Low-income Households

Mark Field Excerpts

Tuesday 14th September 2010 Westminster Hall

[Ms Karen Buck (Westminster North) (Lab)]

I am grateful for the opportunity to hold this debate because, over the recess, a number of studies and reports have emerged that have analysed and cast doubt on some of the central claims of the coalition Government in respect of the impact of the Budget and the differential impact that the comprehensive spending review will have on the lowest-income households. All claims about the June Budget being progressive are now being dismantled, and the theme that the pain will be shared is proving to be clearly inaccurate. The refrain has been “We’re all in this together,” and that has been explicitly stated by the Chancellor of the Exchequer. The claim that the measures in the June Budget are progressive has been widely echoed by Government Members, yet that is clearly not the case. In challenging that assertion and asking further questions of the Minister, I am hoping that the Government will, even at this late stage, see sense and acknowledge the dangers that are implicit in a number of their proposals.

I will draw heavily on the analysis carried out by Institute of Fiscal Studies, which has been challenged by defensive Ministers, and I look forward to hearing what the Minister has to say this morning. It would be wise for Ministers not to rubbish the IFS conclusions too rapidly, not least because they extensively used such research when they were in opposition. When the Chancellor was in opposition, he did not hesitate to summon IFS statistics to his aid when he was participating in pre-election economy debates, and the Conservative party policy document, “Labour’s Two Nations”, published in 2010, favourably quoted IFS research in its attack on Labour’s record on poverty, so what is sauce for the goose must surely be sauce for the gander.

Before talking a little about the content of the IFS critique of Government policy, I want to spend a moment or two challenging the two myths that are repeated so frequently: that Labour’s record on inequality was a failure and demonstrated the inability of the Labour Government to put forward progressive measures; and that the Labour Government failed to tackle the reform agenda, and particularly welfare reform.

[Mr Mark Field (Cities of London and Westminster) (Con)]

On that latter assertion, I am sure that the hon. Lady has avidly read the books of Lord Mandelson and the erstwhile Prime Minister, Tony Blair; it is fair to point out that both would stand up and say that the reform agenda did not go through in the way in which they envisaged, and that there was insufficient planning in the run-up to May 1997 to enable them to succeed in making the reforms to the welfare system that were required. I am not suggesting for one minute that such decisions are easy. I am sure that the coalition Government will face some significant problems in the years to come, despite the quite significant long-term planning that took place in the run-up to 201. That planning is in great contrast to what happened when there was an incoming Labour Government 13 years ago.

[Ms Buck]

I am grateful to the hon. Gentleman for his comments. I will not shy away from it: there was internal debate within the Labour party, both in the run-up to 1997 and subsequently, on what reform agenda was needed and how it would be carried forward. As can be traced through numerous speeches in Parliament and elsewhere, I was not always in agreement with the priorities of either Tony Blair or Peter Mandelson. It is historically inaccurate to claim that the welfare state was not subject to significant reform throughout the 13-year period. One of the earliest, and fairly controversial, proposals was on incapacity benefits; it was voted on in 1998. The first clash that took place after the 1997 Government were elected was over lone-parent benefits. Housing benefit was subject to a number of changes. My hon. Friend the Member for Bishop Auckland (Helen Goodman), who was a Minister at the time, will confirm that I beat a path to her door to exercise my concerns about what the Labour Government were proposing on housing benefit reforms, which I felt then and feel now were wrong, but which have been picked up on and exaggerated by the Government.

On the more positive side, the whole tax credits agenda was clearly designed and had an impact on work incentives. The idea that there was no reform agenda is complete nonsense. The reason why welfare reform, particularly in relation to work incentives, has not satisfied the incoming Government is that it is extremely difficult to achieve reform that both makes it easier to work and does not increase poverty. Clearly the new Government have come down on one side of that equation. The simple facts are that inequality soared under previous Conservative Governments. As measured by the Gini coefficient—I do not think that we can argue against this—there was a very sharp upward curve on inequality throughout the mid to late 1980s; it levelled off a little during the 1990s. During the first two terms of the Labour Government, real progress was made on turning the curve down again. Levels of inequality flattened out and then turned up again in the last term of the Labour Government, not least—but not solely—because of the impact of the financial crisis.

