Welfare Benefits Up-rating Bill

Liam Byrne Excerpts

Monday 21st January 2013 Commons Chamber

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

rose—

[Richard Graham]

On that note, I am happy to give way to my great friend, who was unable to recommend his proposals on tax credits to the Communist party of China last week.

[Mr Byrne]

I am grateful to the hon. Gentleman, who is giving way with characteristic generosity. He will accept that hitherto in this country, and for many years, the proposal to uprate benefits has been presented annually and much closer to the time at which uprating should take place, so that the Chancellor can take account of the latest economic circumstances and the latest level of inflation. It is only now that the House of Commons is being invited to set in stone a strategy that will stretch ahead for many years to come. That is the unusual situation.

[Richard Graham]

My friend—for he is my friend— the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) would make a valid point if it was not for the fact that this provision is set for only three years and it is set in the context of what he and his colleagues achieved during the extraordinary runaway period between 2003 and 2010, when they unleashed £170 billion of tax credits and raised welfare spending by 60%, so that, as we know, it is now a third of all Government expenditure. That is the bill that all our constituents are having to pay today.

It is not surprising that the Government are having to take the risk—I accept that there is an element of risk—of pre-setting the uprating of these benefits without knowing what the level of inflation will be. That is why my right hon. Friend the Member for Wokingham (Mr Redwood) was right. Hon. Members on both sides of the Committee gave him credit for flagging up the two crucial ingredients—control of inflation and energy—so that some of the less well-off in our constituencies do not suffer from the effective freeze over the next three years.

[Mr Byrne]

The hon. Gentleman is incredibly generous in giving way. Does he think the Bill is unconnected to the OBR’s decision to uprate the claimant count by a third of a million over the next few years, lifting its forecast for spending on unemployment and other out-of-work benefits by £6 billion? The Bill is needed to pay the price of economic failure. Surely that is the arithmetic.

[Richard Graham]

The right hon. Gentleman, with his great experience of these matters, asks a technical question which I am fully confident the Minister will answer in detail in due course.

I promised I would be brief, Mr Amess, so let me come to the point. In effect, tonight we have debated in practical terms the benefits of tax credits against the benefits of tax allowances. I argue that tax credits, the chosen policy of the previous Government, were flawed by their cynicism, having been increased by 58% just before the 2005 election and by 20% just before the 2010 election. I am sorry to say that those were giant electoral bribes that led directly to the greatest bust of all times. The hon. Member for Glasgow North East spoke about moral divisions, and to hear that from a Member whose Government created pension credits, which divided pensioner from pensioner, discouraged saving, enabled arguments between—

--- Later in debate ---

[Steve Webb]

This has been a wide-ranging debate of nearly four hours. Although it has technically been about amendments to clause 1, the generosity of the Chair has meant that we have essentially covered the whole Bill and the issues raised by it.

First, I want to respond to the point about the language in which the debate is constructed. My right hon. Friend the Member for Ross, Skye and Lochaber (Mr Kennedy) and a number of other Members said that we should avoid divisive language, and I entirely agree. I seem to recall that it was the Labour party that used the phrase “strivers’ tax” about this debate—indeed, a year or so ago, the shadow Secretary of State used his party conference speech to create the very divisions that his hon. Friends are criticising. He said:

“Let’s face the tough truth—that many people on the doorstep at the last election felt that too often we were for shirkers not workers.”

The right hon. Gentleman has form on this issue. In 2012, he was at it again. During a speech at the London School of Economics, to what I imagine was a packed house, he said:

“Labour is the party of hard workers not free-riders. The clue is in the name. We are the Labour party. The party that said that idleness is an evil. The party of workers, not shirkers.”

[Mr Byrne]

The Minister will remember that it was Sir William Beveridge who used the phrase about idleness being an evil.

There is a difference between reporting a conversation on a doorstep in one’s constituency and using a line as the basis of a political strategy that seeks to punish those on low incomes while handing out a £3 billion tax cut to Britain’s richest citizens. I am simply not sure how the Minister, as a Liberal Democrat, can support that policy.

