The First Deputy Chairman:
With this it will be convenient to discuss the following:
Amendment 7, page 1, line 4, leave out ‘1%’ and insert
‘the Retail Prices Index measure of inflation.’.
Amendment 10, page 1, line 4, leave out ‘1%’ and insert
‘the percentage by which the general level of earnings is greater at the end of the period under review in that tax year under section 150(1) of the Social Security Administration Act 1992 than it was at the beginning of that period’.
Amendment 20, page 1, line 22, leave out subsection (5).
Clause stand part.
In this Bill the Government are punishing people who are already hard up for the failure of their economic policy. We were promised that the policy would lead to steady growth and falling unemployment, but it has failed. We have had a double-dip recession, and some predict that this week we will learn we are in a triple dip. Unemployment is now officially forecast to go up next year, so spending on unemployment benefits will go up, and borrowing will go up too.
The Chancellor’s policy has failed and the Government have decided to respond by forcing down the incomes of those whose incomes are already the lowest of all. Roughly speaking, the saving over the two years to which the Bill refers will be about the same as the increase in welfare spending resulting from the rise in unemployment forecast just between the Budget last year and the autumn statement.
The Government want to cut the incomes of the least well-off in real terms, not just for the coming year but, through this Bill, for the year after and the year after that. At the same time, in April they will give a tax cut to everybody earning more than £150,000 per year. That combination of policies will force up poverty in every part of the country, and it is a disgrace that Ministers are forcing this Committee stage into a single day.
This Bill is a bitter blow to large numbers of families—in work and out of work—who are on low incomes at the moment and struggling to make ends meet. Three new food banks open every week; last year a quarter of a million people received help from a food bank because they could not afford enough to eat, and this Bill will make matters significantly worse. It means that for three years, low-income families will get below-inflation increases. The number of people visiting a food bank will be higher this year and, because of this Bill, it will be higher still next year and higher again the year after that.
As Citizens Advice points out:
“The cumulative impact of capping the uprating of most benefits to no more than 1%”,
for the next three years, will lead to an exponential increase in net losses each year. Child Poverty Action Group stated that
“the poorer you are, the greater your loss.”
We certainly want it to be more worth while for people to be in work, but forcing down the incomes of those who are out of work is not the way to do it.
Clause 1 affects mainly out-of-work benefits, but people struggling to make ends meet in work are hit as well. Schedule 1(b) means that the personal allowance used in the calculation of housing benefit for people in work will go up by only 1%, irrespective of what happens to rent levels.
I will make a little more progress, and then gladly give way again. As I was saying, schedule 1(b) means that housing benefit for people in work will be cut in real terms as well. We will return to that when we speak to amendment 17.
The change in the personal tax allowance, which we have heard a good deal about, will not do very much to help people who are in work on low incomes. Citizens Advice points out that
“any rise in net earnings leads to a reduction in housing benefit and council tax benefit.”
In addition, of course, the change will do nothing at all for people who are out of work.
No—I will make progress before I give way again.
The Bill was designed by the Chancellor to promote his party’s narrow interest. Like a number of the Chancellor’s efforts of that kind, it has not worked out as he hoped, but let us be clear that the Government have restricted uprating to 1% for the coming year without a Bill and did not need a Bill to restrict uprating for future years. The Chancellor thought he could boost his party’s standing if he introduced a Bill, so we have one. Coalition Ministers are here to help advance the Chancellor’s cause.
In particular, it is ridiculous to announce now—before we know anything about the future course of inflation—by how much benefits will be uprated in more than two years’ time, which is well after the general election. The Opposition therefore reject the proposal to restrict the uprating of social security benefits and tax credits to 1%. As I have said, in our view, uprating should be in line with inflation and assessed, as it always has been, at the end of the preceding year.
The Secretary of State claimed in his speech on Second Reading that, as part of employment and support allowance, the support group is protected, but it is not. The Secretary of State said that people who are not in the support group will find that they are affected. That is true, but people in the support group will be hit as well. Citizens Advice has worked out that a lone parent with three children who is in the support group will lose £600 in 2015-16 because of the exponential way in which the Bill will grind down the incomes of people who are already hard-up. We will come back to that.
Is my right hon. Friend aware of the coalition of 60 Scottish charities that says that the Bill contradicts the principle that everyone should have a reasonable income in order to live a dignified life, and that many people in Scotland will be adversely affected by the Bill?
My hon. Friend is absolutely right, as are the organisations to which she refers. Indeed, as I shall say, there has been a widespread call along those lines pointing out the damage that the Bill will do. Disability Rights UK states:
“The Government has suggested that all disabled people are protected from the lower 1% increase in benefits. This is not the case.”
In fact, as the impact assessment tells us, disabled households are more likely than others to be hit by the changes in the Bill.
The right hon. Gentleman has twice from the Dispatch Box repeated the commitment to uprate benefits by inflation? Is that the retail prices index or the consumer prices index, or has that yet to be decided?
That is a matter to be announced at the appropriate time. At the end of this year, we will set out how benefits should be uprated for the following year, as it always has been done, and at the end of next year for the year after that.
I will make a little more progress and then I will gladly give way again.
In moving amendment 12, I wish to focus on the effect of clause 1, as it stands, on child poverty. Previously—reflecting the commitment in the coalition agreement to eradicate child poverty by 2020—the Government have published the effect of Budgets, spending reviews and autumn statements on child poverty. We know from the Institute for Fiscal Studies that, taking account of everything that the Government announced before the autumn statement, child poverty is set to go up by 400,000 by 2015 and 800,000 by 2020. In this autumn statement, they did not mention child poverty at all. There was no mention in the impact statement, where it should have been. I tabled a question and the Minister told me that he would reply as soon as possible: I am still waiting.
Despite the Government’s best efforts, the answer did slip out in an answer from a different Minister. In that, we read that the three years of uprating will increase child poverty by an additional 200,000 on top of the increase that is already due. That means that we are on track for 1 million more children below the poverty line by 2020. That is a devastating blow and will undo all the progress of the last 15 years.
The powerful figures that the right hon. Gentleman cites show that this is a cruel and callous Bill. Given that that is the case, does he not think that Labour supporters might be disappointed that he will not commit now to re-link the upratings with RPI? Nor has Labour said that if it were to form a Government next time, they would reverse the Bill. Is not there a danger that people will think that it is all rhetoric and no action from the Opposition?
The time to announce how benefits would be uprated for next year is later this year in the normal way. The time for the following year is the end of next year. We reject the Bill, which is the Chancellor’s partisan and unprecedented device to set out the trajectory for two years’ time, before we know anything about the future course of inflation.
Ministers still say that they are committed to eradicating child poverty. It says so in the coalition agreement. That commitment is clearly now fictitious. The Bill is simply incompatible with that commitment. Ministers should stop pretending. They have given up on reducing child poverty. They have not just given up on publishing the numbers as they used to do: they have given up on delivering the goal as well. Now they are implementing policies that will force child poverty up.
Given that the last Government spent £150 billion on tax credits and achieved a 6% reduction in child poverty, does the right hon. Gentleman think that lifting 350,000 out of child poverty for a £2 billion investment in universal credit represents good value for money?
The policies of the previous Government reduced the number of children below the poverty line by 1.1 million. The policies of this Government are set to increase it by 1 million by 2020. That is a shameful record.
What we will have from April is a toxic combination of policies that will cut the highest rate of income tax and real-terms cuts in benefits and tax credits. Some 8,000 people who earn over £1 million a year will get a tax cut in April averaging more than £2,000 a week. Someone receiving the adult rate of jobseeker’s allowance will receive 71p a week. People are getting angry at what the Government are doing.
The right hon. Gentleman may or may not think that the Bill is a partisan device by the Chancellor—and he may or may not be right—but in refusing to support either the amendment tabled by Caroline Lucas or the various amendments tabled by Liberal Democrat Members, is not the Labour party being absolutely pathetic? It has the opportunity to do something about this and it is not taking it.
We will announce uprating policy in the normal way on the normal timetable, not on a date chosen by the Chancellor for his own partisan purposes.
I think the Minister knows that I have been looking back at his speech in the Child Poverty Bill Second Reading debate in July 2009—fewer than four years ago. It was an autobiographical speech, as he said at the time. He explained that his first job was with the Institute for Fiscal Studies, where he had the task in the 1980s of compiling its poverty statistics. He said that
“year after year the level of child poverty would remorselessly grow. A majority of people would do relatively well, enjoying tax cuts, and the people at the top would do exceptionally well, but year after year more and more children would find themselves in poverty.”
He said that he decided to become a politician because he
“was appalled at what was happening in our country to the most vulnerable people”—[Hansard, 20 July 2009; Vol. 496, c. 625.]
Now here he is, three-and-a-half years later, arguing in this Committee for exactly the same combination of policies he condemned at the time: tax cuts for the highest paid and benefit cuts for the most vulnerable. Exactly as in the 1980s, as he knows better than anybody, the result is certain: child poverty rocketing. With the extra rise as a result of the Bill, if current policies are maintained it will go up by 1 million by 2020—right back up to the level he was logging at the IFS in the 1980s.
Does the right hon. Gentleman accept that the most recent data demonstrate a reduction in child poverty last year of 300,000? If he disputes that, does he have any comment on the way the previous Government measured child poverty, and whether that measure should be changed?
Absolutely right—the policies of the previous Government have continued to have beneficial impacts, but as soon as this Government change the policy the numbers will rocket back up again. According to the IFS, child poverty will rise by 400,000 by 2015 and by 800,000 by 2020. On top of that, there will be an additional rise of 200,000 as a result of the Bill. That is what the Government’s policies are doing.
Of course, that is the figure the Government have been prepared to acknowledge in relation to relative income poverty, but they have said nothing about the impact on absolute poverty, material deprivation or persistent poverty—all measures they are signed up to in the Child Poverty Act 2010. Does my right hon. Friend agree with me that they should publish the impact on those measures of poverty as well?
Absolutely. That is what they have done in previous Budgets and autumn statements; in this one there was silence. I agree with my hon. Friend that the Government should absolutely return to the practice they adopted after the election.
Like the Minister in the 1980s, anybody who cares about poverty and who is looking at what is set to happen to the most vulnerable in the next few years, will be appalled. Child poverty will be growing remorselessly once again—back to the policies of the 1980s and back to their consequences, too. There is enormous public concern about the effects of clause 1 and the Bill as a whole. My hon. Friend Sandra Osborne referred to the coalition of organisations in Scotland who have written about their concern. The Child Poverty Action Group has said:
“The Bill is a cause of great concern.”
Barnardo’s has stated:
“This policy will punish children the most by trapping them in poverty and impacting on their lives, leading to poor health, poor qualifications and unemployment.”
Citizens Advice said:
“It is imperative, particularly whilst increases to earnings from work are restricted, that support for low earners received through the welfare system is not disconnected from inflationary measures to the cost of living.”
The Children’s Society said:
“Groups which are meant to be protected (such as households with somebody with a disability) are more likely to be affected than households without protection.”
In an open letter this morning, the chief executives of Catholic charities in Liverpool, Manchester and London warned of the threat the Bill
“poses to the fundamental well-being of disabled, unemployed and low paid people, as well as their families who are already buckling under the weight of recent changes to the welfare system.”
I ask the right hon. Gentleman to look at the facts, rather than scaremongering. The fact is that the child element of tax credit has gone up by 16% under this Government—£470. He really should look at the facts.
I simply ask the hon. Lady to look at all the other things the Government have done and at the Institute for Fiscal Studies assessment of the consequences for child poverty. As I have said, its assessment is that the number of children living below the poverty line will increase by 400,000 by 2015 and by 800,000 by 2020 and that there will be an additional rise of 200,000 as a direct result of the Bill.
The general secretary of USDAW, the shop workers’ union, has spoken of
“a kick in the teeth for working people that will fill many households with despair.”
Disability Rights UK has said:
“We are fearful that the Welfare Benefits UP-rating Bill will… impoverish thousands more disabled people.”
Homeless Link has said that
“the proposals contained in the Bill are grossly unfair, hitting the poorest in society the hardest.”
I just wonder how the right hon. Gentleman can forecast with such certainty this abrupt turnaround and deterioration until 2020. Does his forecast assume that there will be a Conservative Government for that second period?
The right hon. Gentleman should ask the Institute for Fiscal Studies, where the Minister served with considerable distinction in the 1980s. It has been a reliable guide in the past and will be in the future. The assumption is that the existing policies will continue.
This is a terrible Bill that is being rushed through in a disgraceful manner. It will hit very hard those people who are already struggling to make ends meet. It will hit women disproportionately hard. It will hit disabled people, including everyone in the support group for employment and support allowance. It will hit children, pushing 200,000 below the poverty line.
At a time when the coalition Government are—
What the right hon. Gentleman is saying sounds like a peroration, so I think that he might have accidentally dropped the page on which he was going to say where, if not from these measures, he would find the £3.5 billion. Where would he find the money?
Of course, the background to this policy is the failure of the Government’s policy. If we look at the unemployment forecast set out at last year’s Budget and compare it with the forecast set out at the autumn statement, we will see that it will cost an extra £3 billion in additional benefits. What the Minister and the Chancellor should be doing is putting in place policies that will reduce unemployment, not see it continue to rise.
At a time when the coalition Government are handing the richest people a tax cut of £2,000 a week each, they have decided that people on jobseeker’s allowance can have only 71p each, 72p the year after, and 73p the year after that. To quote the Minister’s 2009 speech, it is “appalling”. I urge the Committee to support our amendment and vote against clause stand part.
I will speak briefly. I think that it is important that all of us who represent communities with a lot of deprivation, such as my constituency of Dover and Deal, make sure that the Government, or any Government, have policies that make work pay. About 5 million people in this country could work but do not. We need more of an incentive for people to realise their potential and do well in life. Part of that needs to be an economic incentive. Let me pray in aid the words of the Chancellor of the Exchequer:
“We have to acknowledge that over the last five years, those on out-of-work benefits have seen their incomes rise twice as fast as those in work. With pay restraint in businesses and Government, average earnings have risen by about 10% since 2007. Out-of-work benefits have gone up by about 20%. That is not fair to working people who pay the taxes that fund them.”—[Hansard, 5 December 2012; Vol. 554, c. 879.]
I will in a moment.
It is also unfair on those people who are not in work, because they have no incentive to go and seek work. We need to provide that incentive, not because we want to attack people who are unemployed but because we want to give them every incentive to get work, realise their potential and take the opportunity to do really well in life and be a great success.
In that case, why does the Bill apply to statutory maternity and paternity leave, adoption leave and sick pay—all those things that are provided for people exactly when they cannot possibly go to work?
As the hon. Lady knows, the principal part of clause 1, which we are discussing, deals with out-of-work benefits. As she also knows, the policy of the Opposition—that uprating should continue according to inflation—and their opposition to this Bill would cost £3.5 billion. Money is tight in this country today. The reason for that is that she and her party drove our economy off a cliff, overspending for years and displaying fiscal incontinence that was unparalleled in this country in the last century.
Does the hon. Gentleman accept that since his Government were elected, they have increased borrowing by £212 billion?
The hon. Gentleman makes the case better than I could about the extent of the mess left by the previous Government, which was such that recovery has been choppy. As the whole Committee knows, a recovery from a debt crisis is always much tougher, particularly when we also have the eurozone plunging into crisis because of its years of mismanagement. Unless we have sound money and ensure restraint in the public finances and growth in the private sector, we will not be able to turn the corner and get the economy growing and the nation’s finances in place. The economy is now starting to heal, but part of that involves building in an extra incentive to ensure that work pays—universal credit is part of that—and ensuring an extra incentive for those who are out of work and on benefits to go into work. We do that by not continuing with the over-generous benefits or over-uprating of benefits, as compared with what people in work have received, that we have seen in recent years.
The hon. Gentleman is making the point strongly that it is important that we make work pay. On that basis, is he concerned that 60% of those affected by the clauses we are discussing today are in work, and that this Bill is making precisely those hard-working people on low and middle incomes worse off by being in work?
The hon. Gentleman well knows that this Government have taken many people on low incomes out of tax altogether. That is not something that his party did. Labour froze the personal allowance and, over time, had more people in the tax system relatively speaking. We have taken people out of tax, because we do not see the point in taking money off people in taxes and then handing their own money back to them. It is better not to take it off them in the first place.
The key point is that the Opposition are proposing to impose a cost of £3.5 billion. I ask them: where are they going to find the money? How will they pay for their spending pledge? If they want to pay for it through more borrowing—which always seems to be their policy—all they will do is raise interest rates for hard-pressed mortgage holders, small businesses and borrowers.
Is not the truth that the Opposition’s opposition to this Bill would cost the average family £5,000 extra in debt? Does my hon. Friend agree that there is no money growing on trees—we pay for that either in debt or in tax—and that the Bill is a sensible measure, as debt simply holds more families back?
I absolutely agree with my hon. Friend. The Labour party just thinks that we can sink further into a sea of debt. We have to call time on that. We have to get control of our public finances and our private finances, and restore sound money once again.
I have been quite generous in giving way, so I would like to make a bit of progress.
Let me turn to the issue of child poverty. We heard a lot of rhetoric on child poverty from the shadow Minister, in addition to the amazing spending commitment that he delivered to the Committee in response to my intervention. Let us look at the child poverty figures, which the Opposition say are a key reason to oppose clause 1. The figures from the last Parliament show that, after housing costs, there were 3.6 million children in poverty in 2004-05. In 2009-10, there were 3.8 million. In other words, it went up 200,000 under the previous Government. The figures for 2010-11, the latest available, went down 200,000 under the present Government. The achievement of the previous Labour Government was therefore to increase child poverty by 200,000—not a great record, to put it mildly—while the present Government have been in office at a time when child poverty has been falling.
