Welfare Reform

Chris Bryant Excerpts

Tuesday 11th February 2014 Westminster Hall

[Kwasi Kwarteng (Spelthorne) (Con)]

I am very grateful for being allowed to speak in the debate. I am also pleased to speak after my hon. Friend the Member for Dover (Charlie Elphicke), who is an innovative and creative thinker on these subjects. I want to say a few words on welfare reform, which is probably the single most important thing that the coalition Government are embarking upon, because the principal reason why the coalition came into being was to reduce the deficit. Everyone here knows that welfare spending, including pensions, is 28% of the entire budget. Surely it makes sense, if we are to reduce the deficit, to look at the biggest part of expenditure.

My hon. Friend is right when he says that there was a huge problem under the previous Government with welfare spending. Between 1997 and 2010, it rose by more than 60% in real terms. Even if pensions are excluded, the welfare bill went up by 55% in real terms. It is right for everyone in the House to realise that that is a real problem. I am grateful to my hon. Friend for bringing the matter up in such a timely fashion and for allowing others to contribute to this important debate. I do not have much time to speak, but I want to say that it is disappointing that so few Labour Members are present, given that they have said nothing constructive about welfare reform over the past four years. They have opposed all the coalition Government’s messages. [Interruption.] The hon. Member for Rhondda (Chris Bryant) looks at me quizzically, but it is true.

[Chris Bryant (Rhondda) (Lab)]

The convention for half-hour debates is that only two people—the Member who secured the debate and the Minister—speak. It is perfectly customary for there not to be anybody else, including the shadow Minister, present.

[Kwasi Kwarteng]

I am grateful for the hon. Gentleman’s contribution, but it is extraordinary to say that Members cannot contribute to debates simply because of convention. This is an important matter and I wanted to put something on the record. That is all I have to say.

[Chris Bryant]

rose—

[Jim Sheridan (in the Chair)]

Order. Mr Bryant, you also did not register to speak. Do you have the permission of the promoter and the Minister to speak?

--- Later in debate ---

[Chris Bryant (Rhondda) (Lab)]

I am grateful, Mr Sheridan. I also thank the hon. Member for Dover (Charlie Elphicke) for securing this debate. If it had been an hour-and-a-half debate, it would have been more conventional to have several people speaking. I say to the hon. Member for Spelthorne (Kwasi Kwarteng) that it is not only a convention, but a rule of the House that only two people are allowed to speak in these half-hour debates. We are therefore engaging in a rather unusual practice this afternoon, which is why things are slightly confusing. The hon. Member for Dover gave a rather short speech—the debate’s promoter normally takes 15 minutes—and he devoted quite a lot of it to saying nasty things about the Labour party. I understand why he wants to do that, but I want to correct some impressions.

The Labour party has been engaged in a process of welfare reform and was when in government. One of the key things that we wanted to achieve was ensuring that work pays. In my constituency, which has historically high levels of people on one form or other of sickness benefit, people have been trapped in a style of poverty that ends up being inherited from one generation to the next. Opposition Members are desperately keen to ensure that we have a system under which work always pays. That is why we supported the introduction of the national minimum wage, which we see as part of welfare reform, and why we introduced tax credits as another means of making it possible for people to get into work.

I do not accept the argument of the hon. Member for Spelthorne that Labour has never been in favour of welfare reform. Indeed, key elements of what the Government are doing now are right. The move towards universal credit is right. The Government have been too ambitious in the time scale that they have set themselves, and it would help the Government’s cause were they a bit more honest about the fact that the scheme is neither on time nor on budget and that a great amount of money has been wasted. Ministers have not yet made key decisions, such as when somebody goes on to universal credit, whether their children will be entitled to free school meals. At the moment, there is a difference between those on in-work benefits and those on out-of-work benefits. The latter’s children get free school meals, but the former’s do not. Universal credit does not recognise the difference between the two, which is a key policy issue that will have to be determined.

[Charlie Elphicke]

The Labour party initially voted against universal credit. Labour should be more supportive of the Government during a big, important reform, rather than too often appearing to throw rocks from the sidelines.

[Chris Bryant]

We are keen to try to help the Government make universal credit work, but it is difficult so to do if the Secretary of State is mouthing inanities and presenting such an optimistic version of events that some might construe it not to be entirely true, which is what the Labour party believe has happened. It is a convention that people receive absolution only after confessing, and the Government need to own up to a few more of the problems that they are experiencing with universal credit. We would then be more than happy to help them.

Another classic example is the bedroom tax. People have different views about whether it is right and proper, but my argument is that while it might be a legitimate thing if we knew that everyone had smaller properties to move to, in truth, when those smaller properties are not available, it is a fairly cruel and vindictive assault on some of the most vulnerable people in society, including hundreds of thousands of disabled people. Even more bizarrely, the Government managed to mess that up by not spotting the loophole in their legislation. On the same day, three different Ministers said different things: one said that only 3,000 to 5,000 would be affected; another said in the House of Lords that the number would be insignificant; and a third Minister said that she had no idea how many people would be affected. Through freedom of information requests, which the Government should have submitted, we already know that, from the third of local authorities who have replied, 16,000 households are affected. In other words, it is likely that some 48,000 to 50,000 people are affected.

The Labour party is engaged in a process of welfare reform. We always have been. We want to make welfare work, so that it both supports those who desperately need it at key times in their lives and gives people an opportunity to stand on their own two feet. In your constituency, Mr Sheridan, and in mine, the vast majority of people are not looking for handouts; they are looking to stand on their own feet, to put food on the table for their family and to provide a better future for their children.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I congratulate my hon. Friend the Member for Dover (Charlie Elphicke) on securing this wide-ranging debate, which has actually been quite refreshing, because we so often get caught up in the minutiae of a clause, amendment or fine detail and it is good to get back to first principles and the context of what the Government have done over the past four years. I also enjoyed his blue-skies thinking about workplace and maternity benefits and so on. I will try to address both those issues, while providing some reflections on his idea for workplace benefits.

