Welfare Cap

Neil Gray Excerpts

Monday 12th December 2016 Commons Chamber

[The Parliamentary Under-Secretary of State for Welfare Delivery (Caroline Nokes)]

I beg to move,

That pursuant to the Charter for Budget Responsibility: Autumn 2015 update, which was approved by this House on 14 October 2015, under Section 1 of the Budget Responsibility and National Audit Act 2011, this House agrees that the breach of the Welfare Cap in 2019-20 and 2020-21, due to higher forecast inflation and spend on disability benefits, is justified and that no further debate will be required in relation to this specific breach.

Today’s motion is about Government accountability for welfare spending before the House and, indeed, before the public. This debate is about the welfare cap. I hope right hon. and hon. Members on both sides of the House will agree that our welfare system is about more than just the numbers. We have a set of principles to build a welfare system that works for everyone. We need to look beyond just benefits, and to work with employers, health professionals and the voluntary sector. We need to ensure the system supports people to get into work, to stay in work and to progress in work. We must also offer care for the minority of people who cannot work, whether through sickness, disability or personal circumstances.

We introduced the welfare cap in 2013 to strengthen control of welfare spending and improve parliamentary accountability for that level of spending. The welfare cap is an important part of our fiscal framework, and it plays a crucial role in delivering our commitment to a sustainable and affordable welfare system. Our welfare reforms are creating a system that makes sure that work always pays and that is fair to those who receive welfare but also to those who pay for it.

The independent Office for Budget Responsibility assessed performance against the welfare cap at autumn statement, and it is now forecast that the current cap will not be met in each year until 2020-21. A similar debate was held in the House on 16 December 2015 on the breach of the welfare cap in the years 2017-18 and 2018-19, resulting from the decision not to pursue the tax credits measure proposed at summer Budget 2015. The House agreed that the breach of the cap in the earlier years of the forecast period was justified and that no further debate would be required on that specific matter. Therefore, the motion we are putting before the House today seeks agreement on the justification of the breach of the cap in the later years of the forecast period—2019-20 and 2020-21.

I would now like to outline the reasons why the cap is forecast not to be met in those years. This is due to increased forecast inflation and spend on disability benefits, partly due to the decision not to pursue the personal independence payment measure proposed at Budget 2016. As with our decision not to pursue the tax credits measure, the Government have once more listened and responded to public concerns, and we have decided not to pursue the changes to the personal independence payment. Higher forecast inflation is another factor contributing to the cap not being met in 2019-20 and 2020-21. In view of the uncertainty facing the economy, inflation is now forecast to be higher than when the cap was set at summer Budget 2015.

I would like to reassure the House that the latest forecasts do not mean that welfare spending is out of control. As my right hon. Friend the Chancellor announced at autumn statement, we will deliver the welfare savings we have already announced and legislated for. I would also like to repeat that the Government have no plans for further welfare savings in this Parliament.

The Government believe that work is the best route out of poverty. That is why we want a welfare system that helps people who can work to get back into work, but that also supports those in most need. Our welfare reforms are working. Employment has risen by 2.8 million since 2010, and is now at a record high of 74.5%. Unemployment is at an 11-year low. Universal credit is revolutionising the welfare system, enshrining the principle that working more always pays more. Through the benefit cap, we are restoring fairness to the system, while ensuring there is a clear incentive to work.

There are now over 1 million fewer people on out-of-work benefits. Some 3.5 million disabled people are now in employment, and in the last three years, the number of disabled people in work has increased by nearly 600,000. We also want a welfare system that is a strong safety net for those who need it—

[Neil Gray (Airdrie and Shotts) (SNP)]

Could the Minister confirm whether it is still the Government’s commitment to halve the disability employment gap by 2020?

[Caroline Nokes]

The hon. Gentleman will have heard my hon. Friend the Minister for Disabled People, Health and Work at her recent Select Committee appearance. She has made the point repeatedly that we are determined to reduce the disability employment gap, and we are working incredibly hard to do that, but we acknowledge that more needs to be done.

The welfare cap plays an important role in ensuring that the welfare bill is sustainable and affordable. We introduced the cap to allow us to bring welfare spending under control, and we have done so. The system we inherited was unaffordable and unsustainable. Under Labour, welfare spending increased by almost 60% in real terms. The number of households where no member had ever worked nearly doubled, and unemployment went up by 457,000.

As part of our continuous commitment to a sustainable welfare system, my right hon. Friend the Chancellor announced at autumn statement the introduction of a new welfare cap, alongside a new fiscal framework. The Government are firmly committed to returning the public finances to balance as soon as is practicable. Given the uncertainty we face, it is important to allow for enough flexibility to support the economy. That is why we are changing the fiscal framework, and why we are introducing a new welfare cap as part of that.

The new cap sets a target for welfare spending in 2021-22, with a pathway for welfare spending in all the years before that. The new cap is set in line with the latest autumn statement forecast. The scope of the new cap remains unchanged. The Office for Budget Responsibility will continue to assess performance against the new cap, and if the cap is assessed as breached, Ministers will still need to hold a debate and justify the breach in the House, or to propose steps to bring spending within the level of the cap.

The House will have the opportunity in due course to debate and agree the new fiscal framework, including the new welfare cap, which was put forward by my right hon. Friend the Chancellor at autumn statement. I commend the motion to the House.