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Ms Harriet Harman (Peckham): Before the Secretary of State goes any further down this disgraceful line of argument-- [Interruption.] If Conservative Members are interested in the facts I will put them to the Employment Secretary and he can confirm them. He should apologise to Philip Bassett because there was no question of him sending that material for me to approve it, vet it or check it. I ask the Minister to accept my assurance on that. Mr. Bassett simply sent it to me because it was an exclusive and he asked me to comment on it for the following day's paper. The Secretary of State is clearly so desperate that he is clutching at straws. Why does not he address the real issue of the unemployment that he has created? He is a disgrace. [Interruption.]
"Ed--This is a copy of what I've written so far, though I may fiddle about with it later. But it will be something like this. It mostly looks at the position, rather than the politics."
The Times does not fax copy in advance for me to comment on, but apparently it does so for the Labour party.
It is time to return to the serious subject of unemployment because 2.5 million people without work is far too many. The Government never forget that unemployment is a waste. Worse than that, it is a cause of great unhappiness and difficulty. Therefore, reducing unemployment is a high priority for the Government.
Ms Angela Eagle (Wallasey): The Secretary of State says that unemployment is a waste. In that case why does he think that it is sensible to penalise the unemployed by cutting their benefit? A quarter of a million people will be worse off as result of the cuts, but they are only the victims of the economic cycle. It is not their fault that they are out of work but the fault of economic forces and the Government's incompetence.
Mr. Portillo: A large number of people will be better off because in future they will get the back-to-work bonus. People will benefit from the £10 allowance that will be available to couples before any benefit is deducted in
Column 49respect of their earnings. We are prepared to change the welfare system so as to update it. The hon. Lady's party is afraid to change anything or to admit to any policy.
Mr. Richard Burden (Birmingham, Northfield): Will the Minister comment on the Bill's provision which would mean that if a newly unemployed person took part-time work benefit would be deducted pound for pound if that person earned more than £5 a week? Will he contrast that with the case of Mr. Bryan Townsend, the chairman of Midlands Electricity? He gave up the job and got a pension of about £2,000 a week. He then went back to the job part time and he gets £165,000 a year for that on top of his pension. Does not the right hon. Gentleman see a contradiction in the way in which the Government whom he represents treat people who already have money compared with those who have nothing?
Mr. Portillo: The Government will treat everybody equally. We are concerned to see that people make their way back into work, possibly by climbing the ladder of part-time work. That is why the Bill introduces a back-to-work bonus which will encourage people to build up a credit of the benefit that is deducted from them when they take part-time work. They will be able to have a lump sum of up to £1,000 when they leave benefit to go into full-time work. The hon. Gentleman should support that by voting for the Bill.
Rev. Martin Smyth (Belfast, South): We are concerned about the unemployed and welcome the fact that in the past two years unemployment has been decreasing. Four years ago the Select Committee on Social Services drew attention to the place of carers and the concept of care for them. As one who has been aware of their problems over the years, will the Minister take the opportunity, through the Bill, to examine the case of carers who have been penalised after having to leave work to look after their parents and others, because when a carer's parents die the carer is not entitled to unemployment benefit? Will the Minister look at the scheme to see how such people could be looked after?
Mr. Portillo: The hon. Gentleman raises an important point for which there is much sympathy in the House. I do not want to attempt an off-the- cuff answer. In Committee hon. Members will want to look at that matter. In respect of sanctions, the position of carers will be different from that of other people. They will be in the protected group, and I am sure that the hon. Gentleman welcomes that assurance, although I know that it does not go as far as he would like me to go.
Higher public spending is not the answer because we cannot spend our way out of unemployment. Higher taxes or borrowing and higher interest rates and inflation would result and those would destroy jobs. The Labour party has to learn that real demand in the economy cannot be increased by increasing public spending. However, it can be done as the Government are doing it--by providing the conditions for sustained recovery.
Underlying the Bill is the recognition that in itself economic growth is not enough. The feature of European unemployment over recent decades is that it has risen from one recession to the next. Even in periods of recovery the totals have not fallen very far. We must sort out the structural problems that impede job creation or diminish the incentives for unemployed people to take work.
