Budget Resolutions and Economic Situation
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The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
I welcome the Budget, which reiterates this Government’s commitment to restoring the damaged economy that we inherited. I remind hon. Members that the deficit—11.2% of GDP—was the largest since the second world war, higher than that of Germany, France and even the USA. The important point is that the deficit fuelled a high debt burden—which had been set to rise dramatically—of 65% of GDP and rising. In fact, if nothing had changed, it was forecast that borrowing would have risen by more than £200 billion during the course of the spending review. The deficit has cost more than £42 billion in interest payments each and every year since we entered office. [Interruption.] I am fascinated to hear that the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who is chuntering from a sedentary position, says that he is concerned about borrowing. The truth is that under Labour’s plans borrowing was set to rise by another £200 billion, and under its existing plans its solution for the problem of borrowing is to borrow more. Perhaps the right hon. Gentleman would like to explain how that would help the deficit.
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)
The Secretary of State is being characteristically generous in giving way so early in his speech. The previous Chancellor’s Budget would have halved the deficit over the course of four years, but this Budget confirms that borrowing is now set to grow by £254 billion more than first forecast. How can the Secretary of State judge that to be a success?
Mr Duncan Smith
Let us be clear about the plan left by the right hon. Member for Edinburgh South West (Mr Darling). Labour Members have been banging on about capital spending over the past 48 hours, but it is worth reminding everyone that while they now claim to want more capital spending, it was set to fall by 7% under the Darling plan. The honest truth is that, notwithstanding the euro crisis and the fact that the rest of Europe is mired in recession, as shown by the situation in Cyprus, the idea that there would have been a continuum and that all would have been well is complete and utter nonsense.
We are reducing the deficit and getting borrowing down, and it is set to fall further. Instead of banging on about capital spending, the right hon. Member for Birmingham, Hodge Hill should explain why Labour’s solution, which would send shudders through the world, is to borrow more. That would make our deficit position worse and raise interest rates dramatically, leaving ordinary people unable to afford their home loans.
Mr Byrne
The truth is that the Secretary of State is in this hole because the recovery that we left this Government has been knocked out. Growth has now stalled and, as a result, tax revenues are coming in at £5 billion lower than forecast. That is why we needed a Budget that would get back growth and jobs.
On capital spending, is the Secretary of State saying that he now agrees with the Deputy Prime Minister, who said earlier this year:
“If I’m going to be sort of self-critical, there was this reduction in capital spending when we came into the Coalition Government”?
Mr Duncan Smith
I do love these little exchanges with the right hon. Gentleman—I am sure we could become quite friendly—but the reality is that he is dancing around what was actually happening. I remind him that Labour’s capital spending programmes would have resulted in a real cut of 7% compared with our plans. It is all very well for Labour Members to talk about this now, but under the plan they left, capital spending was falling fast. We are spending more than their plan proposed, which would have resulted in a net 7% cut.
Borrowing today is lower than under Labour. It was £159 billion at its peak and it is now £120.9 billion, which is £38 billion lower, and forecasts approved by the Office for Budget Responsibility show that by the end of this Parliament it will be £63 billion lower and falling. [Interruption.] I say to the right hon. Gentleman that the public do not believe that Labour’s plan would have been any better. In fact, it would have been a lot worse and now Labour Members want to make it even more so, because they want to spend more, borrow more and see the deficit rise.
Mr Kevan Jones (North Durham) (Lab)
Does the Secretary of State not recognise that the difference between this Government’s plan and the one we left is that the economy and capital investment were growing? The Chancellor’s emergency budget in 2010 caused damage by ripping the heart out of the capital programme, and that led to a depression.
Mr Duncan Smith
I know it is difficult in the Chamber for anyone to listen to what anybody else is saying, but I want to return to my point. Under the plan that Labour left behind, capital spending would have been 7% lower compared with what it is today. It is absolutely no good—
Mr Duncan Smith
I am going to make some progress. The right hon. Gentleman will have plenty of time to contribute and I want to finish responding to the intervention from the hon. Member for North Durham (Mr Jones). Capital spending was set to fall. The plan that Labour left was to lower capital spending and there is no way around that. He cannot talk about capital spending rising because it was set to fall. We are bringing borrowing down. Labour has no plans at all for that and would raise borrowing.
Mr Brooks Newmark (Braintree) (Con)
Does my right hon. Friend agree that the bottom line is that today more men are in work than ever before, and more women are in work than ever before? That is the most important thing for our constituents.
Mr Duncan Smith
I was going to come on to that. I agree with my hon. Friend, and our employment levels put us in a better position than almost everybody else in Europe. We have more people in work and lower levels of unemployment. To be honest, people in Spain or France would give their eye teeth for the figures that we have today. Labour would push the cost of borrowing higher and higher, the deficit would spiral and the world community would not lend to us except at the highest rates possible. We would be rather like Spain or, in some senses, Italy.
Mr Duncan Smith
I will give way for the last time, and then I will make some progress.
Mr Byrne
The Secretary of State knows as well as I do that annual housing starts totalled just 98,000 in 2012. That is 11% down on the previous year, and half the number of homes that it is estimated are needed in this country. That is why Labour is saying clearly that we should spend the proceeds of the 4G licence sale, and half the money from a bank bonus, on building homes. This week’s figures show a 65,000 fall in the number of people working in the construction sector. This country needs investment in building homes, not a spare homes subsidy for the very rich.
Mr Duncan Smith
I thought the right hon. Gentleman would have avoided this issue because it is like walking into a large hole of his own making. Let me quote something from his right hon. Friend the ex-Prime Minister. This is how much he thought of house building:
“Housing is essentially a private sector activity...I don’t see the need for us to continue with such big renovation programmes”.
He cut spending, and I remind Labour Members that house building under his Government fell to the lowest levels since the 1920s—[Interruption.] No, absolutely not. Housing construction orders are up by 32%, and our plans will outstrip the house building figures of the previous Government.
Mr Duncan Smith
No. The reality is that under the previous Government, house building fell to the lowest level since the 1920s.
Mr Duncan Smith
No. The numbers of people living in overcrowded accommodation rose. The housing waiting list doubled. It was a shambles and a mess, and we are doing more to put it right. The plans in the Budget, which I will come on to, will improve the situation even more.
