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Mr. Dunne: I am most grateful to you, Madam Deputy Speaker, for your guidance. I was merely trying to draw to the House's attention the fact that the number of claimants can be significantly reduced if more and better training support can be given to those who have been on incapacity benefit for a longer period.
Mr. Ruffley: With the leave of the House, I should like to respond to the debate, which has been interesting, important and short. I was particularly interested to hear the remarks made by my hon. Friend the Member for Beverley and Holderness (Mr. Stuart), who reminded us in an interesting and fluent contribution that benefit dependency has been on the increase in the past eight years. People are now on benefits who do not want to be on them; they would rather be in work. He also reminded us that benefit uprating has been conducted more often by Conservatives when in government than by other parties. He stressed that the Conservative party believes in welfare for those who need itthose who, for no fault of their own, need the support of the state and the taxpayer, who is, of course, happy to lend that supportbut we need fresh thinking to ensure that those who can work and want to work are given the opportunity to do so and have the obstacles that are in their way removed.
My hon. Friend also warned about the perils of excessive means-testing, which is on the rise. He also talked about the ongoing tragedy of occupational
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pension schemes going bust and the consequent increase in the number of pensioners who must rely on benefits to live in dignity in their old age. It was an enjoyable contribution, with some important points, which can also be said of the contribution of my hon. Friend the Member for Ludlow (Mr. Dunne), who drew attention in a technically adept set of remarks to the fact that the tax credit disregard, which has been raised from £2,500 to £25,000, appears to be an uncosted commitment and that he has sought in vain, using the method of asking parliamentary questions, to find out the cost to the Exchequer of that policy change. I really do hope that the Minister can tell us and not shuffle us off to other Ministers at the next Treasury questions.
My hon. Friend also talked about savings, which are, of course, very pertinent to a debate on benefits uprating. If the savings culture is as damaged as he saidI think that he is rightmore and more pensioners must rely on the very benefits that are uprated by the order. He spoke about the need for the Government to find more intelligent savings policies. Those points were well made. He also touched tantalisingly on pathways to work and how benefits recipients might escape from benefits into work. He certainly touched on incapacity benefit reform in an instructive way. He talked about the experience of Holland and the lessons that DWP Ministers might learnthe Opposition are certainly learning themabout active intervention in the labour market to get those who are desperately keen to get off benefit back into work. Although we share the same objective as Ministers, today's debate has shown that the Opposition have radically different solutions and means to achieve that common objective.
The Parliamentary Under-Secretary of State for Work and Pensions (Mr. James Plaskitt): We have had a short but, nevertheless, lively debate. I have been struck by the fact that the hon. Members who have spoken have found it quite a strain to confine themselves to the orders under consideration. I take it from that that, in fact, they have very little to criticise in the upratings that we are making.
Before I address any of the specific points made during the debateI promise to do soI want to remind hon. Members that this year's uprating order continues the Government's commitment to provide help for those who most need it. After all, it adds more than £3.44 billion of extra spending, £2.58 billion of which goes to pensioners and £360 million is above inflation. Some £40 million goes to children; £400 million to disabled people and their carers; and £420 million to people of working age. Most benefits have increased in line with the retail prices index, at 2.7 per cent., while pension credit guarantee has increased in line with earnings, at 4.2 per cent. Those uprating increases contribute to our programme of radical reform which balances rights with responsibilities and offers everyone the chance to build a decent income for their retirement.
I turn now to the contributions to the debate. Many of us enjoyed the footwork of the hon. Member for Bury St. Edmunds (Mr. Ruffley) as he tried, in the same sentences, to change, but not change, Conservative policy on the new deal. We heard him describe the
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Conservatives' approach to the new deal as revamping it, recasting it or improving it. When they have finally sorted that out, we will be interested to hear what emerges.
