Budget Resolutions and Economic Situation
William Bain Excerpts(11 years, 9 months ago)
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Mr William Bain (Glasgow North East) (Lab)
In a previous era of austerity presided over by a Tory-dominated Government, the slogans on Conservative party posters in its failed 1929 general election campaign included “Safety First” and “Trust Baldwin he will steer you to safety”. Having presided over the worst recovery in over 140 years, with an economy that is increasingly plagued by low investment, falling real wages, low productivity, dismal demand, stalled deficit reduction and surging public debt, the one guarantee is that the Conservative party will not be using either of those slogans in the name of the current Chancellor or Prime Minister come 2015.
Jacob Rees-Mogg (North East Somerset) (Con)
Will the hon. Gentleman give way?
Mr Bain
I will give way in a moment.
With the OBR having confirmed on Wednesday that people will be worse off in 2015 than they were in 2010, the Conservative party will also be unable to revive the 1959 election slogan: “Life’s Better Under the Conservatives”.
I have spoken in pervious Budget debates about the absurd economic theories that have underpinned the Government’s fiscal policies since 2010. As Mark Blyth writes in his recently published work on austerity:
“Austerity is a zombie economic idea because it has been disproven time and again, but it just keeps on coming.”
The central idea behind the Government’s economic policy is that a short-term sacrifice by the British people would produce long-term benefits in growth and a massive reduction in national debt.
There have been plenty of sacrifices demanded by the Chancellor: the average £10.47 a week in reduced support for child care for ordinary families since 2011; the higher VAT, which is costing ordinary families four times more in this Parliament than they will get back through the rise in the personal allowance to £10,000 from next year; the 1% cap on most benefits and tax credits being introduced in weeks, hurting 5.l million working-age households by as much as £5 a week on average; and, most cruelly of all, the vicious bedroom tax. The cumulative loss to ordinary families’ living standards in Scotland resulting from the tax, benefits and wages policies pursued by the Government has been quantified by Landman Economics for the TUC as £28.63 a week, or £1,488 a year, by 2015. What has it all been for? Where is the growth? When will our debts begin to fall during this Parliament? When will living standards begin to rise again for ordinary people?
Since the spending review in 2010, we have seen the third lowest growth in the G20, the fifth worst industrial production in the European Union and the fourth biggest slump in real wages in the EU. The judgment of the Office for Budget Responsibility on the Budget has been brutal—growth downgraded this year and next, by 0.8% of GDP, even since last December’s autumn statement; this Budget adding nothing to growth all the way through to 2018; borrowing £245 billion more than promised in 2010; and the national debt doubled by 2018 if we continue with the Chancellor’s failing plan.
Four years into a recovery, unemployment is stuck at 2.5 million—and is predicted by the OBR to peak at 2.63 million next year—and there are 3.2 million people underemployed in this country, desperate for more hours at work to pay the bills but unable to get them under a flatlining economy.
The Budget should have attempted to secure two aims: first, to boost economic demand to stimulate higher growth in the short term; and, secondly, to begin the process of rebalancing the economy by ending the culture of short-termism and making the fundamental reforms we need in our banking system.
In Scotland, retail sales are falling in a sector that comprises more than three quarters of economic output. Real wages have slumped by 3.2% since autumn 2010. Median wages are more than £3,000 a year lower in real terms since 2009. This week’s OBR projections mean a further loss of £200 a year in wages—four times more than any benefit from the increase in the personal tax allowance next year. The Chancellor should have eased that burden by cutting VAT to 17.5% in the Budget and putting back some of the £480 a year on average that he removed from average families in the June 2010 Budget. He should have done far more on child care costs.
Jane Ellison
This is a simple question. The hon. Gentleman has outlined what he would like to have seen in the Budget. Assuming fiscal neutrality, how would he have paid for it?
Mr Bain
The shadow Chancellor has said that we would follow a different path. Continuing with the fiscal policy that the Government are pursuing will lead to a doubling of the national debt and a downgrading in growth this year and next. We need to do something different, as I hope the hon. Lady will accept when she makes her contribution.
As I was saying, HMRC has shown that in the year to last December, the amount of additional support, through the tax and benefit system provided to ordinary Scottish families with their child care costs, amounted to a miserly 1p a day extra. For this year, next year and the year after, the message from the Chancellor in the Budget was, “Not a penny more.”
Under the plans unveiled on Tuesday, households require all earners to be working and paying income tax to benefit either from the child care tax relief or the additional resource through universal credit, which will have to be found from elsewhere in the welfare budget. We see the gross unfairness of a two-earner couple with children, working part time on a combined income of £19,000 a year, receiving nothing under the plans, whereas a household with two earners on a combined income of £299,000 a year receives a tax break of £2,400 a year if they have two children. How on earth can that be fair?
The Chancellor should have brought forward more capital investment in the Budget. He should have announced a major social and affordable house building plan to begin this year. All he announced was a plan to reallocate capital spending from 2015, which will be of no help to the struggling construction sector now. He should have taken the opportunity to scrap the bedroom tax affecting nearly 90,000 households in Scotland.
The Chancellor has spent the past few months searching for escape velocity for the UK economy. Wednesday was the day when he finally crashed to earth. He will not change course because he puts his pride before this nation’s economic fall. He would rather that the living standards of millions were diminished than admit the scale of his mistake or take action to put it right. Only with a new policy to promote growth and boost investment will we generate the tax revenues to cut our debt. After this Budget, that can come only with the election of a new Government to replace this disastrous coalition.
Jacob Rees-Mogg
Opposition Members are talking about their new path. There was a Shining Path in one country at one point, but that was not very successful, although the Opposition are probably looking for the Via Dolorosa. We are definitely making progress.
I want to pick the hon. Member for Glasgow North East (Mr Bain) up on his wonderful reference to the 1930s. I was pleased that he reminded us of our splendid slogans, which I will certainly use in my election campaign. I think that this was a “Safety First” Budget, and quite right too. What the country needs is genuine prudence, rather than the prudence of the late ’90s and early 2000s.
