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The Parliamentary Under-Secretary of State for Wales (Alun Cairns)
It is a privilege to have the opportunity to respond to the debate and to serve under your chairmanship, Mr Turner. I congratulate the hon. Member for Caerphilly (Wayne David) on securing this important debate.
I have listened carefully to the concerns raised by the hon. Gentleman and other right hon. and hon. Members who have contributed. The Government are making welfare changes that will turn around so many communities and offer them hope. I want to underline at the outset the context and circumstances in which our reforms are taking place.
The hon. Member for Caerphilly talked about the economic situation in the valley communities. I wonder whether he will acknowledge that although Wales is now the poorest part of the United Kingdom, that was not the situation inherited by the previous Labour Government in 1997. Over the duration of the previous Administration, Wales became the poorest part of the United Kingdom. We have heard about regeneration plans, but we did not see any of those plans succeed or transform the prospects of the communities that he highlighted.
Huw Irranca-Davies
Just to test the logic of the Minister’s proposition, does he recognise that the last time we saw a massive increase in those on incapacity benefit and other benefits was during the 1980s? I do not want to revisit the wholesale closure of the mines, but will he tell me what regeneration strategy was put in place at that time?
Alun Cairns
I find it strange that the hon. Gentleman has gone back to the 1980s. I was still in school—that is how long ago it was.
It is relevant that when this Government came to power in 2010, Wales was the poorest part, nationally or regionally, of the United Kingdom. In 1997, when the previous Labour Government came to power, it was not. There needs to be a recognition of the context in which the welfare changes are taking place. The data are quite stark. The hon. Member for Caerphilly mentioned support from European aid that has gone to west Wales and the valleys. I remember that that support was discussed as a one-off opportunity, but we have just come to the third prospective round of European aid. That demonstrates the legacy that the previous Administration left.
Nia Griffith
Will the Minister tell us what he is going to do to improve the record of his Government’s Work programme, which is failing the people in the valleys, and particularly those who are furthest from the workplace, such that Oxfam Cymru has said that some people are being “parked” and are not being given the opportunities they should have?
Alun Cairns
I am grateful to the hon. Lady for raising that point. I will cover that as I make some progress with my speech.
I want to underline the context in which the Government are responding, with Wales, sadly, the poorest part of the United Kingdom. We inherited a situation in which parts of Wales were also sadly blighted with worklessness. In some communities, a third of the working age population were claiming out-of-work benefits. The Government had to act. We have taken steps—
Alun Cairns
In a moment—with the greatest of respect, I would like to make an element of progress, certainly at the outset.
We have taken steps to deal with the legacy of a welfare system that encouraged dependency and penalised those who wanted to work. The benefits system was clearly broken. It did not work for claimants, for the economy or the people of those communities or for the nation’s finances. According to the Work and Pensions Committee, a parent who increased their hours from 16 to 30 hours of work a week would gain less than £1 for every extra hour they worked. It was hardly a system that incentivised people to do the right thing. That sort of example underlines absolutely the need for reform.
Paul Murphy (Torfaen) (Lab)
Does the Minister accept the thrust of the Beatty-Fothergill report? In Torfaen, which is a valleys constituency, £34 million is sucked out of the local economy every year, depriving it of expansion and entrepreneurship in my constituency, just like all the other Welsh constituencies. Do the Government accept that that is a really serious issue that we need to look at?
Alun Cairns
I am grateful to the right hon. Gentleman for making that point, but that report does not take account of the incentives that are built into the welfare reforms, nor does it recognise the increased income that the poorest in the community will receive from the universal credit. I will come to that.
Nia Griffith
Will the Minister take up with the Secretary of State for Work and Pensions the serious issue of the taper on universal credit, which will mean that work will not pay? That is exactly the opposite of what he and we want to see.
Alun Cairns
I hope to come to universal credit if I make progress in my speech.
Welfare reform is part of the long-term economic plan to stabilise the nation’s economy, to deal with the years of financial mismanagement under the last Government, and to get the people of Britain, including Wales, back to work. The Government want to move people from dependence to independence. We must enable them to free themselves from a lifetime on benefits and enable them to achieve their ambitions.
The previous Government, to their credit, recognised the need for changes to the welfare system. Various Governments attempted to address the issues, but only tweaked an already failed system. Another tweak was not an option. An overhaul was required, so we are creating a new welfare system in Wales and throughout the UK based on flexibility, simplicity and fairness. We want a system that can respond to the modern and flexible labour market, while ensuring that no individual is worse off by accepting a job. We want a system that is easy for people to use.
Wayne David
The Minister says he does not want people to be worse off by accepting employment, but part of the Government’s strategy is to reduce the value of benefits so that there is more incentive for people to take low-wage jobs because they are receiving hardly anything, and sometimes nothing, on welfare.
