Autumn Statement Distributional Analysis, Universal Credit and ESA

John McDonnell 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.

[Stephen Timms (East Ham) (Lab)]

On the ESA cut, does my right hon. Friend recall that at the time it was being taken through the House, we were assured that the Government would introduce an ambitious plan to reduce—indeed, to halve—the disability employment gap by 2020? Does he share my dismay that that goal has been abandoned completely?

[John McDonnell]

I recall my right hon. Friend advising the Government of the unreality of their proposals at the time. What worried us all was that, on the one hand, benefits were being reduced, but the support was not being put in place by which those people could gain work and supplement their incomes.

I understood the motivation of the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) when he resigned. The overriding demands of the Treasury were undermining the policy goals he was seeking to implement. He rightly objected to a further burden being placed on the social security budget, especially at a time when new, long-planned systems were at the early stages of introduction. I understood then his sense of frustration, and I understand now why he and many of his hon. Friends have called on the new Chancellor to look again at the burden that is being placed on the welfare budget and the threat, above all else, that it poses to the successful roll-out of universal credit and the policy of supporting disabled people into work.

The planned cuts are more than a threat to the implementation of policies long advocated and cherished by many Government Members. More importantly, they are a threat to the livelihoods, living standards and quality of life of millions of low earners and some of the poorest and most vulnerable people in our communities. The Government have sought to judge themselves on their own set of economic metrics: eliminating the deficit, reducing the debt and adhering to a cap on welfare spending. On all their own metrics, they have failed. However, there is an alternative and very basic set of metrics on which a Government should be judged—whether they ensure that their population is adequately fed, decently housed and kept warm in winter, and has sufficient income through employment or a support safety net to have a decent quality of life.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

My right hon. Friend is laying out a powerful case for the need to make some very different decisions next week in the interest of all our futures. There is clearly a combined moral and economic rationale for an urgent focus on disability employment. The 30% disability employment gap makes that even more important. Does my right hon. Friend agree that people with disabilities and their families deserve so much more from the Government, who should be on their side, rather than pursuing a strategy characterised by cuts to ESA, the tragic failure of work capability assessments and no strategy for fairness?

[John McDonnell]

I fully agree with my hon. Friend. There is a week in which we can overturn at least an element of that brutality. This week, we need to seize upon the chance as best we can, across parties, to deliver change.

From our privileged position in this House, I firmly believe that before we consider cuts to basic support for low earners and disabled people, we have a moral duty, as my hon. Friend said, to fully appreciate the plight of many of our fellow citizens and the impact that any changes that are forced upon them could have. There are some basic facts that we need to face up to—basic facts that depict the harsh reality of the lives of so many members of our community. Nearly 4 million of our children are living in poverty. The scandal is that two thirds of them live in families where someone is working. Thanks to low wages, zero-hours contracts and forced or bogus self-employment, which has been exposed today, the promise that work will lift people out of poverty is a broken one for many.

If a basic responsibility of the Government is to ensure that their population is adequately fed and housed, they are failing. A million emergency food parcels were given out by food banks last year to families who did not have sufficient income to feed themselves. The latest reports confirm that the numbers are rising. This year, 200,000 children in our country will be dependent on a food bank to get a decent meal at Christmas. One survey reported that more than 20% of parents had regularly not eaten so that their children could eat. Others report the frequent choice between eating and heating. This is 2016.

On the duty of the Government to ensure that people are adequately housed, they are failing again. Rough sleeping has doubled in recent years. The equivalent of 100 households a day are evicted from rented homes—a near-record 40,000 in the year to date. Some 1.2 million households are stuck on council housing waiting lists. In my constituency tonight, there will be families sleeping in beds in sheds that have been rented to them.

As for the Government’s responsibility for disabled people, as the UN report concisely summed it up, the Government have—and I quote—systematically or gravely violated the rights of disabled people. Independent research suggested that Government efforts to push people off claiming disability benefits have been associated with more than 500 people committing suicide in three years.