Column 50I want to secure through the Bill and other measures economic growth that brings more jobs and lower unemployment, not economic growth that improves life only for those who have work but does nothing for those who do not. We have to make it as easy as we can for one person to offer work to another. Recently that has meant resisting a number of proposals from Brussels which were fully supported by Walworth road. Those proposals would have made it more expensive to employ people and would have imposed on employers liabilities and obligations that would be bound to make them wary of taking on new people.
Another part of what we have to do is to examine incentives. Most people without a job want more than anything else to be able to work. The Bill is designed with those people in mind and they have nothing to fear from it.
Mr. Portillo: I had hoped that the hon. Lady was rising to say what policy she intended to reverse. My colleagues and I in the Government are addressing a problem on which there is meant to be agreement across the House. How do we find a benefit system that the country can afford--a system that is equitable?
The hon. Lady speaks of relief for mortgage interest payers. She knows that such relief is not universal today, and that it is not applicable to people who receive unemployment benefit. It is available only to those in receipt of income support. In future, people can make their mortgages secure by taking out insurance which is available in the private sector. The hon. Lady, however, would rather struggle on with a state system which is inadequate, and which is misleading people into believing that their mortgages are protected rather than placing any reliance on the private sector. Why, when people are able to protect their mortgages with insurance, should the taxpayer of all people be responsible for insuring those mortgages? Has the hon. Lady no concept of individual
responsibility--of the fact that, if someone can afford to take out a mortgage, that person should also consider how to protect the payments? The hon. Lady believes in the Commission on Social Justice and in the new welfare state; why will she not admit that, in one corner of the welfare state, there is an opportunity for individuals to take some responsibility? Why will she not admit that the taxpayer should not be the first port of call? The hon. Lady is, as ever, silent.
Over the years leading up to the Bill, we have examined a range of policies to see how they affect motivation, and how they have helped or hindered people in their quest for independence and the ability to provide for themselves. We reformed income-related benefits and introduced family credit: our objective was to ensure that more people would be better off in work than receiving out-of-work benefits, and that those with families would be encouraged to take and keep jobs.
We have recently introduced, or announced, further changes to ease the way back to work. It is now possible, on family credit, to spend up to £40 a week on child care without affecting entitlement to benefit. We have also looked hard at the help that we can give people to help them over the "job hump"--the difficulties that they face
Column 51when they find a job after being out of work for a long time. We have introduced the jobfinder's grant, which puts cash in people's hands to help them with bus fares, clothing or the tools that they need for the new job.
We have adjusted the benefit system to ease the transition into work. People who find a job after a long period of unemployment will receive the same amount of housing benefit for the first four weeks of work as they received when they were out of work. We are also tackling employer discrimination against the long-term unemployed. We have experimented with workstart--payments to employers who take on the long-term unemployed to encourage them to give those people a chance to prove themselves. The Bill extends that idea by waiving for one year the national insurance contributions that employers would have to pay on newly recruited employees who had been out of work for two years or more.
Mr. Portillo: Let me explain an important difference to my hon. Friend. With workstart, we are giving long-term unemployed people who would otherwise face discrimination a chance to prove themselves in the world of employment. I do not believe that spending public money creates more jobs; it cannot do so, because that money is raised from taxes that other people pay. I do believe, however, that we can help to provide opportunities for people who have been out of the labour market for some time--people whom employers would otherwise not be willing to consider. That is good for those people, and good for the performance of the labour market; but I do not draw the conclusion that we can endlessly spend money and make the state the employer of last resort. I shall explain that more fully later.
The Bill introduces a further incentive to help people into jobs--the back- to-work bonus. Income-related benefits are paid to unemployed people to help them when they have insufficient income. Naturally, if they secure part-time work, the money that they earn reduces their need: that must be reflected in the payment of less benefit.
Part-time work, however, is sought by some as an effective ladder leading back to full-time work, and is valuable in maintaining morale while that search goes on.
Column 52We should therefore encourage people on benefit to take part-time jobs if they are more readily available than full -time jobs. The back-to-work bonus will allow people to build up a credit equal to half what they lose in benefit, and to receive a lump sum of up to £1,000 when benefit is replaced by a full-time job.
