political debate and a set of wheezes that the Government think will pay off for them. The problem with wheezes is that they tend to fracture when they come into contact with reality. The Government cannot make serious money out of an assault on out-of-work benefits, whatever the Conservatives like to say. Just 3% of all welfare spending goes on jobseeker’s allowance. Indeed, all out-of-work benefits account for only 3% of GDP between them. The House of Commons Library advises me that if only out-of-work benefits were subject to the 1% cap, but in-work benefits were uprated as normal, 80% of the proposed savings would disappear. If one factors in the changes to the personal tax allowance, one finds that working people, as the Resolution Foundation demonstrated to us, take 60% of the hit.

If the Bill is passed, 2.5 million workless households will lose out by about £215 a year by 2016, and of the 14.1 million working-age households with someone in work, 7 million will be hit: 30% of all households will take a hit on their income because of this Government’s obsession with the tiny minority of long-term or multigenerational workless.

The distinction between those in and out of work is far less rigid than the Government would have us believe. That is an extraordinary piece of rhetoric, given that the universal credit, the centrepiece of the Government’s welfare agenda, is designed to blur the distinction still further, and it has that one significant advantage of seeking to do that. Millions of our constituents, in Conservative and Liberal Democrat constituencies as well as in Labour ones, churn between those states of being in and out of work. Last year there were between 244,000 and 357,000 new claims every month for jobseeker’s allowance, while between 242,000 and 370,000 left benefit every month.

It is a myth that the welfare reform agenda put forward by the Government is about tackling worklessness. It is an assault on low-income working families far more than on working households. It is an assault on both, and on very low-income families, but it is real and not mythical families who will be hurt as a consequence.

It is real children who are at increasing risk of going to school hungry, as teachers unions are already reporting, and it is real children who will return to homes that cannot be heated by parents who cannot manage to balance all the bills.

We live in a country that apparently can afford tax cuts for millionaires but requires low-income, working families to go to food banks and pay their mortgages with payday loans. Every day in London 100 homes bust the £1 million value level, yet 70,000 children were homeless this Christmas. Today we should not be reducing the capacity of 9.5 million families and households across the country to pay their bills.

What the crash and its aftermath demonstrated beyond doubt was that the future cannot be like the past. We want everyone who can work to do so, we want that work to be secure and fairly paid and for the costs that consume an unsustainable element of people’s incomes to be reduced.

Did my hon. Friend notice that the Secretary of State accused Labour of having a new idea with our job guarantee? In fact, the pamphlet produced by my right hon. Friend Mr Byrne on a job guarantee is dated January 2012. We have been discussing these ideas for more than a year.

We have indeed been discussing these ideas. The future jobs fund demonstrated value for money in getting people back into work, but the Conservative party, which claims to like evidence, trashed it in favour of the Work programme, which, as we know, has been less effective than doing absolutely nothing would have been.

Without jobs, deficit reduction is doomed, however much the Government cheese-pare away at the income of the poorest. While housing and child care costs consume an ever-larger portion of the incomes of poorer families, work cannot pay and families cannot thrive. It is jobs, fair pay, affordable homes and good affordable child care that will get us out of the trap we are in, whether it is the trap we want to spring to get people into work or the trap of deficit reduction. The trap that the Government are setting today will catch 30% of households in a worsening squeeze on their incomes at the very worst time for them to be facing it.

People who come to my constituency office these days for help with some kind of error in their benefits often spend the first few minutes trying to justify their worth. They usually begin by trying to explain their history of working and that they have paid tax. They are desperate to get over the point that they are not like other benefit claimants—they are not a scrounger. It is perhaps a feature of the way in which the term “scroungers” has become so pervasive in social consciousness that even those on benefits do not attempt to debunk the entire category, only to excuse themselves from the label.

Language matters. Politicians in this place know that, because all of us spend a good deal of time worrying about how everything we say will be reported by the media, just as journalists pore over every fact, comma and noun we give to look for power shifts and personal divisions. Any modern political party devotes considerable money and effort to testing messages with focus groups to see how they would influence voting patters. However, I am afraid we often spend less time considering how our language actually affects people’s lives, choices, values and sense of worth, how they rub up against their neighbours and how society itself functions.

In an atmosphere of uncertainty and limited resources and where every family in this country is struggling, there is a natural tendency to try to find someone to blame for our woes. A fissure already exists between the working and non-working poor. Hammering on that fault line with the language of “shirkers” and “strivers” will have long-term impacts on public attitudes, on attitudes to one neighbour against another. It will make society less generous, less sympathetic, less able to co-operate. The marginalisation of the undeserving poor will place one group outwith society entirely over time and leave them less able to make choices about their lives and to participate. That fragmentation of society, for me, is the spectre of broken Britain, and it is one that we hasten at our peril.

Does the hon. Lady not recognise that the nub of the whole argument is that if we allow benefits to be increased by more than salaries, that will increase the number of people on benefits who are trapped in poverty and unable to afford to go to work?

I will return to that point in a moment, because I want to make another point about public attitudes first.

For those of us in this place who care about social justice, long-term changes in public attitudes to poverty should give us other causes of concern, because it will make it more difficult for any politicians who come after us to argue for any option for the poor, because public opinion will simply not support it. The irony, of course, is that, as many have said, many of those affected by the Bill are actually in work; many are the same group who have already had a negligible pay rise and are already bumping along at the bottom of the poverty threshold. For me, that is the first of a number of disingenuous comparisons used to argue for the fairness of the Bill. The first is that those affected are out of work, when many more are in fact in work but on low pay. As Ms Buck mentioned a moment ago, many of those are part of the group of people who cycle in and out of work all the time; I see that in my constituency.

The second disingenuous point is about percentages themselves, which fail to take into account the cuts to housing benefit that families in my constituency will be experiencing in the next six months or so as the changes filter through. There are also the changes in April to council tax benefit; they will affect the same families affected by the uprating provisions in the Bill.

The third point is whether percentages mean anything at all. Whatever goal posts are used to measure the percentage change in benefit across time, it is clear that the monetary value of rising average wages is significantly more than that of benefits. Percentages do not buy milk, bread or school uniforms—pounds and pennies buy those things, and it is in pounds and pennies that people will experience a cut.

I thank the hon. Lady very much for giving way. I have sat for three or four minutes listening to her and I have never in my life agreed with her more. She is right about the language of the debate and about the percentages—it is monetary value that is important.

Can the hon. Lady explain to me in any way how the removal of the best part of £6 billion from the economy in the next two to three years will stimulate the economy? How many jobs will it create, if any at all?

The fourth disingenuous point is probably that cutting the incomes of those at the bottom of the income threshold will help boost the economy. All the evidence says that money put into the pockets of those at the bottom of the income spectrum is most likely to be spent. That is precisely why my party argued so hard during negotiations to ensure that we raised the threshold of tax on the lowest paid.

I do not enjoy voting against my own party, and I cannot vote for the Labour amendment, but with a very heavy heart I shall be voting against the Second Reading of the Bill. I hope that I, and any others who choose that course of action, will give the Government some cause for thought and reflection.

It is a pleasure to follow Sarah Teather.

The truth is that all western economies need to refashion their social contract to cope with demographic and economic change—expanding child care versus higher child benefit; housing benefit versus house building; and long-term care versus reliefs and benefits for old age. In each case, we need to choose.

The Bill asks us to make three judgments: about fairness, affordability and politics. The Chancellor claimed in his autumn statement that the Bill was about distinguishing working people from those

“asleep, living a life on benefits.”—[Hansard, 5 December 2012; Vol. 554, c. 877.]

That has been blown out of the water by the facts that have come out since; the facts unearthed by my right hon. Friend the shadow Secretary of State today are damning.

What of the 3,120 people in South Shields on income support or the 4,200 on jobseeker’s allowance alleged to be choosing a life of Riley? I have three points. Two years ago, the Prime Minister said that he had ended the option of a life on benefits through the so-called Welfare Reform Act 2010. Secondly, the Government’s own figures about the level of fraud show it to be 0.7%—by the way, it is lower among immigrants to this country. Thirdly, the DWP’s own figures, published by the Secretary of State, show that more than 10 jobseekers in South Shields are seeking every job. In all the talk of fairness, that is what is unfair.

Will the right hon. Gentleman elaborate on the statistic he gave? Do immigrants not have a lower level of benefit fraud because fewer of them are entitled to the full range of benefits?

I do not want to give the hon. Gentleman a maths lesson—I did not get good marks in maths—but percentages are percentages; that is the whole point. If we change the denominator it plays through in the percentage that comes later. I do not want to get too diverted by that, but I thank him for the extra 50 seconds.

