Autumn Statement Distributional Analysis, Universal Credit and ESA

James Cartlidge Excerpts

Wednesday 16th November 2016 Commons Chamber

[Damian Hinds]

They have not forgotten that, and it is because we are getting our nation’s finances back in order that we can afford to increase our funding for the national health service by £10 billion, in line with what the NHS itself has deemed necessary in the five year forward view, a plan that it would never have been possible to realise had the Labour party been in government.

The Opposition claim that the poorest in our society have borne the brunt of the reductions in the deficit, but that is not the case. It is undeniable that when we face a deficit of almost £6,000 for every family in the country, we have to do some difficult things, but people throughout society have contributed to getting our finances back in order. We have never seen tackling the deficit as just an option. It is a matter of social justice, because when Governments lose control of the public finances, with all that flows from that, it is invariably those who have the least who stand to lose the most.

[James Cartlidge (South Suffolk) (Con)]

Is it not the case that a distributional analysis cannot capture the impact that things such as capital gains tax cuts have on the wider economy by encouraging entrepreneurs to create jobs and wealth so that we can pay our way in the world, which is what we have to do if we are to afford schools, hospitals and all the rest of it?

[Damian Hinds]

My hon. Friend is of course right. There is always a dynamic effect of changes in taxation. I will come on to the question of the distributional analysis, because when we look at it we see that it is rather different from what the shadow Chancellor suggested.

--- Later in debate ---

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

The UK Government must commit to protecting disadvantaged people from the impact of future budget cuts in their autumn statement. Post-Brexit, it is essential, that with the risks to economy and with inflation rising and set to rise further, the Government act now.

Analysis by the IFS is the latest sign that the UK leaving the EU is having a negative impact on the UK economy even before article 50 is triggered. The IFS said that “virtually all” forecasters revised down their predications for growth and revised up their expectations for inflation in the years ahead. The collapse in the value of the pound, combined with potential rises in inflation, will hit the poorest and the most disadvantaged in society hardest. It will mean more of their income will have to be spent on day-to-day costs and living standards will push people into poverty.

[James Cartlidge]

If the hon. Gentleman is so concerned about the disadvantaged, will he explain why it has been reported that the Scottish Government will defer, until April 2020, taking powers from the UK Government to administer the welfare system?

[Ian Blackford]

I expected this issue to be raised, given press speculation. Let me tell the hon. Gentleman the facts of the matter: with the powers coming to us, we will control 15% of welfare spending in Scotland. We have to put in place the mechanisms for us to deliver fairness with the revenues we have at our disposal. We certainly would not punish the poorest in our society in the way that this Government have, and we certainly would not be punishing the Women Against State Pension Inequality Campaign women, who are not getting their just rights when they have had only a year’s notice. What I would be saying to this Government is, “Give us the powers over welfare so that we can protect the people in Scotland.” When we have put in place the mechanisms to allow us to look after people, we will certainly be doing a better job than the Government are doing today.

--- Later in debate ---

[Tommy Sheppard (Edinburgh East) (SNP)]

One of the beneficial consequences of the recent change in Government personnel is that we are no longer subjected on a daily basis to the phrase “long-term economic plan.” We know of course from recent press reports that that is because the Government do not really have an economic plan at present, and many of the pre-existing problems in our economy are now exacerbated considerably by the decision to leave the EU. We also know, as my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) said, that it is going to get a lot worse before it gets better. The Institute for Fiscal Studies reports that pretty much every forecaster says things are going to get extremely challenging. Six months ago we could have got $1.50 for £1; today, we would be lucky to get $1.25. As those changes feed through, we are going to see a rise in prices and in inflation.

Yet at the same time we have had practically no real-terms growth in wages over the last 10 years, and that is likely to continue. Although there has been a blip in 2016 as a result of the increase in the national minimum wage, it is likely to be just that; we are not likely to see sustained growth in wages, so revenues are not going to increase as a result of increasing wages. This will present the Government with an even more challenging problem; they will be facing rising costs, and revenues not keeping pace with them, and they are going to have to take some difficult decisions.

[James Cartlidge]

The point about the currency has been made several times now. I campaigned for remain, but in terms of the cost of living, which is obviously key to this debate about poverty and living standards, the hon. Gentleman must surely recognise that our country’s economy is unbalanced and there is significant benefit from a lower pound. We need to export more if we are to have sustainable growth.

