Welfare Benefits Up-rating Bill Debate
Full Debate: Read Full DebateDepartment: Department for Work and Pensions
Steve Webb
Main Page: Steve Webb (Liberal Democrat - Thornbury and Yate)Department Debates - View all Steve Webb's debates with the Department for Work and Pensions
(11 years, 11 months ago)
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Stephen Timms
The right hon. Gentleman should ask the Institute for Fiscal Studies, where the Minister served with considerable distinction in the 1980s. It has been a reliable guide in the past and will be in the future. The assumption is that the existing policies will continue.
This is a terrible Bill that is being rushed through in a disgraceful manner. It will hit very hard those people who are already struggling to make ends meet. It will hit women disproportionately hard. It will hit disabled people, including everyone in the support group for employment and support allowance. It will hit children, pushing 200,000 below the poverty line.
At a time when the coalition Government are—
The Minister of State, Department for Work and Pensions (Steve Webb)
What the right hon. Gentleman is saying sounds like a peroration, so I think that he might have accidentally dropped the page on which he was going to say where, if not from these measures, he would find the £3.5 billion. Where would he find the money?
Helen Goodman
Let me ask the question before trying to answer it. We have heard that the IFS has estimated that by 2015 the number of children in relative poverty will increase by 400,000. Furthermore, the Bill will push another 200,000 children into relative poverty. The Minister knows that we had four measures in the Child Poverty Act 2010. What will be the increase over the life of this Parliament in the number of children living in absolute poverty?
Steve Webb
I will respond very fully on the issue of child poverty, which a number of hon. Members have raised. I wanted to ask the hon. Lady about the point she made about incapacity benefit. She said that if we look across Britain, we will see that incapacity benefit is highest in all the industrial heartlands. I hesitate to bring her back to the Bill, but is she aware that we are actually proposing to increase the main rate of incapacity benefit fully in line with inflation?
Helen Goodman
Yes, but the hon. Gentleman knows that his own impact assessment demonstrates that the Government’s claim that they would protect all people with disabilities is not accurate. I am disappointed that he did not answer my question about child poverty. I do not know whether that is because he does not know the answer or because he is ashamed of it. Perhaps he can explain when he winds up the debate.
Steve Webb
This has been a wide-ranging debate of nearly four hours. Although it has technically been about amendments to clause 1, the generosity of the Chair has meant that we have essentially covered the whole Bill and the issues raised by it.
First, I want to respond to the point about the language in which the debate is constructed. My right hon. Friend the Member for Ross, Skye and Lochaber (Mr Kennedy) and a number of other Members said that we should avoid divisive language, and I entirely agree. I seem to recall that it was the Labour party that used the phrase “strivers’ tax” about this debate—indeed, a year or so ago, the shadow Secretary of State used his party conference speech to create the very divisions that his hon. Friends are criticising. He said:
“Let’s face the tough truth—that many people on the doorstep at the last election felt that too often we were for shirkers not workers.”
The right hon. Gentleman has form on this issue. In 2012, he was at it again. During a speech at the London School of Economics, to what I imagine was a packed house, he said:
“Labour is the party of hard workers not free-riders. The clue is in the name. We are the Labour party. The party that said that idleness is an evil. The party of workers, not shirkers.”
Mr Byrne
The Minister will remember that it was Sir William Beveridge who used the phrase about idleness being an evil.
There is a difference between reporting a conversation on a doorstep in one’s constituency and using a line as the basis of a political strategy that seeks to punish those on low incomes while handing out a £3 billion tax cut to Britain’s richest citizens. I am simply not sure how the Minister, as a Liberal Democrat, can support that policy.
Steve Webb
It is good to hear from the true heir of Beveridge. The quotes describing the Labour party that I just read out were in party conference speeches and at a conference at the LSE—
“The party that said that idleness is an evil. The party of workers, not shirkers.”
Steve Webb
It is disgraceful, as my hon. Friend says.
