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I note that the right hon. Gentleman said rather wryly that he was pleased to read the Prime Minister’s article in the Financial Times and that a smile came across his face when the Prime Minister advocated welfare reform. I also note his comment—I think that I have got this correct—that, in the past few weeks, the Prime Minister has come to recognise the value of public sector reform. I almost felt his pain when he
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referred to the past few weeks. I fear that he regrets that that did not happen somewhat earlier.

My right hon. Friend the Member for North-West Hampshire (Sir George Young), who is in his place, had it absolutely right: the Chancellor’s speech yesterday would have been more illuminating and entertaining if there had been more statistics. It is not often that that can be said. My right hon. Friend spoke interestingly on housing in the context of welfare.

The hon. Member for Regent's Park and Kensington, North (Ms Buck), who is not currently in her place, criticised choice and contestability in public service reform, which might indicate why the right hon. Member for North Tyneside still has some way to go in persuading the Labour party of the advantages of that approach.

I fear that my hon. Friend the Member for Tiverton and Honiton (Angela Browning) may have been in danger of misleading the House when she said that she was entitled to the state pension and the winter fuel allowance. I for one find that very difficult to believe, and I think that I have the support of Members from all parts of the House in saying that. She spoke about a measure in the 2007 Budget that gives rise to problems—pensioners aged between 60 and 64 will lose out as a consequence—which will come into effect as a consequence of the Budget resolutions that we are debating. She is absolutely right to highlight the issue; let us not forget that although there were very few large, substantive measures in yesterday’s Budget, the Budget resolutions that we are discussing will implement the doubling of the 10p rate, and a group of people will lose out as a consequence.

My hon. Friend also spoke about the income-shifting measure, and rightly highlighted that it has been deferred for a year. It was not mentioned in the Chancellor’s speech yesterday, which is a great pity, but the fact remains that it has been deferred, and not yet abandoned as she and I would like it to be. It is interesting that in the Red Book—the financial projections for revenues and costs—the Government still anticipate that the measure will come into effect next year, and will raise the same amount of revenue as they anticipated it would this year. It will be interesting to hear what the Government’s and the Financial Secretary’s thinking is on the issue, and whether they think that it is realistic to suppose that they can obtain that sort of revenue, given that they will, I hope, make substantial changes to their proposals.

My hon. Friend raised the interesting point—for the benefit, I think, of both the Conservative and Government Front Benchers—of the taxpayers charter. I, too, have the Chartered Institute of Taxation paper on the subject, and I will certainly discuss the issue with my hon. Friend the shadow Chancellor. If he makes an announcement on it, I suspect that the Government will do so shortly afterwards. We shall see. The hon. Member for Northampton, North (Ms Keeble) discussed a wide range of issues arising from her experiences as a member of the Select Committee on the Treasury. I enjoyed serving on that Committee with her.

I was delighted to hear the contributions of two Hertfordshire colleagues. My hon. Friend the Member for North-East Hertfordshire (Mr. Heald) mentioned the importance of addressing inflation, and highlighted the concern that inflation is creeping back into the
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system, causing great difficulties for a number of people. He rightly says that the issue must be a priority. He also raised the issue of child poverty and our earlier discussion with the Secretary of State for Work and Pensions. I shall come back to that in greater detail later. My hon. Friend the Member for Broxbourne (Mr. Walker) delivered a speech that will certainly bear further reading. I am delighted that he loves capitalism, and I am sorry that he cannot afford to live in Holland Park. I am sure that he would rather live in Broxbourne, the constituency that he represents so well.

Yesterday was the Chancellor’s first Budget. It is worth considering the last time that someone delivered their first Budget. I refer, of course, to the Prime Minister, who delivered his first Budget in 1997. Welfare reform was at the heart of that Budget speech. He stated:

That sounds rather similar to comments made by the right hon. Member for North Tyneside today.

The then Chancellor went on in his speech to highlight three types of people for whom welfare reform was needed. The first type was young people. He said that it was no longer an option for young people to stay at home on full benefits, but the fact is that 11 years later, as we debate the current Budget, there are still more than 1.2 million young people aged between 16 and 24 who are not in work or full-time education. That is 15 per cent. more than in 1997. The second group that he highlighted were lone parents. We continue to have the lowest lone parent employment rate of any major European country. Any improvements in the rate of employment—there have been improvements, which is not surprising in a period when employment has gone up generally—have slowed down and are much slower now than they were in the late 1990s.

The third group that the then Chancellor highlighted were incapacity benefit claimants. There are 2.6 million people claiming incapacity benefit. That is 120,000 more than in 1997. It is not just the numbers that cause concern, but the nature of the people claiming incapacity benefit. The hon. Member for Rhondda (Chris Bryant) referred to the high levels of incapacity benefit in his area. It is not surprising that there are high levels of incapacity benefit claimants among people such as former miners at the end of their working lives, who have undertaken hazardous careers, but the number of under-25s claiming incapacity benefit has increased by 25 per cent. People are also claiming incapacity benefit for a long time. More than half claim it for more than five years.