Jacob Rees-Mogg
There is a union of people whose seats have “North East” in their names and who make helpful interventions. I am extremely grateful to the hon. Gentleman because he leads me right to my next point, which is about the absolute essence of where growth will come from. I refer right hon. and hon. Members to page 56 of the “Economic and fiscal outlook” produced by the Office for Budget Responsibility, which contains charts on household leverage indicators. That is crucial because about three-quarters of the economy is dependent on private consumption. What we needed, and what has taken time, is for household budgets and balance sheets to rebalance at the same point as the Government balance sheet and budget.
In these charts we see that income leverage—interest payments as a percentage of income—is now at an historic low. That is important because it means that households can now afford to spend. Even more important, asset leverage is back alongside historic averages, so households are no longer over-geared in the way they were in 2007 and 2008. I actually think that the figure on household leverage is overstated because there is still a lot of bad debt in the system that the banks have been reluctant to write off because of concerns over their balance sheets. That is what has happened over the past few years. By following stable and sensible policies, the Government have allowed households to shore up their balance sheets, which means that they will now be in a position to begin to spend again should they wish.
Having looked at the big macro picture of two crucial things—Government expenditure under control, and household balance sheets restored—it is worth considering some of the positive detail within the Budget. The £2,000 cut in national insurance for businesses is fantastic. We know that small businesses are the ones that create new jobs—a series of data from the United States show that, on average, large companies shed 1 million jobs a year, while small companies create just over 1 million jobs a year. The reason for that is straightforward: large companies are always looking to cut costs, but small companies are where new ideas are built up. Anything that helps small businesses is welcome and national insurance is a very bad tax on jobs. I hope that ultimately the Government will look at national insurance in the round, but that will need to be in a time of boom, rather than a time of austerity.
The other policy that is relevant to today’s debate, which was opened by my right hon. Friend the Secretary of State for Work and Pensions, is the £10,000 tax threshold. That is a joy to behold because it gets us away from the taxation and benefits merry-go-round where people on low incomes are taxed and then given back some of their own money, once the Government have taken a cut for administration. We want to get that threshold as high as possible so that we do not tax people and then give them benefits. We want to get people out of that altogether, and out of the dependency culture that exists when we tax people on low incomes.
This measure has a further benefit if it can be extended and if the national insurance threshold can be raised, because that will reduce the administration of employment. If the national insurance threshold can be raised towards the £10,000 tax threshold, employers will be able to pay their employees without having a big administrative burden on top. I hope the Government will look at that as it would be a fantastic boost to employment. I think it could possibly be paid for simply by shifting the band for employees national insurance into line with the increase that would be made from the current level to £10,000. I accept there would be a gap on employers, but that might be minimised by doing it in the way I suggest.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
We have had an interesting debate. There have been 27 Back-Bench speeches, of which 19 have come from Labour Members. There have been passionate speeches. A lot of information has been given about constituencies and constituents’ experience in the real world rather than the world that some on the Government Benches would like to believe exists.
We started off with a typically bullish performance from the Secretary of State for Work and Pensions, who seemed reluctant to accept that, notwithstanding what he tried to claim the Chancellor is doing, in fact the Government will borrow £245 billion more than planned. That borrowing is to deal with failure rather than to invest for future success.
The Government seem to fail to recognise that the situation has happened on their watch. It is not good enough, halfway through a Parliament, for the Government continually to come to the Chamber and harp back to what went on in the past without taking any responsibility whatever for what they are doing and their own actions.
It is interesting that Government Front Benchers seem to have an obsession with the shadow Chancellor. Perhaps it is because he has been proven to be correct. The economy is flatlining, there is no growth, the deficit targets have been missed, the triple A rating is lost and the Office for Budget Responsibility has confirmed that people will be worse off in 2015 than in 2010. There is no plan—it is more of the same from the downgraded Chancellor, and from the downgraded Government Front Benchers here this afternoon.
We have heard consistently from the Labour Benches about how unfair it is that, while millionaires will be laughing all the way to the bank at the beginning of April, very real cuts are coming for ordinary working people and those who are desperately seeking work.
A number of themes have come through the debate and I want briefly to touch on them before coming to some of the points made by my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne). We heard powerful speeches about living standards, not least from my hon. Friend the Member for North Tyneside (Mrs Glindon), who spoke towards the end of the debate, and from my hon. Friend the Member for Easington (Grahame M. Morris). Both talked about the impact of welfare cuts on their constituents’ and general living standards.
Early in the debate, we heard from my hon. Friends the Members for Houghton and Sunderland South (Bridget Phillipson) and for Lewisham East (Heidi Alexander) about the impact of child care costs on families and how what the Government propose is too little, too late. They mentioned the dangers of changing the carer-to-child ratios, downgrading again the service provided as well as giving with one hand and taking away with the other—promising something that will happen in 2015 while cutting tax credits.
Government—[Interruption.] Government Front Benchers may think that the situation is funny, but I assure them that it is not funny for the families who my hon. Friend the Member for Glasgow North East (Mr Bain) mentioned from his constituency. He knows well the impact of the bedroom tax and the problems there.
Mr Bain
Does my hon. Friend share the anger of my constituent with cerebral palsy, who I visited last Friday? She has a house that has been adapted and she gets physiotherapy in it. She has been asked to pay a bedroom tax of £9.63 a week, while the Secretary of State was unable today to guarantee that millionaires will not benefit from a spare home subsidy as a result of the Budget.
Mr Gauke
If the hon. Lady is concerned about people on waiting lists or living in overcrowded conditions, she might want to think about what we could do about too many people who have got spare rooms.
