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"Chart A3 shows that the top expenditure decile will lose almost 15 times more, in absolute terms, than the bottom expenditure decile from changes in indirect taxes."
The increase is not nice, but we feel that it is appropriate.
Lorely Burt: I am sorry but I cannot take any more interventions.
We have talked about welfare throughout today's debate, but I should point out that the welfare bill was set to rise to nearly £200 billion and we just cannot afford that. The autumn spending review will treat those most in need as a priority, and although we will make cuts, we will cut carefully. This year's Labour Budget included plans for £44 billion of cuts and tax rises, but the previous Government did not say how they would raise that money and what taxes they would have increased. Until Labour Members are prepared to tell us what they would have done, they have no right to criticise this coalition Government.
8.27 pm
Maria Eagle (Garston and Halewood) (Lab): In March, before the election, the Chancellor told the News of the World:
"We are all in this together. I am not going to balance the budget on the backs of the poor",
which was very reassuring for voters to hear before an election. Since the election, both the Prime Minister and the Deputy Prime Minister have tried to argue that the Government and even their Budget are progressive. However, having had a closer look at the Budget and the Government, we can conclude that neither is progressive in political or economic terms. I am afraid that it looks very much like the Chancellor is indeed planning on balancing the budget on the backs of the poor.
I want to spend a little of the time that I have examining the effects of several Budget measures on poorer and disabled people. Disabled people are some of the most marginalised and vulnerable of our fellow citizens, but they are also one of the greatest sources of under-utilised talent and potential in our country. They are generally at the poorer end of the income distribution and they are more reliant on public services than many of our citizens, so the Budget's impact on them will indeed test the Chancellor's claim that he is not aiming his Budget at the poor.
I characterise the Chancellor's overall Budget strategy as further and faster deficit reduction than was planned by the last Labour Government, and an 80:20 split
between spending cuts and tax rises in advance of severe spending cuts in the autumn. That is his general approach. We should remember that even the most Thatcherite hawks who did not believe in the existence of society in the 1980s only ever aimed at a 50:50 split between spending cuts and tax rises, so the Chancellor is making the Thatcherites of that time look soft and even-handed. That is not, by the way, how the people of Liverpool remember them for what they did in that decade.
We can say that for most disabled people on lower incomes, who are more dependent than most on public services, the increase in VAT is a disaster. Some Government Members have had the grace to accept that it is a regressive tax. Indeed, both the Prime Minister and Deputy Prime Minister, before the election, said on TV that it was a regressive tax. The deputy leader of the Liberal Democrats, who is in his place, has said so more recently. The increase in VAT, which both the PM and the Deputy PM promised us before the election we would not have, but which they are now both going to invite their hon. Friends to vote for, is not only a joint broken promise that will hit the poorest hardest, but something on which both parties will be judged.
The degree of reliance on spending cuts will also impact much more heavily on poor and disabled people than a more balanced ratio would have done. More than half the £11 billion of welfare cuts will come from indexing benefit rates to the consumer prices index rather than the retail prices index. That sounds technical, but the effect is to set benefits on a permanently lower trajectory, thus year by year compounding the disparity at every uprating, though saving more money for the Chancellor. That, in my book, is the very definition of balancing the Budget on the backs of the poor.
The changes in disability living allowance will be judged not only on that score, which will in itself cut almost £300 a year from the payment. The Red Book also promises us reform
"to ensure support is targeted on those with the highest medical need"
"The Government will introduce the use of objective medical assessments for all DLA claimants".
Indeed, one Government Member referred to DLA as a benefit that one languishes upon. However, DLA is an extra costs benefit: it is paid not on the basis of a medical diagnosis, but to compensate disabled people for the extra costs incurred by the effect their condition has on their ability to get around or look after themselves. People who work receive DLA. It is not a benefit that one languishes upon; it is a recognition from society that disabled people need a little extra support to enable them to participate in life.
Mrs McGuire: Does my hon. Friend agree with the Essex Coalition of Disabled People, which has indicated that the increase in people claiming DLA has resulted in more disabled people living independently in the community, rather than in the residential care that was in existence in 1993, 1994 and 1995?
