Capital Gains Tax (Rates)

Iain Duncan Smith Excerpts

Monday 28th June 2010 Commons Chamber

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

My right hon. Friend the Chancellor of the Exchequer has delivered our first coalition Budget, making what he legitimately described as unavoidable choices in the face of a potential eurozone economic crisis. They will involve, first, a reduction in spending to repair the record deficit left by the previous Government. I remind the House that we inherited the largest deficit in peacetime history: for every £4 we spend today, we are being forced to borrow at least £1. According to the Office for Budget Responsibility, this Budget will put us back on track to balance the structural deficit by 2015-16, with net debt falling as a share of gross domestic product by the end of the Parliament.

Secondly, the measures will include a restructuring of the tax and welfare system, underpinned by our commitment to fairness and protecting the vulnerable, even when faced with some tough choices—and there are tough choices.

[Chris Heaton-Harris (Daventry) (Con)]

Will my right hon. Friend kindly clarify the rate at which the Department for Work and Pensions can undertake work capability assessments for people on incapacity benefit?

[Mr Duncan Smith]

I was not going to deal with that at this point, but while we are on it, I can tell my hon. Friend that I know there has been speculation in the media over the past few hours and days. I can confirm that, as we said previously, we will launch the work programme in 2011, and will migrate current incapacity benefit claimants to employment support allowance over the three years. We have absolutely no intention of changing the current plan to assess 10,000 claimants per week over the period. That is our expectation. As the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) will know, it will involve challenges, but we will stick to it and see if we can get there. Unlike the last Government, we will provide an extra bit of help for those on employment support allowance who undergo the work capability assessment and need that support. My hon. Friend the Minister of State will table a statement tomorrow giving more details.

I am sure that the right hon. Lady—my opposite number—will back up what I have said. She has already expressed the hope that we will proceed with the changes that she introduced and with which we agreed.

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

Will the Secretary of State confirm that his timetable is the one that we proposed for the roll-out of the work capability assessment, and that it is expected to save about £1.5 billion over the next five years? Does he plan to make additional savings, and if so, where? The briefing that was in the papers today will have caused concern to people. Will the Secretary of State also tell us whether he will implement the small amendments to the work capability assessment that we announced just before the election in response to points raised by the citizens advice bureaux?

[Mr Duncan Smith]

We are continuing with the programme that the right hon. Lady left. We thought it a good programme, and I want to make it happen. She asked us to do that, and I agreed that it was right. We always said in opposition that we would do it.

As for whether we are looking for more savings, we are going to intensify the work support programme, which was not there before. I should be happy to give the right hon. Lady more detail about it, and my hon. Friend the Minister of State will make a more detailed statement. We estimate that we will be able to return more people to work, but we will keep that estimate under review. The right hon. Lady will recall that when she was Secretary of State there was a constant review of the programme to deal with the group who were flowing in. Recommendations were made, and we are paying attention to them.

[Yvette Cooper]

Does the fact that the Secretary of State thinks he will be able to help more people to return to work—although he has cut the job guarantee and billions of pounds from the support that would help them to do so—mean that he thinks that other people will not get jobs instead, or is he suggesting that the Office for Budget Responsibility will raise its forecast of the number of people in employment? Where will the jobs come from for the extra people whom he is going to return to work?

[Mr Duncan Smith]

The right hon. Lady is assuming that the economy is static, and that nothing changes in it. We believe that unemployment will fall—that is what the Office for Budget Responsibility says—and that we will therefore create more jobs.

The right hon. Lady’s programme, which we inherited, provided support for the “back to work” element in only two parts of the country. We are extending support to the whole country, and that is where we will get the extra effort. We will continue the programme. We think that we have embellished it and made it somewhat better, and I guarantee that we will keep it under permanent review.

The third thing that we are doing is setting down a strong foundation for long-term reform, which is part of the Budget proposals. Although we must correct the failings of the last Government, we are committed to delivering a better future for Britain, and we have had to make the stability of our economy a priority. I know that it is difficult for many Opposition Members to talk about this, but I also know that it is what they would be talking about if they were in government. There are always difficult choices to be made at a time when we have to draw our horns in.