We heard a number of speeches from the Labour party, and two points about the fiscal situation were consistently raised. First was the concern that borrowing is higher than we had wanted and expected it to be—borrowing is too high and debt is increasing too fast. We then had a number of speeches that called for more spending and said that we should not worry quite so much about borrowing and should be prepared to borrow more. Remarkably, a number of speeches made both points at the same time, but the reality is that the Labour party believes that the right approach to our current difficulties in the economy is to borrow more. The proposals from the shadow Chancellor involved £33 billion more spending.
The most interesting point in the entire debate was when the hon. Member for Glasgow North East (Mr Bain) called for more spending in a particular area, and my hon. Friend the Member for Battersea (Jane Ellison) intervened to ask how he would do that in a fiscally neutral way. At that point the hon. Gentleman paused and said, “Well, we are on a different path.” He is an articulate and eloquent speaker, but rather than say what that path was, he refused to answer. Labour Members are on the path that dare not speak its name. Their path is simply more borrowing.
Oral Answers to Questions
William Bain Excerpts(11 years, 9 months ago)
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Steve Webb
My hon. Friend has a good track record of challenging the issue of charges and value for money. The Association of British Insurers has just published its code of practice, to which members have to sign up, to ensure that instead of people just defaulting to the provider they save with, they shop around. We will monitor closely whether that makes the market more effective. [Interruption.] Opposition Members are shouting “Do something”, but they did not do something when they were in power.
Mr William Bain (Glasgow North East) (Lab)
A constituent I met on Saturday is a divorced lone parent who works hard for a low income, and his children stay with him on three evenings a week. Why does the Secretary of State believe that such a hard-working individual should lose £12 a week under his hateful bedroom tax?
Mr Duncan Smith
Again, another hon. Member who does not know the difference between a subsidy and a tax. The reality is that those who do not occupy all the rooms in social housing are being subsidised by many of those who live in overcrowded accommodation. Let me remind the hon. Gentleman—Opposition Members do not like to be reminded—that under local housing allowance for the private social rented sector, which was introduced by the previous Labour Government, people were not allowed to occupy houses that had spare bedrooms.
Housing Benefit (Under-occupancy Penalty)
William Bain Excerpts(11 years, 9 months ago)
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Mr William Bain (Glasgow North East) (Lab)
I was pleased to spend last week’s recess talking about this issue with my constituents, because what we decide in the House has its most crucial impact in the communities we represent. The bedroom tax has achieved in a shorter period the ignominy once reserved in Scottish society only for the hated poll tax. In my constituency, hundreds of people, from Dennistoun to Springburn, continue to sign petitions to stop the measure, which will cost people up to 14% of their weekly housing allowance.
Last week, at an event hosted by NG Homes, I met voluntary groups and housing associations from across Glasgow who warned of the effects of the plans on homelessness, rising levels of evictions and rising debt in north and east Glasgow. The Prime Minister’s ambition is being realised at last—the big society is coming together, not in his support but in complete opposition to the absurdity and unfairness of the housing benefit plans and the chaos and social harm they will cause. In my constituency, nearly 86% of the 16,580 housing benefit recipients are in properties rented from registered social landlords, and 65% are within the age range that is subject to the bedroom tax. The vast majority receive between £25 and £100 a week in local housing allowance to help with rental costs. That is in a constituency where the median wage is under £17,600 a year, and child poverty is the third highest in the UK and the worst in Scotland, at some 43%.
The three areas that will be hurt hardest in Glasgow North East, according to the Glasgow Housing Association, are Milton—with a higher than average number of lone parents, rent payments there will go up by a collective £8,000 a week—Keppochill and Possilpark, but last week I discovered people right across my constituency who will be hit by this cruel tax. Around half the recipients in my constituency are on out-of-work benefits, but three in 10 of those who are in employment earn less than the living wage. It is clear that the decline in real wages—it has accelerated under this Government—which have fallen every month the Government have been in office, has driven the greater reliance on housing benefit to maintain even these basic living standards.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I should have reduced the time limit but did not, on the off-chance that there would not be too many interventions. I warn Members that I will now have to reduce it, and if they are upset it is due to the number of interventions.
Geraint Davies
In a nutshell, the cost of reducing the tax threshold by £1,000, which gives taxpayers £6 a week, is £5 billion, 10 times what is being saved here. If someone who is very poor looses £7.50 a week through the empty bedroom tax, someone else is being given £6. Does that not illuminate the Government’s priorities: hitting the poor and letting the middle class off?
Mr Bain
My hon. Friend is certainly right to draw attention to the absurdity of the Chancellor’s claim that there is a zero tax band for people on low incomes, who of course pay national insurance, higher VAT under this Government and all the things described in this debate. I should also point out that rents are rising in much of Scotland—by 6.3% in Aberdeen and 5.1% in Edinburgh, for example—which is adding to the pressure this policy will cause.
The bedroom tax will hurt the country in many ways that the Government do not presently acknowledge, for example through its impact on families, the economy, employment and housing. First, these plans utterly fail the test of promoting economic growth. Indeed, by diminishing demand among people who will spend the money, the least well-off, they will have a deeply contractionary effect. Keynes’s paradox of thrift will sadly become a death knell for local shops across the country as people are forced to cut back on spending. The University of Strathclyde’s Fraser of Allander Institute estimates the cost to the Scottish economy to be more than 300 jobs, £30 million a year in lost demand and a reduction in wages in Scotland of nearly £8 million a year.
The Minister claims that people should work longer hours, but do I really have to point out to him that under-employment has soared to 3.2 million under this Government and that there is a slump in productivity because demand has been so weakened by their catastrophic fiscal policies? I also remind him that, with the deficit tracking 7% higher this year than last and our credit rating having been downgraded, these are Tory cuts that he is defending because of the Chancellor’s utter and abject failure on growth.
