Welfare Reform Bill

Baroness Clark of Kilwinning Excerpts

Wednesday 1st February 2012 Commons Chamber

[Andrew Percy]

I will not give way at the moment, as I want to say a little something about under-occupancy, and a lot of people want to speak in the debate.

I listened to the debate about under-occupancy, and I am sorry that it turned into such a knockabout. There is significant under-occupancy in parts of the area that I represent. In my time as a councillor in the city of Hull, I represented a big council estate on which there was a huge amount of under-occupancy, which was largely, but not entirely, due to older people. Dealing with the matter is not as simple as just talking about housing swaps. I have tried to arrange housing swaps for constituents within the local authority, never mind outside it, and it is incredibly difficult. One party often gets cold feet and pulls out of the arrangement, for example. It is not easy to achieve at all.

That does not mean that we should do nothing about the problem, however. The point made by my hon. Friend the Member for Aberconwy (Guto Bebb) was interesting in this regard. We talk about under-occupancy figures, but we must also consider the figures for over-occupancy.

[Katy Clark (North Ayrshire and Arran) (Lab)]

rose—

[Sheila Gilmore]

rose—

Oral Answers to Questions

Baroness Clark of Kilwinning Excerpts

Monday 23rd January 2012 Commons Chamber

[Chris Grayling]

Let me pay tribute to the hon. Gentleman for his work on that committee—his contribution was much appreciated and greatly valued. He is absolutely right, though I emphasise that there is a mix. Today, we have begun a consultation on scrapping the first seven regulations that we have identified as superfluous or duplicating other provisions. As I said at the start of my remarks, our approach is not about undermining health and safety, which protects people from death and serious injury in the workplace, but about creating a streamlined and simple system that businesses can understand quickly, easily and cost effectively.

[Katy Clark (North Ayrshire and Arran) (Lab)]

The Minister will know that the Health and Safety Executive estimates that, each year, £22 billion is lost in the UK economy because of health and safety failures. Surely any reduction in health and safety regulation risks increasing that figure.

[Chris Grayling]

That does not follow because the Löfstedt review—and the hon. Member for Ellesmere Port and Neston (Andrew Miller)—identified many areas in which the rules and codes of conduct are too complicated and difficult for businesses to understand. We need to get back to a simple regime that is easy to understand and does what it is supposed to do: protect people from death and serious injury in the workplace.

--- Later in debate ---

[Mr Duncan Smith]

I absolutely agree with my right hon. Friend. It is remarkable that there is overwhelming support. Yes, he is right about making sure that we get the transition right, but the principle behind this and its application are vital. I simply cannot understand why the Opposition snigger and wriggle on this issue, failing to do what is right, and failing to do what is proper or to face up to their responsibilities.

[Katy Clark (North Ayrshire and Arran) (Lab)]

T7. The disability advocacy group Black Triangle has said that 11 disabled people have committed suicide in circumstances in which the coroner said that it was as a result of assessments as part of the work capability assessment. Is that figure right? Can the Minister advise whether he has looked into what legal liability the Government may have and, in particular, whether there is exposure under the corporate manslaughter legislation?

[Chris Grayling]

It is always a matter of regret when any person on benefits or indeed any person at all commits suicide. We always look carefully at reports that suggest any link between anything we do and people finding themselves in such a position. Let us be clear: the principle of trying to help back into work people who have been on benefits long-term is very important in supporting people who have mental health problems. If we do not reassess people, we will never be able to identify those who can benefit from that help.

Youth Unemployment

Baroness Clark of Kilwinning Excerpts

Wednesday 9th November 2011 Commons Chamber

[Ian Lavery]

I agree wholeheartedly. The 9.6 people going for every job in my constituency are now being threatened and told that if they do not secure employment, their benefits will be withdrawn. That is hardly a carrot-and-stick approach; it is basically a baseball-bat-over-the-head approach. Instead of encouraging people into employment, we are seeing quite the opposite.