In its pre-election briefing, the IFS said:

“The tax and benefit measures implemented by Labour since 1997 have increased the incomes of poorer households and reduced those of richer ones, largely halting the rapid rise in income inequality we saw under the Conservatives.”

[Ms Buck]

I will not make a similar error to that being made by the Conservatives. I will not say that absolutely everything that the Labour Government did was perfect, and that they achieved every single goal and target that they set for themselves, whether on child poverty or on reducing income inequality; they did not. However, it is also nonsense to use the hon. Gentleman’s line to make the case that the Labour Government’s investments, whether in employment growth or in tax and benefit changes, did not slow down and flatten out the rapid rise in inequality that took place throughout the 1980s and into the 1990s. That would be to claim that all the investment in tax credits, increased child benefit and the national child care strategy failed, and it absolutely, clearly and demonstrably did not.

[Mr Mark Field]

Does this exchange not sum up the big problem in trying to assess equality or inequality? The question is whether we consider the matter in an absolute or in a relative sense. As we represent neighbouring constituencies, the hon. Lady will know that one of the effects of globalisation and the huge wealth that has come from the financial services industry in Britain over the past 20 years is that relative inequality has increased. The huge wealth of certain people in our constituencies—whether in St John’s Wood, Mayfair or Belgravia—is clear. That is not to get away from the idea that some progress was made under her Government, and I am sure that the same will be true under the coalition Government. The most vulnerable will be looked after and we will ensure that absolute levels of inequality are at the forefront of our minds.

[Katy Clark (in the Chair)]

Order. I remind hon. Members that interventions must be short.

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[Mr Mark Field (Cities of London and Westminster) (Con)]

I congratulate my constituency neighbour, the hon. Member for Westminster North (Ms Buck), on obtaining this important debate. I hope hon. Members will forgive me if I discuss issues affecting central London specifically and some of the alleviation that will take place in our local authority area. The hon. Lady is absolutely right to identify the key problem of in-work poverty. We often think of low-income households as consisting of people who are simply out of work, but in-work poverty is an important issue.

There are a range of issues that have not been dealt with over the past 20 years. Perhaps we can achieve little on some of them, such as the impact of unregulated immigration, over which we, as members of the European Union, have no control. I am not making an anti-European statement; that is simply a fact. There is no doubt that with the growth of the EU, immigration levels over the past six years have played an important part in driving down wages. Employers have perhaps been somewhat irresponsible in taking advantage of that, but it has and will continue to have a significant impact on welfare.

Understandably, the hon. Lady prayed in aid the high-profile report by the Institute for Fiscal Studies on the Budget, and its concerns about what will happen on 20 October. It is fair at least to argue that the outgoing Labour Government made it clear that they too would have had to do a lot to sort out the deficit. The erstwhile Chancellor of the Exchequer stated that their own Budget would have included £40 billion in cuts. None of those was specified, so it is slightly unfair for the hon. Lady to be accusatory, as she has not analysed where Labour’s cuts would have come into play and what impact they would have had on the lowest-income households.

[Ms Buck]

I remind the hon. Gentleman of what I said in my comments. The IFS analysis says that the more progressive elements of the changes to tax and benefits, which the coalition Government now claim will balance out their other changes, were in fact among those proposed by the previous Chancellor of the Exchequer. The less progressive changes, which will hit lower-income groups disproportionately, are the ones introduced in the June Budget.

[Mr Field]

That is a fair point. To be absolutely honest, the core problem that we all face is a lack of any explicit mandate for anything that is being done on the issue. For we Conservative Members who have been warning about the deficit and levels of public debt for many years, at a time when conventional wisdom was that we would stick to the outgoing Government’s spending plans, that is obviously a matter of some concern.

