Welfare Reforms and Poverty

David T C Davies Excerpts

Monday 13th January 2014 Commons Chamber

[Mr Meacher]

I have already made slight reference to that, but my hon. Friend is entirely right. The change is quite small, but its impact can push very poor families into deep poverty.

What are the causes of the emergence of absolute poverty? The biggest cause is the huge rise in sanctioning: depriving someone of all their benefit entitlement for a month in the first instance, for three months in the second instance and, on a third infringement, for three years!

[David T. C. Davies (Monmouth) (Con)]

Will the right hon. Gentleman give way?

[Mr Meacher]

I will not give way to too many Members, for the simple reason that many want to speak, but I will give way to the hon. Gentleman.

[David T. C. Davies]

I am grateful to the right hon. Gentleman for giving way. Does he not agree that it is vital that those who are not looking for work are made to realise that there will be consequences to those actions, particularly at a time when 1 million people have been able to come into this country from eastern Europe and find work here?

[Mr Meacher]

Those who come to this country are more likely to be employed and take out less in benefits than many of the indigenous population. The real point is that these people want work. Of course the hon. Gentleman is right that people should get work if they can, but there are 2.5 million people who have been unemployed for the best part of two years, and there are 562,000 vacancies—I checked that figure today. So four out of five of those who are unemployed simply cannot get a job whatever they do.

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[David T. C. Davies (Monmouth) (Con)]

Members of the shadow Cabinet might need a boxing referee to sort out their disputes at the moment, as we read today in the Daily Mail, but I can assure hon. Members that I believe that the Conservative party is absolutely united in supporting the coalition Government and coalition Ministers in what they are trying to achieve. We do so against the backdrop of one of the most disastrous economic situations that this country has faced outside of a war.

It is worth reminding ourselves just what we were looking at in 2010. We took office with a deficit of £160 billion and a debt that was rising rapidly to £1 trillion. That was after years of overspending in good times, as well as in bad, by Labour, a cheap money supply and lax banking regulation under the former Government. We had disastrous economic decisions, such as that to sell gold at a fraction of its real rate. Worst of all and most seriously—this is what we are dealing with today—we had a welfare system that allowed people to get into a trap of welfare dependency, leaving them on the dole for many years, but at the same time filling the consequent gap in employment by allowing mass and uncontrolled immigration into this country, which completely undercut British workers.

That was the disastrous legacy that this coalition Government faced in 2010. I am proud of the fact that, instead of shirking their responsibilities, Ministers in this coalition Government took difficult economic decisions. Of course we had to make cuts and reduce public spending. It would have been grossly irresponsible not to do so, and in the longer term it would have led to far greater poverty than we face now. The reality is that we are a nation in debt. We are having to borrow about £10 billion every month. We are also having to roll over existing debts that previous Governments left us. If for any reason the international money lending organisations that give us that £10 billion a month ever decided that we were not in a position to pay either the interest or the original sum, they would simply stop lending to us, and there would be no European bank or International Monetary Fund waiting to bail us out with the sums we would need.

We would face an economic catastrophe on a far greater scale than the one we face now, and it would lead to real poverty. Indeed, it could lead to even third-world levels of poverty, because we would simply run out of cash. That is the catastrophe that keeps me awake at night—far more so than the bogus claims about global warming, when we have seen no rise in temperature for 16 years, or than terrorism, which is a much more serious matter but which the security services have thus far been able to contain.

[Hugh Bayley]

Will the hon. Gentleman not acknowledge the truth that the amount spent on welfare by the last Labour Government decreased over time because we were effective in creating more jobs and getting people off welfare and into work? The national debt was some £800 billion when his party came to power, but is it not now well over £1 trillion and rising?

[David T. C. Davies]

Indeed, the hon. Gentleman is quite correct in his last point. He makes an important point, but I would like to find out where it was going. Is he suggesting that we are not doing enough to pay down the national debt? Is he suggesting that we should cut further and faster? If so, and if we had the support of other Opposition Members, that is exactly what the Government could do and, indeed, possibly should do. I look forward to seeing that support for getting the deficit down.

