Charter for Budget Responsibility

Oral Answers to Questions — Prime Minister – in the House of Commons at 1:53 pm on 26th March 2014.

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Photo of George Osborne George Osborne The Chancellor of the Exchequer 1:53 pm, 26th March 2014

I beg to move,

That the modified Charter for Budget Responsibility, which was laid before this House on 19 March, be approved.

I am putting before the House today a charter for budget responsibility updated to include a new cap on welfare spending. I am conscious that this is a time-limited debate and will keep my remarks brief so that others can speak. The welfare cap marks an important moment in the development of the British welfare state. I believe the public back a welfare system that provides fair support for those genuinely in need and that supports those who have a disability and cannot work; those caring for others; those on maternity or paternity leave; and those who have lost a job and are trying hard to find work. The public, through their taxes on that hard work, are willing to pay for that support. It is a level of support that a country such as ours—we now have a growing economy—can afford to give.

However, that is not the welfare state we inherited in 2010. That welfare state was not fair and not affordable. It was not fair that some received £50,000, £60,000 or up to £100,000 in housing benefit, paid for by taxpayers who could never dream of affording homes with rents that big, so we capped housing benefit payments at just over £20,000 a year.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I will give way in a moment.

It was not fair that many out-of-work families received more as an income in welfare than the average family got from going out to work, so we capped the total benefits that one family can receive at £26,000. Thirty-six thousand households are now subject to the cap.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I will give way to the hon. Lady, then to my hon. Friend.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

How many families received housing benefit at the level he first mentioned—the £50,000-plus mark? Is he aware that, of the families covered by the benefit cap, nearly half are in temporary accommodation provided by councils because they owe them the statutory duty?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

First of all, 21,000 people have been affected by the housing benefit cap, so 21,000 people were receiving housing benefit more than that. Secondly, the hon. Lady seems to be suggesting that she is against the cap on benefits. That points to a wider truth that we will discover today about the welfare cap, and specifically whether the Labour party is committed to the cap we are setting out today, with the list of benefits in it. We will discover whether Labour is committed to the cap at the level we have set—not just the principle of a welfare cap, but the practical application of it.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

We will explore that point later, but let me take my hon. Friend’s intervention.

Photo of Robert Halfon Robert Halfon Conservative, Harlow

Is my right hon. Friend aware that a person on average wages pays roughly £1,200 a year in taxation just to pay the welfare bill, not including pensions? Does he agree that the welfare cap is fair on lower earners?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

It is absolutely fair. That is what the cap is about—building a welfare system that is fair to those who need it and fair to those who pay for it.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I will take a couple of interventions in a while. I have only 15 minutes for my opening remarks because we want lots of contributions later in the debate.

It was not fair that benefits were unlimited. We have introduced a cap. It was not fair that those looking for work faced marginal tax rates as high as 96%, sapping the incentives to find a job. We are addressing that through universal credit. It was not fair that benefits were rising much faster than wages; not fair that people who could never afford a place with a spare room subsidised the spare rooms of others; not fair that people who did not speak English could receive out-of-work benefits without even trying to learn it; and not fair that the long-term unemployed were cycled and recycled through the new deal. That was not fair, but it was the welfare system we inherited. It was unfair to those trapped in poverty and to the millions of people who paid for it. It was a perverse distortion of what William Beveridge had conceived. In the face of opposition to each and every measure we have introduced, we are removing those distortions, restoring the work incentives and creating a fair welfare state.

Several hon. Members:

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Photo of Chris Bryant Chris Bryant Shadow Minister (Work and Pensions)

Will the Chancellor confirm that, since his initial spending review, he has had to spend £13 billion more on welfare than he predicted? He has had to put it up by £1 billion this year and another £1 billion next year, so if the cap he envisages had been in place during this Parliament, he would have had to come to the House and apologise on four occasions?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

For a start, welfare spending is £3.7 billion lower than I set out in my first Budget. It is also £10 billion less than the Labour party proposed. Labour Members cannot have it both ways. They keep claiming that we are cutting the welfare system and then complain that the cost is too high. That is one thing that we will explore in the debate—what exactly the Labour policy is.

Several hon. Members:

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Photo of George Osborne George Osborne The Chancellor of the Exchequer

I will give way to my hon. Friend James Duddridge and then make progress.

Photo of James Duddridge James Duddridge Chair, Regulatory Reform Committee

If we had followed the policies of the Labour party, we would not have created 1.3 million jobs and those people would have been on benefits.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend is absolutely right. We have also created the right incentives so that work pays. Alongside supporting business—by the way, extraordinarily, the Labour party last night voted to increase taxes on business—we are creating an environment in which jobs are being created.

We are creating a fairer welfare state.

Photo of Andrew Gwynne Andrew Gwynne Shadow Minister (Health)

Will the right hon. Gentleman give way?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I will give way in a little moment, but let me make some more progress.

We are creating a welfare state that the country—

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Of course I will give way, but will the shadow Chancellor confirm, so that we know the terms of this debate, whether he is committed to the specific welfare cap, the list of the benefits included and the level to which the Government have committed? The shadow Work and Pensions Secretary, Rachel Reeves, said on the radio that Labour would do things differently. Perhaps he could confirm that.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

I will make my speech on the welfare cap in a moment. I want to go back to the remark the Chancellor just made about last night’s vote. We have said that we do not think we should go ahead with the next cut in corporation tax and instead use all the money for a freeze in business rates for small businesses. Is the Chancellor really saying that large companies are business, but small businesses do not count? [Interruption.]

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Order. Just to remind everybody, shorter interventions would be helpful. We have 11 speakers to follow and I know the Front Benchers are desperate to hear the Back Benchers.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

We are particularly keen to hear the Labour Back Benchers.

Photo of Chris Ruane Chris Ruane Labour, Vale of Clwyd

Both the Chancellor and the Prime Minister have used the line that people on benefits are getting £60,000, £70,000, £80,000 and £90,000 a year. I have tabled parliamentary questions and freedom of information requests on this point. Will the Chancellor tell me how many people are receiving more than £100,000 a year?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

None, because we have capped housing benefit payments. [Interruption.] Just to clear up the previous point, Labour is going to say to the country, “Elect a Labour Government and business tax will be higher and corporation tax will be higher.” That is a terrible message to send to the rest of the world. [Interruption.]

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Order. I want to hear the Chancellor. All the howling behind the Chancellor is not helping me, or other people who want to listen to him. I want to hear the Chancellor as, I am sure, do those on his own side.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

If the right hon. Gentleman has something useful to say, let us hear it.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

The Chancellor will not misrepresent Labour policy. All the money—[Interruption.]

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Seriously, I could not hear the Chancellor and I want to hear the shadow Chancellor. I want a little bit more respect to both sides.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

We are proposing that all the money from deferring the cut in corporation tax goes to small business in a business rates freeze. That is not a rise in the taxes on business, unless the Chancellor thinks that somehow small businesses are second class and do not count. Is that really what the Chancellor is saying?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

We have cut the corporation tax rate for small businesses. We have capped rates for small businesses. We are giving a £1,000 discount to high street stores. Those are the measures we are taking for small businesses, and we are also cutting the corporation tax rate. The truth is that Labour is now committed to higher business taxes in Britain with a high corporation tax rate.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

May I just say to the shadow Chancellor that he does not need to talk to me? He needs to talk to the business community of Britain, which knows that he is anti-business. His party is anti-business, anti-job creation and, as I am about to explain, it is the welfare party, too. If he waits a little, he can intervene and answer the question that we need answered.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I will give way in a moment. Let me make progress with my speech. [Interruption.] All right, I will give way if the right hon. Gentleman answers this question in his intervention: is Labour committed to a higher rate of corporation tax? Yes or no?

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

We will raise the corporation tax rate to cut taxes—[Interruption.]

