Welfare Cap

David Pinto-Duschinsky Excerpts

Wednesday 29th January 2025 Commons Chamber

[Helen Whately (Faversham and Mid Kent) (Con)]

The welfare cap we are debating today was introduced back in 2014 by the Conservative Chancellor at the time, George Osborne, to hold the Government to account on the cost of our welfare system. Through the 2010s, in government, we broadly kept to that cap; it was part of the discipline we applied to the welfare system to make it fair for the taxpayer and to put into practice the strongly held Conservative principle that if you can work, you should work. We introduced universal credit to ensure that work always pays and supported businesses to create millions of jobs, and we helped thousands of people into work and drove down economic inactivity—and were opposed at every step of the way by the Labour party.

But in the years during and since the pandemic—I will not shy away from telling the truth—things changed. While the number of jobs kept going up, the number of people economically inactive also started to go up, and with that, the welfare bill, and that is a big problem. It is a financial problem that means we are today debating a welfare cap which has been breached. It is an economic problem because our economy needs the talents and energies of everyone. And it is a social problem: of the 9 million people of working age defined as economically inactive, 2.8 million are not working because of ill health. That includes growing numbers of young people. Young people are starting out on a life on benefits instead of starting out on a career, missing out on the opportunities that work brings—the sense of purpose, the connections with other people, the chance to learn and develop skills—missing out on the experience of being paid for their efforts, and missing out on the chance to build financial independence and security. We as a country have a moral and financial imperative to turn this around and in government we were working flat out to tackle it.

[David Pinto-Duschinsky (Hendon) (Lab)]

Will the hon. Lady acknowledge that under the last Conservative Government inactivity rates among the young were the highest in the OECD, and that they were working on it, but it was not working?

[Helen Whately]

As I am sure the hon. Gentleman heard, I was just acknowledging the fact that the economic inactivity rate started going up in the run-up to and particularly following the pandemic. We have a particular concern, which I am sure the Government share, around growing inactivity among young people. It is a challenge that we are experiencing more than other countries, and there is a lot of work to do to get to the bottom of it. I was involved in that work in government as a Health Minister, and it is imperative that the new Government get a grip on that issue.

--- Later in debate ---

[David Pinto-Duschinsky (Hendon) (Lab)]

I thank my hon. Friend the Minister for her opening speech, on a timely subject as the Government have just laid out their bold and striking ambitions to grow our economy and take the tough decisions needed, after years of dither and delay by the Conservative party. Today more than on other days, we have seen laid out in stark relief the choice before us of either doubling down on the failures—more of the same—or picking a new route. That is what this debate is about.

I want to talk about the root causes of some of the growth issues that we face. But first I want to focus on a number: £8.6 billion. That is how much the welfare cap was breached by, because of the Conservatives’ failures time and again. That is not a small amount. To put it in some context, it is as much as the entire programme budget of the Department for Work and Pensions. To give another comparison, it is half the entire police grant for all policing in England and Wales.

It is a phenomenal failure on the part of the Conservatives that we face this issue today, and it is not their only failure in the DWP. My hon. Friend the Minister laid out fantastically well the litany of failures. Let me pick up one in particular: the Conservatives breached the welfare cap, but we have not had much time to talk about their failures on fraud and error. Because of failures on their watch, the numbers more than doubled, and are now stuck at an elevated post-covid rate. They left us with an entrenched fraud and error problem.

We could go on. The litany of catastrophic mismanagement is almost endless. The hon. Member for Faversham and Mid Kent (Helen Whately) said that she could make savings. The Conservatives had 14 years —where were they? Instead, we got lots of “dog ate my homework” excuses. They should be hanging their heads in shame. As hon. Friends have pointed out, it is telling that, behind the shadow Minister, the Opposition Benches are empty. They know how badly they let the country down.

It is not just about the £8.6 billion; the Conservatives’ failures shine a spotlight on two deeper failures that are the root causes of today’s motions: a failure to grow the economy, and a failure to get people into work and to help those with health conditions move on in the labour market. Let me turn to growth first. We have heard a lot today about the economy, but it is worth pausing to remember how bad things were under the Conservatives. From 2019, on their watch, the economy grew slower than any other G7 economy, bar one. In the last decade of their rule, GDP rose in real terms by only 6%. If it had grown at the same rate as comparable countries, on average we would each be more than £8,000 better off.

I welcome the fact that after years of this country being held back by previous incompetent Governments, this Government are finally taking the decisions to realise our country’s potential. That is what we heard today: £78 billion being released through supporting the Ox-Cam arc; £160 billion through the Chancellor’s excellent announcements over the weekend to allow investment of pension surpluses; £7.9 billion of infrastructure to give us nine new reservoirs. The Conservatives had 14 years in government—do you know how many reservoirs they built, Madam Deputy Speaker? Zero. That is the difference.