Let us also consider the fact that there were 700,000 children in severe poverty in 2004-05. By the end of the Labour Government, that figure was the same. After one year of this Government, however, the figure had gone down to 600,000. Before the Opposition start talking about child poverty, they ought to take a closer look at their record in office. We also need to have a closer look at the policy of universal credit, which, according to Government statistics and the Red Book, will take about 350,000 children out of poverty.
It is important that we look after children and give them the best possible start in life, and this Government are committed to that. The Secretary of State for Work and Pensions is certainly committed to that, as am I. I am committed to the Bill, and the measures in clause 1 are really important because we need to do all we can to ensure that people who are not in work achieve their potential, get into work, do really well and achieve great success in their lives.
Charlie Elphicke forgot to mention that while those on benefits have had their benefits uprated at twice the rate of those in work in percentage terms over the past five years, the actual increase in financial terms has been on average about £49 for those in work and about £12 for those on benefits. Those figures were put into the public domain by Paul Lewis on “Moneybox” on BBC Radio 4, and I have no reason to disbelieve him. I wonder whether the hon. Gentleman has. It is important to take those figures into consideration. Percentages are meaningless; 50% or 100% of very little is still very little. Making comparisons in the way that he did demeans the debate.
I would like to thank you for calling me to speak, Mr Evans, because this is an important debate on a Bill that, if voted through, will have a detrimental impact on many thousands of my constituents and others across Tyneside and the north-east. I have said this before, but it is important: the way in which this country’s economy works is very different in different parts of the country. It is therefore important to remember that the equation of welfare to work is a two-part equation. Welfare is one part; work is the other. In some parts of the country, there is no work; in others, between a dozen and 20 people—or even more in some places—wait for each vacancy. In such places, where people have no real opportunity to get work anywhere near their own locality, there must be decent welfare so that they can sustain themselves, their families and, most important, their children.
I was fortunate enough to speak in previous debates on this issue earlier this month, so I shall keep this speech as brief as possible, given that many Members will wish to take part in the debate. I shall try not to repeat the points I have already made. Instead, I shall focus on the impact that the Bill will have on families and, particularly, on children. I also do not want to disregard one important set of people—namely, those with mental health difficulties. I believe that the impacts of the Bill on those people has been underplayed to a certain extent.
I visited Tyneside Mind in Gateshead on Friday and spoke to a range of service users there. It is disturbing to see the increased pressure being put on those vulnerable people, who are in a fragile state of mind, to jump through a whole range of hoops, and to see the impact that the new measures are having on them.
Does the hon. Gentleman accept that this situation puts great pressure on local agencies that are trying to help people back into work—the Agored Cymru in my constituency, for example, which works with people with mental health and substance abuse problems—and that they are feeling the pinch as well?
I have no doubt that that is the case. It applies to the north-east of England where the capacity of local authorities to help out local communities has been dramatically undermined—disproportionately, by comparison with other parts of the country.
This Bill provides yet another example of the Government demonising the most vulnerable in our society, making the poorest live in relative poverty. The Government’s decision to cap uprating on certain benefits and tax credits will, as confirmed only last week by the Minister with responsibility for disabilities, result in around 200,000 more children living in poverty. Let us bear in mind the fact that this is not the only policy forcing those on the lowest incomes into poverty. We need look only at the sprouting of food banks everywhere truly to understand the impact of this Government’s welfare agenda.
According to the Child Poverty Action Group report entitled “The Double Lockout: How local income families will be locked out of fair living standards”, this Bill
“is poverty-producing and means that both absolute and relative child poverty will increase”.
How exactly? First, delinking the uprating of benefits from increases in the price of commodities such as fuel and food will obviously result in a fall in standards of living for anyone dependent on state assistance. Given that two thirds of the households affected by the Bill have children in them, it is not hard to understand why child poverty will increase. Furthermore, given that proportionately poorer households spend more on basics such as fuel, food, water and other households necessities, their rate of inflation is higher when the prices of those basic goods increase faster—a trend we have seen over recent years.
In the last few months we have seen utility companies hiking up their prices—the highest change we have seen is about 10.8 or 11%. How on earth are the low paid and those out of work supposed to heat their homes if their benefits are not increased in line with inflation? We are going to see families—we are already seeing them—having to make the difficult choice between eating or heating.
The Children’s Society estimates that the following professions are also affected: 300,000 nurses and midwives in the NHS; 150,000 staff in primary and nursery schools; 1.14 million admin workers, secretaries and secretarial assistants; 44,000 electricians and electrical fitters; 510,000 sales assistants and cashiers; and 42,000 armed forces personnel.
Does not that list of people in those professions that are going to be badly hit fundamentally undermine the idea that the Bill is really about incentivising lazy people to go and get a job, which will happen only if the incentive system is made a little bit nastier?
I think it is the ultimate insult to ordinary people’s intelligence to say that in order to incentivise those at the top end of the economy we have to pay them more, while incentivising people at the bottom end by paying them less. “We are all in this together”—I don’t think.
By no stretch of the imagination should these hard-working people—all those I have just listed—be regarded as shirkers. The Joseph Rowntree Foundation estimates the cost of child poverty to the taxpayer as £25 billion, despite the fact that 57% of children living in poverty have one parent working. Surely increasing the number of children suffering from child poverty, which is what the Bill will do, will take more out of the Treasury’s coffers in the long term than would be saved from capping the uprating.
On the subject of insulting people’s intelligence, will the hon. Gentleman vote for either of the amendments that seek to change the rate of this benefit cut?
What I will do is listen to the debate and see whether I can be convinced one way or the other.
Given that the majority of the people impacted by the Bill are in work, the Minister should perhaps have listened to my suggestion on Second Reading: why not legislate for a living wage so that low-paid workers are not reliant on the Government to top up their income but are paid an adequate wage?
The hon. Gentleman talks about low-paid people and what they are suffering, but will he acknowledge that many people have been taken out of tax altogether, including 3,000 in his own constituency, and that 30,000 people in his constituency have at least benefited from the increased personal allowances?
Is not one reason why very low-paid people do not gain in any way from an increase in the tax threshold the fact that if they are working part-time on the minimum wage, they will be below the tax threshold in the first place?
Is it not the case that people do not feel better off because since the Government took office, the price of the average weekly shopping basket has risen by 17%?
I could not agree more, and that, of course, has a dramatic impact on people at the lower end of the income spectrum.
Let me clarify something that I said a moment ago. The average income per household in my constituency is just above £20,000 per annum, but that average is dragged up by some relatively well-heeled neighbourhoods. An awful lot of my constituents are struggling to get by, and I have a fantastic amount of sympathy for them, but there seems to be a compassion bypass on the Government Benches.
Given that most of the people affected by the Bill are in work, perhaps the Minister should adopt my earlier suggestion and return to the idea of a living wage. That could reduce the benefits bill, and also make companies such as Starbucks pay their staff a real wage so that we, the taxpayers, would not have to subsidise multinationals that may not be paying the corporation tax that they should be paying.
The Chancellor talks of strivers and skivers, but I see something different on the ground. I see families scraping by in low-paid work, or jumping from insecure jobs to benefits and back again. I have come across people who are working with all their might and main, moving from one part-time job to another just to scrape a living, and all too often the work that they are doing is demeaning and low-paid.
The truth, unlike what the Government keep spouting, is that those who rely on benefits and tax credits are in work, have worked, or will be desperately trying to find work in the near future. They are not scroungers, but victims of a stagnated economy, and the Government are undoubtedly making the situation worse. We need to stimulate the economy rather than stagnating it. We need to provide jobs in places such as the north-east. That, rather than crippling those who are on the lowest income levels in the whole economy, is the way to reduce the benefits bill.
Let me say this to Members in all parts of the House. When they walk towards the Lobbies, they should think long and hard about whether they can vote to allow 200,000 more children to live in poverty. I know which Lobby I will choose.
I think it would be a good idea for us to start by working out what we agree about, because during debates such as this the House sometimes becomes very tribal. It seems to me that we agree that we hate poverty, and that that is true not just of the Opposition but of the two governing parties. We see poverty as a scourge. We come here to promote and support policies that will make people better off and improve their living standards—of course we do—and today’s debate is about how we can achieve that in very straitened and difficult circumstances.
I should have thought it was common ground that we need to ensure that it is more worth while to work. In order to ascertain whether that is common ground, I intervened on Stephen Timms—who was very eloquent—and he said that that was indeed Labour policy as well as Conservative and Liberal Democrat policy. So we agree that we want to get rid of poverty and that we need to make work more worth while. That is where our Ministers are faced with a difficult dilemma. Last year’s benefits uprating occurred at about the peak of the spike in inflation and so benefit recipients got the 5.2% increase whereas low-paid people working alongside them in their local communities got perhaps 1.7%, if they were lucky—that was about the average. Suddenly, in one fell swoop, people were 3.5% worse off in work than out of work because of the normal uprating.
What the right hon. Gentleman has just said is fundamentally untrue. Just because the percentage rise for someone on £71 a week is more than that for someone on £35,000 a year does not mean that they are better off. Will he correct the record on that point?
No, I am talking about people in very similar circumstances—those either in low-income employment or out of work—where the two numbers are much closer together. They are closer together than any of us would like, because we want it to be that much more worth while for people to work. The hon. Gentleman has to accept that, at the lowest income levels, there was a problem because the benefits went up by much more than the wages. What would the best answer be? It would be for all wages to go up more. The second best answer would be for the prices not to go up so much. But we are where we are and we have to work to try to come up with a fair settlement for the future.
The right hon. Gentleman highlights the 5.2% increase last year. I have not yet heard Opposition Members congratulate the Government on that, but I congratulate the Government now. Does he agree that one of the worst things—for decades far too little was done to fix it—was the benefits trap, whereby people discovered that when they started to work part time, they ended up with less money than they had before? I hope that this entire House could agree that that is fundamentally wrong. It has affected some of my constituents and has not yet been fixed sufficiently.
If we can work to try to prevent that kind of problem from happening again, we might make a bit more progress. My right hon. and hon. Friends have a couple of policies that try to do that. First, they are rightly taking many low-paid people out of tax altogether. I believe in tax cuts for everyone. I do not just want tax cuts for the rich; I want tax cuts for those on middle incomes and low incomes, particularly those at the lower end. The idea of the tax cut for the rich is to get more money out of them; all we are trying to do is get back closer to Labour’s very successful 40% rate, which it kept for almost all the time it was in office. I noticed that its 40% rate collected considerably more revenue than the 50% it bequeathed to the incoming Government, and so it was rather foolish to put in a rate that did not work in taking money off the rich. We are trying to get back to the earlier rate.
The right hon. Gentleman clearly did not read the background papers published with the Budget in March, which showed, incontrovertibly, that the amount of money lost by the cut in the top rate of tax from 50% to 45% was £2.5 billion. As he well knows, the only reason why the Government have got cover is because people have been shuffling their income around from one year to another.
The hon. Lady has chosen the wrong Member to accuse of not reading the Budget papers properly; I am normally accused by my right hon. Friends of reading them too closely. If she read on through those Budget papers, she would see that that top rate led to an almost 10% reduction in the amount of top-level income tax coming in, which is a very foolish position to get into when we need all the money we can get. My right hon. and hon. Friends are very sensible to try to correct that, in order to get more money off the rich. We need more money off them and less money off people at the other end of the income scale. The way to take less money off people at the other end of that scale is to take them out of tax altogether, and good progress is being made in that regard.
I agree with my hon. Friend Charlie Elphicke, who has not stayed for the rest of the debate but who wisely said that it was more sensible to let people keep the money they earn at the low income levels rather than taking it off them through an expensive tax system and then giving it back through an expensive benefits system; by definition, they get back less overall, because we have to charge them a handling charge, as the rich will not pay all the money we need—they pay only quite a bit of it—and so we also have to tax the poor in order to give them benefits, and that can be silly.
The problem with using the tax threshold as a means of not taking money away with one hand and giving it back with the other is that it gives to people who do not need as well as to people who do. By contrast, tax credits targeted at lower-income households give to people who need, and the tax credit is tapered away rather than kept at the same level as people rise up the income spectrum.
What a miserable world the hon. Lady lives in. People on £30,000 and £40,000 need more money as well as people on £10,000 and £20,000, and I am here to try to ensure that they get more money. I do not believe that the Government should take all their money; they should be allowed to keep more of it so that they have more to spend, which would create more jobs. I thought that was part of the Opposition’s argument—or it would be, were we having a different debate. They will not use that argument today, because we are debating benefits.
My right hon. and hon. Friends on the Front Bench are trying to deal with part of the problem by taking people out of tax altogether and cutting the amount of tax that those at the lower end of the income scale have to pay. That is a very good thing to be doing. They are also about to launch their universal credit in trial systems. The whole purpose of universal credit, as described, is to make it more worth while to work and to deal with the fact that if benefit is taken away too quickly, people face a high rate of tax combined with benefit withdrawal, which is a big disincentive to going to work. It might even get in the way of their going to work, as they might not have enough money for the bus fare, the clothes they need and all the rest of the things one needs when setting oneself back up in a job. That is very important.
The hon. Gentleman shouts “Where is the work?”, and of course we need more work. There are a lot of jobs on offer and we wish people well in applying for and getting them. I accept his implied point: in some parts of the country work is very scarce and we need economic policies that promote it. That is where lower taxes can be extremely helpful, and I urge my colleagues on the Front Bench to do more, if they can, because if more money is circulating in people’s pockets, bank accounts and purses, we will have more spending in the economy, which will help.
The right hon. Gentleman’s idea of compassion is almost as convincing as his attempts at the Welsh national anthem. Does he concede that the Government have proposed to put benefits up by 1% because of his Government’s economic failures?
That is not my case at all. My case is that the Government inherited an impossible financial position: the public sector was spending and borrowing far too much and the economy had been performing very badly, with a collapse in living standards towards the end of Labour’s period in office that was the biggest that any of us in this House had witnessed in our lifetimes.
My right hon. and hon. Friends on the Front Bench are trying desperately to come up with a series of policies that promote growth and restore a greater degree of normality. The Committee must recognise that the model that sustained growth from 1945 through to 2007 was comprehensively broken when Labour broke the banks and nationalised them. Until we sort that mess out, we will be dealing with very unpopular and difficult choices, whoever is in government.
If the hon. Gentleman looks again at the numbers in the Budget Red Book, he will see that the automatic stabilisers have been more than functioning. Under this Government, public spending has gone up considerably while borrowing has remained at extremely high levels. The borrowing levels the Government inherited were off the chart compared with those in any previous cycle we have witnessed in the British economy. Levels of public borrowing are still well above the peaks in previous cycles. The hon. Gentleman must understand that the numbers show that plenty of automatic stabilisers are in operation—the question he needs to answer is why they are not working. Of course, they are not working because of the other problems that have been inherited, such as the broken banks, the difficulties with tax rates and the large structural deficit. Those are all part of the problem and we can debate them at another time during a general debate on the economy.
The Government are attempting, through their tax and benefit changes, to tackle the problem of people asking, “Why work?” I have two bits of advice for my right hon. and hon. Friends on the Front Bench that might be more to the liking of the Labour party. If my right hon. and hon. Friends are going to pursue and sustain the policy of very low benefit increases for the next period, it is important that two other conditions are met. The first is that every action should be taken to get inflation down. If inflation suddenly took off, this would become a much tougher and crueller policy than Ministers have in mind. That would be extremely difficult. So it is in everybody’s interest—not just of those in low-paid work and not just those on benefit, but those people in particular—that more is done to sustain and control price rises.
I hope my right hon. and hon. Friends on the Front Bench will make sure that their contacts with the Bank of England stress the need to do a better job of controlling price inflation than the Bank has been able to do in recent years, and I hope they will also be looking at reforms in a number of areas, particularly in energy, for example, because it is energy prices above all which have done so much damage to people at all income levels, but especially to people on low incomes and benefit incomes. There are other things, which are not the main subject of this debate, that could be done to tackle high and rising energy prices. This policy will be much easier to sell and to sustain if Ministers can say, “The real cut is very small because we are doing a better job now of controlling price inflation than was the case in the past.”
The second condition picks up on a point that has already been mentioned by the Opposition. The policy will also be much easier to sustain if more jobs are flowing into the economy. I pay tribute to those on the Front Bench for what they have achieved so far. Some 1.2 million new jobs have been created in the economy during their period in office. That is extremely welcome. We need to make sure that more people already settled here and down on their luck get access to those jobs and can take them so that they can enjoy the benefits of higher income in work.
My right hon. Friend makes a valid point—1.2 million new jobs created. He missed one point, however— 1.2 million new private sector jobs.
That is true, and it had to be the case because the public sector had no money left, as the previous Chief Secretary reminded us, and it was inevitable that action had to be taken to rein in the public sector. I remember that just before the Labour Government left office, they enacted proposals to halve the deficit over the next Parliament, so members of their Front-Bench team in office were fully aware that they had overdone it and they were recommending pretty unpalatable cuts to their colleagues. They did not specify the cuts, of course, because that would have been even more unpopular, but they told us in general terms that there had to be very big cuts.
Is the right hon. Gentleman pleased that many of those 1.2 million jobs claimed to have been created are part-time and low paid, and as such allow people to claim tax credits and lift the bill that his hon. Friends complain so much about?