Let me make some progress. The Office for Budget Responsibility has confirmed that we are on course to meet the fiscal mandate one year early. The deficit has already been cut by a third to a forecast 7.4% this year, and it is predicted to fall every year in this Parliament. The likelihood of meeting the supplementary debt target has decreased. Public sector net debt is forecast to be 75.9% of GDP this year, and to peak at 85.6% in 2016-17. However, we have made a £31 billion saving in the debt interest payments predicted two years ago—almost as much as the whole defence budget.
Borrowing is down to £115 billion and forecast to be £87 billion by the end of this Parliament. Even excluding Royal Mail pensions and the asset purchase facility cash transfers, it is already £39 billion lower than the £159 billion peak for borrowing under Labour, and will be £63 billion lower—a reduction of 40%. I remind the House that Labour’s prescription is to borrow more, not less. The Institute for Fiscal Studies has estimated that in the absence of measures taken by the Government, total borrowing would have been £200 billion higher between 2010-11 and 2015-16.
It is important to note that since the beginning of this Parliament, issues in the eurozone have made matters very difficult, and in the current economic climate the challenge is harder than anyone could have predicted or hoped. As the OBR, OECD and others have explained, there are real risks to our stability and to others, in particular the financial storm in the eurozone, which shrank by 0.6% last quarter—the largest fall since the height of the crisis. With Europe accounting for 40% of our exports, it is no surprise that weak net trade has impacted on our GDP. In the words of the OBR, the
“unexpectedly poor performance of exports is more than sufficient on its own to explain the shortfall”.
Although the eurozone is expected to remain in recession throughout the year, the UK is forecast for a slight increase in growth. This Budget will, I believe, stimulate growth further still, so let us look at a few of its important measures. We are further reducing the main rate of corporation tax, which we had already lowered to 21%, to 20% from April 2015, down from the very high 28% inherited from Labour. It will now be the lowest rate in the G20. We are also—this is really important for my right hon. and hon. Friends, and for me it is the most important measure in the Budget—merging small company and main rates of tax at 20p. That had been asked for, but as I think Mr Frost said, it goes way past what was actually asked for. It is a real boost to small businesses.
We are increasing capital spending by a further £3 billion more than our existing plans from 2015-16, meaning that the Government will never cut capital to the levels planned by Labour which, I remind hon. Members, would have reduced spending by 7% more than our plans. We are taking measures to dramatically reinvigorate both house buying and the construction industry in this country by extending the excellent right-to-buy scheme, building 15,000 more affordable homes and increasing fivefold the funds available for building for rent. I remind colleagues that one of our biggest problems in getting housing benefit under control is due to the failure of the previous Government to allow enough houses to be built for rent, so that measure will be a huge help. We are introducing Help to Buy—a two-part scheme set over three years, committing £3.5 billion into shared equity loans for new builds, and offering new mortgage guarantees to support £130 billion of mortgages. That is really important.
I was watching the news programmes yesterday, and it was quite amusing to watch the shadow Chancellor run around. More and more he reminds me of the film “Toy Story”, and that rather angry Mr Potato Head who wanders around shouting, screaming and being very angry to absolutely no effect at all. Disaster, chaos, crisis, U-turns—I wonder what he does in his private life when anything goes wrong. He is certainly not much help to his wife I expect.
Sir Peter Bottomley (Worthing West) (Con)
Was that before or after the shadow Chancellor heard that people would not trust him with the economy?
Mr Duncan Smith
It is despite the fact that he knows nobody trusts him with the economy, which is why he looks more and more like an angry Mr Potato Head. It really is appalling and the idea that the alternative to the Chancellor is the shadow Chancellor is, frankly, enough to make one leave the country.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
The list of initiatives that my right hon. Friend has read out illustrates that this Government are part of the aspiration nation, wanting people to own their own homes. That is one of the greatest things to which people aspire, and it is fantastic that we are doing everything we can to help the construction industry and help people achieve that dream.
Mr Duncan Smith
I congratulate my hon. Friend on arriving at a really good statement: the aspiration nation. She is absolutely right, and the fact that she has come across it herself is testament to her brilliance on the Back Benches. This is about an aspiration nation, and the alternative—as somebody just remarked to me—is Mr Potato Head to infinity and beyond on borrowing. That is about the end of it.
The Budget also includes further measures, which I want to go through because some are really good.
Nick Smith (Blaenau Gwent) (Lab)
Did the Mr Potato Head comparison occur to the Secretary of State when he was looking in the shaving mirror this morning?
Mr Duncan Smith
Looking at the television was enough to give me the idea. I am glad the hon. Gentleman agrees that the shadow Chancellor more and more resembles angry Mr Potato Head.
By introducing an employment allowance, we will reduce the amount that 1.25 million businesses pay in national insurance contributions each year, and take 450,000 small employers out of national insurance altogether. That is a huge measure, and really important for small businesses, which, as we know, drive most of our employment.
Through tax reliefs both for social investment and for businesses that help employees to return to work after sickness, we are incentivising interventions that prevent long-term social problems. The sickness absence review on which the Government have led is really important. That tax help will drive change on one of the big problems we have had—we have talked with Dame Carol Black and Mr Frost about this—namely, that too many companies leave people who have difficulties to slide through their sickness and fall out eventually into incapacity benefit or, currently, employment and support allowance. We are trying to get companies to work with us on that review to ensure that they do much more to intervene earlier with help and support to try to resolve problems before people crash out of work and fall on to the benefits system. I hope that the sickness absence review will be fully supported on both sides of the House, and that that tax measure starts to get us ahead of the problem, which is where we always want to be. When somebody at work is finding it difficult, we want the companies involved earlier to ensure that something is done to change the situation.
That tax relief is important, as is the tax relief on social investment bonds. Sir Ronald Cohen has said that there is potentially a huge market for investment in social projects, and huge potential for bringing investors and some of the wealthier people in society back into contact with, and helping, areas of society that have damage and difficulty. Such investment can help to get kids off drugs or help with rehabilitating people from prisons. The measure will be a huge incentive, and I am pleased that we are consulting on it.
Nick de Bois (Enfield North) (Con)
My right hon. Friend might be aware that the Chancellor responded to representations from me and others and will consider further incentives for social investment tax relief to encourage smaller investors and crowd funding to help to drive local community finance initiatives.
