Welfare Benefits Up-rating Bill

Alun Cairns Excerpts

Tuesday 8th January 2013 Commons Chamber

[Alun Cairns (Vale of Glamorgan) (Con)]

This is obviously a difficult debate. Any debate that discusses cuts or limits to payments is difficult, and no one should take any pleasure in it. However, two fundamental elements need consideration. The first is the tax credit system as a whole and its purpose, and the second is how benefits in general relate to income. I will briefly take each in turn.

It is hard to believe that until the last general election, anyone earning up to £60,000 a year could still qualify for tax credits. That was nonsensical and crazy. At the time, £60,000 was nearly two and a half times the average salary, but the Government of the day still chose to issue those privileged people with welfare payments.

[Sheila Gilmore]

The Bill is not about restructuring the tax credit system but about placing a limit on an uprate. Much restructuring has already happened: has not £14 billion already been taken out of the tax credit system? The hon. Gentleman should address the issue of uprating.

[Alun Cairns]

I wish that the hon. Lady would at least allow me to create a context and develop an argument, and that she would focus on the real issue and allow me to develop arguments on that. To me, someone who earns £60,000 a year is quite privileged and should not be receiving those payments. Nevertheless, that was the position inherited by the Government.

[David Rutley (Macclesfield) (Con)]

Will my hon. Friend remind the House what steps the Labour party took to bring benefit increases closer to the world of work when it was in office?

[Alun Cairns]

I am grateful to my hon. Friend for that useful reminder that the Labour party did nothing on the issue. Few individuals—if any—would reject a benefit payment, even if in their hearts they were confused about why they were receiving it or uncomfortable with that. The then Chancellor knew well what he was doing and that withdrawing a payment after issuing it in the first place would create a difficult and almost impossible situation—the situation we are in now. Dependency on the state became more widespread, and with that came a significant political shift to the left. The centre ground of politics moved at that moment. It is, therefore, little wonder that £90 billion is now spent on welfare for people of working age.

During the seven years before the last general election, tax credit spend increased by a staggering 258%—that is the context I wished to create in response to the hon. Member for Edinburgh East (Sheila Gilmore). Adding insult to taxpayers’ injury, the tax credit regime was one of the most inefficient benefit systems ever devised, leading to £2 billion of fraud each and every year. Today’s Bill will lead to savings of £1.9 billion over two years, with the pain shared by those recipients whose increases in benefits will be limited. Although £1.9 billion is a significant sum, it does not go anywhere near the increases in spending introduced by the previous Government, particularly leading up to the 2010 general election.

[Ian Austin (Dudley North) (Lab)]

Will the hon. Gentleman give way?

[Alun Cairns]

I will in a moment but I want to develop my argument a little further. Presumably in an effort to drive the landscape even further to the left, tax credits increased dramatically—strangely—in the run-up to the 2005 general election, and, by coincidence, in the run-up to the 2010 general election.

[Mr Marcus Jones (Nuneaton) (Con)]

Given the political manoeuvring and increases in tax credits that my hon. Friend describes, which took place under the previous Government, is there a direct correlation between the time that tax credits started, the start of the financial crisis, and the substantial rise in the deficit created by the Labour party?

[Alun Cairns]

My hon. Friend makes an excellent point. The previous Prime Minister knew exactly what he was doing and he did it for party political ends rather than to support and help families who needed tax credits.

[Ian Austin]

If the hon. Gentleman is so worried about helping people further down the income scale, why does he support a tax cut for people who earn more than £150,000 and a reduction in the living standards of the poorest people in Britain?

[Alun Cairns]

That is right on cue because I remember the 50% tax rate as being temporary. Is the hon. Gentleman saying that he is committed to that rate leading up to and beyond the next general election?

[Ian Austin]

I would rather see people who earn more than £150,000 make a contribution than take money off the poorest people in Britain, which is what the hon. Gentleman is arguing for today.

[Alun Cairns]

I would have much more respect for the hon. Gentleman if he told the House that that will be his commitment at the next general election.

[Ian Austin]

We will announce our policies for the next election but they will not be to give tax cuts to the wealthiest people in Britain while hammering the poorest. That is what the hon. Gentleman and his colleagues are supporting today.

[Alun Cairns]

It is obvious that there are two options. Either that will not be a commitment going into the next general election, or the Labour Government introduced the only temporary tax rate that would last almost 10 years. I hope the hon. Gentleman will allow me, in the minute I have left, to develop my second point.

On benefits and incomes, it is difficult to believe that out-of-work benefits have increased by 20% since 2007 and that earnings have increased by half that amount. What is the incentive to work? The Labour Government left a marginal rate of tax of 80% for some of the lowest earners and those on benefits. What sort of incentive was that to get people into work? They continue with the same principle in this debate. That inequality must be resolved, particularly given the nation’s debt, the need to encourage people into work and the demand for structural changes in the economy to deliver growth. It is Labour’s policy to increase spending, taxes and benefits and to take us into a further spiral of increased borrowing, spending and taxes. The people will not stand for it.

--- Later in debate ---

[Hywel Williams (Arfon) (PC)]

Today, we are debating an uprating Bill that will result in a real-terms cut in support for people working and contributing to the economy. That paradox will not be lost on those hard-working families so beloved of spin doctors. I do not see how the Bill will promote the work ethic so beloved of those on both sides of the House, and I do not see how it will enable working people to contribute more effectively in the savings culture.

As a Welsh MP, I have to say that Wales will be hit particularly hard. Incomes in Wales are substantially lower than elsewhere. Gross value added per head in Wales is £15,696, whereas in the UK it is £21,368—a difference of more than £5,500 per person.

[Alun Cairns]

Given what the hon. Gentleman has said, is he comfortable that welfare payments are rising at twice the rate of earnings?

[Hywel Williams]

This point has been done to death this afternoon. It says a lot about the quality of the hon. Gentleman’s argument that he repeats it continually. I do not think I will bother with it any further.

Some 6.8% of households in the south-east of England, for example, claim working tax credits. In Wales, that figure is 7.1%. In Gwynedd—my own area—9,200 families are on tax credits of some form out of 53,000 households. That is 17.5% of the population—nearly three times the Welsh rate. The point is that any cuts to in-work benefits for the low-paid will hit Wales and my constituency particularly hard.