We have had to prioritise the stability of our economy lest we forget the shambles with which we were left. Borrowing will be £149 billion this year, the second largest amount in Europe, and, as the Prime Minister pointed out before the Budget, it was on course to double in five years to £1.4 trillion—£22,000 for every man, woman and child. As a result of the Budget, however, the debt will fall to £116 billion next year, £89 billion the following year, and £60 billion in the year after that. It will fall to £37 billion in 2014-15, and is projected to fall to £20 billion in 2015-16, with the current structural deficit back in balance. That is the task that we have set ourselves. That was the first test of this Budget: to tackle borrowing and get the deficit down. Our approach has been reinforced by the judgments of the credit rating agencies and the business lobby when they agreed on Budget day that the plan is credible. Measures include reducing current expenditure by £30 billion a year by 2014-15, stronger medium-term growth with more business support to restore UK competitiveness, and reducing regulation and tax rates; and unemployment is forecast to fall throughout the OBR’s forecast period.

[Glenda Jackson (Hampstead and Kilburn) (Lab)]

Will the Secretary of State tell the House how many credit rating agencies made that judgment? My knowledge, which I admit is limited, is that there is one individual in Florida and another rating agency company comprising three individuals in the United States of America, and also that they consistently failed to remove the triple A rating from those companies and banks that caused the economic downturn in the first place. Why are the Government listening to people who clearly do not know what they are talking about?

[Mr Duncan Smith]

It is not just the Government who are listening to them; it seems that the rest of the world is as well. I must remind the hon. Lady that if we are not careful—[Interruption.] Whatever she says, if the credit rating agencies downgrade our rating, we would, like Spain and Greece, be paying far more to borrow the money that we are borrowing as a result of the previous Government’s position. Whether or not we agree that the credit rating agencies got it right on the banks is irrelevant, therefore. In this particular case, the question is whether or not we would end up paying more as a result of their bad rating, and that is something we were not prepared to risk. This is a Budget to get the economy back on track. It is a Budget to support the recovery and drive down the deficit, and, most importantly, to get Britain back to work.

Despite facing the tough and unavoidable choices forced on us by the fiscal position left by Labour, we are increasing the threshold for paying the basic rate of income tax, and increasing the child element of the child tax credit by £150 above indexation next year. We are making sure that the most vulnerable do not pay disproportionately.

[Bob Russell (Colchester) (LD)]

On that point, will my right hon. Friend advise me whether the current level of 3.9 million children living below the poverty line—inherited after 13 years of failure by a Labour Government—will be increased or decreased by the end of this Parliament?

[Mr Duncan Smith]

Directly in terms of this Budget, there will be no increase at all; that figure is approved by the OBR, and it is our determination to drive the figure down. Let me say to my hon. Friend that he is right: we have inherited from Labour one of the worst records of household unemployment in western Europe and, worse than that, we have the highest number of children living in workless households in the whole of western Europe. That is a shameful record of the previous Labour Government, and although Labour Members go on about it, it is we who have to deal with it, and I promise my hon. Friend that we will deal with it.

[Yvette Cooper]

Will the Secretary of State confirm that the number of children living in workless households has fallen from about 2.3 million in 1997 to 1.8 million today, and that it was, in fact, his party when in government previously that trebled the number of children in poverty?

[Mr Duncan Smith]

If the right hon. Lady wants to go on fighting past elections, she can; it will not change the results of them. The reality is that under her Government, child poverty rose—[Interruption.] It rose from 2004 onwards, and the Government threw a lot of money at it and absolutely failed. Under her Government, in the last seven or eight years child poverty has risen dramatically, and I have to point out to her that she has failed to recognise that as a result of their policies child poverty is now at serious risk of rising even further. We have to get it down.

[Several hon. Members]

rose—

[Mr Duncan Smith]

I will give way in a minute; I want to make a bit of progress first.

Universal child benefit will be frozen, but benefits will be recycled so that they are targeted at the most vulnerable through child tax credits. Thereby, the poorest will be protected. That is exactly what we will do in this Budget.

We will freeze public sector pay, but we will also increase the pay of those on the lowest incomes. I am sure the right hon. Member for Normanton, Pontefract and Castleford will welcome the fact that half the employees—the lowest paid—at her former Department will get at least £250 this year and next.

