Welfare Cap

Ian Blackford Excerpts

Wednesday 16th December 2015 Commons Chamber

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

In the spirit of the season, let me congratulate Tory Front Benchers on recognising the futility of having passed legislation a year ago and now agreeing with the SNP’s position that the benefits cap was wrong.

The breach of the welfare cap prompts the question of what is the point of it if it can be exceeded within its first year. I remind the House that in 2014 the Chancellor of the Exchequer said:

“The welfare cap brings responsibility, accountability and fairness…From now on, any Government who want to spend more on welfare will have to be honest with the public—honest about the costs—and secure the approval of Parliament in order to breach the cap.”—[Official Report, 26 March 2014; Vol. 578, c. 381.]

He will have to eat his own words. To save his blushes, he should abandon this inflexible, unworkable, draconian policy and focus on tackling the root causes of welfare dependency at source.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

The hon. Gentleman knows full well that this is an example of the cap working. The Government have had to explain why they have had to do this, and explain the context of the changes announced in the autumn statement. That is absolutely right and proper, and he should support the Government.

[Ian Blackford]

I am grateful for the hon. Gentleman’s intervention. Of course we will support the Government tonight, but the fact remains that we should not be having this debate because the cap should not have existed in the first place.

We have to recognise that social security protects the poorest and the vulnerable in our society, but we do not do that through these false measures, which is exactly what this is.

[Alberto Costa (South Leicestershire) (Con)]

In his festive mood, the hon. Gentleman has perhaps forgotten what the good people of Scotland said earlier this year, so it is worth reminding him. A Survation poll in Scotland said that a majority of its people, just like those in my constituency and across the UK, support efforts to reduce the cost of welfare, so are not he and his party out of touch with the people of Scotland?

[Ian Blackford]

I am truly grateful to the hon. Gentleman for asking that question. Of course the Scottish National party wants to reduce the cost of welfare, but we will do that by fixing the economy, driving up productivity and creating jobs. What we should not do is punish people. While we are on the subject of the election, let me take this opportunity to remind the House that we won 56 of the 59 seats in Scotland, and we did that while standing on a platform of investing in our communities and in job creation, making sure that we did not punish people with a failed austerity programme, and arguing for investment of an additional £140 billion throughout the whole of the UK over the next five years. That responsible position would have led to the financial deficit coming down to 2% of net national income by the end of this Parliament. The people of Scotland were very happy to support that much more responsible approach, and I commend it to this House.

Although we welcome today’s decision to breach the cap, it is apparent that the Chancellor cannot even stick to his own targets. When will this Conservative Government realise that the inflexibility of the welfare cap is unworkable and that the fact that they will breach the cap illustrates the need to abandon the policy?

We are calling on the Chancellor to abandon the cap and instead to focus on welfare dependency by tackling the structural drivers of higher welfare spending, such as rising rents, low pay and worklessness, as well as the barriers to work. That is a much more progressive way of dealing with the problems we face in the United Kingdom. We agree that it is sensible to control welfare spending, but the Government are simply not doing that with their continued focus on the austerity agenda. The welfare cap is simply not the correct approach.

The Chancellor of the Exchequer has chosen not to be here today. I am grateful to the Minister for speaking earlier, but he is here, cap in hand, to seek our support for the Government breaching their own rules and missing yet another target.

[Alison Thewliss (Glasgow Central) (SNP)]

Does my hon. Friend agree that, given that the Chancellor is absent and the Work and Pensions Secretary was late, perhaps they ought to be sanctioned?

[Ian Blackford]

Indeed. Perhaps Opposition Members could handle the appeal—let us see how they would get on in such circumstances. I have some sympathy for the Minister, though, because it is the Chancellor of the Exchequer who ought to be answerable to the House on this issue.

Of course, the Chancellor has form when it comes to missing targets. Let us remind ourselves that the Government have spectacularly missed their targets for the budget deficit and for net debt. We were supposed to be in the black by now, but with growth and tax receipts in particular consistently coming in below target, the deficit and debt have remained above target. We must pose the question: when will the Government learn that their false optimism has a price, and that price is the cuts to budgets as they seek to balance the books?