If somebody wanted a part-time job, I am delighted that they have now got a part-time job. Quite a lot of people choose to have a part-time job. Their family commitments mean that that is what they can manage and it is a very good thing that we have generated more part-time jobs so that they can have them. To those who seriously want a full-time job—I am sure the hon. Gentleman can find people who would prefer a full-time job and are still in part-time work—I would say it is easier to get that full-time job from their part-time job than from unemployment. It is easier to get work from work. It is easier to get promoted when they are in the company and very difficult to get promoted if they have not joined the company.
It is very encouraging that people in some of our best large enterprises start off in part-time, low-paid, not very glamorous work, and when they show application and interest, they get trained and are then given greater responsibilities, and they can go on to do great things. When I last visited one of my local supermarkets, I met the manager and the deputy manager who had worked their way up from shelf-stacking some years before. That is great and shows that that path can work for people.
The broad-brush principles that my right hon. Friend describes are pretty much unarguable, but the Bill is very specific. It specifies a 1% uprating for two years beyond the coming year. Does he sign up to that inflexible approach? He is talking about keeping inflation down. Does he think that being able to predetermine and know the rate of increase is a wise approach to deal with the problem?
I have already expressed the view that I did not come to Parliament to impose such restrictions on people with very little income, that that is a difficult thing to have to do but that I quite understand why Front Benchers are in that position.
Yes, I will trust Ministers’ judgment today but I am also saying to them that there are those two important conditions. They have to watch the situation because if inflation starts to rise too far, things will be too tough, and it would be wrong not to recognise that. If there is not a sustained increase in the number of jobs, that, too, will make the policy difficult to sustain. I am hoping that the economic policy can kick in with lower price rises and more jobs, which would make the measure a little less unpalatable. However, surely nobody can say that they want to do this—it is not very pleasant—but what else can we do?
The right hon. Gentleman is making an interesting speech. However, is not a clear consequence of his argument that it is a serious mistake to be setting now the levels of benefits in two years’ time, when we just do not know what inflation will be in the meantime?
The Government are fighting for credibility with their general finances. They have a series of difficult decisions to make and have decided to make this decision. The Opposition cannot always come here and say that they must get the deficit down but never support anything that makes a contribution towards that. That is where they have great difficulties.
The Opposition have great difficulties today because they are coming here and saying that they do not like the measure, but will not support amendments that would mean that we were definitely going to pay a lot more. They have sufficient maturity to understand that the benefits bill is extremely large and difficult to manage.
I have one final thought to put to Ministers. The British public, who wish to see the benefit bill controlled and brought down, are keen for us to check up on eligibility, which causes more issues than anything else. Most of us feel extremely generous when it comes to eligibility for disabled people and we want the Government to do the best they possibly can, which might not be generous enough.
What we are worried about is extending eligibility too far—through the European Union rules, for example. I hope that that kind of thing will be pursued. I hear that the Prime Minister is now looking at the matter, but I do not think it is right that a large number of people should be able to come into the country and immediately start claiming benefits that other people, who have been settled here for a long time and are working hard, have had to pay into and make contributions towards. I hope that we will get better news and that there will be some kind of contributory principle or settlement before people can get those benefits, so that somebody who has been living here clearly becomes our responsibility after a sensible period.
Does my right hon. Friend agree that if we put benefits up faster in this country, we would make it more attractive for other EU citizens to travel here and take advantage of our generous benefits system?
I am rather pleased that our benefits system is a lot more generous than those afforded in eastern Europe, but I also want to make sure that we do not open ourselves up to paying a large number of benefit bills to people from more or less anywhere in the European Union who come here because they have worked out that we have a generous system compared with theirs. That would seem extremely unfair, very tough on British taxpayers and ultimately self-defeating, because people who were working hard and had talent and enterprise would say, “I can’t afford to pay the tax rates in Britain to pay for benefits for everybody else, so I’ll go somewhere else to do my work.”
My right hon. Friend made an interesting and important point about eligibility. Does he agree that one of the most pernicious legacies of the last Government was that their tendency to hand out, increase and widen the eligibility for welfare payments has meant that, when the payback comes, the most vulnerable people in our society tend to be hardest hit? We are doing everything we can to target benefits at those who need them most. For example, there are 600,000 disability claimants. Increasingly, we know that small groups of people desperately need the benefits but that many receiving them do not.
I quite agree. I would like to see a more generous regime for disabled people, as my hon. Friend rightly says. To pay for that, I have come up with suggestions both on getting more people back into work, which is the best way, and on dealing with the issue of eligibility so that only our own deserving cases get the generous treatment that we rightly expect.
In summary, the policy is not easy. Ministers have to watch to make sure that it does not become unintentionally more penal. We want much more work on the side of promoting jobs and growth because we come here to eliminate poverty, not to make it worse. It is also time for the Opposition to join the serious conversation about how we tackle these obstinate and difficult issues, given that the high-level aims—getting rid of poverty and making it more worth while to work—are, mercifully, shared across the House.
I will speak to amendment 7, which stands in my name. It is an attempt, at least, to neuter what I believe is a cruel and callous Bill by restoring the historic link between benefits and tax credits and the retail prices index.
It is a fiction that benefit levels are too high. Someone who relies on benefits is poor and will be struggling to survive from week to week; if any unexpected costs occur, they will probably have to go without or go into debt. The Institute for Fiscal Studies points out that we do not know at least two important things about the Bill: we do not know what the actual effects of breaking the link with prices will be, because that will depend on future price levels, which exposes the poorest in society to serious inflation risk; and secondly, we do not know the Government’s view on how benefits should be indexed in the longer run, and we ought to.
What are we to make of the Government’s long-term policy intentions? Unfortunately, I think they are clear: to chip away at the welfare state and leave people to fend for themselves, with US-style deprivation for the unsuccessful. It is a scandal to expose poor people to such risk and insecurity, especially at the same time as the most wealthy are set to enjoy a significant tax cut. That is why I have tabled my amendments, which represent the very minimum safety net that must be in place.
I think the answer is probably both of the above. Recently, the RPI has been higher. I would have been happy to look at an amendment—no such amendment exists, unfortunately—that combined the work that the hon. Gentleman’s party has been doing on earnings with my effort to get a link back to the RPI and prices. We should look at whichever is the most generous. I stuck to the RPI link in my amendment because I wanted it to be realistic enough to get more support across the House. I fear that I might have been a little over-ambitious.
It worries me that instead of seeking to restore the link to prices, the official Opposition have not sought to protect people who are seeking work, but appear to have picked out one or two benefits, such as employment and support allowance and maternity benefit, for proper protection. They have ignored, for example, those on jobseeker’s allowance, as long as some sort of workfare system is brought in for people who have been looking for work for two years. Do the Opposition think that it is okay for the link to be broken for JSA recipients in the meantime? The Opposition amendments offer an improvement to a nasty Bill, and for that I support them, but I believe they expose a certain cowardice in not confronting the stereotypes and myths that the Government continue to perpetrate. Why are the Opposition not standing up for unemployed people and restoring the link to RPI? I do not accept that they could not consider that principle today, and it is disappointing that they will not. A link to prices is an absolute minimum, a safety net red line.
Will the hon. Lady confirm that she is advocating a return to a link between all benefits and the retail prices index from now on? In 2012-13, benefits went up by 5.3% and the Office for National Statistics labour statistics show that the pay of all those in work went up on average by 2.1%. What impact does the hon. Lady think that would have over a few years on the morale of people in work? Would it act as an incentive to work, or to retreat back to benefits as fast as possible?
The hon. Gentleman’s intervention shows the different beliefs that he and I have about the great British public. I do not believe that most people have to be pushed into work by cruel incentives; I believe that the vast majority want to work, contribute and feel part of a wider society. That is where he and I differ.
I am with the hon. Lady; I do believe that most people want to work. I am asking her about the impact it will have if somebody off work continually gets double, if not more, the increase that working people get. Surely she understands that there is a link?
The proposition is spurious. First, it happens very rarely; secondly, we ought to look at the actual amounts of money involved. The Government talk glibly about percentages, but the percentage of something very small is still very small. The amounts that we are talking about do not make that much difference. What does make a difference is social solidarity and the sense of people really being in it together. If this Government cared more about making that a reality than just having the rhetoric, we might stand a chance of securing a happier and better-off society.
The hon. Lady would of course also argue that historically benefits have been very low indeed and, in fact, the amount of money that people have to live on is miserably low. I think that the majority of the British public would accept that and accept that we need to raise benefits substantially. That is why it is so important to use a rate that raises benefits by the highest amount, perhaps by RPI or earnings.
I absolutely agree with the hon. Gentleman and thank him for his intervention. I think that people do want that to happen, partly because it is what they would want if they themselves fell into difficulties, and it is what they would want for their families and friends, who unfortunately and increasingly are in exactly that position.
I will give way in a moment, but I should like to make a little progress on the other amendments.
The Opposition have supported the public sector pay freeze and the switch from RPI to CPI introduced by the coalition, saying that they did so on a short-term basis to tackle the deficit. The former shadow Pensions Minister, now shadow Chief Secretary to the Treasury, Rachel Reeves, said that the Opposition supported the switch to CPI indexation as a temporary measure, and in July 2011 she said:
“Making a permanent change from the use of the retail prices index to the consumer prices index with the impact being felt even after the deficit is long gone is an ideologically driven move that we do not support.”––[Official Report, Pensions Public Bill Committee,
My contention is that people are suffering now and that is why the link to prices should be restored now. The Opposition seem to have swallowed the Government line that this measure is necessary despite acknowledging that it is ideologically driven. I repeat my disappointment that apparently they will not support my amendment 7.
This is a debate about priorities, not necessarily about affordability. As David Miliband made very clear during his strong speech on Second Reading, today, prices are increasing and they have been rising faster than earnings in recent years. We are in the grip of a harsh public sector pay freeze imposed by the Government and supported by the Opposition. If the Opposition really believe in making sure that benefits reflect the increase in the price of a pint of milk or a pair of school shoes, or what it really costs to make sure that people can survive without becoming destitute, I ask them again to reconsider whether they might support my amendment.
Does the hon. Lady share my puzzlement that she has tabled an amendment—a principled amendment with which I disagree—suggesting that the RPI measure of inflation should be used, and yet the official Opposition will not support it although they gave a commitment at the Dispatch Box that they wanted inflation uprating? Does she not find that strange?
I thank the hon. Gentleman, who has encapsulated what I said in my earlier intervention and what I am saying now. Yes, it is strange, and disappointing.
Let me say a few words about RPI and earnings. Mr Kennedy and Andrew George have tabled amendments on earnings that would improve the Bill, and I support them. However, we have a public sector pay freeze, and earnings growth right now is slow; people are experiencing falling living standards as energy bills and food prices rise faster than income. In the longer term, however, earnings are important. Since the second world war, the UK norm has been for earnings to rise faster than prices, with real wages rising in most years, driving living standards higher.
Let me make a bit more progress.
It is worth remembering that benefits were linked to earnings until 1980, when the Thatcher Government changed the link to prices in order to save money. That was a deliberate and aggressive policy to run down benefit levels. In 1980, unemployment benefits were one fifth of average earnings; today, they are one tenth. Earnings are important in the long term, but in the current context, I worry that focusing on earnings when they are so low, without the link to RPI, risks being a smokescreen for existing Government policy. I worry that without the additional protection of a link to prices, the link to earnings will not protect people from inflation risk over the next three years. People must, at the very minimum, be able to keep up with the rising cost of living. My personal view is that benefits should increase either in line with RPI or in line with average earnings, depending on which is higher, but I deliberately tabled a more modest amendment that would just restore the link to RPI because I wanted to press the Committee to provide that minimum protection in the face of this Bill, and hoped that such an amendment would garner more support.
The hon. Lady stated earlier that a 1% increase in benefits is a very small increase on a very small amount of money. Is she aware that the welfare budget is almost a third of all Government spending and is by no stretch of the imagination a small amount of money?
If the hon. Gentleman made a distinction between the overall benefits bill and pensions, he might find that he had a rather different set of figures before him.
It is not true that the Government are doing this to be fair. The measure is an unnecessary, spiteful and counter-productive attack on the poor. It is unnecessary because it is ludicrous to blame the unemployed and the low-paid for the deficit and to elicit from them the highest price for paying it off when high earners are receiving tax breaks. As the Government well know but conveniently forget, the culprits behind the entire financial crisis were the bankers on their very high incomes, many of whom do very well from over-generous tax relief on pension contributions and will benefit from the tax cut that is being granted to the highest earners with the abolition of the 50p rate. I welcome the Opposition’s amendment on the latter point.
The measure is spiteful because the Government insist on suggesting that it is somehow unfair that benefits have gone up by 20% when they know very well that 20% of very little is very little, and that in cash terms the average annual increase for those on jobseeker’s allowance over the past five years has been just £2.37—that is hardly the life of Riley that Ministers are pretending. Again and again they frame the debate around misleading percentages instead of the reality of hard cash increases that are far lower for people on benefits than for those in work.
The hon. Lady talks about reality. The reality that the country faces is that we are running a huge deficit year on year and have been doing so for some years. Will she say a little about that? Can she say how she proposes to pay for the policy she advocates and how much it would cost?
The hon. Gentleman has asked me a question, so he should let me answer it; I am very happy to do so. We face a number of choices, and the key thing is where we decide that the axe is going to fall. His Government would like the axe to fall on the poorest and most vulnerable; I would prefer that it fell on those with the broadest shoulders. That is the difference between us. It is also important to say that his Government’s policies are draining demand out of the economy and making the deficit worse. If I were in his shoes, I would be looking to see why my own Government’s policies are exacerbating the deficit, not making it better. If we looked for some alternatives, we might find a more positive way forward.
I have let the hon. Gentleman intervene once, and I think that is probably enough.
The policy is also counter-productive. [Interruption.] Perhaps Mr Jones would like to listen to this, because it addresses his point. Such a measure is counter-productive because, first, if money is taken from people who are only just surviving, they will experience more crises that the state will then have to step and pay for; and secondly, if money is put into the pockets of the poorest, they will spend it into the economy and thus address the deficit that we are trying to deal with.
Does the hon. Lady agree, though, that the policies of extremely expensive energy that she promotes are at the root of poverty now, and that if she would reverse her policies and go for cheap energy, we might be able to do something for the people we want to help?
I congratulate the right hon. Gentleman on his attempt, but it was a bit feeble. All the evidence from Deutsche bank, the International Energy Agency and many other places tells us that rising fuel bills are a result of rising gas prices, and the percentage extra on people’s fuel bills that is coming from renewable energy, which, sadly, he is not a fan of, is very much smaller. I do not agree with his premise.
If our priority is fairness, we should be seeking savings from those who can afford it, not penalising the poorest and pushing them into ever more precarious misery. Without this very basic link to RPI, what exactly are we saying to people on benefits? We are giving them a message of punishment that says, “You’ve done something wrong. It’s your fault that you don’t have a job and the state is going to make life hard for you.” Frankly, that is despicable. Oxfam says that it is Dickensian and rightly points out that slashing the incomes of those at the bottom is not just cold-hearted but wrong-headed, because it will depress the economy further.
I said earlier that most people want to work, and I could cite very many examples from my own constituency of people who have come to my surgeries who are desperate for work but have been unable to find it. The link to RPI, as I have said, is essential. It is the absolute minimum acceptable. The Government have already taken from the poorest by switching to CPI and now they want to heap even more misery on people who simply cannot absorb it. Amendment 7 seeks to provide the most basic protection for benefits from the accumulative erosion of value that severing the historic link to prices will create. I commend the amendment, and hope to press it to a vote.
Amendment 10 stands in my name and in those of my right hon. Friend Mr Kennedy and my hon. Friends the Members for Argyll and Bute (Mr Reid), for Manchester, Withington (Mr Leech), for North Cornwall (Dan Rogerson) and for Ceredigion (Mr Williams). Its purpose is to address the oft-repeated key concern of the Secretary of State and the Government—it has been repeated today by Richard Graham and others—that in certain circumstances and, admittedly, over selected periods, benefits have risen at a rate higher than wages, and that in straitened times such as these, a principle should be established whereby that should not happen and that average wages should be the marker against which future benefit rises are set.
A further weakness in the Government’s proposals, to repeat an earlier intervention of mine on Mr Redwood, relates to their intention to enshrine in future policy the blunt and inflexible instrument of a 1% rise beyond the next general election—up until 2016—and whether we can foretell with confidence what is likely to happen during that time.
The Bill covers only two years, but the Government have already announced in the autumn statement their intention to introduce a statutory instrument so that the 1% also applies next year, so it will cover three years in total.
The combined effect of both the statutory instrument and the Bill will, indeed, be for three years. I have no clairvoyant skills whatsoever and would never follow my forecasts on the future of the economy or prices, but the Bill is asking us to forecast what is likely to happen, particularly in relation to prices. In the context of food price volatility, which we know takes place, and of tremendous uncertainty in the energy market and, indeed, other markets, we are being asked to predict what the circumstances are likely to be in 2016, beyond the next general election.
In his opening remarks, Ian Mearns said that large swathes of people are out of work in some parts of the country and in work in other parts. There are also many places, including my own in west Cornwall and the Isles of Scilly, where a lot of people spend their lives going in and out of work because of the seasonality of the area’s economy. Not only are such people moving in and out of work—not of their own choice, but because of their circumstances—but there is also a plethora of zero-hours contracts and of people who exist on the basis of putting together part-time work.
