Welfare Reform Bill

Geraint Davies Excerpts

Wednesday 9th March 2011 Commons Chamber

[Mr Duncan Smith]

What we want from the Bill is to encourage people to get involved in the process—to help people to use it as part of the incentive of trying to make the right decisions about taking work and providing for their families.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Will the right hon. Gentleman consider the example of a married couple who are at work and have five children from previous marriages, but then lose their jobs because, for instance, they work for the local council? Because they have five children, they would get almost £500 of personal allowance and £200 of housing benefit, taking them over the £500 cap. Rationally, they might choose, because of the £500 cap, to split up their family so that there are three children and two children in two houses, each with £250 of personal allowance and £200 of housing benefit, making a global total of £900, when it would have been £700. Surely his policies of breaking up families and making demands for more and more social housing, alongside making people unemployed, do not add up to fairness or competence.

[Mr Duncan Smith]

I understand the hon. Gentleman’s point and can, I hope, assure him that as the Bill progresses, and as he will see as we reach Committee, our objective is to recognise that unemployment, for those who fall unemployed, is probably a temporary condition. He will understand that point more as we get into the detail, but trying to find some way of protecting such people through that process is critical to us, as the vast majority will be back in work within a set period: 90% of people will be back in work within a year. Most people will get through that process, and it is for us to ensure that the transition is met and dealt with, but I think that he will be very happy in due course to hear what we propose.

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[Mr Byrne]

I am grateful for that observation. I say gently that, with five people chasing every job in the economy, if we are serious about getting people back into work—I think that the Government do want to do the right thing—we have to do more to create more jobs. We can pass laws and put in place extra help for unemployed people, but there must also be an economic policy that creates more jobs to absorb the very deep public sector job cuts that we know are coming down the line.

[Geraint Davies]

Does my right hon. Friend accept that the deficit was the price paid to avoid a depression caused by the bankers, and that the best way to get rid of it is to focus on economic growth, make bankers pay their fair share and make sensible savings over time, not to make the poorest pay the most while the richest are lavished with massive bonuses, which is what the Bill is about?

[Mr Byrne]

I will avoid getting into an extended debate about macro-economic policy, although I would happily discuss it all afternoon, but my hon. Friend is right. Under our approach, despite the fact that we faced the worst global crash since the 1930s, unemployment did not go beyond 3 million, as it did not once but twice under the Conservative Administration.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

This is a mean-minded, ill-thought-out Bill that is not designed to promote fairness or help people into work. Rather, its purpose is to punish the poor, the disabled, those with children, those trying to save and those starting a small business for the cost of the greed and recklessness of City bankers, who created our deficit. That is laid at the door of the poor, while those responsible indulge in sharing £8 billion of banker bonuses under a system propped up by the taxpayer, whereby if risks go wrong the public pay and if they go right the bankers profit.

[Steve Baker (Wycombe) (Con)]

I share the hon. Gentleman’s sense that the banking system is responsible for the greatest injustices in our society, which I fight often, but, as has been pointed out, these reforms long predate the banking crisis.

[Geraint Davies]

I shall come on to the reforms.

The deficit was the price paid to avoid a depression, and the Government had a clear choice: they could halve the deficit in four years by focusing on economic growth and making the bankers pay their fair share while also making savings over time that are fair and do not harm economic growth. The alternative, which the Government have chosen, was to cut the deficit at twice that pace, clearing it in half the time—in four years. That is a “formidable” challenge, according to the Institute for Fiscal Studies, which says that the Government need a plan B.

There is an over-reliance on savage cuts, particularly to public sector jobs and the welfare benefits we are considering today. That will throw whole communities into poverty, with a third of a million public sector redundancies triggering a further 1 million private sector job losses, which will cost an extra £7 billion a year in benefit costs and lost tax. The benefits of those thrown on to the dole will be cut, forcing them, in the worst instances, into community projects like criminals when they cannot find work. Why is this happening? It is happening because the Government have thrown a bucket of water over the embers of economic growth that Labour had kindled.

[Mr Heald]

That is a nice soundbite, but the policy will cost the taxpayer money. The hon. Gentleman seems to think that it is not giving money to people at the bottom of the pile, but we are talking about £2.6 billion to help poor people into work.

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[Geraint Davies]

The Bill will cost around £4 billion to implement, and save some £18 billion by taking from the poorest families. The Government’s plans are incompetent, unfair and counter-productive. The fact is that the cuts are choking growth and VAT is stoking inflation, and both are pushing the deficit up, not down. In Germany the focus is on growth, not cuts, and growth continues apace. In Britain, of course, growth is negative—and it is not just the snow. Alongside the £4 billion cost of the Bill is the £4 billion cost of dismantling the health service and the £7 billion lost through the unemployment created by the job cuts, and so it goes on.

What is the impact on people in Swansea? Some 40% of its workers are employed in the public sector. We face the second highest level of job cuts and very large benefit cuts. Some 65% of people employed in the public sector are women, and the combination of cuts in jobs and welfare payments will impact on families in particular as they pay their share of the £18 billion in savings that will be made.

The Bill will hurt children, the disabled and enterprise. Let us consider a Swansea woman with children who works for the council and is made redundant. She has savings of £18,000 and, being an enterprising person, wants to start her own business. She will get no benefits, of course, because she has saved more than £16,000 in good faith. She will have no wage, but she will be assumed to be getting the minimum wage as she is starting a business. Her business will face various start-up costs, such as a computer, setting up a website and promotional literature. She will be penalised for being a worker, penalised for being a saver and penalised for being an entrepreneur.

Let us assume for a moment that the woman is successful, despite those barriers. She will be threatened with the loss of her council house if she earns too much—hardly an incentive for people on council estates to start their own businesses. Let us say that she is in her second marriage and she and her husband have five children. Her husband was also employed by the council—they met working there—and both were made redundant. They have five children, so they have nearly £500 of personal benefits in addition to £200 in housing benefit, which means they get £700 in total. The £500 cap is imposed on them, so they are forced to split up. They now live in separate council houses, each drawing £200 in housing benefit, with one parent looking after three children and the other looking after the other two. This is a recipe not just for destroying jobs and crushing entrepreneurial activity, but for splitting up homes and increasing the cost to the Exchequer to £900 when it was £700.

The Government’s approach in Swansea and elsewhere in Britain will make people jobless, make them poorer, break up families, crush enterprise, punish saving and harm children and the disabled. This is a Bill born not out of fair-mindedness and enlightenment, but an unnecessary and unwise economic strategy of cutting too far too fast and punishing the poor for the reckless greed of the bankers. It should be opposed so that we can go back to the drawing board and think again.