During the run-up to the general election, a spurious debate took place in which all parties danced on the head of a pin. Apparently, the necessity for £6 billion in cuts was a matter of Armageddon on one hand or sunlit uplands on the other. As the political class, we all took a decision to keep the electorate away from some of the harsh choices that would have been inevitable whoever won the election. That lack of an explicit mandate will cause difficulties in making the necessary case for deficit reduction, a case that I have discussed many times in the House. It is of great importance that we reduce the deficit as responsibly and as early as possible, not just to impress the money markets.

I feel strongly that we will now face intergenerational conflict. Almost uniquely outside wartime, the children of the present middle-aged generation—I see several 40 and 50-somethings here—will have a less good financial situation than the one that we have taken for granted. In many ways, that is a terrible indictment of the debts that we are building up, and it is one reason why we need to reduce those debts. It will make this country a more acceptable place for our children to live in.

The hon. Lady and I both have sons. I worry for my son when he comes to adulthood at 20. I hope he will have the education and skills to make him a globally mobile citizen. He and many of the brightest and best of our young men and women may choose to vote with their feet. I fear that we are already seeing an element of that, given the huge levels of unemployment among our graduate population, many of whom have globally mobile skills that they may well use to go elsewhere. I took for granted the opportunities that were available to me when I left university in the 1980s. We need to bring back those opportunities as quickly as possible. Reducing the deficit and ensuring that debt is kept to a minimum will provide a level playing field for future generations.

I appreciate that others want to speak. I will say a bit about some things that are happening in central London specifically. Due to the grave financial situation inherited by the coalition Government, all of us, whether in business, in households or in local and national Government are, understandably, being forced to tighten our purse strings. My local authority, Westminster city council, is no exception. One clear priority in Westminster is the most vulnerable in our community. Hopefully, that is a benefit of having two Members of Parliament for Westminster, one on each side of the political divide, to make the case.

It is easy to characterise my constituency in particular as extremely wealthy. The hon. Member for Stretford and Urmston (Kate Green), whom I have not had a chance to meet, is an erstwhile constituent of mine, and indeed a former candidate for the Barbican in 1997. She will recognise that although the Cities of London and Westminster contain pockets of incredible wealth, there is a lot of poverty not far from the surface. An important part of my job has always been to provide a voice for the most vulnerable in my community.

[Bob Russell]

I thank the hon. Gentleman for drawing attention to pockets of poverty, which are different sizes in different parts of the country. If housing benefit is cut and people cannot afford to pay the rent, what happens to them?

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[Mr Field]

I will come to that later. One issue facing us in central London is that—without wanting to be unkind about it—it will cease to be our problem. Many of those people will leave central London and end up being rehoused elsewhere, potentially in communities a long way from where they were brought up, where housing is relatively cheap but they have no connection. That is a problem we need to deal with.

I have historically had a concern that too much social housing, particularly in central London, has tended to be clogged up with people who are perhaps in long-term unemployment or who have chaotic lifestyles. There inevitably needs to be some sort of balance. As the hon. Lady says, the interests of some of the most vulnerable and voiceless people need to be properly looked after.

In Westminster, we have an innovative scheme called the family recovery programme, which provides a form of intensive intervention. That programme tries to assign resources to specific families with a track record of causing problems within the community. In 2008, Westminster council identified a small number of families with complex and entrenched social problems, who were responsible for the vast majority of the antisocial behaviour in Westminster. The social impact on the neighbourhoods in which those families were located was immeasurable. I think all hon. Members know that it takes only one or two problem families on an estate to ruin the quality of life for all who live there.