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Order. I think we have heard enough noise. I want to hear the question that has been posed to the Chancellor of the Exchequer and I want to hear the reply. If people do not want to hear, I can explain where the door is. Somebody will be going through it if we do not have calm.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

The Chancellor must not mislead and misrepresent on the welfare state or on business taxes. Labour is not committed to an increase in business tax.

He has said that three times. Every time he has said that, he has misled this House. I am saying that all the money from the corporation tax rate will go back to small business. That is the right position. Every time he misleads this House I will correct him, Mr Deputy Speaker.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

This is desperate stuff from the shadow Chancellor. If Labour had had its way in the vote last night, business taxes would be higher—yes or no?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Yes, they would be, because corporation tax would be higher and businesses would be paying more. No wonder Labour does not have a clue about how to fix the economy or how to deal with the welfare system. That is evident from its period in office, when welfare spending, which will be contained by the cap, went up 42% in real terms. Housing benefit went up by £7.6 billion alone, as a real increase—bigger than the entire police budget. Every single one of the pounds the Labour Government spent on working age welfare was not earned, but borrowed—borrowed because Britain could not pay its way in the world. Rather than using valuable public resources to pay for apprenticeships, science, roads and railways, money was spent on an unaffordable, unfair and out-of-control benefits bill. That economic insecurity is being addressed and control is being re-established. We insist that welfare is affordable and we insist that it is fair: fair to those who need it and fair to those who pay for it.

Several hon. Members:

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Photo of George Osborne George Osborne The Chancellor of the Exchequer

I will make a bit of progress and then take some interventions.

Today, we take another important step towards the goal. We seek the support of Parliament not just for the principle of this welfare cap—important as that is—but its practical application: the list of benefits in it and the cash limit we set out today. I have noticed, in the past 24 hours, a change in the language being used by those on the Labour Front Bench. A day or two ago it was, “We are going to vote for the Government’s welfare cap.” Clearly, Labour MPs did not like that, so this morning the shadow Work and Pensions Secretary, said that Labour will sign up to something called a welfare cap, but that

“We would do it in different ways”.

What different ways? Does that mean different benefits would be included? [Interruption.] Will the shadow Chief Secretary, Chris Leslie, explain Labour’s welfare cap? Does that mean different levels of benefits? Does it mean a different level of spending? Every time the Opposition are faced with a difficult decision and asked to prove their fiscal credibility, they buckle because they are weak. We know what has happened. They have read the polls and seen the focus groups. They are being told not to vote against the welfare cap, but everyone knows what their instincts are. Everyone knows what gets them a cheer at the Labour conference: more spending on welfare paid for by more borrowing. Indeed, their only welfare policy is a £500,000 increase in housing benefit. The shadow

Work and Pensions Secretary gave it away last week, in a private left-wing meeting. She said this, in private:

“it will be much better if we can say that all of the changes the Government have introduced we can reverse and all benefits can be universal.”

At least those Labour MPs voting against the welfare cap today are being true to what they believe in. No one thinks that of the shadow Chancellor and the Labour leadership today.

Time is short, so let me set out briefly how the cap will operate, first by enforcing public expenditure control where there was none previously. Welfare spending was called annual managed expenditure by the previous Government—no doubt a term dreamt up by the shadow Chancellor when he was running things so badly—but it was expenditure that was neither managed nor set annually. Now it will be. The Budget document sets out the 26 different benefits that will sit under the cap. They include almost all transfer payments from tax credits, housing benefit and employment and support allowance to statutory maternity pay, carer’s allowance and disability living allowance.

Some of those benefits, such as statutory maternity pay, have relatively stable and predictable costs, while others, such as housing benefit, have consistently grown much faster than forecast; but each one involves many hundreds of millions, often billions, of pounds of spending, and deserves the same careful management and scrutiny as items in the defence budget or the education budget. Some of those benefits, such as disability living allowance, help some of the most vulnerable citizens, but that is not an excuse for failure to manage their budgets. After all, our national health service also cares for the most vulnerable, but that does not prevent us from giving it an annual budget.

Photo of Nigel Dodds Nigel Dodds Shadow Spokesperson (Justice), Shadow Spokesperson (Foreign and Commonwealth Affairs), DUP Westminster Leader

Will the Chancellor spell out the implications for devolved regions such as Northern Ireland, where welfare spending is devolved? What is the implication for the block grant if there is a rise in welfare expenditure through no fault of the Northern Ireland Executive?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Many benefits apply universally throughout the United Kingdom, but some areas of welfare spending are devolved. I know that there are specific arrangements with Northern Ireland, and we have been having discussions with the Northern Ireland Executive. I am well aware that the right hon. Gentleman represents only one party in the power-sharing arrangement, but we are keen to see the Executive make progress on welfare reforms and help to control the bills, and, as he knows, we are discussing that with him and his colleagues. However, I shall be happy to sit down and work out with him how some of the principles of the welfare cap here can be used to control welfare spending in Northern Ireland.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Let me make a few more points first. I will give way in a second—or a minute, perhaps.

The only benefits that we are excluding from the cap are the most cyclical ones which track the performance of the economy directly, such as jobseeker’s allowance and the housing benefit that is passported with it. They are the basic automatic stabilisers. By excluding only those benefits, we ensure that the economic cycle does not drive permanently higher spending on, for instance, sickness and disability benefits. We have also excluded the state pension and the additional pension. I know that the shadow Chancellor wanted to include them, but I would think it pretty unfair if a Chancellor who, for example, lost control of tax credit spending responded by cutting the basic state pension. That would not be sensible, and it would certainly not be fair. I think that adjusting the pension age is the best way to control expenditure on pensions over the long term as life expectancy rises.

In the Budget, we set the cash limit for the benefit cap at £119.5 billion in 2015-16—

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I shall now ask Andrew Gwynne whether he supports that cash limit.

Photo of Andrew Gwynne Andrew Gwynne Shadow Minister (Health)

In one breath, the Chancellor talks of fairness to taxpayers and the need to impose budgetary control on welfare spending. Can he perhaps explain to the House why setting up universal credit has cost taxpayers about £161,000 per claimant?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

This is a huge system that will apply to millions and millions of people. Let me tell the House what we are going to do. I know that this will come as a complete shock to the Labour party, but we are going to take our time, get it right, and make sure that we do not put everyone on to a new credit with which the system cannot cope, which is exactly what the Labour party did with tax credits. All of us who were Members of Parliament at that time remember people coming to our surgeries who had been treated shockingly by a Labour Administration who had not got their administration right.

As I was saying, we will set the cash limit for the welfare cap at £119 billion. If inflation is higher than forecast, the Government cannot wash their hands of that either. Public services such as the police and transport have to absorb higher inflation, so why should welfare budgets be different? [Interruption.] I am sorry, Mr Deputy Speaker; there is a private conversation going on. My right hon. Friend the Secretary of State for Work and Pensions has done more to reform the welfare state than any of that lot.

The charter makes clear what will happen if the welfare cap is breached. The Chancellor must come to Parliament, account for the failure of public expenditure control, and set out the action that will be taken to address the breach. Then the House of Commons—the ultimate guardian of the people’s money—

Photo of George Osborne George Osborne The Chancellor of the Exchequer

No; I am going to end my speech now. [Interruption.] Well, I want to make sure that all these Labour Members have a chance to stand up and say exactly what they think of the welfare cap, and tell us that they support it, and that they should have introduced it when they were in office. They look such a cheery bunch. I want to make sure that they have a chance to explain what they are voting for this afternoon—or perhaps some of them will not.

