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The Secretary of State for Social Security (Mr. Alistair Darling): I apologise for interrupting the hon. Gentleman's flow, but will he answer the following question: I know that he is against and would scrap the working families tax credit; does it follow that he would oppose the disabled persons tax credit?
Mr. Duncan Smith: No, not necessarily--it depends to a great extent on what the proposals are. If the disabled persons tax credit works out to be pretty much the same as the working families tax credit, we shall oppose it. We shall decide what to do when the right hon. Gentleman produces the details, as his hon. Friends have asked him to do. My simple point is that the proposals for the working families tax credit will result in effects that are exactly the opposite of what the right hon. Gentleman thinks will be achieved. It is clear that the WFTC will strike at the heart of families and supporting families, and create problems for them; it certainly will not improve their situation.
I said that nothing in the WFTC will help the single-earner household. We have seen from the figures--I shall cite them in a moment--that the WFTC will create greater problems. The Chairman of the Social Security Select Committee, the hon. Member for Roxburgh and Berwickshire, referred to the likelihood of increased fraud, partly because employers will know which employees are receiving the credit, as will their colleagues. That will lead to stigma and increased costs. Most businesses do not want that to happen.
The Secretary of State will have to address a whole range of issues. The WFTC is not likely to work. We believe that it will fail, add cost, create no new jobs and, ultimately, raise social security spending--which is not one of the Prime Minister's declared aims. Behind the failing programme of spend to save--to which the Secretary of State is now pledged--screened by the rhetoric and the rising costs, lies a much clearer agenda. I disagree slightly with the Chairman of the Committee on this point. This is the dog that does not bark--but different from Labour Back Benchers, who spend most of
their time not barking about anything. It is the debate about means testing that the Government simply refuse to have.
The Committee Chairman was quite clear: he is concerned about the way the matter is drifting. I do not think that it is drifting: I believe that the Government's agenda is to move to a means-tested system, in which the contributory principle is thrown away and people become wholly dependent on the state to meet their needs. That is not a constructive agenda for the future. It does not deal with the real issues of dependency or family breakdown, which it will accelerate.
Let us examine the way in which the Government propose to deal with the state pension. The extension of pensioners' minimum incomes is nothing more than a con trick. I have talked to many pensioners--including those from the pensioners parliament--and many of them say that they have spotted the trick, and they do not like it. The Government have just repackaged existing benefit, and have not dealt with the real issue of improving pensioner incomes. They have reinforced the natural disincentive to save that is present in the means-tested system for existing pensioners or those approaching pension age.
The Government say endlessly that, if people are going to save big, that is fine. However, if they are not going to save big, they should not bother to save at all. For example, the Government's proposal makes a saving of £9,000 an irrelevance--a person might as well not have bothered to save at all. People would be better off redeclaring and redefining their lives on to income support. They should not put money away for a rainy day, because they will suffer if they do. However, the person who does not save will benefit.
The Government clearly intend to means-test the state pension. Let us clear up that matter once and for all. The Conservative party has said that we will not means-test the state pension after the next election. Will the Secretary of State match that commitment, so that we may have a proper debate? I give him the opportunity to intervene now. He does not wish to do so, so he has finally admitted that the Government wish to retain the option of means testing the state pension.
The Secretary of State must admit that his inaction makes our case. If he did not believe in it, he would rule it out now. However, nothing would surprise me from a Government who spent their first few weeks in office discovering ways of taxing pensioners an extra £5 billion a year. Damaging pensioners' savings is no way of resolving these matters.
The hon. Member for Newbury also referred to means testing, and to the severe disablement allowance. I hope that the Secretary of State will say once and for all what will happen to severely injured people over the age of 20 who have not had the chance to build up their contributions, and who will now not be eligible for severe disablement allowance or incapacity benefit. They will experience a real-terms cut in their income. The hon. Member for Newbury raised a reasonable point, and I hope that the Secretary of State will respond to that tonight, or write to us.