The Office for Budget Responsibility predicted in November 2011 that the economy would grow last year by 2.5%. It has been confirmed today that instead, it grew at less than a tenth of that rate. The impact assessment on these changes also reveals the truth: if people are able to change their behaviour, as the Minister vainly hopes they will, these plans will save little or no money for the Exchequer. His other policies to cut the benefits bill are failing, because unemployment is 340,000 higher than the OBR predicted in 2010 and living standards are falling in a low-growth economy. He can generate the savings he is seeking with this policy only if people cannot move or work longer hours and so are forced to pay the tax. He is making the poorest suffer for the Chancellor’s manifest incompetence in securing less than a tenth of the economic growth we were predicted to have over the past two and a half years.
Secondly, these proposals are a byword for absurdity. The Minister believes that people can simply uproot themselves from homes they have lived in for three decades or more, and from friends, family and jobs, to go and live in parts of the country where there are smaller houses and perhaps fewer opportunities to work. He says that alternatively, people should take in a lodger—a step that is actively discouraged in the registered social housing sector in Scotland, where stock is allocated on the basis of need. The sheer absurdity is further heightened by his refusal to admit until this afternoon that his plans will potentially remove money from up to 96,000 members of the armed forces, nearly 8,000 Army trainees, carers and foster parents in Glasgow, while nearly 1,000 prisoners on remand in Barlinnie jail in my constituency will be exempt.
Mr Bain
No, because I am compliant with Mr Speaker’s strictures on those who wish to take part in the debate. The Minister will have an opportunity to deal with this later.
All age groups in society will be affected. People over the age of 61 could be drawn into this tax too if they have a spouse or a partner living with them who is under that age and they apply for universal credit after October.
Thirdly, these plans hit the most vulnerable the hardest. Two thirds of the 660,000 people affected across the UK have a disability. Last week I met disabled people who told me that they will be caught by the tax and asked to pay an extra £14 a week for having a room in which no one sleeps but that is used to provide physiotherapy and medical treatment within their home. I spoke to the friends of a young person with a learning disability who is co-operating with the local housing association and who would move into a small house if he could, but there are simply none available. Through no fault of his own, he will be forced to pay the bedroom tax on income support of £47 a week.
Fourthly, there is a lack of available properties for people to move into. Some 540,000, or 81%, of those losing out will be people who cannot move because there are no one-bedroom properties in their areas. According to Glasgow Housing Association, there is a waiting list of 13,000 in Glasgow for one-bedroom properties because housing associations, and the council before them, responded to local housing demand by building homes with two or more bedrooms. With a social housing shortfall of 156,000 properties for Scotland’s housing needs, there is no way the required properties could be built so that people can avoid destitution through having to pay this tax from April.
Fifthly, these plans will cause enormous uncertainty for our housing associations. They now have no clarity about their future revenue levels or the investment decisions they can make on social housing. They are unsure whether they should be building one-bedroom houses. They are fearful of managing a surge in rent arrears, with the cost being paid by all tenants in the form of lower priorities for refurbishment of existing properties or reduced budgets for repairs.
The wider issue is this Government’s lack of empathy with those who live in social housing. This is a further attack on that very concept from a Government who have cut the social housing budget in half. This is not an issue that divides people in Scotland from those in England and in Wales: it is about a feeling that Ministers are losing their sense of what is morally right or wrong for people across the United Kingdom. What best sums up what ordinary people feel about the injustice of this absurd tax is a conversation that I had with a 69-year-old constituent on the way to my constituency office last week, who stopped me to see whether she would be affected by the bedroom tax. When I explained that she would not, she told me how troubled she was that other people in her community would have to pay it. She said that this has been the worst Government in her lifetime and that the right hon. Member for Tatton (Mr Osborne) is the most arrogant and out-of-touch Chancellor in history, but that of all the cruel things they have done, this is by far the most vicious. She was right.
The voice of ordinary people has been heard in this debate, but it must also be reflected in the votes in the Division Lobby tonight. I particularly urge the party of Lloyd George and Gladstone not to vote for a policy that even the party of Thatcher would have shrunk from in the 1980s. It is the duty of all Members to avoid causing unnecessary suffering to nearly 700,000 people by opposing this cruel tax in a strong, clear vote tonight.
Oral Answers to Questions
William Bain Excerpts(11 years, 10 months ago)
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Mr Duncan Smith
The Minister of State, Department for Work and Pensions, my hon. Friend the Member for Fareham (Mr Hoban) and others are engaged on this matter with our European partners. We do not think it right that somebody who has made no contribution to this country should be able to walk in here on day one and take benefits, as is being proposed. I promise my right hon. Friend the Member for Wokingham (Mr Redwood) that I will not allow that to happen.
Mr William Bain (Glasgow North East) (Lab)
T10. The Minister has failed to justify to the 430,000 women in the rest of the country, or to the 500 women in my constituency, born between 5 April 1952 and 6 July 1953 why they will receive a state pension of up to £1,900 a year less than a man born on the same day as they were.
Steve Webb
To risk repetition, I say to the hon. Gentleman not only that those women will receive potentially up to two years more but that, on average, the new system is costing no more than the one it is replacing. So it is simply not the case that we are taking new pensioners and spending more money on them than we were in the system that we are replacing.
Welfare Benefits Up-rating Bill
William Bain Excerpts(11 years, 11 months ago)
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Mr Redwood
That is not my case at all. My case is that the Government inherited an impossible financial position: the public sector was spending and borrowing far too much and the economy had been performing very badly, with a collapse in living standards towards the end of Labour’s period in office that was the biggest that any of us in this House had witnessed in our lifetimes.
My right hon. and hon. Friends on the Front Bench are trying desperately to come up with a series of policies that promote growth and restore a greater degree of normality. The Committee must recognise that the model that sustained growth from 1945 through to 2007 was comprehensively broken when Labour broke the banks and nationalised them. Until we sort that mess out, we will be dealing with very unpopular and difficult choices, whoever is in government.
Mr William Bain (Glasgow North East) (Lab)
I know that the right hon. Gentleman always reads his economic documents, so why does he disagree with the view expressed by the Chancellor when he came to office in 2010 and by the IMF now that the automatic stabilisers in our economy should operate unimpeded?