We will protect health spending, which was a priority, and honour our international aid obligations. We will reduce the deficit by raising taxes more and cutting spending less, but we will also reduce corporation tax from 28% to 24% to make the UK more competitive internationally and get people back to work. We will reverse the cynical pre-election clawback by the previous Government from this year’s uprating forecast, and we will do the decent thing and fill the gap they left. We were left with a £300 million shortfall, because the previous Government had uprated benefits when the retail prices index fell below zero but had made no provision to find that money in 2011, so benefits would have been uprated less than the uprating we shall put through next year.

Let us not forget that we chose to take hundreds of thousands of low-income individuals out of tax, improving work incentives. More than 880,000 people on the lowest incomes will be taken out of tax altogether and 23 million taxpayers will benefit. That is a Liberal choice—I say that to the hon. Friends sitting on my right—and one I wholeheartedly support.

[Emily Thornberry (Islington South and Finsbury) (Lab)]

The right hon. Gentleman talked about making sure that the most vulnerable did not pay disproportionately. Is he aware that in Islington, 2,154 families are in private accommodation on housing benefit and a third of them will be affected by the new caps on housing benefit? If and when they face eviction, what help will the Government give to stop hundreds, if not thousands, of Islington families being made homeless? If they are made homeless, what help will he give to get them somewhere to live?

[Mr Duncan Smith]

The hon. Lady is looking at things in a rather doom-laden way. The reality is that the changes to housing benefit will assist people into the right level of home. At the moment, through local housing allowance, we are paying vast sums of money to people who would not be able to get the same money if they were in employment. For example, in south-east London, which is similar to the hon. Lady’s area, people on low incomes living in private rented accommodation would still—even with the caps in place—be nowhere near the level of money that somebody on local housing allowance receives. That is not fair on those who are striving and working, but having to struggle to live in a house. Before the hon. Lady carps too much, she should recognise that we have also increased the discretionary payment, trebling it to £60 million. If there are specific difficulties there will be money for local councils to help and assist.

[Mr Andrew Tyrie (Chichester) (Con)]

May I take the Secretary of State back to child poverty? Page 34 of the Red Book makes it clear that there will be

“no measurable impact on child poverty in the next two years”

of Budget measures. Can he explain why the Government have published that assessment only for a two-year period and whether he will commit to publishing an assessment for the whole of the planning period?

[Mr Duncan Smith]

Indeed, we will. We shall launch a strategy in March next year and I promise my hon. Friend that I shall inform him about how it goes. As I pointed out, child poverty has risen by more than 100,000 since 2004, so when the Opposition lecture us about child poverty they ignore the facts. They spent a lot of money but they failed to meet even their targets.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

Does my right hon. Friend agree that although the welfare state is obviously necessary to protect the poor and vulnerable, it has often acted as a disincentive for people to go from being out of work to work? I know that from my constituency. Will he ensure that over the next few weeks, when we consult on the future of the welfare state, all the relevant charities, agencies and local councils, which are very knowledgeable about such things, are fully involved so that the outcome is informed by the facts and not by prejudice?

[Mr Duncan Smith]

I give my hon. Friend absolute confirmation that we shall consult widely. As he knows, we are planning to reform the benefit system so that it no longer acts as a major disincentive for people to go back to work. We have had to take decisions in the Budget, but beyond that we want to bring forward changes that make work pay—significantly for those going to work for the first time, as they understand. My comments at the weekend were about the need to recognise that often people want to move 10 or 15 miles to take a job, but they worry about the cost of travel to work or losing their house. The coalition has to look at that sort of thing to see whether we can make it easier for people to make decisions and take risks without being punished every time, as with the last Government. It is worth remembering that, of all social housing tenants—it is a falling figure—only 5% change their houses during the year, whereas 35% of low-income private tenants change. That is the problem: they are static, and they are stuck in what they do.

[Mr Andy Slaughter (Hammersmith) (Lab)]

When will the right hon. Gentleman publish more details of the proposals for the cuts in housing benefit? The local authorities affected, such as mine in Hammersmith, which is a Conservative authority, really do not know what is happening, other than that 750 families, at least, will have to move out of the borough because even the substandard accommodation that he clearly wants them to move into is not available in central London. How does he expect those families who move to areas where less work is available than in central London to find jobs, as he says that he wishes they would?

