Welfare Reform (Welsh Valleys)

Wayne David Excerpts

Tuesday 11th November 2014 Westminster Hall

[Wayne David (Caerphilly) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Turner.

As a Member of Parliament representing a seat in the south Wales valleys, I am only too aware of the impact on my constituents of the Government’s changes to welfare over the past few years. I have constituents who have had to wait nine months for their personal independence payment applications to be processed or who have had zero points allocated by Atos in their work capability assessments, only to win their cases on appeal and so achieve more than 15 points. I have had numerous cases of people who have experienced unfairness because of the bedroom tax. Many constituents who have come to my surgery are genuinely struggling to make ends meet. Such individuals are close to the point of despair because of the Government’s welfare changes.

[Huw Irranca-Davies (Ogmore) (Lab)]

I congratulate my hon. Friend on securing this important debate and thank him for his generosity in giving way. May I draw his attention to a report that came out earlier this year, commissioned by the Government themselves, on the rise in food aid and food banks in the UK? Three causal factors were identified, two of which were the cumulative effect of benefit changes and the delays in the payment of those benefits, putting working people in the food banks.

[Wayne David]

My hon. Friend makes his point extremely well and reinforces my points about the everyday hardship experienced by so many of our people—our poor people, in particular. All of us who represent valley seats are well aware of such examples, and many others.

[Jessica Morden (Newport East) (Lab)]

I thank my hon. Friend for securing an important debate on a piece of work that focuses on the valleys, but is also important for constituencies such as mine. Does he agree that the impacts that the report talks about are keenly felt by women in particular? Some reports estimate that 74% of savings from benefit changes come directly from women’s pockets.

[Wayne David]

My hon. Friend makes her point well. I am aware of an excellent paper prepared by Chwarae Teg that highlights how women are all too often at the sharp end of benefit changes in Wales and elsewhere.

I have been aware of all the changes on an individual basis, as they have affected my constituents, but until recently I was not fully aware of the impact that the reforms are having on the south Wales valleys as a whole.

[Nia Griffith (Llanelli) (Lab)]

Does my hon. Friend agree that it is not simply the individuals who feel the effect, but the small businesses in the area and in our town centres, such as in Llanelli? More and more money is being sucked out of the community. It would be far better to tax the rich, rather than to penalise the poor, because the money of the poor goes straight back into the community.

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[Wayne David]

Yes. My hon. Friend touches on the central point of my speech. The welfare changes are having a detrimental effect not simply on individuals, but on the community as a whole, in a variety of different ways.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

On that theme, Sheffield Hallam university has just produced an important report on the welfare changes of the previous Labour Government and the coalition Government, indicating that more than £1 billion has been taken out of the Welsh economy as a result. The biggest single hit was the changes to incapacity benefit, which was a reform of his previous Labour Government.

[Wayne David]

The hon. Gentleman has led me on neatly to my next point and the central part of my contribution this afternoon. That is to talk not about the work of the previous Labour Government—yes, we began the process of welfare change, but we did it fairly—but about what we have seen since: a completely unfair introduction of welfare reform, or so-called welfare reform, that, more accurately, has been a way of making crude cuts affecting some of the poorest and most vulnerable in society.

As the hon. Gentleman said, however, an excellent report was published by the Industrial Communities Alliance in Wales. It was written by Christina Beatty and Steve Fothergill of the Centre For Regional Economic and Social Research at Sheffield Hallam university. The report sets out in well researched detail the scale of the Government’s cuts on one of the most deprived areas of the United Kingdom and quantifies in great detail the impact that those cuts are having on the economy of the south Wales valleys.

It is important to remember that not all the cuts have yet been implemented but, when they are, the valleys will lose around £430 million a year. That is an average of £650 per adult of working age. Those are massive figures, especially when we realise that the impact on the valleys is far greater than it is on virtually any other part of the United Kingdom. Without taking into account the household benefit cap and the bedroom tax, the overall financial loss for the United Kingdom as a whole is £475 per working-age adult—for the south-east of England, £370.

The contrast with the valleys is sharpest in parts of southern England outside London. In parts of Surrey, Berkshire, Hampshire, Oxfordshire and Buckinghamshire, the financial loss per adult of working age is estimated to be little more than a third of the loss for the people living in the south Wales valleys. The Government’s welfare cuts are therefore accentuating the already huge differences between well off and poor areas, and are having a hugely negative impact on the local economy across the old south Wales coalfields from Torfaen to Ammanford.

