Amendment of the Law

Iain Duncan Smith Excerpts

Monday 23rd March 2015 Commons Chamber

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

It is a pleasure to open the debate, possibly for the last time, and to welcome this final Budget—[Hon. Members: “Hear, hear.”] I knew that I would draw support from different parts of the House, and I am pleased to hear that I draw it from the Opposition Front Bench as well. Last week the Chancellor reiterated the Government’s commitment to our long-term economic plan—even the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), slightly smiled at that one—restoring the public finances and supporting businesses while providing security and stability for Britain’s families.

At the start of this Parliament we inherited an economy that had suffered a greater collapse than almost any other country, with £112 billion wiped off our GDP and 750,000 people losing their jobs, contributing to a welfare bill that had risen by 60% in real terms under the previous Government. Over the past year, however, Britain has grown faster than any other major advanced economy, with the Office for Budget Responsibility’s future growth forecast revised up. Britain has had the best performing labour market in the G7, with employment forecasts revised up too, and unemployment revised down. We are on the path, therefore, from austerity to prosperity. The deficit has been cut in half. The fiscal mandate has been met in the target year. National debt is set to fall in the coming year. A surplus of £7 billion is forecast by the end of the next Parliament. Welfare spending is down in real terms for the first time in 16 years and is below its 2010 level as a share of GDP.

Underpinning this recovery is the remarkable performance of our labour market, with the highest employment rate that Britain has ever seen, at 73.3%. The rise in youth employment in the UK over the year is larger than the rest of Europe combined, and there are now more people in private sector jobs than ever before, more women in work than ever before, more lone parents in work than ever before, more older workers than ever before, more disabled entrepreneurs than ever before, and perhaps most importantly, the most households in social housing in work since records began. That is arguably the most important of all the figures.

[Wayne David (Caerphilly) (Lab)]

Will the right hon. Gentleman give way?

[Mr Duncan Smith]

In a moment.

Importantly, and contrary to the myths that the Opposition promulgate, of this rise in employment since 2010—I want to make this clear, as I suspect the hon. Gentleman may ask about this—80% is full-time work and 80% is permanent. Three fifths has come from managerial, professional and associate professional jobs, 70% of private sector jobs have been outside London, and two thirds of jobs have gone to UK nationals, reversing the damaging trend under the previous Government when more than half went to foreign nationals.

[Wayne David]

Will the Secretary of State kindly tell the House how many of those new jobs were on low pay?

[Mr Duncan Smith]

I think I have just told the House. It is always good to ask another question when I have just answered it. The jobs that we are providing are paid well. We have seen a rise of 2.1% in private sector pay against inflation of 0.3% now, and a rise in public sector pay of 0.7%—somewhat over and above inflation.

So we have seen unemployment fall to pre-recession levels. The number of out of work benefits has fallen to its lowest for a generation, and the number of workless households has fallen to the lowest on record.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Precisely on employment at record levels and the other boasts that the right hon. Gentleman has made, why then are national insurance and tax receipts way below budget and employment above budget? Does that not reflect the quality and level of the employment that is being offered—1.8 million zero-hours contracts, for example?

[Mr Duncan Smith]

I respect the hon. Gentleman and I am glad he asked me that, because it allows me to point out something that I was going to come to later. We have raised the thresholds on taxation. It is not surprising, therefore, that some of the insurance levels are low. I am proud of that. I am proud that my right hon. Friend the Chief Secretary is also proud of the fact that we are raising the point at which people pay tax for the first time. The real reason behind all these facts and any other issues that the hon. Gentleman raises in this regard is the fact that the previous Government saw the economy go over the edge of a cliff, and we have been picking it up ever since. If the question is why it is not perfect yet, the answer is that we still have some way to go, but we are making progress and going in the right direction.