The Labour party has proposed a five-point plan for growth and jobs, and the Government parties would be well advised to scrutinise it. What the Minister said absolutely appalled me: he said that they should not listen to the Labour party. Well, let me give him a message. I am here to represent hundreds and thousands of people unable to attract employment. The employment that is available is low paid. On youth unemployment and jobs, the Government should be listening to everyone from across the parties. People are asking me, and are entitled to ask, whether this is a cynical, political attempt to attack the north-east region and them as individuals, because of a fundamental lack of support for the Government parties.

[Katy Clark (North Ayrshire and Arran) (Lab)]

The problems that my hon. Friend is describing do not just affect the north-east. Does he agree that Government Members seem to be in denial about the scale of the problem and the fact that it will get a lot worse if they do not change course?

[Ian Lavery]

That is exactly right, and the economy shows clearly that borrowing is up by £46 billion, that CPI inflation is up to 5.2% and that RPI inflation is up to 5.6%. We have the highest level of unemployment for 17 years, the highest level of unemployment among women since records began in 1988 and almost 1 million unemployed young people.

We have to change course. Whether it is plan B, plan C, plan D, plan A plus or whatever, I say to the Government, please listen to what people are saying on the ground. Instead of saying, “We are not prepared to listen,” please listen to these people, who are desperate out there—the people who have been marching the streets of London, the disabled and the women, who I have already mentioned. Listen to what they have to say, please change course and let us see what can be delivered for the people who are most in need in the UK.

Oral Answers to Questions

Baroness Clark of Kilwinning Excerpts

Monday 24th October 2011 Commons Chamber

[Steve Webb]

Let me point out that the bulk of crisis loans will remain available under a UK-wide scheme. The devolution of the social fund relates principally to community care grants and a small amount of crisis loans. In our view, that money is better handled locally, close to the communities in question, and we hope that the Scottish Parliament will take the opportunity to have the money that is available and to spend it in Scotland, which is what it always tells us it wants.

[Katy Clark (North Ayrshire and Arran) (Lab)]

18. What recent assessment he has made of the capacity of the Jobcentre Plus network to administer the benefits system during periods of rising unemployment.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

The Department for Work and Pensions reviews work loads and staffing regularly to ensure that there is capacity to pay benefits and help people find work. On average, the DWP aims to clear jobseeker’s allowance claims within 10 days. It is currently clearing them in 9.6 days, nearly five days faster than five years ago.

[Katy Clark]

I thank the Minister for that answer. Twenty-two jobcentres and 17 benefit processing centres are due to close. While I understand that the Government are saying that they are going to try to avoid compulsory redundancies, there is no doubt that staff will be forced out of their jobs. Overall, the unemployment figures are reaching 3 million. In my constituency, the claimant count went up by 10% in the year to September. Surely we are going to see a worse service provided to claimants. Will the Minister undertake to provide regular performance statistics to this House?

[Chris Grayling]

What the hon. Lady does not understand is that we inherited a network of half-empty buildings. I am sure she would agree that it makes no sense to fund, for example, two or three jobcentres within a mile of each other in a city centre. Rather than cutting back—the hon. Member for Nottingham South (Lilian Greenwood) mentioned bus services—I would like to protect the services that we can possibly protect, and making our network of jobcentres and benefit delivery centres operate more efficiently and effectively seems a very good way of trying to ensure that we protect front-line services.

Social Security

Baroness Clark of Kilwinning Excerpts

Thursday 17th February 2011 Commons Chamber

[Steve Webb]

My hon. Friend is quite right. One of my first tasks as a Minister was quite strange. I had to write ministerial letters to say why we the Government—meaning my predecessors—had frozen people’s SERPS pensions, which was precisely because the RPI was negative, yet inflation was not.

[Katy Clark (North Ayrshire and Arran) (Lab)]

When the Chancellor announced the change in his emergency Budget last June, he said that it would save more than £6 billion a year by the end of this Parliament. If that is true, it must surely mean that individuals will be worse off.

[Steve Webb]

Just to be clear, my right hon. Friend the Chancellor was talking about the CPI indexation of all social security benefits, not just pensions. Clearly, compared with previous plans, benefits for people of working age will generally increase by less over the Parliament, which will lead to significant savings. I should mention therefore in passing that any political party that went into the election promising to reverse that would also have to indicate where many billions of pounds would come from over the course of a Parliament. However, specifically for pensioners, the earnings link in the long-term is much more generous than the reduction from the CPI change.