[Steve Webb]

It is good to hear from the true heir of Beveridge. The quotes describing the Labour party that I just read out were in party conference speeches and at a conference at the LSE—

“The party that said that idleness is an evil. The party of workers, not shirkers.”

--- Later in debate ---

[Mr Duncan Smith]

No, I am going to make a little progress now, although I will give way later. I recognise that some who did not get a chance to speak earlier may wish to say a few words, and I want to give them a little time to do so.

The previous Government appeared to have no care or concern for the fact that more than £10 billion was wasted and lost eventually through fraud, error and overpayments, nor that the rest of the money altogether failed to meet its aim. There was already a problem with fraud and error on tax credits, but, worse still, the previous Government did not even record overpayments, so we have no idea to what degree that system was damaged. However, we do know—

[Mr Byrne]

rose—

[Mr Duncan Smith]

I said that I would make a little progress and then give way. I wish to make one point, which is that £4 billion has had to be written off as a direct result of this inability to get the money back, with a further £4 billion likely to be written off directly as a result of Labour’s massive failure to control that budget.

The second part of our approach is important and it relates to the issue of fairness, which my hon. Friend the Minister of State addressed. We do not do these things lightly, but we do want to make sure that those paying the tax bill for those receiving it in welfare recognise that their taxes are well spent; we want to ensure that those in work paying their taxes do not see the rises for those on welfare outstripping their own. We have already discussed the increases, so this is fundamentally an issue of fairness.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

rose—

[Mr Byrne]

rose—

[Mr Duncan Smith]

I said I would give way, so I will give way to the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) now.

[Mr Byrne]

Over the past month or two, as the Secretary of State has warmed up the debate for tonight’s Bill, he has launched attack after attack on tax credits. Will he just accept the principle that tax credits are important in helping to make sure that people are better off in work and, indeed, that that is why he is not abolishing tax credits but incorporating them into the new system of universal credit? Will he just set that point straight for the House?

[Mr Duncan Smith]

I have said all along that I do not doubt that at the beginning the intention was to try to improve the lot of those working on low incomes; I have never attacked that as a principle. The point I am making tonight is that there seemed to be a loss of control. In 2005, the then Government stuck a 58% increase into tax credits just before an election—almost 70% of all the money in tax credits goes on child tax credits—and they were, in a way, bribing an electorate in the hope that these people would vote for them because they felt that there would be some reason why they would not get the money afterwards.

I wish to make one important point to the right hon. Gentleman on tax credits, because he has asked me about them. The reality was that the previous Government ended up, through tax credits and child tax credits, attempting to chase a target that, as the economy improved, ran away from them. This became spending for an arbitrary target, and the taxpayer was chasing a target that the previous Government never achieved.

[Mr Byrne]

rose—

[Mr Duncan Smith]

I will not give way. Progress on tackling child poverty stalled, and the previous Government missed their 2010 target by some 600,000 children.

--- Later in debate ---

[Mr Duncan Smith]

I shall give way in a second, but I want to make a little more progress.

Let me deal with the point about deficit reduction, which is really important. The Opposition did not answer a key question during our debates in Committee. They have voted against every single measure to reform and reduce the overall spending on welfare so that we can get the deficit under control. Let me quote somebody whom they might remember. The quote is this:

“from 2005 onwards Labour was insufficiently vigorous in limiting or eliminating the potential structural deficit.”

That was their former Prime Minister, Tony Blair. I agree with him. In 2005 the previous Government raised spending dramatically as a device for electoral success, as we said earlier. Time and again Labour has voted against our reforms.

[Mr Byrne]

rose—

[Mr Duncan Smith]

Before I give way, let me give some examples. The Opposition opposed the Welfare Reform Bill, and that would have cost £2.1 billion in extra spending. They rejected the benefit cap—a further £500,000. Reversing tax credit savings would cost £5.5 billion. Reversing the child benefit savings would cost £1.7 billion. Voting against this Bill would cost another £1.9 billion. That money would need to come from somewhere.

