Welfare Cap

Shailesh Vara Excerpts

Wednesday 16th December 2015 Commons Chamber

[The Parliamentary Under-Secretary for Work and Pensions (Mr Shailesh Vara)]

I beg to move,

That, pursuant to the Charter for Budget Responsibility: Summer Budget 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 2016-17, 2017-18, and 2018-19 resulting from the decision not to pursue proposed changes to tax credits, as laid out in the Autumn Statement 2015, is justified and that no further debate will be required in relation to this specific breach.

The motion is about the Government accounting to Parliament and the public for decisions about welfare spending. It is something we on this side of the House take very seriously. That is why in 2013 the Chancellor announced we would be bringing forward a welfare cap to control welfare spending in a way that has never been done before. The cap would be set shortly after each new Parliament and assessed each year by the independent Office for Budget Responsibility. Any breach of the cap requires my Department to come to the House to set out one of three courses of action. The first would be to propose measures to reduce welfare spending to within the level of the cap. The second would be to seek the approval of the House to increase the level of the cap. The third would be to explain why a breach of the cap was justified. The House will be aware that, following the Chancellor’s autumn statement, the cap is forecast not to be met in the short term. The motion seeks agreement that this is justified.

[Ian Lavery (Wansbeck) (Lab)]

Even this early in the debate, the Minister is saying that he is going to justify breaching the cap. Is he not somewhat embarrassed about that?

[Mr Vara]

Not at all. If the hon. Gentleman will give me time, I will explain the justification. He will be aware that there has been a huge amount of debate on this issue, and that the Chancellor has listened.

[Ian Lavery]

I must have missed that.

[Mr Vara]

The hon. Gentleman obviously did.

In making our case, I want to set out the circumstances that have led to this forecast. The cap was initially set in line with the OBR’s March 2014 forecast. In the summer Budget, the Chancellor set a lower welfare cap to help to reflect our move to a lower tax, lower welfare and higher-wage economy. Since then, as part of the autumn statement, the Chancellor took the decision not to pursue proposed changes to tax credits. This will give families longer to adjust as we make work pay and provide better support for people in work.

This change has been possible partly because of improvements in the nation’s finances, including improved tax receipts and lower debt interest payments. These are not free choices, however, and as a result of this change, we will be spending more in the shorter term than had been forecast in the summer Budget. That means that, based on current forecasts, the cap will not be met for the next three years: 2016-17, 2017-18 and 2018-19.

--- Later in debate ---

[Madam Deputy Speaker (Natascha Engel)]

Order. I am not embarrassed or concerned. The Minister might be, but I am not.

[Mr Vara]

If we are talking about embarrassment, perhaps it is the hon. Member for Wansbeck (Ian Lavery), along with those on the Opposition Front Bench, who ought to be embarrassed. They ought to be embarrassed about the millions of people who lived in misery because they were forced to become unemployed. They ought to be embarrassed because, under Labour, the welfare cap was out of control. They ought to be pleased that this Government have the guts to take the difficult decisions to bring the welfare cap back under control.

[Owen Smith (Pontypridd) (Lab)]

It is Christmas, and I think the Minister would like to know that his Government have won first prize for being the first Government ever to breach £1 trillion in welfare spending over five years. That is £130 billion more than the Labour Government spent in their last five years. You have won the prize!

[Mr Vara]

The hon. Gentleman speaks of Christmas spirit. In that spirit, perhaps he would like to apologise to the House on behalf of his party for the mess that it left us. Perhaps he would like to apologise to the people out there—yes, the public—who endured misery and ended up being unemployed under Labour’s policies. Perhaps he would like to apologise to the taxpayers for letting the welfare budget get completely out of control. As a result, we are having to take the tough decisions. [Interruption.] I am happy to give way to the hon. Member for Pontypridd (Owen Smith) if he would like to apologise. [Interruption.] I have given him the opportunity to apologise but he would rather not do so.

[Heidi Allen (South Cambridgeshire) (Con)]

On the subject of Christmas, I would just encourage all of us, please, to remember that there are people at the heart of these decisions, and this should not be the moment for political footballs. We are here to say that things have changed and that our view, policies and outlook have changed. I implore every Member in this House to remember that we are speaking on behalf of people, not our own personal political agendas.