Three years ago, I led a debate following the presentation of the War on Welfare petition, which highlighted the call for an overall impact assessment of the Government’s policies on disabled people. I cited the immense human suffering caused by the brutal implementation of the work capability assessment and the latest round of cuts to benefits and care services. I cited examples of people who had tragically taken their own lives in despair following the WCA and the penalisation through sanctions. We now know that those suicides were not isolated examples, but that there have been hundreds.

[Robert Flello (Stoke-on-Trent South) (Lab)]

Of course, there is a double whammy, because people who are suffering and being punished in that way are not likely to get access to good mental health services or NHS services, because those are being cut and wound down across the country as well.

[John McDonnell]

I have listened carefully to the Prime Minister’s responses to a number of questions about cuts to mental health services at Prime Minister’s Question Time. I hope that her commitment to social justice will result in the reversing of some of those cuts, particularly to mental health walk-in services, which were raised at the Prime Minister’s questions session before last.

[Kevin Foster (Torbay) (Con)]

The shadow Chancellor mentioned what happened three years ago. He will probably remember, as I do, that the hon. Member for Leeds West (Rachel Reeves), who was the Labour party’s spokesman at the time, pledged that Labour would be “tougher than the Tories” on benefits.

Bringing things more up to date, many people in the ESA work-related activity group have told me that the current support package—a visit to the jobcentre once every six months—is completely inadequate. Does the shadow Chancellor agree that that shows a system that urgently needs reform?

[John McDonnell]

I fully agree with the hon. Gentleman. There needs to be more support, and that was promised but has not been delivered. At the same time, benefits have been taken away, so as my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, there has been a double whammy in the impact on disabled people. That demoralises people who are under pressure, losing benefits and not getting support, which pushes them into an even worse position.

I have raised this issue before, but we now have better figures than we had two or three years ago. We now know that between 2011 and 2014, more than 2,000 people who were assessed in a work capability assessment as being capable of work died before they could even take up that work. Surely we have to learn the lessons from that evidence, and surely one lesson is that if we impose further cuts on people who are already struggling, not only will we increase the deprivation and suffering that they endure, but many of them will see no light at the end of the tunnel and will simply despair.

The WOW debate was intended simply to ensure that any impact of decisions on benefits was properly assessed. We called for a cumulative impact assessment to be published, and we asked for a detailed impact assessment of every policy to be published for the House before a final decision was made. In a supposed post-truth environment, I still believe that evidence-based policy making is worth aiming for. That is why it is critical that the Government also restore the distributional analysis of their proposals, and ensure that it is intelligible and usable.

Before scrapping that analysis entirely, the Chancellor’s predecessor took to publishing figures that disguised the real impact of his policies. That accusation is not mine but that of one of his old colleagues, the former Chief Secretary to the Treasury, the former Member for Inverness, Nairn, Badenoch and Strathspey. If the Treasury is to restore public trust, it must not just let the House know when it will publish the distributional analysis, but ensure that the figures are published clearly and without any attempts to massage or spin them. Only in that way will we be able to test the fairness and equity of policy proposals.

In my view and that of many Members, when the cuts were first introduced they reflected a grotesque unfairness, because at the same time the Government were cutting taxes for some of the wealthiest in our country and for large corporations. [Interruption.] Capital gains tax, inheritance tax—how many more examples do we need? That was a strange priority to many Members on both sides of the House. As the Resolution Foundation has pointed out, reversing just some of those tax cuts could render the cuts to benefits unnecessary. The last Chancellor also had a penchant for absorbing budget gaps at various times.

There is a real opportunity next week for the Chancellor to live up to the Prime Minister’s spoken commitment to tackle social injustice. We believe that the Chancellor will reset the fiscal framework in next week’s autumn statement. He has already adjusted it. That will allow him the flexibility he needs to reverse the cuts. I appeal to hon. Members throughout the House to help us lift the threat of further cuts from families and disabled people. We have a week to achieve that, and we can start today by supporting the motion.

--- Later in debate ---

[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.

[John McDonnell]

May I remind the Minister of what the Institute for Fiscal Studies said about the Government’s changes? It stated that the long-run effect of tax and benefit changes in last year’s autumn statement, which were translated into the Budget, would be percentage losses around 25 times larger for those in the bottom decile than for those in the top decile.