Charter for Budget Responsibility

Lord Dodds of Duncairn Excerpts

Wednesday 26th March 2014 Commons Chamber

[Mr Osborne]

I will make a bit of progress and then take some interventions.

Today, we take another important step towards the goal. We seek the support of Parliament not just for the principle of this welfare cap—important as that is—but its practical application: the list of benefits in it and the cash limit we set out today. I have noticed, in the past 24 hours, a change in the language being used by those on the Labour Front Bench. A day or two ago it was, “We are going to vote for the Government’s welfare cap.” Clearly, Labour MPs did not like that, so this morning the shadow Work and Pensions Secretary, said that Labour will sign up to something called a welfare cap, but that

“We would do it in different ways”.

What different ways? Does that mean different benefits would be included? [Interruption.] Will the shadow Chief Secretary, the hon. Member for Nottingham East (Chris Leslie), explain Labour’s welfare cap? Does that mean different levels of benefits? Does it mean a different level of spending? Every time the Opposition are faced with a difficult decision and asked to prove their fiscal credibility, they buckle because they are weak. We know what has happened. They have read the polls and seen the focus groups. They are being told not to vote against the welfare cap, but everyone knows what their instincts are. Everyone knows what gets them a cheer at the Labour conference: more spending on welfare paid for by more borrowing. Indeed, their only welfare policy is a £500,000 increase in housing benefit. The shadow Work and Pensions Secretary gave it away last week, in a private left-wing meeting. She said this, in private:

“it will be much better if we can say that all of the changes the Government have introduced we can reverse and all benefits can be universal.”

At least those Labour MPs voting against the welfare cap today are being true to what they believe in. No one thinks that of the shadow Chancellor and the Labour leadership today.

Time is short, so let me set out briefly how the cap will operate, first by enforcing public expenditure control where there was none previously. Welfare spending was called annual managed expenditure by the previous Government—no doubt a term dreamt up by the shadow Chancellor when he was running things so badly—but it was expenditure that was neither managed nor set annually. Now it will be. The Budget document sets out the 26 different benefits that will sit under the cap. They include almost all transfer payments from tax credits, housing benefit and employment and support allowance to statutory maternity pay, carer’s allowance and disability living allowance.

Some of those benefits, such as statutory maternity pay, have relatively stable and predictable costs, while others, such as housing benefit, have consistently grown much faster than forecast; but each one involves many hundreds of millions, often billions, of pounds of spending, and deserves the same careful management and scrutiny as items in the defence budget or the education budget. Some of those benefits, such as disability living allowance, help some of the most vulnerable citizens, but that is not an excuse for failure to manage their budgets. After all, our national health service also cares for the most vulnerable, but that does not prevent us from giving it an annual budget.

[Mr Nigel Dodds (Belfast North) (DUP)]

Will the Chancellor spell out the implications for devolved regions such as Northern Ireland, where welfare spending is devolved? What is the implication for the block grant if there is a rise in welfare expenditure through no fault of the Northern Ireland Executive?

[Mr Osborne]

Many benefits apply universally throughout the United Kingdom, but some areas of welfare spending are devolved. I know that there are specific arrangements with Northern Ireland, and we have been having discussions with the Northern Ireland Executive. I am well aware that the right hon. Gentleman represents only one party in the power-sharing arrangement, but we are keen to see the Executive make progress on welfare reforms and help to control the bills, and, as he knows, we are discussing that with him and his colleagues. However, I shall be happy to sit down and work out with him how some of the principles of the welfare cap here can be used to control welfare spending in Northern Ireland.