The Government have a means-testing agenda. They view the system as a balloon, and believe that they can get rid of much of the cost by pressing down on it to make it thinner. They fail to realise that their action makes the
balloon expand at either side, as people find their way into other parts of the system. That distorts spending. Increasing means testing may reduce costs in the short term, but in the medium and long term, costs will balloon, and there will be changes in people's behaviour.
Those changes will create confusion and chaos. For example, the working families tax credit will attack single-earner couples. I said that the difference between single-earner couples and lone parents will be made more stark by the working families tax credit. If a single-earner couple and a lone parent each earn £15,000 a year, the couple will receive next to nothing from the WFTC, and the single parent will receive about £70 a week more. That creates a position of divide and rule, it causes chaos for those who want to provide for themselves and to save, and it creates disincentives for those who are able to do so.
As many Labour Back Benchers are now beginning to discover, the Secretary of State's changes to widow's benefit mean that many widows will lose their entitlement. Readjusting the benefit was a way for the Government to save money. I am surprised that Labour Members did not realise that when the Secretary of State made his speech on the subject, but he dressed up the measure more cleverly than his predecessor might have done. Its effect has now been spotted--it is another extension of means testing.
I said a year ago, before the Secretary of State was in his post, that every Member of the House would want to support welfare reform, as long as the Government abided by four principles. First, reform must strengthen the institution of the family, rather than breaking or undermining it, which the Government are doing. Secondly, any change must strengthen personal responsibility, and break the dependency culture. The working families tax credit certainly does not do that; it will add 500,000 to the benefit regime. Thirdly, reform must strengthen alternative provision of welfare and break the state monopoly of provision. The Government have made no far-reaching proposals on that. Pensions come into that category. Fourthly, reform must protect those in genuine need.
The Queen's Speech contained many proposals, all of which we were already aware of and which are mechanistic. There was nothing new or unexpected, and nothing to tackle the big issues. For example, what will happen to housing benefit when the working families tax credit is implemented? No change is proposed. I remind Labour Members that, back in March, the previous Secretary of State for Social Security, the right hon. Member for Camberwell and Peckham (Ms Harman), said:
There have been no proposals--only leaks--on child benefit. Most importantly, we have heard nothing on pensions. The Government have spent 18 months fiddling around on pensions, and still have no proposals for reform.
The Queen's Speech, no matter what the spin or what friendly journalists write, reveals that, 18 months after the election, the Government have balked at their own targets
for welfare reform. Even the Prime Minister recognises that. He has changed his language to match the changes that he would like to make to Labour's pledges. In 1997, he said that Labour's aim was to
The Government's heavy reliance, rhetorically and politically, on welfare to work merely masks the failure of their big picture. It is not as if there is no vision; it is simply that, after 18 months, we can see what that vision is. The Government's big idea is means testing and more means testing. It is not radical--[Interruption.] The Secretary of State for Social Security smiles in agreement. It is good to have that confirmation. All he will do is chase the error.
"we are reviewing the interaction of housing policy and housing benefit and we will bring forward proposals . . . shortly."--[Official Report, 19 March 1998; Vol. 308, c. 1436.]
We have heard nothing. There has been no Green Paper, and no proposals on housing benefit. That creates a huge problem.
"start reducing the very high welfare and benefits bills we pay in this country so that we can get the resources into education and health that we need".
That is not happening, so, at the Mansion House earlier this month, the Prime Minister said:
"People often say the aim should be to cut welfare bills. But they forget: some welfare spending . . . is good and necessary".
I remind the Government that it was the Prime Minister who said that Labour would cut welfare bills. He set the target, and the Government now want to change the rhetoric. As my right hon. Friend the Leader of the Opposition said on Tuesday, it seems that they are a Government who govern to win elections, but do not win elections to govern. Nowhere is that more true than in this regard. Redefining their pledges and rewriting history will not work. The Prime Minister will and must be judged on the pledges he gave.
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