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13 Mar 2008 : Column 455

On the Freud report, which has been mentioned, I am a strong supporter of much greater use of the private and voluntary sectors to get people into work. As the Secretary of State knows, our policy proposals go somewhat further than the Freud report. They enable help to be made available more quickly and stop artificial barriers being set up for claimants who might go to a Jobcentre Plus, for example. We also need to examine the barriers that exist between benefits. For people on one benefit, one form of support is available, but the support that they might need is available only to people on a different benefit. That relates particularly to people with mental health problems, who might want to get condition management support, for example, but can get it only if they are on incapacity benefit, and not if they are on jobseeker’s allowance.

My main criticism of the way in which the Government are seeking to implement the Freud report is the emphasis on big regional monopolies. I am not convinced that a switch from a regional state monopoly to a regional monopoly of a large, possibly foreign-based, multinational provider is necessarily the right way to go. I would like a system based on the model used in Australia, where there is more choice among different providers and where small local providers, as well as big multinationals, are able to take on contracts.

Mr. Heald: Does the hon. Gentleman accept that it is necessary to have a certain level of case load to support the administrative costs? There is no reason why one of the larger providers could not subcontract work to a smaller provider as part of the scheme. Does he not think, on reflection, that his concerns may not be as strong as he thought?

Danny Alexander: Despite that intervention, my concerns are still strongly held. I look at examples such as the Shirlie Project in my constituency, which does a fantastic job in the city of Inverness but nowhere else. It is not in a position to win such a contract.

The exchange that took place on DEL and AME—I am not sure which of the Chancellor and the Secretary of State for Work and Pensions is DEL and which is AME—was an interesting one, but it is clear to me that the Treasury has still not fully bought into the idea that savings on annually managed expenditure—benefit reductions—should be spent on welfare to work. The Secretary of State, in arguing that case internally, as I am sure he is, will certainly have my strong support, for what it is worth, in beating the Chancellor over the head until he agrees to what would be a genuinely innovative funding mechanism.

Two things on the welfare-to-work front could have been considered in the Budget, but were not. The first is the inordinate complexity of our benefits system, which is still a huge barrier to getting people into work. The second is the competence with which the benefit system is administered. The delays that people face, the wrong decisions and the increasing amount of money lost through error—not fraud—in benefit claims point to a system creaking under the strain and to a Government who need to get those basic points right.

To conclude, the many hard-pressed families throughout the country will not feel that this Budget has taken on their concerns. It was a Budget in which the child poverty and fuel poverty targets were
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effectively abandoned. It is a Budget of additional compulsion for claimants but little additional support. It is a Budget in which hard-pressed families are the big losers, with higher rates of tax and higher fuel, energy and food bills, and in which precious little is handed back. It is a Budget that will not make Britain fairer.

1.52 pm

Mr. Terry Rooney (Bradford, North) (Lab): I congratulate the Chancellor on what he did yesterday, particularly on child poverty. I am sure that when he woke up last Monday and got a copy of the report on child poverty by the Select Committee on Work and Pensions, he completely rewrote his Budget strategy, and we are grateful for that. What really pleased me was the categorical restatement of the policy on the elimination of child poverty by 2020, and of a move towards the 2010 target, compared with something that was an ambition, was downgraded to an aspiration, and now appears to be a maybe.

I particularly liked the disregard on child benefit that will apply to housing benefit from 2010, because that is definitely an in-work benefit that will benefit larger families in particular. Larger families are one of the key groups at risk of being in poverty. Despite what the Member for Inverness and Renfrew said. Is that it? Something like that, anyway. [ Interruption. ] Paisley and Renfrew, South—I have found it. knew that I had written it down somewhere. Despite the hon. Gentleman’s rather cheap comment, it remains the fact that work is the best route out of poverty. If someone leaves school at 18 and starts work, they will not be earning what they will earn two, three or four years later. The key challenge is to get people who have often been out of the labour market for years into work, and then develop that work so that they improve their earning capacity.