Through this Government’s employment programme we are ensuring a jobs recovery for all. I want to point out some of the figures: 2 million apprenticeship starts since the beginning of this Government; over 1 million claimant commitments signed—as people go in to sign on to jobseeker’s allowance, setting out and reinforcing people’s obligations; work experience for 250,000 young people; 60,000 start-up businesses through the new enterprise allowance; and the Work programme helping more long-term unemployed people back into work than any other programme before.

[Mr Jim Cunningham (Coventry South) (Lab)]

rose—

[Mr Duncan Smith]

I will come back to the hon. Gentleman. I want to make a little progress, as I know that others want to speak.

The Work programme is continually improving. Nearly 1.1 million people have spent time off benefits, 680,000 have got a job, 400,000 have found lasting work, and job outcomes after 12 months are nearly twice as high as with the early cohorts, including the new employment and support allowance claimants. Compared with the previous back-to-work programmes—the flexible new deal, for example—the Work programme has helped more than twice as many people into work in the first two years as the flexible new deal, with nearly three times as many people in jobs for six months. This is not just getting people into work but ensuring that they stay there—that is the critical element.

I will give way to the hon. Member for Coventry South (Mr Cunningham) and then make some progress.

[Mr Cunningham]

The Secretary of State said that when the present Government took over, the economy was on a knife edge. I remember the previous Conservative Chancellor claiming credit when we were in power for the handling of the economy. More importantly, the Secretary of State has not mentioned the fact that recently the purchasing power of wages has dropped by 6%. Wages might have gone up by 2% in the private sector, but their overall purchasing power has dropped by 6%.

[Mr Duncan Smith]

I am a little bit lost. I am not sure whether the hon. Gentleman is saying that the previous Prime Minister was claiming credit when he was Chancellor in the previous—[Interruption.] If he is referring to my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), it is difficult for the previous Labour Government to claim credit when their Chief Secretary left a letter on the desk saying, “There’s no money left.” If the hon. Gentleman wants to claim credit for that, I will certainly allow him to intervene.

While the Budget proposed new measures to boost growth and support private sector job creation, in turn increasing employment, the Opposition’s only alternative, the jobs guarantee, it now turns out, is more like a no-jobs guarantee—a make-work scheme that the Institute of Directors has said is

“not the source of sustainable jobs”.

It is the kind of scheme that, for the past 20 years, the OECD has demonstrated is expensive and counter-productive in the long term. It says that large deadweight losses, displacement and substitution effects are of little success in helping unemployed people to get permanent jobs in the open labour market. We got rid of the Opposition’s last scheme, which did not work, and this one will fare no better. Labour’s flagship programme is just a rehash of the failed make-work schemes that seem to be its solution almost every time.

The hon. Member for Leeds West (Rachel Reeves) made this comment about Jobs Growth Wales:

“I went to see a scheme very similar to this in Wales last week and...that’s what we would aim to do across the UK”.

If that is what she thinks she is going to do, let us deal with what Jobs Growth Wales actually produces. It has been revealed to be an expensive exercise in cherry-picking the best-quality people who want to go back to work. Far from being a guarantee for all, which I understood was her policy, the hardest to help are not eligible for the programme, and only one in three applicants has got a place on it. A success rate of 80%, at a cost of £6,000 per place, is trumpeted, yet that compares with the 90% success rate of all—not some of—the eligible people in Wales who apply, who move off jobseeker’s allowance within nine months anyway. The reality is that this programme, on top of already successful programmes getting people into work, is less successful than the programme that it seeks to replace. Apparently, this is the programme that the Opposition want to copy and turn into a national programme in government, and it is all a rehash of the future jobs fund.

In the public sector, this Government have achieved the same success as the future jobs fund achieved through work experience in the private sector, but—here is the key—at a twentieth of the cost of what it cost Labour to provide jobs in the public sector. That is the problem with this make-work scheme.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

While the right hon. Gentleman goes on mudslinging about party policies, he is skimming over the fact that what is wrong with our economy and the jobs being created is that over the past five years we have had a terrible deficiency of highly skilled workers. We are still churning out apprentices from short-term apprenticeships of a year, on average. That is not meeting the real need. When is he going to address that? If he does not do so, he will never solve the problem of low productivity.