Mr Duncan Smith
I congratulate my hon. Friend on being picked out in the Budget—it is not often that people are picked out in a Budget. He should shake hands with the hon. Member for Stoke-on-Trent Central (Tristram Hunt). He was angry before the Budget, but waved his Order Paper to applaud the Chancellor during his speech. I do not blame the hon. Gentleman, because he helped to change opinion—[Interruption.] I apologise. I do not want to talk about that too much because he has a career ahead of him—I hope.
Finally, in a welcome move, we are raising personal tax allowances to £10,000 by the end of the Parliament. That measure, which is a result of a good coalition agreement, means that working families pay £700 less in tax than when the Government took office, and that almost 3 million more of the lowest earners will pay no income tax at all.
James Duddridge (Rochford and Southend East) (Con)
The concept that 24 million people are helped by that measure is somewhat difficult to grapple with. It is much better interpreted by individual constituency. In my constituency, for example, 38,062 people will be £700 better off, and 359 people will be lifted out of income tax altogether.
Mr Duncan Smith
I agree with my hon. Friend and thank him for reminding me that we need to centre the measure down to constituency level, so that hon. Members know what it does. With my right hon. Friend the Chancellor, I will endeavour to ensure that every constituency is informed about how many people will be lifted out of tax and how many will benefit.
Mr Duncan Smith
Let me finish my point. That is one coalition measure of which I, as a Conservative, am incredibly proud. I am incredibly proud that we struck that agreement, and that, a year early, before the end of the Parliament, we will raise the threshold to £10,000. That will do more for poorer people who are struggling to make ends meet than almost anything the previous Government did. I should remind the House that they did exactly the opposite. They got rid of the 10p tax rate. They tried to pretend that that was somehow a tax cut, only to find that they spent billions of pounds—borrowed billions—to try to rectify it.
Mr Duncan Smith
During the passage of our last Bill, we were clear about who was winning and losing in those circumstances, and I am happy to engage with the hon. Gentleman on that. There are two important things to remember. The Opposition go on about this, but the reality is that in every year of this Government, the wealthiest in society—the top 1%—will pay nearly a quarter of all income tax, and the top 5% will pay nearly half of all tax. The richest will pay more in every single year of this Parliament than they would have paid under the previous Government’s plans. The 14,000 people in the UK who earn more than £1 million a year will pay £14.2 billion in tax this year. Conservatives did not say that they were pleased for people to be filthy rich; Labour did. The previous Government allowed wealthy people to boast that they paid less tax than their cleaners. We need take no lectures on upper rate tax from the Opposition.
Mr Byrne
Will the Secretary of State tell the House what representations he has made to the Chancellor on whether it is right that universal credit should be calculated on post-tax income? The Secretary of State will know that the effect of that is to claw back three quarters of the increase in the personal allowance from Britain’s poorest families.
Mr Duncan Smith
The reality—the right hon. Gentleman needs to get his head around this—is that those who engage with universal credit, all the way up the scale, will be better off than they would have been going back to work under all the measures in place at the moment.
Graham Jones
On the Secretary of State’s list of things that will be beneficial to constituents, does he agree that we probably do not need to include figures on the VAT measures, because everybody in every constituency will suffer from them?
Mr Duncan Smith
I seem to recall that, under the previous Government, the then Chancellor had to admit that his changes to VAT were a complete disaster and made no difference to anybody. Most companies ended up spending more money trying to make alterations. The reality is that the previous Government should have increased the personal tax allowance threshold to £10,000, but they never did. I would love to hear the Opposition welcome that measure rather than carp about it.
Nick de Bois
I suspect my right hon. Friend will wait in vain for that. Does he recall that the previous Government introduced stealth taxes by refusing to increase tax-free allowances even in line with inflation, so more people paid more?
Mr Duncan Smith
We know about the incredible stealth taxing under the previous Government. Their tax on pension funds meant that they were worse off by £100 billion, which sounded the death knell for defined benefit pensions. The previous Prime Minister, who, as I have said, got rid of the 10p starting rate, did more to punish people than we would ever expect from a Labour Government.
Jeremy Corbyn (Islington North) (Lab)
I would be grateful if the Secretary of State turned his attention to the benefit cap and its effect on poor people in high-cost areas such as the one I represent. Is he aware that 1,000 children in Islington schools are affected by the benefit cap? Some of their families will be affected by as much as £200 a week. That will lead to the social cleansing of the whole of central London because of the high cost of rents. Will he look again at the benefit cap and its effect on those in private sector housing, and do something rapidly to stop the enforced movement of poor people out of central London?
Mr Duncan Smith
I do not agree with the hon. Gentleman, although I understand fully what he says. I keep all benefit changes under review, but people have been told for more than a year that they are the families that will come under the benefit cap when it comes in on 1 April. A large number of those families are now heading back to work and taking jobs. That is what we are seeing—the figures will be released. It is remarkable how many people are moving to control their own situation. I remind the House and the hon. Gentleman that, despite all that is said, the benefit cap is set at the average earnings in Britain. Many people who are not on benefits have to cope with that.
Ms Karen Buck (Westminster North) (Lab)
Will the right hon. Gentleman give way?
Mr Speaker
Order. I gently remind the House that the Secretary of State is in order. He has been generous in taking interventions, but 30 hon. Members wish to speak in the debate. I know that both the Secretary of State and his shadow will factor that into their calculations.
Mr Duncan Smith
Rather than advice, I will take that to be an instruction, gently and eloquently given. I can crawl with the best of them—I hope better than my opposite number, but he will make his own attempt. I will make progress and try to be quicker.
I will talk briefly about the single-tier changes for which we are legislating. They are not just about improving the prospects of workers today, but about securing their position as they enter retirement. I am enormously pleased that the Chancellor confirmed that the single-tier pension will start in April 2016, which is in keeping with our original timetable. That means that after 60 years of modifications and tinkering, we will deliver a vital overhaul of the pensions system as soon as possible. I pay tribute to the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), who has been instrumental in driving that forward. If anyone is able to say at the end of this Parliament, “I made a difference,” it will be him. I will ensure that his name is remembered for that.
