Low-income Households

Helen Goodman Excerpts

Tuesday 14th September 2010 Westminster Hall

[Helen Goodman (Bishop Auckland) (Lab)]

It is a pleasure, Ms Clark, to see you in the Chair this morning. I congratulate my hon. Friend the Member for Westminster North (Ms Buck) on securing this extremely important debate on an issue that concerns millions of our fellow citizens.

My hon. Friend pointed out some key facts, and I hope that the Minister will respond to some of them. The Government have made huge play of the importance of work incentives, but the Red Book, which the Chancellor of the Exchequer presented to the House, shows that 80,000 people in this country will face worse work incentives as a result of his Budget. That demonstrates the point that my hon. Friend the Member for Stretford and Urmston (Kate Green) made about the total incoherence of the policies being presented.

My hon. Friend the Member for Westminster North asked some sharp questions, and I hope that we will hear from the Minister where the extra £2.5 billion—or is it £4 billion?—will come from in the public spending cuts in the autumn, and what exactly her assessment is of the impact on homelessness of the massive cuts in housing benefit. The hon. Member for Cities of London and Westminster (Mr Field) placed great stress on the need to tackle the deficit. Of course we need to tackle the deficit; there is no question about that. The policies set out by my right hon. Friend the Member for Edinburgh South West (Mr Darling) would have produced a debt to GDP ratio in 2014 of 75%—a high level and not one that we would want in the long term. However, over the next five years, the Government propose an additional tightening of £120 billion in public spending cuts and tax rises. The net result will be to reduce the debt to GDP ratio by 5%, so that it will be 70% rather than 75%. That is not even a 5% reduction now; it is a change in 2014. The hon. Member for Solihull (Lorely Burt) backed that point and said that we should worry about the markets. I am sorry, but I do not believe that the markets will take such a different view of a debt to GDP ratio that is 5% smaller in four years’ time, or that that will make all the difference. That is the altar on which we are told we should smash our public services.

[Mr Mark Field]

No one supports the smashing of public services, but in defence of the assertion made by the hon. Member for Solihull (Lorely Burt) and me, the bond markets have made it clear in the aftermath of the emergency Budget that they are impressed by the resolution of the coalition Government. That is one of the reasons that the yields have relaxed, which augurs well for the long-term debt to which the hon. Member for Bishop Auckland (Helen Goodman) referred. This year, £1 in every £4 that we spend has been borrowed, and we must try to keep the cost of that borrowing to a minimum.

[Helen Goodman]

We have tested to destruction the theory that we should drive our politics by what bankers want. That is not what we want to do, which is why Labour Members regard this Budget as deeply ideological. It will damage the life chances of the most vulnerable people—

[Mr Mark Field]

Will the hon. Lady give way?

[Helen Goodman]

Not again. My hon. Friend the Member for Stretford and Urmston made an excellent forensic analysis of the policies that we have seen so far. She is right to question the competence of Ministers who say one thing but do something completely different. Some seem to be totally out of their depth.

The hon. Member for Colchester (Bob Russell) is rapidly building a reputation as one of the most effective parliamentarians in the House. I would like to point out two facts in response to his contribution. First, under the three Labour Governments, the number of children in child poverty fell by 600,000. Secondly, the number of pensioners living in poverty fell by 900,000.

On 22 June, the Chancellor put the best possible gloss on his Budget, claiming that the effects were progressive and that the richest people would bear the greatest burden. He produced tables in the Red Book which purported to demonstrate that. Since then, independent study after independent study has demonstrated the precise opposite to be the case. In every dimension of vulnerability, the poorest do worst. The Red Book tables were incomplete and did not include the effect of the benefit cuts. Moreover, the Chancellor took credit for the decisions of his predecessor.

As my hon. Friend the Member for Westminster North has said, the first major study was undertaken by the Institute for Fiscal Studies and showed that the impact of the full £11 billion of cuts to the benefits programme, taken together with the tax changes, was regressive. Next, analysis carried out by the House of Commons Library into the impact of the cuts on women, showed that women will lose £6 billion while men lose £2 billion, thereby widening a gender gap that is already too great. In part, that reflects the cuts in support for children, but even if those cuts are stripped out, women will pay two thirds of the extra revenue taken by the Chancellor, and men will pay one third. The Government have admitted that they did not carry out an equality impact assessment of the Budget beforehand. Will the Minister tell us what stage that impact assessment is at, and when we will see it?