[Mr Duncan Smith]

In fact, over a third of all the properties available for rent are available below the 30th percentile. The reality is that property is out there, and we know that we can do it. Of course, I did not say at any stage that these changes would be easy. They will not be easy—we recognise that—and they will not happen overnight. They will not start until next October, and most cases will be reviewed only on their anniversary, which could be anything up to a year and a half or two years away.

[Several hon. Members]

rose—

[Mr Duncan Smith]

Excuse me; I am answering the hon. Member for Hammersmith (Mr Slaughter) if hon. Members do not mind. We will publish the full details, and he can discuss them with us at any time—the door is always open, as soon as I am ready.

I felt it unfair therefore to make such a change, and I agreed that we needed to ensure that we protected the worst-off.

[Mr David Lammy (Tottenham) (Lab)]

Will the right hon. Gentleman give way?

[Mr Duncan Smith]

I will give way in a second; I think that I have been reasonably generous.

I should like to return to the choice on the uprating of benefits—something on which, I guess, Opposition Members will want to intervene. Before the Budget, there was some media speculation, much of it fed by the Opposition. In fact, I think that the right hon. Member for Normanton, Pontefract and Castleford said that she would not support a freeze of benefits and that she would definitely want to oppose that. The media speculation was that we would go to that—in fact, I believe that that would have saved some £17 billion over the lifetime of this Parliament—but I resolved not to do that. We decided that it would be unfair for the worst-off. Instead, the Chancellor and I agreed that we would continue to uprate benefits by the consumer prices index, which is forecast in the Budget to be 2.7% this year. Of course, the CPI does not include housing costs, and it seemed more reasonable. However, the right hon. Lady was reviewing that before she left office, and I am sure therefore that she will want to tell me that she agrees with the uprating, rather than remaining as we were. I would therefore like her to tell me exactly what reduction in spending she was planning as her Department’s share of the £45 billion. I will give way to her if can tell me which elements of saving she would have made in her budget. She does not want to use the CPI; what was she going to do that added up?

[Yvette Cooper]

In fact, as the right hon. Gentleman will be aware, the additional support that we have put in to help the unemployed has kept unemployment at about half the level of previous recessions and nearly 750,000 lower than it was predicted. That in itself is likely to save more than £15 billion over the next five years. We believe that the right way to do welfare reform is help people into work, not just to slash the support for the most vulnerable people in society.

[Mr Duncan Smith]

I am very sad that the right hon. Lady chose not to answer the question. When I give way to an intervention from now on, I will ask Opposition Members—this goes for all of them—the very simple question: what would they have reduced? They were in government not two months ago, and they have left us with a terrible problem.

[Chris Bryant (Rhondda) (Lab)]

Will the right hon. Gentleman give way?

[Mr Duncan Smith]

Before I give way—I will give way in due course—I want to make a bit more progress, and I want Opposition Members to tell me what they would have advised the right hon. Lady to cut from the Department’s spending. It is utterly unreal that they can sit there now in opposition as though they have been there for six years and they had nothing to do with the mess. After all, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who is sitting on the Front Bench right now, said that there was no more money left, so where was the right hon. Lady going to get the money from?

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Will the right hon. Gentleman give way?

[Mr Duncan Smith]

I will give way in a second; I think that I have been reasonable.

Our action to increase benefits in line with headline inflation measures is in marked contrast to the actions of the previous Government. I mentioned that there was no provision to find the extra £300 million that they would have reduced next year’s budget by. Let me look at some of the other measures. Today in the UK, nearly 2 million children grow up in homes where no one works. They are at risk of poorer outcomes than those of their peers in working households. That is unacceptable, so the Budget will deliver fairness for children and families while protecting the vulnerable. To help lone parents to raise themselves out of benefit dependency and into work, our measures include lowering the age at which lone parents will be expected to move into work to when their youngest child reaches five. However, it is important to remember that jobcentres have wide discretion on this, and as they assist parents, they will of course have the capacity to examine how things fit in with parents’ requirements around their children’s education. It is right and fair that lone parents should work as and when their children are in school, although more particularly in this case that will be part-time work.

When we are restricting eligibility for the Sure Start maternity grant for the first child, it is right that we provide additional support for families to buy essentials. However, it is also right that these essentials are not repeatedly bought for subsequent children but used again, which is what is done by many hard-working families on low incomes. For multiple births, the grant will come through a corresponding number of times, so people who have triplets or twins will receive different lots of that £500. Further help may be available from the social fund if there is an additional need.

