Autumn Statement Distributional Analysis, Universal Credit and ESA

Wednesday 16th November 2016 Commons Chamber

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I inform the House that Mr Speaker has selected the amendment in the name of the Prime Minister.

13:43

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move,

That this House notes with concern the £3.4 billion reductions to the work allowance element of universal credit and the £1.4 billion reductions to employment and support allowance; calls on the Government to reverse those reductions; and further calls on the Government to reintroduce detailed distributional analysis for the Autumn Statement and all further Financial Statements, as was done between 2010 and 2015.

On a solemn note, I wish to send my condolences to the family and friends of Debbie Jolly. Some Members may have known Debbie, who was a disability campaigner. Over the years, she provided briefings for many Members of the House of Commons and, through Disabled People Against Cuts, was involved in many of the various lobbies of Parliament. She passed away last week, and I would like to send our condolences to her family and all her friends. We all hoped she would survive long enough at least to see this debate. I pay tribute to her for the work she did.

I want to explain the genesis of the motion that I and my right hon. and hon. Friends have tabled for today’s debate. As we all know, the autumn statement is a week today. Traditionally, we would have held an Opposition day debate and used it to have a wide-ranging debate, second-guessing and commenting on what we predicted would be contained in the autumn statement.

This year, we want to try something different. We want to break radically with that tradition, because next week could be the last chance to head off what is shaping up to be quite a harmful disaster for many low earners and many vulnerable people in our society. For our debates today, we have taken two significant issues that are contained in the Budget plans announced earlier this year by the Chancellor’s predecessor, and which the new Chancellor has the ability and opportunity to intervene upon and, we hope, reverse. The first is the plan to cut the work allowance element of universal credit and employment and support allowance, and for the later debate we have chosen the issue of funding social care.

We believe that the Chancellor, by withdrawing the proposed cuts to ESA and universal credit, would dramatically beneficially impact upon the lives of many, many of our fellow citizens, who are, yes, low earners, but many of whom, through their disability, are also often the poorest and most vulnerable in our society. We want to see today and, yes, over the next week, whether we can assemble across the House a coalition of pressure that can decisively influence the Chancellor to think again.

I welcome the Back-Bench debate that has been secured for tomorrow, which I believe will contribute to forming that coalition; I certainly believe and hope that we can succeed in doing so. So the appeal to hon. Members today and in the coming week is to do all we can to prevail upon the Chancellor to halt the policy of cuts to universal credit and ESA contained in the Budget introduced by the former Chancellor, which are planned to come into effect on 1 April.

Before I come to the grounds for making this appeal to the Chancellor, it is important to understand the origins of the proposals, and this goes to the heart of the autumn statement process. I believe their origins lie in the mistake by the last Chancellor of imposing a fiscal framework on his colleagues that was simply impractical, given the economic circumstances that we were facing, and certainly what we are about to face. If the fiscal framework is wrongly set and, importantly, if it is so inflexible that it cannot reflect the realities and challenges of the economy, decisions on both tax and spending equally fail to reflect the economic realities and meet the new economic priorities. I believe that in this instance, the fiscal framework imposed by the former Chancellor was so inflexible, and unworkable in the end, that it totally failed to meet the economic targets he set for it. It is also vital to understand that the former Chancellor’s fiscal framework imposed on his colleagues’ Departments unrealistic constraints that are undermining their ability to achieve their own policy goals.

[Jeremy Quin (Horsham) (Con)]

The reality is that the fiscal framework did see a significant reduction in the annual deficit. That is a good thing for this country. I have not seen anything from Labour Members to suggest that they would have been able to do anything like that.

[John McDonnell]

The hon. Gentleman clearly has not been listening. We introduced a fiscal credibility target, which would have built in the flexibility that we need—and actually, which his colleagues would have benefited from as they sought to deliver the goals set out in the manifesto upon which they were elected. That is the critical problem—that this fiscal target has become unworkable. Next week, most probably, we will see that not only will it be reset, but large elements of it will be scrapped; and some of those political disputes within the Government will be seen to have been completely unnecessary if only the Chancellor, at that stage, had listened not just to us, but to some of his own colleagues.

On the Government’s own economic metrics, the fiscal framework has failed. I remind the hon. Member for Horsham (Jeremy Quin) that the former Chancellor’s target was to eliminate the deficit by 2015. The deficit remained at over £45 billion in the first six months of this financial year. I remind the House that his target was to reduce the debt. The debt now stands at £1.7 trillion and has increased over the past six years, according to the latest estimate, by £740 billion. I believe that the biggest failure was to ignore the needs of the real economy and use the fiscal framework to constrain investment. The failure to invest on the scale needed to modernise our economy resulted in stagnating productivity.

In the face of all the evidence that the fiscal framework was not working and not achieving its target, the decision to set a target for the framework not just to eliminate the deficit, but to produce a multibillion-pound surplus by 2019-20 demonstrated to many of us how far the former Chancellor’s politics was overriding sound economics. The result of his setting targets even more removed from reality was that he imposed on his own colleagues the task of scrambling round to find a scale of cuts that, in many instances, undermined what chance they had to implement the policies on which they were elected and their long-standing ambitions, some of which could have secured cross-party support.

That was no more evident than at the Department for Work and Pensions. For the Treasury to demand cuts to universal credit that would take, on average, £2,100 out of the incomes of people who were doing all that was asked of them—working all they could to come off benefits, bringing up their families, contributing to society—flew in the face of all that the universal credit system was meant to be about. The same can be said of the cuts of nearly £30 a week to employment and support allowance. That is an extremely significant cut to the incomes of disabled people who are also doing all that has been asked of them—seeking work to lift them off benefits, and overcoming their disabilities and conditions.

[Stephen Timms (East Ham) (Lab)]

On the ESA cut, does my right hon. Friend recall that at the time it was being taken through the House, we were assured that the Government would introduce an ambitious plan to reduce—indeed, to halve—the disability employment gap by 2020? Does he share my dismay that that goal has been abandoned completely?

[John McDonnell]

I recall my right hon. Friend advising the Government of the unreality of their proposals at the time. What worried us all was that, on the one hand, benefits were being reduced, but the support was not being put in place by which those people could gain work and supplement their incomes.

I understood the motivation of the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) when he resigned. The overriding demands of the Treasury were undermining the policy goals he was seeking to implement. He rightly objected to a further burden being placed on the social security budget, especially at a time when new, long-planned systems were at the early stages of introduction. I understood then his sense of frustration, and I understand now why he and many of his hon. Friends have called on the new Chancellor to look again at the burden that is being placed on the welfare budget and the threat, above all else, that it poses to the successful roll-out of universal credit and the policy of supporting disabled people into work.

The planned cuts are more than a threat to the implementation of policies long advocated and cherished by many Government Members. More importantly, they are a threat to the livelihoods, living standards and quality of life of millions of low earners and some of the poorest and most vulnerable people in our communities. The Government have sought to judge themselves on their own set of economic metrics: eliminating the deficit, reducing the debt and adhering to a cap on welfare spending. On all their own metrics, they have failed. However, there is an alternative and very basic set of metrics on which a Government should be judged—whether they ensure that their population is adequately fed, decently housed and kept warm in winter, and has sufficient income through employment or a support safety net to have a decent quality of life.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

My right hon. Friend is laying out a powerful case for the need to make some very different decisions next week in the interest of all our futures. There is clearly a combined moral and economic rationale for an urgent focus on disability employment. The 30% disability employment gap makes that even more important. Does my right hon. Friend agree that people with disabilities and their families deserve so much more from the Government, who should be on their side, rather than pursuing a strategy characterised by cuts to ESA, the tragic failure of work capability assessments and no strategy for fairness?

[John McDonnell]

I fully agree with my hon. Friend. There is a week in which we can overturn at least an element of that brutality. This week, we need to seize upon the chance as best we can, across parties, to deliver change.

From our privileged position in this House, I firmly believe that before we consider cuts to basic support for low earners and disabled people, we have a moral duty, as my hon. Friend said, to fully appreciate the plight of many of our fellow citizens and the impact that any changes that are forced upon them could have. There are some basic facts that we need to face up to—basic facts that depict the harsh reality of the lives of so many members of our community. Nearly 4 million of our children are living in poverty. The scandal is that two thirds of them live in families where someone is working. Thanks to low wages, zero-hours contracts and forced or bogus self-employment, which has been exposed today, the promise that work will lift people out of poverty is a broken one for many.

If a basic responsibility of the Government is to ensure that their population is adequately fed and housed, they are failing. A million emergency food parcels were given out by food banks last year to families who did not have sufficient income to feed themselves. The latest reports confirm that the numbers are rising. This year, 200,000 children in our country will be dependent on a food bank to get a decent meal at Christmas. One survey reported that more than 20% of parents had regularly not eaten so that their children could eat. Others report the frequent choice between eating and heating. This is 2016.

On the duty of the Government to ensure that people are adequately housed, they are failing again. Rough sleeping has doubled in recent years. The equivalent of 100 households a day are evicted from rented homes—a near-record 40,000 in the year to date. Some 1.2 million households are stuck on council housing waiting lists. In my constituency tonight, there will be families sleeping in beds in sheds that have been rented to them.

As for the Government’s responsibility for disabled people, as the UN report concisely summed it up, the Government have—and I quote—systematically or gravely violated the rights of disabled people. Independent research suggested that Government efforts to push people off claiming disability benefits have been associated with more than 500 people committing suicide in three years.

Three years ago, I led a debate following the presentation of the War on Welfare petition, which highlighted the call for an overall impact assessment of the Government’s policies on disabled people. I cited the immense human suffering caused by the brutal implementation of the work capability assessment and the latest round of cuts to benefits and care services. I cited examples of people who had tragically taken their own lives in despair following the WCA and the penalisation through sanctions. We now know that those suicides were not isolated examples, but that there have been hundreds.

[Robert Flello (Stoke-on-Trent South) (Lab)]

Of course, there is a double whammy, because people who are suffering and being punished in that way are not likely to get access to good mental health services or NHS services, because those are being cut and wound down across the country as well.

[John McDonnell]

I have listened carefully to the Prime Minister’s responses to a number of questions about cuts to mental health services at Prime Minister’s Question Time. I hope that her commitment to social justice will result in the reversing of some of those cuts, particularly to mental health walk-in services, which were raised at the Prime Minister’s questions session before last.

[Kevin Foster (Torbay) (Con)]

The shadow Chancellor mentioned what happened three years ago. He will probably remember, as I do, that the hon. Member for Leeds West (Rachel Reeves), who was the Labour party’s spokesman at the time, pledged that Labour would be “tougher than the Tories” on benefits.

Bringing things more up to date, many people in the ESA work-related activity group have told me that the current support package—a visit to the jobcentre once every six months—is completely inadequate. Does the shadow Chancellor agree that that shows a system that urgently needs reform?

[John McDonnell]

I fully agree with the hon. Gentleman. There needs to be more support, and that was promised but has not been delivered. At the same time, benefits have been taken away, so as my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, there has been a double whammy in the impact on disabled people. That demoralises people who are under pressure, losing benefits and not getting support, which pushes them into an even worse position.

I have raised this issue before, but we now have better figures than we had two or three years ago. We now know that between 2011 and 2014, more than 2,000 people who were assessed in a work capability assessment as being capable of work died before they could even take up that work. Surely we have to learn the lessons from that evidence, and surely one lesson is that if we impose further cuts on people who are already struggling, not only will we increase the deprivation and suffering that they endure, but many of them will see no light at the end of the tunnel and will simply despair.