Maria Eagle: My right hon. Friend is correct. She, like me, is a former Minister with responsibility for disabled people and has had to grapple with these issues.
This proposal is retrograde because it reverts to a medical model of disability, which disabled people themselves resent. It also has enormous deadweight costs. People who have never been able to walk do not need a doctor's assessment to say that their mobility is restricted. What possible sense is there in subjecting them to one? It just looks like harassment. How does that sit with not introducing a medical for those components of attendance allowance which are the same as the components of disability living allowance? What about pensioners who got their DLA before they turned 65 and still retain it? Are they to be subjected to a medical test? Looking at the Red Book, it seems to me that we have a savings figure attached to this measure of £1.1 billion, and the objective medical test is simply designed to reduce the numbers on the benefit by 20%. The policy has not been thought through. This seems to be a proposal aimed at saving money.
Similarly on housing benefit, the Red Book says:
"Housing Benefit is often criticised as making excessively generous payments that damage work incentives. To address this, the Government will remove payments that trap benefit claimants in poverty instead of providing incentives to work".
But only one in eight housing benefit claimants are unemployed. The majority are pensioners, disabled people, carers or people in work who are on low incomes. What is the point of making this benefit one that incentivises work when most of the people on it fall into those categories? It is nonsense. If instead we start with a suspicion that the reforms are actually about saving money, and we see that they cut £1.8 billion, we are more likely to get to the nub of the issue.
The Institute for Fiscal Studies says that the welfare reforms are
"A mixed bag, with no consistent objective beyond the desire to save money".
The private rented sector reforms just decouple the local housing allowance payable from the level of the rent even in local housing markets, which can only result in people falling into arrears and debt, and being subjected to eviction. In the public and registered social landlord sector the reforms are equally worrying. Many disabled people only have their home. It is the foundation of their lives and their security. It is all they have that is their own. These proposals will force people to move house and face increasing levels of debt. If their area gentrifies-nothing to do with them-they have to move on. If their children grow up and leave home, as they tend to do, they have to move on.
What about disabled people who have adaptations in their home? Are they to have to move? Often, those adaptations make life liveable. They are not a luxury; they are a necessity. Having debt and having to move from one's home is difficult enough for anyone to cope with, but many disabled people are too vulnerable to cope well with such upheaval. How are learning-disabled people, those with severe mental ill health and those with severe physical impairments supposed to go out and look for a new home, as they may have to simply because of these reforms to save money? Disabled people are the least equipped to do that, even before the spending review cuts the support they can get in their local communities to help them with such things.
The Budget is a triple whammy for disabled people: VAT and the cost of living up; incomes and benefits slashed; help and support to navigate those challenges
ended. If the Tories do this, they should not have the support of the Liberal Democrats and, quite frankly, the Liberal Democrats should be ashamed to walk through the Lobby tonight to support this appalling Budget.
8.35 pm
Stuart Andrew (Pudsey) (Con): I am grateful, Mr Deputy Speaker, for the opportunity to make my maiden speech.
I congratulate my hon. Friends the Members for Thurrock (Jackie Doyle-Price), for East Surrey (Mr Gyimah), and for Maidstone and The Weald (Mrs Grant), as well as the hon. Member for Airdrie and Shotts (Pamela Nash) on making excellent maiden speeches and for raising the bar so high. I fear that all that is about to change. Through you, Mr Deputy Speaker, may I thank all Members of Parliament and staff for the courtesy and help that they have given new Members? This is a baffling and overwhelming place to get used to, particularly when lost down a corridor somewhere.
I pay tribute to my predecessor, Paul Truswell, who was the Labour MP for the constituency from 1997 until the recent election. He was, and is, an honourable man, and although we did not always see eye to eye, I would like to think that we had mutual respect for each other. He was regarded as a very good constituency Member of Parliament, and only announced his retirement after a serious car crash. I hope that he is recovering well, and that he will enjoy his time with his family. I shall also say a few words about his predecessor, the late Sir Giles Shaw. I never had the fortune of meeting him-sadly, he died not long after his retirement-but he was a contender for the post of Speaker. I understand that he was a witty man, who was well respected for his ability in consensus seeking. Indeed, he had such an effect on the constituency of Pudsey, that someone asked if I was taking over from him.