We are successfully rolling out auto-enrolment, which will help up to 9 million people get into a workplace pension scheme. That is important as it will make saving the norm. However, auto-enrolment will not work unless it pays to save. That is the key problem that the Minister and I have been discussing endlessly. What is the incentive to save? Too many people in Britain have been spending rather than saving.
The single-tier pension is all about solving that problem. We are replacing the complicated two-tier system of the basic state pension, additional state pension and the other outdated add-ons with a single flat-rate payment. That means that people will know what they are entitled to and will be able to project forward so that they know what they need to save. They will know that what they save will go above the line and that they will be able to use every pound; it will not be means-tested away so that they cannot use it. At £144 a week, the new state pension will be set above the level of the means test.
We are ending the unfairness whereby many people reach state pension age, having scrimped and saved all their life, only to find that others, who did not make any effort, get the same income through the pension credit. That is unfair. This change is about fairness and making saving pay. Michelle Mitchell, the charity director general of Age UK, said:
“The government’s proposals for a single tier state pension could help transform retirement for future pensioners, bringing clarity and stability to a system which is currently opaque and unfair.”
In 2020, three quarters of new pensioners will get a higher state pension following the introduction of single tier. That will benefit those who have historically had poorer state pension outcomes in particular. There will be better provision for the low-paid. Some 60% of low-income pensioners will see their income in retirement increase by 2040, compared with the current system.
Critically, there will be better provision for the self-employed, who, for the first time in about 40 years, will be treated the same as employees for the purposes of state pension retirement. There will be better provision for those with broken contributions, such as women and those with caring responsibilities. Some 700,000 women who reach state pension age in the 10 years after the single tier is introduced will receive £9 per week more on average. Implementing it in 2016 will benefit an additional 85,000 women who will now retire under single tier.
The single-tier pension is one of the big reforms, alongside universal credit, that will transform the landscape. It pays to work and it will now pay to save.
Mr Duncan Smith
With respect, I am under the eye of Mr Speaker. Although he is invariably generous, given his admonition, I will make a little more progress to ensure that I finish on time.
Universal credit makes it pay to work. Alongside universal credit sits universal jobmatch, an online job searching and matching service that is revolutionising the way in which people look for work. Two million people are already registered. It is already allowing us to segment those who are out of work so that we can deal with the people who are the most difficult to get into work earlier than we could before.
From April, we will begin to replace disability living allowance with the fairer and more objective personal independence payment. We are also improving employment opportunities for disabled people so that they can live independent lives.
Finally, we are getting to grips with the housing benefit system, which the last Government allowed to run out of control. Housing benefit doubled in 10 years. We are dealing with the problems that we inherited.
James Duddridge
As well as being welcome to individuals, will not the simplification of benefits bring massive savings in the administration of the Department by making it much simpler not only to deal with claims at the outset, but to stop people coming to us repeatedly who have problems not with the outcome, but with the system and the bureaucracy?
Mr Duncan Smith
Absolutely. Our dramatic changes will allow savings to be made for the right reasons, such as improving efficiency. The system will be simpler and easier, so people will understand it better. The lack of complication will help to save more.
In conclusion, the Labour Opposition vote against our reforms again and again. On welfare alone, they have voted against savings of £80 billion. That money needs to come from somewhere. They do not say where it would come from, apart from borrowing. Once again, that is backward logic: borrow more to cut borrowing; spend more to cut spending. Meanwhile, the Government are changing the culture of welfare and Government spending in the country. We are backing people who want to work hard and get on in life, and taking bold action to ensure that we succeed in the global race. It pays to work. It pays to save. The Chancellor’s Budget delivers sound public finances and a fairer deal for working families. It has all the right elements and I commend it to the House.
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)
As if we needed it, Wednesday’s Budget was the final, definitive, categorical proof that plan A has failed. Growth has halved; it will be lower this year and next year than was forecast. The deficit is not falling; it is static. The IFS said yesterday that the only way for the Chancellor to bring the deficit down this year and ensure that it is lower than last year would be to pay this year’s bills next year. Paul Johnson of the IFS concluded:
“The truth is that borrowing is the same this year as it was last year. And it will be the same next year as this year.”
Total debt is not down; it is going through the roof because the Government’s fiscal plans are in tatters. Borrowing is set to be £245 billion higher than was forecast. We were promised that the books would be balanced by 2015. That is a promise broken. According to Wednesday’s figures, the national debt will not be falling until 2017-18.
I am glad that the Secretary of State raised the idea of the global race. The House will have seen from the OBR’s figures on Wednesday that the fabled rebalancing that we were promised is simply not happening. Our exchange rate has fallen by 20% since 2007. Exports have grown by 1%. Once upon a time, in its early days, the OBR said that the export boost to GDP was set to be 1.2%. It now admits that net trade is dragging down our economy by 0.8%. What a contrast that is to 20 years ago, when sterling depreciated by 18% and exports grew by more than a third. Contrary to what the Secretary of State says, the OBR says that our market share is deteriorating not because the growth of our trading partners is slowing, but because our exporters have become less competitive. The Chancellor was right to say on Wednesday that we are in a global race. The problem is that we are set to lose it by setting sail for a low growth, low pay, low skill economy, and there was nothing in the Budget to change that course.
Mr Duncan Smith
The right hon. Gentleman is doing his usual trick of trying to rabbit around the figures and then arrive at an insoluble conclusion. He says that there are difficulties and complains about borrowing, but his prescription is to spend more and to borrow more. Will he please explain who agrees with him that we should spend more and borrow more when our problem is borrowing and our problem is a deficit?
Mr Byrne
The chief economist to the IMF has been clear that a different fiscal strategy is needed. Indeed, the Secretary of State for Business, Innovation and Skills hinted that what was needed at the moment was a whacking great boost in capital spending, and the Deputy Prime Minister has admitted that the Government cut capital spending far too fast. That is why we have set out clear, costed plans to increase capital spending and change course.
The Chancellor and the Prime Minister bear responsibility for that catastrophic failure and the failure of their fiscal plans, but, let us be honest, they have been aided and abetted by the Secretary of State for Work and Pensions, who has proved incapable of translating his fabled welfare revolution into practice. There could not have been a worse curtain-raiser to Budget day on Wednesday than the unemployment figures that we saw at 9.30 am. Halfway through this Parliament, unemployment is higher than it was at the general election—and it is not going down, it is going up. [Interruption.] I do not know where Government Members were on Wednesday. Unemployment rose on Wednesday. Youth unemployment went up by 50,000 on Wednesday. Unemployment among women went up, not down, on Wednesday. Government Members would do well to live in the real world for once.