The WOW debate was intended simply to ensure that any impact of decisions on benefits was properly assessed. We called for a cumulative impact assessment to be published, and we asked for a detailed impact assessment of every policy to be published for the House before a final decision was made. In a supposed post-truth environment, I still believe that evidence-based policy making is worth aiming for. That is why it is critical that the Government also restore the distributional analysis of their proposals, and ensure that it is intelligible and usable.

Before scrapping that analysis entirely, the Chancellor’s predecessor took to publishing figures that disguised the real impact of his policies. That accusation is not mine but that of one of his old colleagues, the former Chief Secretary to the Treasury, the former Member for Inverness, Nairn, Badenoch and Strathspey. If the Treasury is to restore public trust, it must not just let the House know when it will publish the distributional analysis, but ensure that the figures are published clearly and without any attempts to massage or spin them. Only in that way will we be able to test the fairness and equity of policy proposals.

In my view and that of many Members, when the cuts were first introduced they reflected a grotesque unfairness, because at the same time the Government were cutting taxes for some of the wealthiest in our country and for large corporations. [Interruption.] Capital gains tax, inheritance tax—how many more examples do we need? That was a strange priority to many Members on both sides of the House. As the Resolution Foundation has pointed out, reversing just some of those tax cuts could render the cuts to benefits unnecessary. The last Chancellor also had a penchant for absorbing budget gaps at various times.

There is a real opportunity next week for the Chancellor to live up to the Prime Minister’s spoken commitment to tackle social injustice. We believe that the Chancellor will reset the fiscal framework in next week’s autumn statement. He has already adjusted it. That will allow him the flexibility he needs to reverse the cuts. I appeal to hon. Members throughout the House to help us lift the threat of further cuts from families and disabled people. We have a week to achieve that, and we can start today by supporting the motion.

13:59

[The Minister for Employment (Damian Hinds)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes the role of universal credit in ensuring that work pays; welcomes the £60 million package of additional employment support announced in the Summer Budget 2016 available to new claimants with limited capability for work from April 2017 and set out in the recent Work and Health Green Paper; further welcomes the proposals for employment support for disabled people and those with health conditions set out in that green paper; and notes the comments by the Chancellor of the Exchequer to the Treasury Committee on 19 October 2016 on his intention to publish distributional analysis at the forthcoming Autumn Statement.”

Since 2010, we have been working to get the country’s finances in order while continuing to provide proper financial and practical support to those who need it. We will have to wait until next week to hear the Chancellor’s plans, but we can note today the significant progress on which the autumn statement will build. In 2010, we faced an economy that was barely growing, investment that was low, unemployment that was high, and a deficit at a level not seen since the second world war. In 2009-10, the then Labour Government were borrowing an annually recurring amount of nearly £6,000 for every household in the country—an unsustainable situation.

Since then, Conservative-led Governments have taken the tough decisions needed to reduce the deficit, and it is working. Over the past six years, we have cut the deficit by almost two thirds from its 2009-10 post-war peak of 10.1% of GDP to 4% last year.

[Robert Flello]

It is funny, because I remember being in the House and being told that the deficit was going to be cut—wiped out, gone—by 2015, and Labour’s plan to halve it by 2015 being dismissed as nonsense. Does the Minister have the same recollection?

[Damian Hinds]

The hon. Gentleman, who is a man of great memory, will also remember the Opposition Front-Bench spokesman shouting “Too far, too fast” over and over. We embarked on a determined programme to get our nation’s finances back in order, which the Opposition opposed at every turn. They voted against essentially all the substantial measures to get us there.

[Robert Flello]

I also remember, in the run-up to 2008, Conservative Members saying from the Opposition Benches that the Labour Government needed to spend more on hospitals, spend more on schools—spend more, spend more, spend more. Funny how they have forgotten that.

[Damian Hinds]

They have not forgotten that, and it is because we are getting our nation’s finances back in order that we can afford to increase our funding for the national health service by £10 billion, in line with what the NHS itself has deemed necessary in the five year forward view, a plan that it would never have been possible to realise had the Labour party been in government.

The Opposition claim that the poorest in our society have borne the brunt of the reductions in the deficit, but that is not the case. It is undeniable that when we face a deficit of almost £6,000 for every family in the country, we have to do some difficult things, but people throughout society have contributed to getting our finances back in order. We have never seen tackling the deficit as just an option. It is a matter of social justice, because when Governments lose control of the public finances, with all that flows from that, it is invariably those who have the least who stand to lose the most.

[James Cartlidge (South Suffolk) (Con)]

Is it not the case that a distributional analysis cannot capture the impact that things such as capital gains tax cuts have on the wider economy by encouraging entrepreneurs to create jobs and wealth so that we can pay our way in the world, which is what we have to do if we are to afford schools, hospitals and all the rest of it?

[Damian Hinds]

My hon. Friend is of course right. There is always a dynamic effect of changes in taxation. I will come on to the question of the distributional analysis, because when we look at it we see that it is rather different from what the shadow Chancellor suggested.

[John McDonnell]

May I remind the Minister of what the Institute for Fiscal Studies said about the Government’s changes? It stated that the long-run effect of tax and benefit changes in last year’s autumn statement, which were translated into the Budget, would be percentage losses around 25 times larger for those in the bottom decile than for those in the top decile.

[Damian Hinds]

The programme of deficit reduction has always been done in a fair as well as a determined way. At the end of this decade, the best-off fifth of households—the best-off quintile—will be paying a greater proportion of total taxes than in 2010-11; in fact, they will be paying more in tax than the rest of the households put together. That means that those with the broadest shoulders are, quite rightly, paying their fair share towards fiscal consolidation. Meanwhile, the plans the Government have set out lead to a projected distribution of public spending between the income groups that is essentially the same as in 2010. As the distributional analysis published alongside the last Budget showed, the poorest will continue to receive a share of spending on benefits in 2019-20 similar to that in 2010-11. I reassure the House that the Chancellor has committed to publishing a distributional analysis alongside the forthcoming autumn statement.

Government reforms to incentivise work and enable those who are just about managing to keep more of their pay packet include the national living wage, increases to the personal allowance, the doubling of free childcare, action on council tax and freezes to fuel duty. Although we have had to make difficult decisions on welfare spending, we have never lost sight of the fact that the most sustainable route out of poverty and just managing is to get into and progress in work. The introduction of the national living wage means that lower-paid workers are now seeing record increases to their earnings.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Will the Minister explain to our constituents how the introduction of the “pay to stay” policy will help incentivise people to get into work?

[Damian Hinds]

I was in the middle of talking about how wages have been rising. If the hon. Lady will forgive me, I thought that she was challenging me on that point, so I will continue to make it. According to recent data on earnings from the Office for National Statistics, the lowest 5% of workers saw their wages grow by more than 6% in 2016, the highest growth for that group since that statistical series began nearly 20 years ago. Based on the Office for Budget Responsibility’s forecast at the Budget, almost 3 million low-wage workers are expected to benefit directly by 2020, with many more benefiting from the ripple effect on income distribution.

At the same time, universal credit is transforming the welfare system to ensure that it always pays to work more and to earn more. That is in stark contrast with the pre-2010 system, in which in-work poverty increased by 20% between 1998 and 2010, despite welfare spending on people in work increasing by £28 billion. Evidence is already showing that people move into work faster under universal credit; for every 100 people who found work under the old jobseeker’s allowance system, 113 universal credit claimants have moved into a job. We estimate that universal credit will generate around £7 billion in economic benefit every year and boost employment by up to 300,000 once fully rolled out.

Most important of all, universal credit will drive progression, delivering sustainable outcomes for low-income families. Unlike tax credits, with the 16-hour cliff edge, it supports part-time and flexible working—as well as full-time working—adjusting on a month-by-month basis according to household income. The work allowances are just one element of a much wider system of support and incentives. The personalised work coach support, the smooth taper rate and the reimbursement of 85% of childcare costs as soon as someone starts working, even for a small number of hours, are all key to making work pay for universal credit recipients.

In this morning’s employment figures, we saw that the employment of disabled people is up by 590,000 in the past three years. The disability employment rate has gone up by 4.9% in that time, and the gap has been narrowed by two percentage points. We were talking about this earlier, and it is welcome news, but there is much, much more to be done, as only half of people with disabilities are in work, compared with 80% of the non-disabled population.

[Stephen Timms]

I am glad that the Minister has raised the question of the disability employment gap. Former Ministers—two of them, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) and the hon. Member for North Swindon (Justin Tomlinson), are in their places this afternoon—promised that a quid pro quo for the cuts in employment and support allowance would be halving the disability employment gap by 2020. That was in his party’s manifesto, and the former Prime Minister, David Cameron, committed to halving the gap by 2020. Why has that promise now shamefully been abandoned?

[Damian Hinds]

We are committed to working towards halving the disability employment gap. The right hon. Gentleman is reading somewhat more into things than he can or should. We are absolutely committed to doing that, but there is a long way to go, and he will know better than most how hard it will be. But the figures we have announced this morning show that the employment rate for people with disabilities is up by almost 5%. That is welcome news that I had hoped would receive a more positive response from the Opposition.

[Stephen Timms]

I am not reading any more into the promise that was made than what was set out very clearly. In the election campaign David Cameron made it clear that the commitment was to halve the disability employment gap by 2020. There was a press release in the name of former Minister for Disabled People, the hon. Member for North Swindon, saying that it would be by 2020. Why has that promise now been so shamefully abandoned?

[Damian Hinds]

We are working hard on this. When my colleague the Minister for Disabled People, Health and Work sums up at the end of the debate, she will no doubt elaborate on that more. To be able to do everything we can as a Government, we need employers to do more as well, as the right hon. Gentleman will recognise. A whole-society approach is required to address this great challenge. Progress is being made but more is needed. He should have no doubt about the Government’s commitment to doing everything possible to achieve that.

One reason why so much more needs to be done is that we still have that yawning gap despite all the progress that has been made—despite the regulatory reform, the medical advances, the advances in assistive and adaptive technology, and, critically, the fact that we know that so many people with disabilities want to move into work and that so much talent is not currently being fully utilised. We know that being in work can have wider benefits for the individual, beyond the purely financial. There is clear evidence that work is linked to better physical and mental health, and to improved wellbeing. That is a key theme in our recently published Green Paper “Improving Lives”, and a driver behind the changes to the employment and support allowance and universal credit that were announced in last summer’s Budget.

ESA was originally introduced—I am happy to acknowledge the bipartisan parts of this debate—in 2008 by the then Labour Government. The expectation at that time was that the Atos-run assessment process would place the clear majority of claimants into the work-related activity group, leaving a relatively smaller number in the support group. Over time it became clear that that was not the case, with around three times as many people in the support group as in the work-related activity group. At the same time, fewer than 1% of people were leaving that benefit for work each month.

That is why we are introducing changes to encourage and support claimants to take steps back to work and to fulfil their full potential. From next April we will no longer include the work-related activity component for new ESA claims, or the equivalent element for people on universal credit with a health condition or disability. I stress that that is for new claims after April next year; there will be no cash losers among those already in receipt of ESA or its universal credit equivalent, and there will be further safeguards meaning that they will not lose the extra payments even if reassessed after April and placed in the work-related activity group.

[Mr David Burrowes (Enfield, Southgate) (Con)]

I very much welcome the Green Paper, which many of us have been looking forward to for some time. It sets the direction of travel, providing a much more joined-up approach for this group of very vulnerable people. On the notional cash loss for new WRAG claimants, could there be support from the financial support grant in the Green Paper—

[Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)]

The flexible support fund.

[Mr Burrowes]

Yes, the flexible support fund, which could provide some flexibility and relief for those particular needy groups.