It is an honour and a privilege to represent the Pudsey constituency, and I am grateful to the voters there for returning me. It is a long constituency that straddles the borders of Leeds and Bradford. In 10 minutes, we can be in the vibrant city of Leeds; in 10 minutes going in the other direction, we can be in the beautiful Yorkshire dales. The common reaction when I say that I represent Pudsey is, "Ah, named after the bear." I point out that the town came first, featuring in the Domesday book. Pudsey is an old mill town, but many of the mills in the constituency have sadly gone. Indeed, at the height of their success, the pollution was so bad that it was said that the birds in Pudsey park flew backwards to keep the soot out of their eyes.
Pudsey is a big town that is suffering somewhat from out-of-town developments, but there is a vibrant market, and I hope that I can do my bit to help the town's economy. There is a lot more to Pudsey than just Pudsey. The neighbouring town of Farsley is home to Hainsworth mills, which provide speciality textiles for the Royal Guards' uniforms, and claim to make the fastest cloth for snooker tables. The cloth in the Woolsack in another place even comes from that mill. One of the town's famous sons is Ray Illingworth, the former England cricket captain.
In Calverley, an attractive and typical Yorkshire village steeped in history, there is a wonderful old hall. In 1604, the local owner and landowner, Walter Calverley, apparently
went insane and murdered his two sons. He refused to plead, and was ordered to be pressed to death at the York assizes-a method that was used to try to force a confession, and something I fear that the Whips would like to use on some of us in future. However, he died without confessing his crime, and his ghost apparently haunts the village on dark, lonely nights.
The next village is Horsforth, considered to have the largest population of any village. It is home to Leeds Trinity university college, which has just received that status and is famed for teaching and media training. Finally, there is Aireborough, an area that was regarded in the 2001 census as the most average place in Britain, which I would dispute. It is the home of the original Harry Ramsden's fish and chip shop, Silver Cross prams and another furry friend, Sooty. I know that I am biased, but I love our constituency.
Let me move on to the debate. Yes, this is a difficult Budget, but these are difficult times and I am glad we have a responsible Budget, one which is sensible and is now clearly endorsed by members of the G20. The scale of our debt is truly terrifying and threatens to restrict what we will be able to do in future years. If we do not deal with the debt now, we will be wasting more than £70 billion a year on interest alone, which will threaten our household interest rates and business growth.
I welcome the initiatives of the Chancellor for encouraging regional growth. Tax breaks for new businesses outside London and the south-east are particularly welcomed by someone who is a Yorkshire MP. I want to see our private sector grow so that we are not so dependent on the public sector. Capital investment, too, has been mentioned. I was pleased to hear about the Leeds and Liverpool railway line. I know that there are other things that we want for our city in Leeds, for which I will be pressing the Chancellor. All these will encourage enterprise.
I shall say a little about my background. I grew up on a council estate in a family that had very little money. I was the eldest, and even I had hand-me-downs. What helped my family and others was the ability to start a new business. I remember my father starting a small roofing company. It was not much, but it was something. It got him off the dole and it employed another person. That is the sort of wealth creation that we need in this country so that we can help the small businesses to create the wealth to improve the prospects for our future, and also to help the millions of people who have been abandoned by the Opposition on benefits. I think particularly of the young people who are out of work. Through the creation of wealth and jobs we can turn the country round and improve the prospect of helping those people.
8.42 pm
Katy Clark (North Ayrshire and Arran) (Lab): Thank you, Mr Deputy Speaker. I warmly welcome you to your position.
I congratulate the hon. Member for Pudsey (Stuart Andrew) on an eloquent maiden speech, as well as the hon. Members for Maidstone and The Weald (Mrs Grant), for East Surrey (Mr Gyimah) and for Thurrock (Jackie Doyle-Price), who also made excellent maiden speeches
today. My hon. Friend the Member for Airdrie and Shotts (Pamela Nash) clearly knows her Labour history. A number of strong Labour women have represented her constituency in the past, and she showed today that she will be a powerful advocate for the community that she represents. She mentioned in her speech that her constituents have not forgiven the Conservatives for what they did in the 1980s. In my constituency, North Ayrshire and Arran, that is what I was told repeatedly during the general election.