If I give way to the right hon. Gentleman now, I would like to hear him tell us how exactly he would reduce the overall spending. Please, nothing on the bankers bonus tax, which has been spent at least 10 times already. If he tells us that he would get long-term unemployed people back to work, he should remember that under his Government the long-term unemployed figures doubled.

[Mr Byrne]

I am grateful to the Secretary of State for giving way. We have said that contributory employment and support allowance should be limited to two years. We have said that there should be an independent gateway for disability living allowance. We have said that we should switch the way we uprate benefits from RPI to CPI. We have said that there should be a benefit cap which, yes, is different in London from the rest of the country, but a benefit cap none the less. We have said that disregards in tax credits should be reduced. Crucially, we have said that there should be a two-year limit on jobseeker’s allowance. That is a far bigger list than the current Chancellor of the Exchequer ever set out when he was in opposition. We think welfare spending should come down. We think getting people back into work is the way to do it. That is why we think the Secretary of State should have brought forward plans to sort out the Work programme, which is failing, and to fix universal credit, which is in disarray.

[Mr Duncan Smith]

I wonder why I bothered to give way to the right hon. Gentleman. Every one of those statements was a spending commitment. They were not reductions. Every one of them would still leave a Labour Government with a vast bill to pay. I remind the Opposition that what they have opposed remains the reality. They are stacking up spending commitments without one single observation about how they would make the savings necessary to cut the deficit that they left us—one of the worst deficits, as I said before. Their proposed raid on pensions, which they wanted to talk about, would not cover it. They have already spent several times over all their little gimmicks. Voting against the Bill is another spending commitment.

--- Later in debate ---

[Mr Byrne]

I rise to oppose Third Reading. I have not been in the House for as long as the Secretary of State, but never in my years here have I seen so much taken from so many so fast. It is a disgrace that the Government should have rammed the Bill through the House in just two weeks. I hope that the other place will have listened hard to our debates today and seen how little time has been granted to us in the Commons to debate measures that will hurt thousands and thousands of our constituents.

In the fortnight since the Bill was introduced, claim after claim made by the Government has simply fallen apart. Originally, we were told that the Bill would not hurt working people, that the Government would protect disabled people, and that they cared about “family-raisers”, to use the Prime Minister’s term, yet in vote after vote tonight the Government have refused to stand by their word. They have refused to protect working people or to offer safeguards for disabled people, and we have heard nothing remotely credible from them about how child poverty will be tackled. After tonight’s debate, no one will believe that there is such a thing as compassionate conservatism. To be frank, it was always a wild claim and, lo and behold, so it has turned out.

When the Bill was first presented to us, we were invited to believe that it was squarely aimed at those of our neighbours who were “sleeping off a life on benefits”, in supposed contrast with a Budget that allegedly helped working people and gave effect to the Prime Minister’s determination, expressed to the party faithful—their number is dwindling—at his party’s conference. He said:

“They call us the party of the better-off”.

That is true; we do. He continued:

“no: we are the party of the want to be better-off, those who strive to make a better life for themselves and their families.”

How does the Bill help those who are striving to be better off? The Institute for Fiscal Studies could not have been blunter: 7 million working people will be hurt by the Bill. The impact of changes announced in the autumn statement will be, between now and April 2015, to reduce the real income of the one-earner working family by £534 on average, net of any increase in the personal allowance. That is why this is a strivers’ tax, pure and simple, which we will oppose.

[Andy Sawford (Corby) (Lab/Co-op)]

Does my right hon. Friend agree that it makes much more sense to uprate by inflation in this Parliament and then take stock, with a proper zero-based budgeting look at this in the next Parliament?

[Mr Byrne]

My hon. Friend is absolutely right that it would make sense to uprate in line with inflation for the rest of this Parliament, but frankly we do not know what kind of mess will be inherited in the next Parliament, which is why my right hon. Friend the shadow Chancellor is right to say that a zero-based review will be needed.

In the seven minutes that remain, I want to make two more points. One is about disabled people, who the Chancellor and Secretary of State said would be protected under the Bill. The Chancellor said that he would “support the vulnerable” and that disability benefits would be

“increased in line with inflation”—[Official Report, 5 December 2012; Vol. 554, c. 879.]