[Damian Hinds]

I am grateful to my hon. Friend, and to the former Secretary of State for Work and Pensions, to whom I pay tribute for bringing forward the universal credit system and so much else that goes with it. The flexible support fund is part of the package of support there is, through the Jobcentre Plus network and other means, to help people into work. It is the case—I will come on to this in a moment—that more money will go into those support packages to help people into work, or, as some people have very significant barriers and some distance to go, to get closer towards work. About 47% of people in the work-related activity group also receive the personal independence payment, which is, of course, exempt from the benefit freeze, and there will be no change to the support group supplement. In the Green Paper consultation, we are consulting on whether we should decouple the support group rates from the type of support people can receive, so that those in the support group can seek help that goes towards their getting work without worrying about their benefit entitlement being at risk.

The amount we are spending on disability benefits, at £50 billion, is not going down: it is going up. In real terms, it will be higher at the end of this decade than it was at the beginning. We believe that the change in the work-related activity group, working in tandem with the new employment support package announced in the Green Paper, will help to provide the right incentives and support to assist new claimants who have limited capability for work. We believe that this package—representing £60 million of funding in 2017-18, rising to £100 million a year in 2020-21 and developed with external stakeholders, including groups and charities expert in addressing the barriers that can come with disability—can have a much bigger and lasting effect on people’s prospects and their livelihoods than the work-related activity component itself. In addition to the funding package, we are introducing £15 million for the Jobcentre Plus flexible support fund in 2017-18 and 2018-19 to help claimants with limited capability for work. From next April, we are also removing the 52-week permitted work limit that exists in ESA, to allow claimants to continue to undertake up to 16 hours’ part-time paid work and, currently, earn up to £115.50 per week.

I trust that hon. Members will recognise the value in our approach. Today’s employment figures show unemployment at 4.8%—a decade low. Average wages are rising at 2.4%, which in real terms is 1.7%. Since 2010, we have seen a 2.8 million rise in the number of people in a job, 865,000 fewer workless households and 62,000 fewer households where no one has ever worked. Income inequality has fallen and average incomes are the highest on record. There are 300,000 fewer people and 100,000 fewer children in relative low income. This morning’s figures show that the rate of young people who have left full-time education and are not in work is at a new low, and the biggest drop in unemployment was among the long-term unemployed.

We introduced the national living wage—a £900 a year pay rise already for a full-time person on the previous minimum wage, with more to come. We have taken millions out of income tax. We have extended free childcare to disadvantaged two-year-olds and we are upping childcare spend by £1 billion a year. We are being ambitious on skills through school reforms and a dramatic increase in apprenticeships, so that more people can share in the opportunities of the new world economy. We are transforming social security through universal credit. We are stabilising the nation’s finances, and ensuring that low-income families and those with health conditions and disabilities have the support they need to enter and progress in work as we build an economy and a society that works for everyone.

14:23

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

The UK Government must commit to protecting disadvantaged people from the impact of future budget cuts in their autumn statement. Post-Brexit, it is essential, that with the risks to economy and with inflation rising and set to rise further, the Government act now.

Analysis by the IFS is the latest sign that the UK leaving the EU is having a negative impact on the UK economy even before article 50 is triggered. The IFS said that “virtually all” forecasters revised down their predications for growth and revised up their expectations for inflation in the years ahead. The collapse in the value of the pound, combined with potential rises in inflation, will hit the poorest and the most disadvantaged in society hardest. It will mean more of their income will have to be spent on day-to-day costs and living standards will push people into poverty.

[James Cartlidge]

If the hon. Gentleman is so concerned about the disadvantaged, will he explain why it has been reported that the Scottish Government will defer, until April 2020, taking powers from the UK Government to administer the welfare system?

[Ian Blackford]

I expected this issue to be raised, given press speculation. Let me tell the hon. Gentleman the facts of the matter: with the powers coming to us, we will control 15% of welfare spending in Scotland. We have to put in place the mechanisms for us to deliver fairness with the revenues we have at our disposal. We certainly would not punish the poorest in our society in the way that this Government have, and we certainly would not be punishing the Women Against State Pension Inequality Campaign women, who are not getting their just rights when they have had only a year’s notice. What I would be saying to this Government is, “Give us the powers over welfare so that we can protect the people in Scotland.” When we have put in place the mechanisms to allow us to look after people, we will certainly be doing a better job than the Government are doing today.

[Hannah Bardell (Livingston) (SNP)]

Does my hon. Friend agree that the point about powers is that, unlike this Tory Government, we are able to help and support people properly? We should not have to fill the black hole they have created in our budget. When we get those powers and have that agency, they will be set up properly. We will protect the people in Scotland properly.

[Ian Blackford]

My hon. Friend makes a very valuable point, because this is about powers and responsibilities. For us to protect people in Scotland in the way that we want to, we need powers. We were promised—since this has been raised—devo to the max. We were promised home rule for Scotland. How on earth can we have home rule for Scotland when we control 30% of our revenues and 15% of social security? I am afraid that the UK Government’s failure to protect the disabled and pensioners demonstrates that if we want to do what is necessary in Scotland, we will ultimately have to have the independent powers to do so. I am sure we will get to that point.

Let me return to what I want to address. [Interruption.] I am only responding to the Conservatives’ uninformed distractions, with which we are all too familiar.

The IFS stated:

“Normally, working-age benefit recipients would also be at least partly protected as benefits usually rise in line with prices, but, as we have discussed before, their benefits have been largely frozen in cash terms, meaning that their income from this source is fully exposed to future inflation. Those in work will, unless they are able to negotiate a bigger pay rise, find that their earnings will stretch less far than they otherwise would have done.”

Why should the most disadvantaged pay the price for Brexit and its consequences? That is what the Conservative Back Benchers should be addressing today rather than making an undisguised attack on the Scottish Government. What we need to address this afternoon is why working people will suffer from rising inflation. The weakest in our society deserve to be protected and their benefits ought to be inflation-proofed. Why are the UK Government not doing that? Why are they not seeking to protect the vulnerable in our society?

[Hannah Bardell]

Does my hon. Friend agree that while the tax gap in the UK sits at £36 billion, this Government should be focusing on closing that gap, and not marginalising and targeting some of the most vulnerable people in our society?

[Ian Blackford]

I fundamentally agree. There is a £36 billion tax gap, so let us fix that hole. I listened to the Minister talk earlier about the challenges the Government face in fixing the deficit. What they fail to recognise is the interaction between fiscal and monetary policy. It is the richest who have benefited most from quantitative easing. We should have had a fiscal stimulus package. That would have driven investment and productivity into the economy, and got more people back into work. That is what we should be doing.

[Jeremy Quin]

This is not the first time I have heard the hon. Gentleman refer to the great fiscal reflation he is planning. I welcome the fact that in the same speech he is also talking about the problems with inflation, but is that not a contradiction in terms?

[Ian Blackford]

It most certainly is not. The reason for the rise in inflation—to something between 2% and 3% next year, according to commentators—is, quite simply, that the pound has crashed, and the reason the pound has crashed is that investors do not have confidence in the UK economy, and who caused that? It is a direct consequence of Brexit, through the referendum, which was the misjudgment of the previous Prime Minister.

[James Cleverly (Braintree) (Con)]

Does the hon. Gentleman not see an inconsistency in his argument, given that only a few years ago, his party was campaigning to leave the United Kingdom and, by virtue of doing so, the EU?

[Ian Blackford]

The hon. Gentleman has made a gross misjudgment. When we were campaigning for independence for Scotland, it was about securing Scotland’s future as a European nation. Those in the Better Together campaign continually told the people of Scotland that our European future would be secured only by staying with the UK. Well how has that worked out? I am glad that the Scottish Parliament has given a mandate to the Government of Scotland to make sure we protect Scotland’s position as a European nation and remain within the single market, and, through that, to ensure we protect the prosperity and jobs of the people of our country.

Let me come back, if I may, to the subject we are supposed to be discussing.

[Alison McGovern (Wirral South) (Lab)]

While half of me is loth to continue this debate, I want us to be clear. We have here an economic crisis brought about by political instability caused by the rupturing of unions between countries. So for the hon. Gentleman to argue that Scottish independence would not have had similar disastrous effects for the Scottish economy is, frankly, disingenuous.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I remind Members to be cautious with the language they use. Also, I do not want this to degenerate into a debate about independence, and I know that the hon. Member for Ross, Skye and Lochaber (Ian Blackford) wants to get back to his brief and not to be tempted by those who want to go out fishing today. To those Members intervening, I say this: when your speaking time is reduced to four minutes, do not blame me.

[Ian Blackford]

I will take your guidance, Mr Deputy Speaker. I only say to the hon. Member for Wirral South (Alison McGovern) that she has demonstrated once again that Better Together is still alive and well—and how did that work out for the Labour party in Scotland?

I will return to the issue we are dealing with. We have inflation created by Brexit and a falling the pound, and the result of this failure will be a fall in living standards for many of our poorest—falling living standards brought to you by this Government. On top of the benefit cuts next year, the Prime Minister is sleepwalking into a perfect storm for low-income families, rather than living up to her promise of delivering for just-managing families. The UK Government must use the autumn statement to end their austerity obsession and instead bring forward an inclusive programme that will truly support low-income families and their children.

The UK Government’s U-turn on tax credits last year was simply a delaying tactic that kicked cuts to universal credit further down the line. The Government should take the opportunity to reverse the cuts to universal credit work allowance in their autumn statement. The original intention of universal credit was to increase work incentives and make sure that, as the Government put it, work paid. On top of damning economic forecasts, however, which will push up the cost of living, the work allowance cut will simply push more working people into poverty. It has slashed the income of working universal credit claimants. The IFS has calculated that in the long term more than 3 million working families will lose an average of more than £1,000 a year as a result of the work allowance cut.

[Hannah Bardell]

Shameful.

[Ian Blackford]

As my hon. Friend says, it is shameful. The Child Poverty Action Group estimates that the resulting cut in income will mean that many low-income parents cannot protect the income levels they had before April 2016.

House of Commons Library analysis from February 2016 calculates that lone parents without housing costs will experience the largest reduction in their work allowance, from £8,800 in 2015-16 to £4,764 in 2016-17—a loss of over £4,000. Is that what the Government want to defend? A person or couple without housing costs who claim universal credit where one or both are disabled will see their allowance reduced from £7,764 in 2015-16 to £4,764—a loss of £3,000. The U-turn on tax credits in the short term saved families and working people from having their benefits cut, but in the long term the work allowance cut will have a similar impact.

The House of Commons Library analysis also states that the work allowance reductions announced in the summer Budget

“will ultimately have a similar impact to the changes to tax credits which are not now going ahead, though the impact of changes to UC work allowances will not be fully felt until the roll out of Universal Credit is complete.”

By cutting the work allowance, the Government will impose an eye-watering level of marginal taxation on people in low-paid jobs and make it harder than ever for those in low-income households to break out of the poverty trap.

That point is well understood by many, including the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), the previous Secretary of State for Work and Pensions, who said:

“At present, the 2016 Budget’s plan to reduce Universal Credit work allowances will not be the most effective way of controlling welfare expenditure and, moreover, it goes against the key principles. The planned reduction will affect more than three million people, reducing their income by an average of over £1,000 per year. This will reduce people’s incentive to move into work. Moreover, in November 2015 the previous Chancellor decided to reverse the reduction in working tax credits, increasing the pressure on Universal Credit as it created an artificial disincentive to move to Universal Credit from Tax Credits.”

I do not say this too often, but I fully agree with him. I would even say that, for the Government, the game is up when even the architect of much of the landscape on this issue can see the fatal flaws in what they are doing. When will they start to listen and begin to act?

