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The Minister of State, Department for Work and Pensions (Steve Webb)
I congratulate the hon. Member for Easington (Grahame M. Morris) on securing an important debate. It is good to see other hon. Members from his region present for the debate today. I will speak primarily about incapacity benefit and the changes made by the Government—indeed, primarily by the previous Government. It is worth spending at least a moment on the context. Every night on the television news, we see stories of what happens in countries that did not get their deficits under control. We see fiascos, shambles, rioting in the streets and Governments being overturned.
It strikes me that two political parties working together in the national interest after the 2010 general election has meant that Britain is not seeing the extraordinary bond rates that Italy or Spain have faced. We are able to borrow at modest rates because of the fiscal credibility that we have. In the context of the north-east, low interest rates are one of the critical things in giving householders money to spend. If someone has a mortgage and the bank base rate is 0.5%, that gives them money in their pocket to spend in the regional economy.
Steve Webb
I will give way in a second. There are direct consequences of the difficult choices that we have made on the deficit that are specifically to the benefit of local economies such as the hon. Gentleman’s. I will give way to him, but he has not left me long to respond. If he wants to add additional points, I will have even less time.
Grahame M. Morris
I am grateful to the Minister, but it is important to challenge the point that is raised again and again that everything has to be sacrificed on the altar of deficit reduction. Is it not true that the Government’s plan is hurting but not working, and that the deficit is growing because there is no growth in the economy? The last figures I saw showed that we are borrowing an additional £46 billion.
Steve Webb
The hon. Gentleman mixes the structural deficit with the cyclical deficit. We have said that we will eliminate the country’s structural deficit. Although when the economy grows faster we get additional revenues and save money on benefit spending, we also have to tackle the structural deficit—something the previous Government failed to do. He referred to a five-point plan that simply adds more debt, and it is hard to see how the solution to a problem caused by excessive borrowing is more borrowing.
The hon. Gentleman referred to incapacity benefit, and his constituency has the highest concentration of people of working age on incapacity benefit in England. I have seen the Sheffield Hallam report to which he refers. It lists four changes that have been made, three of which—although he did not want to admit it—were introduced by the previous Government. My hon. Friend the Member for Redcar (Ian Swales) made that point. The replacement of the personal capability assessment by the work capability assessment was introduced by the previous Government; I am not sure whether the hon. Member for Easington supports that, or indeed the process of re-testing the stock of people on incapacity benefit, or the requirement to undertake work-related activities—all measures initiated by the previous Government. Those are three of the four measures in the Sheffield Hallam report, and it seems that each was a move in the right direction.
My hon. Friend the Member for Redcar was right to say that the system of work capability assessment that we inherited was broken, and a work capability assessment that focuses on whether people can work or not is a positive measure. We have proceeded with the Harrington review, and Professor Harrington’s second report will be published imminently. Significant changes have been made to the WCA process. For example, we will ensure that we garner more medical information initially rather than wait for it to emerge on appeal, and we will allow Department for Work and Pensions decision makers to more readily override the Atos assessment. A lot of positive changes to the WCA process have been recognised by those who campaign on such issues, and we have refined and improved the process to the benefit of the hon. Gentleman’s constituents, and others.
My hon. Friend the Member for Stockton South (James Wharton) asked the key question: what does the hon. Member for Easington want for his constituents who are on incapacity benefit? Even when private sector jobs are created, they do not go to those on incapacity benefit. There is a gap: folk on IB are stuck on IB and nothing gets them off it. We need to bridge that gap, which is where the reassessment process and, crucially, the Work programme come in, involving serious money that gets spent only when real jobs are created.
Let me give the hon. Gentleman a feel of how seriously the Government approach this issue. He referred to the ring-fencing of money, but suppose one of his constituents is on incapacity benefit but expected to be ready for work in about three months under the employment and support allowance process. If they find a job through the Work programme and that job is sustained, we will pay about £13,700 to the provider—double the £6,500 that we pay when someone comes off jobseeker’s allowance. That is a serious amount of public money going into the hon. Gentleman’s constituency, although only if those people about whom he is rightly worried get lasting jobs. The money does not get paid—via a small up-front fee—if the folk do not get a job. In many previous Government programmes and new deals, people got sent on schemes and the providers were paid whether those schemes were useless or not. Under this scheme, the providers will be paid only if they get people into lasting jobs. That will benefit the local area and is an entirely positive measure.