--- Later in debate ---

[Katy Clark (North Ayrshire and Arran) (Lab)]

My contribution will be brief, but I want to speak because we are taking a momentous decision today. It is very sad, on the day when we are passing legislation that will reinstate the link between earnings and pensions—for which I and many Labour Members have campaigned over many years, and which Government Members have been able to get their Ministers to deliver on—that we are also probably going to pass legislation that will make a very significant, and probably a very long-term, change to the way in which we uprate pensions and benefits.

Today’s debate has made it very clear that these proposals are being made not just because of the current economic situation or because of the Government’s policy of deficit reduction, but because of the belief on the Government Benches that this is a more appropriate means of uprating. I have always taken the view—the trade union view—that pensions are deferred pay. It is very important that people have certainty in arrangements for their retirement. The decision we are making today will have implications for many of the lowest-income people, who are dependent on benefits, and some of the poorest pensioners.

I have been lobbied by a considerable number of constituents on this issue, but that number is a very small fraction of the number of people who will be affected by these changes and, I suspect, will be very angry when they realise the impact that the changes will have on them. I have also been lobbied by several of the trade unions that represent the affected individuals.

My hon. Friend the Member for Aberdeen South (Dame Anne Begg) mentioned women in the local government pension scheme, who have an average pension of approximately £2,600 per annum and will be worse off by £40 this year if the changes go ahead. They would have been £40 better off if the RPI link had been maintained. According to the trade union Unison, the average person who receives a pension from the local government pension scheme receives £4,100 per annum, and they will be £62 worse off in the coming year if the change goes ahead. A woman who works in the national health service receives, on average, a pension of £3,500; these are not people on high incomes, by any stretch of the imagination, and they will be £53 worse off this year if the change goes ahead.

If we pass the order today, it is likely that next year a similar order will be proposed, and the same approach will be taken for decades. The cumulative effect on the pensions of individuals will be very substantial indeed. Reference was made to figures released by the PCS trade union showing the impact that it thinks the change will have on its members.

These are very considerable public policy issues, about the extent to which we feel it is important as a society—

[Jane Ellison]

I must press the hon. Lady. She refers to the impact on pensioners, but does she give regard to the impact for the taxpayer of an aspect mentioned by my hon. Friend the Member for Finchley and Golders Green (Mike Freer)—the long-term lack of viability of major pension funds in the public sector?

[Katy Clark]

The matter under discussion has long-term and considerable public policy implications. Indeed, the Fire Brigades Union informs me that part of Lord Hutton’s interim report states that pay freezes and work force reductions will reduce future pension costs. Further, the gross cost of paying unfunded public service pensions is expected to fall from 1.9% of GDP in 2011 to 1.4% of GDP by 2060. If the long-term effect is that we pay less as a society towards pension funds, that will have significant implications for the individuals concerned, who will have less income, but also for the public purse. If people do not have adequate pension provision for their retirement, the state will have to pick up the cost, perhaps in greater benefit bills.

If public policy does not develop in such a way that people employed in the private and public sectors have pensions constructed and funded to be their main source of income in retirement, that will have substantial implications. If the changes go ahead, constituents of Members on both sides of the House will be worse off. No Member should take that lightly, given that inflation is rising and people are facing difficulties. I say to the hon. Lady and to other Members who support the decision that we as a society need to find the funds collectively. We need a public policy that encourages individuals to save for their retirement, but that also puts provision in place to ensure that they have adequate pensions in retirement.

In the emergency Budget in June last year, the Chancellor announced that the change would result in a saving of more than £6 billion a year by the end of this Parliament. There is no doubt, therefore, that the proposal is cost driven. My submission is that, as an ageing society, we need to find ways, collectively and individually, to put more aside for our retirement. We need pensions that are at a reasonable level for people to live on in retirement. If the change goes ahead, fewer people will have pensions that allow them an adequate standard of living in retirement.