I congratulate the Government on their achievement in rolling out apprenticeships, but the fact is that those apprentices are being paid £2.65 an hour for their apprenticeship and have to do bar work, waitressing and other work at the weekend in order to get themselves up to a living wage. An apprenticeship offers a good opportunity, but we have to acknowledge that, among working people and those who are moving in and out of wages, there is a class or group who are, in effect, on the very margins of survival. They will be significantly affected by the proposal to peg benefits at 1%. Some argue that the Bill is about ensuring that we make work pay and that clause 1 is entirely about out-of-work benefits, but the fact is that a significant number of people—many thousands—who are in work or, indeed, in and out of work will be affected by it. That is the most difficult position.
My hon. Friend makes a valid point about those who move from unemployment into temporary work and the complexities involved in re-applying for benefits under the current system. Does he agree that the introduction of universal credit will improve the situation, remove that uncertainty and make it a much bigger incentive for those who are out of work to take temporary work?
I agree with that point and congratulate in particular the Minister of State, Department for Work and Pensions, my hon. Friend Steve Webb on advocating that for many years. He must be pleased. Indeed, I am pleased for him and it is appropriate that that policy is being rolled out. I hope that it will help to iron out the difficulties faced by a lot of people. Having said that, let us see whether it addresses those issues, as I hope it will, when it is rolled out.
If we look back at the principles set out by the Chancellor in the first emergency Budget, we will see that we were clearly told that we were all in it together, that those with the broadest shoulders would bear the greatest burden and that the vulnerable would be protected. Those are the principles against which we must measure the Government. We all have different views on where the lines should be drawn with regard to achieving those objectives, and that is where we get into specifics such as those in the Bill.
It would be a kamikaze mission for me to begin a debate—I am only seven minutes into my speech—by asking my hon. Friend the Minister, for whom I have the highest respect: what on earth does he know about benefits? He is highly regarded in that sphere. He is respected considerably by people and, indeed, by his political opponents—and rightly so—for what he has achieved. I think we would have ended up with something a great deal worse had he not been in his position.
Before the hon. Gentleman began on his paean of praise for the Minister, I thought he was making a very good case about the situation in west Cornwall and the difficulties faced by people on the margins of the labour market. That being so, when it comes to the vote will he and his colleagues who tabled amendment 10 vote against clause stand part?
I am sure that my right hon. and hon. Friends will make up their own minds on that issue. I do not speak for them, but I have made it clear that I will vote against the Bill as it stands, because I do not think it addresses the fundamental concerns that I have enunciated elsewhere.
To return to congratulating my hon. Friend the Minister on his achievements, my beloved coalition colleagues may not like what I am about to say—[Hon. Members: “Don’t say it!”] Having listened to what has been articulated by those in the Conservative party in recent months, we have to acknowledge what would have happened had my hon. Friend and, indeed, the Liberal Democrats not been in the coalition Government. First, we have to question whether we would have had the increase in the personal tax allowance, on which I congratulate the coalition Government. The Conservatives made it quite clear that they wished not only to freeze benefits altogether but to do so for six years, so we would not even be getting a 1% rise. There would have been a wider impact on pensioners and the disabled, which would have been significant. Child benefit would have been constrained, as well as being cut from families with more than two children.
The hon. Gentleman is making a powerful contribution. Given what he has said, does he reject the spin of some Government Members who have said that people on benefits have had their income uprated by 20% over a five-year period as opposed to 12.5% for those who work? When we examine the figures in cash terms—the impact on people’s pockets—we see that the uprating has been worth an average of £49 for people in work and only £12 or so for those who rely on benefits.
There has been a lot of selective quotation of statistics, with selective beginnings and ends of the time period within which those comparators are applied. I understood that the purpose of the Bill was as the Secretary of State articulated it when he introduced it—to ensure that benefits would never rise faster than average wages. Our amendment would deal with that.
My hon. Friend has suggested that people are referring to arbitrary time frames, but they are not. By looking at the past five years we can determine when the financial crisis began, so that is an entirely natural time frame to examine.
One can look at it in a variety of ways. If we examined a much wider time period, say the past 20 or 30 years, we would certainly not come to the conclusion that benefits have risen significantly faster than wages, because that is clearly not the case.
Will my hon. Friend acknowledge that the fiscal problem that the Government face began as a result of the financial crisis? It is therefore entirely logical to consider the matter over the period between the financial crisis beginning in 2008 and the present day.
But when does the crisis end? The figures produced by the Office for Budget Responsibility estimate that in three years’ time, wages will exceed CPI. One has to examine the matter over a much longer period. The Conservatives paid for some posters a couple of weeks ago to make the point that it was unacceptable for benefits to rise faster than wages, and the amendment would deal with that issue.
I said earlier that one big weakness of the Government’s proposal, and the reason why I opposed it, was the inflexibility of the 1% uprating. It takes no account of what may happen to food prices, for example, by 2015-16. It is all very well having a Bill that takes a clairvoyant view that a 1% increase will not press large numbers of working families, as well as out-of-work families, into severe and extreme hardship. However, we have experienced this year in the UK the impact of significant volatility in our climate. There has been significant climate change, which is having an impact on the food baskets of the world, including those in many developing countries and here. We therefore need to ask ourselves whether we can confidently say that there will not be food price spikes such as we saw only a few years ago. I suggest that we may see such spikes again. There is also tremendous concern about the potential volatility of energy prices. The 1% uprating figure is inflexible and somewhat arbitrary, and we cannot say with confidence that we will not need to introduce further primary legislation to revise that figure in 2016.
We must also consider the impact of the 1% uprating on housing. In their emergency Budget, the Government proposed to cut housing benefit from the 50th percentile of rents to the 30th percentile. Whether or not we like the fact that only 30% of the private rental market might be available to people in receipt of housing benefit, rather than half of it, it is essential that the rate is linked to the variation in private sector rents. The 1% uprating will break the link with what is available in the market and instead peg housing benefit back. In my area, and I know in many others, the Government’s attempt to peg it back by cutting the rate to the 30th per- centile of rents has failed to constrain private sector rents, so it has not had not the desired impact. Maybe it has in some areas, but certainly not in mine or many others.
The measures that the Government have brought forward in the Bill have been ill thought through, and I fear that we will have to reconsider the figure set out in it next year or the year after. On that basis, we will listen to what the Minister says in response to the debate before we have the opportunity to divide the Committee on the amendment.
It is a great pleasure to follow the thoughtful and useful contribution of Andrew George and the contributions of other hon. Members.
One thing that has come across in the speeches of Members on both sides of the Chamber is the economic illiteracy of the Government’s policy as part of a strategy for reducing the deficit. As other Members have said, one of the great things about welfare payments is that when people are living on the bread line, the money that they receive is spent in the local economy, often within their own community or on their own estate. They spend it at their local convenience store. They tend to spend it the minute they get it, rather than put it in trust funds, because they are attempting to sustain their life on the bread line.
When money is taken from the poorest in our society and at the same time given to the very wealthiest in our society, as was mentioned earlier, we are taking money away from people who will spend it in the real economy and giving it to people who are much more likely to take it out of the real economy and not spend it. It makes no economic sense, even on the basis that the Government are introducing this measure to reduce the deficit.
As Members on the Government Benches are fond of reminding us, at one point they thought that the original plans of my right hon. Friend Mr Darling were not paying off the deficit fast enough. We now see, however, that under those plans we were actually paying off the deficit faster than this Government are doing. That the Labour party was going to make tough decisions is reflected in a whole number of ways, and we supported—with tremendous reluctance—the very small uplift in public sector pay. We heard from Caroline Lucas a shopping list of things we should be asking for and ways in which she felt we did not go far enough.
The Labour party recognises that tough choices need to be made, and it agreed to a whole raft of things in all the discussions on welfare. When I go back to my local party, the members ask, “Why are we agreeing with these things?” I say, “Look, it is very difficult. We would always like to make certain different decisions but”—
Let me just answer the point raised by Kwasi Kwarteng. We would always like to make different decisions, but we are not always in a position to do so. There are a raft of things with which we have agreed that we would not have wanted. We have seen, however, from the policies that the hon. Gentleman has so loyally supported time after time, that when we pursue austerity to the extent that he has been happy to support, demand comes out of the economy. Various retail businesses have gone bust and people are losing their jobs. A huge number of people in the public sector who were consumers are now not spending money, and the level of borrowing that the Government predict is higher than what the Labour party proposed under its policies.
On the specific issue of whether HMV has gone bust purely as a result of the economic circumstances, no, that is not the case I am making. However, when a raft of retail organisations go into administration, and when we see in many town centres—happily, not in Chesterfield because of the progressive policies of the Labour council—a huge number of empty shop units, it is perhaps time to start considering whether the economic policies pursued by the Government may have some sort of link to the economic success of our businesses.
I am following what my hon. Friend says and I absolutely agree that cuts have to be economically competent. The International Monetary Fund has already warned the Government that the annual cut of £24 billion to benefits and tax credits will reduce economic output by up to £40 billion.
That very important point underlines much of what I am saying. When hon. Members talk about benefits rising faster than earnings, we have to understand that each one of us needs basic things to stay alive. We need to have enough food to eat and put in front of our children for them to survive; we need clothing so that we can go out in the street; and we must be able to afford transport to get to job interviews.
I would like to finish my point. I am glad that my comments have elicited so much excitement and that lots of people want to intervene. There are basic things that we need in order to sustain life, and if someone is on poverty money—Charlie Elphicke said there are 600,000 people in severe poverty—their 1% increase cannot be compared with the way that a school teacher, for example—
—or a Member of Parliament is able to sustain small increases. There is no comparison between what someone in severe poverty is able to cut and the situation faced by public sector workers, despite their currently being hard pressed, as many will testify.
We have heard a lot of talk about universal credit but we still lack a lot of the detail. Given the record of the Secretary of State for Work and Pensions and the most catastrophic Work programme in history, if I was the hon. Gentleman I would not have much confidence in the success of the policies pursued by the Secretary of State until he has seen what the Government deliver.
My hon. Friend is making a series of interesting points. Does he agree that the insufficient time allowed by the Government to scrutinise these changes—eight days between Second Reading and the remaining stages of the Bill—does not allow us to scrutinise and ask the Government questions about why, for example, they are treating categories of disabled people differently and why they do not recognise that they may be breaching United Nations conventions relating to the rights of children and disabled people?
That is an incredibly powerful point. My hon. Friend probably thinks—as I do—that we are being given so little time to scrutinise those issues because this is an entirely political Bill. It is not an economic Bill or something put together and discussed on the Floor of the House because the law needs to be changed. It is being done for entirely political reasons, and the minute that the Opposition said—to their tremendous credit—that they were going to oppose it, the posters were already up and ready because they had been designed in advance. This was an entirely political manoeuvre that had nothing to do with comments that might be made by the United Nations or any of the details of it.
I want to return to the issue of benefits rising faster than earnings.
I am pleased to see the hon. Gentleman in his place. The past two times that he has been billed to appear he has not actually been present, so now that that he is here I will definitely allow him to intervene. However—perhaps he will reflect on this—the central point of the whole debate seems to be that benefits claimed by someone on £71 a week can be compared with the earnings of a school teacher or a doctor in a hospital, and that a 1% rise is the same to someone on jobseeker’s allowance as to someone working in the public sector. Will the hon. Gentleman at least accept that they are not the same thing?
I am very grateful to the hon. Gentleman for letting me intervene and I will come straight to his specific point. It would be interesting if he came to meet some of my constituents who work in the public sector in Gloucester. We have over 20,000 people working in the public sector—as I used to—and most of them are seeing no increase in their salary whatsoever, with a cap at a maximum of 1%. The hon. Gentleman appears to be supporting an increase of 2.2%—more than double what those in work will be getting—for those who are out of work. I would like him to respond to a constituent of mine who wrote to me. She is a retired nurse—
It is almost as though the last two minutes of my speech did not exist. I had answered the hon. Gentleman’s point before he made it and I have no idea why he felt the need to intervene when I had specifically dealt with that issue—[Interruption.] I have already dealt with that point. We just cannot compare what 1% means to someone on £70 a week with what it means to a doctor. People on poverty money and in severe poverty have not got lots of options as to what they can cut back on. They cannot decide, “Well, I’m only going to have one holiday this year”, as those whose jobs are more lucrative might be able to do. Interruption.] I have reflected on that point and I think I have answered it at some length.
There is a particular irony in the Chancellor, who was a millionaire the day he was born, railing against the extravagance of those on £71 a week. The debate needs to be put in proper context.
I will take further interventions, but I would like to crack on a bit now.
The 1% increase comes on top of a raft of difficult choices on benefits, including housing benefit cuts, tax credits cuts and council tax benefit cuts, at a time when there is increasing poverty, including severe poverty and child poverty. Specifically, there is an increase in poverty among those in work. That is the context in which this debate is held, and the reason why the Labour party has taken the stance it has. No one should be in any doubt that, in taking that stance, the Labour party recognises that there is tremendous contention about benefits, and that many feel just like Richard Graham and his constituent. I recognise that many people in many communities feel that way, and therefore how difficult it was for my right hon. Friend Stephen Timms to take that principled stance.
I am not sure whether my hon. Friend could hear Richard Graham say a second ago from a sedentary position, “What’s your solution?” Surely the Opposition’s solution is to help families such as the 8,600 families in his constituency who receive in-work tax credits. The hon. Member for Gloucester seems silent now.
My hon. Friend makes a valuable point. Perhaps Government Members’ strategy is to follow Mitt Romney, who said that anyone who receives any welfare should be written off because they will never vote for the right-wing party. It did not work particularly well for Mitt Romney, but perhaps that is the electoral strategy of the hon. Member for Gloucester.
The hon. Gentleman is about to tell us what he will do for the 8,600 people in his constituency who will be worse off as a result of the vote he will cast tonight.
I thank the hon. Gentleman for his generosity in allowing me to intervene a second time, but the answer to him and Susan Elan Jones is that, on the question we are debating, I have not heard their proposal. Does he agree with Caroline Lucas that the solution is to peg those benefits for ever to the retail prices index, so that people who are out of work can continue to have annual rises three times higher than those who are in work? While the hon. Gentleman is advocating that my public sector workers should continue to lose out relative to people who are on benefits, I am proud that the Conservative party has left 35,000 people with lower tax bills.
The hon. Gentleman was silent on the 8,600 people in his constituency who will be worse off as a result of the vote he will cast tonight, but the Opposition’s proposals are clear in the amendment. I will touch on this in more detail, but one interesting thing is the extent to which the Chancellor, for reasons best known to himself, has chosen to handcuff himself to a level of benefit increase for year after year when he has no idea what the level of inflation will be—the hon. Member for St Ives made that point.
Let me make more progress before I let hon. Members intervene again.
One issue I have raised previously in the context of the Bill is housing benefit changes. Last week, I met Chesterfield borough council officials to discuss the impact of the bedroom tax, which will hit people across Chesterfield in April. The council knows it faces a time bomb as people who cannot afford to pay their rents are told that there is a shortage of smaller properties for them to move to. Many of those people are at the back end of their working careers, and are either not working or in part-time employment. The council is budgeting for a situation in which around a third of them will fall into arrears—their housing-related benefits will be reduced and they will no longer have enough to pay their rents—and the Government are increasing the discretionary payment to allow councils to meet the costs of some who fall into that situation, which is a totally illogical policy. People who have been council house tenants for many years will fall behind, and the Government will give money to councils to bail them out. At the same time, the Government will hit them on housing and council tax benefit, and on tax credits. They are saying, “Those payments have already been cut, but they will now be increased by less than the rate of inflation.
A thread running through the hon. Gentleman’s speech is how we help the lowest paid. Does he agree that the coalition Government are helping the lowest paid in his constituency, because in April 3,880 of his constituents will be lifted out of income tax altogether, like 3,168 people in my constituency?
I welcome any measure that makes people better off, but the hon. Gentleman is entirely wrong if he thinks those being lifted out of tax are the lowest paid—they are not. Many who are earning less than them will get no benefit from the increase in the tax threshold. The people being lifted out of tax are not the lowest paid, although I recognise that they are on modest incomes.
More than 30,000 people in the hon. Gentleman’s constituency have seen their pay go up in recent years by just 10%. They are in work and striving to get by. How can he justify asking them to pay more taxes and provide more money for people on benefits when the latter have had a 20% increase in the same period? Is that not unfair on working people?
One point I have laboured is that hon. Members cannot compare in percentage terms the difference the Bill will make for someone on £70 a week and someone on £35,000 a year. The hon. Gentleman seems to be attempting to make such a comparison, but as my right hon. Friend Mr Field related previously—
As my right hon. Friend the Member for Birkenhead has said, in cash terms—we should bear in mind that we buy food and clothing for our children with cash— people on benefits have had an increase of £12 a week; at the same time, working people have had an increase of £49 a week. It is impossible to make the comparison in simple percentage terms. That is one of the central points of my speech, but I have dwelt on it rather too much. I keep returning to it because hon. Members who intervene seem not to hear it.
I will crack on, because I have not taken a useful intervention from Government Members yet, and other hon. Members want to speak.
Many of the people I meet who face this financial calamity on the horizon have worked most of their lives. The people I meet who have worked for 30 years and then gone on to benefits are overwhelmed not by the generosity of benefits, but by the difficulty of getting by. They believe there must be an alternative benefits system that is incredibly generous—that is the one they read about in the papers—because it is tough to get by on the benefits that they receive.