When we look at the myriad training schemes that the Government are supporting through the education and skills agenda, and the billions that have been put in, we find that people who get into work can advance and develop a career. It is right that more needs to be done on the minimum wage and the quality and sustainability of work, but it is important to get people into work. It is always easy for someone to get another job, if they already have one. It is a major challenge to get people who have been out of the labour market for five, seven, 10 or 15 years into their first job. We need to build and support that process, and if we look at the outcomes of the employment retention trials, with the support that has been put in, we find that if the package is right, people stay in work, but then look to advance.

Another key issue when moving into work, particularly for lone parents, is child care. When most lone parents first go back to work, they are looking for 20 to 25 hours a week, because they want to be around when their children go to school and come home. It is true that child care throughout the country is accessible, but there is the key issue of affordability, and the child care tax credit goes nowhere near meeting the cost of child care for disabled children. There are factors that extended schools do not cover, and that affects a lot of people, particularly lone parents, who want to work evenings and weekends. There are gaps, but nationally 22 per cent. of child care places are vacant, which raises a question. A lot of money is funding dead places, and we need to work out why that is happening.

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I have been championing for years the idea that work is the best route out of poverty, and I am glad that the Front-Bench team and the Opposition parties have caught up with me. I made a speech on that in 1994; I wait and I wait, but eventually everyone gets there—I think that there is a saying about a prophet in his own country. It is also a question of the quality and sustainability of employment, and the pay associated with it. I welcome, as I hope everyone in the House did, the increase announced last week in the minimum wage. Frankly, however, even £5.73 an hour is a pretty poor level of pay. The Mayor’s living wage in London is £7-odd an hour, but even that is hardly a living wage. The more skills and work experience people have, the more they will drive up their earnings level. It is a chicken-and-egg situation.

People who are living in poverty, particularly children, suffer in terms of health and education. They get lower qualifications, which reduces their life chances at work and means that they will be in poverty when they retire. That is a complete life cycle. It is a matter of not only child poverty, but the next 60, 70 or 80 years of that individual’s life. That is why the issue is so important, and I am deeply sorry that the official Opposition still cannot commit to saying, “We accept that this has to be done.” We have had the usual banter between those on the Front Benches, but when the best we can get is a “Maybe”, to me that says, “It is not a concern for us.” For a party that froze child benefit for three years running—in 1988, 1989 and 1990—there is a lot of history, and perhaps some apologies are in order.

I welcome the publication of the document “Ending child poverty: everybody’s business”. The 2010 target concerns fiscal measures, but the 2020 one concerns longer-term strategies. That document says that Government do not have all the answers, which is true. All sorts of agencies need to contribute, because there is a 12-year strategy to meet the 2020 target. It is a radical change for a Government to say, “Tell us what we need to do,” instead of making an imposition. Everyone should welcome that.

I am sorry if I am boring people by restating the issues, but one of the key issues for anyone moving from benefit to work is the point of change. What happens then? Typically, the challenge for lone parents involves moving from a low income that is secure. They know that that income will arrive every week, and they know that housing benefit will pay their rent so that their children have a roof over their heads. They then move into the uncertain world of work, which is a real challenge, especially if people have two or three children, because they think about the children first, not themselves.

We need to firm up the package on offer at the point of change. In some circumstances, for example, housing benefit runs on for four weeks. I personally believe that it should continue for three months. One problem is that far too many authorities are too slow in assessing a new claim when somebody’s circumstances change. When someone moves from income support to work, the 100 per cent. claim stops and a new claim has to be made. If we had a three-month run-on, when the claimant was still paid 100 per cent., it would provide
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security for the claimant and give the authority time—under threat of some sort of penalty—to make the fresh calculations.

I may part company with my right hon. Friend the Secretary of State on the next point. We need to do better on the “better-off” calculation. It is currently poor and inaccurate, there are wide discrepancies between different offices and, indeed, it is not a better-off calculation. That was confirmed to me in a written answer, which said that any additional expenses arising out of starting work are not taken into account in the calculation. I am sorry to use strong language, but that constitutes deception. Most notably, the calculation does not include the cost of school meals, which were previously free. That can wipe out the £25 a week better-off promise. We need to improve the calculation and ensure that it includes all expenses, as well as income. Only income is currently included, whereas additional expenditure is not.

I have already considered the problems with child care. I am pleased about what the Budget documents state, but, as the Secretary of State knows, a major problem remains for families with disabled children or a disabled parent or—worse—a disabled parent and a disabled child. I appreciate the Government’s commitment on the matter, but we need much more action on opportunities for those people.