Mr Redwood
If the hon. Gentleman looks again at the numbers in the Budget Red Book, he will see that the automatic stabilisers have been more than functioning. Under this Government, public spending has gone up considerably while borrowing has remained at extremely high levels. The borrowing levels the Government inherited were off the chart compared with those in any previous cycle we have witnessed in the British economy. Levels of public borrowing are still well above the peaks in previous cycles. The hon. Gentleman must understand that the numbers show that plenty of automatic stabilisers are in operation—the question he needs to answer is why they are not working. Of course, they are not working because of the other problems that have been inherited, such as the broken banks, the difficulties with tax rates and the large structural deficit. Those are all part of the problem and we can debate them at another time during a general debate on the economy.
The Government are attempting, through their tax and benefit changes, to tackle the problem of people asking, “Why work?” I have two bits of advice for my right hon. and hon. Friends on the Front Bench that might be more to the liking of the Labour party. If my right hon. and hon. Friends are going to pursue and sustain the policy of very low benefit increases for the next period, it is important that two other conditions are met. The first is that every action should be taken to get inflation down. If inflation suddenly took off, this would become a much tougher and crueller policy than Ministers have in mind. That would be extremely difficult. So it is in everybody’s interest—not just of those in low-paid work and not just those on benefit, but those people in particular—that more is done to sustain and control price rises.
Mr Reid
A lot depends on where we start. If we are talking about rises matching prices or wages, it all depends on the starting point—if we pick a different starting point, we get a different result.
I was talking about the next three years. We know what the rise in average earnings was last year, so obviously we know what the rise in benefits would be in 2013-14. We do not know what it would be in 2014-15 or 2015-16, but setting the increase to the rise in average earnings, rather than a fixed rate of 1%, would mean that as the economy gradually grew, the level of growth in the economy would be paid to those on benefits, as well as those in work. That is a better approach than having a fixed rate of 1% for three years.
No Government have control over world food and energy prices. At Prime Minister’s questions last week I raised this potential problem when I asked the Prime Minister what contingency plans the Government had for benefit increases, should food and energy prices rise by more than expected. He answered by pointing to the good work being done by my right hon. Friend the Secretary of State for Energy and Climate Change to ensure that energy companies put people on the lowest available tariffs. That will indeed be a big help to people on low incomes, but if energy prices rise by more than expected, the lowest tariff will rise by more than expected too. After I heard the Prime Minister’s answer, I am afraid that I was left to form the conclusion that the Government have no contingency plans for a scenario in which prices rise by more than expected. I hope that when my hon. Friend the Minister replies to this debate, he will be able to reassure me on that point. I hope there is a plan B, in case world prices go up by more than expected.
Setting future increases to the increase in average earnings would address the legitimate argument that out-of-work benefits should not rise faster than earnings and would help to cut the deficit. For example, if the CPI figure were used for 2013-14, benefits would increase by 2.2%. If average earnings were used, they would increase by 1.6%, saving half the amount that a 1% increase would save. It is also important to point out that cutting public spending on its own will not eliminate the deficit. We need to grow the economy as well. All the economic research indicates that money put into the pockets of people on low incomes is far more likely to be spent straight away than it would be by those on higher incomes. Not increasing welfare benefits by the rate of inflation will have an impact on shops and other businesses, as well as the recipients themselves.
To sum up, linking benefit increases to average earnings is much fairer all round and avoids committing ourselves to a fixed figure unnecessarily far in advance. I hope that the Committee will support amendment 10, and I hope that you will allow it to be put to a vote, Mr Amess.
Mr William Bain
This evening’s debate on clause 1 and amendment 12, moved by my right hon. Friend the Member for East Ham (Stephen Timms), is important because it speaks to more than the £13 billion increase in the welfare budget caused by this Government’s failure on growth since 2010 or even the chronic lack of jobs, in a still depressed economy, faced by so many hundreds of thousands of people in our country. This debate speaks to the very values of our society.
Are we a country that is content to divide socially instead of coming together—jobless and workers, low-paid and middle earners—to defeat again the social evils of worklessness, low pay, slumping living standards and poverty? Are we a country that is content to see the doubling of food banks under this Government since May 2010, as 1.4 million people in work find themselves needing to resort to credit to help to pay the rent or the mortgage each month? Are we a country that will fall for the cynical “divide and rule” tactics of the Chancellor, which treat people as pawns in a squalid political game, amid a campaign of demonising the poor and turning neighbour against neighbour, when a responsible Government would seek to unite people rather than divide the country? This clause is rotten economics, ruinous for weak economic demand up and down the country and rank politics, from a Government who can relaunch as many times as they like, but who will never rediscover any sense of moral purpose while they engage in this basest of agendas of social division.
Andrew Bridgen
The hon. Gentleman mentions unity. Does he agree that if people lead their life on welfare, it is not only bad for our economy and for our society but tremendously bad for those people themselves, hugely reducing their life expectancy and seriously damaging their children’s lives and prospects? It should be discouraged; the best way out of poverty is through work.
Mr Bain
On this pleasant occasion, I find that I entirely agree with the hon. Gentleman. Let us hope that that agreement will continue when he contributes to the debate later, and in future debates.
These measures are not pro-growth, as they were included in the analysis from the Office for Budget Responsibility in December that further downgraded growth forecasts for this year by 0.8% of gross domestic product. They are not pro-deficit reduction, as unemployment is set to become 340,000 higher than the level predicted by the OBR in 2010, and benefit bills will be £13 billion higher than forecast. They are not pro-equality either, as two thirds of the real-terms cuts introduced by clauses 1 and 2 will hurt women, and three fifths of them will hurt working families.