Youth Unemployment

Baroness Clark of Kilwinning Excerpts

Wednesday 16th February 2011 Commons Chamber

[Katy Clark (North Ayrshire and Arran) (Lab)]

I am grateful for the opportunity to contribute to this important debate and to speak in favour of the motion, which is far from narrow. It goes much further than simply criticising the cancellation of the future jobs fund, which would have created 200,000 jobs. The motion states clearly our belief

“that the Government’s economic policies have slowed economic growth, raised youth unemployment and created the highest graduate unemployment for over a decade”.

It is in that context that we need to have this debate. As Members from all parts of the House have said, youth unemployment is a significant problem in this country at this time. Given the economic figures that we are seeing, particularly the most recent growth figures indicating that the economy is shrinking and the revised figures from the Office for Budget Responsibility showing that levels of growth are projected to reduce, it is incredibly important to have this debate.

It is unfortunate that the future jobs fund and apprenticeships are being counterposed. The number of apprenticeships created by the previous Labour Government has been mentioned, and I would have liked Labour to have done even more on that. I hope that this Government will set about an ambitious apprenticeships scheme, but we have not seen it yet. I assure the Government that if they do so, they will get the full support of Labour Members, because we fully recognise the value of apprenticeships in both the public sector and the private sector.

My constituency has a strong tradition of public sector apprenticeships in engineering and in organisations such as the Ministry of Defence. Individuals have been trained in the public sector and have worked in it for a number of years, and have then gone on to work in other parts of industry and in the private sector. We want to encourage these apprenticeships and we want the Government to take this on board. Labour Members wish to see policies that will develop our industrial and manufacturing sector, that will support apprenticeships and that will do everything possible to create employment in the private sector. That is particularly important in constituencies such as mine, which faces a significant problem of unemployment, particularly youth unemployment.

My part of the world traditionally had a strong industrial and manufacturing sector, but those manufacturing jobs have gone over the course of many decades. In the 1970s, 17,000 people were employed by ICI at Ardeer in my constituency; 7,000 or 8,000 jobs went in the 1980s at the Glengarnock steel mill; and even when I was at school in the 1980s some 10,000 miners worked at the Killoch pit in south Ayrshire. So I come from a part of the world that has a strong and proud industrial past, but which has been devastated. The manufacturing base is now comparatively weak and we are dependent on the public sector to replace the jobs we had, so the 500,000 public sector jobs cut that the Government are proposing will have a disproportionate impact on areas such as mine.

My constituency has probably the worst youth unemployment problem in Scotland. The statistics show that 20% of our young people between the ages of 16 and 24 are receiving benefits, which is the highest level in Scotland, and that 14.7% of our 18 to 24-year-olds are claiming jobseeker’s allowance.

So it is very fair to say that the part of the world that I represent faces significant challenges, and it is the duty of any Government to create policies that address those challenges and create the economic environment that will ensure that young people are able to get employment. There has been a significant increase in the number of young people in my constituency going into further and higher education over the past 20 years, which is to be welcomed. However, further and higher education is not necessarily the best choice for every young person. It may be something to consider at a later stage, but well-paid employment that gives hope for the future is the best option for some young people.

We have heard tragic stories today of young people who are unable to get jobs, and we know from experience that it takes many decades to recover from a period of high unemployment. All sorts of social problems are associated with high levels of unemployment and youth unemployment, and we spend many hours debating how to grapple with those. Such problems include crime, and drug and alcohol misuse, and they arise when we have the kinds of poverty that are associated with unemployment. Many of the benefit changes being proposed by this Government will disproportionately affect the unemployed, particularly the long-term unemployed. I am thinking of policies such as reducing housing benefit for those who are unemployed for 12 months or more— there are more and more of those people. The number of 18 to 24-year-olds in Scotland claiming jobseeker’s allowance for six months or more has risen by 119% in the past two years, and the number of these people out of work for 12 months or more has risen by 349%. So we face significant challenges.