Time limiting of ESA was an important part of the deficit reduction strategy, and the hon. Gentleman referred to people being left “in penury.” It is, therefore, important to put on record two key features of that time limiting, which are that the sickest and poorest people will not be affected. The sickest people will be in the support group, which is not time limited, and they will continue to receive contributory ESA.
Steve Webb
Perhaps the hon. Gentleman will bear with me; I have six minutes left to respond to everything that he said. The people in the support group are not on time-limited ESA, and if they are regarded as inappropriate for work-related activity, they will continue to receive benefits indefinitely. The second category of people who are not affected by the time limiting are those on income-related ESA—in other words, even if someone else in the household has an income or substantial capital, they will not be affected. That means that 60% of those coming to the end of a period of time-limited contributory ESA will move to the income-related version. Those in the support group are not on time-limited ESA, and nor are those who move on to the income-related version. People not in those groups will be those who have other household income or substantial amounts of capital in the bank.
People may ask about the impact of such measures on the local economy, but we must also look at the impact of thousands of people who are stuck on incapacity benefit for years with nobody talking to them. Sometimes, people are stuck on IB for three, four or five years, with no contact at all. Nobody asks them, “What would it take? What are the barriers to work? What would help and support you?”, which shows the difference in approach taken by the new Government. We are not writing people off and leaving them on IB; we want to talk to them, identify those who could be active participants in the labour market with the right support, and have a Work programme that supports them into a job.
The hon. Gentleman mentioned regional policy, but my personal view is that having a regional Minister would feel a little tokenistic. We can have a Minister for this or for that, but will they be in the room when key decisions are made in the way that departmental Ministers will be? I am sceptical that a Minister for one region would get special treatment compared with a Minister for another region. We do, however, have a substantial regional growth fund that is worth £1.4 billion and has been popular and successful. We have now had two rounds of bidding—I could go through a long list of projects in the north-east that have been awarded funding. We recognise that additional support needs to be provided to areas that have experienced difficult economic times, and the regional growth fund is an important part of our response to that.
Many of the changes to incapacity benefit were rightly introduced by the previous Government, whether that is the work capability assessment, which, as my hon. Friend the Member for Redcar said, needed to be refined to ensure that we get decisions right, or the attempt to take an incredible number of people—1.5 million nationwide—off incapacity benefit. As the hon. Member for Easington noted, some of those people will be former miners who have claimed IB for a decade or more. Is it humane or economically rational to say, “Well, you’ve been on IB for a decade, you are seven years away from the state pension age so we will leave you alone, you can have IB until pension age, and then you will get a pretty lousy pension because your miner’s pension will have stopped years ago”? That is not good enough.
The hon. Gentleman asks why we cannot wait until there are more jobs, but even if we waited for a big increase in private sector jobs, those on IB would not be active participants in that labour market. Ex-miners who have received IB for seven years are far from that labour market and not competing in it. When jobs are available, who will the employer choose between someone who has received no contact with the system, and no encouragement, work-related activity or training, and someone who has just come from another job? Both I and the hon. Gentleman know who that employer will choose, and it will not be his constituent on IB. We must talk to people on IB and look at who could work with the right support and who needs to be in the support group. We must enable and support those who are able to work for when jobs become available. I accept that there is currently pressure on jobs, but there is churn every day and week as people leave old jobs and start new ones. When recruiting someone new, perhaps not net additional employment but as a replacement for someone who has left, the crucial question will be whether the person on IB is a credible participant in that labour market. We believe that our policies support the north-east by helping those on IB, supporting them and paying by results when people get lasting jobs. That is the long-term answer to the pressures faced by the hon. Gentleman’s constituents.