Mr Byrne
I can confirm that, and I will also say to the House that families are now paying an extraordinary price. They are doing anything and everything to get work. On average, people have taken a £1,250 pay cut since the election, and that is why it is such a bad idea to cut tax credits and give a tax cut to millionaires in two weeks’ time.
Mr Duncan Smith
Let me make two things clear. Unemployment is at a lower rate than when we took over in 2010, and there are more people in work than ever before. It is no good the hon. Member for Westminster North (Ms Buck) harking back to 2008—Labour bust the economy in 2008-09, which led to this problem, and youth unemployment was rising. The right hon. Gentleman said that he is supported by the IMF. Let me quote Christine Lagarde, who said
“when I think back myself to May 2010, when the UK deficit was at 11% and I try to imagine what the situation would be like today if no such fiscal consolidation”—
the one we are carrying out—
“programme had been decided... I shiver.”
She shivers at the problems caused by the previous Government and what they would have done.
Mr Byrne
My hon. Friend is absolutely right to raise that point. Not only did we see youth unemployment rise on Wednesday, but the claimant count for long-term unemployment went up again. That is why I say to the Secretary of State that we needed action in the Budget to bring unemployment down.
The organisation of back-to-work schemes under this Secretary of State is now in a state of complete chaos. This is what he had to say about the Work programme in November 2010:
“The difference between this Government and the previous Government will be that the Work programme—the most comprehensive, integrated work programme in existence, certainly, since the war”.—[Official Report, 22 November 2010; Vol. 519, c. 18.]
What have we had instead? We have had a Work programme that has been literally worse than doing nothing: just 2.3% of people referred on to the programme have found sustained jobs. The Public Accounts Committee had this to say:
“Actual performance was even below the Department’s assessment of the non-intervention rate—the number of people that would have found sustained work had the Work Programme not been running.”
Will the Secretary of State now tell us what on earth is going wrong and what he got from the Chancellor to fix it?
Mr Duncan Smith
I will hold the right hon. Gentleman to those words when we publish the next figures, because the Work programme will be proven to be a remarkable success. As the Work programme becomes a success, it will actually save the taxpayer money, because none of the companies are paid unless they get people into work for six months. He knows full well that his Government’s programmes were expensive and failed: unemployment rose dramatically, and youth unemployment was rising from as early as 2004, when the economy was meant to be growing.
Mr Duncan Smith
I tell the right hon. Gentleman that when we publish the figures on the Work programme, he will be eating his words.
Mr Byrne
I will take that as a no.
The only measure in the Budget that might remotely help jobs is the employment allowance—a welcome idea that we support and for which we have argued before—but it will not kick in until halfway through 2014 and will not be fully up and running until 2015-16, when the GDP growth is forecast to be 2.4%, which is three times the growth forecast this year. We need action on jobs now, not in the first year of the next Parliament.
If we require any proof of the need for a big plan for jobs, we have only to look at the story by Mr Patrick Wintour in today’s Guardian. Here we learn some of the terrible ways in which front-line jobcentre staff are now being asked to reduce the unemployment figures—targets for sanctions and league tables for jobcentres. So tough is the pressure on staff that they are threatened with disciplinary action by their superiors if they fail to deliver for Ministers. They are even given a dictionary of which phrases to spot so that they can catch out jobseekers who have turned up to jobcentres for help. The leaked e-mails tell staff to look out for phrases such as, “I pick up the kids”, “I look after my neighbour’s children” and “I didn’t come in yesterday because my husband was ill”. It beggars belief that Ministers told the House on Monday that no such targets or league tables existed, yet we see from these e-mails that it is deep within the DWP’s culture.
Mr Byrne
I will give way to the Secretary of State in a moment, because I am going to invite him to apologise to the House.
How on earth could Ministers not have known? How on earth could the House have been given information earlier in the week that was the opposite of the truth? I know that the Secretary of State will apologise, because he is a decent man. On Tuesday, the Minister of State, Department for Work and Pensions, the hon. Member for Fareham (Mr Hoban), said:
“There are no league tables in place. We do not set targets for sanctions”.—[Official Report, 19 March 2013; Vol. 560, c. 828.]
The Under-Secretary of State for Work and Pensions, the hon. Member for Wirral West (Esther McVey), said:
“There are no targets whatsoever.”—[Official Report, 19 March 2013; Vol. 560, c. 872.]
I am glad that we have secured an independent review of the sanctioning regime in the Jobseekers (Back to Work Schemes) Bill. It was clear that we were right to demand it, and it is now clear that the sanctioning regime is running out of control, so I hope that the Secretary of State will guarantee that the independent review will get to the bottom of every case in which sanctions have been used. If he does not, we will bring forward such amendments in the other place.
Mr Duncan Smith
First, I can absolutely commit to the fact that there are no targets for any sanctions whatsoever. To emphasise that, I should point out that the head of Jobcentre Plus has issued a reminder to everybody in the estate that there are no targets and that there will be no targets, and that anybody using those targets will be disciplined. It was the last Government, not this Government, who set up a target culture; we are breaking with that culture. I see the hon. Member for Walthamstow (Stella Creasy) in her place. The work they do in that jobcentre is remarkable at getting people back to work. They have accelerated and improved their performance. I would love to hear the shadow Secretary of State say to those working hard in jobcentres, “Well done for the work you do in getting record numbers back to work.”
Mr Byrne
My admiration for jobcentre staff working under this regime is unbounded. They are good people trapped in bad systems, with a Secretary of State who, I fear, is out of touch.
I have a copy of the e-mail that Mr Wintour reports today, and this is its concluding paragraph:
“Guys, we really need to up the game here”—
on the issuing of sanctions—
“The 5% target is one thing—the fact that we are seeing over 300 people a week and only submitting six of them for possible doubts is simply not quite credible.”