On the autumn statement, the Office for Budget Responsibility managed to magic up an additional £27 billion of forecast revenues—talk about a sleight of hand to dig the Chancellor out of another hole of his own making. We know that the OBR has a history of over-estimating tax receipts. The respected Paul Johnson, director of the Institute for Fiscal Studies, said of the Chancellor’s plans:

“If he is unlucky—and that’s almost a 50-50 shot—he will have either to revisit these spending decisions, raise taxes, or abandon the surplus target.”

Talk about having form. If I may use some football terminology, I would not want the Chancellor to take a last-minute penalty for my team in a cup final—he would only miss the target. Own goals are much more the Chancellor’s speciality.

Why am I raising these matters? It is because social security spending is linked to the failure to deliver a robust economy, drive up tax receipts and limit the need for the safety net that social security provides. That is why the welfare cap is wrong: it does not deal with the cause of, or the need for, welfare.

The disastrous policy—made in No. 11 Downing Street—of punishing millions of hard-working families by reducing tax credits and thereby dramatically cutting the income of lower-paid workers has, thankfully, been reversed. If the benefit cap is breached as a consequence of sense prevailing, we should be grateful. We are mindful, however, of the fact that although the vindictive impact of the tax credit cuts has been avoided, there will be pain in years to come because the Government are still wedded to reducing the social security budget by £12 billion, with universal credit bearing the brunt.

We are not fooled by the Chancellor’s words that this is a reversal of the Tory ideological assault on the most disadvantaged. He announced that he would, in effect, spend £3.4 billion in 2016-17 to reverse the changes to the threshold and the taper rate, but it is important to note that the planned reductions in tax credits for families with more than two children will still apply. Ian Mulheirn of Oxford Economics said that

“this may be a U-turn in April 2016, but it doesn’t look like a U-turn by 2020.”

I want to point out that the IFS estimates that cuts in universal credit will mean that 2.6 million working families will be an average of £1,600 a year worse off.

The continued lack of ambition by the Tory Government to take fiscal responsibility means that alternative action must be taken in Scotland to put off the impact of the austerity we are now facing. I am glad that the Scottish Government have taken measures, as they have in their budget today, to protect the people of Scotland. The Institute for Public Policy Research, an independent think-tank, has found that low-income families in Scotland will face a reduction in income of more than £800 by 2020 as a result of UK Government cuts, but the richest 40% will see an increase in income as a result of the tax cuts.

We are in this situation not because of structural issues with social security, but simply because we have not been able to drive sustainable growth to a level that would drive job creation and, crucially, raise real wages, which is the best way of curtailing the demand for social security. We cannot fix the problem of poverty in our country by cutting social security, particularly in-work benefits, but we can do so by creating the circumstances that allow people to find meaningful employment, and in doing so work the hours that will assist them to put food on the table and to heat their homes.

[Heidi Allen]

Will the hon. Gentleman reflect on one of the elements of universal credit, which is that it is not just an IT system but an entire way for people to work with a mentor and somebody in the jobcentre who will assist them to build a life of better employment and higher wages? That is what he should be talking about if he wants to get people out of poverty.

[Ian Blackford]

Absolutely. We fully support that: we want people to be able to move out of poverty and into meaningful work that is well paid, where the social security system will support them. We would happily support some reforms, but problems remain in relation to the level of sanctions and the cuts to universal credit that will happen over the next few years.

[Ian Lavery]

The real issue concerns in-work benefits and people who are in work. The Sports Direct model is failing, but the Conservatives are not prepared to get stuck into the likes of Sports Direct and of Mike Ashley. They believe that that is a fantastic model of employment, but it is not acceptable.

