Amendment of the Law

Rachel Reeves Excerpts

Monday 23rd March 2015 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I thank the Secretary of State for his valedictory address this afternoon, and I hope that this will be my last speech from the Opposition Benches.

The last five years have been a tragic and terrible waste for working people in this country, and a shocking record of Tory welfare waste at the Department for Work and Pensions. What a wasted opportunity this Budget was to put in place the better plan that we need. People in my constituency—and in every constituency around the country—have been let down yet again. People are putting in the hours at work but still falling behind with the rent and the bills; they are desperate to work and earn, but are not getting the support they need to find a job. People who cannot work because they are sick or disabled are forced to turn to food banks because the safety net is being pulled away from them.

The people of our country have been put through five years of hardship by this out-of-touch Government, and they are still waiting to feel the benefits of what has been the weakest recovery in more than 100 years. Five wasted years in which working people have put in the hours, day after day, year after year, only to find themselves £1,600 a year worse off than when the Government took office. Five wasted years in which families have been hit by tax and benefit changes that cost the average household more than £1,100 a year, only to find that the Government have borrowed £200 billion more than they said they would and have totally failed to deliver on their central promise to balance the books. Five wasted years in which people have been told “We are all in this together”, while the Government prioritised tax cuts for millionaires and came back time and again to take money from the poorest. Five wasted years in which a Secretary of State for Work and Pensions has waxed lyrical about his grand scheme for welfare reform, but all he has delivered is delays, backlogs, write-offs and overspends—a record of Tory welfare waste that we cannot stand for another five years.

Let us remind ourselves of the backdrop to this Budget and of the complacent and self-congratulatory speech we have just heard from the Secretary of State. The Chancellor promised in 2010,

“we will bring down the benefits bill.”

Since then we have had five years of cruel and unfair policies: taking money from the pockets of disabled people through the bedroom tax; taking money from working families with restrictions to tax credits; driving hundreds of thousands of people to food banks to feed their families; and increasing the number of children in absolute poverty by 500,000. And yet, at the beginning of this year, the Institute for Fiscal Studies confirmed that

“Real terms benefit spending…is forecast to be almost exactly the same in 2015–16 as it was in 2010–11”.

Why is that, we may ask, after the Government have inflicted so much hardship on so many people who have the least? It is because, the IFS explains, these harsh and unfair policies have been cancelled out by upward pressure on the benefits bill resulting from

“weak wage growth and rising private rents”.

Meanwhile, it says, most of the major structural changes, such as universal credit, have run into problems and are yet to be delivered. This is the reason why, in the past five years, the Government have spent £25 billion more on social security than they said they would in 2010. It is why, yet again, the small print of the Budget reveals another £600 million overspend this year against last year’s forecasts.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

My hon. Friend is making some incredibly strong points. On low wage growth, does she agree that we have seen particular challenges in very low paid sectors, such as care? Not only are carers struggling to get by on very low wages and struggling with the cost of living, we are seeing the minimum wage being undermined and some companies possibly not even paying it. Allegations have been made this week about MiHomeCare in Penarth in my constituency. The Government are failing to enforce the minimum wage.

[Rachel Reeves]

We know that still too many people are not even paid the minimum wage, and we know that the number of people paid less than the living wage has increased from 3.4 million to 4.9 million in the past few years. It is also true that we need to do more to ensure the minimum wage is always enforced, which is why we have said we would increase fines for non-payment to £50,000 and why we would give more powers to local authorities to ensure that the minimum wage is always paid.

[Mr Robinson]

Will my hon. Friend confirm what the Secretary of State failed to confirm? What she has clearly exposed this afternoon, supported by an earlier intervention, is that there have been 1.8 million zero-hours contracts in the past five years. As a consequence, tax and national insurance receipts are, cumulatively, £100 billion below the Government’s own projections. That is at the heart of the problem.

[Rachel Reeves]

My hon. Friend is right. Income tax and national insurance receipts have fallen short of forecasts by a staggering £97 billion in the life of this Parliament. As he makes clear, too many people are working on zero-hours contracts or in very low-paid jobs where they just cannot make ends meet.

[Mr Sheerman]

As a fellow Yorkshire Member of Parliament, does my hon. Friend share my anger that despite all this bland talk about the success of the economy and the success of the welfare system when it is actually being destroyed, in my town—and probably in hers—30% of people working are on low wages? It is women and families with children who are being particularly hard hit.

[Rachel Reeves]

My hon. Friend is right to talk about the experience of people in his Huddersfield constituency. People in Huddersfield, Yorkshire and around the country will, I think, be slightly shocked by the degree of complacency from the Secretary of State today and from the Chancellor last week, when for them and their families things are very often getting harder, not easier.