Having taken those and other steps to help people back into work, and to ensure that they can be confident of being better off when they are in work, we must now examine the conditions of entitlement to benefit. Let us be clear about the principles. Benefits are paid to help people to deal with contingencies that prevent them from providing for themselves-- retirement, disability, sickness or involuntary unemployment.
Since the original introduction of unemployment insurance, it has always been understood that benefit is payable only to people who want to work but cannot. It was presumed that such people would be seeking work, and would take it if it became available. Beveridge was concerned by the effect of the availability of a cash benefit on people's self-reliance, and it was explicit in his report that benefits for unemployed people should be paid only to those who were seeking work. That report stated:
"The correlative of the State's undertaking to ensure adequate benefit for unavoidable interruption of earnings, however long, is enforcement of the citizen's obligation to seek and accept all reasonable opportunities of work, to co-operate in measures designed to save him from habituation to idleness, and to take all proper measures to be well."
Mr. Frank Field: Will the Secretary of State also tell the House that, although Beveridge carefully laid down those safeguards for public money, he added that claimants who fulfilled the conditions would receive benefit until they obtained jobs?
Mr. Field: The Secretary of State is wrong. Beveridge laid down that unemployed people would be able to draw national insurance benefit until they found jobs, provided that they fulfilled the conditions that the right hon. Gentleman has just read out.
Mr. Portillo: I am not aware that that has ever been accepted. Certainly it has not been accepted in the living memory of any Opposition Member. National insurance benefits for unemployed people have been time- limited for as long as any Opposition Member can remember. I admit that the time limits have changed from time to time, but the benefits have not been in perpetuity during the lifetimes of Opposition Members.
The principles that I have read out remain good and valid today. No one has a God-given right to decide to be idle and to live off others, and there is no novelty in saying that today. The taxpayer has every right to expect those seeking work to do so with vigour, and to demonstrate their desire to work by taking actions that are likely to improve their ability to find and hold down jobs--attending courses, undergoing training or actually working in programmes of activity financed by the Government.
To describe that as "workfare" strikes me as loose talk. To me, "workfare" means that the state will be the employer of last resort, committing itself to provide work for any who are without it. That implies a bigger role for the state than I am willing to contemplate. I do not shy
Column 53away from saying that financial provision is there for those who need it because they cannot support themselves, but they must be able to demonstrate that by their willingness to work. That can include being required to take work that is offered to them on penalty of losing their benefit; if that spells workfare to some, so be it. I aim to see the world as it really is. Much of what we have already done sets out to tackle the practical disincentives to taking a job which real people face. That is realism. We must also be realistic, however, about the ways in which the system can be abused and no good is done to anyone by ignoring that problem.
The Bill makes explicit much that has until now been implicit. It re- establishes clear principles, in particular the clear conditionality of benefit that was there at the creation of the welfare state. At the heart of the Bill is the proposed jobseeker's agreement, under which the jobseeker will make a commitment to pursue actions that will be most likely to lead to a job. The Employment Service will provide the opportunities that will be of benefit to the jobseeker.
The jobseeker's allowance will provide a better service for unemployed people. There will be, as far as possible, a single set of rules and a single claim form. It will, generally, be delivered from one office--the local job centre.
Mr. Donald Dewar (Glasgow, Garscadden) rose --
Mr. Dewar: I positively melt, but I shall recover. My question to the right hon. Gentleman is short. He said that the jobseeker's agreement is the core of the Bill and obviously, therefore, it is an important change. Will he please explain to me precisely how the new powers in relation to agreements, duties and obligations of both the applicant and the Employment Service have changed the existing position?
Mr. Portillo: The most important change is that the signature on a jobseeker's agreement will be necessary for the triggering of a claim. The claim will not be valid without there being a jobseeker's agreement. I think that I have answered the hon. Gentleman directly. That is an important change. No claim will exist until a jobseeker's agreement has been signed.