[Tommy Sheppard]

The Government are faced with a big challenge, and I think how they manage the necessary deficit in the years ahead will be the measure of this Government. The Prime Minister has talked about just-managing families; we will have to see whether or not we have a Government who, as they have to make the necessary cuts and adjustments to their plans, are prepared to protect the most vulnerable and disadvantaged. It is said that the mark of a civilised society is how it treats the worst-off and the most vulnerable; we will see in next week’s autumn statement whether the Government really believe that.

The Government have a bit of form on this question. Just last week there was a report from a United Nations committee which put the Government in the dock for the way in which their policies affect disabled people in our society. It is not the first such report; there have been many others, yet the reaction from the Government was to dismiss this out of hand in a fairly cavalier manner and say that the criticisms were unfounded. Well, these reports cannot all be wrong, and we need a better approach from the Government to these reports if disabled people in our community are going to feel with any confidence that their concerns are taken seriously.

I do not have a lot of time, but I want to spend a couple of minutes talking about the cuts to employment and support allowance. Perhaps over 500,000 people will be affected by them, including over 60,000 in Scotland and over 1,300 in my constituency. It has been said that the cut of £30 a week in this benefit, bringing it into line with jobseeker’s allowance, is being introduced to make sure that there are no incentives to be on the higher rate. Not a single one of us in this Chamber could live on £109 a week, but let us take the Government argument at face value. It is not an incentive, and the argument that it is fails to recognise the very real costs that people in this category have as a result of their illness or disability.

Over 1,300 of my constituents will be affected by this, as I have said, and I want to read into the record the testimony of two of them. The first is Dean Reilly, a single father of three children. Four years ago he was diagnosed with multiple sclerosis and had to leave his job at British Gas. Dean is currently in the work-related activity group of ESA and gets the £30 a week. He tells me in his correspondence that this money means he has more security, independence and confidence. It helps to mitigate some of the extra costs he incurs because of his health condition, and it helps to compensate for the fact that his condition prevents him from being able to function normally. One of the symptoms of his condition is that he often suffers from fatigue which can develop without warning. If this happens when he is out of the house, he has either to rely on friends or to pick up a taxi, which can be very expensive.

Dean also uses oxygen therapy to help to alleviate the symptoms of his condition and he attends the MS therapy centre in Leith twice a week and makes the suggested donation of £13 on each visit. That is what he spends his £30 a week on, and he believes that were he not to get it, his quality of life would be significantly affected. In fact, it could be even worse. Dean works a few hours a week, as he is allowed to, at the local Nike shop. He feels that if he was not getting this extra money and support, he would not be able to continue that employment, so would face a double whammy in terms of loss of income.

The second person I want to mention is Lauren Stonebanks. She wrote a long letter to me, but I will only read out a couple of the points it makes. She says the money

“helps with increased bills because I find it so hard to leave the house. Most people spend a chunk of time at work or school or university but I’m often stuck in my own house using my own gas and electricity. It also gets used on a takeaway or very, very convenient food if I am too exhausted from fighting my illness to cook. Other times it might cover a taxi if I need to get home as quickly as possible because I’ve become too unwell to be outside the house.”

She also says:

“In my personal experience, losing this money won’t incentivise me to return to work. It will demoralise me and make me feel like I’m completely worthless. £30 a week is nothing to MPs but everything to someone as ill as me…I already struggle with finances because of my condition. Financial insecurity and welfare reform wreak havoc on my mental wellbeing.”

The Minister will probably say that existing claimants like Lauren will not be affected by this change, but most of the people receiving this benefit are not doing so on a permanent basis. The whole purpose of it is to get them back into employment so that they can stand on their own two feet. If this change goes through, many people will take employment, and if it does not work out for them because of their condition, they will have to go back on ESA, at which point they will lose money.

For anyone who has a mental health condition or who suffers from stress and anxiety, making it difficult for them to go to work, what sort of additional pressure will be put upon them when they have to ask themselves, “If I take this job and it doesn’t work out, I could lose a third of my income and be much worse off?” That is a horrible position in which to put people, and I appeal to Members on both sides of the House to come together and support the motions today and tomorrow, and to ask the Government to reconsider, to postpone the changes, to stop digging and to have a think and change their mind.

[James Cartlidge (South Suffolk) (Con)]

I applaud the hon. Member for Edinburgh East (Tommy Sheppard) for his great passion. He speaks very eloquently. I could not resist intervening on him about the currency because I think that the key economic challenge for the country involves rebalancing. Every aspect of what we are debating today is affected by the sustainability of our growth.

I want to focus on two key points. The first is why I support the move to a universal credit system in principle, based on my experience of running a small business. The second is that, when we talk about distributional analysis, we need an analysis of the intergenerational impacts of any changes. We have to start talking about all benefits in the system, not just those that are paid out to those of working age.