The Government have failed to control social security spending, as they promised they would, because they have failed to tackle the true causes of rising welfare spending, such as low pay and the lack of affordable housing, and because they have failed to deliver the flagship reforms the Secretary of State made such great claims for five years ago. What a tragic waste of time, talent and taxpayers’ money: wasting the precious time of sick and disabled people forced to wait for months on end for the support they so desperately need; wasting the talents of people who are not getting the help they need to get into work, or who are stuck in low-paid insecure jobs that my hon. Friends have spoken of that do not make the most of their potential; and wasting money on IT systems that do not work, assessment and appeals procedures that have descended into chaos, and soaring spending on in-work benefits because of this Government’s failure to build an economy that actually rewards hard work.

[Mr Duncan Smith]

The hon. Lady talks about what she calls soaring benefit costs. Does she accept that under her Government not only did in-work benefits rise by more than 50%, but housing benefit for those out of work rose by 70%? In other words, both in-work and out-of-work housing benefit claims rose dramatically under her Government.

[Rachel Reeves]

Under the last two Conservative Governments, unemployment reached 2.5 million. There was a global financial crisis during the period of the last Labour Government, and as a result, unemployment rose, but it has risen even further under this Government, from 1.5 million, when Labour left office, to 1.7 million in February 2012. The OBR’s Budget forecast last week showed a £600 million increase in the forecast for social security spending in just one year, and since 2010, the Government have spent £25 billion more on social security than they set out to spend.

Under the Government, the number of people paid less than the living wage has soared by 44%, while house building has fallen to its lowest levels since the 1920s. It is for those reasons that housing benefit spending—the second-largest area of DWP spending, after pensions—was more than £2 billion higher in 2014-15 than in 2009-10. It was due largely to the rocketing numbers of working people not paid enough to cover their rent. In this Parliament, the Secretary of State has spent £1.8 billion more than he planned on housing benefit for working people and, on current Government forecasts, the cost of working people’s rising reliance on housing benefit to pay their rent will reach £14 billion by the end of the decade, if left unchecked—£488 for every household in the country.

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

I think there is some common ground between us, particularly on zero-hours contracts for women who choose to work part time, but could the hon. Lady not congratulate the Government on regulating part-time zero-hours contracts, especially given that the Office for National Statistics has knocked the figures Labour used? This is often something that working mothers choose.

[Rachel Reeves]

According to the ONS, the number of zero-hours contracts has increased from 1.4 million to 1.8 million in the last year. This is a huge challenge for working mothers and others. We want to ban the exploitative use of zero-hours contracts so that if someone does regular hours, they will be offered a regular contract and so that their hours cannot be cancelled at the last minute without compensation. If we make those changes, I hope we can stem the increase in the number of zero-hours contracts, giving more people the security of paid work they know will happen week after week.

[Barbara Keeley]

I want to give an example from the social care sector to add to that given by my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty). I recently spoke to a constituent working in the care sector whose job decayed over the years after an agency took over the firm she worked for, to the point where, instead of working the 35 to 40 hours a week she wanted, she was lucky if she got 20 hours a week, and the agency constantly cancelled at short notice. She could not manage from week to week with that. Sadly that is the care industry these days.

[Rachel Reeves]

My hon. Friend speaks powerfully about something she knows a lot about. The number of zero-hours contracts in the social care sector, and more widely across the economy, has grown. It is incredibly difficult to plan from week to week if someone does not know how much money they will take home or whether they can afford to pay the rent and bills and put food on the table. That is why more people in work are having to rely on food banks to make ends meet.

I move now to key reforms that have spun out of control under the Government. Universal credit was supposed to cut fraud and make work pay, but after five wasted years of this Government and more than half a billion pounds of taxpayers’ money spent, it is being paid to just 41,000 of the 1 million people who were supposed to be receiving it last April. The National Audit Office has identified a fortress mentality and a “good news” reporting culture in the Department as key factors behind this fiasco. Last summer, the Secretary of State promised an accelerated roll-out plan, but we have yet to see much evidence of it—things could not be going much slower.

The Work programme—another failed programme—was the Government’s belated and inadequate replacement for the future jobs fund they scrapped, but it has failed to tackle long-term unemployment. Indeed, the number of long-term unemployed people has risen by a staggering 49% since 2010. It still sends more people back to sign on at the jobcentre after two years than it places in a job and has made no impact on the disadvantaged and high-risk unemployment faced by over-50s and disabled people. The introduction of personal independence payments has also been a complete and utter shambles, leaving sick and disabled people waiting months on end for support, while total spending has gone over budget by more than £2 billion. The roll-out of employment and support allowance was supposed to deliver big savings by helping more disabled people into work, but just 8% of people on ESA have been helped into work by the Work programme. Furthermore, analysis by the House of Commons Library shows that the Secretary of State has spent £8.6 billion more than he said he would on ESA. What a mess and what a waste—five years of Tory welfare waste we needed this Budget to put an end to.



