Charter for Budget Responsibility and Welfare Cap

Beth Winter Excerpts

Monday 10th January 2022 Commons Chamber

[Beth Winter (Cynon Valley) (Lab)]

We are here this evening to discuss the welfare cap that is referred to in the autumn Budget. Introduced in 2014, it is designed to limit spending on social security. This is notable as it reflects the Conservative hostility to properly fund a social security safety net for the most vulnerable and disadvantaged groups in society.

The welfare cap is repugnant and regressive, and is driven by a Conservative ideological approach to stigmatising those in poverty and experiencing hardship. It does absolutely nothing to tackle the underlying causes of people’s reliance on social security, which is a failure of the economic and social policies of successive Tory Governments.

When it was introduced in 2014, my right hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott) said in this Chamber:

“Everyone in the House wants to bring down welfare spending, because welfare spending is the price of Government and social failure…This benefits cap is arbitrary and bears no relationship to need, as our benefits system should.”—[Official Report, 26 March 2014; Vol. 578, c. 389.]

She was absolutely right. The cap was also condemned by economists from the National Institute for Economic and Social Research, and the New Economics Foundation. Even the OBR questioned whether the welfare cap has any meaningful impact on spending plans and outcomes.

The cap covers carer’s allowance, disability living allowance, personal independence payments, universal credit and the winter fuel payment. It is wrong in principle to subject these to an arbitrary cap. The cap itself does not reduce the need for social security.

As others have said, we are facing a crisis in the cost of living. The Joseph Rowntree Foundation estimates a third of low-income households—some 3.8 million people—are already behind on their bills, and 4.4 million households took out new or increased borrowing during the pandemic. If inflation stays at its December rate into April this year, the number of people being pulled into deep poverty will be around 200,000. Do the Government believe that this amounts to a negative shock? At what point do they consider rising poverty a shock? In the coming months, I expect—indeed, I know—that many more people in my constituency of Cynon Valley, and across Britain, will face a negative shock.

The covid pandemic has had a devastating effect in my constituency, and it will be exacerbated by the continuation of the welfare cap. That is partly why I recently commissioned independent research by a think-tank in Wales—the Bevan Foundation—on my constituency, called “The Cynon Valley after covid: action for recovery and renewal.” The findings are absolutely shocking.

In Cynon Valley, the rates of unemployment doubled during the pandemic and by March 2021 we had the highest rate of economic inactivity of all constituencies, not just in Wales but in Britain—a staggering 42% of people of working age. Many of these people, through no fault of their own, are now reliant on benefits that come within the scope of the welfare cap. We have 6,000 people on universal credit and over 5,000 still on legacy benefits. They are also now suffering from the £20 cut to universal credit.

How many more are going to have to join them this year due to the Government’s failure to lift minimum pay to a real living wage, end insecure work and zero hours contracts, control rip-off energy bills or properly invest in building sufficient affordable and suitable housing? I could not visit my local citizen’s advice bureau in Mountain Ash or the local food bank in Aberdare and say that I backed this welfare cap. It is gesture politics of the worst kind, grounded in demonisation and hostility to social security recipients—the most vulnerable and disadvantaged in our society who need our support. The priority must be to lift incomes, reduce reliance on social security and maintain a sufficient safety net for those in need. That is why I oppose this welfare cap.