--- Later in debate ---

[Ian Blackford]

I fully agree with the hon. Gentleman. We need to deal with low pay in our economy. The only way to do so is to have a real debate about how to drive up productivity in this country, and about how to tackle companies that are abusing the minimum wage. Such companies must be held to account for what has happened.

We often hear from the Government and their myriad Back Benchers about a mythical long-term economic plan. I say “mythical” because it is a meaningless soundbite, and we are left asking, “Where is the detail? Where is the substance?” If there is a long-term economic plan to benefit workers, a core theme must be a rise in productivity that will help to drive up wages and living standards sustainably. The hon. Gentleman has just made that point.

Let us look at what the OBR said in its publication on the day of the autumn statement:

“Although actual productivity growth has picked up in the latest two quarters, some of this has been cyclical or reflects broader temporary factors… But since it is difficult to explain the abrupt fall and persistent weakness of productivity in recent years, it is also hard to judge when or if productivity growth will sustainably return to its historical average.”

It is well worth dwelling on that. It can be paraphrased as the OBR saying that it has not got a clue why productivity in the UK has been so weak in the past few years. It is certainly the case that the Government do not have a clue. I would suggest that they have no clue and no strategy for driving up productivity in the UK economy and for dealing with our social security bill.

The hon. Member for Hayes and Harlington (John McDonnell) famously quoted from his little red book and then tossed it at the Chancellor during the autumn statement. However, it is not that red book that should concern us, but the stark reality of what is contained in the OBR Blue Book that offers little comfort for many in this country. We will support this motion, but we should not be having this debate because we should not have a benefits cap. We need a meaningful long-term economic plan, not Government gimmicks and soundbites.

[Greg Mulholland (Leeds North West) (LD)]

I welcome this U-turn. Sometimes, it is right to accept that one is wrong and has made a mistake. I commend the Government for doing so on this issue.

I also commend all those who took part in what was very much a cross-party campaign, in which all the Opposition parties and some Government Back Benchers worked together. I pay tribute to the hon. Member for South Cambridgeshire (Heidi Allen) for the courageous way in which she spoke out, which was noticed around the country and did this place a real service.

I also pay tribute to the other place. Although I will always campaign for that House to be abolished in its current form and replaced, finally, with a wholly elected Chamber, which is what we should have in this country and is the only justifiable way to run a modern democracy, it did show that it has a role to play in this Parliament. I commend my Liberal Democrat colleagues in the other place, who made it clear that they would speak and vote against the tax credit cut. That was crucial in leading to the U-turn.

As a liberal as well as a Liberal Democrat, I will always be extremely proud that it was the great, reforming Liberal Government of 1906 to 1914 that brought in the very welfare state that we are discussing. That is a great achievement of my party.

However, we accepted in our five years in coalition, in difficult financial circumstances, that the welfare state had got out of control and was no longer sufficiently focused on those who needed it. I was a member of the Work and Pensions Committee for five years and that Committee, which had members from all parties, was entirely clear that there was a disincentive to work and that too many people were incentivised to be on benefits, rather than to work. I am very proud that, in the five years of the coalition, we did a lot to tackle that.

[Ian Blackford]

Will the hon. Gentleman remind us how the Liberal Democrats voted when the welfare cap came before Parliament last year?

[Greg Mulholland]

I am very happy to. As usual, the contribution from the SNP Benches contained the usual milk and honey, promising everything to everyone and not taking any difficult decisions. In the end, even in Scotland, the shine will come off and people will start to see the reality of the false veneer of the Scottish National party. That is something that the rest of us will welcome.

I am not even sure that the hon. Gentleman knows what he is talking about. There are two different issues: the household benefit cap and the welfare cap. He seemed to confuse and conflate the two things. We absolutely supported the household benefit cap, which was brought in under the coalition, because it is entirely right and all our constituents support not having a situation in which a single household can take an unlimited amount in benefits, when hard-working families are unable to raise the same amount. The welfare cap is an entirely different thing. It seeks to control the amount of money that the Treasury allocates to welfare as a whole. He does not seem to understand the distinction, which is worrying, given his position.