The Employment Service has developed a range of active employment measures that experience has shown--
Mr. Portillo: People have been signing on for as long as any hon. Member can remember. They will sign a jobseeker's agreement. They will commit themselves to a programme of activity and the Employment Service is giving to them the range of opportunities that is available. I do not see how the hon. Gentleman can object to any of that.
The Employment Service has developed a range of active employment measures which experience has shown can dramatically improve a person's chances of getting a job. Last month, the service helped 174,000 people--a new record- -to get into jobs. It assesses people's needs at restart interviews--nearly 4 million each year. People may then be referred to job clubs, where nearly half are successful at finding work, or to the job interview
Column 54guarantee scheme, where again nearly half find a job. The job plan workshop scheme and new restart courses have enabled more than 90 per cent. of attendees completing the course to apply for a job, employment, training programme or other sort of help. Of course, there are also the training programmes provided through the training and enterprise councils, including programmes tailored for people with disabilities or other special needs.
Many of those programmes have been tried first on a pilot basis to ensure that we maximise their effectiveness before they are used to help people on a national scale. We want to have the flexibility to try new ideas with pilot schemes. The Bill has, therefore, a carefully defined power to run local pilot schemes, but it rules out piloting any trial schemes that would involve reduced rates of benefit.
With the very substantial improvement that the Employment Service has made in the help that it can offer, we are in a better position than ever to tailor effective assistance to each person's need. The Employment Service has a track record of service and of success in helping people into work.
The vast majority of people will, therefore, accept the jobseeker's agreement as a fair and just agreement, but the Bill provides a back-up power. It enables the Employment Service to issue a direction to a person to undertake activity that reflects the person's needs and abilities. That will be necessary only if the jobseeker refuses to do reasonable things aimed at him becoming more employable and sanctions would follow only if the direction were ignored.
Of course, directions and sanctions must be reasonably applied. Jobseekers must not be subject to arbitrary demands and there must be safeguards. There will be. Decisions on sanctions will be subject to independent adjudication and to the same appeals structure as we have today.
Some people who lose their benefit because of sanctions will be able to claim hardship payments. Vulnerable groups such as the ill, pregnant women, people with children or people with caring responsibilities will be protected. Healthy, childless people will have no access to hardship payments if they fail the basic conditions of entitlement and they will have no access to hardship payments for two weeks if they break rules once on benefit.
The economy is generating jobs and we are making sure that unemployed people get the chance to take them. We are willing to make changes to our system of provision because the welfare state must be kept up to date. The Labour party claims to be concerned with reform and with the critical question of affordability. The welfare state costs every working person in this country £15 each working day. Yet the Commission on Social Justice proposes additional expenditure of £7 billion a year, which would require higher taxes and would destroy jobs. Conservative Members understand that the business of government requires decisions and requires choices. The hon. Member for Peckham complains about the Bill, but her refusal to commit her party to reverse it shows that Labour is not serious but vague, vacuous and dishonest.
Column 55The Government have three main aims in the Bill--to help people into jobs, to deliver a better service to people while they are unemployed and to achieve better value for the taxpayer. It is part of our policy to encourage jobs through economic policy and through labour market reforms. The Bill is about jobs, about supporting people while they look for work, about encouraging them to compete for jobs and about helping them into jobs. For all those reasons, I commend the Bill to the House.
Ms Harriet Harman (Peckham): The Bill demonstrates just how out of touch the Government have become with the concerns and interests of ordinary British families. Insecurity among the work force is increasingly recognised as a central economic and social problem. Even the deputy chairman of the Tory party, John Maples, admitted in his secret memorandum that people feel insecure at work. They feel constantly under threat of losing their jobs and believe that the Government are doing nothing to help them, yet the Government have not listened and will not learn.
Despite the somewhat warmer words of the Secretary of State for Employment- -I thought at one point that he was on the brink of a U-turn--we must focus on the Bill's provisions because, of course, the Bill will not help to reduce unemployment or to put people back to work. It will make people who are out of work, and even people who are in work, feel more insecure and more fearful.