The hon. Gentleman also dwelt at some length on the labour market. It is worth just pointing out what the latest statistics show us. Employment has risen by 183,000 over the last year. The claimant count for January, the latest month for which figures are available, went down by 2,000, a welcome drop after several months in which it increased. We have seen a fall of 58,000 in the number claiming incapacity benefit since August 2005, and a fall of 29,000 in the number claiming lone parent benefit. When one excludes students from the figuresit is important to do that because the number of students going into higher and further education is increasingone sees that the inactivity numbers have gone down by 61,000 over the last year.
The hon. Gentleman also dwelt at some length on means-testing, seeking to criticise us for that being part of the system, while himself declaring that a welfare state requires an element of means-testing. He referred to the projection in Lord Turner's report that if nothing changed in the current configuration of pensions provision, we could find ourselves with 70-odd per cent. of pensioners encountering means-testing. Lord Turner does say that, but in fairness, the House should acknowledge what he also said about the effectiveness of the means-testing in the system in reducing pensioner poverty. There is an issue about the role and degree of means-testing in the system for the long term, and of course we are reflecting on Lord Turner's point, as are many others, and we will have things to say about that when we come back to the House in the spring with our response to his report.
Mr. Graham Stuart: I wonder how the hon. Gentleman reconciles the remarks that he has just made about means-testing with the Chancellor's remark, made when the Labour party was in opposition, that he wanted a significant diminution in the use of means-testing in the British welfare system. Is that an aspiration that has entirely left the Labour party and its Members of Parliament?
The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) also dwelt at length on Lord Turner's report. He reminded us of the one Liberal Democrat pensions proposal that has so far emergedthe citizen's pension, which is specifically rejected in the report. We will see whether the Liberal Democrats make further proposals in due course.
The hon. Gentleman also dwelt on the issue of fraud and error in the benefits system, describing the recent report by the National Audit Office as critical of my Department in that respect. I urge him to go back and read the report again; it is actually very balanced and fair. Although it certainly takes us to task and says that
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there is still more that my Department needs to do in respect of fraud and error, it also acknowledges the considerable progress that we have made in tackling them over the last seven or eight years.
The hon. Gentleman asked me to distinguish between performance on fraud and that on error, and I am happy to do so. Our performance on fraud is very encouraging. Losses to fraud are now below £1 billion, and we think that the figure now stands at less than 1 per cent. of the total spend. That is a creditable performance. On the main benefits that tend to be prone to fraudhousing benefit, income support and jobseeker's allowancelosses to fraud are down by a half since 1997. Of course there is still more to do. We recently published the fraud strategy document, which I am sure that the hon. Gentleman has studied, in which we outline additional measures that we are now taking and additional powers that we have to make even more progress in reducing fraud in the benefits system.
On error, yes, the figures are flat-lining; there has not been as much progress in reducing losses to error in the system as we would have hoped. We believe that the total of such losses is about £1.7 billion. If the hon. Gentleman has a little patience, I hope to be able to say more about what we can do to make further progress on reducing such losses.
The hon. Gentleman moved on to be critical of our proposed reform of housing benefit. I think that I heard him describing the local housing allowance as "not radical". Again, I urge him to have a further read of the chapter in the welfare Green Paper. He will find that once the local housing allowance is rolled out nationally in the private rented sector, it will definitely help us to make progress in increasing financial inclusion, something that I should have hoped he would welcome. It will certainly help us make progress in simplifying aspects of the benefits system; I had hoped that he would have welcomed that. It will certainly help us to make progress in increasing return-to-work incentives; and I would have thought that he would have welcomed that. The hon. Gentleman went on to refer to the single room rate. He should know, and I would have thought welcomed the fact, that under the LHA scheme, support for young people is more generous than under the existing scheme. I am sorry that he did not welcome those developments.
The hon. Member for Beverley and Holderness (Mr. Stuart) treated us to an amusing trip down a selective memory lane on the performance of the economy under the previous Government, and sought to rubbish the record under the present Administration, therefore overlooking the fact that ever since this Government came to office in 1997, there has been continuous growth in the economy, for a longer period than was ever sustained under the Conservatives. We have falling unemploymentit is now at a very low level. We have had steady and low inflation, which was not delivered by the previous Conservative Government. We have low levels of public debt. We have low levels of interest rates.