We have heard criticism of the future jobs fund today, but all the feedback I have received in my constituency, both from people using the fund and from those placing people on to it, has been very positive. The motion calls for an independent evaluation of the fund. We need that to be done, because the future jobs fund is one of the few schemes that is delivering for young people. We need to do everything we can to give young people political priority, so I think it is a tragedy that the scheme is being cancelled. I call on this Government to do more. They should not only support the future jobs fund, but take other steps to give young people the future they deserve. I thank you, Madam Deputy Speaker, for letting me contribute to this debate.

Oral Answers to Questions

Baroness Clark of Kilwinning Excerpts

Monday 14th February 2011 Commons Chamber

[Katy Clark (North Ayrshire and Arran) (Lab)]

The Minister mentioned the consultation on the Child Support Agency, which includes the suggestion that both parents should have to pay for use of that agency. Many parents on low incomes need to go to the CSA. Will not such charges, if they are made, simply be a tax on their children and mean that there is even less money to bring those children up properly?

[Maria Miller]

Let me make it absolutely clear that there will be very clear ways in which such families can come to their own arrangements without incurring charges. If they feel that that is not possible, the statutory system will be there. Just to reassure the hon. Lady—the charges being put in place are only a fraction of the costs incurred in running the system. Indeed, the up-front charge that we are proposing for individuals on benefits is just one tenth of the cost of processing an initial application.

Low-income Households

Baroness Clark of Kilwinning Excerpts

Tuesday 14th September 2010 Westminster Hall

[Mr Mark Field]

Does this exchange not sum up the big problem in trying to assess equality or inequality? The question is whether we consider the matter in an absolute or in a relative sense. As we represent neighbouring constituencies, the hon. Lady will know that one of the effects of globalisation and the huge wealth that has come from the financial services industry in Britain over the past 20 years is that relative inequality has increased. The huge wealth of certain people in our constituencies—whether in St John’s Wood, Mayfair or Belgravia—is clear. That is not to get away from the idea that some progress was made under her Government, and I am sure that the same will be true under the coalition Government. The most vulnerable will be looked after and we will ensure that absolute levels of inequality are at the forefront of our minds.

[Katy Clark (in the Chair)]

Order. I remind hon. Members that interventions must be short.

[Ms Buck]

I am not sure whether it is possible to have an absolute measure of inequality. Inequality is, almost by definition, a relative indicator. I am glad that the hon. Gentleman accepts the fact that we made progress in levelling out soaring inequality. Interestingly—he makes this point—we are talking about a global context of widening inequalities.

We are in a highly globalised economy, with fabulous increases in wealth and income at the top levels; that is very well demonstrated in the City of London in the hon. Gentleman’s constituency. The fact that, even against that backdrop, the Labour Government were able to level out inequality, broadly, after the soaring increase in inequality that we saw in the 1980s, was an extraordinary achievement. Then, on top of that achievement—as he rightly says, there is a difference between relative inequality and poverty—the Labour Government were also able to make real progress, particularly in their first two and a half terms in office, in tackling child poverty, and even more progress in tackling pensioner poverty.

However, the Labour Government’s record is not faultless, by any stretch of the imagination, and I am not here to claim that it is. Nevertheless, that does not make it any better for the coalition Government falsely to claim that there was no reform agenda, falsely to exaggerate the impact on levels of inequality between 1997 and 2010, or inaccurately to compare Labour’s record with that of previous Governments before coming out with a set of proposals that are absolutely guaranteed to make the situation dramatically worse.

Clearly, that set of proposals by the Government is the central point of this debate, because the claims that the Budget of June 2010 was progressive have been completely demolished by the IFS, and that was even before last week’s announcement that an additional £4 billion will be cut from the welfare budget. As the IFS states:

“researchers have previously cast doubt on this claim”—

the claim that the June Budget was progressive—

“noting that the main measures which will lead to losses amongst better-off households were announced by the previous government”.

They were announced by Labour, but they have subsequently been rolled into the coalition Government’s claims. The IFS says that new research that it published two weeks ago shows that the changes

are clearly regressive as, on average, they hit the poorest households more…in cash, let alone percentage, terms”.

Those who lose the least are households of working age without children in the upper half of income distribution; those who lose most are low-income households, usually with children.