Ms Harman: Our particular concern is the deepening of the poverty trap and the cut in the period of non-means-tested unemployment benefit from 12 to six months. I shall not anticipate the contents of our election manifesto in some two and a half years. I can tell the hon. Gentleman that we shall introduce a comprehensive range of measures that will deal with the problem of the poverty trap and will allow people to move from welfare to work and to undo the damage that has been done. The Bill does damage and deepens the poverty trap. If the hon. Gentleman is concerned about the deepening poverty trap, like Labour Members, his response should be to vote with us against the Bill tonight.
Unemployment is not, as the Government so often imply, a problem of a minority of lazy people refusing to work. It is a major problem. The Department of Employment's own figures show that nearly 11 million people-- 40 per cent. of the work force--have been out of work at some point in the past five years. Many of the remaining 60 per cent. who have been continuously in work live in households with people who have been unemployed. The families who have not been affected in some way by unemployment, which has swept through this country, are a rapidly diminishing minority. That is why the Government's attack on the unemployed in the Bill is of concern to people far beyond those currently on the dole.
Column 56For once, the Secretary of State for Employment has restrained himself from delivering his usual tirade about how excellently the economy is doing and how excellent the employment prospects of people are. Perhaps at last he recognises how abysmal the Government's record is.
I remind the House of what the Secretary of State failed to report as the background to the Bill. Britain has lost 40 per cent. of its manufacturing employment over the past 15 years and we are the only one of the top seven industrialised nations that has seen no rise in employment since 1979. The United States has seen a rise of 21 per cent., Japan a rise of 18 per cent. and Germany a rise of 8 per cent. The Government's record on employment creation is 17th out of 21 countries of the Organisation for Economic Co- operation and Development. That is a record of which the Government should be ashamed.
Unemployment is still almost 1 million higher than it has ever been under any post-war Labour Government. Unemployment among the unskilled is still rising while the Government are still cutting training for the unemployed. Long-term unemployment remains at almost 1 million--39 per cent. of all those unemployed. Our record on long-term unemployment is the second worst among the G7 countries. The number of very long-term unemployed--over two years--is still nearly 500,000; that is more than 100,000 higher than it was two years ago.
That is the real background to today's debate, not the fairyland that is so often painted by Ministers. The truth is that the Government have failed on unemployment and, as a result, we have a work force who are fearful and insecure. It is against that background that the Government propose the jobseeker's allowance. The Secretary of State said that the heart of the Bill is the jobseeker's agreement. Of course it is not, and he does not believe that. The central measure in the Bill is to cut the entitlement to unemployment benefit from 12 to six months. That did not warrant much of a mention in the Secretary of State's speech, but it is clear that that measure will have the harshest and most dangerous impact.
Ms Harman: The hon. Lady failed to listen to my previous response. I have said clearly that I will not anticipate measure by measure what will be in our manifesto in two and a half years, and the hon. Lady would not expect me to do so. I hope that she will vote with us tonight, because I can assure her that we will have a comprehensive welfare-to-work programme, and we will vote against the deepening of the poverty trap that will occur as a result of the Bill.
Mr. Iain Duncan Smith (Chingford) rose --
That cut in entitlement will make thousands of people much worse off. [Interruption.] I have answered the question twice. Hon. Members who are interrupting from a sedentary position about our manifesto promises should reflect on whether they have kept any of the promises contained in their manifesto. One thing that will be different in our manifesto is that we will keep our
Column 57promises. Perhaps Conservative Members will pipe down about manifestos for a few moments and reflect on their own betrayal.
Ms Eagle: My hon. Friend has seen the Conservative party's manifesto from the last election. Is there any reference to halving the amount of contributory benefits for the victims of the recession? Is that in the manifesto on which the Conservative party won the election?
Ms Harman: Of course the Government did not put in their manifesto that they would cut unemployment benefit or that they would increase national insurance contributions. In fact, quite the opposite: the Government promised that they would not cut benefits and help for the unemployed and that they would not increase national insurance contributions. The Bill does precisely those two things.
Mr. Portillo: I am a reasonable man. I understand that the Opposition cannot be expected to tell us every jot of what will be in their manifesto. Manifestos are published close to elections. However, the hon. Lady is launching an attack on the Bill. She said that her central onslaught is on the reduction of the contributory principle from 12 to six months. She said that that is at the heart of the Bill. She said that it is iniquitous and that she hates it. Therefore, she must be able to say that she would reverse it, otherwise she does not have a leg to stand on. That is the fact--she does not have a leg to stand on.