We are having this debate today, and welcome though it is, it is important that we achieve a cross-party consensus on the substantive motion we are debating tomorrow, on the cuts to employment and support allowance. The House will have an opportunity to send a very clear signal to the Chancellor ahead of the autumn statement next week. It is a scandal that proposed cuts to ESA WRAG are still going ahead. The Chancellor must halt these planned cuts until the UK Government can deliver the long-awaited support promised for disabled people in and out of work. Almost 500,000 disabled people in the UK rely on ESA WRAG. This £30 cut will make the cost of living more expensive for many people—even more so in the context of the devalued pound and a possible inflation increase.

The UK Government said that these changes were introduced to

“remove the financial incentives that could otherwise discourage claimants from taking steps back to work”.

But Mencap’s review of this policy found

“no relevant evidence setting out a convincing case that the ESA WRAG payment acts as a financial disincentive to claimants work, or that reducing the payment would incentivise people to seek work”.

It is a positive step that the new Secretary of State has announced the Green Paper on support for disabled people in and out of work, and we look forward to assessing the detail of the Department’s proposals in due course. However, until the detail in the Green Paper comes to fruition, storming ahead with these cuts is simply putting the cart before the horse. The autumn statement is a key opportunity for the new Cabinet to prove it is true to its rhetoric about delivering for just-managing families. That can be achieved only by abandoning austerity by reversing these cuts and delivering an inclusive Budget fit for the post-referendum economic turmoil.

A failure to act will drive more people into poverty and the use of food banks. Recent data show that the Tories’ austerity agenda continues to push people into poverty across the UK. A survey for the End Child Poverty coalition suggested that 3.5 million children were living in poverty in the UK, with 220,000 of them in Scotland. A separate study by the Trussell Trust found that in the first half of this year there was an increase in food bank usage that included 500,000 three-day emergency food supplies distributed across the UK, of which 188,500 were for children.

A recent Resolution Foundation report has highlighted the need for the urgent delivery of support for families who are just managing. It also noted:

“Average incomes in the low to middle income group were no higher in 2014-15 than in 2004-05, reflecting not just the turmoil of the post-crisis period but also a sharp pre-crisis slowdown in income growth.”

It also points out that the projections for unemployment have been revised up since the March Budget following the referendum in June, and real pay growth is now projected to be lower than previously thought.

In conclusion, with this autumn statement, the Chancellor has the ability to re-prioritise the spending agenda to reflect the very real danger of economic turmoil resulting from the June referendum and ongoing negotiations with the EU. The Chancellor must use the autumn statement to propose measures that reverse benefit cuts and mitigate the impact of economic uncertainty on disadvantaged people.

[Several hon. Members rose—]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Before I call the next speaker, let me clarify that we shall start with a seven-minute limit, but if Members can speak in less time than that, everyone should be able to have approximately equal time.

14:40

[Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)]

I shall be as brief as possible and certainly intend to be well under that limit. I shall not follow the hon. Member for Ross, Skye and Lochaber (Ian Blackford) down a memory-lane trip involving independence or leaving the single market. I will say, however, that I am a huge admirer of him. Many of my ancestors are buried in his constituency, so I like to claim a little bit of union with him, even though he would not want to admit it. I shall visit the area as often as possible to ensure that I give the hon. Gentleman the best support I can for him to stay up there as long as possible.

I rise for the first time in, I think, nearly seven years to speak from the Back Benches, and I do so to speak on an issue that is very close to my heart. I want to explain why that is the case to my colleagues. Let me start by welcoming both Ministers to their new roles on the Front Bench, and I congratulate them on continuing to commit to the changes and reforms necessary to improve the quality of life for so many people who would otherwise be left behind.

In passing, let me note one or two figures. The number of children in workless households has fallen to record levels—down to just under 11% from the 20% that we inherited. A child in a workless household is nearly three quarters more likely to be in poverty than a child in an in-work household. That is an important point, because that dynamic is critical—a point to which I shall return. The fall in income inequality has been mentioned, and it is falling because more people at the lower end are going back into work.

There is another important issue about disability. We have committed to, want to commit to and must stay with the position of wanting to see more people with disabilities in work. We want the gap to be at least halved, which I think is feasible. I shall explain in a few moments why I think that it is feasible.

[Stephen Timms]

Will the right hon. Gentleman give way?

[Mr Duncan Smith]

In a minute, but let me finish this point first.

A lot of the work of the Green Paper was done when I was in the Department. It was a White Paper at that stage, and I hope it gets speeded up and becomes a White Paper again fairly soon. After five reviews of the inherited employment and support allowance, I would be the first to acknowledge that although we have stabilised it and it is better than it was, it is a very difficult area, as we all know. If every Member was prepared to be reasonable, we would all recognise that these things need to change.

Let me clarify that the main single thing that I wanted to see change and I still want to see changed is this artificial idea that people are either too sick to work or unable to work. There should be a greater nuancing in people’s lives, and universal credit now opens the door to a much more flexible process that allows even those diagnosed and reasonably said to be “not capable of work” to be able to work—and if they wish to work, they should be allowed to do so as far as they possibly can, with the taper used to take benefit money away gradually. I think that might improve the quality of life for many people. I know that this is a submission in the Green Paper, and I hope the Minister will bear it in mind.

Let me return to the point that when universal credit was set up by my noble Friend Lord Freud, who worked very hard on it, and me, the idea was that it was not just about money, but about human interface. The people in jobcentres now stay with individuals as they go into work to help advise them and be with them. This will be a more human interface, so that people can be helped through to gain extra hours, which opens the door for people with limited capabilities to work to be helped in a way that would not have been possible if we had stayed with the original system. All this is very good and very positive.

There are two critical elements. First, when people step into work, the barrier must be reduced by improving the amount of money that can be held from benefit before it is tapered away. The second element is the taper itself, which is the simple process by which people have their income reduced. I say to the Minister that those two elements, notwithstanding all the other stuff such as improved childcare and everything else, are at the heart of what delivers.

The Institute for Fiscal Studies and others recently looked at what the dynamic effect of universal credit might be as it rolls out. The IFS was very clear: it said that the effect was a 13% improvement in all elements—going back to work, staying in work, taking more hours and earning more money. I know from my experience in the Department that every time one benefit has been substituted for another, it has almost always been worse on arrival than the previous benefit before people engage with it and improve it. This is the first time that a benefit being rolled out is a net improvement on a previous benefit.

I therefore make this recommendation. That figure of a 13% improvement was made on the basis of the original work allowances. In the spirit of general collective view and belief, I say that if we really want to see the right thing happen to people out there who try to get into work and stay in work, the allowances are critical. I recommend and hope that my colleagues in government will think very carefully again about the decision to reduce those allowances. I recognise the problem with the deficit, and we of course want to reduce it. I am not asking for more money; I am asking for wiser spending. I wonder whether we could revisit the idea of a tax threshold allowance and look to see whether getting the money to the lower five deciles would be better served by universal credit. Some 70% of those people will be on universal credit, whereas only 25p of a tax threshold allowance will actually go to the bottom five deciles.

I urge the Minister to speak to his right hon. Friends and say, “Look, we have a very good opportunity to do something that is really bold and right for those whose lives we really want to improve—those that the Prime Minister rightly said was her target group.” It is a very Conservative thing to do to help people who are doing the right thing to improve their lives. Even if the Government cannot do it all, they should look at two elements: lone parents and those with limited capability for work. This would answer the problems surrounding the WRAG, too. I urge Ministers to do just that. It is the right thing to do, and it will be the thing to do that changes lives and improves the quality of those lives.

14:47

[Jenny Chapman (Darlington) (Lab)]

I begin by saying some words that I never thought would leave my mouth: I really hope that Ministers listen to what the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) has just said—but where were you as Secretary of State? The right hon. Gentleman has explained very clearly how many people feel about the proposed changes. I hope that it is not too late for the Government to change their mind.

This Government seem to be developing a problem with transparency. We found out from the front page of The Times this week that there is no plan for Brexit, even though we were told that there was. My constituents found out through a leak from another local authority that their A&E department was under threat. Now we find that the Government do not intend to publish a full distributional analysis of the impact of the decisions they are about to make in the autumn statement. The decision not to publish a full analysis of that impact makes Opposition Members incredibly suspicious. The people who are going to feel the worst brunt of those decisions might well feel extremely angry.

[Robert Flello]

The right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) said that, historically, whenever there was a change to benefits, people suffered until the situation was changed and improved. Does that not also explain why so many of our constituents are extremely worried about what is going to happen?

[Jenny Chapman]

That is right. People want clarity. What everyone wants is for work to pay and for people to be better off in work than out of work, but that is not what we are going to get.

The Government used to be very keen on having a full and detailed distributional analysis, and I have with me the introduction to the one they published in 2012. They said then:

“The Government has taken unprecedented steps to increase transparency and enable effective scrutiny of policy making by publishing detailed distributional analysis of the impact of its reforms on households.”

It was a very good thing that the Government, and the right hon. Member for Tatton (Mr Osborne), did then. The right hon. Gentleman went on to say:

“The analysis shows average impacts due to policy changes over time across the income and expenditure distributions by decile”.

I hope that, at the end of the debate, Ministers will commit themselves to publishing the information by decile, so that we can scrutinise it properly and challenge the Government on what they are about to reveal. That is not just my view. The Tory Chair of the Treasury Committee agrees, because he knows that if he is do his job effectively the information must be published and available to everyone, including the public. This matters: the distributional analysis should reveal the impact of tax, welfare and public spending changes on 10 household income brackets, but the Government want to halve the amount of detail and cover just five brackets.

I was pleased when the Conservatives chose this new Prime Minister, given the choices that they had, and I was pleased when she said that she wanted this to be

“a country that works for everyone”.

Don’t we all? But how can we know whether the Prime Minister is true to her word if she does not proceed to publish the information that we need to test the assertion by which she herself asked to be judged? Unless she does so, we cannot test that claim.

This leads us to ask ourselves what the Government are attempting to hide. What the Minister said sounded incredibly positive, and there were many measures that he said we ought to be welcoming. If that is true—if he is right and Opposition Front Benchers are wrong—he should publish the information, so that we can test him on his claims. Go on, let us see it!

I suspect that the picture is not quite as rosy as the Minister suggested. Perhaps it is the £1,500 a year to be taken from disabled people that he is trying to conceal, but it could be any number of the measures that he has in mind. The Resolution Foundation has estimated that the poorest 50% of households will be £375 worse off on average by 2020-21, while the other half will be £235 better off. We need this information to be published before every Budget and every autumn statement, so that we can compare the impact of the different measures. I want to be able to see what is going to happen next week and compare it with what happened three years ago.

[Mr Jim Cunningham (Coventry South) (Lab)]

My hon. Friend is making a marvellous speech. Does she agree that we can safely conclude that someone is going to lose out somewhere when the Government speak about their proposals in such glowing terms?

[Jenny Chapman]

My hon. Friend has far more experience of scrutinising Conservative Governments than I have, and I suspect that he may be right.

According to the Institute for Fiscal Studies, the effect of all the tax and benefit changes in last year’s autumn statement would mean losses about 25 times larger for those in the bottom decile than for those in the top decile. If the IFS is wrong, let the Government publish the information so that the Minister can back up the claim that he has made today. The IFS also says that average earnings have been revised down in every year of the forecast, as has real household disposable income.

We want to know exactly what the country is in for. On 23 June, we made a decision to leave the European Union, and what that has done—or part of what it has done—is unleash a huge amount of uncertainty on the country, on business and on decision makers. One thing that the Government could do to ease some of that uncertainty is publish all the information that we need to determine where we are and track the direction in which the Government are taking us.

