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7 Oct 2008 : Column 209

The second thing that we will not do is to repeat the mistake of the previous Government of massaging the figures to pretend that the numbers are not changing. We will not shift people on to incapacity benefit and consign them to a life trapped on benefits without any kind of support, as a way of keeping the headline figures below what they really are. I can give the hon. Member for Epsom and Ewell that commitment, and I hope that he will match it. We will not manipulate the figures in the way that he did. We will not move people on to inactive benefits when they should be on active benefits. In fact, we shall be doing exactly the opposite; we will make sure that people are moved on to active benefits precisely because that is the right thing for them and their families.

The hon. Gentleman may want to listen to the third lesson of the changes, as for once I am about to agree with him. He is absolutely right: we should not take our foot off the pedal of welfare reform. When people may be finding it more difficult to look for work, they should get more help rather than less. He said that we should be accelerating reforms and bringing them in right now. If I may say so, that is a tiny bit churlish given that yesterday we said that we would be bringing in radical reforms to lone parent support, and given that we are abolishing incapacity benefit and bringing in the employment and support allowance this autumn.

A programme of reform is already going on. It is significant and radical and the hon. Gentleman has praised it a number of times over the past few months. We welcome and accept his support, but he should recognise the changes that are going on. We are increasing the support we give lone parents but we are also asking them to do more in return. From this April, every lone parent who goes back into work has a £40 in-work credit every week—£60 in London. They have more help in and out of work; there is a discretionary fund that can pay for a new uniform or for child care costs.

We have radically improved support for lone parents and in return we think it is right to ask them to look for work at a slightly earlier stage. At present, in Sweden, they have to look for work immediately when their parental leave finishes. In Denmark, the age is one, but in the UK it is 16. Clearly, the balance is not right in this country so we shall be reducing the age from 16 to 12, to 10 and then to seven. That is the right approach: giving people more support, but also expecting more of them in return.

We are doing exactly the same thing with incapacity benefit. Under the Conservative Government, incapacity benefit tripled. Lone parent numbers tripled. The numbers went up from 700,000 to 2.6 million. There was no support for people at all. They were given no help with their health or to get back into work. We introduced pathways to work. We know that the process works and that it gets more people back into work and now we are making it available to everyone across the country. We are replacing IB with the ESA. We will re-test everybody on incapacity benefit to see whether they are on the right benefit and we will expect the vast majority of people on ESA to take up pathways to work and the support we offer. Again, there will be better support, which we know works, and we will be asking and
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requiring people to take up that support because we know it will change their lives. It will get more people back to health and back into work.

It is wrong to say that we are not introducing radical welfare reform right now; we are doing exactly that. To pick up the point the hon. Member for Epsom and Ewell made about the AME-DEL transfers—the Ant and Dec of welfare reform policy—we are moving ahead with them as fast as David Freud recommended. The fact that the hon. Gentleman thinks that should be done now shows his complete lack of understanding of how we contract with the private sector. David Freud, whom the hon. Gentleman often quotes, says that we are proceeding at exactly the right rate and that the strategy will be a revolution in the delivery of welfare. I would rather take advice from David Freud than from the hon. Gentleman.

At the end of the hon. Gentleman’s remarks he spoke about the insolvency regime. I am sure the House listened with interest to what he said, but I am afraid I have to tell him that the reforms introduced in the Enterprise Act 2002 have modernised our system, and have meant that it is recognised across the world as one of the very best insolvency regimes. The hon. Gentleman mentioned three things. On automatic sale enforcement, administration already provides for a moratorium for all companies while restructuring is agreed. On priority funding, again administration already provides for priority status over other creditors. The same is true for his proposal on restricting creditor rights to veto restructuring. We have already modernised the regime and we are bringing in further changes next year, yet he tries to pretend that there is a solution to something that the Government have already achieved.

Mr. Peter Bone (Wellingborough) (Con): I am listening with interest to the Secretary of State on this point. I am quite sure that chapter 11 or its equivalent is not in place in the UK at present. Is he really saying that the Government’s Act is the same as chapter 11?

James Purnell: It is similar. We have a different approach because we have a different legal system but the hon. Gentleman is welcome to read the Enterprise Act 2002 and raise it with Ministers.

In conclusion, the thing we should be doing in the House is protecting people in the short term and helping them for the long term. Instead of scoring partisan points and trying to make rather eccentric use of the figures, the hon. Member for Epsom and Ewell should be focusing on what is right for people. We are continuing to help people, as we have done, and in addition we are making sure that people have proper protection for their mortgages—again improving something his Government left undone. We are making sure that the rapid reaction force is available to people around the country. Most of all we are learning those three lessons: not to fiddle the figures, not to consign people to inactive benefits and, still less, not to slacken the pace on welfare reform. I hope that that is the approach he will be taking.