The kind of engagement that the family recovery programme has been involved in includes appointing a specific team to work with individual family members on a one-to-one basis. Such a programme is not inexpensive, but Westminster’s commitment to its family recovery programme has been unswerving and in the two years that it has been in operation the results have been encouraging. The proportion of families who remain unregistered with a local GP has fallen by more than two thirds and more than 80% of children for whom truancy had been an issue have increased their school attendance. In a study of families where crime and disorder was a major concern, the number of offences of which they were accused decreased by 69% in the 12 months following a family recovery programme engagement. The average number of suspected offences per month fell from nine in the previous year to roughly one and a half. Importantly, a survey of 100 of the families’ neighbours found that two thirds were either satisfied or very satisfied with the response from both the police and the council.

A housing renewal programme is also in place, which is integral to the city council’s plans to support households currently in employment in Westminster that are on low incomes. The strategy outlines the city council’s commitment to health and well-being. Its objectives are to increase the amount of housing, particularly family housing. Much of both the social and private housing that is being developed tends to be very small, caters for two adults and often has no more than two bedrooms.

We need more affordable homes for local workers and we need to increase the range of tenure types to help residents who wish to get on the housing ladder to do so. The hon. Lady made the stark reality of the situation very clear when she said that, without relying on help from family members, the average age at which someone gets on the housing ladder is 52. That is a pretty depressing statistic. One appreciates that in central London we are part of a global housing market. However, affordable housing is not just a central London issue; it is a problem in suburban areas and I am sure in the Solihulls and Colchesters of this world. Only a generation ago, the average person in their mid-20s could get on the housing ladder, but that is now an absolute impossibility, unless they work in a highly remunerated business. In addition, through CityWest Homes—the city council’s arm’s length management organisation for housing—the city council is committed to building some 500 new homes across our existing estates over the next four to five years. The majority of those will be available for social housing.

Returning to the housing benefit issue that the hon. Member for Colchester (Bob Russell) mentioned, we are still awaiting full details of the cap and we do not know quite how it will operate. I hope the Minister will give us a bit more detail on that, although I appreciate that she and her Department have a very busy work load that they are still working on in the run-up to 20 October. It would be helpful if we could get some indication of the cap, particularly for those authorities whose housing benefit profile means that there is likely to be a significant shift as a result of Government policy.

I know that my city council is lobbying for a significant proportion of the additional money that was announced in the emergency budget to help manage out the existing system. As part of that, a policy will be developed to clarify whom the city council will prioritise for help. Although the details will depend on the nature of the discretionary award, it is likely to focus particularly on low-income households, pensioners and, of course, disabled residents.

Local housing allowance residents will also be written to shortly to advise them of a change to the system. Obviously, in many ways, the uncertainty is the most difficult element of the situation. We have all had letters—the hon. Lady has probably had more than I have—from constituents who are worried sick about the potential changes. That has perhaps not been helped by one or two of the scare stories being put around. However, those people are legitimately worried about where their medium and long-term future will lie. I hope we will be given some concrete details as quickly as possible, so that, as I said, we can ensure that the most vulnerable in our communities are properly looked after.

I want briefly to touch on a local matter on which I have worked with the right hon. Member for Holborn and St Pancras (Frank Dobson) and the hon. Members for Islington South and Finsbury (Emily Thornberry) and for Lewisham East (Heidi Alexander). That issue is the Crown Estate’s announcement of its intention to sell properties on the Millbank estate. With Westminster city council, I have been lobbying through the Greater London authority and independently to try to ensure that we keep the key worker nominations that are on those estates. Fewer than 1% of properties in central London are currently available at intermediate rent, so it is essential that properties such as those provided by the Crown Estate remain available at their current level of subsidy. Although Westminster city council remains concerned about the sales, given that the Crown Estate has been proven a successful landlord over many decades, guarantees have been received that the intermediate rent properties will remain available at their current rate in perpetuity and that there will be no reduction in the number of intermediate rental properties.

