Welfare Reform

Lord Dodds of Duncairn Excerpts

Tuesday 11th February 2014 Westminster Hall

[Charlie Elphicke (Dover) (Con)]

It is a pleasure, Mr Sheridan, to have this debate under your chairmanship. I want to explore where we are with welfare reform and the options for the future. The coalition Government inherited a broken welfare system that was in desperate need of reform. We have started and are seeing through the most far-reaching reforms in more than half a century. The reforms are not about saving money; they are about saving lives. They are about replacing dependence with independence.

Let us look at what has been done to date. Labour left the biggest ever peacetime deficit, with £120 million a day in interest bills. Under Labour, welfare spending increased by 60%, taking inflation into account. That is £3,000 a year for every household in Britain. More than £170 billion was spent on tax credits, four and a half times the cost of the benefits they replaced. By the end, out-of-work benefits were increasing nearly twice as quickly as earnings. That was the toxic legacy left by the Labour party, and that is the out-of-control spending that the Government have fought to keep in check while protecting pensioners with the triple lock.

Welfare spending is now falling as a share of GDP. Savings of £25 billion will have been made by the end of this financial year, with £50 billion having been saved by the end of the Parliament. At every turn Labour has been unapologetic. Labour has opposed every single reform, including universal credit, and has provided no ideas. Labour has nothing to say. Indeed, the few policies developed so far are spending pledges, rather than savings. For example, the jobs guarantee will cost a staggering £1 billion. On my count, it is the 10th time that Labour’s bank bonus tax has been spent. To every problem, its answer is the same: more spending, more borrowing, more debt and more welfare. It is small wonder that the Labour party is increasingly known as the welfare party.

The Institute for Fiscal Studies says that we need to reduce the benefits bill by a third, but Labour has failed to name even one working age benefit it would cut. Government Members have given thought to the reforms that could be made to promote a greater sense of fairness: fairness to people on welfare, so that they might have independence in place of dependence; and fairness to hard-working people and their families, who expect their taxes to be used to help people escape poverty and welfare, rather than further to enchain them within it.

I have been giving thought to how work-based benefits could be reformed, particularly to improve the position of women in the workplace. In our system, industrial injuries benefits cost £907 million a year, while maternity pay costs £2.3 billion. The maternity pay system, however, too often hampers rather than safeguards the position of women in the workplace. There are still too many barriers to hiring women. Too often employers are scared of employing women who may go on maternity leave. Even the Labour peer, Lord Sugar, was moved to say:

“We have maternity laws where people are entitled to too much.”

He also said that the prospect of women becoming pregnant and taking maternity leave puts businesses off hiring women.

That attitude needs to change, as does the shocking complexity of the system, which involves complex reclaims though the tax system and leaves people at risk of their employer going bust or otherwise failing to pay. Women are increasingly self-employed, yet the self-employed are worse off with maternity allowance, and injury benefits are sparse indeed. Meanwhile, pay is not even at minimum wage levels. Pay is set at £137 a week, which is a far cry from the £220 received by a minimum wage earner for a 35-hour week. To my mind, the system is ripe for reform, to safeguard and improve the position of women in the workplace, to increase simplicity and security, to treat the employed and self-employed alike, and to pay parental leave more fairly.

How can that be done? We should think about a new system of workplace benefits, paid for by the workplaces of the nation. We should set up an at-work scheme—a compulsory pooled risk system along the lines of the Financial Services Compensation Scheme, backed up by the state but funded by business with reference to the total pay-as-you-earn income tax paid by each business. In return, businesses would see a corresponding cut in their net employers’ national insurance contributions. That way, the cost would not be affected by the number of injuries or the amount of maternity leave that might at any one time affect any one workplace. The at-work scheme would pay out regardless, whether there were no parental leave absences or many. In that way, the fear of the burden of maternity would be reduced, and so too would the barriers to women in the workplace. The self-employed would contribute on the same basis and be treated in the same way as employed people. Pay for leave could more easily be increased from the current £137 a week to the minimum wage level of £220, and that would ensure that the minimum basic standard would be the minimum wage.

We have seen the toxic legacy left by the Labour party and we have passed welfare reforms to save lives and promote independence in place of dependence.

[Mr Nigel Dodds (Belfast North) (DUP)]

The hon. Gentleman raises an important issue about the future of welfare reform. Will he join me in deploring the fact that the current welfare reform measures have still not been implemented in Northern Ireland, at a possible cost of more than £1 billion over the next five years? The Finance Minister there indicated that the Northern Ireland Executive have already lost £15 million. We have negotiated good tweaks to the system to suit the Northern Ireland situation, yet Sinn Fein holds up that reform, at a massive cost to the Northern Ireland block grant. Does the hon. Gentleman agree that it is time for Northern Ireland to move into line with what is happening elsewhere?

[Charlie Elphicke]

Yes, I would. It is about fairness to hard-working people and their families. They pay their taxes and want to see those taxes used to help people escape poverty, rather than to enchain them within it. They want their taxes to fund doctors, teachers and nurses, rather than those on welfare. It is also about fairness to people on welfare and their having a greater sense of independence, rather than being locked into a cycle of dependence. I hope that the Northern Ireland Executive will think more carefully about the future, and fairness for working people and those not in work.

In the absence of any positive ideas from the Labour party, I hope the Government will consider new reforms like the one I am suggesting. It would promote the role of women in the workplace, increase simplicity and security, treat employed and self-employed alike, and ensure that maternity and parental leave is paid fairly and that the system is funded by the workplaces of the nation on a long-term sustainable basis.