I am proud of our Chancellor, who has made the tough decisions that have given us the foundation of stability and allowed us to make these announcements today. It is because of the stability created by the Budget and her other decisions that we now have inflation of 2.5%, that interest rates have been cut twice, because the Bank has confidence in the Government’s fiscal management, that investment is at a 19-year high, and that wages are growing at their fastest rate in three years—I could go on. It is only because of the tough decisions that we have made that we are in that position.

Beyond the Conservatives’ failure on growth, the breaches of the welfare cap also shine a spotlight on their terrible failure to get people into work and to combat poverty. The figures are extraordinarily stark; I thank my hon. Friend the Member for Loughborough (Dr Sandher) for sharing some of them. Today, one in five adults is economically inactive because of the Conservatives’ legacy. We are the only G7 country where employment rates remain below the pre-covid level. I note that the hon. Member for Faversham and Mid Kent, when asked, acknowledged the fact, but she could not tell us why that is. Well, I have a clue for her. It is because of the incompetence and the failures of her party.

What is more, we know that these problems are driven overwhelmingly by ill health, with 85% of those who have dropped out of the labour market having done so due to ill health. This disproportionately hits those over 50, but, scandalously, also affects the youngest in our society. The number of NEETs—those not in employment, education or training—went up by a third in the last three years of the previous Government.

It goes deeper than that. Beneath the shocking rise in 16 to 24-year-olds who are out of work and inactive, a stunning 79% are also low skilled, with skill levels lower than GCSEs. Because of Conservative failures, so many of our young people have been caught in a downward spiral of low skills, poor opportunity, low self-esteem and poor mental health.

This failure by the Conservatives is a moral disgrace, but it is also a massive economic problem. If not addressed, the sickness bill they bequeathed the country could exceed £100 billion by the end of this Parliament. I would like to say that this is the first time they Conservatives have done something like this, but that would not be true. Those of us old enough to remember will know that in 1997, the outgoing Conservative Government bequeathed more than 5.1 million inactive people to the incoming Labour Government. It is just what Conservative Governments do.

My hon. Friend the Minister also mentioned the fact that many of the technical changes the previous Government made to universal credit and other benefits actually dragged people further away from the labour market, putting up barriers and making it harder to get work. This is an absolute scandal, especially because we know that DWP staff—the people who work on this—want to make a difference. I worked for the new deal taskforce 26 years ago, working on the previous Labour Government’s strong efforts to get people back into work. I know that DWP staff want to make a difference, but, because of the previous Government’s terrible policy design and incompetence, they are often prevented from doing so.

This is a massive human tragedy. We know from survey work that at least half of the people who are inactive—4.5 million people—say that they want to work if they can have the right support. We also know that work is the best tonic for many of the issues faced by those who are inactive. We know from a University of Cambridge study, for instance, that just eight hours a week of paid work can reduce mental health issues in a large portion of the population by up to 30%.

What is more, the Conservative party did far too little to tackle the underlying dynamics of low work and no work faced by so many people in poverty. We know that the average family in poverty goes through up to seven separate spells in poverty. All too often, it is like “Hotel California”: they can check out, but they can never leave. Rather than trying to deal with that problem, all we got from the Conservative party were sticking plasters and political slogans.

I am incredibly proud to sit on the Labour Benches and support a Government who will take a different approach and are absolutely determined to make an actual difference and tackle the root causes. We heard from the Minister the action that will be taken to give our young people a choice, through the youth guarantee, between earning and learning—a real, proper stable start in life. We heard about the changes we will make to the DWP to actually get it working. We heard about the changes that will actually tackle the barriers to work—real, practical steps rather than the slogans of the Conservative party. We heard about the work on fraud and error, so that our public money is spent on helping people to get back to work, rather than leaking out of the system. We heard about the efforts that will be made to get people not just into jobs, but into good jobs.

It is worth pausing on that point for a second. The labour market has changed a lot in the past 30 years. It is no longer a given that all jobs provide a ladder to good, fulfilling, family-supporting work. For too long, the Conservative party, when it was in government, ignored that. It is such good news that through the good work laid out by the Minister on the industrial strategy, and through bringing the careers service together with Jobcentre Plus so that we have a system that focuses not just on getting people into work but on helping them get on, we finally have a Government who are taking the problem seriously.

Our ambition is no less than to give people proper power over their own lives. As my hon. Friend the Member for Loughborough pointed out, the Conservative Government so often just sought to demonise and sloganise. We are trying to put power back into people’s hands and give them the real power over their own lives that only fulfilling and decent work can offer.

As I said, I started work in the new deal taskforce in the DWP’s predecessor Department. I was lucky enough, later on, to work on similar issues in the Prime Minister’s strategy unit. What characterised the Administration then was a real passion to change lives and a real passion to make things better. That has been so lacking for the past 14 years, and it is so refreshing to hear that it is back. I am absolutely proud to stand here and support the motion.