I could set out more of the details, but much of that has already been done in the Red Book. This is the key point that I want to make to Labour Members. The welfare cap brings responsibility, accountability and fairness. Those who want to undo our welfare reforms will now have to tell us about the other cuts that they will make, or else come clean and admit to the public that what they really want are higher welfare bills. The phoney argument that welfare can be magically cut by a Government’s spending more and borrowing more will run into the brick wall of the OBR’s independent assessment. The phoney argument that a Government can spend half a billion pounds of taxpayers’ money on a spare room subsidy and pay for it with a cut in winter fuel payments worth a fifth of that will be exposed by an inevitable breach of the welfare cap. The “welfare party” will have to make its case for more welfare spending in the plain sight of the British people.

Our welfare cap ensures that never again can the costs spiral out of control and the incentives become so distorted that it pays not to work. From now on, any Government who want to spend more on welfare will have to be honest with the public—honest about the costs—and secure the approval of Parliament in order to breach the cap. Twenty-six benefits will be controlled by the welfare cap as part of our long-term economic plan to restore sanity to the public finances. This is a system that is affordable and fair, and I commend it to the House.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer 2:17 pm, 26th March 2014

Labour Members support the capping of social security spending, a policy advocated by the Leader of the Opposition last year. With welfare spending now £13 billion higher than the Government planned in their spending review, Labour will make different and fairer choices to get the social security bill under control and tackle the root causes of rising spending. On that basis, we will support the motion.

I shall come to the welfare cap in a moment, but let us first be clear about the background to the motion and the charter for budget responsibility. In the charter, the Government have set out their fiscal targets and reforms, and have also included the welfare cap details. Four years ago, the Chancellor promised to balance the budget in 2015. The Prime Minister said:

“In five years’ time, we will have balanced the books.”

But because they choked off the recovery and flatlined the economy, they are not going to balance the budget at all.

Several hon. Members:

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Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

I am going to speak first about what is in the charter, and then about the welfare cap. I will give way in a moment.

Last week, the Budget revealed that the Government were not balancing the books. The deficit is set to be £75 billion. In this Parliament, partly owing to rising welfare costs, it will be £190 billion more than they planned.

Several hon. Members:

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Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

I will give way in a moment. I want the House to know what is in this document first.

The Chancellor pledged to get the national debt falling. Page 7 of the charter says that

“the Treasury’s mandate for fiscal policy is supplemented by: a target for public sector net debt as a percentage of GDP to be falling at a fixed date of 2015-16”.

So the charter says that the national debt should be falling in 2015-16, but the OBR said in respect of last week’s Budget that it expects the national debt to be rising next year. The national debt is not falling according to this charter, and it is rising according to the OBR. I want the House to understand what is before us. I have to ask the Chancellor this: how on earth did he end up putting before the House a week after his Budget a motion that puts up in lights the fact that he is failing his own target to reduce the national debt? What an own goal! Is he going to blame the chair of the Conservative party for that one, too?

It gets worse for the Chancellor. The charter goes on to say—[Interruption.] Government Members should listen—[Interruption.]They should listen to this:

“The Treasury’s mandate for fiscal policy lapses at the dissolution of this Parliament.”

Lapses! It has already collapsed. It has expired; it has ceased to be; it is an ex-mandate. The charter goes on to say:

“The duty to set out a fiscal mandate will require the Treasury to set out a revised mandate for fiscal policy as soon as possible in the life of the new Parliament”.

That is what we will do: we will balance the current budget and deliver a surplus in the next Parliament. We will get the national debt falling. We will do those things as soon as we can in the next Parliament, but we will do so in a different way, starting by reversing the Chancellor’s £3 billion tax cut for people earning more than £150,000. That is what we mean by doing things in a different and fairer way.

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

Will the right hon. Gentleman confirm his announcement earlier that Labour will be raising taxes on British business?

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

I have said to the Chancellor that that statement is a direct misleading of the House and, Mr Deputy Speaker, I would ask the hon. Gentleman to withdraw that statement now.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

We have said, Mr Deputy Speaker, that all the money from not proceeding with a further cut in corporation tax will go to small business with a business rates—[Interruption.] When Julian Smith and the Chancellor say that is a tax rise for business, that is only true if they do not think small businesses are proper businesses, which is a bit like saying, “If you didn’t go to Eton, you didn’t go to a proper public school.”

Photo of Mark Pritchard Mark Pritchard Conservative, The Wrekin

I know the shadow Chancellor always wants to be accurate. Not everybody on the Government Benches went to private or public school, unlike many on the Opposition Benches, including him.

On the specific point, I believe the shadow Chancellor is a fair and reasonable man, so will he join me in welcoming the fact that in the last 12 months 4,000 jobs have been created in Shropshire? Surely that is good news for everybody to celebrate, whatever our party affiliation.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

First, I went to an even lesser private school than the Chancellor of the Exchequer. [Interruption.] Neither of us went to Eton, unfortunately. [Interruption.] I agree with Mark Pritchard that the rise in employment is good news, but I am concerned that in his—[Interruption.]

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Order. Mr Shelbrooke, we missed you on Budget day, but I am not missing you today, am I?

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

The thing I am concerned about—this relates directly to the welfare cap—is that in the constituency of the hon. Member for The Wrekin long-term youth unemployment has gone up by 129% since 2010. I presume the hon. Gentleman would agree that that rise, based on the jobseeker’s allowance claimant count, is a real concern. I think he should be backing our welfare reforms. The fact is—[Interruption.] If the deputy Chief Whip, Greg Hands, is saying that because the hon. Member for The Wrekin has got a large majority, he does not have to worry about youth unemployment, that would be rather revealing. I hope he was not saying that.

Let me get on to the subject of the welfare cap. The Chancellor has failed to balance the books, he is contradicting his own charter by increasing national debt when it says he should be reducing it in 2015, and he has failed to control welfare spending. We have had plenty of tough talk and divisive rhetoric from the Chancellor, but his failure to tackle low wages, to deal with the cost of living crisis and to get more homes built means that he is spending £13 billion more than he planned in the spending review of 2010, and in last week’s Budget that was revised up by £1 billion in social security spending next year and the year after.

I want to explain where we are. We support the welfare cap. We support what is in the welfare cap. We agree that long-term bearing down on the costs of ageing is a good idea, but it should not be in the welfare cap in the next Parliament; we have agreed with that all along. We have also said we would match the Government’s spending in 2015-16, and the welfare cap over these five years, which we support, would rise on that basis. Although we support that, however, we will make different—

Photo of Mark Pritchard Mark Pritchard Conservative, The Wrekin

On a point of order, Mr Deputy Speaker. I said that the shadow Chancellor is a fair and reasonable man, and I know he would not want, even unintentionally, to mislead the House. He has got a lot of figures before him, so I have a great deal of sympathy for him, but the fact is that in my constituency of The Wrekin there has been a fall of more than 27% in youth unemployment over the past 12 months.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

I will repeat exactly what I said a moment ago, because unlike the Chancellor I am not going to mislead the House on any matter in my speech.

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Mr Burns, I think you need to relax as well. No hon. Member will mislead this House, and I am sure that is not what the shadow Chancellor intended to say and I am sure he will be happy to withdraw it.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

The Chancellor said three times that Labour was proposing a rise in business taxes and that is untrue, Mr Deputy Speaker.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

Let me answer the hon. Member for The Wrekin and then I will come to the soon to be ex-hon. Member for Dover. [Interruption.] If hon. Members quieten down, I will answer the point. Since 2010 there has been a 129% rise in long-term youth unemployment: that is young people on the claimant count who have been out of work for more than 12 months. That figure has gone up by 129%. That is the truth. It is a fact, and I will place the information in the House of Commons Library. There has been a 129% rise since 2010 and I think the hon. Member for The Wrekin should support what I am about to say.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

I thank the right hon. Gentleman for giving way. He chooses his words carefully, but he should know that youth unemployment is lower than it was in 2010, and not only that: it is lower than it was before the crisis partly caused by his Government.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

In the constituency of Ipswich there has been a 140% rise in long-term youth unemployment over 12 months, and long-term youth unemployment is a real problem. I am glad the hon. Gentleman intervened because I was reading his Hansard remarks from 2012 when he said that asking the Office for Budget Responsibility to audit the parties’ manifestos at the next election was the right thing to do. He said there was no reason why that could not be done. I will come back to him in a moment on that one.

