Welfare Cap

Ian Blackford Excerpts

Monday 12th December 2016 Commons Chamber

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

It is a pleasure to follow the hon. Member for North Swindon (Justin Tomlinson). He has been a loyal supporter of the Government from the Back Benches during the past few months, and it sounds very much as though he is putting in a job application to the Prime Minister as much as to anyone else—[Interruption.] Well, you never know.

Another breach of the cap calls into question what its actual point was in the first place. As a means to reduce welfare spending, it continues to be inflexible and unworkable. When we look at the motion and words of the Minister from the Dispatch Box, we see a mea culpa. The Government are admitting that the cap has in effect gone for the next four years. The Minister will not have to continue to come back to the Dispatch Box to say that it is not working, because we have now given them a blank cheque for the next three or four years, which I guess we should welcome.

We should really be talking about the fundamentals of the economic circumstances that got us into this situation in the first place. We need not the soundbites we used to hear about the long-term economic plan, but a real plan to make sure that we are boosting investment in productivity in this country. The challenge in delivering that has just got a little bit harder as a consequence of Brexit, which I suspect is really why we are having this debate today. It was always going to be about circumstances, and Brexit—the fall in the value of the pound, the declining confidence in future growth—has had the impact of bringing the Government to the Dispatch Box with the display we have seen this evening.

On social security, the Chancellor missed his opportunity to be the reformer he claims to be for “just about managing” families. He should instead have focused on addressing the underlying root causes of poverty by working to address unemployment and employment support. We acknowledge that the Government have now had to abandon their own targets on the welfare cap, and the projected increases in resources are welcome, after they had used the cap for so long as a source for cuts.

The welfare cap is a reprehensive and regressive measure that places the burden of the UK Government’s failed economic strategy on the shoulders of the most disadvantaged in society. We should remind ourselves that the welfare cap was a flagship policy for the Government in the last Parliament, but it ended up as a tool to find more cuts that the Treasury has used and abused to squeeze resources from the Department for Work and Pensions.

The new Chancellor will again have to breach the target set for him, but we ask him to acknowledge that the sheer fact this Government cannot even stick to their own targets proves that the inflexibility of the welfare cap makes it unworkable. The fact that they will breach the cap again and again illustrates a desire not to provide guidance about forgoing the cap for the next four years, but to abandon for good the policy of having a cap. An arbitrary cap in these times of uncertainty is neither useful nor adequate, as the Government’s previous breaches have shown.

The best way to reduce and manage welfare spending is to restore the economy to a healthy state, not to hit the most disadvantaged with the bill. The cap will not address the underlying structural problems that are keeping people reliant on social security, including low pay and wider labour market inequality. The fact that people in well-paid jobs cannot afford to pay rent, because of high housing costs, should at least provoke the Government to listen to the point that reliance on welfare is more than what they perceive as a culture of dependency. We keep coming back to the issue of housing and housing costs, but the only way to address that is to make sure we address the issue of supply in the housing market, which the Government have singularly failed to do.

The Institute for Fiscal Studies has said of the welfare cap target:

“The Conservative government already has the unimpressive record of meeting nought-out-of three of its fiscal targets.”

The Joseph Rowntree Foundation said in March 2014:

“The government’s newly-announced welfare cap will disproportionately target benefits claimed by the least well off”.

The IFS green budget, from February 2016, said that

“in practice, the welfare cap has proved much less binding. Spending is already forecast to exceed the cap that was set in July 2015 for each of the next three fiscal years. In other words, even though the welfare cap has only been in operation for less than two years (since the March 2014 Budget), it has already been broken by the Chancellor. It is therefore not clear whether it remains a real constraint on the government’s actions.”

The IFS was right then and is right today. What is the point of the welfare cap as a principle if it is breached time and again? It is, in effect, no constraint on what the Government are doing, or at least on what they should be doing. It is unworkable and meaningless. It was simply a sop to show that the Government were talking tough, and pays no regard to changing circumstances. It is intellectually, morally and ethically daft.

The £1 billion allocation to benefits in the autumn statement is a drop in the ocean, with billions of savings still to come from cuts to social security benefits over the next few years. Changing the taper rates will not, on its own, mitigate the impact of those cuts on low-income families. Instead, the Government should reverse cuts to the work allowance in full, so that working parents in low-paid jobs—people whom we, as a House, should want to support—do not lose out. Changing that taper rate—the rate at which support is withdrawn from low-income working households under universal credit—will be less effective at targeting support towards low earners with children than simply reversing the cuts to the work allowance would be.