If the Government believe that they are standing up for fairness in the midst of the longest slump for 140 years, this must be either the most incompetent or the most misguided set of measures since those proposed by the National Government in 1931. On every count, they will increase, not cut, inequality in our country, given that 71% of the households affected are on or below the average income, and that 60% of the total savings from the Bill will come from the poorest third on the income scale. Only 3% will come from the wealthiest third. On no count can these measures be described as fair. How on earth can the Government believe that it is right to introduce a 4% real-terms cut in benefits until 2015 while continuing to pay top-rate pension tax relief to top-rate taxpayers at a rate of 50p in the pound? They are doing that while impoverishing the very poorest people at the same time.
Unemployment in my constituency remains consistently high at more than 4,000, or 12% of the working-age population. Although more than two thirds of jobless people experience only a few months out of work at the most, there are more than 1,300 people there who have been out of work for a year or more. Within that group, some 600 people have been out of work for two years or more. If the Government were serious about welfare reform, they would accept that ending the crushing blow of such long-term joblessness, which saps the human spirit and harms long-term job prospects—as the hon. Member for North West Leicestershire (Andrew Bridgen) pointed out—should be the first duty of a responsible Government. Instead, they have put this ruinous set of measures before us tonight.
Andrew Bridgen
Given the sense of unity between us, will the hon. Gentleman endorse the coalition Government’s policies that have helped the economy to create 1.2 million new private sector jobs during this Parliament?
Sheila Gilmore
Would my hon. Friend like to refer the hon. Member for North West Leicestershire (Andrew Bridgen) to recent articles—including some in The Guardian, which he would probably discount—that show not only that those jobs were transferred from the public sector to the private sector but that the Government are counting unpaid work in the total of new jobs being created?
Mr Bain
Yes indeed, I have seen that report, and it was scandalous. I was somewhat perplexed by the right hon. Member for Wokingham (Mr Redwood) when he said that people who were in part-time work were satisfied with that situation. The truth is that, as the TUC has established, 3.2 million people in this country are stuck in involuntary part-time work because of weak demand, low growth and low investment in the low-productivity economy that is being presided over by this Government.
Christopher Pincher (Tamworth) (Con)
The hon. Gentleman is making a thoughtful contribution, as ever. He talks about fairness. Does he think it fair for a Government to spend £25 billion over 10 years only to see the number of those in fuel poverty increase by 2.8 million? Does he think it fair to add 75p to a pensioner’s pension? Does he think it fair to add 10p to fuel duty? And does he think it fair that 1,610 people in his constituency were lifted out of tax last December?
Mr Bain
What I would certainly define as unfair is introducing a clause whose impact on the poorest 10% of people on the income scale will be 14 times harder than on the richest 10%. I hope that he has read the impact assessment as closely as I have. If he has, he will know that 1.4 million people in the lowest 10% will be affected by this measure, but only 100,000 in the top 10% will be similarly affected. That cannot, by any stretch of the imagination, be considered fair.
Mr Bain
I hope that the hon. Gentleman will have an opportunity to make his own contribution later, and that he will recognise that I have been generous in giving way to him once already.
Long-term unemployment in Scotland has risen by 385% since 2008. I welcomed the presence of Scottish National party Members in the Division Lobby with Labour Members the other week, voting for our reasoned amendment to the Bill relating to the jobs guarantee, and I hope that it will not be too much longer before the Scottish Government follow Labour’s lead and introduce a jobs guarantee for those most in need of work in Scotland. They could easily do that. I hope that they will look at the example set by Glasgow city council in introducing a successful jobs fund for the young jobless, because such a measure would supersede the measures in clause 1. Countries such as Sweden, which many in the Scottish Government often ask people in Scotland to emulate, have used jobs guarantee policies very successfully indeed for nearly two decades, while reducing their deficit at the same time.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Does the hon. Gentleman also welcome the Scottish Government’s efforts to ensure that every 16 to 19-year-old in Scotland be guaranteed an educational or training place?
Mr Bain
I would welcome any measures from any tier of Government that would increase the level of training and skills provided to my constituents and those in other Scottish constituencies. I have to say to the hon. Lady, however, that I have two major colleges in my constituency—North Glasgow college and John Wheatley college—which have seen staggering levels of cuts introduced by the Scottish Government. That is driving more young people in my constituency into unemployment and creating the very figures that allow those on the Treasury Bench to produce measures such as those in clause 1.
Even in constituencies such as mine, it is still the case that people move in and out of unemployment. The calculated framing of this debate by the Government, based on the fabricated and manufactured premise that there is a monolithic army of the permanently idle, unwilling even to open their curtains, and defrauding the system, wilfully ignores that fact. Fraud in the benefit system is only 0.7%, and many unemployed people, including many of my constituents, are struggling hugely on just £71.40 a week. Unemployment benefit as a proportion of average income has fallen from 22% in 1979 to a mere 15% now, so the argument from those on the Treasury Bench that unemployment benefit is somehow unaffordable and that it cannot continue into the decades to come is simply a false premise to put to the Committee tonight.
Helen Goodman
Would my hon. Friend like to point out to Government Members that, in the days when jobseeker’s allowance and its predecessors represented a higher proportion of earnings than now, we also had lower unemployment?
Mr Bain
That is absolutely right. We also had lower levels of long-term unemployment than we have now. As I and other Members have pointed out, high levels of long-term unemployment decrease the earnings potential of the people afflicted by that social evil.
Only today, the Joseph Rowntree Foundation published a survey of poverty in Scotland which revealed that a baby boy born in the richest 10% of Scottish neighbourhoods has a life expectancy 14 years higher than that of a baby boy born in the poorest 10% of such neighbourhoods. Having a 4% real-terms cut in unemployment and other out-of-work benefits of the sort contained in clause 1 is going to make those figures in Scotland even worse. I urge the Government to think again, to accept amendment 12 and to reduce the terrible social damage that will be caused if this measure becomes law.