[Mr Vara]

My hon. Friend makes a very good point, and let me put on the record the fact that it is our welfare programme that is improving people’s lives. It is no bad thing occasionally to ask the people who created the mess to apologise. I think the public outside would welcome an apology, because they have had to endure quite a lot of misery as a consequence of the people who took the decisions earlier on. She makes a good point when she says that people are watching, but I would also say to her that those people want an apology. I make no apology to the House for requesting that apology from the Opposition.

[Owen Smith]

rose—

[Mr Vara]

I will give the hon. Gentleman an opportunity to apologise. He needs to apologise and I will give him that opportunity.

[Owen Smith]

I rise in the spirit of the intervention made by the hon. Member for South Cambridgeshire (Heidi Allen) and to say that I absolutely welcome the decision by the Government today to breach the welfare cap in order to reverse-ferret on the cut for 3 million recipients of tax credits—low-wage workers right across Britain. It is an excellent thing the Government have done and we will be fully supportive of it. I hope that she will be supportive of us when we call for a similar reversal on universal credit work allowances.

[Mr Vara]

The House will have noted, as will the people who are watching at home, that still we have no apology.

The Government are determined to continue the work that we have done to date and to honour the mandate from the British people at the general election, so that we can tackle welfare dependency and fix the nation’s finances. Despite this short-term additional spending, we have made sure that, through our welfare reforms, the cap will be met later in this Parliament—by 2019-20. Let me be clear: the Government are committed to the welfare cap, and the Office for Budget Responsibility has confirmed that the cap is met in the medium term. The OBR also forecasts that welfare spending within the cap will fall as a proportion of GDP from 6% to 5% over the welfare cap period. That is a fall of 1%, in line with the 1% fall forecast at the summer Budget. By 2019-20, therefore, we will still achieve the £12 billion a year welfare savings that we said we would achieve—

[Owen Smith]

rose—

[Mr Vara]

I will not give way to the hon. Gentleman. I have given him plenty of opportunity to apologise, and he is not doing what the nation wants. If he is not going to do that, he needs to sit quietly and contemplate what policies his party is going to produce. On policies, it is worth noting that he, along with the hon. Member for Islington South and Finsbury (Emily Thornberry), actually supported the measure that introduced this cap, as did several other welfare Cabinet Ministers when Labour was in government, so it is ironic that they now seek to make cheap political points. As I say, by 2019-20 we will have achieved our £12 billion welfare savings. That is what we pledged at the election, that is what the public gave us a mandate for and that is exactly what we will deliver. We can do this because of the permanent savings that we have already made and the long-term reforms that we are making.

The simple fact is that Labour completely overspent on welfare during its 13 years in power. Under Labour, welfare spending went up by almost 60% and the benefits system cost every household an extra £3,000 a year. Spending on tax credits increased by 330%. That is £24 billion—

[Emily Thornberry (Islington South and Finsbury) (Lab)]

You are still spending more than us.

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[Mr Vara]

The Labour party is a little slow in hearing, so I will repeat the figure for the Opposition’s benefit: £24 billion. We had a welfare system that did not incentivise work and left some people getting more in benefits than they would in work. That was not fair to the hard-working taxpayers who paid for it and it certainly was not fair to those who had become dependent on the state, with no hope for a brighter future. What did Labour have to show after all that spending? Nearly one in five households had no one working. The number of households in which no one had ever worked had nearly doubled. Some 1.4 million people had been on benefits for most of the previous decade, and close to half of all households in the social rented sector had no one in work. Ever more spending on welfare just is not the answer.

We were right to bear down and get a grip on a welfare bill that was simply out of control. The introduction of the cap has brought greater scrutiny and challenge around welfare spending, and that is the way forward. The Chancellor said that he would listen on tax credits, and he has. This one-nation Government are determined to move to a lower tax, lower welfare and higher wage economy. We are doing so in a way that ensures families have more time to adjust to the changes. I commend the motion to the House.

[Owen Smith (Pontypridd) (Lab)]

Let me start by wishing a very merry Christmas to you, Madam Deputy Speaker, and to the Under-Secretary of State for Work and Pensions, the hon. Member for North West Cambridgeshire (Mr Vara) and all the Ministers on the replete Front Bench, especially the Secretary of State who I had hoped would lead the debate today. Indeed, I had hoped that it might be the Chancellor, because I seem to recall—

[Mr Vara]

rose—

[Owen Smith]

I will certainly give way. I had not really started, but the hon. Gentleman can carry on.