[Mr Duncan Smith]

I agree with the hon. Gentleman that that was the situation we inherited. As I said earlier, under this Government there have been 2 million new apprenticeships aimed at getting people the necessary skills. There are also more people going to university and studying science. The reality is that it is not possible to turn around in a few years the problem mentioned by the hon. Gentleman, which followed 13 years of Labour government. We have set in train all of the right measures for the medium and long term to get more skilled people back into work. Before the hon. Gentleman sneers a little too much about people going back to work, I want to say that they are far better off in work and working towards full-time pay than sitting on benefits being depressed and worried.

[Mr Sheerman]

indicated assent.

[Mr Duncan Smith]

The hon. Gentleman agrees with me. The key point is that we want to get people into work, including skilled work, and for them to develop skills not only while they are in work, but as they come through apprenticeships and university.

I want to return to the make-work scheme, because I have a feeling in my bones that the Opposition are beginning to slide away from it. They have failed to answer a number of questions. We have asked them time and again how many private businesses have signed up to the jobs guarantee, but we have never had an answer. We have been told endlessly that there is a lot of interest, but we have never heard any examples.

I heard the shadow Chancellor on, I think, a Radio 4 programme and he seemed rather scared and unusually unable to be coherent. [Interruption.] All right, I will drop the “unusually”. He was unable to list the vast number of private sector companies taking part. When asked how many there were, he seemed to lose his nerve and said:

“But if not, you can do it through the voluntary sector. If not, you have to have a final backstop: a public work scheme.”

The shadow Chancellor has pretty much made it clear that the scheme is going to be about jobs created not in the private sector, but in the public sector. [Interruption.] Oh no, it will not: the right hon. Member for East Ham (Stephen Timms) knows that to be the case. In other words, the Opposition would repeat the mistakes of the past.



I hope that the hon. Member for Leeds West will answer another question we have asked the Opposition time and again: how long will the guarantee last? Back in 2011, we heard about a 12-month guarantee for young people unemployed for one year. By 2013, the proposal had morphed into a six-month guarantee—half the time previously advertised—for those unemployed for two years. Even that is not enough, for as Labour begins to see what a disaster the policy is and the shadow Chancellor begins to wind away from it—there is no interest in it from private sector firms and it has no traction with business—they seem to be beginning to realise that it is not worth all the money they are talking about spending.

I had a look at the Labour website when it launched its tuition fee policy. Interestingly, buried in the relevant document—I would like to say it was in the small print, although the print was pretty small anyway—I found that the scope of the flagship jobs guarantee had been halved again. This announcement was made without fanfare and without anyone taking to the airwaves to tell everybody what a wonderful scheme it was going to be. Labour now proposes “a six-month job”—remember it was for a year originally—

“for any more 18-24 year olds who find themselves claiming Jobseeker’s Allowance for a year”.

It also proposes “a three-month job”—it used to be for six months—

“for the over 25s out of work for two years”,

not one year. In other words, Labour is edging back, killing off its policy bit by bit, and I suspect that eventually it will let it go altogether.

Following a Budget in which the Chancellor once again pledged that no spending commitments would be unfunded, the final and most significant unanswered question—I hope the hon. Lady will answer it, because this is her last opportunity to do so—is: how will the jobs guarantee be paid for? That is a legitimate question, for the Budget punched a hole in Labour’s two proposals with two new measures: the first to levy funding from the banks and the second to restrict pensions tax relief.

Given that the shadow Work and Pensions Secretary has herself declared that

“we need to make sure that the sums add up”,

it is right that we do the maths, starting with the cost of the jobs guarantee, an estimation of which was done by Treasury officials in January. The cost of the jobs guarantee for 2015-16 is forecast to be £1.54 billion for over-25s and £540 million for under-25s. That is £2 billion in total in one year alone, which is far more than the Labour estimate. Taking the small print of the document we found, even if the figure in it is halved, as the Labour U-turn seems to make clear that it will be, it is more than three times the £300 million a year that Labour says it will cost, at close on £1 billion a year.