The hon. Gentleman regaled us with the alleged failings of this Administration in respect of incapacity benefit, neatly overlooking the fact that when the Conservative Government came to office 700,000 people were claiming incapacity benefit, and by the time they
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left office, the figure was 2.7 million. It was convenient for him to overlook that. He should note that last year we saw a welcome fall in the number of people claiming incapacity benefitdown by 58,000and once we bring forward measures that are outlined in the welfare Green Paper, we hope to make considerably more progress by reducing that number even further.
The hon. Member for Ludlow (Mr. Dunne) sought also to criticise the Government on what has happened to savings. Indeed, one or two other Members made the same point. The savings ratio is quite a volatile indicator and there have certainly been periods under this Government to date when it has been quite low, but I urge the hon. Gentleman to look at the figures under the previous Administration. He will find that at times the savings ratio fell to levels lower than at any time under this Administration. He should know that the savings ratio tends to be very much geared to the housing market, and during periods of high inflation in house prices we see the ratio plummet. When the housing market stabilises, we see the savings ratio recover. Interestingly, that is exactly what it is doing again, as the latest figures confirm.
The hon. Gentleman also made some sensible observations, which I welcome, in respect of the Turner report. He urged us to think carefully about the advice that is given to people and about confidence in the system, and he made constructive and sensible comments. I appreciate the work that he does on the Work and Pensions Committee, as I do his comments about the Dutch experience and the importance of undertaking reforms that focus on people's capacity to work and not on their incapacity to do so. I would claim that that is very much the direction of travel of the Government's reforms.
Since 1997, the Government have worked to build a modern, active welfare state. There are now 2.3 million more people in work and 1 million fewer people on benefits. We have lifted 2 million children and almost 2 million pensioners out of absolute poverty. We have already taken action to replace the "one size fits all" model of benefit dependency with an active service, where tailored support to help people back into work is matched by their obligation to do everything possible to help themselves.
It is because of the economic decisions that we have made and the reforms that we have delivered that we are making good progress in tackling the challenges apparent in the labour market, but we need to do more. As my hon. Friend the Minister for Pensions Reform said in opening the debate, we need to provide a welfare state that enables people to move on and to escape poverty, rather than institutionalising dependency. That is why we have set ourselves the ambitious target of an 80 per cent. employment rate.
Our approach is based on a belief in an active welfare state that balances rights and responsibilities, and provides work for people who can work and support for those who cannot. That strategy is set out in the Green Paper and is threefold: we will endeavour to reduce the numbers of new claimants; we will provide greater help for those on benefits to return to work; and, for the most severely sick and disabled, we will provide greater levels of support. The publication of the Green Paper marks the start of a three-month consultation process. We will listen very carefully to everyone who responds and
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especially to those who share our commitment to improving the employment prospects of people currently living on benefits.
The Government are committed to supporting parents not only in achieving their ambitions in the workplace but in carrying out their parenting responsibilities. This year's uprating order directly benefits the poorest families and helps to eradicate child poverty. By increasing the child allowance for families on income-related benefits, our uprating measures maintain our commitment to, and progress towards, a fair, inclusive society with opportunity and autonomy for all.
This year's uprating order takes us another step away from the shameful legacy of pensioner poverty that we inherited. Many pensioners were expected to live on as little as £69 a week. My hon. Friend the Minister for Pensions Reform set out at the opening of the debate the pensions policies that we have introduced. Through measures such as pension credit, the state second pension and stakeholder pensions, we have provided a solid basis for a long-term pensions settlement and lifted nearly 2 million pensioners out of absolute poverty. An extra £10 billion will be spent on pensioners in 200607. Almost half of that extra money will go to the poorest third of pensioners.
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