[Chris Leslie]

I certainly disagree with the reduction in the maternity allowance, but can the right hon. Gentleman justify scrapping the health in pregnancy grant? The money would have been available for the grant, by the way, if the Government had been tougher on the banks with the banking levy.

[Mr Duncan Smith]

The reality is that the grant came far too late and had no effect on improving women’s health, which was its original target. It was actually paid after the child was born, so the whole grant was a nonsense from start to finish. Getting rid of it has affected nothing out there and there are far better uses for the money.

[Mr Stewart Jackson (Peterborough) (Con)]

Did my right hon. Friend read last week that the media commentator Stephen Pollard had spent his family’s health in pregnancy grant on a trip to the Fat Duck restaurant in Bray? That is an example of a lack of proper targeting of those who are most in need of such funding, and it shows why we were right to get rid of the grant.

[Mr Duncan Smith]

I thank my hon. Friend for that example. We have put £2 billion into the child tax credit because we believe that that is a far better way of helping poorer parents. The grant is rather indicative of the way in which the previous Government scattered money around in the hope that they could buy some votes in the run-up to the election although, as was demonstrated, that failed.

[Several hon. Members]

rose—

[Mr Duncan Smith]

I want to move on to housing fairness and work incentives, but I shall give way in due course. I have been pretty reasonable about that.

[Chris Bryant]

In your view.

--- Later in debate ---

[Mr Duncan Smith]

Perhaps not in the hon. Gentleman’s view, but he has never been reasonable in my view, so good luck to him.

The Budget tackled the ballooning cost of housing benefit. In real terms, the cost of working-age housing benefit has increased from £10.6 billion to £15.4 billion in 2010-11. If the system was left unreformed, it is projected that the housing benefit bill would reach £21 billion in 2014-15. It is out of control and what is more, housing benefit is often unfair for working families. Today, a tenant in a five-bedroom house in an expensive area such as Westminster could feasibly get more than £100,000 a year. Although that example applies to a small number of people, some 750,000 get more than £10,000 a year. Those cases are still in the minority, but they happen far too often. It is unacceptable and unaffordable that people on benefits are living in homes that our hard-working families cannot afford, so we have capped local housing allowance levels at the rate for four-bedroom properties.

[Sheila Gilmore (Edinburgh East) (Lab)]

Is the right hon. Gentleman aware that the biggest reason behind the increase in housing benefit is the lack of affordable rented housing in this country? Most of my constituents would rather live in an affordable rented house than a private rented home.

[Mr Duncan Smith]

Oh dear me; there is no stopping Labour Members sometimes. I must say to the hon. Lady: whose fault is that? The Labour Government slashed the building programme, so Labour Members have only themselves to blame. Everyone warned them about the problem for years. As far as we possibly can, we need to ensure that the houses that people occupy are of the size that they need. We should not have elderly people trapped in houses that are far too large for them and that they cannot look after. Only the most expensive areas will be affected by the cap.

[Several hon. Members]

rose—

[Mr Duncan Smith]

I will give way in a minute.

We have also introduced size restrictions to the social rented sector to make better use of existing housing stock, changed the percentile of market rents for local housing allowance rates to 30% to keep rents under control, time-limited the housing benefit award for jobseekers to reinforce back-to-work incentives and changed the current system of mortgage interest support, in which 92% of customers get more help than they need.

Of course I am listening to the concerns about the potential impact of housing benefit reform, and we will keep it under review. That is why we are tripling the discretionary housing payment to £60 million and we will provide for an additional bedroom for non-resident carers, who may need to stay overnight—something, by the way, that the other Government could have done and never did.

[Several hon. Members]

rose—

[Mr Duncan Smith]

I give way to the hon. Member for Wakefield (Mary Creagh).

[Mary Creagh (Wakefield) (Lab)]

I can tell the right hon. Gentleman that there are no fat ducks in Wakefield. What we do have is a large number of poor families who will be hit by his cut to the Sure Start grant. I can tell him that if someone has a child who is two, they cannot expect a baby to travel in the same pushchair. I can tell him that if someone has a child of six of seven, they have already given away the pushchair by the time the next baby comes along, because that is how families organise themselves. He argues that people should reuse and recycle goods for babies, but people cannot fit two babies in the same cot—is that what he is now suggesting families in this country should do?

