Charter for Budget Responsibility

Andrew Gwynne Excerpts

Wednesday 26th March 2014 Commons Chamber

[Mr Osborne]

My hon. Friend is absolutely right. We have also created the right incentives so that work pays. Alongside supporting business—by the way, extraordinarily, the Labour party last night voted to increase taxes on business—we are creating an environment in which jobs are being created.

We are creating a fairer welfare state.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Will the right hon. Gentleman give way?

[Mr Osborne]

I will give way in a little moment, but let me make some more progress.

We are creating a welfare state that the country—

--- Later in debate ---

[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.

[Andrew Gwynne]

Will the Chancellor give way?

[Mr Osborne]

Let me make a few more points first. I will give way in a second—or a minute, perhaps.

The only benefits that we are excluding from the cap are the most cyclical ones which track the performance of the economy directly, such as jobseeker’s allowance and the housing benefit that is passported with it. They are the basic automatic stabilisers. By excluding only those benefits, we ensure that the economic cycle does not drive permanently higher spending on, for instance, sickness and disability benefits. We have also excluded the state pension and the additional pension. I know that the shadow Chancellor wanted to include them, but I would think it pretty unfair if a Chancellor who, for example, lost control of tax credit spending responded by cutting the basic state pension. That would not be sensible, and it would certainly not be fair. I think that adjusting the pension age is the best way to control expenditure on pensions over the long term as life expectancy rises.

In the Budget, we set the cash limit for the benefit cap at £119.5 billion in 2015-16—

[Andrew Gwynne]

rose—

[Mr Osborne]

I shall now ask the hon. Member for Denton and Reddish (Andrew Gwynne) whether he supports that cash limit.

[Andrew Gwynne]

In one breath, the Chancellor talks of fairness to taxpayers and the need to impose budgetary control on welfare spending. Can he perhaps explain to the House why setting up universal credit has cost taxpayers about £161,000 per claimant?

[Mr Osborne]

This is a huge system that will apply to millions and millions of people. Let me tell the House what we are going to do. I know that this will come as a complete shock to the Labour party, but we are going to take our time, get it right, and make sure that we do not put everyone on to a new credit with which the system cannot cope, which is exactly what the Labour party did with tax credits. All of us who were Members of Parliament at that time remember people coming to our surgeries who had been treated shockingly by a Labour Administration who had not got their administration right.

As I was saying, we will set the cash limit for the welfare cap at £119 billion. If inflation is higher than forecast, the Government cannot wash their hands of that either. Public services such as the police and transport have to absorb higher inflation, so why should welfare budgets be different? [Interruption.] I am sorry, Mr Deputy Speaker; there is a private conversation going on. My right hon. Friend the Secretary of State for Work and Pensions has done more to reform the welfare state than any of that lot.

The charter makes clear what will happen if the welfare cap is breached. The Chancellor must come to Parliament, account for the failure of public expenditure control, and set out the action that will be taken to address the breach. Then the House of Commons—the ultimate guardian of the people’s money—