Then we learned the truth: 3.4 million disabled households will be hit by the Bill, admitted the Pensions Minister in a written answer. On average, they will be £156 a year worse off. Hundreds of thousands of people on employment and support allowance—people who the Department says have a disability—will be £87.50 a year worse off.

[Alun Cairns]

Will the right hon. Gentleman give way?

[Mr Byrne]

No. Given the hon. Gentleman’s support for a programme motion that has given me six minutes to respond to a Bill that takes hundreds of pounds off thousands of his constituents, he will forgive me for carrying on.

Some 206,000 disabled people will be £62 a year worse off as a result of this Bill. The Government have been caught red-handed trying to keep the truth from this House.

I am glad that today we have had an extensive debate on child poverty, because we were told nothing about how many children and how many working parents would be hurt by this Bill. Only in the past couple of weeks has the truth finally emerged. I want to put on record Labour Members’ gratitude to the Child Poverty Action Group for ruthlessly exposing the impact of the Bill and the cumulative impact of other measures.

The Secretary of State spent some time casting doubt on the strategy for tackling child poverty, which I seem to remember he voted for when he supported the Child Poverty Act 2010. On 24 November 2004, the Prime Minister said:

“I believe that poverty is an economic waste and a moral disgrace. In the past, we used to think of poverty only in absolute terms… That’s not enough. We need to think of poverty in relative terms.”

The Chancellor was even blunter when he said to the News of the World: “We’re all in this together. I’m not going to balance the Budget on the backs of the poor.” That encouraged the Secretary of State to wade in on “Sky News” in June 2010, when he said that “you have” to make savings

“but protect the poorest and that’s my absolute priority.”

How hollow those words ring tonight.

The truth is now before us: 200,000 children will be pushed into poverty as a result of this Bill. According to the Child Poverty Action Group, the measures in this Bill, alongside other measures that have been introduced, mean that 1 million children will be pushed into poverty by this Government. That will be the Secretary of State’s legacy. He spent all those years trying to persuade us that the Conservative party was finally a party that cared about poverty, and now, because the Chancellor needed a new year’s dividing line on welfare, he is accountable for putting 1 million children into poverty. It is well and truly clear that the nasty party is back.

This is about not just children but their mothers. A fortnight ago, my hon. Friend the Member for West Bromwich East (Mr Watson) published a list of 106 battle- ground constituencies. In those seats, there are 150,000 mothers who will be hurt by this Bill, losing £180 a year. In fact, as a result of measures put through by this Government, they are now losing £1,400, and tonight Members on the Treasury Bench voted to allow that to continue. They were given the chance to protect those 150,000 mothers and they chose not to. Over the next few months, we will be getting in touch with mothers in those constituencies and making it very clear that their Member of Parliament had a chance to protect their maternity pay and chose not to. Right now, the price of children’s clothing is rising by 4.5% and food prices are rising by 3.6%. Working mothers going on to statutory maternity pay are losing £180 a year at a time when someone on £1 million a year is getting a £2,000 tax cut. How are Government Members going to justify that to people in their constituencies?

[Penny Mordaunt]

Will the right hon. Gentleman give way?

--- Later in debate ---

[Mr Byrne]

No, there is too little time.

It is a disgrace that this Bill is being rammed through the House tonight. The Secretary of State did not want public hearings and Ministers did not want to defend the detail of the Bill in Committee. We hope that the other place will give it the scrutiny that was denied to Members of this House.

The tragedy is that there is another way to bring down welfare spending. Long-term unemployment is now rising towards the 1 million mark, as is youth unemployment. Nothing in this Bill fixes the Work programme, which gets only 2.6 people out of every 100 back into work, or fixes the disarray that is now unfolding in universal credit. What the Government should have been doing tonight is bringing us measures to bring down unemployment, long-term unemployment and youth unemployment, and to save this country the cost of failure. Instead, the debate on this Bill has shown a Government and Secretary of State who are hellbent on making savings and clearing up the cost of the failure of a rising unemployment bill by taking that money from working people—6,000 working people for every Conservative-held marginal constituency.