According to the IFS, nearly half a million children will be plunged into absolute poverty by 2020

“as a result of planned tax and benefit reforms”

in the March Budget. The IFS says that an additional 500,000 people—including 400,000 children—will be in relative poverty because of tax and benefit overhauls. That paints a very different picture from the one presented by the Minister. Unless he is prepared to publish a proper distributional analysis, we shall be forced to conclude that he is, for some reason, trying—his attempt will fail—to conceal the impact of some of the measures that he has in mind. I hope that he will resist that urge and commit himself to publishing a proper analysis with 10 deciles, so that we can see what is happening, make comparisons over time, and challenge and scrutinise the Government effectively.

14:56

[Mr David Burrowes (Enfield, Southgate) (Con)]

I am pleased to be able to take part in the debate. The shadow Chancellor talked about econometrics; I want, like the Prime Minister, to focus on human metrics. At the outset of her premiership, she rightly said that this would be a Government who wanted to

“stand up for the weak”

and reach out to the “just managing”.

Today’s debate, like the debate that we shall have tomorrow, is about seeking to fulfil those aims.

I intend to concentrate on cuts in the universal credit work allowance today and delay most of my comments about the ESA WRAG payments until tomorrow, although I will say now that I approve of the Green Paper’s direction of travel. Its vision of integrated and personalised employment and health support is overdue, but welcome. However, we need to look out for the disabled people—some 500,000, according to a House of Commons Library estimate—who worked in April as new WRAG claimants. They will still be affected. The flexible support fund—about which I look forward to hearing from my hon. Friend the Minister for Disabled People, Health and Work—is crucial. Along with other discretionary relief, it needs to meet the wider costs of job seeking for disabled people by April. We cannot deny that those wider costs exist, and we must ensure that we meet them. My support for the Government’s admirable reform agenda for disability depends on that.

Let me now say something about low-income families, who are the main subject of the debate and, in particular, about the first few lines of the Government amendment, which

“notes the role of universal credit in ensuring that work pays”.

That is what we want to happen. It is the very basis of our welfare reforms. We must commend the Government, and previous Governments, for the fact that some 764,000 children will not wake up in workless households today because of the opportunities for work that have been provided. That is extraordinarily important. Work is obviously a primary route out of poverty, and the income tax cuts, the national living wage and the 30 hours of free childcare are all extremely welcome.

What will drive all this through, however, is universal credit that does what it was designed to do, and makes work pay. In Enfield, which rolled the scheme out early, it has been a success. Work coaches have reached out to previously unreached individuals, helping them to find work. More people are working, obtaining work more quickly, staying in work longer, and earning more. The first nine months have been very successful. Universal credit claimants are now 13% more likely than jobseeker’s allowance claimants to be employed, work 12 days more, and are more than twice as likely to try to work for more hours.

That is all extremely welcome. However, there is a risk that the cuts in the universal credit work allowances will unpick the good work of the universal credit: the work coaches, the incentives, the living wage and the free childcare. It will be like a travellator in an airport. We want the travellator to help people—especially those on low incomes—to travel into work. It will now be switched in another direction; actually, it will be going in the opposite direction, which will mean that 2.7 million working families will on average be £1,500 worse off without the benefit of work allowances. It matters greatly to these families. It also does not make sense that these families who are claiming universal credit will be worse off than families protected under legacy tax credits payments living in the same town, the same neighbourhood or even the same street. That is not fair.

There is cross-party concern about this, and a shared concern among campaign groups, which are not always on the same wavelength. Gingerbread, focusing its concerns on single parents as well as couples with children, makes the point that working single parents in the poorest fifth of households are set to lose nearly 7% of their income. A home-owning single parent working full time will be over £3,000 a year worse off without the work allowances, and if a second earner enters work he or she will lose 65p in every pound earned. CARE also made this point in relation to recognising our support for marriage in the tax system, which it says could be undermined. In particular, single-earner married couples on median incomes with two children will lose significantly without the work allowances.

[Mr Duncan Smith]

My hon. Friend is rightly dealing with the levels and the amounts, but may I take him back to one point that came out of the dynamic study, which was that if we stayed with the purposes of the original universal credit with that allowance, it would amount to a minimum of an extra 300,000 people in work over and above existing forecasts? That is a positive reason for staying with those allowances.

[Mr Burrowes]

I agree, and it helps to revolutionise things for everyone—those on low incomes and those on median incomes. A one-earner married couple on a median income with two children—those with children are particularly impacted, given the costs—will lose some £2,211.04 per year without the allowances.

This Opposition debate is plainly timely as it comes ahead of the autumn statement. Before all the universal credit is rolled out and has its full impact, we want to make sure that that impact fulfils the first line of the amendment: to ensure that work pays. Welfare reform rises and falls on this basis, and that is why I commend my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) for all the work he has done. That is the basis of our welfare reform. We want this to rise to meet the aspirations of everyone who can work—families who have been put in poverty, and vulnerable disabled people who are the subject of this debate.

I urge Ministers to take back to the Chancellor the message coming from both sides of the House and from campaign groups, who are united in their concerns for these low-income families, and to ensure that universal credit, which is doing great work across our country, is given the boost it deserves and that work allowances are regenerating it to ensure that work pays.

15:02

[Tommy Sheppard (Edinburgh East) (SNP)]

One of the beneficial consequences of the recent change in Government personnel is that we are no longer subjected on a daily basis to the phrase “long-term economic plan.” We know of course from recent press reports that that is because the Government do not really have an economic plan at present, and many of the pre-existing problems in our economy are now exacerbated considerably by the decision to leave the EU. We also know, as my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) said, that it is going to get a lot worse before it gets better. The Institute for Fiscal Studies reports that pretty much every forecaster says things are going to get extremely challenging. Six months ago we could have got $1.50 for £1; today, we would be lucky to get $1.25. As those changes feed through, we are going to see a rise in prices and in inflation.

Yet at the same time we have had practically no real-terms growth in wages over the last 10 years, and that is likely to continue. Although there has been a blip in 2016 as a result of the increase in the national minimum wage, it is likely to be just that; we are not likely to see sustained growth in wages, so revenues are not going to increase as a result of increasing wages. This will present the Government with an even more challenging problem; they will be facing rising costs, and revenues not keeping pace with them, and they are going to have to take some difficult decisions.

[James Cartlidge]

The point about the currency has been made several times now. I campaigned for remain, but in terms of the cost of living, which is obviously key to this debate about poverty and living standards, the hon. Gentleman must surely recognise that our country’s economy is unbalanced and there is significant benefit from a lower pound. We need to export more if we are to have sustainable growth.

[Tommy Sheppard]

The Government are faced with a big challenge, and I think how they manage the necessary deficit in the years ahead will be the measure of this Government. The Prime Minister has talked about just-managing families; we will have to see whether or not we have a Government who, as they have to make the necessary cuts and adjustments to their plans, are prepared to protect the most vulnerable and disadvantaged. It is said that the mark of a civilised society is how it treats the worst-off and the most vulnerable; we will see in next week’s autumn statement whether the Government really believe that.

The Government have a bit of form on this question. Just last week there was a report from a United Nations committee which put the Government in the dock for the way in which their policies affect disabled people in our society. It is not the first such report; there have been many others, yet the reaction from the Government was to dismiss this out of hand in a fairly cavalier manner and say that the criticisms were unfounded. Well, these reports cannot all be wrong, and we need a better approach from the Government to these reports if disabled people in our community are going to feel with any confidence that their concerns are taken seriously.

I do not have a lot of time, but I want to spend a couple of minutes talking about the cuts to employment and support allowance. Perhaps over 500,000 people will be affected by them, including over 60,000 in Scotland and over 1,300 in my constituency. It has been said that the cut of £30 a week in this benefit, bringing it into line with jobseeker’s allowance, is being introduced to make sure that there are no incentives to be on the higher rate. Not a single one of us in this Chamber could live on £109 a week, but let us take the Government argument at face value. It is not an incentive, and the argument that it is fails to recognise the very real costs that people in this category have as a result of their illness or disability.

Over 1,300 of my constituents will be affected by this, as I have said, and I want to read into the record the testimony of two of them. The first is Dean Reilly, a single father of three children. Four years ago he was diagnosed with multiple sclerosis and had to leave his job at British Gas. Dean is currently in the work-related activity group of ESA and gets the £30 a week. He tells me in his correspondence that this money means he has more security, independence and confidence. It helps to mitigate some of the extra costs he incurs because of his health condition, and it helps to compensate for the fact that his condition prevents him from being able to function normally. One of the symptoms of his condition is that he often suffers from fatigue which can develop without warning. If this happens when he is out of the house, he has either to rely on friends or to pick up a taxi, which can be very expensive.

Dean also uses oxygen therapy to help to alleviate the symptoms of his condition and he attends the MS therapy centre in Leith twice a week and makes the suggested donation of £13 on each visit. That is what he spends his £30 a week on, and he believes that were he not to get it, his quality of life would be significantly affected. In fact, it could be even worse. Dean works a few hours a week, as he is allowed to, at the local Nike shop. He feels that if he was not getting this extra money and support, he would not be able to continue that employment, so would face a double whammy in terms of loss of income.

The second person I want to mention is Lauren Stonebanks. She wrote a long letter to me, but I will only read out a couple of the points it makes. She says the money

“helps with increased bills because I find it so hard to leave the house. Most people spend a chunk of time at work or school or university but I’m often stuck in my own house using my own gas and electricity. It also gets used on a takeaway or very, very convenient food if I am too exhausted from fighting my illness to cook. Other times it might cover a taxi if I need to get home as quickly as possible because I’ve become too unwell to be outside the house.”

She also says:

“In my personal experience, losing this money won’t incentivise me to return to work. It will demoralise me and make me feel like I’m completely worthless. £30 a week is nothing to MPs but everything to someone as ill as me…I already struggle with finances because of my condition. Financial insecurity and welfare reform wreak havoc on my mental wellbeing.”

The Minister will probably say that existing claimants like Lauren will not be affected by this change, but most of the people receiving this benefit are not doing so on a permanent basis. The whole purpose of it is to get them back into employment so that they can stand on their own two feet. If this change goes through, many people will take employment, and if it does not work out for them because of their condition, they will have to go back on ESA, at which point they will lose money.

For anyone who has a mental health condition or who suffers from stress and anxiety, making it difficult for them to go to work, what sort of additional pressure will be put upon them when they have to ask themselves, “If I take this job and it doesn’t work out, I could lose a third of my income and be much worse off?” That is a horrible position in which to put people, and I appeal to Members on both sides of the House to come together and support the motions today and tomorrow, and to ask the Government to reconsider, to postpone the changes, to stop digging and to have a think and change their mind.

15:11

[James Cartlidge (South Suffolk) (Con)]

I applaud the hon. Member for Edinburgh East (Tommy Sheppard) for his great passion. He speaks very eloquently. I could not resist intervening on him about the currency because I think that the key economic challenge for the country involves rebalancing. Every aspect of what we are debating today is affected by the sustainability of our growth.

I want to focus on two key points. The first is why I support the move to a universal credit system in principle, based on my experience of running a small business. The second is that, when we talk about distributional analysis, we need an analysis of the intergenerational impacts of any changes. We have to start talking about all benefits in the system, not just those that are paid out to those of working age.

Last year, we had a number of debates about tax credits at the time when the changes were meant to be coming through. I spoke about this several times, and I said then—I say it again now—that tax credits were one of the greatest mistakes in the history of the welfare state, bringing in a £30 billion means-tested in-work benefit for healthy working people to make them completely dependent and to nationalise the income of the country for political purposes. I say that not out of ideology but out of experience.

