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We have had to prioritise the stability of our economy lest we forget the shambles with which we were left. Borrowing will be £149 billion this year, the second largest amount in Europe, and, as the Prime Minister
pointed out before the Budget, it was on course to double in five years to £1.4 trillion-£22,000 for every man, woman and child. As a result of the Budget, however, the debt will fall to £116 billion next year, £89 billion the following year, and £60 billion in the year after that. It will fall to £37 billion in 2014-15, and is projected to fall to £20 billion in 2015-16, with the current structural deficit back in balance. That is the task that we have set ourselves. That was the first test of this Budget: to tackle borrowing and get the deficit down. Our approach has been reinforced by the judgments of the credit rating agencies and the business lobby when they agreed on Budget day that the plan is credible. Measures include reducing current expenditure by £30 billion a year by 2014-15, stronger medium-term growth with more business support to restore UK competitiveness, and reducing regulation and tax rates; and unemployment is forecast to fall throughout the OBR's forecast period.
Glenda Jackson (Hampstead and Kilburn) (Lab): Will the Secretary of State tell the House how many credit rating agencies made that judgment? My knowledge, which I admit is limited, is that there is one individual in Florida and another rating agency company comprising three individuals in the United States of America, and also that they consistently failed to remove the triple A rating from those companies and banks that caused the economic downturn in the first place. Why are the Government listening to people who clearly do not know what they are talking about?
Mr Duncan Smith: It is not just the Government who are listening to them; it seems that the rest of the world is as well. I must remind the hon. Lady that if we are not careful- [Interruption.] Whatever she says, if the credit rating agencies downgrade our rating, we would, like Spain and Greece, be paying far more to borrow the money that we are borrowing as a result of the previous Government's position. Whether or not we agree that the credit rating agencies got it right on the banks is irrelevant, therefore. In this particular case, the question is whether or not we would end up paying more as a result of their bad rating, and that is something we were not prepared to risk. This is a Budget to get the economy back on track. It is a Budget to support the recovery and drive down the deficit, and, most importantly, to get Britain back to work.
Despite facing the tough and unavoidable choices forced on us by the fiscal position left by Labour, we are increasing the threshold for paying the basic rate of income tax, and increasing the child element of the child tax credit by £150 above indexation next year. We are making sure that the most vulnerable do not pay disproportionately.
Bob Russell (Colchester) (LD): On that point, will my right hon. Friend advise me whether the current level of 3.9 million children living below the poverty line-inherited after 13 years of failure by a Labour Government-will be increased or decreased by the end of this Parliament?
Mr Duncan Smith:
Directly in terms of this Budget, there will be no increase at all; that figure is approved by the OBR, and it is our determination to drive the figure down. Let me say to my hon. Friend that he is right: we have inherited from Labour one of the worst records of household unemployment in western Europe and, worse
than that, we have the highest number of children living in workless households in the whole of western Europe. That is a shameful record of the previous Labour Government, and although Labour Members go on about it, it is we who have to deal with it, and I promise my hon. Friend that we will deal with it.
Yvette Cooper: Will the Secretary of State confirm that the number of children living in workless households has fallen from about 2.3 million in 1997 to 1.8 million today, and that it was, in fact, his party when in government previously that trebled the number of children in poverty?
Mr Duncan Smith: If the right hon. Lady wants to go on fighting past elections, she can; it will not change the results of them. The reality is that under her Government, child poverty rose- [Interruption.] It rose from 2004 onwards, and the Government threw a lot of money at it and absolutely failed. Under her Government, in the last seven or eight years child poverty has risen dramatically, and I have to point out to her that she has failed to recognise that as a result of their policies child poverty is now at serious risk of rising even further. We have to get it down.
Mr Duncan Smith: I will give way in a minute; I want to make a bit of progress first.
Universal child benefit will be frozen, but benefits will be recycled so that they are targeted at the most vulnerable through child tax credits. Thereby, the poorest will be protected. That is exactly what we will do in this Budget.
We will freeze public sector pay, but we will also increase the pay of those on the lowest incomes. I am sure the right hon. Member for Normanton, Pontefract and Castleford will welcome the fact that half the employees-the lowest paid-at her former Department will get at least £250 this year and next.
We will protect health spending, which was a priority, and honour our international aid obligations. We will reduce the deficit by raising taxes more and cutting spending less, but we will also reduce corporation tax from 28% to 24% to make the UK more competitive internationally and get people back to work. We will reverse the cynical pre-election clawback by the previous Government from this year's uprating forecast, and we will do the decent thing and fill the gap they left. We were left with a £300 million shortfall, because the previous Government had uprated benefits when the retail prices index fell below zero but had made no provision to find that money in 2011, so benefits would have been uprated less than the uprating we shall put through next year.