I could say much more, but I appreciate that other hon. Members want to have their say on the matter. Such issues will be high profile for us all and I accept that the nature of representative—and perhaps argumentative—politics means that they will be utilised by the Opposition to try to make political capital with both coalition parties. As someone who feels strongly about the most vulnerable, who need a voice and must be looked after in our communities, it is important to me in my role as an inner-London Member of Parliament who feels passionately about such matters to do all I can.

These are not simple issues. Clearly, we all have to face the fact that there is a huge deficit, which we need to address for the reasons that I set out in my earlier comments. As a matter of equity for the entirety of our communities—particularly the young—we need to do so with some haste. However, it is also of great importance that the most vulnerable are looked after. I am very worried—as the hon. Member for Westminster North is—about those in work ending up in poverty. It is understood that the workless will have some poverty issues, which are equally important and must be dealt with, but we all have a great concern about the people in our communities who work extremely long hours—they often have two or three jobs—to try to make ends meet. The voice of such people is often ignored and they are often regarded in the national context as not being such high priority welfare cases. However, those cases are very close to our hearts and we will do our best to represent those interests both in the House and at local government level in the years to come.

[Several hon. Members]

rose—

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[Helen Goodman (Bishop Auckland) (Lab)]

It is a pleasure, Ms Clark, to see you in the Chair this morning. I congratulate my hon. Friend the Member for Westminster North (Ms Buck) on securing this extremely important debate on an issue that concerns millions of our fellow citizens.

My hon. Friend pointed out some key facts, and I hope that the Minister will respond to some of them. The Government have made huge play of the importance of work incentives, but the Red Book, which the Chancellor of the Exchequer presented to the House, shows that 80,000 people in this country will face worse work incentives as a result of his Budget. That demonstrates the point that my hon. Friend the Member for Stretford and Urmston (Kate Green) made about the total incoherence of the policies being presented.

My hon. Friend the Member for Westminster North asked some sharp questions, and I hope that we will hear from the Minister where the extra £2.5 billion—or is it £4 billion?—will come from in the public spending cuts in the autumn, and what exactly her assessment is of the impact on homelessness of the massive cuts in housing benefit. The hon. Member for Cities of London and Westminster (Mr Field) placed great stress on the need to tackle the deficit. Of course we need to tackle the deficit; there is no question about that. The policies set out by my right hon. Friend the Member for Edinburgh South West (Mr Darling) would have produced a debt to GDP ratio in 2014 of 75%—a high level and not one that we would want in the long term. However, over the next five years, the Government propose an additional tightening of £120 billion in public spending cuts and tax rises. The net result will be to reduce the debt to GDP ratio by 5%, so that it will be 70% rather than 75%. That is not even a 5% reduction now; it is a change in 2014. The hon. Member for Solihull (Lorely Burt) backed that point and said that we should worry about the markets. I am sorry, but I do not believe that the markets will take such a different view of a debt to GDP ratio that is 5% smaller in four years’ time, or that that will make all the difference. That is the altar on which we are told we should smash our public services.

[Mr Mark Field]

No one supports the smashing of public services, but in defence of the assertion made by the hon. Member for Solihull (Lorely Burt) and me, the bond markets have made it clear in the aftermath of the emergency Budget that they are impressed by the resolution of the coalition Government. That is one of the reasons that the yields have relaxed, which augurs well for the long-term debt to which the hon. Member for Bishop Auckland (Helen Goodman) referred. This year, £1 in every £4 that we spend has been borrowed, and we must try to keep the cost of that borrowing to a minimum.

[Helen Goodman]

We have tested to destruction the theory that we should drive our politics by what bankers want. That is not what we want to do, which is why Labour Members regard this Budget as deeply ideological. It will damage the life chances of the most vulnerable people—

[Mr Mark Field]

Will the hon. Lady give way?

[Helen Goodman]

Not again. My hon. Friend the Member for Stretford and Urmston made an excellent forensic analysis of the policies that we have seen so far. She is right to question the competence of Ministers who say one thing but do something completely different. Some seem to be totally out of their depth.