My experience of running a small business taught me about the problems of the people who are trapped on the rough edges of the welfare state. I had a member of staff who told me that she did not want a pay rise because she would lose too much in tax credits. More commonly, people working 16 or 24 hours a week told me that they did not want to work any more hours. I heard that many times, and other business owners have told me exactly the same thing. People should be encouraged to make the most of the talents they were born with, and we should not have a system that stymies that aim or disincentivises people from making the most of their talents.

What I particularly welcome about universal credit is the fact that it smooths out the rough edges by being more generous in terms of childcare and support. I am sure we all agree that we want people who are unemployed to move off benefits and into work, but we never talk about people who are on in-work benefits needing to work harder to get off those benefits. To me, however, it should be the goal of our economic system to reduce dependency and help people to maximise their income from real employment. The other part of the system that I welcome is the extra support that it will give, not just to get people into work but to get people who work part time to work more hours. That is very much to be commended.

It is quite extraordinary that, for the first time ever, pensioners are now better off than the working-age population, once housing costs have been taken into account. This is something that we need to talk about, because 68% of benefits are paid out to pensioners. The point about housing costs is incredibly important.

[Ian Blackford]

Does the hon. Gentleman not recognise that a pension is not a benefit? People who have paid national insurance have an entitlement to a state pension, which they have paid for.

[James Cartlidge]

That is a very fair point. Our voters say, “Well, I’ve paid in so I should get it,” but that is not the case for the winter fuel allowance—as the hon. Gentleman knows, millionaires get that along with everybody else—the free TV licence or the Christmas bonus. Although the state pension is based on paying in, it is a pay-as-you-go system. The fact is that the current young working generation are paying in but they might not receive the triple lock. Also, we know for certain that many of them will still be paying their housing costs when they retire. We know that 94% of home-owning pensioners own their property outright. They have no housing costs. The young working generation are probably paying for the defined benefit pensions of those who are fortunate to receive them, and for the state pension of those who have the triple lock. They are also paying for those who possibly do not even have housing costs, yet they themselves will have housing costs perhaps well into their retirement. We are reaching a critical point here.

[Ian Blackford]

I am conscious that we should not be diverted from the topic, but the key point here is that the national insurance fund is currently running at a surplus that, according to the Government’s own figures, is due to increase. It is not the case that pensioners are taking their income from others. They have paid their national insurance contributions, which fund the amount that is paid out to pensioners.

[James Cartlidge]

It is a pay-as-you-go system, but the key to this is the triple lock. The hon. Gentleman is welcome to read the report on intergenerational payments produced by the Work and Pensions Committee. It has my name on it, although I have to say that I approved it having been on the Committee for only 15 minutes. I did not contribute to it, but I welcome all of it. It makes the point that we have a pay-as-you-go system and that the younger people currently paying in might not benefit from the present generosity, particularly in relation to the triple lock, which is unaffordable and unsustainable.

This is primarily a political question. During the leadership hustings, I asked the final two contestants the same question. I said, “Given the situation of many young people, is it morally defensible to continue to protect pensioner benefits?” The answer that both contestants gave me—quite rightly, given that we are a democracy and that we have elections—was that our manifesto had pledged to protect those benefits. However, as the shadow Chancellor has said—I am certainly not trying to pray him in aid—we also pledged to wipe out the deficit. That pledge is now coming home to roost. We are protecting so many budgets and forcing so many disproportionate cuts on others because of this huge cost which we will not touch, and I think we have to talk about it. This has to be done in a cross-party way. We all know the political reality of this situation. I am not naive, and I know the political price that can be paid if these things are not done correctly, but from canvassing in my constituency, I know that the older voters understand this point. They are as concerned about it as anybody else. We have to start talking about how the whole benefits system—not just the one for working-age people—can be reformed.

I very much welcome the speech made by my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith), and I welcome what has happened with universal credit. It will smooth out some of the perverse incentives created by the tax credit system, and it will encourage people to make the most of their talents and reduce their benefit dependency. Just as we had radical reform on in-work benefits, we must now start to think about what will happen to those who are retired and who will live longer and longer, so that we can all live in a happy, one nation situation in which all the generations get a fair deal.

15:18

[Helen Goodman (Bishop Auckland) (Lab)]

I am pleased to take part in this debate, and to follow the hon. Member for South Suffolk (James Cartlidge). He made the very fair point that benefits that go to pensioners in the higher tax brackets could be an area that is targeted for reductions. If we made those reductions, we would not be putting people with long-term chronic health conditions and disabilities into the position that the Government are choosing to put them in by making these ESA cuts.

I want to take part in this debate because in my constituency 6,138 people are either on universal credit—or on jobseeker’s allowance and will be moved on to universal credit—or on ESA. That is a lot of people and the cuts will have a significant impact on some of them. When we look at the wider economic impact, we must also take account of the fact that more than £1 million will be taken out of the local economy—another £1 million that will not be spent in the local high street and that does not help the local economy. The measure does not make sense for individuals—it is unkind and cruel—and does not make sense for the local economy either.

I want in particular to focus on what the Chancellor publishes regarding the distributional implications of his measures. I note that the Government’s amendment refers to the Chancellor’s remarks to the Treasury Committee last month. He simply said:

“I will look carefully at the best format for doing so, including the issues you have raised around the baseline.”

That is pretty gnomic. As well as being able to stop the ESA cuts, I hope that we may also persuade the Chancellor to revert to the practice that we saw between 2010 and 2015 of providing proper distributional analysis, showing how each decile will be affected in the first year and for the rest of the Parliament by changes in the tax and benefits system. That is the detail we want. That is the detail we used to have.

It is incredible that the Government have not published the detail. I do not believe that they do not know what the distributional impacts are. It is possible that they do not care, but they are foolish if they think that they can hide the impacts. Every year, three days after the Budget, the IFS does the analysis anyway, so the impacts are revealed to the nation in the newspapers. It would be much better for the Chancellor to do what was done between 2010 and 2015 and be up front about the impacts and put them in the back of the Red Book.

The Treasury Committee has been on this case for a long time and initially asked the previous Chancellor to make the changes. However, we have returned to pressing the new Chancellor. The Committee’s Chairman, the right hon. Member for Chichester (Mr Tyrie), first pointed out that the quintile analysis

“cannot be used to determine the effect of government policies on household incomes.”

Secondly, he said that it is

“not possible to determine the impact of the policies of the present Government on the distribution of tax and spending.”

Thirdly, he stated that the “assumptions underpinning the analysis” keep changing, meaning that we cannot compare one Budget with another. Fourthly, he said that the attempt to apportion

“public spending on items such as health, police, justice, defence”

by quintile is extremely flaky. We do not really know how much of these other public services are consumed by people in the different quintiles. If the Government want to do the quintile analysis, that is fine and they can publish it, but they should also do the decile analysis.

I want to remind the House about the impact of the last Budget. The truth is that it provided losses in annual net income for all families except two-earner couples without children. The bottom half of the income distribution gained £20. The top half, however, gained £170. Looking in detail at the deciles, the second poorest decile lose £1,500 between 2015 and 2019, but those next to the top gain £170. Looking at working-age families with children, the second poorest decile is set to lose £2,800, but those next to the top will gain £500. The number of children in absolute poverty between 2009-10 and 2013-14 rose by half a million. The proportion of children in absolute low income rose in that period from 11% to 17%. Ministers must not be seduced by their own rhetoric. We need to come back to a fact-based approach to policy making.

The new Chancellor has an opportunity to break free from the tight framework set by his predecessor. He can fulfil the promise made by the Prime Minister to help those who are just managing. If he publishes the information and makes some sensible change, we will all know that he has done that.

15:25

[Justin Tomlinson (North Swindon) (Con)]

It is a pleasure to contribute to the debate. Given the upcoming autumn statement and the incredibly important Green Paper, it represents a welcome opportunity for us to shape some of the decisions that will be taken. It is disappointing, however, that only two speakers so far—my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) and my hon. Friend the Member for South Suffolk (James Cartlidge)—have actually made suggestions about where funding could come from should any changes be made.

I want to look first at the context of the debate. This Government have introduced the national living wage, benefiting 2.75 million of this country’s lowest earners, and we have committed to reach at least £9 an hour by 2020—a whole pound higher than what was in the Labour party manifesto at the election. The increase in the personal tax allowance, taking it from £6,495 to £11,000 with a commitment to reach £12,500 and then index-link it going forward, has lifted the lowest 3.2 million earners out of income tax altogether. Despite the doom and gloom of some speeches, we are delivering the strongest economic growth of any developed country, leading to record employment—461,000 more people are in work today than at this time last year. With my old Minister for disabled people’s hat on, I welcome the news that a further 590,000 disabled people are in work compared with three years ago—a 4% increase. There is still much more to be done, but we are making a genuine difference to some of those who are most desperate to be given an opportunity to work.

Wages are also increasing at 2.3% against inflation of 0.9%. I gently remind the SNP speakers, in particular the hon. Member for Ross, Skye and Lochaber (Ian Blackford), that inflation fell this week. I do not know whether that news escaped them.

[Ian Blackford]

rose—

[Justin Tomlinson]

The hon. Gentleman has had plenty of opportunities to contribute to this debate and other Members still want to speak.

We are also significantly extending childcare with a doubling of free childcare coming in.

Specifically on universal credit, the key difference is that it provides additional much-needed support. We know how important it is. Only 1% of ESA claimants came off the benefit every month despite the vast majority wanting the opportunity to work. There will be additional childcare, which will be beneficial for lone parents in particular, the provision and identification of training opportunities and specific job search help. Most importantly for me, in-work support will be offered for the first time. Many people coming off that benefit will go into low-paid jobs. They will often then stay at that low level and not benefit from a growing economy. In-work support will be provided. Someone may be told, “Look, you have been going for three months. You have turned up and been a diligent worker. Perhaps it is now time to push for greater responsibility and greater earning opportunities.” That is something that is very much welcomed by people I talk to.

My hon. Friend the Member for South Suffolk highlighted the 16-hour cliff edge. He pointed out that his staff did not want to work extra hours. That is not quite the case. They were desperate to work additional hours, but they were just unable to work them, and that was blocking opportunity for them.

On ESA, I wish to take a moment to pay tribute to the staff in the jobcentres, the Work programme providers, including Shaw Trust, plus many other organisations and charities that support those activities. They do a huge amount of work that often goes unseen. They are often not thanked, but I know that they have made a real difference to many people and we are seeing that in the jobs figures.

As my right hon. Friend the Member for Chingford and Woodford Green said, there has to be an emphasis on what people can do, rather than on what they cannot do. That is highlighted right the way through the very welcome Green Paper. I am proud to have made a small contribution to bringing that forward. It is very welcome that organisations such as Scope, Leonard Cheshire, the Royal National Institute Of Blind People, the National Autistic Society and hundreds of others are using their expertise and first-hand experience to help shape policy. I will continue to raise the importance of making them a priority in policy development and in delivering in the future.

We have already seen with the additional £60 million rising to £100 million that we will have more of a personalised and tailored approach. There will be quicker assessments, which is particularly important because 50% of people on ESA also have a mental health condition, and it is vital that we get support to them as quickly as possible. There will be a place on the new Work and Health programme, work choice for those who choose to volunteer, and additional places on the Specialist Employability Support programmes.

If anyone visits a jobcentre, they will understand how desperate people are to have those extra places. It is a bit like getting tickets for a very popular concert—first thing, once a month, it is about getting on the phone to try to grab those one or two available places. Job clubs will provide support, which will be delivered by peers, particularly those who have disabilities, who will give their first-hand experience and support. For many people, trying to return to the work environment is a very, very scary prospect.