Many hon. Members have spoken about the significance of housing benefit. The Minister’s Department carried out an impact assessment into some of the changes to housing benefit, but once again, it was an incomplete analysis because the papers produced at the end of July looked at the effect on the private rented sector only. Even that study showed that over 50,000 of the poorest pensioners will lose an average of £14 a week and that tens of thousands of severely disabled people will lose an average of £13 a week. Lone parents and people with children will lose more than adults without children.

The next major study was the analysis by Cambridge university, which showed that 134,000 families who already live in poverty will face the most cruel dilemma—whether to move or whether to cope on a lower income. When he accepted the position of Secretary of State for Work and Pensions in May, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) said that he was interested most in the poorest people. However, the Cambridge university study shows that 54,000 families will have less than £50 to live on after the cuts to housing benefit.

Research produced at the end of August by Experian and published by the BBC looked at the north-south divide. It showed that the spending cuts will hit the north-east and parts of the midlands the most. Middlesbrough is ranked as the most vulnerable place in the country and will suffer most from spending cuts. The average income in Middlesbrough is £18,000. Elmbridge in Surrey is ranked as the most resilient town; the average income there is £27,000.

Most recently, the TUC has looked into the impact on public spending. It shows that the poorest 10% of people will lose 20% of the value of their income in terms of public services, while the richest 10% will lose 1.5%. I have looked again at the work done by the TUC, and put it together with the analysis carried out by the IFS. The work done by the TUC included the impact of the strongly progressive measures introduced by my right hon. Friend the Member for Edinburgh South West in March. However, if we strip those figures from the table, we see that the impact of the measures for which the Government are responsible will be even more regressive. By 2012, the picture looks even more unfair. After tax, benefit and spending changes are taken into account, the poorest 10% of people will lose 23% of their income, while the richest people will lose 2%. That situation will get worse over time. If we put the TUC distribution of public spending together with the IFS tax and benefit figures for 2014, we see that the poorest will lose one quarter of their income in terms of the loss of value in public services, tax and benefits, while the richest will lose 2%.

All that is before we look at the impact on jobs and unemployment. The facts speak for themselves: 25% of income will be taken from the poorest people, 2% from the richest. The effects will be felt not only over the next two or three years. We all know that poverty in childhood affects a person’s opportunities throughout their lives. Of course the deficit needs to be tackled, but the speed, depth and manner of the cuts is short-sighted, unnecessary and unfair. The coalition Government are losing all credibility in their repeated claims to be concerned about fairness. The evidence shows that there is not a shred of integrity in their claims.

--- Later in debate ---

[Maria Miller]

The hon. Lady is again being selective in her recollection of the facts. When we examine the level of child poverty now, we see that it has gone up since 2004 under Labour. She can throw her hands up in horror, but unfortunately the facts speak for themselves.

There are other facts that we need to acknowledge. Levels of household debt have gone up significantly. In 2009, there were almost 160,000 personal insolvencies in this country. Those were record levels; there were 30,000 more than in the previous year. The hon. Lady must look at the whole picture when giving the facts in the debate.

Further assertions have been made that progress was made under the previous Government because of the level of investment that they put in, but as we all know, investment alone is not the answer. We need structural changes in the way in which support systems work. In relation to welfare, spending on social security and tax credits has increased by about £60 billion in real terms over the past 10 years, yet as the hon. Member for Colchester said, there has been an inability to tackle the issues of poverty, and the performance on inequality has either stalled or deteriorated.

Now we face the biggest legacy from Labour of all, which is that we have the biggest deficit of any G20 country. It is incumbent on the present Government to get that deficit under control; otherwise, stability, either in interest rates or in our ability to provide employment for people or to encourage strong business, will be undermined. It is therefore absolutely right that the Government put first and foremost trying to get the deficit under control.

The Labour party now understands the failure of its policies in this area and that keeping on spending at unsustainable levels is not the way forward. The hon. Member for Bishop Auckland (Helen Goodman) was a Minister in the Department in which I am now a Minister when that spending spiralled out of control. She will know that the cuts would have had to come anyway and that her Department was already tabling 20% cuts. The problem is that the Opposition would not tell us where those cuts were to come from. Despite their being asked repeatedly, those details were not forthcoming.