The hon. Member for Colchester (Bob Russell) is rapidly building a reputation as one of the most effective parliamentarians in the House. I would like to point out two facts in response to his contribution. First, under the three Labour Governments, the number of children in child poverty fell by 600,000. Secondly, the number of pensioners living in poverty fell by 900,000.

On 22 June, the Chancellor put the best possible gloss on his Budget, claiming that the effects were progressive and that the richest people would bear the greatest burden. He produced tables in the Red Book which purported to demonstrate that. Since then, independent study after independent study has demonstrated the precise opposite to be the case. In every dimension of vulnerability, the poorest do worst. The Red Book tables were incomplete and did not include the effect of the benefit cuts. Moreover, the Chancellor took credit for the decisions of his predecessor.

As my hon. Friend the Member for Westminster North has said, the first major study was undertaken by the Institute for Fiscal Studies and showed that the impact of the full £11 billion of cuts to the benefits programme, taken together with the tax changes, was regressive. Next, analysis carried out by the House of Commons Library into the impact of the cuts on women, showed that women will lose £6 billion while men lose £2 billion, thereby widening a gender gap that is already too great. In part, that reflects the cuts in support for children, but even if those cuts are stripped out, women will pay two thirds of the extra revenue taken by the Chancellor, and men will pay one third. The Government have admitted that they did not carry out an equality impact assessment of the Budget beforehand. Will the Minister tell us what stage that impact assessment is at, and when we will see it?

Many hon. Members have spoken about the significance of housing benefit. The Minister’s Department carried out an impact assessment into some of the changes to housing benefit, but once again, it was an incomplete analysis because the papers produced at the end of July looked at the effect on the private rented sector only. Even that study showed that over 50,000 of the poorest pensioners will lose an average of £14 a week and that tens of thousands of severely disabled people will lose an average of £13 a week. Lone parents and people with children will lose more than adults without children.

The next major study was the analysis by Cambridge university, which showed that 134,000 families who already live in poverty will face the most cruel dilemma—whether to move or whether to cope on a lower income. When he accepted the position of Secretary of State for Work and Pensions in May, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) said that he was interested most in the poorest people. However, the Cambridge university study shows that 54,000 families will have less than £50 to live on after the cuts to housing benefit.

Research produced at the end of August by Experian and published by the BBC looked at the north-south divide. It showed that the spending cuts will hit the north-east and parts of the midlands the most. Middlesbrough is ranked as the most vulnerable place in the country and will suffer most from spending cuts. The average income in Middlesbrough is £18,000. Elmbridge in Surrey is ranked as the most resilient town; the average income there is £27,000.

Most recently, the TUC has looked into the impact on public spending. It shows that the poorest 10% of people will lose 20% of the value of their income in terms of public services, while the richest 10% will lose 1.5%. I have looked again at the work done by the TUC, and put it together with the analysis carried out by the IFS. The work done by the TUC included the impact of the strongly progressive measures introduced by my right hon. Friend the Member for Edinburgh South West in March. However, if we strip those figures from the table, we see that the impact of the measures for which the Government are responsible will be even more regressive. By 2012, the picture looks even more unfair. After tax, benefit and spending changes are taken into account, the poorest 10% of people will lose 23% of their income, while the richest people will lose 2%. That situation will get worse over time. If we put the TUC distribution of public spending together with the IFS tax and benefit figures for 2014, we see that the poorest will lose one quarter of their income in terms of the loss of value in public services, tax and benefits, while the richest will lose 2%.

All that is before we look at the impact on jobs and unemployment. The facts speak for themselves: 25% of income will be taken from the poorest people, 2% from the richest. The effects will be felt not only over the next two or three years. We all know that poverty in childhood affects a person’s opportunities throughout their lives. Of course the deficit needs to be tackled, but the speed, depth and manner of the cuts is short-sighted, unnecessary and unfair. The coalition Government are losing all credibility in their repeated claims to be concerned about fairness. The evidence shows that there is not a shred of integrity in their claims.