The second question that has arisen is why the Bill is necessary. It has been suggested that the Bill is simply a political device, but that draws a veil over the fact that we are dealing with one of the biggest deficits in peacetime history. To listen to the Labour leadership, one would think that they took such matters seriously. The leader of the Labour party said on “The Andrew Marr Show”, in an interview, I think, with James Landale:
“So when it comes to the next Labour government, if I was saying to you, ‘I can absolutely promise to restore this cut or that cut’, you would say ‘Well, where is the money going to come for that?’...We are absolutely determined that Labour shows we would be fiscally credible in government.”
We have not heard a lot of that today. The shadow Chancellor has said:
“The public want to know that we are going to be ruthless and disciplined in how we go about public spending”.
In fact, we have heard speech after speech calling for the Bill to be scrapped but there has not been a hope of hearing where the money would come from.
The Bill and related measures save £3.6 billion. When I challenged the shadow Minister, the right hon. Member for East Ham (Stephen Timms), about where that money would come from, he said—I paraphrase—“We wouldn’t start from here.” I am afraid that the Opposition have to do rather better than that.
Steve Webb
I will not give way; I would like to respond to what has been said in the past four hours before taking further interventions.
A number of my hon. Friends asked perfectly reasonably about why we needed to set out in legislation exactly where we were going. We all want our constituents to continue to enjoy, for example, the low mortgage rates that are absolutely crucial to their standard of living. We all know that for those of our constituents in the position of owning their own homes, the mortgage is their biggest single outgoing by a long way. It is vital, therefore, that we keep interest rates under control.
Steve Webb
But that is kind of the point—not at the moment, because we have kept interest rates under control.
Why is that necessary? Let me share what the International Monetary Fund’s “World Economic Outlook” said as recently as October 2012:
“To anchor market expectations, policymakers need to specify adequately detailed medium-term plans for lowering debt ratios, which must be backed by binding legislation”.
That is the important point. Were we to go year by year, seeing how it went, we would not have the credibility of deficit reduction to which all of us who signed up to the coalition agreement are committed.
Likewise, the OECD’s economic outlook said:
“The government’s fiscal policy stance and strong institutions have secured the confidence of financial markets, as evidenced by the near record-low government bond yields.”
In other words, this is for a purpose—the purpose of tackling the vast, sprawling deficit. To give a sense of scale, my hon. Friend the Member for Argyll and Bute (Mr Reid) was absolutely right when he said that in the final year of the previous Labour Government, for every £3 raised in tax, £4 was spent. What did that add up to? We are talking about a Bill and related measures that will eventually save about £3 billion a year. Labour was borrowing £3 billion a week, so we would need, say, 50 of these Bills to tackle just one year of Labour borrowing. That is the scale of the situation. When Labour Members airily take the moral high ground and pretend that there is a free lunch to be had—that we do not have to do this or make all the other cuts, but that somehow the deficit will disappear—we need to remind people that these are Labour cuts tackling Labour’s deficit.
People should not just take my word for it regarding the need to include social security as part of deficit reduction. Clearly, as my right hon. Friend the Member for Wokingham (Mr Redwood) said, this is not comfortable stuff, and it is not something that any of us take any pleasure in. However, the IFS has said this about why social security is part of the mix:
“When cutting public spending dramatically to help reduce an unsustainable budget deficit”—
that is the IFS’s language, not mine—
“it is almost inevitable that spending on benefits and tax credits—which account for 30% of the government’s total budget—will be targeted.”
Steve Webb
Not for the moment.
We have a target for 2015-16 of £10 billion of spending reductions. We have not yet found that £10 billion. Even with this Bill, we are on about £6 billion, and without the Bill and related measures we would be down to about £3 billion. The challenge for Opposition Members who have said that taking money away from benefits takes spending power out of the economy is that so do other forms of spending cuts. If the money comes not from benefits but from local government, that will be money out of the local economy; if it comes from infrastructure projects, that will be money out of the local economy. There is not a free way of finding money without any impact.