Alun Cairns
I am trying to get on to universal credit, but I will highlight how the poorest will be better off financially. We cannot take one policy in isolation and we must consider the reduction in unemployment—I hope that the hon. Gentleman recognises and welcomes it—as well as other economic changes.
We want a system that is easy for people to use but ensures that customers receive all the benefits to which they are entitled. We want a fair system that reflects the heart of our nation—a nation that looks after those who need it but ensures fairness for hard-working individuals and families.
Worklessness needed addressing and is being addressed. Surely we must all be concerned that 200,000 people in Wales have never worked. That is wholly unsustainable. As Welsh MPs, we should want the Government to do all they can to move people from dependence to independence. I am sure the hon. Member for Caerphilly supports that and that we can continue to enable people to free themselves from a lifetime on benefits and enable them to achieve their goals.
Huw Irranca-Davies
Does the Minister accept my proposal that to free someone from benefits to go into a job with poverty pay is a strange sort of freedom? Does he agree that we must ensure that that work pays and that there is no increase in the bill on taxpayers to subsidise poverty pay, as there is at the moment, including with housing benefit?
Alun Cairns
The hon. Gentleman makes a point that I will try to cover when I come to universal credit. The introduction of universal credit will always make people better off while they are in work. I have highlighted one example and could cite many more of people who were trapped in the benefits system. All parties have recognised the need for reform and the universal credit will bring about the change to move people from dependence to independence. Clearly, it is not good for individuals, their families or their communities to be out of work and it is certainly not good for the rest of the nation.
Successive Governments have failed to tackle the problem, but we have tackled it head-on. We are working to improve the incentive to work because it remains the best route out of poverty. Hon. Members will be pleased to hear that the latest statistics show that the number of workless households in Wales has fallen by 19,000. Across the south Wales valleys, 17,000 more people are in work since the election and almost 12,000 have come off benefits. I hope that the hon. Member for Caerphilly will recognise that.
Wayne David
Does the Minister accept that in-work poverty is now greater than ever before?
Alun Cairns
That is one thing that universal credit will put right because people will always be better off. I will come to that in a moment. Our reforms are already reaping benefits. People are moving from dependency on benefits and into work. That is a positive step for Wales, for communities and for the individuals who, for far too long, have been locked in the benefits system.
The welfare system we inherited was built for 1940s society and is no longer able to deliver the support that people need in a modern flexible labour market: the sort of market that communities are already adapting to. Our benefits system needs to reflect that and to support people who need it.
A flexible labour market will be supported by universal credit because households in Wales will be entitled to £163 more a month on average and 75% of those who will gain will be in the bottom 40% of the income distribution curve.
Alun Cairns
I will happily look at the Joseph Rowntree Foundation’s report, but I again emphasise that universal credit will leave people with an average of £163 more a month and 75% of them will be in the bottom 40% of income distribution. My point is that the very poorest in society and the community will not only be incentivised by universal credit to get back into work, but receive an uplift in their monthly income as a result, as they stand. People will always be better off in work than in one example I have highlighted in which people were happy to work 16 hours a week because they retained their benefit, but working the 17th hour was simply not worth their while. That was not what they wanted, nor was it what employers wanted because of the inflexibility that that built into the labour market.
Alun Cairns
With credit to the right hon. Lady, who has been a strong champion of constituents with disabled rights for many years and has gained respect throughout the House, I underline the comments made at the time by Disability Wales that Remploy and the segregation of disabled employees was something for the last century rather than this century. It wants the mainstreaming of disabled people. Disability Wales clearly recognises and champions that.
Jonathan Edwards
On universal credit, is it not the case, as the “Dispatches” programme highlighted last month, that the roll-out is in complete chaos and is a shambles, and that Jobcentre Plus is unable to deal with the demands of the roll-out set by the Department?
Alun Cairns
The hon. Gentleman will know that, in Wales, Shotton in Flintshire is where universal credit has been rolled out. The response has been remarkable in incentivising people into work. Some 75% have responded positively and said that they are now in a better position to find work as a result of universal credit than they were under the previous system.
In the minute remaining, I ask Opposition Members for support, because there is a responsibility on all MPs. Reference was made to council cuts and I underline the fact that council taxes in Wales rose when there had broadly been a freeze in England. We need to draw attention to that. Local authorities must keep their bills as low as possible.
Housing benefit has been considered and discussed. Only three local authorities in Wales applied for additional discretionary housing payments. Caerphilly was one, so I give recognition and credit to Caerphilly. If housing benefit and the spare room subsidy are such an issue, why did the other 19 local authorities in Wales not make an application for the additional funding that was available? I hope that the hon. Member for Caerphilly would support that.