[Helen Goodman]

There is absolutely no truth in the suggestion that the Department for Work and Pensions was proposing to the Treasury 20% cuts. I do not know where the hon. Lady has got that from. She certainly should not have seen the papers under the previous Administration. There is no truth in it, and I can assure her of that fact.

[Maria Miller]

Of course the hon. Lady will know that it was the other way round: the Treasury telling the Department for Work and Pensions that that was the case, because it was published in its detailed information about how a Labour Government would have to move forward after the last general election.

There is no option but for the present Government to be putting on the table the reform that is needed, because there is no viable alternative. We cannot proceed with the way in which the previous Government mismanaged the country. We have agreed and made it clear that we will protect the most needy and the most vulnerable. In the emergency Budget, my right hon. Friend the Chancellor of the Exchequer made it clear that the measures that he was proposing first and foremost would do that.

A number of hon. Members, including the hon. Member for Westminster North, referenced the IFS study. Obviously it is important that we examine such studies; and across Government that study will be taken seriously and examined in detail. However, as the hon. Lady will have to admit, it is not a complete analysis. There are omissions in the IFS analysis that make its findings incomplete. I am thinking particularly of the area that affects my Department the most—the impact of incentives to work, which will have a dynamic effect on all issues but were not taken into account in that study. The analysis by the hon. Member for Solihull (Lorely Burt) of the IFS report was a helpful contribution to the debate and balanced some of the other comments.

Another area that many hon. Members touched on was the impact of the Budget measures on families in general. My hon. Friend the Member for Cities of London and Westminster (Mr Field) referred to the wide-ranging impact that poverty can have on communities. I join him in applauding the work that Westminster city council does in that respect. I know about that, having met people involved in it before the election, when I was not in my current post, to hear in more detail about the family recovery plan in that area.

The Budget measures included increases in the child element of the tax credit that are well above inflation. That meant that the measures taken to freeze child benefit would be neutralised. We saw in the Budget a very effective way of protecting the poorest families by ensuring that we target the help available to us on the people who need it most.

A number of hon. Members referenced the VAT increase. I want to ensure that it is clear to hon. Members that that still does not apply to the things that children need the most: food and clothing. Therefore the increase will not have the impact that some of the scaremongers who have been talking about it might imply.

The hon. Member for Westminster North asked where the savings were coming from. I suggest to her that having 2.1 million people written off on old-style incapacity benefits is not the best and most effective way to run the country, that work is the best way out of poverty and that helping more of those people out of benefit dependency and into work will be an effective way of reducing our benefits bill.

In addition, we are working on a number of ways to ensure that families and parents benefit from work. Jobcentre Plus is now very experienced in developing employment programmes to support lone parents. The previous Government did a lot of work on that. Lone parent advisers have flexible options to enable families to get into work whenever they can, within the needs of the families and particularly their children’s need to go to school. [Interruption.] If hon. Members will forgive me, I have two minutes to try to complete my answers to an extremely long list of questions.

I want to talk directly about child poverty. The hon. Member for Colchester challenged me again on a number of issues to do with child poverty. I confirm to him that I have had meetings with both Save the Children and Barnardo’s. He talked about putting in place a cross-Government scheme to examine these issues. The Cabinet Committee considering social justice issues will be exactly the forum to debate some of these matters. Perhaps I can give him more details of that later.

The coalition Government continue to be committed to the aims of the Child Poverty Act 2010 and eradicating child poverty by 2020. The latest figures show that 2.8 million children remain in poverty. That is an increase of 100,000 since 2004 and is well off the previous Government’s targets. The Opposition need to acknowledge that fact if we are to have a reasoned debate.

There are a number of issues that I have not been able to cover in my comments. I was glad that the hon. Member for Solihull mentioned issues relating to pensioner poverty. Our policies in that respect will do a great deal to alleviate some of the problems faced by pensioners. With regard to disabled people, perhaps I can clarify one point for the hon. Member for Stretford and Urmston (Kate Green). It will not be a medical gateway that we introduce in relation to DLA. It is an objective assessment. I just wanted to put her mind at rest on that.