Let me deal first with amendment 12, tabled by the right hon. Member for East Ham. My hon. Friend the Member for Gloucester (Richard Graham) put it very well when he said of Labour that there is a vacuum where there should be a policy. That is a metaphor for the Labour party. In relation to a Bill that says that benefits and tax credits should go up by 1%, the amendment would take out the figure of 1%, so what would be left? Presumably, “Benefits should go up” but by how much? Perhaps by a fraction of 1%—we do not know. The amendment is incoherent; it would take something out and put nothing in its place. It would remove the heart of the Bill but gives no guidelines on whether the figure should be below inflation or above inflation, below earnings or above earnings.
Toby Perkins
As the right hon. Member for Wokingham (Mr Redwood) and the hon. Member for St Ives (Andrew George) said, the Chancellor sets a Budget every single year, and the benefit uprating will have to be relevant to whatever else has happened in the economy by taking into account inflation, wage inflation and so on. There is no need for this Bill now because we have a Budget every single year. Surely that is the central point.
Steve Webb
The hon. Gentleman was not listening. The point about establishing a long-term fiscal framework is that it has to be credible; if it could be changed every year, it would not be credible. The whole reason we are able to keep interest rates low—[Interruption.] The hon. Gentleman is saying, “Why not change it every Budget?”, but that would not be credible for the long term.
Toby Perkins
On a point of order, Mr Amess. The Minister is misquoting me, so let me clarify this. I said that if it was all about stability, why do we have a Budget every year instead of setting three-year budgets, which would reflect that fact?
The Temporary Chairman (Mr David Amess)
That is not a point of order—it is a point of debate.
Steve Webb
I will not for the moment, because my hon. Friend has joined our proceedings relatively recently. I should like to respond to the amendments that my hon. Friends and others have tabled, and I hope he understands that.
Amendment 7, tabled by the hon. Member for Brighton, Pavilion (Caroline Lucas) and supported by the hon. Member for Banff and Buchan (Dr Whiteford), is in fantasy land, I am afraid. It not only rejects the savings in the Bill but would add additional savings on top by linking benefits to RPI. I have to give credit to the hon. Member for Brighton, Pavilion, because she knows how ludicrously expensive her amendment is and I am grateful to her for being frank about that. In a single year, it would cost £2.6 billion more than the current plan.
Steve Webb
Let me respond a little further. The hon. Lady said that we should choose RPI because, essentially, it is bigger on average. The point about correcting benefits for inflation is not just to find the biggest number possible, but to measure inflation properly and correct benefits accordingly. We could also have a separate debate about the adequacy of benefits, but to use a flawed inflation measure that even the Office for National Statistics, which constructs it, says does not meet international standards, is a crazy direction to take, even if the hon. Lady did not need to find £2.5 billion.
Caroline Lucas
The hon. Member for Banff and Buchan (Dr Whiteford) addressed the fact that RPI is not a perfect indicator, but it is better than what we have. On the question of paying for our proposal, this is about priorities. If the Government limited tax relief on pension contributions to £26,000, that would give them £33 billion. If they cracked down on tax evasion and tax avoidance, they could get more than £100 billion. It is about political choices: this Government want to target the poorest and we do not.
Steve Webb
If it were trivial to raise £100 billion from the filthy rich, I suspect that most Governments would have been there by now.
The most credible, coherent amendment in this group is amendment 10, which was moved by my hon. Friend the Member for St Ives (Andrew George). He was so nice about me that I was almost tempted to accept the amendment, but not quite. Let me explain the reasons why not.
The first relates to the specifics of the amendment, which links benefit increases in 2014-15 and 2015-16 to whatever amount average earnings grow by. Based on the forecasts—I accept that that is what they are—that would mean an above inflation increase in the second of those two years, because we think that average earnings in a couple of years’ time will be more than CPI, as is the case in many normal years. At a time when we all agree that money will be tight, my hon. Friend is suggesting that an above inflation benefit increase in the second of those two years should be a priority. I do not think that it should be. At a time when we will have to make other difficult decisions about saving, the first consequence of his amendment—I do not imagine that he meant this—would be to lock in what we expect to be an above inflation increase in benefits in 2015-16. I do not believe that that will be our priority at that point.