Last year, we had a number of debates about tax credits at the time when the changes were meant to be coming through. I spoke about this several times, and I said then—I say it again now—that tax credits were one of the greatest mistakes in the history of the welfare state, bringing in a £30 billion means-tested in-work benefit for healthy working people to make them completely dependent and to nationalise the income of the country for political purposes. I say that not out of ideology but out of experience.

My experience of running a small business taught me about the problems of the people who are trapped on the rough edges of the welfare state. I had a member of staff who told me that she did not want a pay rise because she would lose too much in tax credits. More commonly, people working 16 or 24 hours a week told me that they did not want to work any more hours. I heard that many times, and other business owners have told me exactly the same thing. People should be encouraged to make the most of the talents they were born with, and we should not have a system that stymies that aim or disincentivises people from making the most of their talents.

What I particularly welcome about universal credit is the fact that it smooths out the rough edges by being more generous in terms of childcare and support. I am sure we all agree that we want people who are unemployed to move off benefits and into work, but we never talk about people who are on in-work benefits needing to work harder to get off those benefits. To me, however, it should be the goal of our economic system to reduce dependency and help people to maximise their income from real employment. The other part of the system that I welcome is the extra support that it will give, not just to get people into work but to get people who work part time to work more hours. That is very much to be commended.

It is quite extraordinary that, for the first time ever, pensioners are now better off than the working-age population, once housing costs have been taken into account. This is something that we need to talk about, because 68% of benefits are paid out to pensioners. The point about housing costs is incredibly important.

[Ian Blackford]

Does the hon. Gentleman not recognise that a pension is not a benefit? People who have paid national insurance have an entitlement to a state pension, which they have paid for.

--- Later in debate ---

[James Cartlidge]

That is a very fair point. Our voters say, “Well, I’ve paid in so I should get it,” but that is not the case for the winter fuel allowance—as the hon. Gentleman knows, millionaires get that along with everybody else—the free TV licence or the Christmas bonus. Although the state pension is based on paying in, it is a pay-as-you-go system. The fact is that the current young working generation are paying in but they might not receive the triple lock. Also, we know for certain that many of them will still be paying their housing costs when they retire. We know that 94% of home-owning pensioners own their property outright. They have no housing costs. The young working generation are probably paying for the defined benefit pensions of those who are fortunate to receive them, and for the state pension of those who have the triple lock. They are also paying for those who possibly do not even have housing costs, yet they themselves will have housing costs perhaps well into their retirement. We are reaching a critical point here.

[Ian Blackford]

I am conscious that we should not be diverted from the topic, but the key point here is that the national insurance fund is currently running at a surplus that, according to the Government’s own figures, is due to increase. It is not the case that pensioners are taking their income from others. They have paid their national insurance contributions, which fund the amount that is paid out to pensioners.

[James Cartlidge]

It is a pay-as-you-go system, but the key to this is the triple lock. The hon. Gentleman is welcome to read the report on intergenerational payments produced by the Work and Pensions Committee. It has my name on it, although I have to say that I approved it having been on the Committee for only 15 minutes. I did not contribute to it, but I welcome all of it. It makes the point that we have a pay-as-you-go system and that the younger people currently paying in might not benefit from the present generosity, particularly in relation to the triple lock, which is unaffordable and unsustainable.

This is primarily a political question. During the leadership hustings, I asked the final two contestants the same question. I said, “Given the situation of many young people, is it morally defensible to continue to protect pensioner benefits?” The answer that both contestants gave me—quite rightly, given that we are a democracy and that we have elections—was that our manifesto had pledged to protect those benefits. However, as the shadow Chancellor has said—I am certainly not trying to pray him in aid—we also pledged to wipe out the deficit. That pledge is now coming home to roost. We are protecting so many budgets and forcing so many disproportionate cuts on others because of this huge cost which we will not touch, and I think we have to talk about it. This has to be done in a cross-party way. We all know the political reality of this situation. I am not naive, and I know the political price that can be paid if these things are not done correctly, but from canvassing in my constituency, I know that the older voters understand this point. They are as concerned about it as anybody else. We have to start talking about how the whole benefits system—not just the one for working-age people—can be reformed.

I very much welcome the speech made by my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith), and I welcome what has happened with universal credit. It will smooth out some of the perverse incentives created by the tax credit system, and it will encourage people to make the most of their talents and reduce their benefit dependency. Just as we had radical reform on in-work benefits, we must now start to think about what will happen to those who are retired and who will live longer and longer, so that we can all live in a happy, one nation situation in which all the generations get a fair deal.