The e-mail says, “So the bottom line. I have until 15 February, along with other area managers, to show an improvement, and then it is a performance improvement plan for me.” He continues:
“Obviously if I am on a PIP…to improve my team’s Stricter Benefit Regime referral rate I will not have a choice but to consider implementing PIPs for those individuals who are clearly not delivering SBR within the team.”
That is why it is important that we have assurances that the independent review, set out in the Jobseekers (Back to Work Schemes) Bill, will get to the bottom of every sanction issued.
Mr Byrne
I will in a moment. I assure the Secretary of State that I will give him time to answer.
The e-mail in question starts by stating that Walthamstow is 95th in the league table out of only 109. This is incredibly serious, not least because in response to repeated questioning the Minister of State, the hon. Member for Fareham, and the Under-Secretary, the hon. Member for Wirral West, assured the House earlier in the week that this was not happening, yet it clearly is.
Mr Duncan Smith
There are no targets for sanctions. There will be no targets. Anybody caught imposing a target will be dealt with. That is absolutely clear. That message has already gone out. It went out before on innumerable occasions. The target culture was under the right hon. Gentleman’s Government. I am sorry that the hon. Member for Walthamstow (Stella Creasy) did not say one word about the good work being done by staff in her jobcentre. She owes it to them to remind everybody that they are doing a brilliant job in difficult times and have improved their performance dramatically.
Mr Byrne
I know that my hon. Friend the Member for Walthamstow (Stella Creasy) will speak later and will provide the Secretary of State with a full answer on that. I repeat, however, that if the Government do not make refinements to the Bill, we will move the necessary amendments. I am glad that the independent review has been legally sanctioned in the Bill. We will ensure that it is used to get to the bottom of what is going on, and I am sure he will co-operate.
Just as bad as the lack of action on the Work programme in the Budget were the new surprises about universal credit. The Secretary of State and others have given frequent assurances that the programme is on track, but that raises the question: what on earth is the track? Earlier in the week, we heard in the Financial Times that small businesses were so badly prepared by HMRC for the introduction of real-time information—the method by which payrolls will be updated to calculate universal credit—that the Government have had to U-turn again, only a few days before the change is being introduced. The RTI system for businesses employing fewer than 50 people—covering about 7 million—will be slipped back by six months. There are worries now, not just about the Work programme and the lack of action on bringing down unemployment, but on universal credit.
As I said earlier in the week, the ultimate test for the Secretary of State is this: when he went to Easterhouse all those years ago, he talked about the need for a jobs revolution in this country, but if we now look at the 1% most-unemployed estates in our country, we see that unemployment has not fallen over the first half of the Parliament but gone up. It has gone up in three quarters of estates, and long-term unemployment, which we are so worried about, has risen on two thirds of those estates. This welfare revolution is falling apart, and we needed a Budget for jobs this week to fix it.
The greatest tragedy is who will pay for this failure. We know that a host of cuts, not least the bedroom tax, that are arriving in a couple of weeks will hurt some of the most vulnerable people in our country. Yesterday in Great Yarmouth, together with Lara Norris, I met a woman called Sandra who had cerebral palsy. She has brought up five children, but for reasons of her disability she sleeps separately from her partner, who is her carer. She will be hit by this bedroom tax in a couple of weeks. She now has to take decisions about switching off the heating for half the week because she can no longer afford to heat her home. She has to go to bed and snuggle up in an electric blanket in order to stay warm. That is what is happening in our country, yet these cuts will start on the same day as Britain’s richest citizens are given a tax cut. It is wrong and we should have had action in the Budget to reverse it.
Mr Byrne
What we need to bring down the housing benefit bill is to build more homes. That is why we have said that the 4G licences and half the bank bonus tax should be spent on building homes. The Deputy Prime Minister—the hon. Lady’s right hon. Friend—admits that capital spending was cut too fast. I look forward to hearing her justify to her constituents who will hit by the bedroom tax why they should pay £14 a week extra while millionaires get a £2,000 a week tax cut.
Mr Duncan Smith
May I just remind the right hon. Gentleman—as far as I can see he lives in cloud cuckoo land most of time—that under the last Government housing benefit bills doubled and were set to rise to more than £25 billion this year? We are saving a minimum of £2 billion from that rise. Under Labour the bill would have gone up and we had the lowest house building programme since the 1920s. Really, he should stand up and apologise for the shambles and the mess they left housing in.
Mr Byrne
The Secretary of State’s level of delusion is now bettering his previous level. He knows that the policy costings—which he has clearly not read—published by his right hon. Friend the Chancellor show that the housing benefit bill is not going down over the next couple of years, but going up. The Secretary of State’s efforts have been so successful that he is bringing in a policy—the hated bedroom tax—that will cost more than it saves. We saw the proof on Wednesday—housing benefit up by more than £1 billion. That is a mark of his failure.
Cathy Jamieson
I will be happy to give way if the Secretary of State can answer that point about unfairness.
Mr Duncan Smith
Will the hon. Lady answer this question? If she is so against this, why is she in favour of people having spare rooms subsidised by the taxpayer? Why did her party’s Government refuse to allow the same thing in relation to private sector social tenancies?
Cathy Jamieson
Once again, the Secretary of State’s question shows just how out of touch this Government are. These are people’s homes, in which many of them have lived—[Interruption.] The Secretary of State can shout from the Front Bench, but he had his opportunity to speak earlier. It is important to reflect back to him the points made by hon. Members when he was not in his place, and that is what I am seeking to do. It is unfair that people who have lived in their homes for many years are now finding that there are no other homes for them to move to. Some people had been given homes under the homeless persons legislation, and some because the homes are suitably adapted for their needs. It is simply not fair to suggest that these people should not be able to continue to live in these homes.
Several hon. Members talked about unemployment and the need for more to be done. My hon. Friends the Members for Lewisham East, Walthamstow (Stella Creasy), for Nottingham South (Lilian Greenwood), for Luton North (Kelvin Hopkins) and for Blaenau Gwent (Nick Smith) highlighted the problems of many more people chasing vacancies in their areas than there are jobs available. The Government consistently say that there have been increasing numbers of people in employment. However, the harsh reality for many people in the constituencies represented by Labour Members who have spoken is that they are not seeing the benefit of that job creation and are finding that jobs are not available, that only part-time jobs are available, or that they are unable to work the number of hours they need to work.