We support the welfare cap. We will make different and fairer choices to keep the social security bill down and tackle the root causes of higher welfare spending. Let me explain—

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

No, I am not going to give way until I have made these points. I will give way to both hon. Gentlemen, but if they shout “Give way, give way” at me in the middle of a sentence, I am not going to do so.

We will do things in a different way. We will introduce a compulsory jobs guarantee to get young people who have been out of work for more than 12 months—up by over 129% in The Wrekin and 140% in Ipswich—and the long-term unemployed all back to work, and we will sort out the shambles of the universal credit. As for the idea that the Chancellor should say to the Work and Pensions Secretary, “Take your time to get universal credit right. Have as much money as you want,” how irresponsible is that?

We will stop paying the winter fuel allowance for the richest 5% of pensioners; we will scrap the bedroom tax, which is not only unfair, but may end up costing more money than it saves; we will get more houses built; we will restore the value of the national minimum wage; and we will tackle the low wages which the OBR has said have pushed up the bill for housing benefit. We will make different and fairer choices to keep the social security bill under control and tackle the root causes of higher welfare spending.

Photo of David Burrowes David Burrowes Conservative, Enfield, Southgate

Now that the shadow Chancellor has explained that he is going to support the welfare cap, will he also clarify whether he will increase housing benefit? If so, where will he make the welfare savings to keep within the welfare cap? When he finds the statistics on Enfield, he will be able to get confirmation that the youth unemployment claimant count is at its lowest since 1997.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

As we and many others have pointed out, including the National Housing Federation, the Government’s bedroom tax is pushing people on to housing benefit in the private sector—on higher rents—so there is a grave risk that it is going to cost money, rather than save money. We will abolish the bedroom tax, within the welfare cap set out on page 87 of the Red Book. That is our very clear position. I have to say to the hon. Gentleman that in Enfield, Southgate there has been a 500% rise in long-term youth unemployment, and he should be backing our compulsory jobs guarantee.

Photo of John Woodcock John Woodcock Labour, Barrow and Furness

Will the Chancellor take this opportunity to confirm that he will never follow the shameful record of the Conservative party, which in the 1990s took people off jobseeker’s allowance and actively put them on the sick? We still bear the scars of that policy today.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

It started in 1986 under a Conservative Prime Minister and social security Secretary, it was called “restart” and it actively moved people from JSA— unemployment benefit—on to long-term sickness and invalidity benefits. It meant that very many people then spent many years out of work. It was a shameful policy.

Photo of Stephen Doughty Stephen Doughty Opposition Whip (Commons)

I am glad that my right hon. Friend has mentioned the compulsory jobs guarantee, because is it not an absolute contrast with the manifest failures of the Work programme? Does he agree that the Government ought to be learning from, rather than smearing, the Welsh Labour Government and the success of the jobs growth Wales programme?

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

All the evidence shows that action to get young people back to work, especially the long-term unemployed, pays real dividends. It is what we mean by tackling the root causes, and it is the right way to implement a tough welfare cap. That is the approach we will take.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

Oh, he is back again. Go on then, have your go.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

Is the shadow Chancellor committed to a welfare cap on the same benefits and of the same numbers as this Budget—yes or no?

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

Yes.

Let me end by discussing the role of the OBR, because that is also set out in this charter. Page 5 states:

“The Coalition Government’s major reform to the fiscal framework has been the creation of the Office for Budget Responsibility”.

We agree with that, which is why we have proposed a reform to enhance the OBR’s role and allow it, as the hon. Member for Ipswich has advocated, independently to audit the tax and spending commitments in the manifestos of the main political parties. Why has the Chancellor not used the opportunity of this updated budget responsibility charter to make that reform? If he were to think again, he would be joining not only me, but the Chair of the Treasury Committee and the Chief Secretary to the Treasury, who have both supported this reform. We need legislation in the Finance Bill to make that happen.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

I will not give way. We know from the head of the OBR that if an agreement is reached by this summer, this reform independently to audit all tax and spending commitments, including all issues referring to social security spending, can be done in time for next year’s general election. It is a matter of political will. The Chancellor seems to be happy to spend his time, and that of the House, trying to set political traps—traps that keep backfiring on him—but he does not seem happy, and neither do other Government Members, to join the hon. Member for Ipswich and allow the OBR to audit the Conservative party manifesto or our manifesto, so that we can have a proper, open and transparent debate at the next election. Why does the Chancellor not join this cross-party consensus and let the OBR play that role? What has he got to hide? This is really not a trap—it is just the right thing to do.

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

May I just announce that we will start with a five-minute limit and see how we go from there?

Photo of Ben Gummer Ben Gummer Conservative, Ipswich 2:35 pm, 26th March 2014

This is an important moment in the way that we run Budgets in this country, it is an important moment for the accountability of politics and it is an important moment for the way we deal with the welfare crisis we were left by the previous Government. It is an important moment in the way we run the Budget in this country because most people would be astounded by the notion that we do not already have a managed expenditure limit on welfare. What most people, even in this Chamber, will not be aware of is that last year, for the first time in the history of setting Budgets in this country, unmanaged expenditure rose above managed expenditure—51% of Government spending came within annually managed expenditure, or AME, and not within departmental limits. So for the first time we are, in effect, writing a larger portion of the Budget on a blank cheque, rather than on the basis of the limits set by the Chancellor at his Budget every year. That, in itself, is astounding, but in five and 10 years’ time people will look back and wonder why on earth we had not come to this point earlier.

The reason, as we have heard so often from Opposition Members—they prefer to pretend that it is not their position now, because the shadow Work and Pensions Secretary said in private a few days ago that they would prefer all the Government’s reforms on welfare to have been reversed—[Interruption.] It is down there in the transcript. She would prefer all the Government’s reforms to be reversed—not only that, she would prefer all existing benefits to be made universal. She is very welcome to intervene on me to deny in the House that she made those comments. I am open to have that discussion with her. She has been given that opportunity before, she is not doing it and the House will draw its own conclusions. The fact is that what the Opposition say in private is very different from what they say in public.

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Order. Mr Burrowes, you have nothing to hide, and I certainly do not want to hear you shout again—I want to hear Mr Gummer. You may not. If you do, you know where to go. Mr Gummer, you have the Floor.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

Thank you, Mr Deputy Speaker. To return to the core of the matter, this is important because it will hold both Governments and Oppositions to account. The shadow Chancellor might have wished to misconstrue the purpose of my private Member’s Bill. It is pity he does that when he claims he is trying to forge a cross-party consensus, because it is wrong—

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

I will give way, but does the right hon. Gentleman want to let me finish my point before he intervenes? [Interruption.] I will say merely that I was proposing a fiscal rule on the Swedish model in which, as the Swedes have, there would be an opportunity for all parties’ budgets to be judged. That clearly is not possible under the existing settlement, not least because the head of the OBR said it would not be.

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

I most certainly would not want to misrepresent the hon. Gentleman, so let me read out the quote from Hansard. He said:

“I…further suggest that the Office for Budget Responsibility be required to assess the major parties’ manifestos at election time, at the request of those parties…A similar role is performed by the Congressional Budget Office in the United States, and there is no reason why it cannot be so here.”—[Hansard, 25 January 2012; Vol. 539, c. 305.]