8.5 pm

Jenny Willott (Cardiff, Central) (LD): I join the hon. Member for Epsom and Ewell (Chris Grayling) in welcoming the new faces on the Treasury Bench. I also welcome the debate; it is good to be talking about such
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important issues so soon. When I was looking for an update on the latest figures, I found an estimate produced by the British Chambers of Commerce today that unemployment figures will rise by 350,000 by next year, which shows how important the issue is and how crucial it is that we do something as soon as possible to try to stem the problem.

The recent rises in unemployment have been widespread across the economy in general, but in the main they can be attributed to people who have been unemployed for less than six months, men, those aged between 25 and 49 and those in the north and the midlands. Specific groups need support and help at this time.

In a long-term crisis, we can use indicators to measure the severity of the situation. Looking at those indicators today, some of them are particularly worrying for the future. One of them is the increasing length of time that somebody is unemployed. As it becomes harder to find work, people are unemployed for longer. As we are at the beginning of the crisis, that is not happening yet. However, the number of vacancies relative to the number of filled jobs has been falling recently, especially in certain sectors such as construction, finance and business and other services. That is a worrying indication for the future.

Another indicator relates to average earnings. When times are very tough, earnings grow more slowly as employees’ bargaining power is eroded as the job market changes. It is too early to see clear trends, but the latest figures—for June—show that average earnings growth, including bonuses, fell from 4 per cent. at the beginning of the year to 3.4 per cent., which, despite large rises in inflation over the same period, suggests that the bargaining power of employees is beginning to become more limited. That is a worrying sign for the long term.

Mr. Davidson: May I seek clarification as to whether the Liberal party agrees that in these circumstances we need a substantial increase in the national minimum wage? What is the figure that the Liberal party would like to see it raised to?

Jenny Willott: That could be a foolhardy move at this point in time. When a number of businesses are struggling, it could tip some of them over the edge.

Another issue that I want to raise is the level of economic inactivity. When there is a long-term crisis in the economy, the long-term unemployed eventually stop searching for work and leave the job market altogether. Fortunately, we have not yet reached that point.

There are worrying signs, but this evening the Government are clearly taking pleasure in the fact that we are not experiencing anything that looks as severe as the situation at the beginning of the last recession in 1992-93, when the Tories were in power. However, I want to flag up a couple of concerns about the Government’s record. The Government have wasted a great opportunity. In 1997, when they came in, there were extraordinarily favourable conditions for introducing radical welfare reform. There was sustained growth, and the Government put a huge amount of money into welfare reform, but the reforms have been patchy at best. There are persistently high incapacity benefit claimant counts and persistent levels of poverty.

Paul Rowen: I am sure that my hon. Friend is aware that there is a part of my constituency where three quarters of people are on one form of benefits or
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another; I know that the Secretary of State is aware of that, because he visited my constituency earlier this year. Does my hon. Friend agree that that illustrates the fact that the Government have patently failed to do anything to get those people back to work?

Jenny Willott: I share my hon. Friend’s concerns. There are areas in the Welsh valleys, very close to my constituency, where there are very high levels of worklessness, which is extremely damaging to entire communities. Despite huge efforts, the Government have not managed sufficiently to reduce persistent poverty levels in the UK. That is one of their failings.

I want to flag up the issue of rising youth unemployment. Gordon Brown— [Interruption.] Sorry; the Prime Minister said in 1995, when he was shadow Chancellor, that no young person should spend years without a job, and he pledged that no young person would do so under Labour. However, the new deal for young people has not been as successful as the Government hoped. Youth unemployment is higher than in 1997, and it is rising. It is up 172,000 on its lowest point, which was reached back in 2001. Worklessness among the 18-to-24 age group is worsening for every single category, including those who have been unemployed for up to six months, those unemployed for between six and 12 months, those unemployed for more than 12 months and those unemployed for more than 24 months. It is very worrying for the future that so many young people are unemployed. The figures are significantly worse than they were when the new deal for young people was first rolled out. Worryingly, we are talking about an underlying trend; the recent economic turmoil cannot be blamed for the situation, as the figures were similar last year. That trend needs to be tackled.

The new deal for lone parents, which the Secretary of State mentioned, has been more of a success, although the picture is mixed. Fewer parents with children over the age of 12 have volunteered to participate than was hoped, but it seems to have been reasonably successful; of those who participated whose youngest child was over the age of 12, about half left immediately to go into employment. I am somewhat confused about why the Government are moving lone parents from a programme that appears to be reasonably successful to a sanctions regime under jobseeker’s allowance, given that research from the Department for Work and Pensions itself found that lone parents did not respond to sanctions by going into work. They often did not realise why they had been sanctioned, as they were not certain about how much benefit they should have been on in the first place. That is unsurprising, given the rate of error in the benefits and tax credits systems.

My main concern about the changes that the Government propose, and the impact on unemployment, relates to the economic climate, which we are all discussing. Introducing conditionality for claimants will mean that if they do not get work, they will face sanctions or have to go into workfare. That seems to be a wrong target, particularly with respect to those furthest from the job market—those who are disabled, who have been out of work for a long time, who have very low skills levels, who are lone parents or who have additional caring responsibilities. The job market is becoming increasingly challenging for those who are out of work, and employers are increasingly calling the shots. They can afford to be
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choosy, and those who are furthest from the job market are most likely really to struggle to get into work. It seems wrong to make them face sanctions. We should not punish those who cannot get into work. Instead, the Government should do more to work with employers, and to tackle the barriers faced by lone parents, those with disabilities and others. They should consider demand as well as supply.