Ms Harman: It is interesting that the Secretary of State is spending less and less time trying to justify his proposals, because he obviously does not believe in them, and is spending more and more time asking us what we intend to do when we form a Government. He will find out what we intend to do. He will see our comprehensive welfare-to-work proposal in our manifesto. He will then be watching us from the Opposition Benches as we implement programmes that end the poverty traps that he has created.
Make no mistake, this cut in entitlement will make much worse off the thousands of people facing the very real money worries that come with unemployment. The Government have admitted--and their own figures show-- that at any one time 90,000 people will lose entitlement to benefit altogether because they are not entitled to means-tested jobseeker's allowance. That is not necessarily because those people are well off or can afford the cut in income; they may be disqualified from benefit because they have a partner in work on a low income or because they have savings or redundancy payments just above the £8,000 limit.
Let us look at the example of an unemployed man with a wife who works more than the 24-hour threshold or who has just received a redundancy payment over the £8,000 limit. Under the old system, during the first 12 months of unemployment, based on national insurance contributions, he would have received £2,300. Now, despite the increase in national insurance contributions, that figure will be cut to under £1,200--a cut of £1,100. That is a serious and shameful cut.
The pernicious nature of the Bill is not confined to the proposal to means- test after six months instead of 12.
Column 58those with mortgages who find themselves unemployed do not at present receive any help. That is the system that the hon. Lady wishes to maintain. Why?
Ms Harman: We are saying that the Government are putting up national insurance contributions-- [Interruption.] Conservative Members may laugh, but people think that this is a serious matter. The Government are putting up national insurance contributions, they are cutting unemployment benefit and, at the same time, introducing new measures to cut the help to home owners who become unemployed. We think that that is wrong.
Our objection to the Bill is not confined to the proposal to means-test after six months. Entirely characteristically, the Government have used the Bill to smuggle in a raft of other measures that will hit hardest those who can least afford it. The Bill will cut the level of benefits paid to young people. In addition to cutting the length of time for which young people can claim, the level of contributory benefit that young people receive will be cut by one fifth. For a young unemployed person out of work for 12 months, the benefit will be cut by at least £500 over that year, even where he or she is still entitled to means-tested benefits.
The Bill will cut the benefits of those with partners who are unemployed. The current rules provide for contributory payments for dependants, but the new rules will mean that from day one payments for dependants will be means -tested. For example, under the current system, a man with a non-working wife who has savings or redundancy payments just over the limit receives £3,822 in the first 12 months of unemployment. As a result of the earlier switch to means testing and the new rules on dependants, that will be cut to £1,200--a reduction of over £2,500--despite the fact that national insurance contributions will have gone up.
What it all adds up to is that, at any one time, 250,000 people will have their benefit reduced or cut altogether. That is what the Bill is about. In addition to the cuts in benefit, unemployed home owners will face the extra problem of mounting debt from mortgage interest payments. It is clear to everyone that the Bill will inflict misery on many unemployed people, but what justification has the Employment Secretary offered? He has effectively offered three justifications, all of which turn out to be bogus.
The first justification, which reflects the true nature of the Employment Secretary, is that benefits need to be made less generous to persuade the unemployed to get out and find work. He believes that the unemployed are a feckless group who refuse to look for work. He said:
"Too broad a benefit system can undermine the morale of those who receive help."
The past 15 years are a testament to the failure of that strategy. The Government have consistently cut benefits since 1979, but unemployment is now more than double the 1979 level. If cutting benefits put people back into work, we would have full employment by now. Evidence from abroad also shows that there is no simple equation that proves that cutting benefits means that people find work. It does not work like that.
The vast majority of the unemployed are not out of work because they are work-shy. They are out of work for three reasons: jobs are not available; they cannot earn
Column 59enough to make it worth moving from benefit into employment; or they lack the skills for existing vacancies. That is the true position.
Mr. John Sykes (Scarborough) rose --