Let me get on to the question of affordability, which is central to the Government’s case. The Government claim that the alternative to this Bill is higher borrowing or higher taxation, but I want to show why that is not true. The Government themselves have projected the total cost of all benefits, all tax credits and all tax relief for the next few years, and I am happy to debate priorities within that envelope. I will take the envelope that they have set, but let us have a proper debate about choices, not the total sum—a priorities debate, not an affordability debate.

rose —

Just a minute.

The measures before us raise £3.7 billion from poor and lower-middle-income people in 2015-16. The Chancellor cut tax relief for pension contributions by wealthier people, but by how much? It was by £200 million in 2013-14 and £600 million in 2015-16. The cumulative saving from the richest between now and 2015-16 is £1.1 billion; the cumulative saving from those on lower-middle incomes on benefits and tax credits is £5.6 billion. Taking five times as much from poor and middle-income Britain as from the richest in Britain—

rose —

I will come to the hon. Gentleman in a minute.

Taking five times as much from lower and middle-income Britain as from the richest in Britain is not equality of sacrifice. The Chancellor reminds me of the man at the top of a ladder in a 1929 election poster. The man at the bottom of the ladder has got water up to his neck, and the man at the top shouts, “Equality of sacrifice—let’s all go down one rung!” It is not equality of sacrifice when you are up to your neck in water.

rose —

I will come to the hon. Gentleman in a moment.

The Government have made a great deal of the point that no one should receive more on benefits than the average wage of £26,000 a year, but they offer tax relief of £40,000 for those with £40,000 spare. Just to be clear, that tax relief costs £33 billion a year, while we are talking about a total bill of £42 billion for out-of-work benefits. If tax relief on pension contributions were limited to £26,000 a year, we would not need this Bill. That is the point about priorities and choices that need to be made.

The right hon. Gentleman gives a very powerful speech in which he mentions lots of facts and statistics, but there is a very fundamental question that he has not answered. Is it right that people on out-of-work benefits should be receiving faster and greater increases in their income than people on very low wages? Is that fair?

Forty thousand soldiers are not on out-of-work benefits but they are being hit by this Bill. Eighty per cent. of the savings—

Answer the question.

I will address it directly; I am very happy to do so. If a couple on £5,500 a year or someone on £3,700 a year gets a 1% increase, that is different from someone who is on £15,000, £20,000, £25,000, £30,000 or £35,000 getting the same increase, because although the people on £15,000, £25,000 or £30,000 are making tough choices, those on £5,000 or £3,700 are making a choice between feeding their kids and heating their home.

rose —

Let me make some progress and I will come to the hon. Gentleman if I have time.

The truth is that this rancid Bill is not about affordability; it reeks of the politics of dividing lines that the current Government spent so much time denouncing when they were in opposition in the dog days of the Brown Administration. It says a lot that within two years they have had to resort to that dividing-line politics. We know the style: you invent your own enemy, you spin your campaign to a friendly newspaper editor, you “frame” the debate. But the enemy within in is not the unemployed; the enemy within is unemployment.

I do not want to live in a society where we pretend that we can enjoy the good life while our neighbours lose their life chances. It is bad enough to have no economic growth, or 420,000 young people out of work for more than six months, or rising levels of child poverty, or declining levels of social mobility, but it is hard to stomach a Government who take absolutely no responsibility for their mistakes. It is intolerable—[ Interruption. ] Government Members are laughing, but I am ready to say what we did wrong; I have not heard them say a word about what they are doing wrong. It is intolerable to blame the unemployed for their poverty and our deficit. That is why I will vote for the amendment and against this rotten Bill.

It is never a pleasure to support any Bill that will leave some people worse off, but Members of both Government parties do so out of a heavy sense of duty and responsibility, both to those who pay taxes and to those who receive them. It is unfortunate, to an extent, that this debate has been framed, perhaps not in this House today, but in some quarters of the press, as a kind of battle between workers and shirkers or, even more regretfully, between immigrants who have come to this country and are sponging off the state and those British nationals who have been here all their lives and paid taxes.

It is true that some people have come to this country and have received too generous an amount in benefits. It is equally true that a lot of eastern Europeans—I know that both points are true from the experience of my own extended family, who are eastern Europeans—have come to this country, sometimes speaking very little English and sometimes with qualifications that are not recognised here, and have managed to find work very quickly, have used that work to get better jobs, and have ended up contributing a great deal to our society. It is true that some British people have not wanted to take on the jobs that have been snapped up by eastern Europeans.

I would have no hesitation in saying to somebody who is fairly young and in their 20s that they should be willing to accept any job going, no matter how demeaning it may appear. I have worked in nightclubs and done other low-paid work in my life. I would have more of a problem, however, with saying to people I know who spent 20 or 25 years working for Tata—British Steel as was—who lost their job through no fault of their own and who may be a father of three or four, “You have to go to work in Starbucks on the minimum wage.” It is a shame that we find it hard in our benefit system to distinguish between different types of people, but that is the way it is.

We are not here to talk about penalising people; we are here because we have a simple problem, which was put eloquently by Mr Byrne when he said that we do not have any money.

If the hon. Gentleman is saying that that is the problem, why is he supporting a Government who are only too happy to give a tax cut of £2,000 a week to everybody earning more than £1 million a year? How does that add up? How is that fair?

Put simply, the total amount of tax that we are taking from the rich has increased, as my right hon. Friend the Secretary of State has said, and that has not been denied by any Opposition Member. The total amount of money that we are taking from the rich has increased, which means that the total amount that we have to take from those who are not so rich has gone down somewhat. That is how I would justify it.

It might be worth reminding Opposition Members about the 10p tax fiasco that they imposed on some of the poorest members of my community. They have not been forgiven for it.

I should also like Opposition Members to recognise the economic truism of the Laffer curve, which has proved that the more we try to tax the rich, the less we get off them. That is why so many people are queuing up to come over here from France at the moment, and good luck to them. We will have their money and spend it on less well-off people here.

I have listened carefully today to Opposition Members and I have not heard any of them explain how they would manage to maintain benefits at their current level or fund the increases that they want to impose. What would they cut in order to fill that gap? What extra taxes would they impose on people? Would they simply continue to do what Labour Governments have done since the time of Attlee, which is just to borrow the money they need in order to pay for projects that they cannot afford?

Opposition Members simply have no credibility left. Government Members are going to take a difficult decision, but with absolutely no pleasure whatsoever. We are doing so because what happened in 2008 was bad, but it was nothing compared with the financial catastrophe that would engulf us if we continued to spend £120 billion a year that we do not have.

Opposition Members and their many supporters outside in the unions and the pressure groups have complained about the bankers. I could complain about bankers as well. Why is it that these people want to put more money into the hands of the bankers by borrowing money from bankers, getting us more into debt and giving them greater amounts of interest? Who are the true friends of the bankers—the people who are trying to keep down their interest payments or the people who want us to be in hock to them?

I do not want to be a Member of Parliament who presides over Britain being turned into Greece, but without the sunshine. That is why I will vote for the Bill today.

As someone who has been in this House for two and a half years and who in the past has been unemployed and has held low-paid jobs, I think that the mirth with which parts of this debate are being greeted will be seen with dismay by many people outside this Chamber.

The Bill is yet another example of the Government demonising and punishing the most vulnerable in our society and making the poorest live in greater poverty. The most important fact to take into account is that the Bill does not target only those who are out of work, whom I refuse to refer to as skivers, but those who are in work on low wages. It does not affect just those in part-time work, but people who are in more than full-time employment—people who regularly work long hours or complicated combinations of part-time jobs just to make ends meet.

Does my hon. Friend agree that the problem is not just with the 1% cap? A constituent came to see me before Christmas who had been made redundant last year by a local factory. His wife is a cleaner and he has now taken employment in a local garage serving petrol at night. He will lose about £20 a week when the bedroom tax comes in because the family home of 30 years is now deemed to be under-occupied.

I could not agree more. My surgery in Gateshead is regularly populated by people with similar problems. This is a society that Government Members do not understand. In the whole town, the average income of a household is not much more than £20,000 a year. That is the income for the whole household, not for an individual.

Surely the way to help people on incomes of just above £20,000 is to reduce the amount of tax that they have to pay. What the hon. Gentleman is proposing is to tax them with one hand and give part of it back with the other.

The way to solve the problem is to do what the coalition Government are doing and remove them from tax altogether.

What is shocking for low-income families is the impact of VAT on their real income. Rises in VAT and other taxes of that nature have a disproportionate impact on people on lower incomes.

Will my hon. Friend give way?

I am afraid that I will not, because I need to make progress.

The shocking statistic is that the number of people experiencing in-work poverty has risen to 1.6 million. Sadly, workers are increasingly reliant on welfare to top up their low wages. The number of families receiving tax credits has risen by 50% since 2003 and 4.4 million jobs pay less than £7 an hour. We have to ask ourselves whether we want to continue to support a situation in which private employers in particular do not want to pay a living wage to the staff that they employ in order to make profits.