[Mr Vara]

For the record, the reason I am addressing this debate is that my right hon. Friend the Secretary of State was chairing a Cabinet meeting, and he arrived after I had started speaking, and the record will show that.

[Owen Smith]

I was here in the Chamber, and I saw the Secretary of State arrive just before the Minister rose to speak. While we are on the subject, perhaps the Minister can clear up this matter. He said to us on Monday at Department for Work and Pensions questions that the Secretary of State had visited a food bank. We submitted a parliamentary question to the Minister asking when that had taken place. The interesting answer—in truth it was a slightly slippery answer—was that Ministers, not the Secretary of State, have attended lots of things, including food banks. I gather there is another question. Perhaps he could tell us when the Secretary of State went to a food bank. [Interruption.] Clearly, he does not want to say.

As I was saying before the Minister intervened on me, it was a year ago when, to a packed House, the Chancellor unveiled his latest wheeze, the welfare cap. He had a mile-wide smirk on his face like one of the famous cats from his Cheshire constituency. He was positively purring as he laid down what he thought would be a trap for a future Labour Chancellor. He said:

“The welfare cap marks an important moment in the development of the British welfare state…and ensures that never again can the costs spiral out of control”.—[Official Report, 26 March 2014; Vol. 578, c. 374 and 381.]

He wanted Labour Members to stand up

“and say exactly what they think of the welfare cap, and tell us that they support it, and that they should have introduced it when they were in office. They look such a cheery bunch.”—[Official Report, 26 March 2014; Vol. 578, c. 380.]

Well, we are cheery this afternoon, as we look for the soles of the feet of the Cheshire cat Chancellor who has carelessly and ignominiously fallen into his own welfare cat trap. It is less a case of being hoist by his own petard, as slipping on his own smirk. Where is he today to answer these questions? A year ago, he was insistent that it would be he who would be called to account in this House for the breach in the welfare cap. He said in the same debate:

“The charter makes clear what will happen if the welfare cap is breached. The Chancellor—

not the Secretary of State for Work and Pensions or one of his Ministers, but the Chancellor—

“must come to Parliament, account for the failure of public expenditure control, and set out the action that will be taken to address the breach.” —[Official Report, 26 March 2014; Vol. 578, c. 380.]

But cometh the hour, there is no sign of the cat. He has disappeared. Even the smirk has disappeared.

--- Later in debate ---

[Owen Smith]

I would trust my shadow Ministers with my life. However, I thought that this was a very important subject. I thought that the welfare cap was one of those things that—what did I say earlier on?—was a great step forward in the British welfare state. I thought that the shadow Secretary of State for Work and Pensions should respond, and I cannot understand for a minute why the right hon. Gentleman wanted his junior Minister to do this belittling debate. The shadow Chancellor is not here. He has disappeared, much like the Cheshire cat—better than that, like Macavity the cat.

[Mr Vara]

You mean the Chancellor.

[Owen Smith]

I know, okay, the Chancellor: the right hon. Member for Tatton (Mr Osborne), in Cheshire—the Cheshire cat—and given that he is rather like Macavity, rather than the Cheshire cat, I thought that I would give the House a treat. I read that there were no Etonians on the Front Bench among the new intake, and I was worried that the lack of classical education from which the Treasury Bench normally benefits might mean that the Macavity reference went over Ministers’ heads, so I brought a little book with me, and I shall read a section from it. [Interruption.] It is not Mao; it is T.S. Eliot’s collected poems. It gives us Macavity the mystery cat, who is, of course, the Chancellor:

there’s no one like Macavity…

he’s very tall and thin;

You would know him if you saw him, for his eyes are sunken in—

I think that is the 5:2 diet—

He’s outwardly respectable

although

(They say he cheats at cards.)—

I bet he does—

And when the larder’s looted, or the jewel-case is rifled…

He always has an alibi, and one or two to spare:

At whatever time the deed took place—MACAVITY WASN’T THERE!

Macavity is not here today, is he? And the deed that he is ducking, of course, is this embarrassing, humiliating U-turn. The cap has been breached, and the Government have done it, of course, because of the spectacular, screeching U-turn on tax credits.