I agree, and so does the head of the OBR, and this can be done before the next election. In no way have I misrepresented the hon. Gentleman—the problem is that he disagrees with the Chancellor.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

Actually, I do not. If the shadow Chancellor reads further, he will find the key point. There is an entire portion beforehand suggesting something, which his colleague, Rachel Reeves, said that the Opposition disagreed with. Here we come to the crux of the matter. The fact is that people will not believe the Chancellor when he talks about sticking to a cap—[Interruption.] I mean the shadow Chancellor—[Interruption.] Yes, it is as close as he will get. He was the author of the golden rule, which claimed that there would be no excess debt over the economic cycle of his Government. None the less from 2002, the Government were running a deficit—[Interruption.] Will he deny that the Government were running a deficit from 2002?

Photo of Edward Balls Edward Balls Shadow Chancellor of the Exchequer

We said that we would balance the current Budget over the cycle, which is exactly what is in the mandate before us. It says that there will be

“a forward-looking target to achieve cyclically-adjusted current balance by the end of the rolling, five-year forecast period.”

That is the golden rule. If the hon. Gentleman is attacking the golden rule, it is the second thing on which he is attacking the Chancellor today.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

The shadow Chancellor is again digging himself into a hole. He wrote a golden rule that claimed that there were would be no deficit over the cycle. He ran a deficit and he is now proposing that there should be a cap on welfare spending. I wish to pin him precisely on the terms of his agreement with the Government. What he has told his Back Benchers in private seems to be rather different from what he is saying in public. [Hon. Members: “Ah.”] Let me list what we have within the frame of the welfare cap proposed by my right hon. Friend. If the shadow Chancellor disagrees with any one of these items, he should stand up and intervene, and his own Back Benchers can draw their own inferences. We have the attendance allowance, bereavement benefits, carer’s allowance, Christmas bonus, disability living allowance, employment support allowance, financial assistance scheme, housing benefit, incapacity benefit, income support, industrial injuries benefit, in-work credit, maternity allowance, pension credit, personal independence payment, return to work credit, severe disablement allowance, social fund, cold weather payments, statutory adoption pay and statutory maternity pay, statutory paternity pay, universal credit, winter fuel payments, personal tax credits, child benefit and tax-free child care. Is there any single element of that that he would change in the next five years.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

Not at all. Now his Back Benchers may wish to draw their own inference from that. In private, the shadow Chancellor has been going round saying that he would change it. He would put one in and take one out. [Hon. Members: “Ah.”] Even in the House, he will say that he will supplement one benefit—withdrawing the winter fuel allowance from richer pensioners will raise £100 million and he would use it to pay for the reversal of the under-occupancy charge, which will cost £500 million. How does he make up that £400 million difference? He has been forced to come to this House to explain his maths. That is precisely why this cap is important. It forces a degree of accountability on the shadow Chancellor in making him explain to the British public how his sums add up, when it is clear that they do not. How does he account for the £400 million difference between the two? [Interruption.] I wish to know the answer as does the British public. [Interruption.]

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Order. The hon. Gentleman has only 30 seconds remaining. Stop shouting him down. I want to hear him.

Photo of Ben Gummer Ben Gummer Conservative, Ipswich

The cap is good for Government finances and it is good for accountability because it forces the Opposition to be honest, even though they are seemingly unwilling to be so. It is also important in terms of how we deal with this welfare crisis. It will force Governments to deal with the underlying causes of welfare dependency rather than just jacking up the bill every time they are faced with a difficult problem.

Photo of Diane Abbott Diane Abbott Labour, Hackney North and Stoke Newington 2:44 pm, 26th March 2014

Any member of the public watching this debate this afternoon and listening to people jeer, laugh, smirk and joke might imagine that some Members of this House were playing a game. Well, I am rising to say to the House that this is not a game; this is about people’s lives. Whether they be elderly people who are dependent on some of the age-related benefits that will fall under the cap, the disabled or people in low-paid work who depend on the system of tax credits, this is not a game; this is people’s lives. If it is really the position of Government Members that poor people should be made to live on even less, they should at least have the grace to be dignified about it, and not turn it into a game. I put it to Government Members and to those on my own Front Bench that social security and people’s lives should not be made a matter of short-term political positioning.

Everyone in the House wants to bring down welfare spending, because welfare spending is the price of Government and social failure. The Chancellor talked as if he were some brave warrior wreaking vengeance on an army of “Benefits Street” layabouts. The reality for British people is very different. Just this week, we saw 1,500 people queuing for three hours for a low-paid job at Aldi. The picture Government Members like to paint of the British people and what is happening in the benefit system is false, misleading and derogatory, yet it is feeding through to public attitudes. The public thinks that 41% of the benefits bill goes to the unemployed. In fact, it is only 3% of the benefits bill. The public thinks that 27% of benefits are claimed fraudulently. In fact, only 0.7% is so claimed. The truth is that 80% of the people who claim jobseekers allowance—those so-called “Benefits Street” layabouts—only claim it for less than a year. There is no credit to MPs if they constantly talk in a derogatory way about people who claim benefits when, at any given point in our lives, we may be dependent on social security—be it child benefit, benefits for the elderly or in-work benefits.

This benefits cap is arbitrary and bears no relationship to need, as our benefits system should. It does not allow for changing circumstances—rents going up and population rising—and will make inequality harder to tackle. There are ways to cut welfare. We could put people back to work, introduce a national living wage, build affordable homes and have our compulsory jobs guarantee. An arbitrary cap is the wrong way in which to go and sends out the wrong message. The Chancellor does not say many things that I think are correct, but he is correct to say that voting for this cap locks us into the coalition’s cuts. I say to the House that the issue of social security should not be about political positioning. As the months turn into years, people will be coming to our advice surgeries wanting explanations for totally arbitrary and counter-productive cuts. Will we say that it was a game we were playing with the Chancellor one afternoon in March? Our welfare system should be based on the facts and on need. Whatever short-term political advantage people think is gained by voting for this cap, it is far outweighed by what is problematic, so, no, I will not be voting for this cap in the Lobby tonight.

Several hon. Members:

rose—

Photo of Mark Reckless Mark Reckless Conservative, Rochester and Strood 2:49 pm, 26th March 2014

We have to make these cuts because the expenditure has been unmanaged. As my hon. Friend Ben Gummer says, for the first time there will be more within the supposed “annually managed” category than the amount that is subject to departmental expenditure limits. The measure that the Chancellor has brought before us today will mean that for the first time this £120 billion of public spending will be properly managed annually by the Treasury and will be subject annually to a vote of this House.

Imagine the Home Office or the Department for Transport letting it slip out that it was spending £1.5 billion more than previously planned. The first thing a Minister must do if a budget is exceeded is bear down on it, find out why, do something about it, and, if necessary, find another area of the departmental budget where savings can be made. If absolutely necessary, they must go to the Chancellor and see whether they can make a case for a proportion of the strictly limited contingency reserve.

Photo of Mark Harper Mark Harper Conservative, Forest of Dean

I listened carefully to what Ms Abbott said and at no point during her speech did she think about the other side of the coin: the people who have to pay the bills. They were the people referred to by my hon. Friend Robert Halfon and the Chancellor. They have needs and requirements. Many low-paid people have to pay the bills, but she never mentioned them once.

Photo of Mark Reckless Mark Reckless Conservative, Rochester and Strood

As we learnt in the Budget, the amount we will spend on benefits for the disabled—as the Minister of State, Department for Work and Pensions, my right hon. Friend Esther McVey, will know well—is £1.5 billion more than was estimated in the autumn statement just three and a half months ago. In the past, we would have just ignored that and borrowed the extra money without even debating it in this House, but at least now we must have a debate.

The OBR expects that that money will be clawed back over the next couple of years—we will spend a similar amount extra next year, but not the following year. If that estimate is not right, however, surely we as MPs, representing the taxpayer and those who benefit from other benefits and from the NHS, must look into that and ask what we can do about it. Many people who are applying for the personal independence payment or employment and support allowance come to my surgeries and I see cases to which I am sympathetic and in which I think a misjudgement has been made in the assessment. The OBR might be right about what the spending will be—I am not saying that we should reduce eligibility for those benefits or that that is where the reductions must fall—but if it continues to increase we must either borrow the extra money, raise taxes, as the Opposition might wish, or find savings elsewhere.