As the Secretary of State knows all too well, a real-terms cut will have a much greater impact on low-income households than on higher-income households because basic living costs make up a greater proportion of their income. Even when a cut is proportional to income, it is often felt more acutely by a household on a lower income, as a greater proportion of its income is spent on essentials such as food, fuel and clothing.

On Friday, The Daily Telegraph reported the managing director of Waitrose as predicting that the prices of basic food such as bread and vegetables could rise by up to 5% this year, and in the past few months utility companies have hiked up their prices—the biggest change that I have seen so far is 10.8%. How on earth are the low paid and those out of work supposed to heat their homes and feed their families if their benefits are not increased in line with inflation? Families are already having to make difficult choices between heating and eating.

Make no mistake about it, the Bill is intended to squeeze further the already squeezed. Analysis by Unison shows that in-work poverty is becoming the modern face of UK hardship. It is estimated that the freeze suggested in the Bill will cost an average family with two children more than £1,000 by 2015-16. The Chancellor may point to changes in personal tax allowances as the reasoning behind the Bill, but that will do little to offset the shortfall in the income of working families. The Child Poverty Action Group argues that a working family eligible for both housing and council tax benefit will gain only 13p a week extra—13p!—as a result of the extended personal allowances. We should remember the furore that the 20p upgrade in old-age pensions caused under the last Government, and in this case we are talking about 13p. It is a slap in the face for the working poor and their children.

The CPAG has also spoken of its grave concern about the Bill, arguing that failure to

“uprate in line with inflation will increase absolute child poverty, relative child poverty and the material deprivation” of many children. The Bill fails any fairness test with regard to income distribution, and it fails the working poor, the job seeking, the caring and the disabled poor. It will push those at the bottom further down the ladder.

The Bill is shrouded in smoke and mirrors. The Chancellor’s choice of start date to illustrate the rise of out-of-work benefits is 2007, but if we take a longer period, for instance beginning in 1979, we can see that benefits have risen significantly less than wages. He talks about strivers and skivers, but I see something different on the ground—families scraping by in low-paid work or jumping from insecure jobs to benefits and back again. The truth, unlike what the Government keep spouting, is that the vast majority of those who rely on benefits and tax credits are either in work, have worked or will desperately be trying to get into work in the near future. They have made a contribution to society, but their families are really struggling.

Welfare to work is a two-part equation: welfare and work. Where there is no work—in many parts of the north-east there is not a great abundance of work—there must be welfare that is enough to sustain families fairly. I know that in difficult times we all have to think about ways of reducing the bills that face the Government, but let us do that in a way that is proper, productive and economically and socially beneficial. Let us do it by stimulating, not stagnating, our economy; by unlocking the huge investment potential of UK business; and by creating hundreds of thousands of real jobs, building houses and reinvigorating our infrastructure, not by punitively poisoning the minds of ordinary people and punishing the poor.

This is obviously a difficult debate. Any debate that discusses cuts or limits to payments is difficult, and no one should take any pleasure in it. However, two fundamental elements need consideration. The first is the tax credit system as a whole and its purpose, and the second is how benefits in general relate to income. I will briefly take each in turn.

It is hard to believe that until the last general election, anyone earning up to £60,000 a year could still qualify for tax credits. That was nonsensical and crazy. At the time, £60,000 was nearly two and a half times the average salary, but the Government of the day still chose to issue those privileged people with welfare payments.

The Bill is not about restructuring the tax credit system but about placing a limit on an uprate. Much restructuring has already happened: has not £14 billion already been taken out of the tax credit system? The hon. Gentleman should address the issue of uprating.

I wish that the hon. Lady would at least allow me to create a context and develop an argument, and that she would focus on the real issue and allow me to develop arguments on that. To me, someone who earns £60,000 a year is quite privileged and should not be receiving those payments. Nevertheless, that was the position inherited by the Government.

Will my hon. Friend remind the House what steps the Labour party took to bring benefit increases closer to the world of work when it was in office?

I am grateful to my hon. Friend for that useful reminder that the Labour party did nothing on the issue. Few individuals—if any—would reject a benefit payment, even if in their hearts they were confused about why they were receiving it or uncomfortable with that. The then Chancellor knew well what he was doing and that withdrawing a payment after issuing it in the first place would create a difficult and almost impossible situation—the situation we are in now. Dependency on the state became more widespread, and with that came a significant political shift to the left. The centre ground of politics moved at that moment. It is, therefore, little wonder that £90 billion is now spent on welfare for people of working age.

During the seven years before the last general election, tax credit spend increased by a staggering 258%—that is the context I wished to create in response to Sheila Gilmore. Adding insult to taxpayers’ injury, the tax credit regime was one of the most inefficient benefit systems ever devised, leading to £2 billion of fraud each and every year. Today’s Bill will lead to savings of £1.9 billion over two years, with the pain shared by those recipients whose increases in benefits will be limited. Although £1.9 billion is a significant sum, it does not go anywhere near the increases in spending introduced by the previous Government, particularly leading up to the 2010 general election.

Will the hon. Gentleman give way?

I will in a moment but I want to develop my argument a little further. Presumably in an effort to drive the landscape even further to the left, tax credits increased dramatically—strangely—in the run-up to the 2005 general election, and, by coincidence, in the run-up to the 2010 general election.

Given the political manoeuvring and increases in tax credits that my hon. Friend describes, which took place under the previous Government, is there a direct correlation between the time that tax credits started, the start of the financial crisis, and the substantial rise in the deficit created by the Labour party?

My hon. Friend makes an excellent point. The previous Prime Minister knew exactly what he was doing and he did it for party political ends rather than to support and help families who needed tax credits.

If the hon. Gentleman is so worried about helping people further down the income scale, why does he support a tax cut for people who earn more than £150,000 and a reduction in the living standards of the poorest people in Britain?

That is right on cue because I remember the 50% tax rate as being temporary. Is the hon. Gentleman saying that he is committed to that rate leading up to and beyond the next general election?

I would rather see people who earn more than £150,000 make a contribution than take money off the poorest people in Britain, which is what the hon. Gentleman is arguing for today.

I would have much more respect for the hon. Gentleman if he told the House that that will be his commitment at the next general election.

We will announce our policies for the next election but they will not be to give tax cuts to the wealthiest people in Britain while hammering the poorest. That is what the hon. Gentleman and his colleagues are supporting today.

It is obvious that there are two options. Either that will not be a commitment going into the next general election, or the Labour Government introduced the only temporary tax rate that would last almost 10 years. I hope the hon. Gentleman will allow me, in the minute I have left, to develop my second point.

On benefits and incomes, it is difficult to believe that out-of-work benefits have increased by 20% since 2007 and that earnings have increased by half that amount. What is the incentive to work? The Labour Government left a marginal rate of tax of 80% for some of the lowest earners and those on benefits. What sort of incentive was that to get people into work? They continue with the same principle in this debate. That inequality must be resolved, particularly given the nation’s debt, the need to encourage people into work and the demand for structural changes in the economy to deliver growth. It is Labour’s policy to increase spending, taxes and benefits and to take us into a further spiral of increased borrowing, spending and taxes. The people will not stand for it.

I have sat through a lot of annual debates on benefits uprating, but I have never seen a turnout quite like this. Very often the number of hon. Members in the Chamber is less than double figures. I hope today’s turnout reflects the importance of the debate. The votes tonight will have a profound effect on many of the most vulnerable and poorest people in our society, whether they are in or out of work. Based on the decisions we take tonight, for some families it will not be a case of whether to eat or heat. Towards the end of the two weeks or the month when universal credit is introduced, some families might have a few days when the children get neither food nor heating, unless food banks, which are increasing, come to the rescue. We should not wish that on our society in the 21st century.

An additional problem is that low-income families—some working, some not—will be faced with a decision when their housing benefit is paid directly to them of whether to pay their landlord or feed their children. Does my hon. Friend accept that we are facing a potential explosion in homelessness?

I thank my hon. Friend, because she sets up my point on how the proposals undermine the Government’s flagship policy of introducing universal credit. Universal credit will create problems—she alludes to the fact that it will be paid monthly, and that housing benefit will be paid directly to individuals, who must make the decisions she describes.

One big claim for universal credit is that it will make work pay in all circumstances, but Government Members somehow cannot understand that making work pay means increasing benefits, because the majority of people who receive the benefits that will be affected by the Bill are in work. The group who are out of work and the group in work are often the same people, as my hon. Friend Ms Buck has said—they move in and out of work.

The principle of universal credit is to smooth the move into work. The Government are freezing the benefits that make up universal credit statutorily for the next three years. I do not know why we are not having the normal uprating debate. There is no reason why the measure must be in the form of legislation, which makes me suspect that it is a political decision. The freezing of those benefits will tie the Government’s hands on the introduction of universal credit and could undermine it.