We should remember that we have had a period of economic growth and benign global conditions. Given that the Government were elected on a platform of welfare reform, the fact that there are still 4.8 million people claiming out of work benefits is a clear and dismal failure of policy. It is in that context, in a debate led by the Opposition, that welfare reform has risen up the political agenda.

After forcing out the only Government Minister who genuinely believed in welfare reform—the right hon. Member for Birkenhead (Mr. Field)—after years of blocking effective welfare reform and after rubbishing
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the Freud report, the Prime Minister has finally allowed some announcements on welfare reform. We must ask ourselves whether he truly believes in it. Has the Prime Minister undergone a conversion to welfare reform, after spending so much time and putting so much effort into blocking progress on it? Is the Secretary of State for Work and Pensions, who is not in his place, so persuasive that he has managed to articulate a case to the Prime Minister, persuading him to take welfare reform seriously? On the evidence of today, it is not the persuasiveness of the Secretary of State that is the answer.

The Prime Minister, as usual, has changed his position for reasons of political posturing. He has seen that the Conservative party has been making the running and putting forward proposals for welfare reform, and he is simply trying to shoot the Tory fox. It is more about calculation than principles. That is why we and the British public should be sceptical about whether the Government will succeed with their platform of welfare reform.

I shall spend a moment or two on the speech that we heard today from the Secretary of Work and Pensions. If, as some have suggested, it was an audition for the role of Chancellor next year, I suspect that the Secretary of State for Children, Schools and Families will not lose any sleep. The Secretary of State for Work and Pensions ran into problems in two areas. First, he claimed that the Government were setting the agenda because they had commissioned the Freud report and had always intended to implement it. That does not fit with the facts. It is well known that Tony Blair commissioned welfare reform, and that Tony Blair was convinced of the need to reform welfare, but it is also well known that the then Chancellor was strongly opposed to what Freud was proposing. Indeed, as Rachel Sylvester put it in The Daily Telegraph, David Freud

about the flaws in his proposals before being ushered into a room full of Treasury advisers who picked more holes in his ideas. I suspect that it was not a pleasant experience listening to the then Chancellor for 45 minutes while he had a rant. I have no first-hand experience of that; I do not know whether the right hon. Member for North Tyneside can illuminate the House. It is clear that the Prime Minister had no enthusiasm—

Mr. Byers rose—

Mr. Gauke: I will certainly give way to the right hon. Gentleman.

Mr. Byers: I do not want to question Rachel Sylvester’s normally accurate reporting, but I understand that it was a 50-minute intervention. [ Laughter. ]

Mr. Gauke: I am very grateful to the right hon. Gentleman. Accuracy is very important, and we should all be grateful that he has helped the House on this matter. [ Interruption. ] It is noticeable that it was the length of time, not the word “rant”, that was corrected.
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My hon. Friend the Member for Tatton (Mr. Osborne) raised with the Secretary of State for Work and Pensions a very important aspect of the Freud report—the proposal to abolish the distinction between DEL and AME. That would enable more money to be used to pay private companies to reduce the numbers on benefit, which is crucial if the Freud report is going to succeed. What do we have from the Government? The answer is that they are going to explore that option. That is not quite a formal review—I could be wrong. Indeed, at one point, it looked as though the Chancellor and the Secretary of State for Work and Pensions were exploring the option in front of the House as they discussed it. I hope that during the course of the afternoon they had the opportunity to discuss the matter further.

Perhaps that is what the Secretary of State is doing at the moment. He may be about to enter the Chamber and announce that the Government have explored the matter, and have decided that they will abolish the distinction between DEL and AME. I hope that that is the case. If they do not do so, Freud is not being implemented properly, which further suggests that this country will not benefit from the full, serious welfare reform it so badly needs.

The other area where the Secretary of State got himself into a little difficulty was one where he clearly expected to get on to the front foot and score some runs. He challenged my hon. Friend the Member for Tatton to say whether we shared the target of halving child poverty by 2010 and of abolishing it by 2020. I do not have the precise wording of what he said; I think that he challenged us to pledge to meet the 2010 targets. Perhaps the Financial Secretary might answer that. Do the Government pledge to meet their 2010 target?

The Financial Secretary to the Treasury (Jane Kennedy): Yes.

Mr. Gauke: The Financial Secretary says, “Yes”, from a sedentary position, in which case, I would be grateful to know what the consequences will be if the Government do not meet their pledge. Every independent observer of these matters, including the Institute for Fiscal Studies, has said that the Government will not meet that target. Indeed, the Department for Work and Pensions has published documentation saying that it accepts that it will not meet the target. I do not know the important distinction concerning a pledge to meet a target. I do not know whether it is a target to meet a pledge or—

Mr. Ellwood: It is a manifesto commitment.

Mr. Gauke: Ah! It is a manifesto commitment. I do not know whether it rates with having a referendum—

Angela Browning: That sort of thing.

Mr. Gauke: Yes, it is that sort of thing. I am grateful to my hon. Friends.