When the hon. Lady gets up to speak, I hope that she will explain how Labour will fund the jobs guarantee. If she is going to use the bankers’ bonus tax again, I must tell her that it has been spent 11 times over. Here are the things on which it has been spent: reversing the VAT increase—£12.75 billion; reversing the tax credit savings—£5.8 billion; more housing—£1.2 billion; reversing the child benefit savings—£3.1 billion; more capital spending—£5.8 billion; child care—£800 million; and there are more. The last Chancellor, the right hon. Member for Edinburgh South West, said that he did not think it would be feasible to repeat the one-off bankers’ bonus tax, but the reality is that Labour will repeat it to pay again and again for other things.

Another announcement in the Budget was the excellent decision to reduce the tax-free lifetime allowance. It had already been reduced from the £1.8 million inherited from Labour to £1.25 million, and it will now fall to £1 million. The latest change will save about £600 million a year. Importantly, it will affect only 4% of those approaching retirement. That is in stark contrast to Labour’s proposal to reduce the tax-free annual allowance, which would plunder the pension pots of moderately paid, long-serving public servants such as police officers, teachers, nurses and others. With the Government already taking effective steps to curb the size of the very largest pension pots—my right hon. Friend the Minister for Pensions has been involved in that—Labour’s proposed pension tax relief changes will be left null and void. Despite the fact that Labour has committed the money for the purpose of increasing working and child tax credits and, very recently, to pay for the £3.1 billion cost of lower tuition fees, it will apparently be used only to fund the jobs guarantee. As for Labour’s final funding proposal, restricting pension tax relief for those with incomes of more than £150,000, it would not come in for a further three years.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

Will the Secretary of State give way?

[Mr Duncan Smith]

Not yet. I will finish this particular point before I move on to the rest of the stuff in the Budget.

In this key area, the Opposition have absolutely no idea what they will do. They do not have the money, they are losing interest in the very policy that they said was at the heart of their policies and the rest has just become smoke and mirrors. It is as simple as that. There we have it: the cobbled-together nonsense of Labour’s jobs guarantee is destined to fail as wholly unfunded. Yet we should not be surprised by that from a party which built an entire economy on debt, with policies paid for by more borrowing and higher taxes. Under Labour, Britain accumulated personal debt of a record high, reaching some £1.5 trillion, while the level of household saving fell to a 50-year low.

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

Will the Secretary of State give way?

[Barbara Keeley]

Will the Secretary of State give way?

[Mr Duncan Smith]

In a minute.

This Government are restoring stability in our economy, with no unfunded spending and no extra borrowing; instead, aspiration, responsibility and security will pave the way for a better future. The principle behind the Budget is to restore a Britain built on savings and investment, and that will be done with three new measures. There is a radical, more flexible individual savings account, with the complete freedom to withdraw money from a cash ISA and pay it back later in the year without losing any of the £15,000 tax-free entitlement. There is the brand-new Help to Buy ISA: we are working hand in hand with first-time buyers to help them to save for a home—£3,000 will be provided by the Government for every £12,000 saved—which is an excellent idea. There is a new personal savings allowance, with up to £1,000 interest-free. It will take 17 million taxpayers out of savings tax, not just cutting but abolishing that tax for 95% of people.

On pensions, the Government have already reversed the decade-long decline in pension saving, rolling out automatic enrolment to make saving the norm and introducing the new state pension, while reducing the means test and creating a solid foundation on which to save. We are returning to people who build up their pension pots the freedom to use that money as they see fit. In last year’s Budget, the Chancellor announced radical changes to abolish the prescriptive rules that dictated how and when people could use their pension savings. That means that from April, 320,000 people a year will be able to choose what to do with their pension savings on turning 55. In last week’s Budget, he went further still by allowing 5 million annuity holders to access their existing annuities. He has extended the freedom to give those people greater control over their finances, which is an excellent idea.