As I listened to the debate today and as I have listened to the rhetoric from the Conservative party over the past few weeks, it reminded me of the 1980s. Fortunately I was a little older than my hon. Friend at the time. When I left school I knew nobody between the ages of 16 and 25 who had a job. Education or the youth training scheme, as it was then, were the only opportunities available. It was astonishing to hear again after 20 years the talk about getting "on yer bike". For most people in areas such as the one that I represent, moving is not an option. For all the reasons that have been set out today, if we see the kind of attacks on our benefit system that are being outlined, that will become even less of an option.
My hon. Friend the Member for Garston and Halewood (Maria Eagle) described in detail how the changes in the benefit system would have a disproportionate effect on some of the poorest in society. The Budget is deeply regressive and will be devastating for some of the poorest communities and some of the poorest people in the country. However, it will also devastate the economy, because it is a depressive Budget. The rise in VAT, the cuts in benefits to some of the poorest in society and, perhaps even more significantly, the huge cuts in public spending will drain huge amounts of money from the economy. In other parts of Europe, more and more Governments are taking an increasingly similar approach, and that is very worrying for not just the British economy but beyond, because it does not seem obvious where we will be able to sell our goods. So this is a very dangerous Budget.
I have already said that the current debate is reminiscent of debates that took place in the 1980s. In 1979, a Government were elected saying that they had no plans to increase VAT, but not long after there was an increase from 8% to 15%; and now, of course, one of the first steps that we see is a significant increase in VAT. Until the past few weeks I had never heard it argued that increasing VAT was anything other than a regressive policy that would disproportionately affect some of the lowest earners in society.
Mr Anderson: I remember a similar situation. Does my hon. Friend remember also that in the 1980s people continually said, "There is no alternative"? Now, the code for that is, "This is unavoidable", and it is sad that the Liberal Democrats have been taken in by the Conservative party. The Lib Dems are the real dupes in this House.
Katy Clark:
I agree. I listened with care to the hon. Member for Solihull (Lorely Burt), who basically said that we could not afford the benefit system and, therefore, it was necessary to take these steps, but the House must remind itself again and again that we are a hugely wealthy country. We have the fifth wealthiest economy
in the world, but the wealth and power in society are unevenly distributed, and that has to be the backdrop whenever we have these discussions.
Given the proposals that we have heard, this Budget simply seems to be a Tory Budget. I appreciate the Liberal Democrats' points about the policies that they have tried to inject, but overall the Budget will disproportionately affect those on the lowest incomes. A few days ago the TUC commissioned a paper, which states that overall the annual loss in income and services for the poorest 10th of households is estimated to be £1,514, which is equivalent to 21.7% of their household income. The average annual loss for the richest 10th of households is estimated to be £2,685, which is equivalent to 3.6% of their overall income. No doubt a lot of work will be done on those figures, but we must consider them when we discuss not only the Budget, but the Finance Bill, which we will debate over the coming weeks.
I agreed with the hon. Member for St Ives (Andrew George), and I fully appreciate the difficulties and stress that Liberal Democrat MPs in his position must feel if they have always argued that a VAT increase would have a disproportionate impact on the poorest in society. I hope that we see some detailed work on the impact of not just the VAT increase, but all those policies on the poorest in society.
In reality, we are seeing unprecedented cuts in spending on public services, but I find it difficult to believe that any Government of any political colour will be able to make the proposed reductions, because we are talking about departmental cuts of about 20% to 25% over five years. It is difficult to imagine that the Government will be able to deliver on that, because these are such savage cuts in the services that all our constituents rely on.
This is a bad policy not only because it disproportionately affects some of the lowest-paid and lowest-earning in society, but because it risks choking off the recovery that is so vital to us all. My hon. Friend the Member for Coventry North West (Mr Robinson) was absolutely right-we needed a Budget for jobs and growth, but we have something completely to the contrary.
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