Surely the important thing is not whether it is called a target, pledge or an aspiration, but whether it is going to be met. The point is that the Government are simply not going to meet their 2010 target. I do not know
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whether the Government will say in 2010, “Oh sorry, we missed our target, but at least it was a target, not an aspiration. The Conservatives would have missed an aspiration, whereas we miss a target.” I fail to understand the distinction.

Mr. Heald: The Secretary of State could give a guarantee and pledge to resign if the target was not fulfilled. That would be something solid.

Mr. Gauke: My hon. Friend makes an excellent suggestion, which might provide some reassurance. I believe that previous Ministers devised something similar for missing education targets, though I cannot recall which Ministers resigned. I am sure that some did.

Mr. Heald: My recollection is that the right hon. Member for Norwich, South (Mr. Clarke) made the pledge on education, but the day before the time was up, he was moved.

Mr. Gauke: Well, he was no longer Secretary of State for Education—perhaps the Secretary of State for Work and Pensions would like to make a similar pledge.

Let me make a suggestion that could help the Government meet their child poverty target. They could abolish the couple penalty in the system, which makes it difficult, especially for working couples, to move out of poverty. Indeed, the Institute for Public Policy Research—a left-leaning organisation, which is close to the Labour party—pointed out that progress had not been made with working couples, and that such progress could take 300,000 children out of relative poverty.

After 11 years, the Government have failed to deliver welfare reform. They had almost everything going for them—a large majority and a mandate for their 1997 manifesto. Manifesto commitments are important and they had a mandate to reform welfare. Indeed, they were to be the party of welfare reform. They have had benign global economic conditions, and there was the Nixon-to-China argument that only Labour could reform welfare, yet it has not done so.

We now face more difficult times and we cannot afford high levels of worklessness. The Government failed to use the good years to prepare for the difficult years. It is easier to get people off benefits in good years. I am afraid that the Budget has strongly demonstrated the theme that there was an opportunity to reform welfare and the Government did not take it. There was an opportunity to reform public services and they did not take it. There was an opportunity to put public finances on a strong footing and, as we know from the figures for borrowing and for debt, they failed to take it.

The Government could have delivered but they did not. They have left the country unprepared. At the next election, they should be punished. If they are, it will be left to the Conservative party to tackle the problems that the Government failed to address.

4.58 pm

The Financial Secretary to the Treasury (Jane Kennedy): We have had a good day’s debate. Occasionally it has been a bare-knuckle political debate, and I intend to continue in that vein.

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When I listen to the shadow Chancellor, the hon. Member for Tatton (Mr. Osborne), I am often disappointed by his contribution, which never fails to sneer, offer personal abuse and shallow points instead of being a considered, tempered and incisive speech. He should occasionally take the time to study his performance. He is the representative of a party that, when in office, oversaw a denial of the concept of society. That denial allowed it to shrug off responsibility for poverty, which was measured by internationally accepted standards. Child poverty doubled during the Conservative Government’s stewardship of the economy, and poverty was endemic for pensioners in communities throughout Britain. Such a speaker would do well to show a little humility, in place of the arrogant pose that he strikes so well. I would have warmly welcomed contributions from those on the Tory Benches that acknowledged that past record. The Conservatives have recently been saying things that sound encouraging. It is always good to welcome sinners to repentance, but oh, how grudging have their contributions been!

Pensioners used to be afraid to turn on their heating under the Tory regime. I can remember when emergency fuel payments used to be dependent on temperatures hitting a low point on a given day in the winter. That was a positively Dickensian policy.

Mr. Ellwood: Will the Financial Secretary give way?

Jane Kennedy: I will happily give way in a moment, but let me just finish this point.

Now pensioners can rest assured, under a Labour Government who introduced winter fuel payments that helped to keep 11.7 million pensioner households warm last winter. I should be very interested to hear whether the hon. Member for Bournemouth, East (Mr. Ellwood) wishes that his party would commit to supporting the payments that we have put in place in the Budget.

Mr. Ellwood: I hope that the Financial Secretary will not make the mistake that we heard the Secretary of State for Work and Pensions make at the start of this debate, when he devoted an entire speech to what was happening 10, 15 and 20 years ago, rather than talking about the issues for today and the future. May I bring the Financial Secretary back to the Budget and ask a specific question about health? It has emerged from what my hon. Friend the Member for Tatton (Mr. Osborne) has said that the amount of money invested in health is about to fall by more than £1 billion. Is that true or not?

Jane Kennedy: The hon. Gentleman will have to contain himself for a moment, because I have not finished with the Conservatives’ record on pensioners and poverty. I will come to his question directly in one moment, but he will have to allow me to answer it in my own time.

Under a Labour Government who have introduced the pension credit, free TV licences, free eye tests and free national bus travel, pensioners can rest assured that we will continue to deliver a minimum income guarantee for them, now at £124 a week. Unlike the Conservatives, who could not bring themselves to support even the payment towards fuel costs that the Budget delivers for pensioners this year, we will stand by them.

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