[Hugh Bayley]

The point I am making is simply that the Labour Government reduced the amount that taxpayers had to spend on welfare because we were effective at investing in the economy, creating jobs and thereby getting people off welfare and into work.

[David T.C. Davies]

I do not accept that point, but I do accept that when the last Labour Government came into office in 1997, they spent the first couple of years paying down the national debt, which is exactly what they should have done.

[Hugh Bayley]

It was the first 10 years.

[David T.C. Davies]

No, from 2001 onwards they started overspending by an average of about £30 billion. That is an absolute fact; I have checked the figures on the national debt very carefully. From 2001 onwards, they started overspending by an average of about £30 billion a year. That is a fact. I can tell hon. Members that I have checked the figures on the national debt very carefully. As I say, from about 2001 onwards, the Labour Government decided to start overspending by approximately £30 billion a year, and they were overspending long before the financial crash happened in 2008—a crash that they, incidentally, had helped to cause.

Ministers in the coalition Government are absolute right to make cuts, and if Labour Members feel that the deficit is still too high and that further cuts should be made, I am sure we would all welcome their support. The Government are right to do this for another reason: the welfare system, which we are reforming, traps people in worklessness. Many members of my family— through marriage—are from eastern Europe, and some of them came to this country barely able to speak English and had no qualifications that would be recognised here. They were, however, able to get into work. They started in low-paid jobs and worked their way up.

I spent many years in low-paid jobs, and I am not talking about holiday jobs or a gap year, as I never even went to university. I happened to believe that, rather than wait around for whatever job people think they deserve, they should take any job available to them and use work to get better work. That is the way forward, and that is what the Government are trying to encourage through the use of sanctions and, frankly, through making it difficult for people to sit around watching the television all day. I am not suggesting that that applies to everyone who is out of work or even a majority of them, but it certainly applies to a percentage of people who are out of work. It is high time that it was tackled and stopped. I am glad that some people have the courage to do that.

We hear nothing from Labour Members except a mass of contradictions. They say that they want to be tough on welfare—tougher than the Tories, as the shadow Work and Pensions Secretary said in October 2013—and then to a different audience they complain about every single cut to the welfare budget. They complain that the Government are making cuts and then they complain, as the right hon. Member for Oldham West and Royton (Mr Meacher) did, that the deficit is too high. It is ludicrous. They say that they are against the bedroom tax, but they brought the bedroom tax in, albeit in the private sector. What they say is a mass of contractions, so I cannot understand how anyone could feel that Labour Members were fit to be put in charge of welfare benefits or indeed the economy ever again.

[Stephen Mosley]

Had my hon. Friend attended Work and Pensions questions this morning, he would have heard Labour Members going on about the work capability assessment. Which Government introduced it? It was, of course, the previous Labour Government.

[David T. C. Davies]

My hon. Friend makes a good point. I believe we would all like to see some consistency from the Opposition—both on the economy and on what they are really planning to do to benefits. In the meantime, let me commend both the Liberal Democrat and Conservative Front-Bench teams, who have been prepared to put aside their personal poll ratings—frankly, these are unpopular decisions—and do what is right for this country rather than what is right for winning elections: namely, getting the deficit down and solving the long-term problem of worklessness. That will do far more to tackle poverty than anything we hear from Labour Members tonight.

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[John McDonnell (Hayes and Harlington) (Lab)]

The question was asked earlier about how we pay off the deficit. There was a choice when the economic crisis hit: should those who created the economic crisis pay for it, or should the others? This Government decided that the poorest in our society would pay. To enable that to happen there had to be some form of ideological attack on the poorest—the latest example is the programme “Benefits Street”—that identifies a group of people and demonstrates that they somehow stand for all those people who are dependent on benefits. That is then used as a justification to cut benefits overall.

The reality, as has been said time and time again, is that some of the people suffering hardest are those who are in work. In two weeks time in this city, the BAFTAs will be hosted again at the Royal Opera House. That weekend, the cleaners will be on strike and picketing outside. I will be joining them, because they are on just above the minimum wage, not on a living wage, and cannot afford to live in the city in which they work. A whole range of constituencies outside London have been mentioned. London and the south-east have an image of wealth, with gold pavements and so on, but there is a growing underclass in London of people in dire poverty.