In spite of everything that has been said today, tax credits were a huge success. They increased the income of workers on low wages and made work pay. For the first time in at least two generations, the poverty trap was ended—I thought that it had gone for ever. There was a genuine poverty trap created by the previous Conservative Government and to all intents and purposes tax credits got rid of that. Almost everybody was better off as a result of tax credits unless they lived in a high accommodation cost area such as London or they had a large number of children. Work paid. The incentives did not always work because work did not pay enough. Through the Bill, the Government are repeating the same mistake—the incentives to move into work under universal credit will not be high enough to make work pay in all circumstances.

My hon. Friend is making an excellent point about the impact of universal credit. I am sure she is aware that the DWP itself says that 1.8 million main earners will be worse off if they take extra hours under universal credit than they are under the current arrangement. The figure for second earners is 300,000.

Indeed, and Barnardo’s has just published a report which says that families that depend on child care to allow the adults to work will be worse off if they increase their hours. The claims that are being made for universal credit—that it will do away with the cliff edges, smooth the transitions and make work pay in all circumstances—are false. The Bill will make that more likely to happen, not less likely.

Welfare benefits have already been attacked and reduced. We have heard today about housing benefit. Still to come are the changes to council tax benefit, and tax credits have been frozen for the last two years. We now know that universal credit will be set at a level comparable to the benefits that it will replace—income-related job seeker’s allowance, income-related employment support allowance and housing benefit, as well as tax credits. If those benefits have not increased with inflation, by the time universal credit comes in it will be set at a much lower level as a result of the decisions taken today. That will mean less support through universal credit for those moving into work. Unless the Government intend to change the tapers and the disregards—and I have heard nothing to suggest that—the difference between being in work and out of work will not be very great, and on many occasions people could be made worse off by increasing their hours or taking work in the first place.

I have always suspected that when the Government said that no existing claimants would lose in cash terms from the introduction of universal credit, it was their intention to reduce what people were receiving before the move to universal credit. This Bill confirms that that is exactly what they intend. They seem to have missed the essential point—to make work pay, the Government need to increase in-work support, not decrease it as this Bill will do. So when universal credit is introduced and fails to be the magic bullet that the Government have claimed—when it does not do all that has been claimed—they cannot say that they were not warned. That is why I will not support the Bill and will vote for the amendment.

It is a great pleasure to follow Dame Anne Begg, who brings great expertise and experience to the topic. While I may not always agree with her on how to resolve welfare benefit issues, I always respect what she has to say.

For me and many others in the House, the central motivation for being here and practising politics is simple: it is to try to improve the country in which we live, to give opportunities to everyone, and to create an environment in which businesses can flourish, jobs can be created and young people can be equipped with the education and skills that they need to do well. At the heart of every civilised society is the protection of those who cannot work or care for themselves and need help.

It is unlikely that many people will disagree with that opening statement, but, as ever, it is where the balance falls. It is how fairness is achieved that often divides us in this place. The underlying focus of the welfare state must, of course, be to help to prepare and equip people for a life back in work. My concern is that over the years—in particular, under the previous Government—the admirable and compassionate aim of the welfare state, of getting people back on their feet, in some circumstances provided an alternative lifestyle and lifelong income. That is the issue that the House has to address on Second Reading, and in other legislation.

The work ethic was a central part of my upbringing. I stand here as the first person in my family to study A-levels, let alone go on to university. I am very proud of my background. My mother was the main breadwinner in our family—she was a children’s nurse in the NHS for more than 40 years. My late father worked in shops, in retail, and unfortunately had periods when he was not in work. However, he always remained focused on the importance of getting back to work, and my parents instilled in me a strong work ethic, a desire to work hard and to achieve my goals.

Role models are important in life, and the lack of hard-working supportive role models can make the challenge of getting back to work even harder. We now have nearly 2 million children growing up in homes where no one works. Nearly 900,000 people have spent at least 10 years claiming incapacity benefit. It can be difficult to find the self-esteem and motivation to move back into work after such a period of time, but I have seen from this Government a commitment to encourage people, and to provide and facilitate a way to get them back and to reach their potential.

In my constituency of Erewash, many churches and community groups are undertaking excellent work. One church in particular, the Arena Church, undertakes a vast programme of outreach and supportive work. It tells me that it has seen people in the last year blossom, find their self-esteem and move back into employment, often after years of not working.

What would the hon. Lady say to the 59-year-old gentleman who came to see me on Saturday at my constituency surgery who suffers from schizophrenia and has failed the work capability test? He has now been sent on a security guard course by his local jobcentre, which is totally inappropriate. Why do we have a system that is so cruel to such individuals?

I thank the hon. Gentleman for his intervention, and he takes up the case on behalf of his constituent in this House. However, I put the responsibility squarely on his Government, the previous Government, which expanded the welfare state with tax credits and left people on incapacity benefit who for too long were never reassessed. That is unfair to those people and we need to recreate the entire welfare system to improve it.

It is always worth saying that there is no Government money, only taxpayers’ money. It behoves us to ensure that taxpayers’ money is used as well as it possibly can be.

I agree with my hon. Friend and thank her for her intervention.

The welfare budget has increased considerably over many years. The Department for Work and Pensions already spends more than £90 billion a year on welfare for working-age people—£1 in every £8 that the Government spend. Limiting certain social security benefits to the 1% that is before the House today, and tax credits is a proportionate approach to funding welfare in the longer term.

My constituents in Erewash often say to me that fairness works both ways. One gentleman said to me that he is working around the clock and his wife has two part-time cleaning jobs, and that they are trying their best to keep things going. Like me, he wants to support people in this society who, for whatever reason, will never be able to stand on their own two feet and get work, but that was not his point. His point was about the standard of living of other people in the area on full benefits. He did not think it right that they should have a higher percentage increase than his family’s budget.

The financial mismanagement of the welfare budget by the last Government—increasing and increasing tax credits without the financial means to pay for it in the long term—has created an imbalance between families, and it is not the fault of those families; it is the responsibility of those in government at the time. The books have to be balanced and accountability is required. Between 2003 and 2010, Labour spent £171 billion on tax credits— more than 60% of the welfare budget increases. How on earth it expected to make that financially viable I simply do not know. At the same time, the number of the most vulnerable and of children living in poverty increased, heading up to between 2 million and 3 million. The last Government failed to tackle the cause of worklessness, and that is why we are in this difficulty.

I take full responsibility for every vote I cast and everything I say in the House—I am happy to do so —but I can reassure my constituents that I do not think anyone in the House takes these decisions on welfare lightly. In the wider picture, however, of maintaining the safety net of the welfare state, preparing people for work and setting them free from welfare dependency, today’s proposals are proportionate and necessary, and I will support the Government.

Today, we are debating an uprating Bill that will result in a real-terms cut in support for people working and contributing to the economy. That paradox will not be lost on those hard-working families so beloved of spin doctors. I do not see how the Bill will promote the work ethic so beloved of those on both sides of the House, and I do not see how it will enable working people to contribute more effectively in the savings culture.

As a Welsh MP, I have to say that Wales will be hit particularly hard. Incomes in Wales are substantially lower than elsewhere. Gross value added per head in Wales is £15,696, whereas in the UK it is £21,368—a difference of more than £5,500 per person.

Given what the hon. Gentleman has said, is he comfortable that welfare payments are rising at twice the rate of earnings?

This point has been done to death this afternoon. It says a lot about the quality of the hon. Gentleman’s argument that he repeats it continually. I do not think I will bother with it any further.

Some 6.8% of households in the south-east of England, for example, claim working tax credits. In Wales, that figure is 7.1%. In Gwynedd—my own area—9,200 families are on tax credits of some form out of 53,000 households. That is 17.5% of the population—nearly three times the Welsh rate. The point is that any cuts to in-work benefits for the low-paid will hit Wales and my constituency particularly hard.

Does the hon. Gentleman agree that the individuals receiving those types of benefit do not save the money, but spend it in their local communities? In areas of high unemployment, such as parts of my and his constituencies, it will have a knock-on effect on the local economy.

Clearly, the hon. Gentleman is blessed with clairvoyance, because that is my next point. People on low incomes tend to spend locally and to spend all their money. The Welsh economy is overwhelmingly made up of small businesses. That is a point for Alun Cairns to consider. Working tax credit reductions will suck demand out of local economies and make matters even more difficult for small businesses struggling to survive in the recession.

The uprating will also hit those seeking work. The Prime Minister talks of unemployed people abed while others are at work. We can almost see him in Shakespearean mode paraphrasing King Henry: “Gentlemen in England now abed shall think themselves accursed they were not out seeking work”—I can see him doing it anyway, but less extravagantly. Unlike the Prime Minister and his friends, I do not think that the overwhelming majority of unemployed people are abed; they are seeking work. They want to work; they want to improve their lives and those of their children. For those who do not seek work, there is a system of sanctions, and there has been for a long time, as the Secretary of State knows full well.

