Incapacity Benefit (North-East)

Lord Wharton of Yarm Excerpts

Tuesday 22nd November 2011 Westminster Hall

[Grahame M. Morris (Easington) (Lab)]

It is a pleasure, Mrs Brooke, to serve under your chairmanship for the first time. There has been tremendous interest in the economic effects in the north-east of changes to incapacity benefit. I was hoping for a much longer debate—a number of right hon. and hon. Members have indicated that they would be interested in participating in such a debate—but I will try to be brief.

I am pleased to have secured this debate, which gives me the opportunity to raise some important issues that affect communities throughout the north-east of England. As the title suggests, I want to focus on the economic effects of one specific coalition policy: the impact of welfare reform and changes to incapacity benefit. I shall refer specifically to a recent research report by Sheffield Hallam university on “Incapacity Benefit Reform: the local, regional and national impact”, and a report from the Institute for Public Policy Research North, the “Northern Economic Summary: October 2011”. I commend the latter report, which is the first of its kind, but IPPR North will produce it quarterly. It will be a useful way of tracking the impact of the Government’s policies on the north-eastern economy.

Before going into my main argument, I want to set the scene and to provide some context for the debate. The IPPR North report indicates that unemployment in the north-east is accelerating and is being driven by a weak northern economy being pushed into recession by public sector spending cuts, which are threatening to increase the north-south divide. The north-east, with Yorkshire and the Humber region, has faced the worst increases in unemployment in the UK. The figure for the north-east now exceeds 11%. Gross domestic product nationally suggests that the UK economy is avoiding a strictly defined technical recession at the moment, but it can be best described as flat-lining. Labour has a five-point plan to stimulate jobs and growth, but I do not want to go into that because of shortage of time. Perhaps it is a subject for another debate.

The situation for workers and those seeking work in the north-east is much bleaker than in many other regions. The northern economy could already be contracting, as the index of production figures produced by the Office for National Statistics show UK manufacturing contracting by 0.6% in the three months from June to August. Contraction in manufacturing affects the north-east disproportionately. It affects the economy in the whole of the north, but particularly the north-east because, despite the need to rebalance the economy—I am a great supporter of manufacturing—the north-east has a relatively high proportion of employees in manufacturing.

The latest job figures show that the north has lost a large proportion of public sector jobs in the last year. The figures produced by the northern TUC show that we are losing them at a rate of 2,000 a month, with almost no increase in the number of private sector jobs. In the north-east, the number of private sector jobs is declining. It has lost more than 32,000 public sector jobs, but more than 8,000 public sector jobs have been created in London, and 24,000 in the south-east. That is clear evidence of the Government’s failing regional policy.

I want to concentrate on the impact of the Government’s welfare reform policies on the economic situation in the north-east. Sheffield Hallam university’s report, “Incapacity Benefit Reform: the local, regional and national impact”, shows that 60,000 people in the north-east face being moved off incapacity benefits, 35,000 of whom will be pushed out of the benefits system altogether due to the time limits. More than 20,000 will be added to the unemployment figures.

My constituency has the highest rate of working-age adults claiming incapacity benefits in England and will be one of the most affected. In my constituency alone, 4,200 people will be moved off incapacity benefit, of whom 2,000 will lose their benefits altogether. That will have a huge adverse impact on those individuals and households, but I want to focus on what it means for the north-east economy as a whole.

If 35,000 people are taken off incapacity benefit altogether, as the pilot study indicates, that will effectively remove more than £170 million every year from the north-east’s economy.

[James Wharton (Stockton South) (Con)]

Will the hon. Gentleman give way?

[Grahame M. Morris]

I would like to make a little more progress, but I will give way when I have made my point.

That money would be in the hands of the poorest in society and would be spent in local communities, neighbourhood shops and local businesses. The clear economic argument is that unemployment would increase if benefits were cut in the region, owing to a reverse multiplier effect of credit withdrawal, because less money would be spent in the local economy. It is staggering that as the north-east seems to be heading into a regional recession, the Government are set to take another £170 million from our regional economy every year. It is even more staggering that, as employment is falling in the private sector owing to the Government’s lack of a credible policy for jobs and growth, they are simultaneously moving 60,000 people off incapacity benefit and adding more than 20,000 to the unemployment count.

The legacy of incapacity benefit is felt most in older industrial areas. The number of people claiming incapacity benefit is not evenly spread. The communities that I represent are mainly former coal-mining areas where long-term ill health is a consequence of years spent working in damp, cramped and physically arduous conditions underground. A recent review of coalfield areas by the former Member for the then constituency of Barnsley West and Penistone, Mick Clapham, reported two significant problems. He identified that incapacity benefit claims are not confined to the older generation, whose ill health was caused by working conditions. Ill health in the younger generation is due mainly to poor employment opportunities and the low expectations resulting from their marginalisation in the active labour market and has given rise to a lost generation.

[James Wharton]

I congratulate the hon. Gentleman on securing this debate. The topic is extremely important to him and to many of his constituents. I am a little concerned that he seems to believe that being on incapacity benefit when able to work is an acceptable end in itself. Does he agree in principle that those who are able to work should be encouraged to do so and should be taken off incapacity benefit and helped back into work? Does he also agree that, although incapacity benefit must be available for those who need it, the Government have a duty to review the system and to address some of the problems that have arisen as the system became out of control in recent years?

[Grahame M. Morris]

I will come to that. My fundamental point in response to the hon. Gentleman is that the big issue for us is not just worklessness; it is joblessness. We want the Government to invest in creating jobs in the private sector and generally to get the local economy moving. There seems to be little point in inflicting penury and misery on large sections of already impoverished communities when there are no jobs for them to go into. The two should go hand in glove, and I have some suggestions for achieving that.