Welfare Reform and Work Bill

Catherine West Excerpts

Tuesday 27th October 2015 Commons Chamber

[Oliver Dowden]

I shall speak briefly against new clause 1. We as a nation need to be clear about the scale of the challenge that we face. The budget deficit has been halved, but it is still enormous and we are spending far more than we earn. Against that backdrop, the increase in welfare spending is an important element that must be addressed. The amount of spending on tax credits has risen from £6 billion when Gordon Brown first introduced them to £30 billion now. That money is being borrowed in order to pay for welfare. I do not think that borrowing money to pay for welfare expenditure is a sensible idea.

[Catherine West (Hornsey and Wood Green) (Lab)]

Let us look at the totality of welfare spending as though it were a cake. Is it not the case that the failure of the Government over the past five years to address the high cost of housing or to bring down the housing benefit bill is the key to solving your problem?

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. It is not my problem. It is somebody else’s problem.

--- Later in debate ---

[Sammy Wilson]

We will be supporting the new clause—not because we are opposed to all welfare reform. Our voting record in this House and the fact that against the odds we have tried to drive through sensible welfare reform changes in Northern Ireland indicates that we do not take the blanket view that welfare reform is bad, full stop. Some of it is necessary, but some of it is wrong-headed, and this change is wrong-headed for a number of reasons.

First, I do not believe that the proposals will achieve what the Government want. We hear time and again—we have heard it today—that the Government want to make work pay and that those who go out every day to employment must have a reward for that and there must be an incentive. All the indications and assessments are that these proposals, because of their timing and their scale, will not make work pay. In fact, the OBR has said they will be a disincentive to work, because the rewards are being taken away from people but the mitigation will not be added quickly enough. Therefore, the objectives that the Government are setting out to achieve will not be achieved.

The second point is that in most cases we are not dealing with people who have a large buffer either of savings or additional income which can help them overcome the timing difficulty. We are talking about people on low wages and probably every penny that they earn goes on their living expenses. We have heard again today that as the tax credits come off, there will be tax cuts, additional childcare support and reductions in rent, and that all those things will mitigate the changes—and that on top of that there will be an increase in the national living wage. However, the tax credit cuts are coming in immediately, whereas the other things will be brought in over a period of time.

[Catherine West]

Does the hon. Gentleman agree that one way of bringing down the entirety of the welfare bill is to build more homes, so that we do not spend £60 billion in a Parliament on housing benefit?

[Sammy Wilson]

I agree, although that is not a short-term answer either. That is a long-term answer and it is certainly not going to deal with the issue facing us today.

The tax reductions will not affect all the people who are on low wages because they will not all hit the threshold. The childcare changes will affect only a fifth of the people whose tax credits will be cut. The national living wage increases will not apply, for example, to people under 25. So there is a whole swathe of the population who will not benefit from the other changes. Many of them will have families as well, of course. The Chancellor has said that the principal way in which the issue will be addressed is an increase in the national living wage, yet a whole swathe of the population will not be affected by that. For that reason, many people will be worse off. Even when all the changes are added together—the tax credits being removed, the tax thresholds being increased, the childcare element, the housing element, which does not apply to people in the private rented sector of course, and the national living wage—it is estimated that people will still find themselves on average a third worse off. This will affect many of our constituents.

Conservative Members should be very thankful that those in the House of Lords swapped their red Benches for red flags last night. That has probably done the Conservative party a favour. Many of the people who will be affected by these changes are the natural supporters of the Conservative party; they are the strivers of society, the people who want to do better, who want to improve themselves, and who probably look to some of the Government’s other policies. They will be hit hardest. I suspect that the Government have got off the hook, therefore.

The Government’s measures should be overturned by the House tonight and the Government should have a complete rethink. If they are serious about having a rethink, they should be supporting the amendments, to enable a radical rethink rather than a tinkering with the policy, which will be detrimental.

This question is rightly asked: what is the alternative? There are many alternatives. The changes represent less than 1% of total Government spending. Surely to goodness across Departments two thirds of 1% in savings can be found to finance dropping the changes. Over the life of this Parliament we can then work towards a sensible rebalancing, where employers pay proper wages and the state has to pay less in subsidies.

[Suella Fernandes (Fareham) (Con)]

We all share a belief in the welfare state, and in a civilised country like ours it is right that we offer help to the most needy, but the amendments are myopic and ill thought out because they forget about sustainability and fairness. Our welfare system is immensely unfair in its discrepancies. The clauses that would be amended—clauses 9 and 10—together freeze the main rates of most working age benefits, child benefit and certain elements of working tax credit and child tax credit for four years, starting from 2016-17, with important exemptions to protect the vulnerable, such as pensioners and those who are disabled, reflecting compassion and proportion.

Why are we doing that? Because since 2008 wages have risen by 12%, but for most working age out-of-work benefits the rise has been 21%. How can it possibly be fair or justifiable that the amount that people receive on benefits is increasing at a faster rate, and is more, than people receive in work? The freezes contained in clauses 9 and 10 go to the heart of reversing that damaging trend.

I want to make three key points about clauses 9 and 10. They support the original concept of welfare, as designed and intended by its father, Beveridge. In 1942, when the Beveridge report was published, he enshrined the key principles of what welfare should stand for—to help those who found themselves in occasional exceptional need. It was to help people cope with unexpected and temporary afflictions of sickness and unemployment.

[Catherine West]

Is the hon. Lady aware that the Government’s proposals would affect 740,000 families in which there are children with disabilities?

[Suella Fernandes]

What I am aware of is that the reforms are part of a package that includes an increase of free childcare to 30 hours, which is worth about £5,000 and will help working families combine work and childcare. That is how we are going to help children. Work, not benefits, is the route out.

Beveridge’s guiding principles were clear—the individual has to take greater responsibility, alongside the state establishing a national minimum standard to ensure that the most vulnerable are looked after and that the system is sustainable. The main problem with the existing welfare system is that it has allowed businesses to act in a way that is both unpalatable and bad for the economy. It has facilitated the underpayment of workers, which has allowed chronic under-training and under-investment in staff. The problem is simple. If a business or an employer knows that low wages will be topped up by the state, what is the point of investing in its workforce? What is the point of investing in training or promotion?