The Scottish National party has consistently argued against the reductions in the work allowance and helped to force a Tory U-turn on tax credit cuts last year. Although the UK Government kicked the cut to the work allowance down the line, it will come back to bite next April, hitting “just about managing” families on low and middle incomes. The maximum gain from the 2% reduction in the taper is only around £500, which will fall short of what low and middle-income families need to manage when the maximum losses from the work allowance cuts are around £2,800. That is the reality of what is happening under this Government.

Torsten Bell, director of the Resolution Foundation, has said:

“When it comes to boosting ‘just managing’ family budgets, all roads lead to universal credit. The most effective way to support families would be by reversing the £3bn cut to work allowances announced by the last chancellor”.

He added that a modest reduction in the taper rate would

“leave a bittersweet taste among just about managing families.”

Analysis by the Institute for Public Policy Research suggested the partial U-turn would cost £700 million a year by 2020-21, compared with the £3 billion a year taken out of work allowances previously announced. Now that the welfare cap has gone, why do the Government not reassess these challenges, and make sure that they support the families that so desperately need that support?

With losses for families on universal credit, the repugnant rape clause—let us not forget that—and cuts for the sick and the disabled still to come down the line, it is clear the Tories have not abandoned their obsession with austerity. For all their rhetoric on the JAMs, they are still unwilling to deliver. Although it is welcome that there are to be no more welfare spending cuts, the sheer fact that the Tories are ploughing ahead with the pre-planned cuts next year, hitting low and middle-income families, shows that there are real-time cuts for families across the UK in this Parliament.

In a report to the Scottish Parliament’s Social Security Committee, researchers from Sheffield Hallam University showed that by 2020-21 Scotland can expect to lose just over £1 billion a year as a result of the latest welfare reforms introduced by the UK Government. That is £1 billion of cuts that have yet to hit ordinary working people in Scotland, delivered by this Westminster Government—happy Christmas. Sheffield Hallam University also estimates that the pre-2015 reforms are already costing claimants in Scotland just over £1.1 billion a year. That brings the cumulative loss expected from all the post-2010 welfare reforms up to more than £2 billion a year. We will not grow the economy by taking cash out of the pockets of the poorest. We will fix the economy, the debt and the deficit by putting in place measures that will grow the economy. This obsession with punishing the poor must stop.

The UK Government are saving a whopping £30 million in 2017-18, rising to £450 million in 2020-21, from the cuts to the employment and support allowance work-related activity group and the component in universal credit, according to figures published by the Treasury in the summer Budget 2015 and updated in March 2016. Already we have seen Tory Back Benchers rise again and again to vote with us on the Opposition Benches against those regressive policies. Even if the Government will not listen to those of us on the Opposition Benches, it is high time they listened to their own Members. Analysis by the Institute for Public Policy Research suggested the partial U-turn on the universal credit taper rate would cost £700 million. Why will the Government not do the right thing by the people affected?

Any move to increase the national living wage, as the Government call it, is to be welcomed, but the UK Government are still dragging their feet; they lack the ambition to really tackle low pay. The UK Government’s national living wage is not a living wage; it is simply a further tier of the national minimum wage. The real living wage is calculated according to the basic cost of living and therefore takes account of the adequacy of household incomes for achieving an acceptable minimum living standard.

Why will the Government not accept that definition and recognise that that should be the bare minimum for those who are working hard in our society? The UK Government’s decision to set an arbitrary rate for their national living wage fundamentally challenges the value of having an organisation providing independent advice on wage levels across the UK. I therefore ask the Minister: will the Government start to accept that impartially provided advice?

The Scottish National party supports the payment and promotion of the real living wage and, in Scotland, continues to set the bar on fair work. Leading the way, on Monday 31 October, the First Minister welcomed the new living wage rate of £8.45 per hour, which will benefit thousands of staff in Scotland, and urged more Scottish organisations to sign up as accredited living wage employers. That rise of 20p will benefit thousands of employees at living wage accredited organisations in Scotland.

The best way to reduce and manage welfare spending is to restore the economy to a healthy state, not to hit the most disadvantaged with the bill. Austerity is a choice, not a necessity—an obsession that has been proved, time and again, to fail. It is time for an economic strategy that focuses on inclusive and fair growth. The SNP is delivering for Scotland; Westminster is delivering ongoing austerity. We are all paying the price for that.

Question put and agreed to.

Resolved,

That pursuant to the Charter for Budget Responsibility: Autumn 2015 update, which was approved by this House on 14 October 2015, under Section 1 of the Budget Responsibility and National Audit Act 2011, this House agrees that the breach of the Welfare Cap in 2019-20 and 2020-21, due to higher forecast inflation and spend on disability benefits, is justified and that no further debate will be required in relation to this specific breach.