Poorer areas of Wales have long suffered from high levels of worklessness and low levels of job availability. To end the misery of unemployment, we need not only to help individuals with their skills and, in a small number of cases, their motivation, but to ensure there is real work for people to do. Recently published Work programme figures for Wales show that success there was the lowest in the UK, with only 1,380 of 42,380 people getting a job that lasted six months or more. That is a miserable success rate, at only 3%. In Wales, more than 77,000 people are looking for work and claiming jobseeker’s allowance, while only 20,000-odd vacancies are being posted in jobcentres. Across Wales, there are four people chasing every job, with 11 people chasing every job in Blaenau Gwent and 21 people chasing every job in the Rhondda.

That brings me to Labour’s amendment. I have a question, to which I would like an answer—which might persuade me to back the amendment—in the wind-ups. Long-term unemployed people might still be unable to find a job after 24 months of searching. Large-scale work opportunities are just not available in many Welsh constituencies, so my question is: under Labour’s scheme, would those people face penalties after 24 months? If Labour’s scheme were adopted, would we see benefit cuts 24 months down the road for people who are not refusing to find work, but who just cannot find a job?

We in Plaid Cymru have been as good as our word—to the extent we can be—to the people of Wales, securing thousands of extra apprenticeships as part of the Welsh Government budget deal. We are now pushing for a new procurement policy that would create 50,000 jobs by sourcing public sector contracts locally. However, Wales needs proper job-creating levers to improve our economy, not just handouts and certainly not workfare. For example—this might be a domestic matter as far as most Members in the Chamber are concerned—we want full and early implementation of part 1 of the Silk commission proposals. We also want the transfer of responsibility for Jobcentre Plus to the Welsh Government. There are answers to joblessness and dependence on benefits. At present, we in Wales look in vain to London and the London parties for those answers.

This is not a difficult one for me. I believe that benefits are far too high—I think most people accept they are at an unsustainable level.

Too high?

Yes; as a nation, our payments on benefits are, without a doubt, far too high. However, what we face in this Bill seems to be a huge lack of confidence by the coalition in its own policies and programmes to deal with that situation.

None of us is going to support scroungers, skivers or people who are fraudulently claiming disability benefits. None of us is going to say that we should not support people into work, but we on the Government Benches say, “We are doing all of that.” We on this side of the House say that we are dealing with the situation so that we can reduce the colossal welfare bill to the nation. It shows a huge lack of confidence for us then to say that we now need to go to the least well-off in the country and say, “You’ve got to make a contribution to deficit reduction,” because if our measures work—we say they are going to work; we tell people how successful they will be—what are we left with? We are left with those who want a job and cannot get one, even when they have been through the Work programme. We are talking about those who are disabled—and who have been assessed as disabled—who are not able to work. We are talking about those in work but on low incomes. Despite the confidence in our strategy, these are the people to whom we are now saying, “We’re not really sure, because we’re going to have to come to you, for you to make a contribution as well.”

I have identified three arguments for this move. The first relates to incentives, and states that work should always pay, but I thought we were going to ensure that that happened anyway. Is that not what universal credit was supposed to be about? The second argument is that we cannot afford to do otherwise, but I did not see much cutting back on the Olympics. I have heard various suggestions, and yes, there are tough decisions to be made. It has been suggested that we limit the tax relief on pensions. We are seen as being able to afford to give tax reductions to millionaires, and of course we can afford to give rich pensioners winter fuel payments. These are examples of the decisions that need to be made, and there are many more, but we need to look at all of them before we turn to the people on the lowest incomes and those with no income who are surviving on benefits.

Does the hon. Gentleman agree that the fiscal cliff deal made last week in America, which took the most money from the top 2%, gave money to those on lower incomes and is projected to increase growth by 1%, is a much better way of squaring the circle than the measures in the autumn statement, which will take money from the bottom 30% to 50% and give it to those further up the ladder, which is reducing overall consumer demand?

We all know that. We know about the multiplier effect on consumer demand. It is not a secret; it is well researched and we all understand it.

The third reason for the proposals that I have identified relates to fairness. A national debate about fairness is taking place at the moment. I am about to get really technical: there is a difference between somebody who is unemployed and somebody who is employed. The person who is unemployed does not have a job. The person who is employed has a job. They are not the same; we cannot compare them when we are talking about fairness and a 1% increase. I will give the House another really technical fact: those people who are on low incomes and receiving tax credits are receiving those tax credits because they are on low incomes. It is very technical, this. How on earth can we compare those on low incomes or on benefits with people who are in a job? We cannot say that it is unfair—or bizarre, according to the Prime Minister—to give someone who is in a job 1%, but then give 2% to those on benefits. We cannot compare the two. There is a difference between somebody who is on benefits and somebody who has a job. The evidence for that is clear.

Of course, people who are in employment do not like the pay freezes or the 1% increase, but is anyone seriously suggesting that they would give up their job to be unemployed? Don’t be ridiculous! Let us not forget that we are eliminating the scroungers and all the rest of it. In my experience, most people in work look at those who are unemployed and say, “Thank God it’s not me!” They do not say that it is unfair that their benefits are being increased; they say, “There but for the grace of God go I.”

I have mentioned the massive lack of confidence in our proposals, but there could be another reason for these measures, although I hope that it is not true. It relates to a sense that the public at large are in favour of these welfare reforms, egged on by opinion polls, and that some people on the Government Benches see that as an opportunity to attack the unemployed. I fear that that is being driven by a deep-rooted conviction that unemployed people are unemployed by choice. This is what worries me. I hope that the explanation is in fact the lack of confidence, but I suspect, deep down, that far too many people on this side of the House believe that unemployed people are the undeserving poor, that they need to sort themselves out, and that we cannot possibly reward them with an increase. Let us remember, too, that this is not an increase. When inflation is taken into account, the measure will simply freeze the level of benefits that we have already decided will provide people with a minimum standard of living. The measure is not fair, and I will not support it.

The Bill is without doubt an attack on the living standards of those who are in work and on low or modest incomes, and of those who are in work on such incomes who are on disability benefits. The Government have tried to paint those who are unemployed as lazy and as scroungers, but it is a fact that the Bill will definitely make people poorer.

The Government are trying to cover up their failures on the economy, and the Chancellor is now raiding working-age benefits and tax credits by a total of £6.6 billion by uprating them by 1% over the next three years—a real-terms cut. Meanwhile, the Government are giving 8,000 millionaires an average tax cut of £107,000—an average cut of £2,000 for every week of the year. In comparison, people on jobseeker’s allowance will see their benefit cut by 71p and people receiving the couples element of the working tax credit will see a minimum increase of 38p. Of course, the Secretary of State has admitted today for the first time that disabled people will also see cuts as a result of the changes made.

I am grateful to my hon. Friend for making some strong points. Does he agree with me that one other group of people in our society who will be severely impacted by the change is children? We are going to see an increase in absolute poverty and relative poverty for children, which will take us back to the level we had over 10 years ago. It is wholly unfair that they should be prejudiced in this manner.

I agree with my hon. Friend, who makes a valid point, and I repeat that people, families, children will be made poorer by the Bill. The Secretary of State refused properly to answer a question about the disabled issue. He would not say how many disabled people would be affected, so that is a subject to which we will certainly return.

Of course another group of people who will be badly hit are women. Some 4.6 million women who receive child tax credit, including 2.5 million working women and more than 1 million women who are caring for children while their husbands or partners are in work, will be hit by this strivers’ tax. Even the Government’s own impact assessment, which we have just got, acknowledges that that will be the case—and it is a disgrace, if I may say so, that we received that impact assessment at such a short time before this debate. Those hit by the Government’s cuts include primary school teachers, nurses and, as we have heard, many members of our armed forces who today are fighting for this country. My constituents are increasingly suffering because of the rising cost of living. The costs of food, energy and fuel are crippling many families, who are having to decide whether to buy a decent meal or to heat the house.

My hon. Friend mentions primary school teachers and nurses. Does he acknowledge the figures in last Sunday’s edition of The Observer in which chief executives of a number of organisations, including children’s societies, Barnardo’s and the National Association of Citizens Advice Bureaux, showed that a single parent primary school teacher or a nurse with two children stands to lose £424 a year by 2015 while an Army second lieutenant with three children will lose £552 a year? Those are hardly people whom we should describe as “scroungers”.

My hon. Friend makes a strong point: many people in work are being hit, and many of them would not usually be viewed by members of the public as those likely to be hit by such changes. Many families on low incomes in my constituency are having great difficulty finding the money to feed their families properly—even to provide proper meals every day. We know that some children are going to school hungry. The problem is so bad in Halton that two food banks have been set up, and I believe that that is a regular feature in many poorer parts of the country. To add to that, of course, are the appalling changes to housing benefit and the unfair cuts to local government funding, including changes to the treatment of council tax support, which will greatly increase the suffering in my constituency and others where the poorest and the weakest will be the most badly hit.