When we talk about the benefit bill, the most fundamental question we must confront is where the money goes. Most of it goes not into the pockets of benefit recipients, but into the pockets of landlords. The Thatcher Government introduced the right to buy. That was a good thing, but they did not have a corresponding scheme to replace the social housing that was lost, and there was chronic underinvestment in the remaining stock.
The Blair Government rightly prioritised the refurbishment of social housing up to the decent homes standard over building new homes, but many Labour Members believe they took too long to take the housing shortage seriously. Although much of that was hidden during the good times, the welcome steps introduced by the Brown Government were too late and too slow to stop the housing crisis from escalating. Whomever we blame for the huge inflation in private rents, the people who claim housing benefit, whether they are working or not, are not to blame.
In a raft of ways, tax credits cuts will hit people on low to middle incomes. By anyone’s definition, they are the thrifty, hard-working strivers that people across the political divide recognise are key to the country’s future prosperity, but they will be badly hit by the Bill.
Once again, women and children will be hit worst of all. The Government’s strivers tax will hit women particularly hard—4.6 million women who receive child tax credit will be hit by the strivers tax, including 2.5 million working women. All those will come together as the perfect storm. The 1% uplift is nothing but a blunt political instrument designed to create a political trap that has nothing to do with a nuanced benefits system, with all its complexities.
The Child Poverty Action Group has said that the 200,000 increase set out in the written answer from the Under-Secretary of State for Work and Pensions, Esther McVey should be added to the increase of 800,000 in children in relative income poverty by 2020 that the Institute for Fiscal Studies found in its analysis of the coalition’s welfare cuts. Let us remind ourselves of what the Prime Minister used to say about relative poverty. In 2006, he said:
“I believe that poverty is an economic waste and a moral disgrace. In the past, we used to think of poverty only in absolute terms—meaning straightforward material deprivation. That’s not enough. We need to think of poverty in relative terms, the fact that some people lack those things which others in society take for granted. So I want this message to go out loud and clear: the Conservative party recognises, will measure and will act on relative poverty.”
That is the manifesto on which Conservative Members were elected, and that was what they used to believe, but that is what they will vote against tonight when they support the Bill and reject the very reasonable amendment moved by my right hon. Friend Stephen Timms.
I shall be brief as we are all conscious that we are increasingly up against the clock. I followed the progress of the argument and analysis by Toby Perkins with some interest. Had his predecessor in that seat been here tonight, he would most certainly have voted for the Liberal Democrat amendment, so I hope that the hon. Gentleman will maintain that proud Chesterfield tradition and join us in the Lobby later this evening.
As one who—like so many of my right hon. and hon. Friends—applauds so many of the initiatives that the coalition has been able to take, specifically in the field of social policy, I think that the input from the Liberal Democrats has been significant, not least from my hon. Friend the Minister of State who will have the arduous task of replying to the very wide diaspora of this debate later this evening. That input includes taking low-paid people out of tax altogether to moving in the direction of universal credit—I do not take the jaundiced view of many as to its prospects. I am delighted that the Secretary of State for Work and Pensions is in his place, because if we find, a little further down the track, that a little more constructive pressure needs to be placed on the Treasury to make things work that little bit better, he can certainly count on support from these Benches, because we think that the direction of travel on universal credit is very good. However, my hon. Friend Andrew George pointed out that the Bill sits at odds, both practically and philosophically, with developments of that type. He used the phrase “a blunt instrument” and I think that is a fair description. Our amendment would maintain a responsible position in relation to the wider issue of the deficit—and deficit reduction policy—in that benefits would not rise at a higher rate than earnings. That is responsible, consistent and a constructive contribution to the debate this evening.
The right hon. Gentleman just described his amendment as a Liberal Democrat amendment. Can he confirm that all the Liberal Democrats will vote for it?
From my time as leader, and indeed from reading the memoirs of previous leaders, I know that no leader of the Liberal Democrats worth his salt would ever dare to predict how every Liberal Democrat was going to vote at any given time. But we hope that the critical mass will be such that it will send a helpful signal to those on the Treasury Bench and give me a sentence or two for my own memoirs, if I ever get round to them.
I do not want to get into detail at this stage in the debate: my objection is more a philosophical and political observation. It is right that a party that can look back to a lineage including Beveridge and Lloyd George should make this reflection—that there is a large measure of political device about the Bill, which emanates in particular from the personage of the Chancellor of the Exchequer, aided and abetted by the Prime Minister. I say that because a tactical judgment has been made by the Conservative—not coalition—high command that this can be a very useful dividing stretch of water to place between themselves and, in particular, the Labour party with a view to the next election.
We are not against the politics of choice, argumentation and the clash of ideas—what is the point of a House of Commons and a parliamentary democracy without that? But the insidious aspect of the Bill is that, in seeking to open up a philosophical divide of that type, it becomes not an issue of political leadership, but of political pandering to some of the fears, insecurities and downright prejudices that can be stoked up in society—the “us and them” mentality and the sense of resentment and envy. When people start playing fast and loose with those factors—and we have seen early examples against the backdrop of this legislation in the last week to 10 days —they are following a very risky strategy indeed.
I was pleased that the Deputy Prime Minister—the leader of my party—spoke out robustly against the initial posters and some of the leaflets that the Conservatives were producing. However, where the temptation of Her Majesty’s Britannic and historic Conservative and Unionist party is concerned about opportunism within the welfare state historically and playing that card to their advantage and to the disadvantage of others, I would take reassurances from them on that this week as assuredly as I would take reassurances on Wednesday night from the Prime Minister about the direction of their European policy. That is the fact of the matter. But if that is the game that we are playing—and I fear it is—the Liberal Democrats should ensure a clear distance between ourselves and the Conservatives, given our political lineage.
My second point is, as my hon. Friend the Member for St Ives said, that the presence of my hon. Friend the Minister of State—and other colleagues, both in the coalition as Ministers and outside it—has added strength to the philosophical and practical arguments that we seek to bring to social policy. Before the last election, I shared a party platform at one of our conferences with the leader of my party. We were speaking about aspects of social policy, and the point I made to him and to the audience I repeat tonight. We can be tough-minded—indeed much more tough-minded than many an outside commentator ever expected the Liberal Democrats would or could be when the coalition was entered into two and a half years ago—and that has been proven. What we have to remind people of—with a view to the next election—is that our party and our cause is not just about the head, but must also be about the heart. Many people will view this Bill as hard-hearted, and many will remember that when they come to cast their votes. In part, what we are trying to do here is remind that section of our electorate, our membership, our activists, our sympathisers and our supporters whom we want to come back over the second half of this Parliament, that while the head remains rigorous in government, the heart has not been lost in the wider environ that is UK Liberal Democracy.
My final point is one that I believe my hon. Friend Mr Reid, who has had such excellent and characteristically detailed input to our internal discussions, raised with the Prime Minister only last Wednesday at Prime Minister’s questions. In setting this arbitrary and post-2015 set of legislative strictures on what will happen to benefits uprating, what account had been taken of the difficult art of gazing into the crystal ball where future levels of inflation are concerned, not least where trends in food and energy prices are involved? The answer, frankly, in any fair-minded way, came there none from the Prime Minister to my hon. Friend.
Thinking back to the awful events that the Prime Minister was describing in this House a few hours ago before this debate, if the Ministry of Defence ever committed itself to a course of action without some sense of a contingency there would great criticism from across the political spectrum. As drafted—which is why the amendment is so important—the Bill will commit the Government, and beyond what can be the lifetime of this Government and this Parliament, to a course of action for which there is no contingency. That is not a social, political or economic blank cheque that those of us who put our name to this amendment, and will vote for it, wish to extend.
It is a great pleasure to follow Mr Kennedy, who made some telling points about the problems with the Bill.
I rise to speak in support of amendment 12, moved by my right hon. Friend Stephen Timms. The proposals to cut the real income of the poorest are ugly and unjust. I am pleased that the Secretary of State is in his place on the Front Bench. He frequently parades his Christian beliefs, so I shall begin by quoting from the Churches Regional Commission report, “Am I My Brother’s Keeper?”, which states that the switch in indexation
“represents an on-going erosion…effectively ratcheting up poverty long into the future.”
By 2015, the effect of 1% indexation compared with indexation in line with the CPI to a person on JSA or ESA will be a loss of £156 a year; that is a 4% cut in real terms for those least able to afford it. If the Office for Budget Responsibility’s inflation forecast is wrong, the situation could be even worse.
As we consider the Bill we need to look across at all the changes that the Government are making—we cannot look at this measure in isolation. To see the impact it will have on people, we need to look across the board.
I now receive a lot of correspondence from constituents on ESA, who are particularly badly hit. I want to tell the House about one person. Her £66 a week rent is paid by housing benefit. In April, her benefit will go up to £71.70. Out of that, she pays £10 a week for electricity, and £6 a week for water rates. Like many of my constituents, she still uses coal for heating, and three bags of coal—just to inform the Minister, because I do not suppose he is up with coal prices—will cost her £19.50 a week. Her return bus fare to the town—she lives in a village—is £4 a week, and her bedroom tax is £9.24 a week. All of that will leave her with £22.96 for food, cleaning, all household goods and clothes. I submit that even Richard Graham could not live on £22.96 a week. If he actually considered the sums of money that ordinary people will be expected to live on, he would understand the outrage we on this side of the House feel at the continuous erosion of the social security net.
I am grateful to the hon. Lady for giving way after her passionate outburst. Yes, of course I share her concern about people on not very much money. My issue with the speech made by Toby Perkins was his assumption that we were talking about people earning £35,000 a year. I do not think he understands that the average wage in my constituency is less than £25,000. We are talking about young nurses—people whose salaries are capped and who are seeing people on benefits get significantly larger increases. That is the issue at stake this evening.
I am sorry, but the hon. Gentleman evidently does not understand the Bill. He evidently does not understand that people on those low wages will also lose out through the cuts to working tax credits and housing benefit. In fact, the whole point about the Government’s strategic, political mistake is that more people in work will lose out from the Bill than those who do not work. Furthermore, if he will allow me to do a little more arithmetic for him, a person currently on ESA will get a 70p increase in April, but a person earning £25,000 and receiving a 1% increase will get a £5 a week increase. Can he not understand that 70p is quite a lot less than £5?
I am not going to give way to the hon. Gentleman again, because other Members want to speak.
I want to address the Minister. When, in the previous Parliament, we introduced the Bill that became the Child Poverty Act 2010, he gave a great deal of evidence from the Family Budgeting Unit in York and the people at Loughborough about the minimum income standard—the minimum income guarantee. He said that what the Labour Government were doing was absolutely shameful and that benefits were not high enough. Now, however, we see that he is prepared to cut benefits in a way that we never did. The testimony to the great success of this Government’s benefit policy is the expansion in the number of food banks: in Durham last year, the food bank fed 4,455 people, of whom 1,390 were children. That is utterly shameful. To demonstrate that it is not possible to live on £22.96 a week, I am going to try to do so during the February recess. Neither I nor, I believe, any other hon. Member seriously believes that they could live on £22.96 a week. We have to look at this in context.
The Bill is unjust because it is simply not fair in the treatment of people in work and those out of work, and the treatment of people on high incomes and people on low incomes. When the dole was introduced in 1912, it was approximately a fifth of average earnings, and so it stayed until 1979, as Caroline Lucas said. By 1989, it was 15.8% of average earnings; by 1997, according to the House of Commons Library, it was 13.2%; and by 2015, it will be 11.1%. It is absolutely clear that the Government are trying to take it back to the very lowest point at the very bottom of the recession, irrespective of the impact on people’s normal standards of living. Everything the Prime Minister has said about those with the broadest shoulders bearing the biggest burden is seen to be utterly empty and fallacious when the Government introduce such a Bill.
There has been an ugly attempt to divide the poor between the “deserving” and the “undeserving”—taking us back to the 19th century—between sheep and goats, between strivers and shirkers, and between with those with their curtains closed and those with their curtains open. In my constituency, if people’s curtains are closed at 9 o’clock in the morning, it is probably because they are on nights and they are trying to catch up with their sleep. The Churches Regional Commission states that
“of all the words to describe those who depend on welfare, “feckless” has to be the one that rankles most.”
This attempt to divide has failed, however, on the factual ground that two thirds of those affected by the Bill are in work. The housing benefit and tax credit changes will affect far more people.
“there is an inevitable trade-off between the level of benefits and incentives to work. Raising benefit levels would undoubtedly hamper the work-incentive”.—[Official Report, House of Lords,
Obviously, that is setting to one side the fact that in order to work harder the poor must be made poorer, but the rich can be made richer.
Let us look at the impact of the changes and the context. In my constituency, 7,200 people will lose out as a result of the Bill, by an average of £500; that will take £3.5 million out of the local economy. If the International Monetary Fund is correct, the second round effect will be even greater, at £4.5 million, so the net upshot is an £8 million loss to the economy of my constituency. It is no wonder shops are closing and small business are folding. That is absolutely illogical, and it goes against what the Chancellor of the Exchequer said about the need to let the fiscal stabilisers work.
The hon. Lady talks of her concern for the poor, and it is shared by right hon. and hon. Members on the Government Benches. The problem is that every time her party gets into office, its policies create more of them. Can she explain why the number of adults out of work for more than 24 months doubled in Labour’s last term in office?
Yes, I can. It is absolutely obvious: we were in the middle of a very deep recession, which the hon. Gentleman seems conveniently to have forgotten. Of course the number of unemployed people has gone up, but the previous Labour Government helped all sorts of other people back into work—365,000 lone parents, for example. If he would care to look at a map of where incapacity benefit and ESA claimants live, he will see that it looks like a map charting the industrial revolution in the 18th century. Those benefit costs clearly reflect the overhanging legacy of the decline of heavy industry. It is totally unreasonable and unfair to punish the people who happened to work in heavy industry.
Once again, we come to the issue of unemployment. We in the north-east have the highest rate of unemployment in the entire country—9.9%. We have seven people chasing every job vacancy. Whether the gap between the increase for a person on £25,000 a year and the increase for a person on JSA is £4.30 or £4.20 will make no material difference to people’s capability or willingness to find a job, which is why we need a completely different approach to job creation. My constituents want to go back to work.
No, I will not. The hon. Gentleman will have a chance to make his own speech. Many hon. Members have given way to him in the course of the debate.
The Chancellor of the Exchequer has broken another promise he made in 2011. He said:
“I also want to protect… those who, through no fault of their own, have lost jobs and are trying to find work”.—[Hansard, 29 November 2011; Vol. 536, c. 802.]
He is patently failing to protect those people. By definition, people on statutory sick pay, statutory maternity pay, statutory paternity pay or statutory adoption pay are not going out to work, but they, too, are seeing their incomes fall, and that is at a time when they have new children coming into the family and need more support.
The hon. Lady talks about the difficult decisions the Government are having to make, but she does not acknowledge the fact that from the time the Government came into office to 2016, the child element of working tax credit will actually go up by £470 in cash terms.
The hon. Gentleman is absolutely right, but the point I am trying to make is that we have to look at the cumulative impact of all the changes. If he looks at the tax and benefits micro-simulation model produced by Her Majesty’s Treasury, he will see that everybody in the bottom half of the distribution is a loser, but those people between 50% and 80% in the distribution are gainers. Therefore, he can understand that although the change to child tax credit—we will discuss it under the next group of amendments—might be very welcome, it is not doing the business because of the severity of the Government’s other reductions.
The hon. Gentleman has raised the issue of child poverty, and there is one specific question I wish to ask the Minister and that I hope—
Let me ask the question before trying to answer it. We have heard that the IFS has estimated that by 2015 the number of children in relative poverty will increase by 400,000. Furthermore, the Bill will push another 200,000 children into relative poverty. The Minister knows that we had four measures in the Child Poverty Act 2010. What will be the increase over the life of this Parliament in the number of children living in absolute poverty?
I will respond very fully on the issue of child poverty, which a number of hon. Members have raised. I wanted to ask the hon. Lady about the point she made about incapacity benefit. She said that if we look across Britain, we will see that incapacity benefit is highest in all the industrial heartlands. I hesitate to bring her back to the Bill, but is she aware that we are actually proposing to increase the main rate of incapacity benefit fully in line with inflation?
Yes, but the hon. Gentleman knows that his own impact assessment demonstrates that the Government’s claim that they would protect all people with disabilities is not accurate. I am disappointed that he did not answer my question about child poverty. I do not know whether that is because he does not know the answer or because he is ashamed of it. Perhaps he can explain when he winds up the debate.
I want to speak in support of amendment 10, to which I am a signatory. It is important to set the debate in context. In 2010, the Government inherited an economic mess from the previous Government, including a huge budget deficit, which is why difficult decisions have to be taken. It is important to remind the Committee that just before the previous Government left office, for every £3 they raised, they were spending £4, so borrowing was going up and up. It was interesting to listen to the opening remarks of Stephen Timms. There was a lot of sound and fury, but little actual policy. In fact, Labour’s amendment would replace the 1% in the Bill with a blank space. Labour does not seem to have any policy at all. His remarks seemed to indicate that the policy, whatever it is, would cost a lot. I think that Labour’s policy of borrow and spend is still in place.
I ask the hon. Gentleman to consider, in terms of what is or is not happening, that this measure is not part of what the Government came into office to do. This measure has been made necessary because they have not managed to reach the position they had anticipated they would reach, and that is because their policies have failed. Had they reached the position they had anticipated reaching, these further reductions in benefits would not be necessary.
Well, we did not hear any policy from the hon. Lady. I can only assume that she still follows the previous Government’s borrow-and-spend policies.