Had we been in Committee upstairs and the Bill had further stages to go through, my hon. Friend may well have said that this was a probing amendment and we could have had a chat about it, but if we were to agree to the amendment tonight it would become part of the Bill that will go to the other place. It is a serious amendment that would have an unintended consequence.
Secondly, this is not intended as a wrecking amendment, but it would have that effect. We estimate that it would wipe out virtually all the Bill’s savings. Although I understand that my hon. Friend shares my concern about the impact on people on low incomes, that money would have to be found somewhere else. I do not believe that there is a painless way of finding that money or that the social security budget would be exempted from finding it.
We have already had to do some very difficult things on welfare spending in the Parliament whereby we have targeted particular benefits and identified particular issues, and a relatively small number of people have faced large cash losses. This is a different approach. It is a gradual approach that will create much smaller losses, but for much larger numbers of people. At a time when we are trying to find savings from this budget, I believe that spreading the pain relatively thinly across a larger group, rather than focusing on a smaller one, is the way to go.
Andrew George
Leaving aside the wisdom or otherwise of committing ourselves to the Government’s proposed uprating level of 1% for 2015-16, my hon. Friend is right, according to the Government’s figures, that there is a funding gap of about £2.5 billion for 2015-16. He has to accept, however, that two fifths of cash benefits go to those with above average incomes. Indeed, a former constituent of mine has said how laughable it is that he now lives in Greece yet still receives a winter fuel allowance. Surely we can find savings that are less painful than those proposed.
Steve Webb
I can tell my hon. Friend that we have his ex-constituent in Greece in our sights. All I can say is that I hope he enjoyed his last payment. Joking aside, even if we took away all winter fuel payments to overseas pensioners, we would be talking about tens of millions of pounds, not savings on the scale that we need.
Greg Mulholland (Leeds North West) (LD)
As my hon. Friend has said, the Government have made a difficult decision to deal with the matter in the least unfair way. What has not been said in the debate is that the 1% uprating will not apply to all out-of-work or in-work benefits. Certain particularly vulnerable groups have been deliberately excluded. I hope he will reiterate that.
Steve Webb
My hon. Friend is absolutely right to remind the Committee of that. We have made our commitment to the triple lock on the state pension, which means that it will rise by an amount above inflation this April. We have passed cash on to the guarantee credit to ensure that the poorest pensioners get the full increase, protected the key disability benefits—disability living allowance and attendance allowance—and ensured that the support component of employment and support allowance is protected. We can be proud of achieving all those things despite the difficult financial situation.
Penny Mordaunt (Portsmouth North) (Con)
Is the Minister aware that in the city that I represent, which also happens to be the birthplace of Charles Dickens, 82,000 people will benefit from the tax cut in April and nearly 7,000 will have been lifted out of poverty altogether by the cumulative effect of tax cuts under the coalition? Is that not the best way of tackling poverty—to stop taking money off people in the first place?
Steve Webb
I am grateful to my hon. Friend for mentioning the position of low-paid workers. People on the minimum wage were mentioned in the debate, and we will have halved the tax bill of someone on the minimum wage. That is a real contribution to their standard of living.
I say to my hon. Friend the Member for St Ives that we cannot find the savings that we need by excluding the social security budget from them. The two biggest things that the Government spend money on are public sector pay, which has already been the subject of a separate measure, and social security benefits. The two together account for a vast swathe of public spending. When we need savings, we cannot ring-fence social security. What we can do, however, is try to do things gradually.
I want to explain why some of the figures for people’s losses that have been quoted are far greater than is truly the case. My hon. Friend mentioned someone who is in and out of work, and the typical time on jobseeker’s allowance is three months. My right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) asked me to give some examples of cash figures. We are talking about an uprating of perhaps 80p a week or so below inflation in one year, so maybe £2.50 a week below inflation over a three-year period. For a typical person who is out of work for three months, which is the median spell on JSA, the difference will therefore be a tenner a month, or £30 to £40 over that three-month period. That £40 is a lot of money to someone who is unemployed, but the typical experience is that someone has three months of unemployment and then finds a job. We are about to cut people’s income tax bills by £600 a year, so that person might have, say, £3 a week less while unemployed, but the typical experience is for them to be unemployed for a relatively short period and then get a job, so they will benefit from all our other measures.