On housing, various circumstances were relayed during the course of the debate. I note that we still have not had an answer from Ministers about the second home subsidy. Will the legislation be constructed in such a way that it will not be possible for people who already own homes to buy another home under this process? Yet again, no answer is forthcoming. Housing was discussed by my hon. Friends the Members for Hammersmith (Mr Slaughter), for Croydon North (Steve Reed), for Islington North (Jeremy Corbyn), for Westminster North (Ms Buck), for North Durham (Mr Jones), for Eltham (Clive Efford) and for Hyndburn (Graham Jones). I list them all because that shows the great strength of feeling about how this Government have got it wrong on housing and have not done enough to bring forward, at an early stage, plans not only to get houses built but to give the construction sector the boost that it needs.
My hon. Friends the Members for Cardiff South and Penarth (Stephen Doughty) and for Ilford South (Mike Gapes) referred to the Department for International Development’s welcome commitment to spend 0.7% of GDP, but made the important point that that money has to be spent on aid and should not be diverted anywhere else.
It was suggested that my hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt) should have a statue erected in his honour because of the amount of work that he has done in his area on energy and climate change issues. As a former sculptor, I would certainly be very keen to see a suitable monument erected somewhere in his constituency.
I want to return to the points raised by my right hon. Friend the Member for Birmingham, Hodge Hill. He made a number of very important points about how this Government have not taken any responsibility for what they are doing under their own watch. He noted how the numbers have been manipulated or massaged—we can use whatever word we like—and how they want to pay this year’s bills next year to ensure that their sums add up. At the same time, borrowing is the same as last year and will be the same next year, too. They also broke their promise to get the deficit down by 2015.
My right hon. Friend highlighted a number of issues with regard to the jobcentre targets, which was also picked up by my hon. Friend the Member for Walthamstow. Will the Exchequer Secretary address some of those issues when he winds up? As my right hon. Friend has pointed out, it has been said that staff were threatened if they did not get the figures down and that they were given a dictionary of certain phrases that they had to look out for whereby people were put on special measures or investigated further if they used those phrases in their job diaries or on their forms.
This is very serious and I have asked Ministers questions about it during previous debates. I received an assurance that there were no targets in the jobcentres, but we have heard evidence today that there seem to be not only targets, but league tables. I cannot imagine why jobcentre staff would say such things if pressure was not being put on them to work in that way. Ministers seem to be saying one thing in public while something else is going on in private behind the scenes. That suggests either that Ministers do not know what is going on, or that they do know but have not been able, for whatever reason, to get the information into the public domain. The Minister needs to answer those questions. For the same reason, it is important that we get the independent review on sanctions, which Ministers were clearly asked to consider in every case in which sanctions were used. We have heard about the many good people working in jobcentres. It has been suggested that they are good people trapped in bad systems, and it is the responsibility of Ministers to address that.
I want to end on a slightly more positive note. We welcome the employment allowance. We want to see the detail and ensure that it moves ahead as quickly as possible. It is something that we have advocated to give more help to small businesses.
Although we welcome some measures, I want to sound a cautionary note on the sickness and absence review in particular. Of course, we support the idea of people getting the help, assistance and medical treatment they need to deal with conditions and to enable them to get back to work if they have been off sick or have been injured. That access to treatment must not, however, be put at risk by further cuts to the NHS and it must not take a similar approach to the one we have already shown to be unfair whereby the Department for Work and Pensions, through organisations such as Atos, appears to be treating people in a way that disadvantages rather than assists them.
We have yet to see all the implications of the plan to introduce the single-tier pension. I have been contacted by many women who have already been hit by the change in retirement age and who are now very worried and confused about how the change to the state pension will affect them. They are now even more worried about the new proposals.
We have had a good debate, but the shadow Secretary of State raised a number of issues for which answers are still required and I hope that the Minister will provide them. I would particularly appreciate answers to the points about sanctions and jobcentres that were raised during the debate.
The Exchequer Secretary to the Treasury (Mr David Gauke)
We have had a well-attended and at times lively debate on the Budget, and I will begin by thanking my hon. Friends for their contributions. My hon. Friend the Member for Rochford and Southend East (James Duddridge) spoke about the steps taken in the Budget to help businesses and ensure growth, and he rightly highlighted measures relating to stamp duty for shares on the alternative investment market. My hon. Friend the Member for Braintree (Mr Newmark) highlighted the extension of capital gains tax policy for seed enterprise investment schemes, and I thank him for his excellent work in promoting those schemes. They are an excellent opportunity to enable start-up businesses to expand, and for investors to find good investment opportunities to help grow jobs in this country.
I thank my right hon. Friend the Member for Sutton and Cheam (Paul Burstow), who I know had to depart early. He highlighted the further substantial progress that the Government have made on the personal allowance, benefiting millions of taxpayers and taking many others out of income tax altogether—a contrast to the record that we inherited. He also highlighted the work on social care reform that the Government have progressed, again in contrast with our predecessors. I know that my right hon. Friend was heavily involved in that process.
My hon. Friend the Member for Enfield North (Nick de Bois) highlighted specific matters relating to community investment tax relief. I know that he has had discussions with the Treasury about his ideas, and we welcome his engagement. My hon. Friend the Member for Wycombe (Steve Baker) dealt with monetary policy—an issue in which he takes a close interest—and we are grateful for his views. My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) highlighted the progress that the Government have already made in dealing with the mess that we inherited, and particularly the fact that we have reduced borrowing by a third since we have been in office.
My hon. Friend the Member for Northampton North (Michael Ellis) highlighted to the House the expression, “There is no money left”, although I have forgotten for the moment who coined that phrase—[Interruption.] I am told that it was Winston Churchill. I was thinking of someone else, although there are certain physical similarities. I also thank my hon. Friend the Member for Hendon (Dr Offord) for highlighting some of the long-standing housing issues in Hendon that he is seeking to address.
Lilian Greenwood
The Minister mentioned housing. Is he as shocked as I am by figures that the Government have released today that show a 12% increase in the number of households with children accepted as homeless in the last year; an 11% increase in those living in temporary accommodation; and a 29% increase in the number of families living in bed and breakfasts? Is that not a disgraceful indictment of this Government?
Mr Gauke
If the hon. Lady is concerned about people on waiting lists or living in overcrowded conditions, she might want to think about what we could do about too many people who have got spare rooms.