I will quickly outline the key measures that will have that impact: the move to update benefits and tax credits by the consumer prices index instead of basing inflation rates on the retail prices index; a reduction in Government spending of £5.8 billion a year by 2014; cuts in the value of housing benefit for some, which will amount to a reduction of £1.8 billion a year; cuts to tax credits for low-income families—something that was flatly and explicitly denied by the Chancellor when he was the shadow Chancellor and other coalition politicians before June, and certainly before the election—and the rise in the tax threshold, which will be of little benefit to low-income families in rented accommodation, as the extra net income will result in reduced housing benefit. Those are just some of the cuts; there are many more specific cuts that will apply particularly to the poorest.

Given the criticism that was aimed at the Labour Government’s policies as they affected work incentives, it is worth reminding ourselves that, extraordinarily, the June Budget increased rather than decreased the proportion of earners facing high marginal levels of deduction. That is one of the most extraordinary and hypocritical things that has emerged from the coalition Government since May. The more aggressive mean-testing of tax credits will raise the marginal rates of deduction for all recipients with incomes above £6,420. The number of people affected by MRDs above 70% will increase from 700,000 to 2.2 million. How on earth can Ministers look themselves in the face, having said so much about the Labour Government’s failure to improve work incentives for two-income households—if not for single-parent households—and then having allowed this change to happen?

Furthermore, despite the massive investment in tax credits and other in-work benefits that the Labour Government made, we should reflect on the fact that yesterday’s report by the Institute for Public Policy Research is just the latest to confirm a large and growing problem of in-work poverty. Wage levels, sometimes—but not always—in conjunction with a sufficiency of working hours, are simply not able to carry the burden of the idea that work is always the best route out of poverty. Without improvements in pay—such improvements are my preferred strategy—and without extra work potential and even better in-work benefits, this situation will not improve and indeed may worsen.

Worryingly, that was also confirmed by an Office for Budget Responsibility document that looked at the prospects for economic recovery. That document stated that, in the view of the OBR, one of the ways that business will reduce its costs as it enters recovery will be not by shedding more jobs—in itself, that is good news—but by maintaining a downward pressure on hourly rates of pay. So, unless we do something about the way that work incentives are supported through tax credits and benefits, we are likely to see even more in-work poverty. Of course, that not only is bad in itself, because it traps people in poverty, but sends out a message that is precisely the opposite of what everybody from all parts of the House claims to support—a message that we in Labour genuinely believe in. That is the message that we do not want worklessness and that we want people to enter employment. However, that work must be made to pay.

I am sure that others will want to talk about the specific tax and benefit changes announced by the Government, and I will not go into great detail about all of those changes. However, I want to say a little more about the issues of employment support allowance and incapacity benefit. After the June Budget, cuts of £4 billion, including the £2.5 billion cuts from ESA, were bounced on to the Department for Work and Pensions last week; that was something of a surprise, not least to the Department. Yesterday, following the statement made by the hon. Member for Colchester (Bob Russell), my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the shadow Secretary of State for Work and Pensions, sought clarification on whether the savings will affect only those people whom the Government have already assessed through the work capability assessment and found not fit for work. She was unable to get an answer from Ministers yesterday, and I wonder if the Minister who is here today can confirm where those proposed savings of £2.5 billion are coming from.

Will there be a reduction in benefit for people who have already been assessed and who have failed the work capability assessment? Can the Minister also confirm that the £2.5 billion of savings come on top of savings already built into Treasury plans, based on the anticipated results of work capability assessments? About two thirds of people who have already been tested have been found fit to work. In addition, can she confirm that, if these cuts are made uniformly, each claimant will lose an average of about £1,000 a year?

Furthermore, has the Minister had a chance to reflect on the report by the Public Accounts Committee yesterday that showed that private providers of the work directions programme have managed to reach only about a third of their targets in placing people in work? That casts real doubt on the validity of a further aggressive reduction in the provision made for people who are classified as long-term sick or disabled and their ability to enter employment.