John Hemming
Does my hon. Friend agree that the Opposition’s policy of not having a policy runs the risk of putting up the interest rate on our Government debt? We owe more than £1 trillion, and 1% more on that would be more than £10 billion extra to find through either extra cuts or extra taxes.
Steve Webb
My hon. Friend is quite right. There is nothing progressive about vast borrowing, because then we are asking our children and grandchildren to pay for it.
There has been much discussion about percentages during the debate. Several Members have said that a small percentage of not very much is not very much—I think their argument was that the answer was a slightly bigger percentage of not very much. However, even a small percentage of a £200 billion bill for tax credits, pensions and benefits is a vast sum of money, which is why we have to take the difficult decisions we are talking about.
Sheila Gilmore
Is not the reality that we have already had all the welfare reforms, and the only reason we are debating this issue is because the Government’s policy has not worked? They have now had to find extra savings, and that is what the Bill is about.
Steve Webb
It is, I suppose, possible that had Labour won the last election the eurozone crisis might never have happened, and I grant it is possible that world commodity prices might not have gone up. It is possible that all sorts of things might have happened, but in the real world we live in a global economy. Of course things have been more difficult than we expected. That is why we must tackle the situation, not just borrow more money.
Let me offer my hon. Friend the Member for St Ives further reassurance about what will happens if inflation rises—an important issue raised by my hon. Friend the Member for Argyll and Bute. Our right hon. Friend the Secretary of State for Energy and Climate Change is actively seeking to ensure, for example, that low-income constituents get the best energy tariff they can, rather than what they currently pay. Evidence shows that the people most likely to shop around, switch and be online are not on the whole the most vulnerable customers, so we are ensuring that the most vulnerable customers, who may not take advantage of those lower tariffs, get access to them. I believe that will make a real difference.
More broadly, my hon. Friend the Member for St Ives asks what would happen if inflation ran away, but the Government would not sit idly by and watch—we have various measures available to us to respond to that. The OBR’s forecast for CPI is lower for 2015 than it is now. It is, of course, a forecast, but we will not simply let inflation rip. If we do not commit now to firm targets on where we are going, the OBR will not sign them off, they will not appear in our spending plans and the market will not believe us. If the market does not believe us, interest rates will go up as will the mortgages of our constituents who will have less spending power—where?—in the local economy, which is exactly where everybody has said they want to see demand. There is a knock-on effect from all those things, and the failure of the Labour party to suggest an alternative is shocking.
Let me respond to one or two other points raised during the debate. The hon. Member for Gateshead (Ian Mearns) made a point about percentages being meaningless, but as I have said, from a £200 billion budget those percentages make a great deal of difference. My right hon. Friend the Member for Wokingham made some powerful points. He said that we need to keep inflation down—I have given some examples of how we want to do that—and mentioned the need to get jobs going, which we agree with.
The Labour party seems to be saying that if we adopt its policies, somehow the jobs would flow, but what have we heard about that today? Funnily enough, we have heard almost nothing about the whizzo scheme that was so good when Labour tried it in office as a pilot that it never actually saw it through. Somehow the scheme is supposed to find £3.5 billion of savings, but that is fantasy land. It was a fig leaf rushed out over Christmas so that Labour had something to say because it realised it was on the wrong side of the argument.
There has been some discussion of child poverty and it is important to address that issue in the final few minutes of the debate. The Institute for Fiscal Studies has said that when looking at a Government’s impact on child poverty, we should look at their policies in the round. Clearly, the single biggest thing that we will do to tackle child poverty is the universal credit introduced by my right hon. Friend the Secretary of State for Work and Pensions. That is designed to make work pay and to take children and adults out of poverty. As soon as we are able to bring it in—starting later this year, which is a great achievement—we will start to see its impact.
