Welfare Cap

Alistair Strathern Excerpts

Wednesday 29th January 2025 Commons Chamber

[Alison McGovern]

Before this Government were elected, we said that we would change this country, and we will. To get change done, any Government have to stand on firm foundations, which is why, as we have just heard from the Chief Secretary to the Treasury, we promised to be responsible with the public’s money. We know that every penny counts in this mission, because if we fail to protect the public purse, we fail to protect the purses of the public. Family finances can never withstand fantasy economics.

That was supposed to be the whole point of the welfare cap. It was designed to help better control public spending, counting the cost of the rising price of failure. I will come to some of the failures we are now seeing and the people thrown on the scrapheap as a result of the failure of 14 years of economic policy, particularly on the labour market.

The welfare cap was intended to ensure that the cost of important parts of the social security system, such as universal credit—though not counting those actively looking for work—the personal independence payment and pension credit, remains predictable and affordable. Only the state pension and benefits for unemployed households were excluded.

What was the result of a decade of Conservative welfare caps? Repeated breaches of the cap, with ever higher limits. The latest cap is now on course to be breached by an £8.6 billion overspend. This is not tolerable, given the state of our economy and the public finances.

Worse still, there is the human cost for every single person who could be enjoying the benefits of work but has been denied the choices and chances they deserve. I regularly meet people in that position. There is the young person who has not recovered from the dreadful legacy of the pandemic—not in college, not starting their first job, barely even able to go out with friends, and bearing the burden of the mental health crisis that our young people face. I believe the pandemic generation was completely let down.

There are our older relatives who have been pushed out of work before their time with hip or knee pain. The NHS is just not able to help them at the moment, and they are not even getting advice about how to make ends meet. That is the legacy we inherited, and it is not good enough for anybody. It is also the legacy of low growth, the higher cost of living and high inactivity, with employment and social security systems ill equipped to meet the requirements of an older, sicker nation. That is the Conservative party’s record.

Unfortunately, this breach—forecast as far back as March 2023 but ignored—is now wholly unavoidable in this fiscal year, given the scale of failure we have inherited. We will not duck the difficult decisions needed to restore economic stability, and we will deal with the failure we see before us.

Before I say how we will do that, I want to reflect on exactly how we ended up in this situation. The sad truth is that, in way too many parts of the country, too many people are denied the opportunity to have a good job so that they can support themselves and put a roof over their family’s heads.

The benefits bill only reflects that failure, with 2.8 million people locked out of the workforce due to poor health, and 3.4 million more working-age people reporting a long-term health condition than 10 years ago. We have large numbers of people turning up to a social security system that is not geared up to meet what has become the greatest unemployment challenge of a generation.

[Alistair Strathern (Hitchin) (Lab)]

My hon. Friend is doing a compelling job of setting out the damning state of the welfare system we inherited when we took charge. Does she agree that investment in the NHS, so that people finally have the healthcare support they need, is fundamental to making sure they can get back to work, contribute as they would like and build a secure future for themselves and their family?

[Alison McGovern]

The NHS is the bedrock that ensures people can thrive and contribute to society, economically and in every other way. We also need to ensure that the health support people get is the right support. At the moment, we are not doing enough on occupational therapies and other things that provide health support tailored to people’s work. We will have more to say about that in the near future, I am sure.

A huge number of people are turning to a social security system that is not geared up to meet the huge employment challenge. At the moment, social security cannot cope. Hon. Members may ask themselves how on earth we got to this place, after 14 years of so-called benefits crackdowns by the Conservatives. Well, I invite everybody to look at their record. When universal credit was introduced 12 years ago, the Government of the day made all sorts of promises. They said it would

“break the cycle of benefit dependency”

and offer

“greater incentives to find a job”.

The former Secretary of State for Work and Pensions, the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), said that universal credit

“will ensure that work always pays and is seen to pay”,

but what have we seen since? A disastrous series of wrong-headed choices that have achieved precisely the opposite effect.

New data, which we are publishing today for the first time, shows the extent of the effects of universal credit on incapacity benefits. There has been increase of 800,000 people receiving incapacity benefits between 2018 and 2023. Around 10% of that increase is because of the rising state pension age and another 10% because of the way changes were made in the move from employment support allowance and other benefits to universal credit, a situation that should have been foreseen and planned for by the previous Government. That leaves an increase of over 500,000 people, to which I will now turn. The Conservatives need to take a long hard look at the changes they made to universal credit.

We must consider how people transitioned between the “looking for work” group in the universal credit health journey, where they are told that they have limited capacity to do any work or work-related activity, to “actively looking for work”. How did people move between being told they cannot work and being told to actively look for work? People moving between those two groups used to receive a top-up to their benefits, but that was removed in 2017, creating a hard barrier between those categorised as incapable for work and those looking for work. In addition, there was a four-year freeze to the rates of universal credit in the late 2010s, except the highest tier of health-related benefits. As a result, the income of those trying to find work was squeezed, and the barrier between those on universal credit actively looking for work and those who had been told that they were unable to work was hardened.

We have seen a steady rise in the number of people on the highest tier of health benefits, where there are no requirements to look for work or to get any help to make the steps on that journey, and no support to find jobs when many people actually want to work. All the while, there have been more and more conditions and box ticking in a system that has failed.

Social security was designed to smooth people’s incomes over time and to take account of life events that could happen to any of us, but the result of all the changes is that either by design or mismanagement—probably both—the previous Government created a social security system that segregated people away from work and forgot about them. There was no helping back to work, and only the promise that they would be left alone.

The Office for Budget Responsibility has said that

“the wider benefits system—in particular the conditionality and generosity associated with incapacity benefits relative to other parts of the system—has affected incapacity benefits flows over time”.

Unfortunately, that situation, created by the last Government, is far from the only problem, because social security will only ever function where the Government take their wider duties seriously.