The Minister will also not be surprised to know that one of my deepest concerns has been about housing benefit. Since the recess, new research from Shelter, for example, shows that the cuts in local housing allowance will cause a huge surge in homelessness. It is estimated that well in excess of 100,000 people are unable to negotiate cheaper rents, and they will either be evicted or forced to move. Providing temporary accommodation for all of those people is likely to cost the Government up to £120 million, cancelling out—as a minimum—a fifth of the savings that the Government are hoping to achieve. Has the Department for Work and Pensions, in partnership with the Department for Communities and Local Government, been able so far to carry out a proper analysis of what the impact on homelessness will be of the cuts in the LHA?

In relation to housing benefit cuts and non-dependant deductions, can the Minister confirm that the unfreezing of non-dependant deductions also applies to council tax benefit? That would affect many low-income home owners and many pensioners. Has her Department carried out an analysis of the breakdown by age group and tenure of the number of people who will be affected by the unfreezing of non-dependant deductions and, if so, what is the average saving per household of that measure?

I could spend a great deal more time working through a number of these specific proposals and setting out the harshness of their impact on low-income groups, but I will let others speak. I will just finish with a couple of sentences on the issue of public services and how they represent benefits in kind. Although I have been focusing primarily on the June Budget, the CSR is likely to have exactly the same differential impact on low-income groups, particularly with its focus on reductions in public services.

The annual analysis by the Office for National Statistics, entitled “The effects of taxes and benefits on household incomes”, provides a vitally important piece of analysis, looking at the value of different services by quintile groups. The value of spending on health, education, transport, housing and school meals is not evenly distributed across income groups but, with the exception of transport expenditure, disproportionately benefits poorer households. Again, housing investment is especially pro-poor, benefiting the bottom quintile 15 times more than the top. A 25% reduction in the housing budget will add 300,000 people to housing waiting lists; a 40% reduction will add 500,000.

I am sure that the Minister will know from her constituency work—although the problem is not, I suspect, on the scale of that in my constituency and that of the hon. Member for Cities of London and Westminster (Mr Field)—what it is like to have constituents who are trapped in grossly overcrowded, substandard or temporary accommodation and who are unable to work due to high rents. They may be trapped at home in extremely difficult circumstances. The average age at which a young person in London will be able to afford their first home is now estimated to be 52. If we deliberately cut investment in housing, not only will it make the situation worse; as the Office for National Statistics clearly confirms, it will affect the poorest disproportionately. According to the ONS analysis of benefits in kind, when all services are taken together, the bottom quintile receives 13 times more benefit than the top. An across-the-board reduction in service expenditure of 25% will therefore, by definition, disproportionately affect poorer households. That fact has not been teased out at all in discussions of the coalition’s Budget.

The analysis by the Institute for Fiscal Studies, increasingly supplemented by work by Shelter, Citizens Advice, the TUC and many others, has driven a stake through the heart of Government claims that the coalition’s tax and spending plans are fair or progressive. In fact, they will sharply increase inequality, weaken incentives to work, cause widespread misery and hardship and almost certainly increase pressure on non-discretionary expenditure such as that on homelessness. On 17 June, the Deputy Prime Minister said:

“it makes no moral sense to abandon poorer children along the way”,

yet that is exactly what has happened. Unless the Government change course between now and the comprehensive spending review, both poverty and inequality in this country are likely to escalate.

--- Later in debate ---

[Several hon. Members]

rose—

[Ms Katy Clark (in the Chair)]

Order. I intend to call Front Benchers at 10.40 am. Three hon. Members have indicated that they wish to speak, so we should give them about 10 minutes each. I call Kate Green.

Capital Gains Tax (Rates)

Baroness Clark of Kilwinning Excerpts

Monday 28th June 2010 Commons Chamber

[Katy Clark (North Ayrshire and Arran) (Lab)]

Thank you, Mr Deputy Speaker. I warmly welcome you to your position.

I congratulate the hon. Member for Pudsey (Stuart Andrew) on an eloquent maiden speech, as well as the hon. Members for Maidstone and The Weald (Mrs Grant), for East Surrey (Mr Gyimah) and for Thurrock (Jackie Doyle-Price), who also made excellent maiden speeches today. My hon. Friend the Member for Airdrie and Shotts (Pamela Nash) clearly knows her Labour history. A number of strong Labour women have represented her constituency in the past, and she showed today that she will be a powerful advocate for the community that she represents. She mentioned in her speech that her constituents have not forgiven the Conservatives for what they did in the 1980s. In my constituency, North Ayrshire and Arran, that is what I was told repeatedly during the general election.