I was asked for predictions about child poverty, but let me point out the paradox that we have published a set of figures that relate to this Government. Those figures show not a rise in child poverty but a fall of 300,000 according to the measure of child poverty that is the key target of the Child Poverty Act 2010. We have not gone round television studios saying, “Aren’t we great, we’ve got child poverty down?”, because the main reason child poverty fell was a recession that meant average incomes fell. It would have been absurd for us to trumpet a triumph on child poverty when children were apparently lifted out of poverty because incomes had fallen. That is perverse.
The hon. Member for Bishop Auckland (Helen Goodman) asked what the figures will be at the end of the Parliament. For a start, there has been a 300,000 improvement, for which we will not claim any credit, and the universal credit policy will help. Of course, taking money off benefits moves things in the other direction, but overall we are moving things in the right direction, not the wrong one.
Helen Goodman
As the Minister knows very well, my question was this: what are his figures on absolute poverty?
Steve Webb
The hon. Lady will know perfectly well that the Labour Government never forecast poverty rates. She was a Work and Pensions Minister with—if I remember rightly—responsibility for child poverty, and never once forecast poverty rates, but in opposition she suddenly believes that this Government should do so. We will publish the annual figures that show the effects of all our policies and the state of the economy. That is what the public want to see.
Another question that resonates with my hon. Friends in the Liberal Democrats is why we are taking money off poor people and giving it to rich people. That is a summary of what was said. I worked for the IFS for nine years and have the highest regard for it, but, to be clear, when the IFS does its numbers, it does not count almost all the taxes on the rich we have introduced—it cannot, because it uses household surveys, to which the rich do not, on the whole, reply at all, partly because they are too busy salting their money away in Swiss bank accounts. [Interruption.] Not any more—we have tackled Swiss bank accounts to the tune of several billion pounds. We have increased the main rate of capital gains tax to 28%, which is a substantial increase.
The Labour party focuses on the wages of millionaires as if millionaires are those who earn a £1 million wage. However, millionaires on the whole are folk who have capital gains and properties. They pay stamp duty. They try to avoid paying tax, but we have been cracking down on that, and there is a further clampdown on pension tax relief. The vast majority of those gains for the Government are not counted in the IFS figures. The overall impact is that we are taking far more from the rich than Labour ever would have done. I can therefore assure my right hon. and hon. Friends that this is not a question of taking money from the poor when we could take it from the rich. Even the Budget that reduced the higher rate of tax from 50% to 45% raised many times more in other measures. As we have heard during the course of the debate, the 45p rate, which Opposition Members tell us they find morally repugnant, is 5% more than the Labour Government levied in 13 years.
Amendment 12 would create a vacuum instead of a policy. It would give us no credibility in the financial markets and drive up interest rates when we want to keep them low. Amendment 7 would reinstate the RPI, which even the official statistician says is not up to international standards, and cost £2.5 billion a year compared with the Government’s plans. I have no doubt that amendment 10, in the name of my hon. Friend the Member for St Ives, is well-intended, but unfortunately it would tie the Government in to an above-inflation increase in 2015-16. The Liberal Democrats would not choose that as a priority, but I can assure him that the Bill, on top of the decisions the Government have made to prioritise the poor, will mean that benefits will rise in line with earnings over the period since the financial crisis. My hon. Friend wants that through his amendment, and that is what we will deliver through the Bill.
I therefore urge the Committee to reject the amendments and support the Bill.
Stephen Timms
We have had an interesting debate. The right hon. Member for Ross, Skye and Lochaber (Mr Kennedy), the former leader of the Minister’s party—the Liberal Democrats—described the Bill as a device dreamed up by the Chancellor, which was recognised on both sides of the Committee during the debate. The Government are bearing down on the incomes of the least well-off people because of the failure of their policies. I urge the Committee to support amendment 12 and to reject clause 1.
Question put, That the amendment be made.
The Committee proceeded to a Division.