If that were not bad enough, Beatty and Fothergill have dug down to ward level and shown that the financial loss per adult in the poorest parts of the valleys is truly horrific. By looking at official Government data, they have shown that in Maerdy in the Rhondda the overall financial loss per adult is £1,050 per year and in Pen-y-waun, near Aberdare, it is £1,040 per year. In my own constituency, the loss is £820 in Bargoed and £790 in St James. In St James, for example, which includes some relatively well off areas, the loss is greatest at sub-ward level, among some of the poorest people in Caerphilly. If that is true in my constituency, I am sure that it is also true elsewhere.

The huge loss of income has not only a hugely negative effect on the individuals and families concerned, but a massive effect on the local economy—a point made by my hon. Friend the Member for Llanelli (Nia Griffith). Over time, Beatty and Fothergill estimate that some 3,000 jobs in consumer services can be expected to be lost as a result of the Government’s welfare policies. The Government’s argument, of course, is that reforming welfare in such a way is increasing the incentive for people to take up employment—I am sure we will hear that from the Minister—but the trouble is that in many parts of the valleys the local economy is incredibly weak and there is little sign of significant growth in quality job opportunities. What growth we do see tends to be in jobs that are part time, have zero-hour contracts attached to them and are very low paid.

There is another factor. Beatty and Fothergill have pointed out that the valleys have an archetypal “weak local economy” with a large pool of people who are unemployed. The consequence is that bringing into the labour market more people who have been on long-term disablement benefits does not necessarily lead to those people getting jobs. Men and women with health problems or disabilities, with few formal qualifications and little if any skilled work experience, and often in the latter phase of their working lives, are rarely employers’ first choice.

[Ann Clwyd (Cynon Valley) (Lab)]

I am sure my hon. Friend will agree with me that the situation of disabled people in the valleys is particularly bad. We have the highest proportion of disabled people compared with other parts of the United Kingdom. Those people will be especially badly hit by the continuing cuts in welfare. Disability attendance allowance and housing benefit form part of a list of things that impact on them. Does he believe that particular attention needs to be paid to the needs of the disabled in the south Wales valleys?

[Wayne David]

Yes, indeed, that is absolutely correct. My right hon. Friend makes her point well. To begin with, we have a larger proportion of people who suffer from disabilities than many other parts of the United Kingdom, because of the industrial past of the south Wales valleys. Such people are being especially hard hit by the Government’s policies.

Many of the people who are losing benefits are not securing employment—certainly not of the reasonably well paid variety. They are suffering a huge cut in their income levels and their standard of living. The report by Beatty and Fothergill points to the resources coming to the valleys from the European Union and compares those to the financial loss from welfare reform. We all know that as west Wales and the valleys were originally designated an objective 1 area, and then a convergence area, they received significant European regional development fund and European social fund moneys. From 2014 to 2020, we will see additional EU aid amounting to £1.6 billion. That funding will be worth around £120 million per year to the valleys, but, as I said earlier, the valleys’ loss through welfare reform is estimated at £430 million a year. In other words, the welfare cuts will remove almost four times as much money as the valleys receive in EU regional aid.

Let us not forget that the ongoing welfare cuts will be running in parallel with the harshest cuts in local government services that we have ever seen. Having been shielded by the Welsh Government until now, local government in the valleys is being forced to introduce unprecedented cuts in expenditure, which will inevitably hit hard those who rely most on local authority services: the sick, the disabled, women, the old, the young and the disadvantaged. Not only will services be hit, but we are likely to see jobs being lost and local economies suffering through the knock-on effects of the contraction of local government. Although the Beatty-Fothergill report does not examine what those cuts will mean, there is absolutely no doubt that they can only make a bad situation very much worse.

The Beatty-Fothergill report demonstrates that Wales is being hit harder by welfare reform than almost any other part of the United Kingdom, and that the valleys are being hit “exceptionally hard”. It concludes:

“The South Wales Valleys, long afflicted by the loss of jobs in coal, steel and manufacturing, have been the target of many regeneration efforts, some more successful than others. Welfare reform unequivocally works in the opposite direction: the poor will become poorer, and the poorest areas will fall further behind.”

Nothing highlights more clearly the need for a Labour Government in Westminster after next year’s general election. That Government need to pursue—I believe they will—policies that have at their heart the need to regenerate the economy of the south Wales valleys. We need policies that will provide well paid jobs, build on the excellent work of the Welsh Government’s jobs growth fund and harness creativity and drive so that entrepreneurship becomes the hallmark of the valleys.

[Jonathan Edwards]

I voted against the Welfare Reform Bill on Second Reading, and was proud to do so—reading the report, I feel vindicated. Will the hon. Gentleman outline which measures introduced by the current Government will be repealed by the next Labour Government, if there is one?