Constituents of mine who, if they were lucky, were getting a 1% wage increase earlier in this Parliament were seeing people on benefits getting increases above 5%. In the five years since 2007, benefit payments increased by 10% relative to increases for those people who were in work. This year, for the first time, we have a 1% limit. Inflation has come down: it is now 1.7% rather than nearly 3%, as it was when we introduced this measure. I do not want to make further reductions to welfare benefits, but if payments to people who are disabled are £1.5 billion more than we thought they would be this year and if that continues to rise, we must make a decision about the priorities and where we want to make savings. Alternatively, should we just have more taxes and more borrowing, as the Opposition would like?

The other important principle of the measure before us is that the Chancellor is returning the control of spending to Parliament. Parliament used to debate the Government estimates in detail, but now the last thing that we debate on estimates day is anything to do with spending. Between the wars, Parliament lost that power and since then we have seen an explosion in state spending. We are spending £120 billion. It would be good news if spending came in below that, and the Treasury would not have to come to us for permission to spend more taxpayers’ money. But if spending is more than 2% above the projected figure there ought to be a debate and a vote in this House about whether to accept that.

Photo of George Freeman George Freeman Conservative, Mid Norfolk

My hon. Friend is making an extremely elegant point. Is it not true that the Labour party’s positioning of itself as the welfare party has betrayed those who depend on the welfare system in two ways? First, it has meant that money required for those most in need is spent on those who are not most in need and, secondly, it has entrenched and locked hundreds of thousands of the most vulnerable families into dependency on welfare, which is the great tragedy of the welfare state that the Opposition have supported.

Photo of Mark Reckless Mark Reckless Conservative, Rochester and Strood

My hon. Friend is completely right. The Labour party used to be the workers’ party, but it has become the welfare party. It has become the defender of the public sector. When Parliament discussed these matters 90 years ago and before, the radicals were those who were trying to control Government spending and who were standing up for the taxpayers—the people in their constituencies—and trying to reduce the amount of money that Ministers were spending on their behalf. Today, all we see from the Labour party is a defence of welfare spending and of whatever is paid in the public sector while our constituents, who have to pay for all that and who are often on very low incomes, are ignored. For the first time, we are considering the comparison between what we are spending on welfare and what we need to do with that money elsewhere.

I wholeheartedly support this House’s having its say on spending. There is an excellent precedent for such a debate in Parliament. The Government came to the House with a motion saying that we should freeze spending within the European Union, but the House looked at the motion, decided that that was not good enough and that we wanted a cut. We voted for one, and the Government went out and delivered it. Parliament took control of spending.

Previously, spending in the welfare area covered by the £120 billion has gone up and up, and people have said, “Oh well, there is a problem and we will have to spend more on these disabled claimants, but we are sympathetic to them so that is fine. We will just borrow the extra money.” For the first time, we will be forced into making a decision about what we can do to get proper control of public spending, represent our constituents and stand up for the taxpayer. Not only has the Chancellor brought in the fiscal watchdog and reformed pensions, but, in this third area, he will be remembered for restoring control of spending to Parliament.

Photo of Eilidh Whiteford Eilidh Whiteford Shadow SNP Spokesperson (International Development), Shadow SNP Spokesperson (Women), Shadow SNP Spokesperson (Work and Pensions), Shadow SNP Spokesperson (Agriculture and Fisheries) 2:56 pm, 26th March 2014

This welfare cap is a reprehensible and regressive measure that once again puts the most disadvantaged people in our communities on the front line. The cap that has been proposed is a crude blunt instrument. It is arbitrary and it simply will not be flexible enough to respond if the economy or our changing democracy drive greater structural need.

The Government recognise implicitly that the drivers of welfare spending are largely structural and they have excluded the most obviously cyclical benefits from the cap, notably jobseeker’s allowance and pensions. Other benefits also have a cyclical component, however, and the Government persist instead in pursuing an agenda that victimises and stigmatises people on low incomes and punishes them for the shortcomings of Government economic policy.

In the short time we have to debate the motion today, I want to address the impact of the welfare cap on sections of our society that are likely to be affected. State pensions have been excluded from the cap, but it does not exclude pension and savings credits. The very poorest pensioners, those who have spent their working lives in low-paid private sector jobs or who have spent years caring for others, will potentially be hit. That could affect 300,000 pensioners in Scotland, most of them women.

The second group I want to mention is children. We already know that as a consequence of the UK Government’s welfare cuts 100,000 more children in Scotland will be growing up in poverty by 2020. We also know that the majority are the children of parents in low-paid work. The cuts to tax credits and the below-inflation uprating of child benefit, housing benefit and other forms of support for families are already expected to drive up child poverty and the arbitrary welfare cap just puts a tin lid on it.

The Child Poverty Action Group points out that child poverty places a huge burden on our economy, not least through the £15 billion spent on addressing its consequences through social services and extra educational support. The group makes the point that in the medium to longer term, the Government’s approach will hinder deficit reduction and we will all pay for the costly long-term legacy of low skills and poor health associated with childhood deprivation.

Disabled people and their unpaid carers are also in the firing line, again. We need to understand the structural challenge as the baby boomer generation develop more health problems and disabilities associated with old age. We need to support family carers, who are the backbone of our community care system. It is a wholly false economy to subject the benefits paid to carers to the welfare cap.

Underpinning the circumstances of all those people is the UK’s pernicious combination of low pay, wide labour market inequality and high housing costs. Housing benefit remains one of the biggest ticket items in welfare expenditure. Increases are driven by chronic shortages of affordable homes, soaring private sector rents in areas of high demand—most notably in London and the south-east—and the failure of Governments to address that. The welfare cap will not address those underlying structural problems and the scandal is that people in good jobs cannot afford to pay rent.

Photo of Eilidh Whiteford Eilidh Whiteford Shadow SNP Spokesperson (International Development), Shadow SNP Spokesperson (Women), Shadow SNP Spokesperson (Work and Pensions), Shadow SNP Spokesperson (Agriculture and Fisheries)

I will not, because other people need to speak.

The best way to reduce and manage welfare spending is to restore the economy to a state of health and that is exactly what the Government are failing to do quickly enough. If the Government were serious about reducing welfare spending, they would be creating more job opportunities in sectors that pay a living wage, investing in child care to enable parents to work or increase their hours, and building more affordable homes and taking action on housing costs.

In Scotland, we spend a lower proportion of revenue and GDP on social protection than the UK as a whole. We have invested heavily in affordable housing and in child care and we have increased apprenticeships. That has enabled more people to work full time, which is why our child poverty rates have fallen more quickly. Those long-term efforts to address the drivers of welfare spending, not just the symptoms, stand in sharp contrast to the Government’s ill-conceived, punitive and counter-productive approach.

I intend to vote against this measure today and I hope that Scottish MPs from all parties will do so too. To acquiesce to this nasty Tory nonsense that piles yet more pain on our poorest pensioners, carers, disabled people and low-income families would be an abject failure of leadership and a betrayal of the people of Scotland who elected us and who, frankly, deserve better.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley 3:00 pm, 26th March 2014

It is often said that a week is a long time in politics, but in one sense that is wrong. Dealing with Government finance and the economy takes multiple years, so the problem that we had in 2010 will take at least eight years to resolve. People who interview me every so often say, “Oh, we have more cuts this year,” but those decisions were made in 2010 and they were driven by Government policy in the previous years.

I shall quote a few comments about Government policy from 2005 to 2010 because they are relevant to this debate and the issue of budget responsibility in the long term. One person said in his memoirs:

“However, we should also accept that from 2005 onwards Labour was insufficiently vigorous in limiting or eliminating the potential structural deficit.”