Frankly, the Government’s approach to welfare reform is cruel and vindictive, with cuts hitting the most vulnerable the hardest. That is said even in the Government’s own impact assessment, which acknowledges that the poorest will be hit the hardest. It is a disgrace that this is happening. I have been contacted, like many MPs, by many constituents who have suffered badly under the benefits system, who have lost benefits or who have been denied them or treated badly. In many cases, these people are in despair and at the end of their tether. We have to deal with such cases—day in, day out. It is therefore important to link that with what is happening today.

There are, of course, people who exploit the system, and they should be dealt with severely, but the overwhelming number of people involved are honest and want to work where they can. In my experience, those who can work want to work. I have heard many tales of constituents applying for countless number of jobs, but getting nowhere because jobs are either very hard to find or do not exist. Despite what the Secretary of State said, many want full-time employment. Many are being pushed into part-time employment because there are no full-time jobs for them. The Government have no coherent policy for growth and jobs. That is why people trust Labour more on jobs and growth. We have given greater priority to job creation, which is why I support our jobs guarantee.

Will the hon. Gentleman give way?

I will not, because I have already given way to two Members and others wish to speak.

Let me return to the Government’s decision to cut benefits. We should not forget the announcement in the June 2010 Budget that from April 2011 the measure of price inflation used for the uprating of benefits and tax credits would be the consumer prices index rather than the retail prices index. That will have a significant impact on benefit rates and on future real-terms cuts. So in addition to what is happening today, a major cut is already taking place. The long-term assumption of the Office for Budget Responsibility is that the annual increase in RPI will be 1.4 percentage points more than the increase in the CPI. That means that after 10 years, benefits will be worth 86% as much as they would have been had they continued to be uprated in line with RPI.

The House of Commons Library research paper on the Bill states:

“A decision to limit increases in benefits to below inflation for a sustained period is historically unprecedented. If inflation averages more than 1% over the three years, families claiming the benefits and tax credits affected will experience a permanent real terms reduction in the support they receive.”

It goes on to say that

“independent estimates of “Minimum Income Standards” suggest that current out-of-work benefit rates for people of working age are significantly lower than the amounts necessary for a minimum acceptable standard of living.”

We should never forget that a large number of those who receive benefits are being paid a very small amount of money, an amount that would surprise many people. It is not the case that the majority, or anywhere near the majority, are receiving massive sums. Members should go and talk to a young person who is unemployed, or a single mum, or a couple, and ask about the benefits that they are receiving—and now disabled people are also being hit by the Government’s proposals.

The Bill clearly constitutes a tax on those who work hard and a cruel, vindictive cut in the living standards of the poorest people in our society. The Government should hang their heads in shame, and that applies especially to the Liberal Democrats.

About 40 years ago, I used to walk through a really run-down council estate on my way to school. The estate was poor, the people living there were poor, the housing was poor, and life expectancy and opportunities were very low. It is still the same today: 40 years on, the people living on that estate have the same opportunities, or lack of them, that they had in the days when I was walking through it.

Successive Governments have failed to address the problems of people who live in poverty in some of our communities. This is not just about money; it is about a lack of aspiration and ambition, about a failure to understand the need to educate people, and about the need for people to develop skills. It is about a whole range of things, and the solution is not simply money. I say that because now, when I look at estates like the one that I mentioned, I see brand-new schools, and I see that all the houses have been done up, but the people are still poor, still unemployed, and still dependent on benefits. The fact is that, regardless of the 1.5% difference between inflation and the uprating, if you have not got the brass you cannot give it out. The purpose of the coalition must be to manage the deficit that we inherited from the last Government, and we must change the culture of dependency in those areas.

The hon. Gentleman talks of dependency. Does he not realise that the Bill will create a food-bank dependency in our nation?

I do not think that it will. I think that the 900,000 or 1 million new jobs created by the Government represent the solution to the problem. We need to face up to the drama in the welfare state. Lisa Nandy says that this is not about a dependency culture, but I can take her to places where people are trapped in a way of life that gives them no incentive to go and look for jobs. That is the tragedy of the situation.

I understand what the hon. Gentleman is saying about the dependency culture—he thinks that if he repeats it enough, people will start to believe him—but what would he say to two people whom I met in a local jobcentre last week? They were made unemployed by AEI Cables in Birtley a year ago. They have the work ethic. They are aged 51 and 52, they had worked for the company since they were 16, and they have applied for literally hundreds of jobs without success. Are those people part of the dependency culture?

No, obviously not, because they are going out there to seek a job. That is the key thing. I thank the hon. Gentleman for the extra time.

We have put a benefit cap at £26,000, and that is net. The vast majority of my constituents would be delighted to take home or have access to that amount of money. Far from doing something outrageous by increasing the amount of money that people are going to get by 1% in this climate, it is an admirable move by those on the Front Bench to facilitate that, bearing in mind the crisis that the previous Government left.

We have made some choices about who we are going to protect and who we will not. There is a debate about disability, but I am pleased that we are protecting pensioners. It was a commitment by this Government to protect pensioners and we have continued with that. I am very concerned that the unemployed, those who are dependent, those who are uneducated and have no skills, those with limited opportunities to offer young people, are the families that are growing in my constituency. That is a tragedy for the future of towns such as mine. We must break that cycle. It cannot be right that it pays to live on the state.

The resentment and anger are real in people who are working hard. They have seen generations continue to claim benefit. Some of those are trapped, but some have no desire to go and work. People are making life choices based on the fact that they can get money from the Government. As was pointed out earlier, that is taxpayers’ money. That cannot be right. When families see no increase in their income after their hard work and they see people on benefits receiving twice the increase, as has been shown statistically, that promotes resentment in our communities. It is not just about strivers or skivers. Failure to address the issue promotes racism and tension in communities, because somebody sees or perceives that somebody else is getting something that they are not getting. After all their efforts they do not see the benefit of working so hard.

rose —

No, I will not give way.

I have great sympathy for all the people who go out there, graft hard and pay their dues, and then look over next door where the curtains are closed or see estates where people are not ambitious, not aspirational, have failed in education and failed in skills. It is the responsibility of those on the Government Benches to address that, as much as it was with the previous Government. In another 30 or 40 years I do not want to see people living in poverty because they have been abandoned and people keep sustaining those estates. Society backfills sink estates in constituencies such as mine.

We do not take decisions about welfare lightly. We take them extremely seriously, as my hon. Friend Jessica Lee said, but we on the Government Benches are on the side of hard-working individuals. That is why I support the Bill.

I rise to speak on behalf of the many constituents who come to see me every week in my constituency office because they have been affected by the Government’s attacks on our welfare system. I have said this before and I will continue to say it: at every point we must challenge the ideology underpinning these so-called reforms, including the Bill, and the divide-and-rule narrative that the coalition Government have developed.

I know I was not alone in being deeply offended by the Chancellor’s autumn statement, not only because the cuts he put forward will affect the poorest 10% in our society, according to the Institute for Fiscal Studies, but because of the way in which he attempted to justify his actions by deliberately vilifying people who receive benefits as the new undeserving poor. By using pejorative language, such as “shirkers”—he has used the terms “work-shy” and “scroungers” in the past—he sunk to a new low, with a disgraceful misrepresentation of the facts, a few of which I would like to put straight.

Myth No. 1 is that most people on benefits are out of work. In fact, 68%—more than two thirds—of benefit recipients are in work. The majority of welfare beneficiaries are net contributors to the Exchequer. As my right hon. Friend Andy Burnham has said, there is no evidence of a culture of worklessness in this country—[ Interruption. ] I will repeat that: independent research has shown that there is no evidence of a culture of worklessness. According to the Joseph Rowntree Foundation and the New Policy Institute, 6.1 million people are in poverty but are working. That compares with 5 million people in out-of-work households.

As we have heard, the Children’s Society’s statistics show that the proposed cap on welfare benefits will affect 500,000 key workers—nurses, midwives, nursery school teachers, primary school teachers, administrative workers, secretaries, shop workers, electricians, fitters and members of the armed forces.

Can the hon. Lady say what proportion of primary school teachers are covered by those statistics?

I cannot because I do not have the figures to hand, but I am happy to provide them later. The evidence is there. Scenario modelling has been done—[ Interruption. ] If I could finish the point. Scenario modelling is available showing exactly how many have been assessed.

Will the hon. Lady give way?

I will not give way at the moment. I will finish my point and then make some progress.

The Children’s Society’s analysis shows that between £500 and £400 will be lost per annum by key workers such as a second lieutenant in the armed forces or a primary school teacher.

In addition to the scenario my hon. Friend is outlining, these cuts come on top of the fact that the move from RPI to CPI for benefits will push a further 4 million children into poverty by 2020.