I support amendment 10, rather than the Labour party’s “empty space” policy. Amendment 10 would have benefits increase in line with the increase in average earnings.
The tax increases under this Government have quite rightly fallen most heavily on those with high incomes, who are paying a far higher proportion of their income in tax than under the previous Government—let us take, for example, the increase in capital gains tax. If there were a Liberal Democrat Government and not a coalition Government, the well-off would be paying far more tax—a mansion tax, for example. The Government have also helped people in low-paid jobs by increasing the personal allowance, which I hope will be raised to £10,000 before the end of this Parliament. The work done by the Minister of State, my hon. Friend Steve Webb on universal credit will also help people on low incomes. Pensioners have also been protected from the cuts, because of the triple-lock guarantee, and my hon. Friend is introducing the new single-tier pension—another major achievement.
The group of people we are discussing this evening, whose incomes would be cut by clause 1, are those in receipt of working-age benefits, but not disability benefits. Coalition is all about negotiations and reaching compromises. It is important to note what would be happening to welfare benefits if we had a Conservative Government and not a coalition. We know from statements in the public domain that a Conservative Government would propose a benefits freeze, not a 1% increase, and that the cuts would apply to all benefits, not just those listed this evening. Such a freeze would last for several years—not just three years, as under the coalition Government’s policy—and child benefit would be awarded only for the first two children in the household. These are all policies that a Conservative Government would introduce, but which the coalition is not. We also know, as was made evident earlier—certainly from the cheers on the Conservative Benches behind me—that a Conservative Government would reduce the top rate of tax to 40%, not leave it at 45%. Liberal Democrats in government have achieved a great deal in lessening the impact on welfare benefits uprating, compared with a purely Conservative Government.
However, my main concern about the measures in the Bill—this echoes concerns raised by Mr Redwood and others who have spoken—is that committing the country to a 1% increase for three years now, before we know what inflation will be when the increase comes into effect, could end up being harmful to people on low incomes, because we have absolutely no idea how much world fuel and food prices will rise in those three years. I recognise the strength of the argument that benefits for people out of work should not rise at a higher rate than the earnings of those in work, which is why amendment 10 proposes to increase such benefits by the same percentage as the rise in average earnings over the previous year. Amendment 10 would be a fair compromise between the need to cut the deficit and the need to provide a safety net for those dependent on welfare benefits.
There has been a lot of talk about scroungers and curtains being drawn. I entirely reject such rhetoric. It is important to note that strong sanctions are available for those receiving jobseeker’s allowance. For example, people can lose their jobseeker’s allowance for up to three years if they do not apply for a job that their adviser tells them about, do not accept a suitable job offer, leave a job voluntarily, lose their job because of misconduct or do not take part in a compulsory Work programme. Therefore, sanctions are indeed available.
I represent a very rural constituency. It is important to point out that prices on islands or remote parts of the mainland are higher than in most of the rest of the country, and that people on jobseeker’s allowance in remote areas who are finding it difficult to get a job in the area in which they live are on very low incomes. We should not commit ourselves to only a 1% increase for the next three years, because we do not know what will happen to prices during that time.
Would my hon. Friend acknowledge that if we had applied the logic that he is now advocating over the last five or six years and pegged benefits to wage rate inflation, the people he is talking about—the people he is trying to help—would be far worse off?
A lot depends on where we start. If we are talking about rises matching prices or wages, it all depends on the starting point—if we pick a different starting point, we get a different result.
I was talking about the next three years. We know what the rise in average earnings was last year, so obviously we know what the rise in benefits would be in 2013-14. We do not know what it would be in 2014-15 or 2015-16, but setting the increase to the rise in average earnings, rather than a fixed rate of 1%, would mean that as the economy gradually grew, the level of growth in the economy would be paid to those on benefits, as well as those in work. That is a better approach than having a fixed rate of 1% for three years.
No Government have control over world food and energy prices. At Prime Minister’s questions last week I raised this potential problem when I asked the Prime Minister what contingency plans the Government had for benefit increases, should food and energy prices rise by more than expected. He answered by pointing to the good work being done by my right hon. Friend the Secretary of State for Energy and Climate Change to ensure that energy companies put people on the lowest available tariffs. That will indeed be a big help to people on low incomes, but if energy prices rise by more than expected, the lowest tariff will rise by more than expected too. After I heard the Prime Minister’s answer, I am afraid that I was left to form the conclusion that the Government have no contingency plans for a scenario in which prices rise by more than expected. I hope that when my hon. Friend the Minister replies to this debate, he will be able to reassure me on that point. I hope there is a plan B, in case world prices go up by more than expected.
Setting future increases to the increase in average earnings would address the legitimate argument that out-of-work benefits should not rise faster than earnings and would help to cut the deficit. For example, if the CPI figure were used for 2013-14, benefits would increase by 2.2%. If average earnings were used, they would increase by 1.6%, saving half the amount that a 1% increase would save. It is also important to point out that cutting public spending on its own will not eliminate the deficit. We need to grow the economy as well. All the economic research indicates that money put into the pockets of people on low incomes is far more likely to be spent straight away than it would be by those on higher incomes. Not increasing welfare benefits by the rate of inflation will have an impact on shops and other businesses, as well as the recipients themselves.
To sum up, linking benefit increases to average earnings is much fairer all round and avoids committing ourselves to a fixed figure unnecessarily far in advance. I hope that the Committee will support amendment 10, and I hope that you will allow it to be put to a vote, Mr Amess.
This evening’s debate on clause 1 and amendment 12, moved by my right hon. Friend Stephen Timms, is important because it speaks to more than the £13 billion increase in the welfare budget caused by this Government’s failure on growth since 2010 or even the chronic lack of jobs, in a still depressed economy, faced by so many hundreds of thousands of people in our country. This debate speaks to the very values of our society.
Are we a country that is content to divide socially instead of coming together—jobless and workers, low-paid and middle earners—to defeat again the social evils of worklessness, low pay, slumping living standards and poverty? Are we a country that is content to see the doubling of food banks under this Government since May 2010, as 1.4 million people in work find themselves needing to resort to credit to help to pay the rent or the mortgage each month? Are we a country that will fall for the cynical “divide and rule” tactics of the Chancellor, which treat people as pawns in a squalid political game, amid a campaign of demonising the poor and turning neighbour against neighbour, when a responsible Government would seek to unite people rather than divide the country? This clause is rotten economics, ruinous for weak economic demand up and down the country and rank politics, from a Government who can relaunch as many times as they like, but who will never rediscover any sense of moral purpose while they engage in this basest of agendas of social division.
The hon. Gentleman mentions unity. Does he agree that if people lead their life on welfare, it is not only bad for our economy and for our society but tremendously bad for those people themselves, hugely reducing their life expectancy and seriously damaging their children’s lives and prospects? It should be discouraged; the best way out of poverty is through work.
On this pleasant occasion, I find that I entirely agree with the hon. Gentleman. Let us hope that that agreement will continue when he contributes to the debate later, and in future debates.
These measures are not pro-growth, as they were included in the analysis from the Office for Budget Responsibility in December that further downgraded growth forecasts for this year by 0.8% of gross domestic product. They are not pro-deficit reduction, as unemployment is set to become 340,000 higher than the level predicted by the OBR in 2010, and benefit bills will be £13 billion higher than forecast. They are not pro-equality either, as two thirds of the real-terms cuts introduced by clauses 1 and 2 will hurt women, and three-fifths of them will hurt working families.
If the Government believe that they are standing up for fairness in the midst of the longest slump for 140 years, this must be either the most incompetent or the most misguided set of measures since those proposed by the National Government in 1931. On every count, they will increase, not cut, inequality in our country, given that 71% of the households affected are on or below the average income, and that 60% of the total savings from the Bill will come from the poorest third on the income scale. Only 3% will come from the wealthiest third. On no count can these measures be described as fair. How on earth can the Government believe that it is right to introduce a 4% real-terms cut in benefits until 2015 while continuing to pay top-rate pension tax relief to top-rate taxpayers at a rate of 50p in the pound? They are doing that while impoverishing the very poorest people at the same time.
Unemployment in my constituency remains consistently high at more than 4,000, or 12% of the working-age population. Although more than two thirds of jobless people experience only a few months out of work at the most, there are more than 1,300 people there who have been out of work for a year or more. Within that group, some 600 people have been out of work for two years or more. If the Government were serious about welfare reform, they would accept that ending the crushing blow of such long-term joblessness, which saps the human spirit and harms long-term job prospects—as Andrew Bridgen pointed out—should be the first duty of a responsible Government. Instead, they have put this ruinous set of measures before us tonight.
Given the sense of unity between us, will the hon. Gentleman endorse the coalition Government’s policies that have helped the economy to create 1.2 million new private sector jobs during this Parliament?
I would not endorse that policy because, as the hon. Gentleman knows, that figure includes the transfer of between 200,000 and 250,000 college staff from the public sector to the private sector. I am not going to endorse that figure; he knows that it is not accurate.
Would my hon. Friend like to refer Andrew Bridgen to recent articles—including some in The Guardian, which he would probably discount—that show not only that those jobs were transferred from the public sector to the private sector but that the Government are counting unpaid work in the total of new jobs being created?
Yes indeed, I have seen that report, and it was scandalous. I was somewhat perplexed by Mr Redwood when he said that people who were in part-time work were satisfied with that situation. The truth is that, as the TUC has established, 3.2 million people in this country are stuck in involuntary part-time work because of weak demand, low growth and low investment in the low-productivity economy that is being presided over by this Government.
The hon. Gentleman is making a thoughtful contribution, as ever. He talks about fairness. Does he think it fair for a Government to spend £25 billion over 10 years only to see the number of those in fuel poverty increase by 2.8 million? Does he think it fair to add 75p to a pensioner’s pension? Does he think it fair to add 10p to fuel duty? And does he think it fair that 1,610 people in his constituency were lifted out of tax last December?
What I would certainly define as unfair is introducing a clause whose impact on the poorest 10% of people on the income scale will be 14 times harder than on the richest 10%. I hope that he has read the impact assessment as closely as I have. If he has, he will know that 1.4 million people in the lowest 10% will be affected by this measure, but only 100,000 in the top 10% will be similarly affected. That cannot, by any stretch of the imagination, be considered fair.
I hope that the hon. Gentleman will have an opportunity to make his own contribution later, and that he will recognise that I have been generous in giving way to him once already.
Long-term unemployment in Scotland has risen by 385% since 2008. I welcomed the presence of Scottish National party Members in the Division Lobby with Labour Members the other week, voting for our reasoned amendment to the Bill relating to the jobs guarantee, and I hope that it will not be too much longer before the Scottish Government follow Labour’s lead and introduce a jobs guarantee for those most in need of work in Scotland. They could easily do that. I hope that they will look at the example set by Glasgow city council in introducing a successful jobs fund for the young jobless, because such a measure would supersede the measures in clause 1. Countries such as Sweden, which many in the Scottish Government often ask people in Scotland to emulate, have used jobs guarantee policies very successfully indeed for nearly two decades, while reducing their deficit at the same time.
Does the hon. Gentleman also welcome the Scottish Government’s efforts to ensure that every 16 to 19-year-old in Scotland be guaranteed an educational or training place?
I would welcome any measures from any tier of Government that would increase the level of training and skills provided to my constituents and those in other Scottish constituencies. I have to say to the hon. Lady, however, that I have two major colleges in my constituency—North Glasgow college and John Wheatley college—which have seen staggering levels of cuts introduced by the Scottish Government. That is driving more young people in my constituency into unemployment and creating the very figures that allow those on the Treasury Bench to produce measures such as those in clause 1.
Even in constituencies such as mine, it is still the case that people move in and out of unemployment. The calculated framing of this debate by the Government, based on the fabricated and manufactured premise that there is a monolithic army of the permanently idle, unwilling even to open their curtains, and defrauding the system, wilfully ignores that fact. Fraud in the benefit system is only 0.7%, and many unemployed people, including many of my constituents, are struggling hugely on just £71.40 a week. Unemployment benefit as a proportion of average income has fallen from 22% in 1979 to a mere 15% now, so the argument from those on the Treasury Bench that unemployment benefit is somehow unaffordable and that it cannot continue into the decades to come is simply a false premise to put to the Committee tonight.
Would my hon. Friend like to point out to Government Members that, in the days when jobseeker’s allowance and its predecessors represented a higher proportion of earnings than now, we also had lower unemployment?
That is absolutely right. We also had lower levels of long-term unemployment than we have now. As I and other Members have pointed out, high levels of long-term unemployment decrease the earnings potential of the people afflicted by that social evil.
Only today, the Joseph Rowntree Foundation published a survey of poverty in Scotland which revealed that a baby boy born in the richest 10% of Scottish neighbourhoods has a life expectancy 14 years higher than that of a baby boy born in the poorest 10% of such neighbourhoods. Having a 4% real-terms cut in unemployment and other out-of-work benefits of the sort contained in clause 1 is going to make those figures in Scotland even worse. I urge the Government to think again, to accept amendment 12 and to reduce the terrible social damage that will be caused if this measure becomes law.
I hope that, at this eleventh hour, the Government will decide to make policy on the basis of evidence, rather than reintroduce some Victorian distinction between the deserving and the undeserving poor. I urge them to think again about the impact that clause 1 will have, ensuring that 90% of those in out-of-work benefits will, according to the Institute for Fiscal Studies, be an average of £215 a year worse off. They should consider the effect that will have not just on high streets in our towns, villages and cities but on the local shop. They should think about the amount of economic demand that will be taken out of local communities, the jobs that will go as a result of the passing of this measure in this form tonight.
The Government ignore the inconvenient truth that out-of-work benefits constitute just 3% of the welfare budget, and that outside of pensions, most welfare spending ensures that work pays for many of our citizens. Nearly three in 10 of my constituents earn less than the living wage of £7.45 an hour. Although introducing a living wage in those parts of the economy where it will work would save money in lower tax credit costs, we, like many other countries, need a strong tax credit system to reduce imbalances within the labour market that would otherwise cause unacceptable levels of inequality. The simple truth is that most poverty in Britain today is among the working poor. It is mainly the working poor who are losing out as a result of these measures. They will be the biggest victims if this iniquitous Bill were to become law, with a real-terms 4% cut in their living standards.
In Scotland, as a result of these measures, some 261,000 working families, nearly one in five, would lose an average of £259 a year by 2015—the antithesis of work paying for those 261,000. About 70% of the tax credit cuts will affect working families in Scotland. The median wage in my constituency is less than £17,600 a year, and many thousands of people will be savagely hurt by clause 1, as Citizens Advice outlined in its submission. A couple on just £13,000 with two children will lose nearly 5% of their income as a result of this Bill, completely overwhelming any benefit from increasing personal tax allowances, which is worth just 13p a week to them.
This debate is not just about the measure before us; it is a debate about the values of this Government and the priorities of our society. This Bill impoverishes the poor, without reducing the deficit; it makes inequality worse, adding 200,000 to the child poverty figures, leaving 1 million more children in poverty by 2020. This clause is a provision that will cause enormous hardship to some of the poorest people in society, and it will devastate economic demand in constituencies such as mine. I urge the Committee to endorse amendment 12 and to vote against clause 1.
I am grateful to be called to contribute to this Committee debate. Many of tonight’s speeches have made me feel that I live in a different world from the one in which my constituents and a large number of people in this country live. I propose to Labour Members that the world in which they live is one far removed from reality.
When this Government came to office in 2010, the coalition confronted the worst peacetime deficit in Britain’s history. That fact cannot be repeated often enough. This is the architecture and the framework through which every single decision has been made since the formation of that Government. It is particularly nauseating to see Labour Members berate the Government for trying to make very tough choices and trying to make savings when they were the architects responsible for the chronic and devastating mismanagement of our public finances; and it is particularly nauseating to see those Members berate and accuse the Government of being purely political in respect of this very difficult measure.
We know what has happened in the eurozone. We have seen the devastation that reckless public spending has brought to Greece, Spain and other countries. If we looked at how they dealt with their deficits, we would see that their particular approach has been far more severe than anything we have seen in this country. Indeed, unemployment benefit in Greece was cut by 20%—a savage, swingeing cut to benefits—and that was done to balance the books. In Ireland, we have seen cuts in public sector wages and cuts in child benefit. I am not suggesting for a minute that we should go down that route. What I am saying is that this is the kind of response that other sovereign countries have had to make to deal with the very serious public finance hole in which they found themselves.
It is also particularly nauseating for Labour Members to pretend that we do not face this grave crisis and to pretend that there are endless streams of public money that we can just keep spending. This is absolutely the wrong approach, and it sends a bad signal to the country. The country knows that Labour spent too much money and that some difficult choices have had to be made. One of the more responsible Labour Members, Toby Perkins, openly acknowledged that even a Labour Government would have had to find savings in this particular period.
Does the hon. Gentleman not appreciate the reason why this particular Bill and its measures have been called “political”? It was clear in the autumn statement that the Chancellor intended these measures to be some sort of political trap. In making choices, any Government would not be looking only at the contents of this Bill. I would be happy to talk about a much wider range of choices, so why can we not have a wider Bill?
In my opening remarks, I made a wider point about the eurozone. This is exactly what goes to the heart of the issue. What those countries have done to deal with their fiscal crisis—I am not saying we should follow it, but we have to remember that their deficits are better than ours at the moment—is to make swingeing cuts to public spending in the form of benefits. We have not done that. We have spared our people that measure of severity, but we have to recognise that a large portion of spending goes in this direction and that the savings we are making are in the region of £3.7 billion a year.