[Barbara Keeley]

One group of people who do not have much chance to accumulate pension pots is unpaid family carers, many of whom have to give up work in order to care. Will he say, at the end of this Parliament, whether he regrets forcing 60,000 unpaid family carers to pay the bedroom tax, meaning that not only can they not acquire pensions, but many of them are having to cut back on food and heating to pay it?

[Mr Duncan Smith]

The spare room subsidy policy that we introduced has been assisted by some £380 million that we have given to local government to ensure that anybody in the local community is supported and aided, as necessary. I do not regret that policy. I think it will bring fairness to social housing. Why does the hon. Lady not get up one time and answer this question: does she not feel ashamed about leaving so many people—7 million people—on long waiting lists for accommodation? Why does she not apologise for leaving so many people, when Labour left office, in overcrowded—

[Barbara Keeley]

rose—

[Mr Duncan Smith]

No, she has had her word. Why does she not apologise for leaving so many people in overcrowded accommodation? Labour Members do not apologise for that. The answer is that they have no policy on that. Social house building under the Labour Government fell to the lowest level since the 1920s. She should get up and apologise for that.

[Barbara Keeley]

I thank the Secretary of State for giving way, eventually. Perhaps he would like to look at the case of the couple in Sefton—the disabled person and her carer—who have fought their case through to the Supreme Court. The Prime Minister was unable to give an answer about that couple. It is not a question of such couples giving up their home or their spare room to anybody else. Carers find those rooms essential. That couple found their room essential. The Prime Minister could not answer. Will the Secretary of State answer?

[Mr Duncan Smith]

That is exactly the reason why we gave £380 million to local authorities to deal with individual cases. The courts have supported us in this. Again, the hon. Lady did not get up and apologise for the mess Labour left social housing in: overcrowded accommodation, people who could not find the right houses, people on huge waiting lists for accommodation and the lowest level of house building on record since the 1920s. That is the shame of the 13 years of the last Labour Government.

I spoke a moment ago about the pension freedoms that have been provided. The last pension freedom that has been provided by my right hon. Friend the Chancellor is to allow 5 million annuity holders to access their existing annuities. I pay tribute to my right hon. Friend the Minister for Pensions because that was originally his idea. It shows that the coalition is working at all levels.

It pays to save and, through our welfare changes, this Government have ensured that it pays to work. We have undertaken the most significant reforms in living memory, which span not only pensions but job-seeking benefits, disability benefits, child maintenance and more. They have been opposed at every turn by the Opposition. We are delivering a welfare state fit for the 21st century.

Universal credit is rolling out nationally. It is already in 150 areas and is set to be in every jobcentre by this time next year. The earliest claimants are spending more time looking for work, are moving into work quicker, are working more and are earning more than those on jobseeker’s allowance. It will bring economic benefits of up to £35 billion over 10 years, as the Public Accounts Committee agrees.

The benefit cap has ended the something-for-nothing culture. Capped households are 41% more likely to move into work and 12,500 have done so. Housing benefit is capped too. There has been the first real-terms fall in housing benefit spending in a decade and it is set to carry on falling in real terms up to 2020. Our reforms are restoring fairness and mean that we are making better use of Britain’s housing stock as we build more houses.

Over this Parliament, the increase in welfare spending has been the lowest since the creation of the welfare state at 0.5% a year compared with the 3.5% increase in Labour’s last Parliament in office. Total welfare spending is below what we inherited in 2010 as a proportion of GDP. In the coming year, out-of-work benefit spending will be back to pre-recession levels. Welfare reforms are set to have saved nearly £50 billion cumulatively, all while departmental baseline spending is down—I say this to the Chief Secretary to the Treasury—by some £2 billion a year. He can say “well done” if he likes. We are doing more, and we are doing more efficiently as a result.