The Secretary of State knows that I disagree with the change to the jobseeker’s allowance regime when somebody’s child reaches the age of 12. I am grateful for his engagement with that discussion, the opportunities that it allowed us and the further discussions that will doubtless take place. However, I want to ask about one matter. Last year, there were 60,000 sanctions for non-attendance at second or subsequent work-focused interviews. I went on about that for ages, and eventually the Department commissioned research because nobody seemed to know what was happening. I understand that the research has been done. Will my right hon. Friend let us know when it will be published? There is obviously something wrong with the system, if there are 60,000 sanctions.

Barriers to work are a key element for most groups of claimants. There are so many barriers that I do not want to go through them all today. I am grateful to the hon. Member for Paisley and Renfrewshire, South—

Danny Alexander: The right hon. Member for Paisley and Renfrewshire, South (Mr. Alexander) is the Secretary of State for International Development, and I am sure that the hon. Gentleman does not want to confuse him with me. My constituency is Inverness, Nairn, Badenoch and Strathspey.

Mr. Rooney: The book over here is wrong.

The hon. Gentleman who speaks for the Liberal Democrats received a written answer yesterday in which the Government helpfully listed several barriers to work:

That is a statement of the so-and-so obvious. However, many groups of claimants experience serious barriers to work. When the Committee prepared a report on
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incapacity benefit a couple of years ago, it was striking to find that it was seldom the actual disability that stopped people moving into work; other factors in their lives, homes or family responsibilities did that. The move to making all claimants undertake the new work capability assessment test is right, but the decision on the test should be accompanied by the right support mechanisms.

Major mental health issues remain. Last year, the Chartered Institute of Personnel and Development conducted a survey of thousands of companies, 70 per cent. of which stated that they would not shortlist somebody with a history of mental illness. If that survey had showed that 70 per cent. of companies would not shortlist a woman, a black person or a Muslim, there would have been hell to pay, but because the statistic referred to mental illness, it disappeared into the ether. There was no press coverage and no discussion. While such discrimination remains in the workplace, we face a major challenge.

The number of new claims has fallen from 900,000 a year to 600,000 a year. The number of people coming on to incapacity benefit is falling dramatically. Doubtless, that has much to do with the economy. However, when people go sick or get injured, too many employers simply leave them on statutory sick pay for 28 weeks, have no contact with them and do nothing to support them. Those people then go on to incapacity benefit, and are lost to the work force. We should learn from places such as Holland, where everything is done to keep people in employment—even if is for only two hours a week—to keep them engaged with work and build them back up.

General practitioners, our old friends—I do not want to upset the British Medical Association any more—[Hon. Members: “Go on.”] I will then. Sadly, too many GPs do not realise that work can be good for people, even if people have a health condition, which applies especially to those suffering from depression. Depression can only be made worse by sitting at home all day on your own in a darkened room watching daytime television. That is enough to put someone in an asylum. We need to improve the interface between the health service and the benefits system. I am sure that Dame Carol Black’s report on Monday on health and well-being in the workplace will be stunning, and I hope that her suggestions are rapidly developed into policies. Too many people are being let down unnecessarily. Some people do not need to appear on the incapacity benefit rolls. We need a much better system to keep people in work.

I welcome the announcement—I am not sure whether many people noticed it—of the root-and-branch review of housing benefit. Its current operation is often a barrier to work, but a benefit should never be a barrier to work. I look forward to the review and to engaging with and contributing to it.

Again, I congratulate the Government on maintaining progress towards our 2010 target. It is telling that the End Child Poverty Campaign and One Parent Families congratulated the Government on what was done yesterday. Let us keep up the good work.

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2.8 pm

Mr. Michael Fallon (Sevenoaks) (Con): What a disappointing Budget. I thought that the new Chancellor would emerge from the shadows as his own man through the Budget, but we ended up with a Chancellor who dithered over Northern Rock and capital gains tax and cannot even decide whether the plastic bags levy should be voluntary or compulsory.

Let me begin with the public finances and our problems. Five years ago, in the Budget of March 2003, we were promised that we would be in surplus by March 2006. Each subsequent Budget and pre-Budget report postponed that. Yesterday, we were told that we would not be in surplus until 2010-11, exactly five years later than originally planned.