That was Tony Blair, who was Prime Minister at the time.

Lord Turnbull, who at one stage was the Cabinet Secretary, the chief civil servant, noted that excessive borrowing started to be a problem from 2005. He said:

“It kind of crept up on us in 2005, 2006 and 2007, and we were still expanding public spending at 4.5 percent a year”.

His argument, essentially, was that the Labour Government should have been aiming to put money aside in the good years. He cited examples of other places that began to accumulate surpluses for a rainy day—places such as Australia.

The Government were borrowing £2,500 on behalf of every person in the country so that, in effect, a baby would have borrowed £45,000 by the time it reached the age of 18. That had to be brought under control, but it cannot be done immediately. It is important that we properly manage Government finances. If anyone can be bothered to read the Charter for Budget Responsibility

March 2014 update, they will find on page 10 that if the welfare cap is found to be breached, there are three options, one of which is to

“explain why a breach of the welfare cap is considered justified.”

Members can vote against the motion only if they do not believe in the Government managing and knowing what they are doing. I would be worried if there was a scheme whereby somebody came and said, “I need benefits. I’ve got no money,” and the Government said, “We’ve run out of money. We have no money to give you jobseeker’s allowance.” People will still have entitlements, but if we spend more than we intend to spend, the Minister will, as an absolute minimum, have to explain why.

I worry still about how the Government manage finances. I have asked questions, for example, on tax credits, to try to work out how many effectively fraudulent self-employed schemes there are, often run by people who are recent migrants. People set up nonsense scrap metal businesses that exist not as businesses, but to qualify for tax credits, but the Government cannot give that information. That is bad. We should be able to analyse the figures.

We need a good benefits system that ensures that there is a solid and straightforward safety net so that if people end up in difficulty, there is a way of rescuing them and keeping them from destitution. However, to argue that we should not try to manage the total costs is nonsense. Hence, I am not surprised that the official Opposition are backing the motion. Anyone who believes in having the money available to look after people believes in managing the accounts and knowing what is happening, and if we spend more than we expect, as an absolute minimum the Minister should explain why.

Photo of Jim Sheridan Jim Sheridan Labour, Paisley and Renfrewshire North 3:03 pm, 26th March 2014

If my hon. Friend Ms Abbott did nothing else in her contribution, she exposed the behaviour of the Government during this debate, reminding us that this is about people. The experience today shows that the Tories are at their happiest and their loudest when they are attacking the poor and the vulnerable. I was reminded that the reason I came into politics was to take on such people.

Events shape our lives and our experiences. I say this as someone who was a recipient of benefits for three years, through no fault of my own. I was unemployed, and when I did get a job, it usually lasted a week before the Economic League, which funded the Tory party, caught up with me and I was blacklisted and out of a job again. I was not lying in my bed waiting for the next girocheque to come in; I was desperate for work.

The vast majority of people on benefits are desperate for work, but they are forced into low-pay zero-hours contracts and it is the fault of the employers. Not one single Tory MP today has mentioned the fact that employers are lucky if they are paying the minimum wage and that therefore people are dependent on taxpayers and their handouts. That is what we should be attacking — the employers who are paying the minimum wage and sometimes even below it and forcing people on to benefits.

I was horrified to see the performance of Members on the Government Benches, none more so than our own Mrs Brown, epitomised by Alec Shelbrooke, whose behaviour was somewhat disappointing, shall we say. The Government will argue that a welfare cap is needed to keep social security under control, but they do not understand the root causes of that spending. I have great difficulty even with the position of my own Front Bench on the welfare cap.

Yesterday I spoke about tax avoidance. I draw a parallel. If I were to call the tax office and report Mrs Brown down the road for not paying her tax or wrongly receiving welfare benefits, an official would probably be at her door the next day. Yesterday I highlighted the disgraceful behaviour of Alliance Boots and its tax evasion, and not one single Member on the Government Benches or on the Government Front Bench has asked what Boots was up to. That is a sad reflection of where our priorities lie.

The welfare cap is portrayed by the Tories and the Lib Dems as a fiscal policy. It is a trap laid by the Conservatives to suck in the Labour Front Bench, and I am extremely uneasy about the position we are taking. I recognise a bear trap when I see it and I hope I will not be seduced into falling into the trap set by the Tories. It is a campaigning slogan which seems to demonise the poor and those on benefits.

As I said at the outset, I am probably one of the few people in the House who has been a recipient of benefits. There certainly are none on the Government Benches, and very few on the Opposition Benches. I was proud to get a job and proud of the company that gave me a job and got me back into work. I was not a benefits cheat, as some would have us believe.

Photo of Stephen Phillips Stephen Phillips Conservative, Sleaford and North Hykeham 3:07 pm, 26th March 2014

When this Government came to office in 2010, they faced immediate and terrifying problems. Listening to some of the contributions from Opposition Members, that seems to have been forgotten. The prudence of the policies that have been pursued by the Government over the past four years has done much to make us forget what we knew at the time—that this country had been brought to the brink of bankruptcy by a Labour Government who, in their 13 years in office, borrowed more money than all their predecessors put together since the foundation of the Bank of England.

If we are never again to repeat the mistakes of the past, we must not forget where this country found itself in 2010, as we should not forget that the authors of the crisis that this country faced are now sitting on the Opposition Front Bench and who would again be king, notwithstanding their clear demonstration in their handling of the British economy in their time in office, that they are unfit to hold it.

Photo of Guy Opperman Guy Opperman Conservative, Hexham

Given that the Opposition have opposed every budgetary and welfare cut throughout this Parliament thus far, why should we ask the public to believe them now, particularly given what the shadow team say in private?

Photo of Stephen Phillips Stephen Phillips Conservative, Sleaford and North Hykeham

I do not know what the shadow Chancellor and his Treasury shadow team say in private.

I do know that when I talk to people in my constituency, they have not forgotten that the authors of the troubles that we found ourselves in and that we are still recovering from and will be for a considerable time are those who again want to hold the reins of power.

Photo of Anne McGuire Anne McGuire Labour, Stirling

In the hon. and learned Gentleman’s historical and economic analysis, when is he going to factor in a little thing such as an international financial crisis that did not start in Britain?

Photo of Stephen Phillips Stephen Phillips Conservative, Sleaford and North Hykeham

He is going to factor it in right now, and he is going to tell the right hon. Lady the truth. The truth is that this country was in a much worse place to weather that financial crisis because of the fact that we had borrowed more money than any other developed economy. Indeed, we had borrowed just about as far as we could possibly go. The truth of the matter is that we would have weathered the financial crisis, which I quite accept was an international crisis, if the last Government had done their job properly, fixed the roof while the sun was shining and had not over-borrowed—if they had not done all the things that led to the difficulties that this coalition Government has had to pick up.

It is quite apparent that the hubris of Opposition Members knows no bounds. There is no plan. They have no plan for the British economy other than the plan that they had during their time in office: spend, spend, spend. That is one reason why it is important that this measure comes before the House today.

Let us recall precisely what we are talking about. This is a prudent measure from this Government, and it updates the charter that was previously laid before the House, and which the House approved. When history comes to look at the record of this Government and the things that they have done, it will see not just that the Government have taken steps to cure the British economy of the malaise from which it was suffering in 2010; they have in addition taken the necessary measures to address the structural changes that were required so that we can go forward. The establishment of the Office for Budget Responsibility—obviously, four years ago—means that we can never again see economic and fiscal forecasts of the type that enabled the previous Government to spend so foolishly the money that we simply did not have.

The charter comes before us again today, and in part it does so because of the announcement, quite correctly, by my right hon. Friend the Chancellor of the Exchequer that we need to take action. We need to take action to stop benefits running out of control as they ran out of control under the previous Government. The figures have been quite startling, and they have been given in this debate. The simple fact of the matter is that this charter, with its cap on benefits, is something that the House should support. I am pleased that the Opposition are going to support it; they should all be supporting it, because it is the right thing to do.