Our coalition colleagues, the Liberal Democrats have said that the time frame is arbitrary. Some people have talked about 1912—more than 100 years ago—and some have talked about the last 30 years. I am not interested in the last 30 years. I am interested in what is happened since the financial crisis. I am interested in what has happened since Labour got us into the mess we are in. I accept that it is an international mess and that there is a world crisis, but the fact remains that, at £170 billion, this was a much larger deficit than that of any of our competitor or partner countries in the OECD. In that context, something had to give. We had to make some very tough choices about spending.
Let me consider some of the provisions. There is clearly a measure of disagreement over how we should approach this aspect of welfare spending. I have yet to hear from Opposition Members by how much they think benefits should rise. We have heard one suggestion, although admittedly it came from the only member of the Green party in the House. Caroline Lucas seemed to be saying that she would have raised the rate in line with the retail prices index. When asked how much that would cost, she blithely replied “£7.4 billion”—I am sorry, it was £7.6 billion—as if that were a snip. It is to her credit that she at least had the honesty to spell out what are, in my view, the disastrous fiscal implications of her policy.
Labour members have given no such undertakings. They have made no such statements about what their policies would actually cost. They have simply wailed and moaned about the harshness of the Government, without in any way recognising the severity of the crisis that we face.
Does my hon. Friend agree that it is not just a question of welfare policies, but a question of employment or, in the case of the Labour party, unemployment policies? In my constituency youth unemployment rose by 52% under the last Labour Government, and rose by 36% in the constituency of Mr Bain. Under the present Government, it has fallen by 11% in Glasgow North East. Does that not show that our war on unemployment is beginning to work, and the economy is beginning to heal?
I could not have put it better myself. My hon. Friend has made an important point about employment, which touches on a wider point about the division between Government and Opposition. The Labour attempt to create a socialist state by means of Government spending led to absolute disaster, as it always does. We will not be able to create jobs simply by expanding the public sector ad infinitum; logic tells us that that is not going to work.
I am pleased to note that my hon. Friend ascribes efficiency and a real plan to the Labour Government, but that great plan of theirs to create a socialist state ended in the payment of tax credits to people earning more than £70,000 a year. Who were they helping in that regard?
This is anecdotal evidence, but I was reliably informed that a couple of Liberal Democrat Members of Parliament were claiming tax credits on the basis that they were entitled to them. That is the sort of barmy universe that was constructed under the last Administration, and it is something that we have had to redress. When we consider matters such as those that we are considering today, we must always bear in mind that, given a budget deficit of £170 billion—more than 12% of GDP—it is very difficult to curb public spending sufficiently to enable the country to pay its way on a sustainable basis.
I am obliged to my hon. Friend for reminding the House that it is the historic mission of the Conservative party to clear up the mess left behind by successive Labour Governments. Does he agree that it is unfair for people earning more than £70,000 a year to be paid tax credits, but very fair that people earning just £10,000 a year—who paid £1,160 in tax and national insurance in 2010—will now pay only £670, and even fairer that next year they will pay only £360? Is that not an example of Conservative fairness?
It is not only fair, but common sense. The Labour cash merry-go-round, when Labour was taxing people with very low earnings and then handing back the money in the form of benefits, did not provide a sustainable model. The measures that we have introduced have been far more effective in reducing—
I wish I could share the joke, but I have more important matters with which to deal.
The hon. Gentleman can! I was just wondering whether he was going to tell the House that the banking collapse had been caused by working tax credit.
I have my own ideas about the banking collapse, which I am happy to share with the hon. Lady—although not, perhaps, tonight.
The financial crisis, which we all remember, devastated everyone. Even today, the United Kingdom economy is 3% smaller than it was in 2008. I cannot speak for everyone in the country, but the vast majority of people are much less well off than they were in those days. What has happened to benefits since then? According to the figures that we have heard, they have increased by 20% while the earnings of people in work have risen by 10%. That is not fair.
Labour Members have talked of fairness. For instance, the hon. Member for Chesterfield argued eloquently that 1% on £70 a week was very different from 1% on £35,000 a year. However, it is not the people on £35,000 a year about whom we are worried; it is the people on very low incomes. People in my constituency who do night shifts at Heathrow come to me and ask “Why did out-of-work benefits rise by 5% last year? I earn £11,000 a year if I am lucky and work 20 hours a week, but I was not given such a big increase.” That is the sort of fairness that we are talking about. This is a really important issue, which Opposition Members have not addressed in any way.
Is not the answer to the hon. Gentleman’s question—which applies to people on low incomes in my constituency as much as to those in his—that those who have worked hard and have low incomes, but have paid their taxes and done the right thing, can still lose their jobs through no fault of their own and find themselves trying to subsist on seventy quid a week, and that we do not want to make things more difficult for those people? I think that very few of them are scroungers, and most want to get back to work as fast as possible.
I accept what the hon. Gentleman says, but I am talking about the position in general. It cannot be right, arithmetically, for benefits to rise, year after year, faster than the wages of the low-paid people to whom he has referred. However, we must look at the overall picture. The 1% increase is not very much. I know that some Government Members proposed a cash freeze, and I am glad to note that the Government have not adopted that severe option; but in the context of the European and the global financial crisis, a cash freeze is not completely off the table. We have seen other countries take extremely tough measures. Why have they done that? They have not done it because they want to limit demand, as the hon. Member for Glasgow North East suggested. They have not done it because they want to hurt people on low incomes. They have done it because they feel that the fiscal future—the future of the state: the future of their countries—requires a tough approach to public spending.
Would the hon. Gentleman care to comment on the fact that the International Monetary Fund has called for the free and unimpeded operation of the automatic fiscal stabilisers, including unemployment benefits, when people, sadly, lose their jobs? Does he agree with Jonathan Portes, who used to work for the Government and now works for the National Institute of Economic and Social Research, and who says that the Bill makes little or no sense macro-economically? Is Jonathan Portes not right?
Jonathan Portes is not right. I do not think that anything he has ever written—I read his blog—makes any sense whatsoever, and I am happy for Hansard to record that. On the point about the automatic stabilisers, I refer the hon. Gentleman to the answer that my right hon. Friend Mr Redwood gave him. The automatic stabilisers are working; in cash terms, a lot of our spending in these elements is higher than it was. That is a clear sign that the automatic stabilisers are working.
We have to consider the sort of society and country we want to live in. Having a society in which benefits are increasing faster than very low incomes is not a sustainable position. It kills incentives.
Does my hon. Friend agree with my argument that what we have heard in this evening’s debate confirms that the parts of the country with the highest levels of unemployment often also have the lowest average wages and so it is important, if we want to make work pay—I believe all right hon. and hon. Members in the Chamber would agree that work must always pay—that we keep that disparity in respect of work and keep the incentive for people to get into jobs?
That is absolutely right.
I shall try to keep my closing remarks brief. The 1% rise in the uprating is surely a temporary measure; I would not want to see this in perpetuity. My right hon. Friend the Member for Wokingham talked about the need to combat inflation. Clearly if inflation is sustained at 3% or 4% over years, that would be very punitive and would make the proposed measures even more difficult for people to bear. So the Government need to keep a firm handle and an eagle eye on the inflation rate. I am absolutely in favour of that, but on the general approach I would not want to see any amendments to this Bill. It is a difficult proposal that we are trying to push through, but many people up and down the country are supporting the Government on it because they feel that the measures we are introducing are encouraging people to get out to work. People also realise—I will close where I started off my speech—the appalling fiscal legacy given to us, the incredibly difficult financial circumstances in which the Government found themselves, and the tough and courageous measures we are taking to get us out of the mess.
I rise to support the amendment because it is very clear: it seeks to tear the heart out of this Bill, and it should tear the heart out of the Bill, because it is a terrible Bill. By taking this stance, I am not saying that we should not, with all urgency, think about welfare reform, because that is a mega task which will face a succession of Governments. I am not saying that we do not recognise that there is a real problem in this country with incentives to work, because there is. I am not saying that there are not all sorts of other issues that we need to deal with and consider in relation to this measure. We have to consider what this measure is actually about.
I agree totally with the Government Members who said how serious the fiscal deficit is. I do not doubt that when Labour breaks the trend and has to clear up a mess—we have been hearing this afternoon about Tories clearing up our mess—we might well have to look at the size of the welfare bill. However, I do not believe that any Labour Government would get cuts through without presenting them in a context in which the cuts were thought to be fair. That goes to the heart of the current Government’s strategy. Despite the rhetoric in which they have tried to clothe themselves in respect of the changes they have been making, the country will have to make a judgment in the election on whether the Government have fulfilled the assurance they gave at the beginning of this journey that who had most would pay most and those who had least would be protected. It is no accident that we link the amendments being debated tonight with the tax cuts in the Budget for those who have most.
We will not have to face this issue tonight because, sadly, we know how the vote is likely to go, despite the presence of some brave Liberals—I hope that my saying that encourages even more to vote, knowing that it is safe to register their protest. In the end, it is those outside this House who will judge whether this measure is fair. Is it fair that, at time when we can find moneys to make tax cuts for the very richest, we cut living standards for the very poorest?
No, I am going to make a short speech. I am grateful for the hon. Gentleman’s interest and the way he is following my speech, but I do not want to extend it.
The country will make a judgment about how fair the collection of measures is. I think the Government must be extremely confident, given that we are seeing a record number of people who are hungry and are turning up at food banks operating in our constituencies. Thank God for food banks. I do not hold the view that food banks are terrible; it is great that we have them, because people are hungry. I think it is terrible that we live in society where people are hungry. That is where we should direct the anger; it should not be aimed at the people providing the food banks. We are thinking about cutting benefits at a time when we also know that people who probably have greater abilities than I do in managing on a low income—thank God, I have never had to do so—find that they fail. The Bill will crush some decent people, who find it impossible to live on the levels of income that we lay down.
That we should do this at a time when we can find the money for the richest to take more passes all my understanding. Perhaps the Opposition will lose the vote tonight, but I am not so sure that, on this argument, an indelible mark will not now be made against the coalition Government, who found money to cut taxes for the very rich while making life more and more difficult for the poor, some of whom do not have enough to eat. Should more people join that terrible queue of our fellow citizens? Lots of other arguments have been marvellously put, but for me it comes down, as I guess it will for the electorate, to whether this is fair. I think that they will say no.
Thank you, Mr Amess, for calling me to speak in this debate. I will follow your advice and try to be as brief as I can.
Tonight I came to listen to different views on options for this Bill, and we have heard an interesting mix of practical ideas, impractical ones and vacuums. Much of the debate has been wrapped in an argument about, on the one hand, who can claim the moral ground as the more compassionate and, on the other, who can claim to be more practical on economics.
We have just heard from Mr Field, for whom I have enormous respect. He made the argument that this is ultimately all about fairness, but given that Labour Members wanted to retain child benefits for all higher-rate taxpayers, no matter how many millions they earn, I find it hard to take that argument at face value. I also reject the bizarre argument about taxing the richest by more than his party ever did in its 13 years in power—that raising £7 billion less in tax revenue for services that all our poorest constituents most value is somehow beneficial to our poorest and most vulnerable members of society.
On the proposals that have actually been made, the only person who emerges with real credit for honesty is Caroline Lucas. She has the guts to say that these benefits should be uprated now and for ever by the retail prices index, at a preliminary cost of some £7.6 billion. She might have some idea where that money will come from—I am sure she does not, as certainly none of the rest of us does—but at least she has tried to put a value on her compassion. Personally, I think that it is as practical as some of her efforts to spread wind farms across the country, in a passion for green energy for which our constituents will also pay heftily through their energy bills, but that is a separate matter. At least she has put a mark on the ground.
In contrast, Opposition Members, including Helen Goodman, disappearing from her seat after speaking at great volume, and the hon. Members for Glasgow North East (Mr Bain) and for Chesterfield (Toby Perkins) were unable to say with what they would replace the Government’s proposed uprating of 1%. It was as if they would offer a happy vacuum in which we would depend on the munificence of the shadow Secretary of State—he who famously apologised for having no money left—who would somehow to find the money to fill it.
I am grateful to the hon. Gentleman, who is giving way with characteristic generosity. He will accept that hitherto in this country, and for many years, the proposal to uprate benefits has been presented annually and much closer to the time at which uprating should take place, so that the Chancellor can take account of the latest economic circumstances and the latest level of inflation. It is only now that the House of Commons is being invited to set in stone a strategy that will stretch ahead for many years to come. That is the unusual situation.
My friend—for he is my friend— Mr Byrne would make a valid point if it was not for the fact that this provision is set for only three years and it is set in the context of what he and his colleagues achieved during the extraordinary runaway period between 2003 and 2010, when they unleashed £170 billion of tax credits and raised welfare spending by 60%, so that, as we know, it is now a third of all Government expenditure. That is the bill that all our constituents are having to pay today.
It is not surprising that the Government are having to take the risk—I accept that there is an element of risk—of pre-setting the uprating of these benefits without knowing what the level of inflation will be. That is why my right hon. Friend Mr Redwood was right. Hon. Members on both sides of the House gave him credit for flagging up the two crucial ingredients—control of inflation and energy—so that some of the less well-off in our constituencies do not suffer from the effective freeze over the next three years.
The hon. Gentleman is incredibly generous in giving way. Does he think the Bill is unconnected to the OBR’s decision to uprate the claimant count by a third of a million over the next few years, lifting its forecast for spending on unemployment and other out-of-work benefits by £6 billion? The Bill is needed to pay the price of economic failure. Surely that is the arithmetic.
The right hon. Gentleman, with his great experience of these matters, asks a technical question which I am fully confident the Minister will answer in detail in due course.
I promised I would be brief, Mr Amess, so let me come to the point. In effect, tonight we have debated in practical terms the benefits of tax credits against the benefits of tax allowances. I argue that tax credits, the chosen policy of the previous Government, were flawed by their cynicism, having been increased by 58% just before the 2005 election and by 20% just before the 2010 election. I am sorry to say that those were giant electoral bribes that led directly to the greatest bust of all times. The hon. Member for Glasgow North East spoke about moral divisions, and to hear that from a Member whose
Government created pension credits, which divided pensioner from pensioner, discouraged saving, enabled arguments between—
The hon. Lady will have to wait, and so will my hon. Friend.
I reject completely the idea of moral divisions. This is not an argument between what Ian Mearns called a compassion-bypass Government and an economic-car-crash Government. It is about what is fair for the people who pay the taxes that pay for the services and benefits and what is fair for those who receive them. Many of us will have had letters from constituents who work for not very much money, contrary to what the hon. Member for Chesterfield implied, and who point out that their motivation for working suffers when they realise that those who do not work have received more than double the increase in their wage over the past year.
Measuring social justice entirely by how much we spend of other people’s money to generate a system where we now pay more in interest on our debt than we spend on the entire education budget—that is not moral compassion. It is wrong, and that is why we must make practical decisions that are sometimes tough. One of them is being presented to us this evening and I shall support the Bill.
I start by paying tribute to the work of the Scottish Campaign on Welfare Reform, which has done so much to draw attention to the impact of the measures in the Bill. It speaks volumes that more than 60 charities, Churches, other faith groups and trade unions have come together to speak with one voice to express their concerns about this heartless Bill and to support amendments that might mitigate some of its most adverse impacts.
The problem with what we are debating tonight is that an uprating cap of 1% is entirely arbitrary. It will inevitably cause hardship not just to those on low incomes but to those on middle incomes. I want to try to focus on amendment 7, which was supported so eloquently by my hon. Friend Caroline Lucas. It is important that we try to restore a link to prices this evening. The problem with a below-inflation flat-rate uprating of benefits is that it represents a real-terms cut in the incomes and living standards of those who already live in the most straitened circumstances and will continue to do so for the next three years. Some 70% of those who are adversely affected are families with children and an estimated two thirds of the savings derived will be taken from the pockets of people in low-paid or part-time work.
Tonight, we have repeatedly heard, not least from Richard Graham, that it is unfair, when people in work may be receiving below-inflation rises, not to impose a real-terms freeze in the uprating of benefits. That is a particularly facile argument, which we rehearsed on Second Reading. It goes without saying that whereas someone with a job with average pay would receive £200 or £300 for a 1% increase, depending on whether they were a man or a woman, a person on benefits of £70 a week would see an annual increase of £36. That probably would not even take me beyond the boundaries of my own constituency. It is wrong to pretend that 1% of not very much is equivalent to 1% of an average salary—or, indeed, of the very generous salary that so many people in this place enjoy.
As others have highlighted, there is a great deal of uncertainty in the Bill. If inflation stays in line with OBR predictions, the Government’s approach will result in a 4% real-terms cut in tax credits and benefits by 2015. That is a very big “if”, though: the OBR’s crystal ball has not been very effective to date and it has certainly not been good at predicting inflation—or, pretty much anything else. If inflation is higher than the guesstimates from the OBR, the impact on low and average-income households will be greater than we predict today. That is why we must preserve the link between social protection payments and the cost of living.
The Government’s distributional analysis of the impact of the autumn statement shows that next year the people in the five lowest income deciles will be worse off as a consequence of the cumulative impact of the Government’s changes to the tax and benefits system, and the least affluent will be the most affected. In contrast, three out of five people on average incomes and above will be better off. That exposes the truth of the matter: the Government have set themselves priorities and made choices that make those on low and average incomes pay for the tax breaks for the very wealthy. The poorer half of our society is being asked to carry the can for a financial crisis and a failure of political leadership that is not of its making, rather than seeing that burden shared across society.