The context that my hon. Friend described was one where, for every £3 that the Government received, they were spending £4. There is nothing progressive or fair about saying that we will pay for a higher standard of living for ourselves now and expect our children to meet the bill. The biggest task that we faced—as my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) said, this was one of the reasons for forming the coalition— was to provide the country with a stable Government at a time of economic crisis and to try to get the nation’s finances on an even keel, which has required a series of difficult decisions, particularly because social security spending is the biggest area of Government spending, every one of which was opposed by Labour, but only one of which it now says that it will reverse. There is a distinct lack of consistency.

I am pretty sure that the record will show—the hon. Member for Rhondda (Chris Bryant) will correct me if I am wrong—that Labour voted against the Welfare Reform Act 2013 on Second Reading. He may not recall, but I am pretty sure that Labour did—it may have voted against it on Third Reading, which is even worse. The 2013 Act introduced universal credit, so it is a bit rich to say that Labour supports universal credit when it voted against the legislation that introduced it. That shows no credibility.

The hon. Gentleman may say that Labour has been engaged in welfare reform for the past four years, but it has only said what it is against. It is against our getting the books balanced by the measures that we have taken, but the positive agenda has largely been avoided. On the odd occasion that we get a positive suggestion, it often involves spending more money, not less. A humane welfare system during a time of austerity is a challenging task. One would have hoped that the party that paints itself as progressive would have engaged constructively over the past four years in how to design such a system, but we have essentially heard nothing on that front.

My hon. Friend the Member for Dover is right that the driver of the reforms that my right hon. Friend the Secretary of State for Work and Pensions and the ministerial team have brought forward has absolutely been fiscal rectitude, but it has also been about more than that. My right hon. Friend has said—I do not think that I am revealing any secrets here—that he did not come into his present role simply to cut, but rather to reform. During difficult times, we are reforming and bringing together a fractured system. Why should people have to go to Her Majesty’s Revenue and Customs for tax credits, to the local council for housing benefit and to the Department for Work and Pensions for income support? Why should there not be a single system? One of the fatal flaws of tax credits, which the hon. Member for Rhondda praised, is that, because the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown)—the previous Chancellor and then Prime Minister—wanted to pretend that it was not welfare, it was claimed that they were negative tax. They were nothing of the sort. They were social security benefits, but paid over the course of a year. People’s needs, however, arise on a weekly or monthly basis. They cannot wait for end-year reconciliation and a following-year clawback.

The beauty of universal credit is that it is real time. It meets people’s needs when they happen, rather than saying at the end of the year, “Oh, guess what? We underpaid you,” or, more often, “Guess what? We overpaid you three years ago by several thousand quid. Please may we have it back?” That shambles will be over as we introduce universal credit.

[Chris Bryant]

Will the Minister give way?

[Steve Webb]

I will not, because it is the debate of my hon. Friend the Member for Dover. I want to respond to some of his specific ideas on workplace benefits. I agree with his goals. I absolutely agree that we need a system that is fair for women; that we need to think hard about anything in the system that makes an employer less likely to employ a woman of childbearing age; and that we clearly want the system to work for self-employed women. He has made some important points.

As the system currently works, however, 93% of the cost of statutory maternity pay is refunded to employers. In fact, more than 100% is refunded to small firms. Small firms that take on a woman who becomes pregnant and goes on maternity leave will get back all the maternity pay that they pay out, plus what is essentially a handling charge—another 3% on top. Even a large employer gets 92% or thereabouts of reimbursement.

If an employer is reluctant to take on a woman who might have a child, therefore, the pure finances should not make a huge difference. Clearly, there is a bureaucracy issue with the reclaiming and so on, and we are happy to look at whether that can be streamlined, but the basic principle is that the employers get the lion’s share of the money back. The thing that might put them off, as my hon. Friend said in his speech, is the thought, “Well, I employ this person. They might not be there in some months’ time. I might have to provide maternity cover, retraining and so on,” but however we reimburse maternity pay, that will still be a feature of the system.

I am not therefore sure that having a collectivised—I hesitate to use the word, but my hon. Friend knows what I mean—system of insurance is any different substantively for the employer. Either way, employers are getting reimbursed—the costs are being met and are not in essence falling on the employer.

My hon. Friend’s proposal is interesting and I am grateful to him for suggesting it, but one of my worries arises from something that I have learnt as a Minister. Whenever we set up a new scheme, we have new infrastructure, bureaucracy and sets of rules. If we had the levy—the at-work scheme that he described—we would have to define the new tax base, have a new levy collection mechanism, work out who was in and who was out, have appeals and all that kind of stuff. There is always a dead weight to such things. Simply setting up new infrastructure costs money. I would have to be convinced that we were getting something back for it.

In essence, my hon. Friend is proposing that, instead of the general taxpayer paying into the pot and employers handing out statutory maternity pay, which is reimbursed by the Government from the general taxpayer—the current system—we have a new levy on employers, although he recognises that he does not want a new jobs tax, so that it is offset by a reduction in something else that employers pay and the tax in that world is neutral overall. However, he then says that he wants the rate not to be some £130 a week, but to be £200 and something a week.

My hon. Friend was commendably brief, so I apologise if I misunderstood, but I was not clear where that extra money would come from. If we pay women on maternity leave double, someone must pay for it. If he does not want that to be an extra burden on firms, paying for it will simply be a tax increase. That might be the right thing to do—increasing taxes to pay for it—but it is an increase.