There will be the new community partners and increased access to work for young people. There are also future opportunities, particularly through the Disability Confident campaign, which is very proactive in identifying to employers the huge wealth of talent that is out there if people will make a small change. I am particularly excited by the encouraging early results from the Small Employer Offer, which, in effect, doorsteps local employers saying that there is a wealth of talent out there. It asks what their skills gaps are and whether they can find the people to match them. Some really impressive results have been achieved.

We have seen increased funding for Access to Work. At the moment, it assists about 38,000 people. There will be funding in place for an additional 25,000 people. People who do not understand the scheme may say that it only helps 38,000. They ignore, or simply do not understand, how often we need to help people on only one occasion to then be able to get them into work. It could be by purchasing equipment, or by providing additional training. That person could then end up having a long-term sustainable career.

The other area is to make sure that the Fit for Work service supports people earlier than the four weeks, because, often, it is simple early advice, particularly to small employers, that will help keep people in work. It is far easier to keep people in work than to try to get them back in. Finally, we need to make sure that the charities are central to the delivery, because they have so much proactive experience. Their policy teams are constructive. When I was a Minister, it was a real pleasure to work with those organisations. Through the Green Paper, they can help to make a real difference.

[Several hon. Members rose—]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I am sorry, but I have to reduce the time limit to five minutes. I call Alison McGovern.

15:32

[Alison McGovern (Wirral South) (Lab)]

It is a pleasure to speak in this debate and to follow the hon. Member for North Swindon (Justin Tomlinson). I admire his ambition and commitment to people with disabilities. Unfortunately, I do not admire the changes that the Government have made, especially the Work programme, which prevented the kind of work with charities that he was just describing. It is a shame that words do not always match reality. That is the nub of what I want to say in my brief five-minute speech.

Today, the Oxford English dictionary added “post-truth” to its long list of words. It is a phrase with which we have become all too familiar over the recent year or so. I place the blame for that squarely on our own shoulders. The public disconnect from the words that we say when they do not match the reality of what they experience.

Another phrase that we learned about in the Brexit debate was the “end of experts”. That is true no more of any profession than of our economists. Far too often, we have seen our economy described in a way that simply does not match up with what the average ordinary person wants in our country.

The point I want to make to Ministers today is that we have a choice about what we offer the British people. We must consider whether we are prepared to face the reality of our decisions. In the end, I feel very strongly that they should publish the distributional analysis—this is what I want to focus on rather than the specifics of ESA. In the end, what matters is the money in people’s pockets. We do not want a repeat of what we saw in the last Parliament, which is the better-off half of our country doing well and those with the least doing the worst. If that happens again, it will not be the Budget book but people’s own bank balances that tell them, so we might as well be honest and up front about it.

A couple of Members have mentioned the prospect of inflation and the fact that the autumn statement needs to respond to the possible risks ahead. Because of Brexit, however, we simply do not know what is going to happen to our economy. Uncertainty has increased radically and British people face a more unstable situation than ever before, so the least they can expect from us is clarity and the knowledge that we have looked squarely at the consequences of our decisions.

[Peter Grant (Glenrothes) (SNP)]

I am sorry that I missed the first part of the debate, but I have been in Committee. As an example of the uncertainty, the hon. Lady will be aware of the collapse in the value of sterling since the Brexit vote, but she may not be aware that as a direct and perverse result of that, the UK’s contribution to the European Union is now £2.5 billion a year more than it was in June. Does she not think it ironic that that alone would cover half the costs of the cuts that are being debated here this afternoon?

[Alison McGovern]

For the good of my constituents, I have never advocated our leaving the European Union and I still do not. Why damage the relationship that we have with our European partners such that they put such high numbers on the table? The hon. Gentleman makes a good point.

We can choose to face squarely the consequences of our actions or we can try to hide them from ourselves. I ask Ministers to consider the steps that they took in the previous Parliament to undermine people’s confidence in us as a body politic that wants to deal with poverty and inequality in our country. Among the consequences of the decisions taken in the previous Parliament—including, despite his welcome contribution earlier, those taken by the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith)—are a steep rise in child poverty that looks set to continue and will see 3.6 million children in relative poverty by 2020. It is no wonder that steps were taken to undermine the clarity of the Child Poverty Act 2010 that meant that we could never hide from the impact of our decisions on the children who depend on us all for a decent life and a decent future.

The Minister mentioned childcare several times. Unfortunately, that is a promise in words only. Families across the country are still not able to access the childcare they need to get to work, and the consequences of the Minister’s decisions mean that we are staring in the face the possibility of single parents being hit hardest, given the changes to universal credit. Ministers should make the right choice, be honest and up front, and allow scrutiny. Let us get this right together. We need to be clear and transparent. At the last Budget, the distributional analysis was not good enough and the IFS produced its own analysis anyway. It did not take long for the obfuscation to be revealed. Others will find out and analysis will make the position clear. Most importantly, our constituents will know. They will see the consequences in their bank balance and in the money in their pockets, and they will not forgive us.

15:38

[Heidi Allen (South Cambridgeshire) (Con)]

It is almost a year to the day that I stood here making my maiden speech and joining Members from all parts of the House to ask for reconsideration of the planned tax credit cuts. We understood and supported the need to reduce the welfare bill, but the planned cuts would have left a gaping hole in low-earning families’ incomes.

Looking back, that was an easy argument to win. No one with a compassionate bone in their body would have thought it good policy to cut the incomes of low-paid working families before replacement systems were put in place, in the form of the national minimum wage and tax threshold increases. However, the reprieve and relief that came in last year’s autumn statement were short-lived, and the legacy work allowance reductions are still embedded in universal credit. Only its slow roll-out has stopped the ticking time bomb exploding.

Our mission now, as it was last year, is to ensure that everyone understands the risks of leaving universal credit as it stands. Although Brexit continues to dominate the headlines, we need to keep our Prime Minister’s vision of creating a Government that works for the “just managing” focused and equipped to deliver. We must demonstrate that we are not only a competent Conservative Government, but a compassionate Conservative Government. It is the detail that matters. It means going beyond the headline statistics and looking at the human detail—the cost, the names on the spreadsheets. It means getting to grips with the impact analysis of policy change.

Life is still very hard for families on low incomes. The high cost of accommodation, low wage growth, rising inflation—apart from today— and the cost of living mean that the transformation of our benefits/work system is not yet over. Brexit means that it may not be business as usual for quite some time; if anything, the economic volatility on the way means that things are about to get a whole lot harder—an estimated £1,000 a year in earnings harder, and that is before we even get on to talking about the cuts in universal credit.

Families transitioning from tax credits to universal credit will receive financial protection; that is a sensible decision, and that is the good that Government can do. A national minimum wage, recent income tax cuts and 30 hours of free childcare—assuming it can be delivered—are the good that Government can do. However, understanding that those three very positive policies still will not offset the cuts in universal credit for the poorest third of families to the tune of £500 a year is the good impact analysis that Government can do.

Brexit has polarised society, with divisions running through communities and even across family dining tables. The Prime Minister has vowed to lead for all, repair those rifts and reunite our country. On both sides of the House, we will struggle to explain that vision to the 3 million families who will be worse off on universal credit than their legacy tax credit neighbours. We can deliver unity only if we treat all just-managing families the same.

Keeping the work allowances in universal credit at the reduced levels set in the summer Budget last year means a single parent without housing costs will be up to £2,800 a year worse off than their tax credit next-door neighbour. A couple with children and no housing costs will be up to £1,200 a year worse off than their tax credit next-door neighbour.

Universal credit has it in it to be the greatest enabler of social change this country has seen in decades. Funded as it was intended, it will support people every step of the way as they make their transition to independence from the state.

Let us get out of our well-heeled shoes and put ourselves in someone else’s for a day. If I were a single mum with little family support, working 10 hours on the national minimum wage and taking home about £240 a week, would I work another 12 hours just to take home a further £36? I am sorry, but I probably would not, and I am coming from a starting point of mental comfort and emotional calm.

Effective policy must understand the lives of the people who will be affected by it. To keep this country firing on all cylinders post-Brexit, we need the workers who run the engine to be able to afford to operate it. I have said it before, and I will say it again: we need every teaching assistant, every careworker, every cleaner and every shop worker to secure our future, and if people are not supported into work, and up in work the engine—the country’s engine—stops turning over. Is it really worth taking a risk with that?

There are options to better fund universal credit. We could review the arbitrary 2.5% factor embedded in the pension triple lock, as my hon. Friend the Member for South Suffolk (James Cartlidge) mentioned, or we could review the planned further income tax allowance changes and question whether that expenditure is being efficiently directed to the right audience.

Quite simply, we need to give universal credit its mojo back, and that means restoring the work allowances that drive it. Only if we do that will the wording of the Government’s amendment—that “work pays” under universal credit—be true. Currently, as work allowances are set, it is not.

I could go on for longer on the subject of universal credit, but I would run out of time, so I will turn to the aspect of the motion that deals with employment and support allowance. I will be brief for I suspect that most Members know where I stand on this.

[Mr Burrowes]

How much of a priority is it that we make changes ahead of this autumn statement, rather than waiting until April?

[Heidi Allen]

I think it would send a message and set the fiscal tone that this Government care and are listening to those who, as I mentioned, are running our engine. It would set the tone by saying that this country is, and will continue to be, open for business and can afford to run itself.

Turning to employment and support allowance, I am, of course, delighted that we have a Green Paper coming, and early signs from disability charities are that it is being very well received. However, it is still only a Green Paper and is still subject to consultation, so I remain uncomfortable, just as I was back in February, that the £30 per week planned cut is still in place.

With a new Prime Minister and a new Government, we have a priceless opportunity to build a system that supports and realises the aspirations of people with disabilities. That clearly and rightly is the Government’s mission, so let us not waste it by retrospectively fitting policies to savings targets agreed in a different era.

15:44

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

This has been a detailed and thorough debate, in which we have heard from 10 speakers. I will begin by responding to the Minister’s comments. I should state for clarity that this Government are borrowing more now than any previous Labour Government have borrowed in the past. We certainly welcome the reduction in the disability employment gap, but unfortunately it shows that the Government have simply stood still, because the situation got worse over the past year. The Minister did not answer the question that my right hon. Friend the Member for Hayes and Harlington (John McDonnell) asked about the commitment to halve the disability employment gap by 2020.

I am glad that the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) has suddenly seen the light, but why did he not do something about the issues faced by the social security system when he was Secretary of State?

My hon. Friend the Member for Darlington (Jenny Chapman) made important points about the distribution analysis and the impact on child poverty. The hon. Member for Enfield, Southgate (Mr Burrowes) made an interesting speech, but I refer him to the IFS data that show that cuts to universal credit work allowances mean that the incentives for single parents to enter into work have been significantly weakened. Similarly, the Child Poverty Action Group has described the cuts as being in direct contradiction to the policy’s stated agenda of making work pay.

I am grateful to my hon. Friend the Member for Bishop Auckland (Helen Goodman) for highlighting her constituents’ issues, particularly with the distribution analysis and the impact on the poorest, as opposed to the richest. The former Minister with responsibility for disabled people, the hon. Member for North Swindon (Justin Tomlinson), said that nobody has explained how our proposal would be funded. As my right hon. Friend the Member for Hayes and Harlington said at the beginning, the Resolution Foundation has shown that reversing the cuts to capital gains tax, corporation tax and inheritance tax would be more than sufficient.

My hon. Friend the Member for Wirral South (Alison McGovern) made a characteristically comprehensive speech. Her passionate and regular campaigning on child poverty does her and our party credit. The same is true of the hon. Member for South Cambridgeshire (Heidi Allen), who is brave to speak out on the issues so eloquently and so often.