As we come to the end of this Parliament, I am proud of the work we have done with my right hon. and hon. Friends in this House. I pay tribute to some of my previous Ministers, including my right hon. Friends the Members for Epsom and Ewell (Chris Grayling), for Basingstoke (Maria Miller) and for Hemel Hempstead (Mike Penning), and my hon. Friend the Member for Fareham (Mr Hoban), as well as to current Ministers, including the Minister for Employment, who has done brilliantly in her job, and the Minister for Disabled People, who is doing brilliantly in his. I pay particular tribute to an hon. Friend who is unsung and unfairly traduced by the Labour party: my good friend Lord Freud. He has worked tirelessly for two different Governments, determined only on one thing, which is to improve the quality of life for people in Britain. I am also proud of my working relationship and what has been achieved with the Minister for Pensions. We have worked well together and achieved good things, and we have also worked closely with the Chief Secretary to the Treasury on many subjects.

The last five years have often been hard and difficult, but always rewarding. We took a system that was bloated and unfair, and which under the previous Government seemed to penalise those who tried and rewarded those who did not. The last Government left us a system that measured only the amount put in and not the results obtained, and it trapped many in dependence. We took that system and changed it for the better, leaving a positive legacy: the deficit down, unemployment down, youth unemployment down, long-term unemployment down, employment up, private sector work up, working households up, growth up. That is a legacy of which any Government of any stripe should be proud. This Budget is key to that legacy, and I commend it to the House.

--- Later in debate ---

[Rachel Reeves]

My hon. Friend is right to talk about the experience of people in his Huddersfield constituency. People in Huddersfield, Yorkshire and around the country will, I think, be slightly shocked by the degree of complacency from the Secretary of State today and from the Chancellor last week, when for them and their families things are very often getting harder, not easier.

The Government have failed to control social security spending, as they promised they would, because they have failed to tackle the true causes of rising welfare spending, such as low pay and the lack of affordable housing, and because they have failed to deliver the flagship reforms the Secretary of State made such great claims for five years ago. What a tragic waste of time, talent and taxpayers’ money: wasting the precious time of sick and disabled people forced to wait for months on end for the support they so desperately need; wasting the talents of people who are not getting the help they need to get into work, or who are stuck in low-paid insecure jobs that my hon. Friends have spoken of that do not make the most of their potential; and wasting money on IT systems that do not work, assessment and appeals procedures that have descended into chaos, and soaring spending on in-work benefits because of this Government’s failure to build an economy that actually rewards hard work.

[Mr Duncan Smith]

The hon. Lady talks about what she calls soaring benefit costs. Does she accept that under her Government not only did in-work benefits rise by more than 50%, but housing benefit for those out of work rose by 70%? In other words, both in-work and out-of-work housing benefit claims rose dramatically under her Government.

[Rachel Reeves]

Under the last two Conservative Governments, unemployment reached 2.5 million. There was a global financial crisis during the period of the last Labour Government, and as a result, unemployment rose, but it has risen even further under this Government, from 1.5 million, when Labour left office, to 1.7 million in February 2012. The OBR’s Budget forecast last week showed a £600 million increase in the forecast for social security spending in just one year, and since 2010, the Government have spent £25 billion more on social security than they set out to spend.

Under the Government, the number of people paid less than the living wage has soared by 44%, while house building has fallen to its lowest levels since the 1920s. It is for those reasons that housing benefit spending—the second-largest area of DWP spending, after pensions—was more than £2 billion higher in 2014-15 than in 2009-10. It was due largely to the rocketing numbers of working people not paid enough to cover their rent. In this Parliament, the Secretary of State has spent £1.8 billion more than he planned on housing benefit for working people and, on current Government forecasts, the cost of working people’s rising reliance on housing benefit to pay their rent will reach £14 billion by the end of the decade, if left unchecked—£488 for every household in the country.