Welfare Cap

Alison Thewliss Excerpts

Wednesday 16th December 2015 Commons Chamber

[Ian Blackford]

I am truly grateful to the hon. Gentleman for asking that question. Of course the Scottish National party wants to reduce the cost of welfare, but we will do that by fixing the economy, driving up productivity and creating jobs. What we should not do is punish people. While we are on the subject of the election, let me take this opportunity to remind the House that we won 56 of the 59 seats in Scotland, and we did that while standing on a platform of investing in our communities and in job creation, making sure that we did not punish people with a failed austerity programme, and arguing for investment of an additional £140 billion throughout the whole of the UK over the next five years. That responsible position would have led to the financial deficit coming down to 2% of net national income by the end of this Parliament. The people of Scotland were very happy to support that much more responsible approach, and I commend it to this House.

Although we welcome today’s decision to breach the cap, it is apparent that the Chancellor cannot even stick to his own targets. When will this Conservative Government realise that the inflexibility of the welfare cap is unworkable and that the fact that they will breach the cap illustrates the need to abandon the policy?

We are calling on the Chancellor to abandon the cap and instead to focus on welfare dependency by tackling the structural drivers of higher welfare spending, such as rising rents, low pay and worklessness, as well as the barriers to work. That is a much more progressive way of dealing with the problems we face in the United Kingdom. We agree that it is sensible to control welfare spending, but the Government are simply not doing that with their continued focus on the austerity agenda. The welfare cap is simply not the correct approach.

The Chancellor of the Exchequer has chosen not to be here today. I am grateful to the Minister for speaking earlier, but he is here, cap in hand, to seek our support for the Government breaching their own rules and missing yet another target.

[Alison Thewliss (Glasgow Central) (SNP)]

Does my hon. Friend agree that, given that the Chancellor is absent and the Work and Pensions Secretary was late, perhaps they ought to be sanctioned?

[Ian Blackford]

Indeed. Perhaps Opposition Members could handle the appeal—let us see how they would get on in such circumstances. I have some sympathy for the Minister, though, because it is the Chancellor of the Exchequer who ought to be answerable to the House on this issue.

Of course, the Chancellor has form when it comes to missing targets. Let us remind ourselves that the Government have spectacularly missed their targets for the budget deficit and for net debt. We were supposed to be in the black by now, but with growth and tax receipts in particular consistently coming in below target, the deficit and debt have remained above target. We must pose the question: when will the Government learn that their false optimism has a price, and that price is the cuts to budgets as they seek to balance the books?

On the autumn statement, the Office for Budget Responsibility managed to magic up an additional £27 billion of forecast revenues—talk about a sleight of hand to dig the Chancellor out of another hole of his own making. We know that the OBR has a history of over-estimating tax receipts. The respected Paul Johnson, director of the Institute for Fiscal Studies, said of the Chancellor’s plans:

“If he is unlucky—and that’s almost a 50-50 shot—he will have either to revisit these spending decisions, raise taxes, or abandon the surplus target.”

Talk about having form. If I may use some football terminology, I would not want the Chancellor to take a last-minute penalty for my team in a cup final—he would only miss the target. Own goals are much more the Chancellor’s speciality.

Why am I raising these matters? It is because social security spending is linked to the failure to deliver a robust economy, drive up tax receipts and limit the need for the safety net that social security provides. That is why the welfare cap is wrong: it does not deal with the cause of, or the need for, welfare.

The disastrous policy—made in No. 11 Downing Street—of punishing millions of hard-working families by reducing tax credits and thereby dramatically cutting the income of lower-paid workers has, thankfully, been reversed. If the benefit cap is breached as a consequence of sense prevailing, we should be grateful. We are mindful, however, of the fact that although the vindictive impact of the tax credit cuts has been avoided, there will be pain in years to come because the Government are still wedded to reducing the social security budget by £12 billion, with universal credit bearing the brunt.

We are not fooled by the Chancellor’s words that this is a reversal of the Tory ideological assault on the most disadvantaged. He announced that he would, in effect, spend £3.4 billion in 2016-17 to reverse the changes to the threshold and the taper rate, but it is important to note that the planned reductions in tax credits for families with more than two children will still apply. Ian Mulheirn of Oxford Economics said that

“this may be a U-turn in April 2016, but it doesn’t look like a U-turn by 2020.”

I want to point out that the IFS estimates that cuts in universal credit will mean that 2.6 million working families will be an average of £1,600 a year worse off.

The continued lack of ambition by the Tory Government to take fiscal responsibility means that alternative action must be taken in Scotland to put off the impact of the austerity we are now facing. I am glad that the Scottish Government have taken measures, as they have in their budget today, to protect the people of Scotland. The Institute for Public Policy Research, an independent think-tank, has found that low-income families in Scotland will face a reduction in income of more than £800 by 2020 as a result of UK Government cuts, but the richest 40% will see an increase in income as a result of the tax cuts.

We are in this situation not because of structural issues with social security, but simply because we have not been able to drive sustainable growth to a level that would drive job creation and, crucially, raise real wages, which is the best way of curtailing the demand for social security. We cannot fix the problem of poverty in our country by cutting social security, particularly in-work benefits, but we can do so by creating the circumstances that allow people to find meaningful employment, and in doing so work the hours that will assist them to put food on the table and to heat their homes.