I take issue with some of the points made by the hon. Member for Epsom and Ewell. Under Conservative Governments in the 1980s, there were more than 3 million people unemployed, a figure that we have not even come close to hitting in recent years. As was highlighted by the Secretary of State, when the figures were looking particularly bad for the previous Conservative Government, rather than tackling the issues, they moved people on to incapacity benefit to get them away from the unemployment figures. That created huge numbers of problems that the current Government are still trying to tackle. It created a hard core of people who have not worked for years, who are out of touch with the job market, and who do not have relevant job skills. It makes it even more difficult for people who are suffering from horrendous physical and mental health problems to enter the job market. The cost to the health service and the economy, and the cost in terms of family breakdown among those who are struggling, has far-reaching consequences for British society, so it is a little rich for Conservative Members to preach to the Government about the problems created by unemployment.

Rob Marris: Does the hon. Lady agree that it is also a little rich for Conservative Front Benchers to criticise the Government for allegedly fiddling the unemployment figures, when, according to my recollection, the previous Conservative Government changed the measure 18 times? This Government have changed it once to bring it into line with international standards and, after that one change, kept it in line with international standards.

Jenny Willott: Governments are known for changing figures to best suit themselves. No Government are immune from that criticism. As the hon. Member for Epsom and Ewell has said, this year, there is almost no point concerning welfare reform on which the Conservative party has disagreed with the Government. It agrees with the Government on the coercive approach that I have mentioned, and about which I have concerns. That approach is particularly worrying at a time of economic downturn. In fact, the Conservatives have been even harsher than the Government on those who face the greatest barriers to work. They have a three-strikes-and-out policy for those who refuse “reasonable” job offers.

The motion mentions helping businesses to

My main concern with the motion is that it does not relate to those people who are already out of work. I am concerned that the motion does nothing to support the millions of people who are currently trying to find work, and who are particularly far from the job market. These are worrying times, and unemployment is rising—nobody disputes that. We do not know how long that will continue, or how bad things will get. I agree with the motion on the point that we need to improve
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back-to-work support. We need to look much more closely at support that is tailored to individuals. We need to look at what works and replicate it. That would be better than getting rid of programmes such as the new deal for lone parents, which seems to have had some success, and replacing them with much more coercive programmes.

I agree with everybody in the House on the need to make more imaginative use of voluntary and private-sector organisations when trying to support people back into work. A lot of things could be done to improve the situation, but we need to be realistic about the jobs market. I have concerns about the introduction of too much conditionality and about sanctions, given the current economic climate.

Mr. Robert Flello (Stoke-on-Trent, South) (Lab): The hon. Lady talks about conditionality and coercion, but the point is actually the effort that is made. It is not about whether a person succeeds, but about whether they are prepared to put the effort in, and nothing else.

Jenny Willott: I agree with the hon. Gentleman that we need to encourage people to put more effort into the process. The issue that I was raising was the Conservative party’s three-strikes-and-out policy for those who do not accept a “reasonable” job. Who is to decide what a reasonable job is for a particular individual? That takes us into very murky waters.

Paul Rowen: I am grateful to my hon. Friend for giving way a second time. Does she not agree that, rather than dealing with the conditionality element all the time, we should accept that many people, particularly the long-term unemployed, need support in gaining skills to get themselves into jobs? For the sake of employers who wish to employ those people, use must be made of benefits to support training while people are in work. If the Government had adopted a scheme with much more flexibility—I know that they are now talking about that—we might have got some of the long-term unemployed people who want to work back into work a lot sooner.

Jenny Willott: It is certainly true that the problems that many people faced in trying to find jobs in the past few years arose from skills gaps. In the buoyant job market over the past few years, it is people who did not have the skills who were unable to find work. One of the worrying trends now is that the problem is more likely to be not skills gaps, but the fact that jobs will not be available, however skilled people are. That suggests that there should be a change in emphasis over the next few years.

Paul Rowen: Will my hon. Friend give way?

Jenny Willott: I would rather finish. When we are considering unemployment and how to support people back into work, it is clearly important for the Government to take into account the current economic climate and to make sure that, as was highlighted by the Secretary of State, they do not make the same mistakes as the previous Conservative Government and make the situation worse. They must not penalise those who are struggling to get work and are doing their best, but who are simply unable to find work because of the economic circumstances.

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Mr. Deputy Speaker (Sir Michael Lord): Order. Before I call the next speaker, may I inform the House that a 12-minute limit has been placed on Back-Bench speeches? That applies from now on, but the House will see that many Members are seeking to catch my eye, so if hon. Members can take less than their allotted span, that would be extremely helpful not just to me, but to colleagues.

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