Let us not forget that we chose to take hundreds of thousands of low-income individuals out of tax, improving work incentives. More than 880,000 people on the lowest incomes will be taken out of tax altogether and 23 million taxpayers will benefit. That is a Liberal choice-I say that to the hon. Friends sitting on my right-and one I wholeheartedly support.
Emily Thornberry (Islington South and Finsbury) (Lab): The right hon. Gentleman talked about making sure that the most vulnerable did not pay disproportionately. Is he aware that in Islington, 2,154 families are in private accommodation on housing benefit and a third of them will be affected by the new caps on housing benefit? If and when they face eviction, what help will the Government give to stop hundreds, if not thousands, of Islington families being made homeless? If they are made homeless, what help will he give to get them somewhere to live?
Mr Duncan Smith: The hon. Lady is looking at things in a rather doom-laden way. The reality is that the changes to housing benefit will assist people into the right level of home. At the moment, through local housing allowance, we are paying vast sums of money to people who would not be able to get the same money if they were in employment. For example, in south-east London, which is similar to the hon. Lady's area, people on low incomes living in private rented accommodation would still-even with the caps in place-be nowhere near the level of money that somebody on local housing allowance receives. That is not fair on those who are striving and working, but having to struggle to live in a house. Before the hon. Lady carps too much, she should recognise that we have also increased the discretionary payment, trebling it to £60 million. If there are specific difficulties there will be money for local councils to help and assist.
Mr Andrew Tyrie (Chichester) (Con): May I take the Secretary of State back to child poverty? Page 34 of the Red Book makes it clear that there will be
"no measurable impact on child poverty in the next two years"
of Budget measures. Can he explain why the Government have published that assessment only for a two-year period and whether he will commit to publishing an assessment for the whole of the planning period?
Mr Duncan Smith: Indeed, we will. We shall launch a strategy in March next year and I promise my hon. Friend that I shall inform him about how it goes. As I pointed out, child poverty has risen by more than 100,000 since 2004, so when the Opposition lecture us about child poverty they ignore the facts. They spent a lot of money but they failed to meet even their targets.
Simon Hughes (Bermondsey and Old Southwark) (LD): Does my right hon. Friend agree that although the welfare state is obviously necessary to protect the poor and vulnerable, it has often acted as a disincentive for people to go from being out of work to work? I know that from my constituency. Will he ensure that over the next few weeks, when we consult on the future of the welfare state, all the relevant charities, agencies and local councils, which are very knowledgeable about such things, are fully involved so that the outcome is informed by the facts and not by prejudice?
Mr Duncan Smith:
I give my hon. Friend absolute confirmation that we shall consult widely. As he knows, we are planning to reform the benefit system so that it no longer acts as a major disincentive for people to go back to work. We have had to take decisions in the Budget, but beyond that we want to bring forward
changes that make work pay-significantly for those going to work for the first time, as they understand. My comments at the weekend were about the need to recognise that often people want to move 10 or 15 miles to take a job, but they worry about the cost of travel to work or losing their house. The coalition has to look at that sort of thing to see whether we can make it easier for people to make decisions and take risks without being punished every time, as with the last Government. It is worth remembering that, of all social housing tenants-it is a falling figure-only 5% change their houses during the year, whereas 35% of low-income private tenants change. That is the problem: they are static, and they are stuck in what they do.
Mr Andy Slaughter (Hammersmith) (Lab): When will the right hon. Gentleman publish more details of the proposals for the cuts in housing benefit? The local authorities affected, such as mine in Hammersmith, which is a Conservative authority, really do not know what is happening, other than that 750 families, at least, will have to move out of the borough because even the substandard accommodation that he clearly wants them to move into is not available in central London. How does he expect those families who move to areas where less work is available than in central London to find jobs, as he says that he wishes they would?
Mr Duncan Smith: In fact, over a third of all the properties available for rent are available below the 30th percentile. The reality is that property is out there, and we know that we can do it. Of course, I did not say at any stage that these changes would be easy. They will not be easy-we recognise that-and they will not happen overnight. They will not start until next October, and most cases will be reviewed only on their anniversary, which could be anything up to a year and a half or two years away.
Mr Duncan Smith: Excuse me; I am answering the hon. Member for Hammersmith (Mr Slaughter) if hon. Members do not mind. We will publish the full details, and he can discuss them with us at any time-the door is always open, as soon as I am ready.
I felt it unfair therefore to make such a change, and I agreed that we needed to ensure that we protected the worst-off.
Mr David Lammy (Tottenham) (Lab): Will the right hon. Gentleman give way?
Mr Duncan Smith: I will give way in a second; I think that I have been reasonably generous.