The other key point that I want to make this evening—again, one that I made on Second Reading—echoes points made by Ian Mearns earlier today. It is that the measures of inflation that we use are not especially good at measuring the impact of inflation on lower income households. We know that low income households spend a far greater proportion of their resources on essentials such as food and domestic fuel. In the past five years, food prices have risen by around 30%, and the prices of some staple foods, such as potatoes, have risen by 40%. Projections for next year are for rising prices for a number of staple commodities because of poor harvests in north America and many parts of Europe, not least in our own country. Thrifty shoppers, as we know, are adept at switching to cheaper brands when money is tight, but when global prices are on an upward trajectory there is often nowhere to hide.
The other disproportionate expense for low income families is domestic energy, which is another area where prices have soared and fluctuated in recent years. The 20% increases in gas prices announced before Christmas are just the latest in a series of cumulative hikes in the price of fuel in recent years. There is snow on the ground outside today; that may be unusual here in London, but it is just normal winter weather in my constituency. In such conditions, families, especially families with young children, need to heat their homes adequately.
Although neither the consumer prices index nor the retail prices index captures the full impact of inflation on the lowest income households, the retail prices index includes some housing costs and is more likely to reflect the actual inflation that poor people experience. The Bill will cause tangible hardship, quantifiable in real money terms and in practical ways for people on low incomes. Hundreds of thousands of people who are disabled, who are carers, who are lone parents, will be particularly hard hit. It will hit families, whether they are in or out of work, dealing with the added expense of bringing up children. It will not cut the deficit—indeed, it will take money out of local economies and inhibit recovery at a time when we should be trying to get local economies going. On the basis of the Government’s own assessment, 200,000 more children will be pushed into poverty by this part of the Bill alone. We know that the long-term cost of child poverty cannot be measured only in financial terms. The long-term implications for children who grow up in deprivation are well quantified. The results are devastating and store up problems for the future, some of which we are still dealing with from the last period of austerity and the last poverty measures back in the 1980s and 1990s.
Dickens has been mentioned several times today. Whereas some speakers have talked of “A Christmas Carol” and the days of Scrooge, I was set thinking of “A Tale of Two Cities”, and indeed a tale of two countries. Today the Scottish Government announced an extra £5.7 million for advice services to support people who have to face the problems associated with these welfare cuts. It is a sad state of affairs when people are using food banks; it is a sad state of affairs when disabled people who, through no fault of their own, cannot persuade an employer to give them a job, are being pushed further into poverty and are being blamed and vilified for the state of the wider economy. People in Scotland have a choice and I look forward to the day they will get to make that choice in a referendum on their future governance, because never again will they have to take the Tory policies that they did not vote for.
Amendment 7 would make this deeply flawed Bill slightly less iniquitous and slightly less unfair, and would ensure that the very poorest families do not carry a disproportionate share of the burden in tough economic times. I urge Members across the Chamber to support us this evening when we push it to a vote.
I apologise, Mr Amess, for persisting in seeking to speak at this late hour. I sat through the five hours of Second Reading and time did not permit me to be called then, and I have tabled an amendment tonight which we will not reach. One could become paranoid at times. I wanted the opportunity to set out my views briefly on this core element of the Bill for my own constituents.
I will vote for every amendment that seeks to ameliorate the Bill. That includes the amendments that have been tabled from both sides, including by my own party. I feel there is a moral imperative to do so. There was a consensus for a time in our country about how we dealt with welfare benefit upratings: they would increase on the basis of either earnings or inflation, whichever was the higher. That consensus was achieved because there was a moral commitment to protect the poorest in our society—in a civilised society. It went alongside a steady rise in wages at the time. What we have seen recently—it has impacted on my constituents particularly—is wage cuts and wage freezes across the public sector and in some parts of the private sector. I opposed the wage freeze in the public sector that was supported by my own party.
In the past 12 or 15 months we have seen a succession of measures—more than a dozen key measures—that have cut the income of my constituents. The Bill is the last straw. People in my constituency are suffering and will suffer more as a result of this measure. As I mentioned in a recent debate in Westminster Hall, there is a gulf between the views and experiences of some Members of the House and the experiences of many of our constituents and the way that they suffer. I thought that might be particular to my community—a working-class multicultural community that is taking a battering at present—but I looked at some of the statistics in the briefings that were prepared for this debate.
The Government’s own household survey of those living below the average wage identified 11% of families in that category who cannot keep their homes warm. I looked at the Save the Children survey, which found that 14% of children do not have a warm coat this winter. I looked at the survey undertaken by Contact a Family, the charity that works with families who care for disabled children. It was an extensive survey which found one in six families going without food, one in five without heating, one in four without the specialist adaptations that they need, and a third taking out a loan to pay for food and heating.
I looked at the Zacchaeus 2000 Trust work that has been undertaken by the Centre for Research in Social Policy, which demonstrated how the basic income from benefits has decreased in relation to the inflationary impact on basics such as food, heating and rents. I also looked at the work it had done on nutrition for expectant mothers and the concern, which was echoed some time ago by the Minister himself, about the incidence of poor maternal nutrition resulting in low birth weight.
Mr Kennedy expressed his fear that this was, effectively, dog-whistle politics, that the poor were being used as a political football between the parties. I share those fears. I wish I did not. That was the tenor of the debate that was opened up in the budgetary statement by the Chancellor of the Exchequer—the reference to curtains, and the debate that has gone on in the media about skivers and strivers. But I have more faith in the British people. I do not believe that they accept the terms of that debate. I think the British people have a sense of fairness and a sense of moral commitment to people less fortunate than themselves. That is why I do not think there is majority support for the measure. I think that, as a result of this debate, understanding is overcoming prejudice. Prejudice will be defeated by humanity; there will be an upsurge of popular support for those of us across the House who will oppose this legislation tonight and are calling for the Government to think again about the whole trajectory of their welfare cuts.
My right hon. Friend Mr Field has done immensely important work about interventions to tackle deprivation. There is a whole range of them, and they are not just about income. However, his work has found that those interventions are impeded from the outset if people are struggling simply to put food on the table, heat their homes and have some kind of decent standard of living.
Clause 1 is a major setback for large numbers of people right the way across our country. It undermines their standard of living and diminishes the whole of our society. It will have repercussions for a long time to come, unless we defeat it tonight.
This has been a wide-ranging debate of nearly four hours. Although it has technically been about amendments to clause 1, the generosity of the Chair has meant that we have essentially covered the whole Bill and the issues raised by it.
First, I want to respond to the point about the language in which the debate is constructed. My right hon. Friend Mr Kennedy and a number of other Members said that we should avoid divisive language, and I entirely agree. I seem to recall that it was the Labour party that used the phrase “strivers’ tax” about this debate—indeed, a year or so ago, the shadow Secretary of State used his party conference speech to create the very divisions that his hon. Friends are criticising. He said:
“Let’s face the tough truth—that many people on the doorstep at the last election felt that too often we were for shirkers not workers.”
The right hon. Gentleman has form on this issue. In 2012, he was at it again. During a speech at the London School of Economics, to what I imagine was a packed house, he said:
“Labour is the party of hard workers not free-riders. The clue is in the name. We are the Labour party. The party that said that idleness is an evil. The party of workers, not shirkers.”
There is a difference between reporting a conversation on a doorstep in one’s constituency and using a line as the basis of a political strategy that seeks to punish those on low incomes while handing out a £3 billion tax cut to Britain’s richest citizens. I am simply not sure how the Minister, as a Liberal Democrat, can support that policy.
It is good to hear from the true heir of Beveridge. The quotes describing the Labour party that I just read out were in party conference speeches and at a conference at the LSE—
“The party that said that idleness is an evil. The party of workers, not shirkers.”
It is disgraceful, as my hon. Friend says.
The second question that has arisen is why the Bill is necessary. It has been suggested that the Bill is simply a political device, but that draws a veil over the fact that we are dealing with one of the biggest deficits in peacetime history. To listen to the Labour leadership, one would think that they took such matters seriously. The leader of the Labour party said on “The Andrew Marr Show”, in an interview, I think, with James Landale:
“So when it comes to the next Labour government, if I was saying to you, ‘I can absolutely promise to restore this cut or that cut’, you would say ‘Well, where is the money going to come for that?’...We are absolutely determined that Labour shows we would be fiscally credible in government.”
“The public want to know that we are going to be ruthless and disciplined in how we go about public spending”.
In fact, we have heard speech after speech calling for the Bill to be scrapped but there has not been a hope of hearing where the money would come from.
The Bill and related measures save £3.6 billion. When I challenged the shadow Minister, Stephen Timms, about where that money would come from, he said—I paraphrase—“We wouldn’t start from here.” I am afraid that the Opposition have to do rather better than that.
I will not give way; I would like to respond to what has been said in the past four hours before taking further interventions.
A number of my hon. Friends asked perfectly reasonably about why we needed to set out in legislation exactly where we were going. We all want our constituents to continue to enjoy, for example, the low mortgage rates that are absolutely crucial to their standard of living. We all know that for those of our constituents in the position of owning their own homes, the mortgage is their biggest single outgoing by a long way. It is vital, therefore, that we keep interest rates under control.
But that is kind of the point—not at the moment it’s not, because we have kept interest rates under control.
“To anchor market expectations, policymakers need to specify adequately detailed medium-term plans for lowering debt ratios, which must be backed by binding legislation”.
That is the important point. Were we to go year by year, seeing how it went, we would not have the credibility of deficit reduction to which all of us who signed up to the coalition agreement are committed.
Likewise, the OECD’s economic outlook said:
“The government’s fiscal policy stance and strong institutions have secured the confidence of financial markets, as evidenced by the near record-low government bond yields.”
In other words, this is for a purpose—the purpose of tackling the vast, sprawling deficit. To give a sense of scale, my hon. Friend Mr Reid was absolutely right when he said that in the final year of the previous Labour Government, for every £3 raised in tax, £4 was spent. What did that add up to? We are talking about a Bill and related measures that will eventually save about £3 billion a year. Labour was borrowing £3 billion a week, so we would need, say, 50 of these Bills to tackle just one year of Labour borrowing. That is the scale of the situation. When Labour Members airily take the moral high ground and pretend that there is a free lunch to be had—that we do not have to do this or make all the other cuts, but that somehow the deficit will disappear—we need to remind people that these are Labour cuts tackling Labour’s deficit.
People should not just take my word for it regarding the need to include social security as part of deficit reduction. Clearly, as my right hon. Friend Mr Redwood said, this is not comfortable stuff, and it is not something that any of us take any pleasure in. However, the IFS has said this about why social security is part of the mix:
“When cutting public spending dramatically to help reduce an unsustainable budget deficit”— that is the IFS’s language, not mine—
“it is almost inevitable that spending on benefits and tax credits—which account for 30% of the government’s total budget—will be targeted.”
Not for the moment.
We have a target for 2015-16 of £10 billion of spending reductions. We have not yet found that £10 billion. Even with this Bill, we are on about £6 billion, and without the Bill and related measures we would be down to about £3 billion. The challenge for Opposition Members who have said that taking money away from benefits takes spending power out of the economy is that so do other forms of spending cuts. If the money comes not from benefits but from local government, that will be money out of the local economy; if it comes from infrastructure projects, that will be money out of the local economy. There is not a free way of finding money without any impact.
Let me deal first with amendment 12, tabled by Richard Graham put it very well when he said of Labour that there is a vacuum where there should be a policy. That is a metaphor for the Labour party. In relation to a Bill that says that benefits and tax credits should go up by 1%, the amendment would take out the figure of 1%, so what would be left? Presumably, “Benefits should go up” but by how much? Perhaps by a fraction of 1%—we do not know. The amendment is incoherent; it would take something out and put nothing in its place. It would remove the heart of the Bill but gives no guidelines on whether the figure should be below inflation or above inflation, below earnings or above earnings.
As Mr Redwood and Andrew George said, the Chancellor sets a Budget every single year, and the benefit uprating will have to be relevant to whatever else has happened in the economy by taking into account inflation, wage inflation and so on. There is no need for this Bill now because we have a Budget every single year. Surely that is the central point.
The hon. Gentleman was not listening. The point about establishing a long-term fiscal framework is that it has to be credible; if it could be changed every year, it would not be credible. The whole reason we are able to keep interest rates low—[Interruption.] The hon. Gentleman is saying, “Why not change it every Budget?”, but that would not be credible for the long term.
On a point of order, Mr Amess. The Minister is misquoting me, so let me clarify this. I said that if it was all about stability, why do we have a Budget every year instead of setting three-year budgets, which would reflect that fact?
I will not for the moment, because my hon. Friend has joined our proceedings relatively recently. I should like to respond to the amendments that my hon. Friends and others have tabled, and I hope he understands that.
Amendment 7, tabled by Caroline Lucas and supported by Dr Whiteford, is in fantasy land, I am afraid. It not only rejects the savings in the Bill but would add additional savings on top by linking benefits to RPI. I have to give credit to the hon. Member for Brighton, Pavilion, because she knows how ludicrously expensive her amendment is and I am grateful to her for being frank about that. In a single year, it would cost £2.6 billion more than the current plan.
Let me respond a little further. The hon. Lady said that we should choose RPI because, essentially, it is bigger on average. The point about correcting benefits for inflation is not just to find the biggest number possible, but to measure inflation properly and correct benefits accordingly. We could also have a separate debate about the adequacy of benefits, but to use a flawed inflation measure that even the Office for National Statistics, which constructs it, says does not meet international standards, is a crazy direction to take, even if the hon. Lady did not need to find £2.5 billion.
Dr Whiteford addressed the fact that RPI is not a perfect indicator, but it is better than what we have. On the question of paying for our proposal, this is about priorities. If the Government limited tax relief on pension contributions to £26,000, that would give them £33 billion. If they cracked down on tax evasion and tax avoidance, they could get more than £100 billion. It is about political choices: this Government want to target the poorest and we do not.
If it were trivial to raise £100 billion from the filthy rich, I suspect that most Governments would have been there by now.
The most credible, coherent amendment in this group is amendment 10, which was moved by my hon. Friend Andrew George. He was so nice about me that I was almost tempted to accept the amendment, but not quite. Let me explain the reasons why not.
The first relates to the specifics of the amendment, which links benefit increases in 2014-15 and 2015-16 to whatever amount average earnings grow by. Based on the forecasts—I accept that that is what they are—that would mean an above inflation increase in the second of those two years, because we think that average earnings in a couple of years’ time will be more than CPI, as is the case in many normal years. At a time when we all agree that money will be tight, my hon. Friend is suggesting that an above inflation benefit increase in the second of those two years should be a priority. I do not think that it should be. At a time when we will have to make other difficult decisions about saving, the first consequence of his amendment—I do not imagine that he meant this—would be to lock in what we expect to be an above inflation increase in benefits in 2015-16. I do not believe that that will be our priority at that point.
Had we been in Committee upstairs and the Bill had further stages to go through, my hon. Friend may well have said that this was a probing amendment and we could have had a chat about it, but if we were to agree to the amendment tonight it would become part of the Bill that will go to the other place. It is a serious amendment that would have an unintended consequence.
Secondly, this is not intended as a wrecking amendment, but it would have that effect. We estimate that it would wipe out virtually all the Bill’s savings. Although I understand that my hon. Friend shares my concern about the impact on people on low incomes, that money would have to be found somewhere else. I do not believe that there is a painless way of finding that money or that the social security budget would be exempted from finding it.
We have already had to do some very difficult things on welfare spending in the Parliament whereby we have targeted particular benefits and identified particular issues, and a relatively small number of people have faced large cash losses. This is a different approach. It is a gradual approach that will create much smaller losses, but for much larger numbers of people. At a time when we are trying to find savings from this budget, I believe that spreading the pain relatively thinly across a larger group, rather than focusing on a smaller one, is the way to go.
Leaving aside the wisdom or otherwise of committing ourselves to the Government’s proposed up-rating level of 1% for 2015-16, my hon. Friend is right, according to the Government’s figures, that there is a funding gap of about £2.5 billion for 2015-16. He has to accept, however, that two fifths of cash benefits go to those with above-average incomes. Indeed, a former constituent of mine has said how laughable it is that he now lives in Greece yet still receives a winter fuel allowance. Surely we can find savings that are less painful than those proposed.
I can tell my hon. Friend that we have his ex-constituent in Greece in our sights. All I can say is that I hope he enjoyed his last payment. Joking aside, even if we took away all winter fuel payments to overseas pensioners, we would be talking about tens of millions of pounds, not savings on the scale that we need.
I want to say something a bit more positive to my hon. Friend. The gist of his amendment is that he believes that fairness demands that benefits go up in line with earnings. The Bill will deliver that for him over what I believe is not an arbitrary period but a sensible, realistic one. He knows that over the five years since it became difficult to find money for things—the credit crunch and financial crisis of 2008—we have put benefits up by 20%, including 5.2% last year, when inflation was very high. With three years of uprating at 1%, we would be on something like 23%. Wages have gone up by 10% or so over that period, and I would wager that on any credible estimate of wage inflation, benefits will have gone up at least as fast as earnings over the whole eight-year period, if not faster. Over a tempestuous period for the economy and the welfare state, we will have ensured that benefits rise at least as fast as earnings, which is a record to be proud of. The Bill will deliver what his amendment asks for—benefits rising in line with earnings overall.
As my hon. Friend has said, the Government have made a difficult decision to deal with the matter in the least unfair way. What has not been said in the debate is that the 1% uprating will not apply to all out-of-work or in-work benefits. Certain particularly vulnerable groups have been deliberately excluded. I hope he will reiterate that.