[Mr Duncan Smith]

I must say to the hon. Lady that that is a pretty poor intervention. The grant of over £500 for every child was far more than most poor, working families would ever achieve from any other source. As I told Labour Members earlier, we have to make tough choices. This is an area where people can share. Having had children myself, I know, as will many others in the House, that people share clothing and pushchairs. They do what they can to get by. There was a ludicrous idea that every child required the same amount of money, and I am afraid that in these difficult times we have had to take a difficult decision. I say to the hon. Lady that we are not going down the road she suggests.

[Mr Clive Betts (Sheffield South East) (Lab)]

Does the right hon. Gentleman accept that the Institute for Fiscal Studies, in its report on the Budget, said that the new measures were largely regressive, and that was before housing benefit cuts were taken into account? A survey at the weekend by Tim Horton and Howard Reed said that if the housing benefit cuts and spending cuts were taken into account, the poorest 10% were likely to face a six times greater reduction in their spending power than the richest 10%. Does that make it a fair Budget, in the right hon. Gentleman’s opinion?

[Mr Duncan Smith]

The IFS talked about it being debatable whether the Budget was regressive or progressive. I say honestly to Labour Members that if they do not like these measures and if they really want to be taken seriously, they need to tell me what they would have done. Had they won the election—heaven help us—they would have been on this side of the House justifying reductions in spending, not playing games on the other side. If the hon. Gentleman wants to say that this is unfair, he should tell us what would have been a fair way of getting that £45 billion reduction.

I am committed to ensuring that disabled people and carers receive the support that they deserve. I have therefore asked the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Basingstoke (Maria Miller), who has responsibility for disabled people, to undertake a strategic review, taking a principled look at the support provided for disabled people across the piece, to ensure that the effect of all the measures is appropriate and that they work.

Over the last decade, spending on disability living allowance—this is the issue—has spiralled out of control, and the system has been vulnerable to error, abuse and, in some cases, outright fraud. In just eight years the numbers claiming DLA have risen by around 700,000. In 2010-11, spending is on track to reach just over £12.1 billion, twice the level of the 1995-96 spending in real terms. That is a significant sum, and we need to make sure, for the taxpayer, that the money is paid to those who desperately need it. That is why we need a proper medical assessment. It is not about cutting support for people who live with serious disability or health problems; it is simply about making sure that we target support at those who need it, and the system remains fair and affordable.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I welcome the right hon. Gentleman to his new post. He will recollect that towards the end of the last Parliament the entire House agreed to an increase in disability living allowance for blind people. Will he give the House a guarantee that he will not go back on that decision?

[Mr Duncan Smith]

We will give that guarantee. We will be laying the regulations for that this week, so there is definitely a commitment to go ahead.

[Several hon. Members]

rose—

[Mr Duncan Smith]

As the hon. Member for Rhondda (Chris Bryant) has been standing up so often, I will give way to him.

[Chris Bryant]

I am very grateful to the Secretary of State. My constituency has one of the highest levels of those on sickness benefits of various kinds. There are historical reasons for that. He asks what I would like to see. I would like to see fewer of my constituents on unemployment benefits and fewer people on sickness benefits because they were in jobs. The difficulty is how one achieves that without cruelty to those who desperately need support and want to be able to go to work. The vast majority of my constituents are not looking for handouts; they want to be able to get into work.

The right hon. Gentleman talks about people moving house. My concern is that that does not apply in constituencies such as Rhondda because we have a very high level of home ownership. For those people, unless he really is talking about just upping sticks and moving to another part of the country, what he is saying poses the very real danger of increased poverty. How will he make sure that those people have a chance in future?

[Mr Duncan Smith]

That is a very reasonable question. As I said earlier, we did not want to be here in the first place. We have inherited a major deficit, and we have to eradicate it. Whoever was to be in government—the hon. Gentleman should know this, having been a Minister—was going to face tough choices. There is no easy choice. Of course I recognise that he has a problem. We have said that we will increase the discretionary allowance. We also want to make sure that more money is spent on areas such as his that can, in turn, develop more jobs. That is a priority, and we will be making announcements about that.

