Autumn Statement Distributional Analysis, Universal Credit and ESA

Jeremy Quin Excerpts

Wednesday 16th November 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move,

That this House notes with concern the £3.4 billion reductions to the work allowance element of universal credit and the £1.4 billion reductions to employment and support allowance; calls on the Government to reverse those reductions; and further calls on the Government to reintroduce detailed distributional analysis for the Autumn Statement and all further Financial Statements, as was done between 2010 and 2015.

On a solemn note, I wish to send my condolences to the family and friends of Debbie Jolly. Some Members may have known Debbie, who was a disability campaigner. Over the years, she provided briefings for many Members of the House of Commons and, through Disabled People Against Cuts, was involved in many of the various lobbies of Parliament. She passed away last week, and I would like to send our condolences to her family and all her friends. We all hoped she would survive long enough at least to see this debate. I pay tribute to her for the work she did.

I want to explain the genesis of the motion that I and my right hon. and hon. Friends have tabled for today’s debate. As we all know, the autumn statement is a week today. Traditionally, we would have held an Opposition day debate and used it to have a wide-ranging debate, second-guessing and commenting on what we predicted would be contained in the autumn statement.

This year, we want to try something different. We want to break radically with that tradition, because next week could be the last chance to head off what is shaping up to be quite a harmful disaster for many low earners and many vulnerable people in our society. For our debates today, we have taken two significant issues that are contained in the Budget plans announced earlier this year by the Chancellor’s predecessor, and which the new Chancellor has the ability and opportunity to intervene upon and, we hope, reverse. The first is the plan to cut the work allowance element of universal credit and employment and support allowance, and for the later debate we have chosen the issue of funding social care.

We believe that the Chancellor, by withdrawing the proposed cuts to ESA and universal credit, would dramatically beneficially impact upon the lives of many, many of our fellow citizens, who are, yes, low earners, but many of whom, through their disability, are also often the poorest and most vulnerable in our society. We want to see today and, yes, over the next week, whether we can assemble across the House a coalition of pressure that can decisively influence the Chancellor to think again.

I welcome the Back-Bench debate that has been secured for tomorrow, which I believe will contribute to forming that coalition; I certainly believe and hope that we can succeed in doing so. So the appeal to hon. Members today and in the coming week is to do all we can to prevail upon the Chancellor to halt the policy of cuts to universal credit and ESA contained in the Budget introduced by the former Chancellor, which are planned to come into effect on 1 April.

Before I come to the grounds for making this appeal to the Chancellor, it is important to understand the origins of the proposals, and this goes to the heart of the autumn statement process. I believe their origins lie in the mistake by the last Chancellor of imposing a fiscal framework on his colleagues that was simply impractical, given the economic circumstances that we were facing, and certainly what we are about to face. If the fiscal framework is wrongly set and, importantly, if it is so inflexible that it cannot reflect the realities and challenges of the economy, decisions on both tax and spending equally fail to reflect the economic realities and meet the new economic priorities. I believe that in this instance, the fiscal framework imposed by the former Chancellor was so inflexible, and unworkable in the end, that it totally failed to meet the economic targets he set for it. It is also vital to understand that the former Chancellor’s fiscal framework imposed on his colleagues’ Departments unrealistic constraints that are undermining their ability to achieve their own policy goals.

[Jeremy Quin (Horsham) (Con)]

The reality is that the fiscal framework did see a significant reduction in the annual deficit. That is a good thing for this country. I have not seen anything from Labour Members to suggest that they would have been able to do anything like that.

[John McDonnell]

The hon. Gentleman clearly has not been listening. We introduced a fiscal credibility target, which would have built in the flexibility that we need—and actually, which his colleagues would have benefited from as they sought to deliver the goals set out in the manifesto upon which they were elected. That is the critical problem—that this fiscal target has become unworkable. Next week, most probably, we will see that not only will it be reset, but large elements of it will be scrapped; and some of those political disputes within the Government will be seen to have been completely unnecessary if only the Chancellor, at that stage, had listened not just to us, but to some of his own colleagues.

On the Government’s own economic metrics, the fiscal framework has failed. I remind the hon. Member for Horsham (Jeremy Quin) that the former Chancellor’s target was to eliminate the deficit by 2015. The deficit remained at over £45 billion in the first six months of this financial year. I remind the House that his target was to reduce the debt. The debt now stands at £1.7 trillion and has increased over the past six years, according to the latest estimate, by £740 billion. I believe that the biggest failure was to ignore the needs of the real economy and use the fiscal framework to constrain investment. The failure to invest on the scale needed to modernise our economy resulted in stagnating productivity.

In the face of all the evidence that the fiscal framework was not working and not achieving its target, the decision to set a target for the framework not just to eliminate the deficit, but to produce a multibillion-pound surplus by 2019-20 demonstrated to many of us how far the former Chancellor’s politics was overriding sound economics. The result of his setting targets even more removed from reality was that he imposed on his own colleagues the task of scrambling round to find a scale of cuts that, in many instances, undermined what chance they had to implement the policies on which they were elected and their long-standing ambitions, some of which could have secured cross-party support.

That was no more evident than at the Department for Work and Pensions. For the Treasury to demand cuts to universal credit that would take, on average, £2,100 out of the incomes of people who were doing all that was asked of them—working all they could to come off benefits, bringing up their families, contributing to society—flew in the face of all that the universal credit system was meant to be about. The same can be said of the cuts of nearly £30 a week to employment and support allowance. That is an extremely significant cut to the incomes of disabled people who are also doing all that has been asked of them—seeking work to lift them off benefits, and overcoming their disabilities and conditions.

--- Later in debate ---

[Ian Blackford]

I fundamentally agree. There is a £36 billion tax gap, so let us fix that hole. I listened to the Minister talk earlier about the challenges the Government face in fixing the deficit. What they fail to recognise is the interaction between fiscal and monetary policy. It is the richest who have benefited most from quantitative easing. We should have had a fiscal stimulus package. That would have driven investment and productivity into the economy, and got more people back into work. That is what we should be doing.

[Jeremy Quin]

This is not the first time I have heard the hon. Gentleman refer to the great fiscal reflation he is planning. I welcome the fact that in the same speech he is also talking about the problems with inflation, but is that not a contradiction in terms?

[Ian Blackford]

It most certainly is not. The reason for the rise in inflation—to something between 2% and 3% next year, according to commentators—is, quite simply, that the pound has crashed, and the reason the pound has crashed is that investors do not have confidence in the UK economy, and who caused that? It is a direct consequence of Brexit, through the referendum, which was the misjudgment of the previous Prime Minister.