As I listened to the debate today and as I have listened to the rhetoric from the Conservative party over the past few weeks, it reminded me of the 1980s. Fortunately I was a little older than my hon. Friend at the time. When I left school I knew nobody between the ages of 16 and 25 who had a job. Education or the youth training scheme, as it was then, were the only opportunities available. It was astonishing to hear again after 20 years the talk about getting “on yer bike”. For most people in areas such as the one that I represent, moving is not an option. For all the reasons that have been set out today, if we see the kind of attacks on our benefit system that are being outlined, that will become even less of an option.

My hon. Friend the Member for Garston and Halewood (Maria Eagle) described in detail how the changes in the benefit system would have a disproportionate effect on some of the poorest in society. The Budget is deeply regressive and will be devastating for some of the poorest communities and some of the poorest people in the country. However, it will also devastate the economy, because it is a depressive Budget. The rise in VAT, the cuts in benefits to some of the poorest in society and, perhaps even more significantly, the huge cuts in public spending will drain huge amounts of money from the economy. In other parts of Europe, more and more Governments are taking an increasingly similar approach, and that is very worrying for not just the British economy but beyond, because it does not seem obvious where we will be able to sell our goods. So this is a very dangerous Budget.

I have already said that the current debate is reminiscent of debates that took place in the 1980s. In 1979, a Government were elected saying that they had no plans to increase VAT, but not long after there was an increase from 8% to 15%; and now, of course, one of the first steps that we see is a significant increase in VAT. Until the past few weeks I had never heard it argued that increasing VAT was anything other than a regressive policy that would disproportionately affect some of the lowest earners in society.

[Mr Anderson]

I remember a similar situation. Does my hon. Friend remember also that in the 1980s people continually said, “There is no alternative”? Now, the code for that is, “This is unavoidable”, and it is sad that the Liberal Democrats have been taken in by the Conservative party. The Lib Dems are the real dupes in this House.

[Katy Clark]

I agree. I listened with care to the hon. Member for Solihull (Lorely Burt), who basically said that we could not afford the benefit system and, therefore, it was necessary to take these steps, but the House must remind itself again and again that we are a hugely wealthy country. We have the fifth wealthiest economy in the world, but the wealth and power in society are unevenly distributed, and that has to be the backdrop whenever we have these discussions.

Given the proposals that we have heard, this Budget simply seems to be a Tory Budget. I appreciate the Liberal Democrats’ points about the policies that they have tried to inject, but overall the Budget will disproportionately affect those on the lowest incomes. A few days ago the TUC commissioned a paper, which states that overall the annual loss in income and services for the poorest 10th of households is estimated to be £1,514, which is equivalent to 21.7% of their household income. The average annual loss for the richest 10th of households is estimated to be £2,685, which is equivalent to 3.6% of their overall income. No doubt a lot of work will be done on those figures, but we must consider them when we discuss not only the Budget, but the Finance Bill, which we will debate over the coming weeks.

I agreed with the hon. Member for St Ives (Andrew George), and I fully appreciate the difficulties and stress that Liberal Democrat MPs in his position must feel if they have always argued that a VAT increase would have a disproportionate impact on the poorest in society. I hope that we see some detailed work on the impact of not just the VAT increase, but all those policies on the poorest in society.

In reality, we are seeing unprecedented cuts in spending on public services, but I find it difficult to believe that any Government of any political colour will be able to make the proposed reductions, because we are talking about departmental cuts of about 20% to 25% over five years. It is difficult to imagine that the Government will be able to deliver on that, because these are such savage cuts in the services that all our constituents rely on.

This is a bad policy not only because it disproportionately affects some of the lowest-paid and lowest-earning in society, but because it risks choking off the recovery that is so vital to us all. My hon. Friend the Member for Coventry North West (Mr Robinson) was absolutely right—we needed a Budget for jobs and growth, but we have something completely to the contrary.