These decisions are not about taking money away from people who need it; they are about making sure that those who need money get the money that they need. Nobody, after these checks, will have money taken away from them who can genuinely demonstrate that they should be receiving DLA. The key point is to make sure that those who do not need it are seeking work.

[Chris Bryant]

rose—

[Mr Duncan Smith]

I have already given way to the hon. Gentleman. If he will forgive me, I want to make some progress.

I started with a clear argument that the first coalition Government faced some unavoidable choices. I know that the Opposition, having been in government a couple of months ago—[Interruption.] The Opposition say that the choices are not unavoidable, but I would love to know what they would reduce if they were in government. What would be their choices? We have heard nothing about that except their talk about the £45 billion—not a single word about a penny piece being cut from any budget. We have to make spending cuts to repair a record deficit, reform the tax and welfare systems while protecting the vulnerable, and set the foundations for long-term, sustainable recovery.

[Mr Lammy]

The right hon. Gentleman has confirmed that he believes that there will be an exodus from central to outer London, and he has said that there is housing to accommodate those people. What is his assessment of that housing in Chingford? Can he confirm that he will be doing a race impact assessment?

[Mr Duncan Smith]

I am happy to consider a race impact assessment—that is reasonable—and if the right hon. Gentleman wants to come and talk to me, my door is open.

We believe that there is enough housing in London. Of course, I did not say that this was going to be easy. The point is that far too many people in houses in central London are paid significant sums—over £100,000 in some cases. That is unsustainable. As much as I like the right hon. Gentleman—he is a fellow Tottenham supporter—I have to say to him that he knows as well as I do that these are tough choices, but they are ones that we believe that we can manage. We have tripled the discretionary fund to allow for difficult cases, and I suspect that a significant amount of that will be used in London because the nature of London means that there will be issues. We will get through this, and I guarantee that we will keep the situation under review. My offer to the right hon. Gentleman still stands.

[Mr David Ward (Bradford East) (LD)]

The Chancellor ended his Budget speech by saying that it

“laid the foundations for a more prosperous future. The richest paying the most and the vulnerable protected: that is our approach.”—[Official Report, 22 June 2010; Vol. 512, c. 180.]

If the actuality falls out of line with the intention, will measures be brought forward to bring it back into line?

[Mr Duncan Smith]

My hon. Friend has to recognise that one needs to see the Budget in the round, over the lifetime of this Parliament and in terms of reform. What I want to do is introduce reforms that focus benefit money—the money that we spend—hugely on the poorest in society. That must be our priority. Right now, the benefit system that we inherited is out of kilter, and has sucked in too many people on higher incomes, and has left too many people on low incomes desperately looking for work, but unable to find it. The answer to my hon. Friend’s question is that we are absolutely—and I am, too—determined to reform the system, so that the poorest benefit the most, and we make sure that they receive assistance to change their lives and become more profitable in all that they do.

[Several hon. Members]

rose—

[Mr Duncan Smith]

I am going to continue.

We have to seize the long-term prospectus for reform, and I shall introduce radical, long overdue changes to the welfare system, reforming the working-age benefit and tax credit system with measures consistent with our core principles: protecting the most vulnerable; improving incentives to work and providing the best route out of poverty; and tackling the pathways into poverty, welfare dependency, family breakdown and debt. That is crucial if we are to tackle income inequality, which is at its highest since records began in this country.

[John Howell (Henley) (Con)]

A vulnerable group that my right hon. Friend has not yet mentioned is pensioners. Will he say something about what we intend to do to protect pensioners’ incomes?

[Mr Duncan Smith]

I was going to come on to that, but I shall deal with it now.

As my hon. Friend knows, the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), fully supports all of this, and has made an announcement. [Interruption.] We are a coalition, and we are together. He has announced some radical proposals on pensions, and I am enormously proud to be the first Secretary of State for Work and Pensions to say that we have relinked pensions and earnings. Moreover, even in these difficult times, we will triple-lock that pension, so that it will rise in line with earnings or prices, whichever is highest, or by 2.5%. [Interruption.] I heard the hon. Member for Wallasey (Ms Eagle) chuntering about the consumer prices index, but earnings will rise in due course well above that, so she does not know what she is talking about. [Interruption.] Okay: she had 13 years to do that, but she did not do it. She should go and look pensioners in the eye, and tell them why the previous Government did not do so, when they had the opportunity.