Let me put it another way. In the financial year that we are completing, we were supposed to have a surplus of £9 billion. Instead, we have a deficit of £7.9 billion. That is a turnaround of £17 billion—half the defence budget—because the Government failed to keep to their original plans.

Alternatively, let us look at net borrowing. Five years ago, we were told that net borrowing in the year that we are about to start would be £24 billion; yesterday, it was admitted that it would be £43 billion, almost twice as much. Worse still, for the first time that I can see in 11 consecutive Budgets and pre-Budget reports, the borrowing figures will be higher in the next two years than they were in the last two. The figures will increase to £43 billion and £38 billion, both of which are higher than the figure for borrowing in the year just ended. Not until 2012-13 will we get back to the borrowing level of £23 billion that we last saw as an outturn in 2002-03—a decade of binge borrowing.

Finally, there is overall public sector net debt. That will rise, according to the Red Book figures, to £731 billion in 2012-13, which is almost double what it was 10 years earlier. This comes at a time when we are already paying almost as much in debt interest, at £31 billion, as we are on the entire defence budget, at £33 billion, as we can see in chart 1.1 of the Red Book. Indeed, debt interest is now our fourth biggest spending programme. We on the Conservative Benches do not need to take any more lessons about unfunded tax promises, because that scale of collapse in the public finances is simply unfunded Government spending.

To put it another way, the Treasury got the growth that it expected from the economy last year, so why does public sector borrowing need to jump from £36 billion to £43 billion? Why do we need to force the motorist, the drinker and the small business to pay more taxes? Growth was around 3 per cent., as forecast and above its historic trend, but we are spending 45 per cent. of our national income while tax receipts account for only 41 per cent. Why? Because the then Chancellor failed to prepare during the stronger years. The Government failed to control spending or pay down debt. That is not just sloppy forecasting; rather it shows clearly and conclusively that the Government, and especially the former Chancellor, cannot plan their public finances properly. Therefore, we cannot trust the current Chancellor when he tells us that everything else will be okay. That is the failure in our public finances.

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Secondly, I want to address the question of who really pays for that failure. It is not the public sector, which now faces relatively smaller increases in its growth. There will of course be fewer additional police community support officers and fewer additional NHS physiotherapists. However, we know that public sector pensions are still protected and that some pay restraint in the public sector is already being breached by the more and more widespread use of bonuses. For instance, one third of HM Revenue and Customs staff received bonuses last year.

It is not the public sector that will pay. The real losers from the collapse in our public finances are the people at the bottom. The first group are the lowest- paid of all. An unmarried person without children who earns only £11,500 year, on the minimum wage or just above it, pays tax and national insurance at 16 per cent. of their earnings. Someone in Ireland in exactly the same position would have to earn almost twice that amount—more than £22,000 a year—before they paid tax at 15 per cent. Why should single people starting their working lives be hit the hardest? Why should they be discriminated against by the myriad rules against part-time working, which make it less worth while to work between four and 16 hours a week, for example, because of the interaction of income support, working tax credit and child tax credit? The tax credit system is fine in itself, as we on the Conservative Benches have accepted. However, because it goes so far up the income scale, it simply does not give enough help to those who need it at the very bottom.

The second category having to pay for all the mistakes is our pensioners, particularly those on fixed incomes and those facing year-on-year real increases in council tax of around 4 or 5 per cent. Let me give an example from Sevenoaks district council, which is one of the southern district councils that has been worst treated by this Government. My constituent, Ms Earnshaw-Whittles, keeps a careful record, going all the way back, of the exact amount that she pays. In 1998-99, the first year for which the Government made the allocation, she paid £90 a month in a band G house. Had that amount been increased with inflation, she would now be paying £115.63. In fact, she has to pay £171, which is 48 per cent. higher. We are talking about people on fixed incomes paying half as much again in council tax they would as if the figures had been indexed. They are the people paying for the Government’s mistakes.

We know, too, that every council has had to plug the gap in its pension funds caused by the then Chancellor’s disastrous raid on pensions in 1997. Every local authority has had to cope with all the extra legislation passed through the House and the multitude of directives issued by Whitehall, but on a reduced grant.

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