[Wayne David]

I am happy to say that top of our list will be the bedroom tax. We have made an unequivocal commitment to getting rid of that. Of course there will be welfare reform, but it will be genuine reform. The system needs to be modernised, but we will not place an undue burden on the poor and those who are least able to suffer cuts. Frankly, we will turn on its head a Government policy that is designed to make the poor poorer and the rich richer. We will have a Labour Government who will stand four-square behind ordinary people. Such a Government, armed with the policies that I outlined, will work in genuine partnership with the Welsh Government. I am confident that will happen and that a new and positive chapter will begin for the south Wales valleys.

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[Wayne David]

Will the Minister give way on that point?

[Alun Cairns]

In a moment—with the greatest of respect, I would like to make an element of progress, certainly at the outset.

We have taken steps to deal with the legacy of a welfare system that encouraged dependency and penalised those who wanted to work. The benefits system was clearly broken. It did not work for claimants, for the economy or the people of those communities or for the nation’s finances. According to the Work and Pensions Committee, a parent who increased their hours from 16 to 30 hours of work a week would gain less than £1 for every extra hour they worked. It was hardly a system that incentivised people to do the right thing. That sort of example underlines absolutely the need for reform.

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[Alun Cairns]

I hope to come to universal credit if I make progress in my speech.

Welfare reform is part of the long-term economic plan to stabilise the nation’s economy, to deal with the years of financial mismanagement under the last Government, and to get the people of Britain, including Wales, back to work. The Government want to move people from dependence to independence. We must enable them to free themselves from a lifetime on benefits and enable them to achieve their ambitions.

The previous Government, to their credit, recognised the need for changes to the welfare system. Various Governments attempted to address the issues, but only tweaked an already failed system. Another tweak was not an option. An overhaul was required, so we are creating a new welfare system in Wales and throughout the UK based on flexibility, simplicity and fairness. We want a system that can respond to the modern and flexible labour market, while ensuring that no individual is worse off by accepting a job. We want a system that is easy for people to use.

[Wayne David]

The Minister says he does not want people to be worse off by accepting employment, but part of the Government’s strategy is to reduce the value of benefits so that there is more incentive for people to take low-wage jobs because they are receiving hardly anything, and sometimes nothing, on welfare.

[Alun Cairns]

I am trying to get on to universal credit, but I will highlight how the poorest will be better off financially. We cannot take one policy in isolation and we must consider the reduction in unemployment—I hope that the hon. Gentleman recognises and welcomes it—as well as other economic changes.

We want a system that is easy for people to use but ensures that customers receive all the benefits to which they are entitled. We want a fair system that reflects the heart of our nation—a nation that looks after those who need it but ensures fairness for hard-working individuals and families.

Worklessness needed addressing and is being addressed. Surely we must all be concerned that 200,000 people in Wales have never worked. That is wholly unsustainable. As Welsh MPs, we should want the Government to do all they can to move people from dependence to independence. I am sure the hon. Member for Caerphilly supports that and that we can continue to enable people to free themselves from a lifetime on benefits and enable them to achieve their goals.

[Alun Cairns]

The hon. Gentleman makes a point that I will try to cover when I come to universal credit. The introduction of universal credit will always make people better off while they are in work. I have highlighted one example and could cite many more of people who were trapped in the benefits system. All parties have recognised the need for reform and the universal credit will bring about the change to move people from dependence to independence. Clearly, it is not good for individuals, their families or their communities to be out of work and it is certainly not good for the rest of the nation.

Successive Governments have failed to tackle the problem, but we have tackled it head-on. We are working to improve the incentive to work because it remains the best route out of poverty. Hon. Members will be pleased to hear that the latest statistics show that the number of workless households in Wales has fallen by 19,000. Across the south Wales valleys, 17,000 more people are in work since the election and almost 12,000 have come off benefits. I hope that the hon. Member for Caerphilly will recognise that.

[Wayne David]

Does the Minister accept that in-work poverty is now greater than ever before?

[Alun Cairns]

That is one thing that universal credit will put right because people will always be better off. I will come to that in a moment. Our reforms are already reaping benefits. People are moving from dependency on benefits and into work. That is a positive step for Wales, for communities and for the individuals who, for far too long, have been locked in the benefits system.

The welfare system we inherited was built for 1940s society and is no longer able to deliver the support that people need in a modern flexible labour market: the sort of market that communities are already adapting to. Our benefits system needs to reflect that and to support people who need it.

A flexible labour market will be supported by universal credit because households in Wales will be entitled to £163 more a month on average and 75% of those who will gain will be in the bottom 40% of the income distribution curve.