The coalition is proud to make sure that we will reform the system that we have inherited. We will reduce the deficit, and we will improve the lot of the poorest in society. We will look back on this and say, “What a shameful 13 years the other side had.”

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

The Secretary of State told us in May in his first speech that he would work to improve the quality of life of the worst-off in Britain. He said that

“we are here to help the poorest and most vulnerable in our society.”

He has just spent 40 minutes defending a Budget that kicks the poorest and the most vulnerable in the teeth. How does that sit on his conscience? Was it his idea, or was it the Treasury’s, to tell a woman in her fifties, who has given up work to look after her elderly parents that, in fact, what they wanted to do was cut housing benefit and make her pay VAT—hundreds of pounds a year—and that even her carer’s allowance over the next five years would be cut in value by about £90 a year? Was it his idea, or was it the Treasury’s, to tell someone who is severely disabled—

[Mr Duncan Smith]

rose—

[Yvette Cooper]

Perhaps the right hon. Gentleman can answer this point as well if he is going to respond. Was it his idea, or was it the Treasury’s, to tell someone who is severely disabled and really cannot work, “We’re going to cut the value of support over the next five years by £300 a year”? If he could answer those points, that would be very welcome.

[Mr Duncan Smith]

I should be grateful if the right hon. Lady answered the original question. She was in government not two months ago. [Interruption.] No—the Opposition have to recognise that they have only just left government, so we have a legitimate right to ask the question. They left the deficit behind, which will lead to real problems for Britain—we have had to resolve it. If she does not like what we have done, what would she have done instead? Will she answer that question?

[Yvette Cooper]

The right hon. Gentleman has not answered the question. He has not explained why he claims to help the poorest and most vulnerable, yet is cutting the benefits of those who are poorest and most vulnerable in society. Government Members like to claim that this is inevitable. This is an ideological choice that they are making. They have chosen to cut an extra £40 billion from the economy. They have chosen to cut an extra £11 billion from the value of benefits and tax credits. They have chosen to cut an extra £17 billion a year from Government Departments, and they have chosen to increase VAT. They have chosen to cut the deficit at a pace that is not only unfair and destructive to our public services but damaging to our economy.

--- Later in debate ---

[Yvette Cooper]

I do not think that was right. That is why it was right to increase the support for pensioners, to increase the winter fuel allowance and to bring in a floor, so that never again would pensioners face such an increase.

Members on the Government Benches jeer and call, but what are they going to do to the winter fuel allowance and to free bus passes? They are already briefing the newspapers that they plan to cut the winter fuel allowance and free bus passes, and that that is needed to protect the police and public services. I invite the Secretary of State to intervene and to confirm that he will make no cuts in the winter fuel allowance every year for the next five years.

[Mr Duncan Smith]

I tell the right hon. Lady that the coalition gave a commitment. We are paying the winter fuel payment.

[Yvette Cooper]

I hope that meant for this year, next year and future years. [Interruption.] The right hon. Gentleman says that he is paying the winter fuel payment in full. It is not clear, however, what he thinks the full level is. Perhaps he could make the same commitment about free bus travel. Will he stick with free bus travel and not cut it for the next five years?

[Mr Duncan Smith]

I shall tell the right hon. Lady what I am going to do. I am going to answer questions when she answers this question: what would she have reduced with a £45 billion requirement on her head to cut the deficit? Until she owns up and answers that question, she has no right to ask us any more.

[Yvette Cooper]

The right hon. Gentleman has gone £40 billion further. He has proposed an additional £40 billion of cuts that we do not think are the right thing to do. He asks what we would have done, but I am sure that he has read chapter 6 of the March Budget, which sets out £20 billion of saving cuts in some detail and a further £19 billion in tax increases. I shall tell him what else we would not do: we would not waste money on measures such as free schools and the married couple’s allowance.

Nothing in the Government’s plans will get a single extra person back to work. In fact, the opposite is true. The Budget cuts the number of jobs in the economy by 100,000 a year. It increases the number of people on the dole by up to 100,000 a year, and that is on the admission of the experts the Government appointed. At the same time, the Government are cutting 200,000 jobs and training places and the youth guarantee and job guarantee schemes. How on earth will they get more people into work if they keep cutting jobs?