I should like to return to the choice on the uprating of benefits-something on which, I guess, Opposition Members will want to intervene. Before the Budget, there was some media speculation, much of it fed by the Opposition. In fact, I think that the right hon. Member for Normanton, Pontefract and Castleford said that she would not support a freeze of benefits and that she would definitely want to oppose that. The media speculation was that we would go to that-in fact, I believe that that would have saved some £17 billion over the lifetime of this Parliament-but I resolved not to do that. We
decided that it would be unfair for the worst-off. Instead, the Chancellor and I agreed that we would continue to uprate benefits by the consumer prices index, which is forecast in the Budget to be 2.7% this year. Of course, the CPI does not include housing costs, and it seemed more reasonable. However, the right hon. Lady was reviewing that before she left office, and I am sure therefore that she will want to tell me that she agrees with the uprating, rather than remaining as we were. I would therefore like her to tell me exactly what reduction in spending she was planning as her Department's share of the £45 billion. I will give way to her if can tell me which elements of saving she would have made in her budget. She does not want to use the CPI; what was she going to do that added up?
Yvette Cooper: In fact, as the right hon. Gentleman will be aware, the additional support that we have put in to help the unemployed has kept unemployment at about half the level of previous recessions and nearly 750,000 lower than it was predicted. That in itself is likely to save more than £15 billion over the next five years. We believe that the right way to do welfare reform is help people into work, not just to slash the support for the most vulnerable people in society.
Mr Duncan Smith: I am very sad that the right hon. Lady chose not to answer the question. When I give way to an intervention from now on, I will ask Opposition Members-this goes for all of them-the very simple question: what would they have reduced? They were in government not two months ago, and they have left us with a terrible problem.
Chris Bryant (Rhondda) (Lab): Will the right hon. Gentleman give way?
Mr Duncan Smith: Before I give way-I will give way in due course-I want to make a bit more progress, and I want Opposition Members to tell me what they would have advised the right hon. Lady to cut from the Department's spending. It is utterly unreal that they can sit there now in opposition as though they have been there for six years and they had nothing to do with the mess. After all, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who is sitting on the Front Bench right now, said that there was no more money left, so where was the right hon. Lady going to get the money from?
Chris Leslie (Nottingham East) (Lab/Co-op): Will the right hon. Gentleman give way?
Mr Duncan Smith: I will give way in a second; I think that I have been reasonable.
Our action to increase benefits in line with headline inflation measures is in marked contrast to the actions of the previous Government. I mentioned that there was no provision to find the extra £300 million that they would have reduced next year's budget by. Let me look at some of the other measures. Today in the UK, nearly 2 million children grow up in homes where no one works. They are at risk of poorer outcomes than those of their peers in working households. That is unacceptable, so the Budget will deliver fairness for children and families while protecting the vulnerable. To help lone parents to raise themselves out of benefit dependency
and into work, our measures include lowering the age at which lone parents will be expected to move into work to when their youngest child reaches five. However, it is important to remember that jobcentres have wide discretion on this, and as they assist parents, they will of course have the capacity to examine how things fit in with parents' requirements around their children's education. It is right and fair that lone parents should work as and when their children are in school, although more particularly in this case that will be part-time work.
When we are restricting eligibility for the Sure Start maternity grant for the first child, it is right that we provide additional support for families to buy essentials. However, it is also right that these essentials are not repeatedly bought for subsequent children but used again, which is what is done by many hard-working families on low incomes. For multiple births, the grant will come through a corresponding number of times, so people who have triplets or twins will receive different lots of that £500. Further help may be available from the social fund if there is an additional need.
Chris Leslie: I certainly disagree with the reduction in the maternity allowance, but can the right hon. Gentleman justify scrapping the health in pregnancy grant? The money would have been available for the grant, by the way, if the Government had been tougher on the banks with the banking levy.
Mr Duncan Smith: The reality is that the grant came far too late and had no effect on improving women's health, which was its original target. It was actually paid after the child was born, so the whole grant was a nonsense from start to finish. Getting rid of it has affected nothing out there and there are far better uses for the money.
Mr Stewart Jackson (Peterborough) (Con): Did my right hon. Friend read last week that the media commentator Stephen Pollard had spent his family's health in pregnancy grant on a trip to the Fat Duck restaurant in Bray? That is an example of a lack of proper targeting of those who are most in need of such funding, and it shows why we were right to get rid of the grant.
Mr Duncan Smith: I thank my hon. Friend for that example. We have put £2 billion into the child tax credit because we believe that that is a far better way of helping poorer parents. The grant is rather indicative of the way in which the previous Government scattered money around in the hope that they could buy some votes in the run-up to the election although, as was demonstrated, that failed.
Mr Duncan Smith: I want to move on to housing fairness and work incentives, but I shall give way in due course. I have been pretty reasonable about that.
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