My hon. Friend is absolutely right. The Institute for Fiscal Studies has shown that nearly half a million more children will be living in poverty by the end of this Parliament, and that is without taking into account the 1% drop. Families up and down the country are struggling. Food prices have increased by 26% over the past three years, almost as much as energy prices. That is a real cut for ordinary families.

The second myth I would like to expose is the claim that welfare benefits have increased more than average earnings. In fact, since 2002 average earnings rose by 36% while jobseeker’s allowance, for example, increased by 32%. Between 2007 and 2010, to ensure that work pays, benefits for people in work rose by 53.1%, compared with 46.9% for out-of-work benefits. The Government have also claimed that the 1% cap will offset increases in tax thresholds. We know that at least 682,000 working families receiving child tax credit earn less than £6,420, so they will not benefit from those changes in tax credits.

I was going to refer to the myth that we need to do this to reduce the deficit, but that myth has already been blown out of the water in other contributions, so I will not go on about the fact that growth has been downgraded yet again, we are borrowing more than anticipated and our economy is one of the worst performing in the G7.

The Government’s response to their failing economic policies is what? It is to give tax breaks to the wealthiest in society. Some £3 billion is being given to 300,000 people earning more than £150,000 a year, with an average gain of £10,000, and the Government are making people on low incomes pay for it. According to the Office for Budget Responsibility, £500 million will be saved as a result of the 1% cut in 2013 and just over £2 billion in 2014, but that money could also be saved if the Government made different choices. It is clear where the Government’s priorities really are. The choices that the Government have made are underpinned by their ideology.

Several hon. Members:

rose—

No, I am not going to give way any more.

That ideology is to demonise people receiving benefits, creating antipathy and resentment and an “us and them” culture. Through the withdrawal of universal benefit such as child benefit, the Government show an irrelevance of the welfare system to non-welfare-recipients; meanwhile, they are dismantling the welfare state.

I am proud of our model of social welfare, born of the second world war, when we were literally all in it together. I want to retain that model, with its principles of inclusion, support and security for all, protecting any one of us who should fall on hard times and ensuring our dignity and the basics of life to help us get back on our feet.

Fortunately, the British public are seeing through the Government. As British social attitudes surveys have consistently shown, they want not a divided society but a fairer, more equal one. That has been reflected in recent opinion polls on benefits. When the Government’s myths are exposed to people, most do not support them.

I do not want ours to be a country where we impoverish children and rob them of their futures. We need to get the economy moving again and I hope that the Chancellor and Secretary of State will listen to my right hon. Friend the shadow Secretary of State’s proposals about how we do that. If they do not, we are in danger of losing a generation, storing up health and social problems for the future—and seeing a divided Britain, not a one nation Britain.

Several hon. Members:

rose—

Order. In a bid to accommodate more colleagues, I am afraid that I am reducing the time limit for Back-Bench speeches from five to four minutes each, with immediate effect.

In the short time available, I want to nail a couple of myths that have come up in the debate and give the view from Cannock Chase.

The first myth is that we are giving a tax break to the wealthiest in society. The answer that the shadow Secretary of State would not give earlier is that over a 13-year period, the Labour Government had a 50p tax rate for 37 days. The idea that we are giving the rich a tax cut is just a sixth-form debating point; the Labour party had 13 years to introduce the 50p rate, and they introduced it for 37 days.

Let us nail another myth. Although many people in work get benefits, there is evidence of a culture of worklessness, whatever the Joseph Rowntree Foundation says. If hon. Members do not believe me—[Interruption.] Give me a second. Let me read the House a summary of an interview on LBC radio in December. A man called Paul phoned in to say that it was not his fault that there were no jobs out there. He said:

“Why would you work for low wages, can’t really understand that, what’s the point? I was offered a job two weeks ago; they wanted me in there at 8 am in the morning.”

The presenter said:

“And you didn’t want to do that job?”

Paul replied:

“It’s ridiculous, that time!”

The presenter asked:

“What time would you finish if you started at 8?”

Paul answered:

“Well it finished about 4, but that time in the morning is too early. Most people start at 9 don’t they?”

The presenter, getting angry now, said:

“No, people start work at all hours. If I was in charge and you turned down a job for that reason I would cut your benefits. You lied you said no work out there. There are people out there struggling every single day who would love to get that job, frankly you can’t be fagged can you?”

Paul said that he would love to have the job but he was not willing to start at 8, only at 9.30, to which the presenter replied:

“I am outraged by what you just said.”

Let us not pretend that there are not some people who cannot be bothered to work.

I am not sure whether that anecdote should lead us to any wider conclusion. The only worklessness in the Chamber today is on the Tory Back Benches—there has been an average of only 12 Tory Back Benchers all afternoon.

I have been here since the beginning of the debate, waiting patiently to speak.

I move on to my constituency. The House of Commons Library shows that average wages in Cannock Chase rose by 6% between 2007 and 2012. During that same period, benefits went up by 20%. Where is the fairness in benefits going up by 20% when pay has gone up by only 6%? Do not take my word for it. This is what a local police officer e-mailed me last year when we uprated benefits by 5%:

“Why has the Conservative Government given a recent rise in benefits money…to the unemployed when Nurses, Police Officers, Fire and rescue workers and all other public sector workers have not received a pay rise for over two years?”

It is a fair question, and I do not know the answer. What I do know is that if the rate of inflation is not sufficient to warrant an increase in public sector pay beyond 1% in April this year, it cannot be so high as to require an increase in benefits beyond that either.

This is what another constituent who recently contacted me said:

“I have a friend who has a partner, neither she or he work and have not worked for as long as I can remember. They are both fit and healthy and perfectly able to work they just do not want to. They openly admit there is no point in finding work as they would not have enough money to live on. She stated to me that in order to get close in wages to what they receive in benefits that they would both have to get a job.”

This is the perverse reality of where we are now—that it pays people not to work and they are better off at home on benefits even though they could work and in many cases want to. Tellingly, the constituent went on to say:

“Some time ago she”— her friend—

“let it slip out that she claimed £500 a week in benefits, I was…astounded and furious and pointed out that it was twice my wages. I am…aware that some people are unable to work and in genuine need…but surely people on benefits who are MORE than capable of working should not be living a life of…luxury and be financially better off than those who…earn a living? These people are playing the system…whilst…genuine hard working people struggle to have a life.”

Those are the real words of a real constituent in an area where the average salary is £22,500, and Labour Members ignore those words at their peril. [ Interruption. ]

Order.

The Opposition have argued that this uprating of 1% will impact on working people and not just those on benefits. Given that the previous Government made 90% of workers eligible as welfare recipients, that is inevitable. Unfortunately, Labour Members make the mistake of taking these measures in isolation. If we take the Government’s measures as a whole, including tax allowances, energy tariff changes and cutting petrol duty, low-income working households will be better off. It is time to end the ridiculous money merry-go-round. Let us take people out of tax and off benefits. Labour used to be the party of the working man; it is now the party of the workless and welfare. I look forward to fighting them on the doorsteps as they take that message to the electorate. [ Interruption. ]

Several hon. Members:

rose—

Order. Before I call the next speaker, let me say that shouting back and forth really does not help the debate, and I am finding it difficult to listen to what the speaker is saying, so please let us have less of it. I call Steve McCabe.

I apologise for being absent for part of the debate while attending duties at the Home Affairs Committee.

The one inescapable fact is that however much the Chancellor talks about shared pain, we are discussing real cuts to benefits at a time when he thinks it is okay to prioritise tax cuts for millionaires. We should no doubt be grateful that pensioners have been spared this cut in their benefits, but that is probably down to Lord Ashcroft having identified what a key group they are and putting their benefits off limits.

I am afraid that these proposals look like an ambition to create division between those who have little and those who have less. That sits comfortably with the values and politics of a particular kind of Conservatism. This is called an uprating, but 1% rises over three years really represent a cut of 4% in the spending power of those already struggling. Citizens Advice estimates that when we take tax changes into account, a family with two children paying £130 per week in rent and earning just above the minimum wage will be almost £13 per week worse off. That is before we take food and energy inflation into account. No wonder people are being driven into the arms of payday loan sharks.

Income transfers for those on modest incomes, for example, are recognised throughout developed economies as exactly the kind of fiscal stimulus needed when recessionary pressures are highest, but the Chancellor is doing the exact opposite. A total of 4.6 million women will lose their tax credits, including 2.5 million working women and more than 1 million who care for their children while their partner works—the same people who are also having their maternity benefits cut. Lord Ashcroft calls them “suspicious strivers”. In his words, they fear they are one more redundancy, one interest rate rise or one tax credit change away from real difficulty, and they would not want to rely on a Conservative Government if they found themselves in trouble.

For the record, 42,654 people in the Peterborough constituency will be better off under the tax changes in April. Is the hon. Gentleman not ashamed that under his Government, who presided over 16 years of economic growth, more than 1,000 people in my constituency were parked on invalidity and incapacity benefit for more than 10 years. That is shameful and it is his Government’s record.