We heard a number of speeches from the Labour party, and two points about the fiscal situation were consistently raised. First was the concern that borrowing is higher than we had wanted and expected it to be—borrowing is too high and debt is increasing too fast. We then had a number of speeches that called for more spending and said that we should not worry quite so much about borrowing and should be prepared to borrow more. Remarkably, a number of speeches made both points at the same time, but the reality is that the Labour party believes that the right approach to our current difficulties in the economy is to borrow more. The proposals from the shadow Chancellor involved £33 billion more spending.
The most interesting point in the entire debate was when the hon. Member for Glasgow North East (Mr Bain) called for more spending in a particular area, and my hon. Friend the Member for Battersea (Jane Ellison) intervened to ask how he would do that in a fiscally neutral way. At that point the hon. Gentleman paused and said, “Well, we are on a different path.” He is an articulate and eloquent speaker, but rather than say what that path was, he refused to answer. Labour Members are on the path that dare not speak its name. Their path is simply more borrowing.
Mr Newmark
I might be able to help my hon. Friend and the hon. Member for Glasgow North East (Mr Bain). The IFS says that the Labour pathway would cost the country another £200 billion in debt.
Mr Gauke
My hon. Friend is absolutely right to point that out. That would be the consequence of pursuing the policies advocated by Labour. That does not take into account the concerns about what going down that route would do for international confidence and the price we pay for our borrowing—interest rates. Such borrowing would jeopardise the economy.
We have made progress on, for example, unemployment. Since the first quarter of 2010, the private sector has increased by 1.25 million jobs and total employment is up by 890,000 in the period. A number of hon. Members, including the hon. Member for Houghton and Sunderland South (Bridget Phillipson), described the conditions in their constituencies. It is worth pointing out that, in the north-east of England, employment has risen by 1.4% and unemployment has fallen by 1.5% in the past year.
We are therefore making progress, but I will not deny that we, like most major economies in western Europe, do not have the level of growth we would like. Two big challenges face all of us. First, how do we get growth when there is no money left, and secondly, how do we live within our means—what do we do to get the deficit down? To deal with that question, we must first acknowledge that the problem essentially is that spending is too high, and not that taxes are too low.
We must take steps to address that, which means taking difficult decisions, as the Government have done, on departmental spending. Our decisions have, by and large, been opposed by Labour. We have had support on one element of departmental spending—the public sector pay freeze. We have announced that we have had to extend that for a further year into 2015-16, but I am not sure whether Labour supports that policy. I believe that freeze is essential if we are to meet our targets.
We have also had to take steps to reform welfare. I congratulate my right hon. Friend the Secretary of State for Work and Pensions on the leadership he has shown and on his bold vision for reforming welfare. We must address welfare. In the decade before the financial crisis, and despite a growing economy, welfare spending increased by 40% and has continued to rise—it went from 11% of GDP in 2008 to 13% of GDP in 2012. Put simply, welfare spending still costs the UK taxpayer more than £200 billion a year, which is almost £1 in every £3 raised in taxes, and more than the budgets for health, education and defence combined. We need to find savings across the government. Inevitably, savings on welfare need to be part of that. If we are to spend more money on other services, we need to tackle our growing welfare budgets.
As my right hon. Friend the Chancellor explained on Wednesday, the previous public spending framework divided Government spending into two halves: fixed department budgets and annually managed expenditure. We decided in the Budget to introduce a new limit on a significant proportion of the latter. That will be set in a way that allows the automatic stabilisers to operate, but brings control to areas of public spending that have been beyond our control. My right hon. Friend the Chief Secretary to the Treasury will provide an update on that at the spending round.
We must recognise that we are in a global race. There will be economies that succeed and those that fail. We must ensure that we are competitive. That is why we have cut the corporation tax rate again to 20%—the lowest rate in the G20. It is striking how the UK is now recognised as having a very competitive tax system. That is also why we are making it easier for start-ups. I have touched on the seed enterprise investment schemes and the measures on stamp duty on AIM shares.
From April 2014, every business and charity in the UK will be entitled to a £2,000 employment allowance each year to reduce their employer’s national insurance contributions. I can tell the House that we have set up a website to help businesses understand how that will work, with an online calculator to illustrate the effect of the allowance on the employer’s national insurance bill in 2014-15. It can be found at www.employmentallowance.com. The employment allowance will benefit up to 1.25 million employers, with 98% of the benefit going to small and medium-sized businesses with fewer than 250 employees.
The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) said that the Labour party has proposals in this area, but the employment allowance is much simpler and is permanent, not temporary. It applies to all businesses and charities, not just the smallest, so there will not be a cliff-edge problem whereby people face disincentives in taking on a 10th employee. It will benefit all businesses and charities, not just those that are taking on new staff. It will be very simple to operate through the real-time information system. It could not be simpler. It is also worth pointing out that the Labour party fought the last election with the intention of increasing employer’s NICs. They wanted to put the jobs tax up, not cut it.
The previous Government’s plan for reducing the deficit was inadequate and had no credibility. The Labour Opposition have not stood by any element of that plan. They wanted to raise employer’s NICs; now they want to cut them. They proposed huge cuts in capital spending, which we have partially reversed. They now complain to us that capital spending should be higher. They put in place a fuel duty escalator, but have subsequently called for it to be scrapped. This Government have managed to freeze fuel duty and it is falling in real terms. The previous Government put in place a beer escalator. I think that the Opposition are supporting us in cancelling that as well.
The Labour party has one solution to our economic problems: borrowing and spending more. It spent and borrowed too much during the boom and it never accepted that there was a structural deficit before the crash. It has resisted all our attempts to control public spending and is not willing to accept that there is a need to constrain public spending in the years ahead. The truth is that the Labour party always wants to spend and borrow more. To be fair, when it is in government, it does spend and borrow more. However, the country cannot afford it.
We need to prepare ourselves for growth. We need to put in place incentives for companies to invest and expand. In government, the Labour party failed to do that and failed to control spending. That is why it cannot be taken seriously. That is why it is not the Labour party, but this Government who can achieve for the United Kingdom.
Ordered, That the debate be now adjourned.—(Joseph Johnson.)
Debate to be resumed on Monday 25 March.