The anxiety and anger we have is that in two weeks the cleaners will go on strike because they have no other option. They are trying to get their employers to negotiate a London living wage, while this week the bank bonuses will be announced. Goldman Sachs has already explained that it looks like it will have a bumper year. We are back to pre-crisis bonus levels. I raised this with the Chancellor and, to give him his due, he actually said that there is an issue that we have to address. We have been told that in one company the average bonus payment is £2.7 million per member of staff. This is the contrast we have: people in work are struggling just to maintain a roof over their heads, feed and clothe their children and have a decent standard of income. At the same time, we have the profligacy and obscene levels of bonuses returning. I think the choice was made under this Government that the poor would pay for the crisis, not the rich who caused it.

Examples have been given of the range of cuts that have been made. I will be frank: I do not know how people in my constituency survive on the income they are getting. I have no idea how they can afford to live on the minimal income that they are getting. We will have a debate in a few weeks’ time about the WOW petition and people with disabilities, who are among some of the hardest hit. However, the latest statistics show that we have 13,000 children in my borough living in poverty, and it is a relatively wealthy borough. We are a working-class area with high levels of employment and, usually, not bad levels of income, but even in my constituency we are seeing child poverty on a scale that we have not seen since the second world war, with all the problems associated with that.

One of the main problems has been touched on by others: the fact that people cannot afford a roof over their heads. House prices have gone through the roof. People cannot afford them on the incomes they are getting, but what do the Government do? They increase rents in the social sector—in council housing and social housing—and at the same time cut benefits. The argument put forward by the Government—it has some logic to it—was that if they cut benefits, somehow the landlords would stop charging higher rents, but the reverse has happened. Rents have gone up in my area. Getting a three-bedroom property in the private rented sector means spending between £1,200 and £1,600 a month, and we are not talking about high standards of property. We are just talking about the roof over people’s heads.

When people go to the council, the discretionary money that has been awarded does not meet the difference between the loss of benefits and the rents they are now being charged. What is happening, therefore—this is the irony of it—is homelessness on a scale that we have not seen for perhaps two decades and children living in bed and breakfasts again. We were promised that that would never happen again, and it is happening. Children are living in appalling conditions in bed and breakfasts, and then they are farmed out round the country, which completely disrupts their education and breaks down the connections with their wider family. That destabilises whole families as well, because people under that pressure begin to implode. It is therefore no wonder that we have family breakdown increasing in many of our areas as a result of the financial pressures that people are under.

That is the result of a whole series of reforms that have been introduced as part of an incremental development to attack the poor. Those of us on the Labour Benches should say: “No more. That’s enough now.” We are the people who invented the welfare state. We introduced it—working, yes, with Beveridge, the Liberals and others. It was not just to provide a safety net; it was to give people the opportunity to achieve their life chances. This Government are destroying that opportunity for people to thrive and enjoy the life chances that we wanted to give them.

[David T. C. Davies]

Given what the hon. Gentleman has just said, does he agree or disagree with his shadow Work and Pensions Secretary, who wants to be tougher than the Tories on benefits?

[John McDonnell]

I am not sure whether the hon. Gentleman was here under the last Government, but I was one of those who argued for a massive redistribution of wealth to tackle poverty in this country, and I will continue to argue that point. I do not think that any of the parties should get into this Dutch auction about who can be more brutal towards the poor, but from the detail of the policy being advocated by the Opposition that I have heard, it is about achieving growth, getting people back into employment, ensuring a fair system of redistribution of wealth in this country and—this is the point my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) made—ensuring that people pay their taxes. At the moment we are living in a corporate kleptocracy, where corporations steal and rob from us through tax avoidance and tax evasion. If we could have some of that back, not only could we tackle the deficit, but that redistribution of wealth could take place and we could lift people out of poverty, provide the homes they need and give them back the life chances that this Government are stealing from them.