Photo of Chris Leslie Chris Leslie Shadow Chief Secretary to the Treasury 3:12 pm, 26th March 2014

The debate has been all too short, so let me briefly reiterate to the House that the Opposition support capping social security spending—an approach that my right hon. Friend the Leader of the Opposition first proposed in June 2013. Welfare expenditure is the largest part of total Government spending and it is now £13 billion higher than the Chancellor planned in his first spending review in 2010. We must get a grip of these rising costs but do so in a fair way—tough on welfare inflation but tough on the causes of welfare inflation as well.

The Government might not realise it, but low wages and job insecurity are pushing the welfare bill higher and higher. The collapse in earnings during this cost of living crisis has hit the taxpayer too. Rising rents and the lack of housing supply push up the housing benefit bill. We need action on house building and a help to build scheme far more urgently than ever before. And long-term youth unemployment has doubled under these Ministers, costing the taxpayer more in benefits but also losing revenue to the Exchequer.

Photo of Chris Leslie Chris Leslie Shadow Chief Secretary to the Treasury

I am afraid I will not give way because we have very little time. I have to give the Chief Secretary some time to try and make some sense of his proposals.

It is no wonder, I say to the Ministers, that in just the four months since the December autumn statement, they have had to revise their projections for welfare spending. In the Budget on Wednesday, they had to revise up predicted social security spending for next year by a further £1 billion and revise up the expected bill for the year after that, 2015-16, by another £1 billion. Controlling welfare inflation will mean tough decisions, such as ending the winter allowance for the richest 5% of pensioners, but we cannot afford the waste and ineptitude of the current Secretary of State for Work and Pensions, who cannot even be bothered to come back into the Chamber for the end of this debate. That Secretary of State has squandered £34 million by scrapping the Department for Work and Pensions inquiry service, in an astonishing waste of taxpayers’ money. He has written off millions of pounds of universal credit IT spending at an alarming rate. He has failed to tackle fraud and tackle the error and overpayments made by his Department of £700 million last year. The country and the taxpayer need protecting from the failures and the incompetence of this Chancellor and this Tory-led Government.

On the modified charter before us, why have the Government not taken the opportunity to revise the OBR’s mandate to allow the independent audit of policy costings and commitments in the manifestos of the main political parties? Perhaps the Chief Secretary can explain why the Government withdrew their first version of the motion last week, which could have allowed an amendment on that matter, and then hastily retabled a fresh version, which was not amendable. I wonder why they did that.

On the wider set of fiscal targets, will the Chief Secretary explain why the Treasury want to reiterate, in their charter today, the particular points on which they fail? If they want to restate the promise that they originally made to get the national debt falling by next year, be our guest. The motion before us today serves to remind the world of their failure to get the national debt down in 2015-16, and as the OBR said last week,

“We expect public sector net debt” still to be rising in that year.

So the fiscal mandate is already in tatters. It had expired even before today’s debate. Is the Chancellor even aware of what he is doing? In his Budget speech on Wednesday he used the phrase,

“as a nation, we are getting on top of our debts”.—[Hansard, 19 March 2014; Vol. 577, c. 781.]

Does he not even realise that he has increased the national debt by a third—£1.2 trillion?

A new fiscal mandate will be needed in the new Parliament and, we will obtain just that. We will balance the books and get the current budget into surplus as soon as possible in the next Parliament—a fairer approach to deficit reduction and tough on the causes of welfare inflation. We need long-term recovery and long-term growth, not the same old short-term politicking from the Chancellor. Sound management and stronger control are necessary to prove to taxpayers that the important safety net of social security for the vulnerable and those in need is sustainable for the longer term, so we will support the motion, should the House divide.

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury 3:17 pm, 26th March 2014

I am grateful to the shadow Chief Secretary for his support for this measure, albeit that from him and the Chancellor we heard another two flatlining speeches from a flatlining political party.

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury

Shadow Chancellor. I am glad he agrees that he is flatlining.

This has been an important debate, and I agreed with Ms Abbott in one respect. She was right to say that this was an important debate on an important subject and should be treated as such. However, it is for precisely those reasons that I support the cap that we are debating, as does my party. Let me explain why. During the debate a few myths have grown up about the cap, which I want to tackle. Fundamentally, as my hon. Friend John Hemming made clear, the motion is about accountability to Parliament and about the transparency of public expenditure decisions.

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury

I do not have much time; I intend to make some progress.

Fundamentally, the motion is about ensuring that we have greater control over public expenditure in this country, and that where a Government wish to deviate from the plans they set out to this House, they must return to the House to explain why they want to make a change, or what action they will take to deal with the pressures that have emerged.

One of my priorities when I came into office as Chief Secretary was to increase the amount of public expenditure that is under the direct control of Government, and indeed under the direct control and accountability of this House.

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury

I will not give way.

When we came into office, only 53.8% of public expenditure was under a direct mechanism of control—departmental expenditure limits. That means that nearly half of public expenditure was simply beyond control—it was so-called annually managed expenditure, which in practice meant annually unmanaged expenditure. Progressively, over the course of this Parliament, we have put in place additional mechanisms to control an ever-rising amount of public expenditure. The pension reforms, which mean that in future, the state pension age will be linked to life expectancy, bring greater control over the costs of the basic state pension. The reforms of public service pensions, which include a cap on the costs within public sector pension schemes, bring that source of expenditure, which had ballooned out of control under Labour, much more directly under the control of Government.

In total, when the measures in the welfare cap are included, we will have increased the amount of expenditure under direct control and directly accountable and transparent to this House from around 50% at the start of the Parliament to 77% at the end of it. From the perspective of every Member in the House, that ought to be a welcome change, because it means that this House has more say and more ability to scrutinise and hold accountable the Government for changes in public expenditure that take place on their watch.

A number of hon. Members mentioned unemployment benefits and jobseeker’s allowance. Jim Sheridan referred to his experience in receipt of unemployment benefits. He is right that most people in that situation are not there through any fault of their own. That is precisely why jobseeker’s allowance is excluded from the scope of the cap. The benefits that are the so-called automatic stabilisers that fluctuate with the state of the economy— jobseeker’s allowance and the benefits that are passported from it and, in due course, those elements of universal credit, too—will not be in the scope of the cap, precisely for the reasons that he described in his speech. That perhaps ought to reassure him and encourage him to vote for the measure.

Fundamentally in the end, I think those people who are speaking against the cap betray their own lack of confidence in their ability, should they wish to, to come to the House transparently and accountably and persuade the House—

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury

I have one minute left. No, I am not going to take any interventions; I am going to make progress.

Those people who speak against the cap betray an enormous lack of confidence in the ability of those who think that, in response to circumstances, welfare spending should be increased above the cap, to come here and persuade the House that that increase in expenditure would be necessary. The truth, over many years, has been that where there have been changes in forecasts, and where decisions have been made that have led to increased costs, they have been sneaked in through the back door, through the forecast, without any direct accountability to this House.

The people who say that the cap involves expenditure cuts are also wrong. The cap starts at around £120 billion and rises over five years to £127 billion, in line with inflation, so we have set it at a reasonable level. In this House, we should never again go back to the situation we had under the previous Government, where public expenditure was uncontrolled, and where debt and the deficit were allowed to balloon uncontrollably. This is part of clearing up the mess that was made of the public finances, and I commend the motion to the House.

Question put.

The House divided:

Ayes 520, Noes 22.

Division number 240

See full list of votes (From The Public Whip)

Aye

No

Question accordingly agreed to.

Resolved,

That the modified Charter for Budget Responsibility, which was laid before this House on 19 March, be approved.