The Budget was a wasted opportunity. We needed a better plan to make work pay and get social security spending under control, but instead the report of the independent OBR confirmed that all we could expect from the Government in the future was more of the same: more unplanned spending on social security and more failure to deliver promised savings on disability and sickness benefits, with the OBR noting on page 143 that

“projected spending on incapacity benefits, DLA and PIP is up by £0.2 billion a year on average between 2014-15 and 2019-20”;

more failure to deliver promised savings on fraud, with the OBR reporting on page 191 that it had

“revised down the savings associated with tax credits operational measures. These increase spending by £0.2 billion a year between 2015-16 and 2019-20”;

and more of the “good news” culture on welfare reform, with the OBR noting on page 192 that

“we have noted a history of optimism bias relating to reforms to incapacity benefits, disability benefits and universal credit.”

“Optimism bias” is a polite way of saying that we cannot trust a word the Government say.

In a moment of optimism bias, the Secretary of State promised that 1 million people would be on universal credit by April 2014, but one year on, fewer than 41,000 people are claiming it. In another moment of optimism bias, he promised that universal credit would be on time and on budget, but with delay after delay and millions of pounds written off, everyone knows that it is neither on time nor on budget. In yet another case of the Government’s optimism bias, they promised to back carers but then forced 60,000 households with carers to pay the bedroom tax, as my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) mentioned. Was it not optimism bias that led the Chancellor to promise to reduce the benefit bill, only for the Government to spend £25 billion more on social security than they set out to spend? And perhaps optimism bias is why the Chancellor broke his promise to clear the deficit by the end of this Parliament.

[Christopher Pincher (Tamworth) (Con)]

Is the hon. Lady’s muddled jobs guarantee an example of optimism bias?

[Rachel Reeves]

Labour’s jobs guarantee would help 150,000 people get into work in the first year of a Labour Government. I am optimistic that we can transform the lives of young people and the long-term unemployed, unlike this Government, who have left them on benefits. Funded by a repeat of the bank bonus tax they abolished and by restricting pensions tax relief to 20% for people earning more than £150,000 a year, our compulsory jobs guarantee will help young people who have been unemployed for a year and older people out of work for two years. Should that not be our priority, rather than tax cuts for bankers?

The Budget also reforms the rules governing pensions and annuities. The Opposition have long called on the Government to sort out the failing pensions and annuities markets, which result in too many hard-working savers finding their retirement pots eroded by excessive fees and poor-value products. So we welcome more freedom for savers to choose how to access their money and plan their retirement. Just as with last year’s announcement, we find the same failure to ensure that savers and pensioners have the support and protection they need to secure a decent and reliable income and to avoid the rip-offs that are already threatening to create another mis-selling crisis.

Just this weekend, we learned that with fewer than two weeks before the reforms announced in last year’s Budget come into effect, there is still no telephone number for the promised advice service, Pension Wise, leaving hundreds of thousands of savers exposed to scams that could have a devastating effect on their retirement plans. Instead, we have the ridiculous spectacle of the Pensions Minister trying to wash his hands of the responsibility by warning of the rip-offs that will result—without doing a single thing properly to protect people from those risks.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

Any decisions about annuities are extremely complex decisions to take. Failing to get the advice lines up and running is not just a fault on the part of this Government, it is negligent. It is negligent to allow people this freedom without providing them with any back-up to help them make the right decision. What is more, there is no thought given to the remedies if the decision they take is wrong.

[Rachel Reeves]

When the Chancellor spoke in the 2014 Budget he said that people would be given “advice”, which was then watered down to “guidance”. Now, with two weeks to go, we know that nobody has received this guidance, yet people will be making irreversible decisions about their retirement income.

This Budget has been more of the same from the same old Tories: more overspends, delays and missed targets on social security; and more big promises for savers and pensioners that are not backed up with the support and the protections we need to make these reforms work.

[The Minister for Pensions (Steve Webb)]

The hon. Lady is concerned, as we are, to make sure that consumers get good value. She has proposed a cap on charges for these new pension products. Presumably, she thinks the cap should come in straight away. What should it be?

[Rachel Reeves]

We have said that there should be a cap on fees and charges—not just for the annuities products, but for the new drawdown products. We think it should be at the same level as the Government have set out, but then reduced over time. In that way, we will ensure that savers get value for money. Unless we do that, more people will be ripped off. Unfortunately, despite all the Government’s rhetoric, they have not taken action to protect people’s retirement incomes.

What we have heard from the Secretary of State today is the same complacency and self-congratulation. Yes, of course we welcome any fall in unemployment, but it was this Government who allowed unemployment to soar to record levels in the first place, peaking three years ago in February 2012 at 1.7 million. Under this Government, the number of long-term unemployed, abandoned to a life on the dole, has risen by 49%. That is why Labour will have a compulsory jobs guarantee.