I hope that, at this eleventh hour, the Government will decide to make policy on the basis of evidence, rather than reintroduce some Victorian distinction between the deserving and the undeserving poor. I urge them to think again about the impact that clause 1 will have, ensuring that 90% of those in out-of-work benefits will, according to the Institute for Fiscal Studies, be an average of £215 a year worse off. They should consider the effect that will have not just on high streets in our towns, villages and cities but on the local shop. They should think about the amount of economic demand that will be taken out of local communities, the jobs that will go as a result of the passing of this measure in this form tonight.
The Government ignore the inconvenient truth that out-of-work benefits constitute just 3% of the welfare budget, and that outside of pensions, most welfare spending ensures that work pays for many of our citizens. Nearly three in 10 of my constituents earn less than the living wage of £7.45 an hour. Although introducing a living wage in those parts of the economy where it will work would save money in lower tax credit costs, we, like many other countries, need a strong tax credit system to reduce imbalances within the labour market that would otherwise cause unacceptable levels of inequality. The simple truth is that most poverty in Britain today is among the working poor. It is mainly the working poor who are losing out as a result of these measures. They will be the biggest victims if this iniquitous Bill were to become law, with a real-terms 4% cut in their living standards.
In Scotland, as a result of these measures, some 261,000 working families, nearly one in five, would lose an average of £259 a year by 2015—the antithesis of work paying for those 261,000. About 70% of the tax credit cuts will affect working families in Scotland. The median wage in my constituency is less than £17,600 a year, and many thousands of people will be savagely hurt by clause 1, as Citizens Advice outlined in its submission. A couple on just £13,000 with two children will lose nearly 5% of their income as a result of this Bill, completely overwhelming any benefit from increasing personal tax allowances, which is worth just 13p a week to them.
This debate is not just about the measure before us; it is a debate about the values of this Government and the priorities of our society. This Bill impoverishes the poor, without reducing the deficit; it makes inequality worse, adding 200,000 to the child poverty figures, leaving 1 million more children in poverty by 2020. This clause is a provision that will cause enormous hardship to some of the poorest people in society, and it will devastate economic demand in constituencies such as mine. I urge the Committee to endorse amendment 12 and to vote against clause 1.
Kwasi Kwarteng
I am grateful to be called to contribute to this Committee debate. Many of tonight’s speeches have made me feel that I live in a different world from the one in which my constituents and a large number of people in this country live. I propose to Labour Members that the world in which they live is one far removed from reality.
When this Government came to office in 2010, the coalition confronted the worst peacetime deficit in Britain’s history. That fact cannot be repeated often enough. This is the architecture and the framework through which every single decision has been made since the formation of that Government. It is particularly nauseating to see Labour Members berate the Government for trying to make very tough choices and trying to make savings when they were the architects responsible for the chronic and devastating mismanagement of our public finances; and it is particularly nauseating to see those Members berate and accuse the Government of being purely political in respect of this very difficult measure.
Mr Bain
Would the hon. Gentleman care to comment on the fact that the International Monetary Fund has called for the free and unimpeded operation of the automatic fiscal stabilisers, including unemployment benefits, when people, sadly, lose their jobs? Does he agree with Jonathan Portes, who used to work for the Government and now works for the National Institute of Economic and Social Research, and who says that the Bill makes little or no sense macro-economically? Is Jonathan Portes not right?
Kwasi Kwarteng
Jonathan Portes is not right. I do not think that anything he has ever written—I read his blog—makes any sense whatsoever, and I am happy for Hansard to record that. On the point about the automatic stabilisers, I refer the hon. Gentleman to the answer that my right hon. Friend the Member for Wokingham (Mr Redwood) gave him. The automatic stabilisers are working; in cash terms, a lot of our spending in these elements is higher than it was. That is a clear sign that the automatic stabilisers are working.
Remploy Marine Fife
William Bain Excerpts(11 years, 11 months ago)
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Lindsay Roy (Glenrothes) (Lab)
I congratulate my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) on securing this vital debate. I fully endorse the thrust of his argument and commend his analysis of the key issues that face us in securing Remploy’s survival and possible viability.
I plan to underpin the case for a more flexible, generous and co-ordinated approach in the transition to financial viability by providing some additional detail. The Fife work force provide outstanding service, well above and beyond the call of duty. They are not shirkers. Remploy Marine’s order book is full. As my colleague said, their lifejackets meet international standards; they go to places such as Norway, Denmark and the USA. They are at the forefront of the manufacturing we want to retain in this country.
The employees take pride in their work, and are making a significant contribution to wealth creation. Through their initiative and enterprise, they have cut their deficit in half, as we would expect from a work force so dedicated to continued employment. They have an entrepreneurial spirit. There is a full order book. The workers want to boost our diminishing manufacturing base and extend our overseas market. They remain determined to succeed. It is a golden opportunity.
In an authoritative report, Scottish Enterprise states that
“high growth rates are forecast, despite the underdeveloped sales channel.”
Nearly all the Fife production goes to one distributor, who makes a healthy profit from the Remploy brand. As I said, the export market is extensive, and much more could be achieved through diversification.
As my right hon. Friend said, a one size approach does not fit all. The Government’s support package is entirely inappropriate. Remploy Marine has real strengths and potential viability, given the right support package. That is why we want joint working and a co-ordinated approach, with effective leadership, between the Scottish Government, the UK Government, Fife council and any other important partners.
Mr William Bain (Glasgow North East) (Lab)
I am most grateful to my hon. Friend for giving way and I thank my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) for securing the debate.
Does my hon. Friend the Member for Glenrothes recall that when he was elected in 2008 the unemployment rate for disabled people stood at 9%, whereas now it is 12.3%? Is there not a duty to more than half a million disabled people who are out of work for every tier of government to do everything possible to help save those jobs?
Lindsay Roy
Absolutely. I am very grateful for that contribution. That is entirely the case that we are making. We want to make sure that all parties concerned do everything they can to support the disabled and disadvantaged in our community, as that is a hallmark of a civilised society.