There are 6.8 million adults in this country who are in working households but who live in poverty. Two out of three of the nearly 4 million children living in poverty are from working households. All the evidence points to the simple truth that, under this Government, work is not a route out of poverty. I contrast that with the achievements of the previous Labour Government, who reduced poverty across the board.

Our disabled people have been battered by this Government, too. Some 5 million disabled people currently live in poverty in the UK—nearly one in three—and the gains made by Labour are now in reverse. Although disabled people are twice as likely as non-disabled people to live in poverty, specifically as a result of their disability or condition, the Government cut £28 billion from 3.7 million disabled people as part of the Welfare Reform Act 2012, thereby increasing the likelihood of poverty.

As we have heard, the IFS has shown that people on low incomes have been most adversely affected by the Government’s changes to tax and social security support since 2010, and that that will continue. In other words, the rich get richer and the poor get poorer.

Landman Economics and the National Institute of Economic and Social Research estimate that poor families with a disabled adult or child have been made five times worse off than non-disabled families, through tax and social security changes. Of course that does not even factor in other spending cuts. There is ample evidence.

Several measures in the Welfare Reform Act 2016 further punish the sick and disabled, but the cuts to employment and support allowance and the related cuts to the limited capability for work element of universal credit are among the most troubling. Nearly half a million people will be affected when the measure comes in next April, losing around £30 a week or £1,500 a year—a third of their weekly income from ESA. Those are people who have been found by the Government’s flawed work capability assessment process to be not fit for work, but who might be in the future. The Minister’s argument that these cuts will incentivise sick and disabled people into work is baseless and deeply offensive. In fact, the Government published this summer their own research showing absolutely the opposite. The policy does not incentivise people; it makes the situation worse. We must stop using this “shirker” and “scrounger” rhetoric, which is harmful and wrong.

I remind Ministers that the Government’s data show that the death rate for people on incapacity benefit and ESA in 2013 was 4.3 times that of the general population; that figure increased from 3.6 in 2003. People in the support group are 6.3 times more likely to die than the general population, and people in the WRAG—the people from whom the Government will be cutting more money—are more than twice as likely to die as the general population. IB and ESA are recognised as good population health indicators, and the Government’s data prove that point.

Consultation on the Government’s work, health and disability Green Paper will barely have finished before the cuts are imposed. I am sceptical that the measure will address the issues that sick and disabled people face, and I fear that it will be just another means to get people off flow. Last year, the Government failed to produce evidence of the cumulative effect of their further cuts on disabled people living in poverty, saying that it was too difficult. Labour disagreed, as did the Equality and Human Rights Commission, disability charities and disabled people’s organisations. Reporting last week, the UN committee that investigated breaches by this Government of the UN convention on the rights of persons with disabilities also disagreed. The UN’s report concluded that “grave and systematic violations” of disabled people’s rights had been perpetrated by this Government.

In the same week as the UN published its damning report, the Trussell Trust released data on the increase in food bank use because of social security issues, and the Supreme Court ruled against the Government on the discriminatory bedroom tax as it related to disabled people and their carers. The film “I, Daniel Blake” epitomises what is wrong with the social security system, in an accurate and moving representation of what is happening in this country. Surely the Government must see red. They must do the right thing and reverse the cuts to ESA WRAG.

On universal credit, we supported the principles of the Government’s flagship programme when it was first introduced: to unify a complex system into a single payment and to ensure that work pays. However, since its inception, universal credit has gone from damage limitation to outright disaster. In particular—apart from the Government’s gross incompetence in its costly implementation—the £3.8 billion of cuts to work allowances significantly undermine the principle that work will always pay under the scheme.

Research by the Resolution Foundation showed that the cuts will leave 2.5 million working families on average £2,100 a year worse off. The Resolution Foundation estimated that the poorest 50% of households will be £375 worse off on average by 2021, while the other half will be £235 better off. Those already on UC will be hit first. House of Commons Library analysis shows that the cuts will mean that a single mother of two who works full time on the minimum wage will lose £2,400 a year. Further analysis by Liverpool Economics has shown that disabled people in work will lose £2,000 a year. The north—particularly the north-west, where UC started—has been hit first: from powerhouse to workhouse. Once again, the Government have failed to publish an impact assessment on the effects of the cuts. The Government’s cuts to UC work allowances, replacing tax credits and topping up income for people in work on low pay, are undermining the principle of making work pay. I repeat the call to reverse these cuts.

In conclusion, the Government’s arguments to justify the cuts to UC work allowances are without any evidence. In contrast, there is a clear and growing evidence base on the effects that these cuts are having on the working poor and on sick and disabled people. At the same time, there is increasing evidence that as a nation we are becoming more and more unequal. After six years, the Government have done next to nothing to curb boardroom pay, giving tax breaks to the highest earners. Last year, the average worker’s pay of £27,645 increased by less than 2%; by comparison, the average top executive pay of £5 million increased by nearly 50%. The impacts of those inequalities are already being felt. The very fabric of our society—who we are and what we stand for as a tolerant and just society—is under attack as a result of these inequalities. The Prime Minister’s warm words about tackling injustice are not enough. We need action, not just words.

15:55

[The Minister for Disabled People, Health and Work (Penny Mordaunt)]

May I associate myself with the sentiments expressed by the shadow Chancellor about the late Debbie Jolly? She was a noted researcher and sociologist, as well as a tireless campaigner. I am sure that our comments will be just two of the many tributes that will be paid to her.

I thank all right hon. and hon. Members for their contributions to this debate. It has been a lean-but-fit Opposition day debate, and I will try to make my reply lean and fit as well.

Let me answer the question asked by the right hon. Member for East Ham (Stephen Timms) about the disability employment gap. I am sure he is aware of the evidence the Work and Pensions Committee has taken on the complexity involved in measuring and tracking progress on the gap. I am taking a much more low-brow approach. All Members will shortly receive an invite to an event in this place on 5 December, when they will receive information not just about the Green Paper and how they can get involved in the consultation at local level, but about the focus on unmet and existing needs in their local area. We will crack this—getting services to focus on what we need to do not just to halve the gap, but to close it completely—by, for example, looking at exactly how many people with learning difficulties there are in their constituency for whom roles need to be carved out.

[Stephen Timms]

Will the Minister give way?

[Penny Mordaunt]

I am sorry, but I am very short of time.

The welfare state is a safety net, but—done well—it should anticipate, empower, be seamless with other services, be unbureaucratic, have commons sense and compassion at its heart, and be focused on helping someone in their ambitions as well as on their basic needs. In the last quarter, there have been many tweaks to the system, some so dry and small that they have not registered with the House. Others have registered, such as the decision to stop reassessments for those with degenerative conditions, the increase in the number of groups able to access hardship funds, and our concerns—they have been expressed by the Secretary of State for Work and Pensions today—about sanctions on people with mental health conditions.

We will continue to work methodically through the improvement plan: reducing the number of people having to go to appeal to get the right decision; ensuring that our programmes work better and improving them; ensuring we have the reach we need; and building capacity and expertise in our organisations. That will build on the substantial reforms already carried out by my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) and my hon. Friend the Member for North Swindon (Justin Tomlinson). I pay tribute to them for the work they have done.

The proof that we have listened and understood will be seen in our actions. A person’s experience of the system and their support is the only thing that will assure confidence, but I hope this debate will afford me the opportunity to reassure colleagues on both sides of the House about the specifics that have been raised. To deliver well, we must understand the impact of a policy on people who are often in complex situations and under considerable strain and challenge. There is the challenge of budgeting for those who have suddenly had to stop work or have lost employment due to their condition, ill health or accident, or the challenge of facing increased costs, or both.

Hon. Members have pointed to three concerns. First, there is a person’s liquidity—their ability to afford the additional costs of looking for work and being poorly or disabled. Someone with a neurological condition will spend almost £200 a week on costs related to their disability, and hon. Members on both sides of the House have raised concerns about that. Secondly—this is often exacerbated by the first—there is a person’s dignity and mental wellbeing. Thirdly, there is the obvious point that someone is more likely to get into work and make a success of it, as well as to recover from ill health, if they are able to devote themselves to that. If they have other worries or concerns, their energy and focus on their objectives will be diluted. Many who find themselves in receipt of universal credit or ESA will already have complex situations to deal with, and the delivery of our services should not add to that.

Let me briefly touch on each of those three concerns. To inform our view of the income needed by the range of people we are considering, we have relied heavily on the work of third parties, most notably Macmillan and Scope. Personal independence payments will be able to help some people with some of those costs, but not with them all. More is therefore needed, and more will be provided.

First, there is the flexible support fund, a discretionary fund that is used by work coaches to provide local support for the costs related to getting into work, such as travel to and from training and travel costs when in work. As part of the enhanced offer, we have committed an additional £15 million to that fund over the next two years. The partners we work with are aware of the fund and signpost people to our work coaches, so that they can access it.

Secondly, we have schemes such as the travel discount scheme for those on ESA, universal credit and jobseeker’s allowance. Thirdly, we are continuing our work that focuses on sectors such as energy costs and insurance. In relation to April’s changes, we are doing new work with key providers, such as mobile and broadband providers, to see whether they can offer further help. Where there is existing help, we must ensure that our clients know about it. We are building on the excellent work that Scope has done through the Extra Costs Commission to drive down costs and utilise the consumer power of this group of people.

In the context of this debate, I am working to provide a greater number of ways to reduce a person’s personal outgoings by next spring by using funds to alleviate the costs directly related to work, negotiating better deals on expenditure not directly related to employment and extending the hardship fund with immediate effect. That will use new money from the Treasury over the next four years.

Happily, my hon. Friend the Member for North Swindon helpfully outlined the measures in the Green Paper, which will be key to supporting those who are in the WRAG. That support may not seem relevant to some hon. Members, who understandably have focused purely on liquidity, but we have a duty to do more than provide what can only be limited financial support. We must also provide a way through to the workplace for the many who want to be there. No Government support can ever compensate for a pay cheque and the financial resilience, health and wellbeing that come with it. That is why, in the last Parliament, we increased the benefits that contribute to the additional costs of disability and care and the elements of ESA that are paid to people with the most severe work-limiting conditions and disabilities.

The changes that we deliver in April will provide more support to those people—something that I hope all will welcome. Alongside that, we will ensure that the focus on personal liquidity, dignity and the ability to focus on one’s health and work ambitions is maintained. We will invest in helping a person out of their situation, rather than helping them endure it. We will support people’s ambitions as well as their basic needs. We will enable them to build their future, as well as helping them in the here and now.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

16:02

Division 82

Ayes: 265

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Labour: 194
Scottish National Party: 49
Liberal Democrat: 8
Democratic Unionist Party: 4
Social Democratic & Labour Party: 3
Plaid Cymru: 3
Independent: 2
Ulster Unionist Party: 2
Conservative: 1
Green Party: 1

Noes: 284

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Conservative: 283

Question put forthwith (Standing Order No. 31(2)), That the proposed words be there added.

Question agreed to.

The Deputy Speaker declared the main Question, as amended, to be agreed to (Standing Order No. 31(2)).

Resolved,

That this House notes the role of universal credit in ensuring that work pays; welcomes the £60 million package of additional employment support announced in the Summer Budget 2016 available to new claimants with limited capability for work from April 2017 and set out in the recent Work and Health Green Paper; further welcomes the proposals for employment support for disabled people and those with health conditions set out in that green paper; and notes the comments by the Chancellor of the Exchequer to the Treasury Committee on 19 October 2016 on his intention to publish distributional analysis at the forthcoming Autumn Statement.