[Richard Graham (Gloucester) (Con)]

The hon. Lady made a number of comments about the prices and charges that should be levied on pensions. Will she confirm that the price cap that has been levied on auto- enrolment pensions is, in fact, half that of the amount levied on stakeholder pensions when her Government were in power?

[Rachel Reeves]

We introduced a cap on charges for stakeholder pensions and the automatic enrolment brought in policies for which Labour had already legislated. We are proud of automatic enrolment, but we disagree with the changes that this Government introduced, which mean fewer people are benefiting from automatic enrolment —1.5 million fewer, two thirds of them women. That is a real lost opportunity to ensure that those people who should be saving are actually saving.

What this Secretary of State and the Government he speaks for simply do not understand is that their failure to make work pay and to deliver a recovery that raises living standards for all is the root cause of their failure to control social security spending and balance the books as they promised. They have spent £25 billion more than they planned and their receipts from income tax and national insurance have, as has been pointed out, fallen short of forecasts by a staggering £97 billion over the life of this Parliament.

It is because of that failure that, in order to deliver his objective of a large surplus in the next Parliament, the Chancellor has now committed to even deeper spending cuts over the next three years than we have seen over the past five years. The Office for Budget Responsibility confirms that these plans will mean

“a much sharper squeeze on real spending in 2016-17 and 2017-18 than anything seen over the past five years”,

and

“a sharp acceleration in the pace of implied real cuts to day-to-day spending on public services”.

My right hon. Friend the Member for Morley and Outwood (Ed Balls)and my hon. Friend the Member for Nottingham East (Chris Leslie) have highlighted the threat this poses to police, defence and social care. Is it not the truth that the Chancellor’s extreme fiscal plan can be delivered only by putting our NHS at risk or imposing yet another Tory rise in VAT? Although it is hard to see how this Government can make the extra £12 billion-worth of cuts to social security spending when they have failed to deliver any savings in social security so far, these cuts could not be delivered without inflicting unimaginable hardship on low-paid workers, children in poverty, disabled people or carers.

So for this Government, this empty Budget will be a fitting epitaph. What of this Secretary of State who wanted to take his place in history as the compassionate Conservative who reformed welfare? His time is up and his record is clear: major reforms undelivered or descending into costly chaos; food banks in every town and child poverty back on the rise; more and more spending on in-work benefits as more and more working people find their wages do not cover the rent. No wonder the OBR says that the Government are guilty of “optimism bias”.

[Mr Jim Cunningham]

One important factor in looking at low pay, child poverty and similar issues is that many people’s employment rights are eroded. We need only to look at City Link in Coventry to see that more than 1,000 people could not even get any redundancy pay because of the erosion of employment laws under this Government. That only adds to the poverty.

[Rachel Reeves]

I thank my hon. Friend for that intervention. Of course, this Government have made it harder for people to access justice, too, through the cuts they have made there.

We have had five years of Tory welfare waste—and it is high time we put it behind us. The Secretary of State wanted universal credit to be his legacy, but it is being paid to less than 4% of those who were supposed to be receiving it a year ago. Instead, this Secretary of State will be remembered for the hundreds of thousands of disabled people hit by the bedroom tax; for the 1 million people forced to resort to a food bank to feed their families last year; for the 3 million low-paid working families who have been hit by this Government’s cuts to tax credits. We cannot afford another five years of this Tory Government.

This could have been a Budget to make work pay, with a plan to raise the national minimum wage to £8 an hour and measures to promote and incentivise the living wage. This could have been a Budget for mums and dads who want to work and earn more, with 25 hours a week of free child care for all working parents of three and four-year-olds and guaranteed wrap-around care for those with children at primary school. This could have been a Budget that gave relief to working families on low incomes, by scrapping the ill-conceived and unfair married couples tax allowance and using the money to introduce a 10p starting rate of income tax instead. This could have been a Budget to create more of the productive, well-paid jobs we need by backing entrepreneurs, small businesses and the growth industries of the future, with a cut to business rates, a proper British investment bank, and new powers devolved to every city and county region across the country.

This could have been a Budget to secure our NHS for the future, with a tax on properties worth more than £2 million to pay for the thousands more doctors, nurses, midwives and home care workers that our health service desperately needs. This could have been a Budget that began to right the wrongs of the past five years, by tackling the tax loopholes and reversing the tax giveaways that have benefited a few and by cancelling the cruel and unfair bedroom tax that is hitting disabled people so hard. All that is not just the Budget that this could have been; it is the Labour Budget that we can have and the Labour Budget that we will have if we elect a Labour Government in just 45 days’ time.

[Several hon. Members]

rose—