A viable rescue package is possible, whether it is an employee buy-out, a social enterprise or a private sector purchase. In my view, the proposals are rushed and, ironically, represent a dramatic withdrawal of life support to a group of people who have been life savers for years. An option must remain on the table for an enhanced package for this internationally renowned product. A company such as Remploy Marine, with a substantial number of disabled people, remains a viable, highly competitive option but, as my right hon. Friend the Member for Kirkcaldy and Cowdenbeath said, that cannot be achieved overnight. There are at least two potential buyers, who need all the support that they can get.
At Leven, we have been told that the subsidy is £13,000 a head, but in terms of best value, the Government have been unable to quantify the increased benefits costs if people are made unemployed, nor do we have details of the redundancy payments. Furthermore, we do not know the care and health costs that often result when people become unemployed.
This year, the Leven factory engaged 76 youngsters on work experience placements at no cost to the Government, so there is an added value component. It is my contention that we do not have an accurate balance sheet. With such a small percentage of workers in employment after the July closures, we must do everything that we can together, and there is genuine optimism that we can save the factories in Cowdenbeath and Leven. Like my right hon. Friend, I can vouch for the community spirit and the wholesale backing of the Fife community for these ventures. The support is overwhelming and it is cross-party.
I urge the Government to take a fresh look at the issue, to consider a co-ordinated approach with various partners, and to take this seriously, as I am sure they will. We have a collective duty to reduce the subsidy per individual, and a collective obligation to maximise employment for disabled people. That need not be done by disbanding a potentially viable business. Where there is a collective will, there is a way, and I am confident that with flexibility, good will, effective leadership and co-ordination a successful outcome can be achieved. That is why my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty) and I have requested an urgent meeting with the Minister, and I trust that she will accede to our request, because by working together we can make a real difference and secure a viable outcome.
State Pension Reform
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Steve Webb
Yes, I can give my hon. Friend the assurance that he seeks. If a pension document says, “You have already built up a pension of £160, £170 or whatever”, people will get at least that amount. Going forward, people will not be able to build up those sorts of pensions in the future, but when they have built them up already, we will recognise those contributions.
Mr William Bain (Glasgow North East) (Lab)
The 1.4% rise in employee national insurance contributions and the 3.4% rise in employer contributions appear to involve an initial windfall of about £6 billion a year for the Treasury. What guarantees will there be in the Bill that current members of public and private sector pension schemes do not lose out in real terms as a result of these changes?
Steve Webb
We have already given a guarantee that, having renegotiated the public sector pension schemes, we will make no further changes in rights under those schemes for 25 years. While we are changing the national insurance state pensions of public sector workers, we are not touching the public sector pension. Private sector workers may—indeed, probably will—find that their employer adjusts the private sector scheme in response, but, as I have said, even with that adjustment—even with the higher national insurance payment—the vast bulk of workers, certainly those within 20 to 25 years of pension age, will still be net beneficiaries.
Personal Independence Payments
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Esther McVey
I can confirm that. What we are doing is all about a smooth transition and getting the implementation correct.
Mr William Bain (Glasgow North East) (Lab)
When my right hon. Friends the Members for Stirling (Mrs McGuire) and for Birmingham, Hodge Hill (Mr Byrne) and I met members of the disability community in Scotland recently in my constituency, they expressed concerns that tens of thousands of disabled people in Scotland might lose their access to passported benefits and their ability to get to work under the new system. With disabled unemployment at a record high, would it not be wrong to create new barriers to disabled people keeping their jobs? Will the Minister guarantee that no disabled person who is currently in work will be worse off as a result of these reforms?
Esther McVey
As the hon. Gentleman will know, it has always been the case under DLA that when people are reassessed, some people stay on the same benefit, some people get more and some people get less. That will be exactly the same under PIP. The difference is that there was no systematic review under DLA, but there will be under PIP.
Remploy
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Esther McVey
I do not recognise the statistics that the hon. Gentleman is putting forward, because since the election a record number of jobs—1.2 million—have been created in the private sector. As I said, 50,000 jobs were found by Remploy Employment Services in the past two years. We can find these jobs, and that is entirely what we are aiming to do.
Mr William Bain (Glasgow North East) (Lab)
With unemployment among the disabled having risen by 63,000 in the past year, this Minister, sadly, has presided over an unmitigated shambles of a tendering process in the Springburn Remploy factory in my constituency, with nearly 50 disabled workers not even given the dignity of her making a written statement to this House. Does she not accept that with the Daily Record in Scotland having made very serious allegations about the propriety of the tendering process at that factory, the only way she can restore confidence in her own policy is to bring in a moratorium so that she does not further preside over the incompetent chaos affecting hundreds of Remploy workers across the country?
Esther McVey
It is a pleasure to debate with the hon. Gentleman again. I have had two Westminster Hall debates with him on this subject, and we have spoken on various occasions. He knows only too well, from the written and verbal replies that I have given to him, what we are doing, what is happening and what has happened in his constituency.
Benefits Uprating (2013-14)
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Steve Webb
We inherited a situation in which approximately £80 billion a year of spending reductions and tax increases were needed simply to balance the books. I have not heard anything this morning from the Opposition—not a single word—on where, now there is no money left, that should come from. If the hon. Gentleman voted against our proposals he would have some credibility, but of course when the crunch comes he will not—he will sit on the fence. He wants his constituents to think he cares, but when it comes to casting his vote in this place he will be somewhere else.
Mr William Bain (Glasgow North East) (Lab)
The Treasury’s own analysis shows that the measures announced yesterday and today are regressive towards people in the seven lowest income deciles. Given that three-quarters of the cuts in tax credits will affect people in work and that the Government have made no steps to deal with the looming work disincentives that will be faced by second earners in couple households with children, are the Government not making a mockery of their pledge to make work pay for everyone?
Steve Webb
If the hon. Gentleman looks at the distribution impact that was published yesterday, he will realise that he has mysteriously forgotten about the large amounts of additional tax that will be paid by the top decile through the restriction of pension tax relief, who will, by far, lose out the most, and that seems a very progressive thing to do.