I cannot wait for the hon. Gentleman to have to meet all those people who are better off at his advice centre.

The International Monetary Fund regularly warns about the dangers of cutting the automatic stabilisers in these economically fraught times, yet that is exactly what is happening. It is estimated—the IMF is the source —that these benefit cuts will contribute to a £40 billion reduction in the country’s output when we desperately need the opposite to happen.

As well as implementing benefit cuts that defy economic logic, the Chancellor has set up a special hotline for Tory MPs who are confused about his benefit changes. Special hotlines for Tory MPs, Government cars to cushion Ministers from rail-fare rises, and specially arranged meetings to cover the transport costs if they want to watch the European cup final—yes, they are definitely all in it together.

My contention is that these decisions do not make economic sense, are not fair and will punish the very people who are striving and struggling to make ends meet while the Chancellor’s millionaire friends are prioritised for tax cuts. That tells us all we need to know about this Government’s values.

The problem with this debate is that nobody has gone back to the idea of what the social security welfare state was for. It was brought in to make sure that people who were in desperate need at a time of unexpected circumstances did not fall into poverty. When somebody lost their job, that often meant they were stuck. That is why the social state was created.

I have sat throughout this debate and listened to many a speech, and the only Opposition Member who has spoken with any passion is Ian Mearns. He gets it—he knows what the welfare state is about. All the other speeches by Opposition Member have, I am afraid, been about pure political point scoring. I do not doubt for one minute that the vast majority of Opposition Members care deeply about the poorest in society, as we do on the Government Benches.

Will the hon. Gentleman give way?

Just give me two ticks. The constant mocking that has gone on is shameful political posturing.

The two commodities that have seen the highest inflation are food and fuel, which affect those on a low income more than anyone else. Does the hon. Gentleman think that the Secretary of State’s benefits cap will enable those people to come out of poverty and go for jobs?

The hon. Gentleman mentions rising food inflation, but let us not forget that we have just knocked 10p off the price of a litre of fuel. That 10p was in the Opposition’s plans and would have created extra inflation.

This debate has been polarised, but a divide has been in existence for more than a decade and it is coming to the fore. As soon as we try to address it, we are described as nasty and heartless and told we are not dealing with people fairly. The fact is that too many people in this country have the wrong idea about benefits, which is not a dirty word.

The divide has not been in existence for just the past decade—Lady Thatcher and Geoffrey Howe hatched a plan to dismantle the welfare state more than 30 years ago. Is this Bill just another phase in bringing the welfare state to a conclusion?

In the past 10 years, people have said time and again, “Why should I do this when someone on out-of-work benefits gets double the pay rise I get?” That is a fact. Wherever we may want to lay the blame and whichever way we may want to look at the issue, the fact is that people do not believe in the welfare state in this country any more. That is not just a tragedy; it is deeply worrying for this country.

The measures being taken by the Secretary of State, which we will vote through, will bring back some fairness to society. They are part of a big package of measures. However, we have a problem. We all want to give as much money to people—of course we do—but we cannot afford it.

Does my hon. Friend agree that when there is a limited pot of money, it is better to spend it on high-quality advice and support for people such as older workers who are back in the job market and are struggling to cope than on increasing an already enormous welfare bill? That kind of advice is long overdue and has been long neglected. [Interruption.]

I thank my hon. Friend for those comments. I just heard Opposition Members say from a sedentary position—we have heard this several times today—that there has been a tax cut for millionaires. Let me be blunt. All the evidence shows that when the 50% tax rate came in, £7 billion disappeared from the Exchequer. Today’s policy will save £1.4 billion from the welfare state bill. If Labour had not brought in the 50% rate, we would not have had to introduce this policy. Opposition Members cannot pick and choose the arguments; they have to look at things consistently and completely.

This debate has shown that the Government are trying to ensure that we have a fair system of social security that is there when people unexpectedly fall into terrible circumstances. Several Opposition Members have described people who have been made redundant recently and who need to rely on the welfare state. That is what social security is for. That is why people pay their national insurance contributions—so that they do not fall into the starvation and poverty that existed before the welfare state. What is shameful about the Opposition, as has been shown today, is that the Front Benchers are not linked up with the Back Benchers. The Back Benchers believe in caring for people, whereas the Front Benchers are trying to score political points. If the Labour party once again votes against reforming social security, let the message go out to the country that it is not interested in the poorest in society, but is interested only in bribing the electorate to try to get back into power.

The proposal is to limit the increase in working-age benefits to 1% for the next three years, which is an effective cut. Let us make no mistake: for anyone who relies on benefits for all or part of their income, this will be a “poverty-producing policy”. Those are not my words, but the words of the Child Poverty Action Group. Working families are finding it hard to get by financially after two years of freezes in child benefit and working tax credit, and cuts to child care tax credit, housing benefit and support for new parents. It is no wonder that the CPAG is warning that the number of children living in absolute poverty will rise.

Let us look at what the proposal means for a full-time worker on the minimum wage. In a response to my hon. Friend Ann Coffey, the Treasury confirmed that the working tax credit lost in 2013-14 by people who are working full time on the minimum wage, due to the Government’s freezes and the increase in the earnings taper, will be £475 for a single person with no children and £660 for a couple with one child. Contrary to the assertions made in Parliament, the amount of working tax credit lost by families with one earner on the minimum wage will be greater than their saving of £420 in 2013-14 from the increase in the personal tax allowance.

Many of my constituents work in low-paid retail work. I am grateful to the Union of Shop, Distributive and Allied Workers for the survey of its members, who all report how difficult it is to manage with the rising cost of food, fuel and other everyday items. Many report that they have turned off the heating at certain times in the month. Tracey said that although both she and her partner work, after paying for the rent, gas and electric, they often find it so hard to manage that they go without food so that their children can eat.

That situation is confirmed by the Oasis food bank in my constituency, which has recently begun to operate. Although I support its good work and pay tribute to it, I deplore the fact that such organisations are needed in the 21st century. The food bank tells me that many working people come to it as they simply cannot make their money stretch to the end of the month, and we know that more people are turning to payday lenders simply to get money to spend on essentials, not on luxuries any more. It is no wonder those payday lenders are circling the estates.

The people affected have not made a lifestyle choice. They are working people such as the one who came to my surgery who gets up at 5 o’clock to do two cleaning jobs. It is not a lifestyle choice for those who are out of work, either. It is a situation that they find themselves in, like the young man who worked at Comet and lost his job, and is now competing with seven others for every job in my constituency. He was almost in tears at having to claim benefits, and I can relate to that: I claimed benefits myself for a few months in the mid-’80s when I was left with a young daughter, and it has left an indelible mark on me. I know what it feels like to go and sign on—it hurts, it really does.

Those in work who are struggling to make ends meet and those out of work who are desperate to find it are the people who are bearing the brunt of the Government’s failed economic policies, not the high earners and millionaires who are getting a tax cut of £107,000 this April. It is not fair, and it is not right, and I am proud to vote against the Bill and defend the 8,100 people in my constituency who are claiming working tax credits.

It is a great privilege to be called to speak in this sensitive and important debate. Any debate that focuses on our welfare system tends to provoke a great deal of passion, and it can be all too easy for politicians of all parties to fall into lazy arguments based on simplistic generalisations or preconceived ideas.

Our welfare system is a valuable part of our social fabric. Even a believer in a small state, like me, can believe that we should unquestionably support those in our society who fall on desperately hard times, either temporarily or permanently. For those who find themselves truly in need, support must be provided through our welfare system as a safety net for the most vulnerable.

However, the idea that our welfare system was sufficiently reliable or fair upon the formation of the coalition Government in 2010 is simply ludicrous. First, the system that we inherited was simply unaffordable, costing taxpayers more than £87 billion in 2010 alone. Such enormous outgoings must be reviewed and targeted for efficiencies. To suggest that a desire to reduce the cost of the welfare system is akin to not supporting vulnerable people is nonsense. In fact, I would argue that a shrinking welfare budget would be a key indicator of a successful welfare system.

That brings me to my second point which is about the wider welfare situation that we inherited in 2010. It was creating a culture of sheer dependency in certain parts of the system and contributing towards the dangerous social divide that my hon. Friend Kris Hopkins touched upon.

I welcome the fact that you welcome a safety net. Do you not agree that unless you increase benefits by the rate of inflation, you are lowering that safety net?

As you rightly said in your speech—

Order. There are too many uses of the word “you” for my liking. It is not about me.

I apologise, Mr Deputy Speaker.

The safety net in the welfare state system is important, but I support the 1% uprating. The point was made earlier that if we are really to focus on the problem, we have to consider inflation as well. If we can keep inflation down through Government measures, as we are at the moment, that is an important part of the system.

An effective and fair welfare system should support those who tragically suffer from difficult medical conditions and those who find