amendment of the law

Iain Duncan Smith Excerpts

Tuesday 25th March 2014 Commons Chamber

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

Last week the Chancellor presented his Budget, reiterating this Government’s commitment to a long-term economic plan. [Interruption.] I will say that again—a long-term economic plan, something that Labour does not have or is in search of, I am not sure. We are restoring the public finances and supporting businesses while providing security and stability for Britain’s families. I must say that today’s other news that inflation is down to 1.7% is very good news for hard-working families.

Following Labour’s great recession, which, I remind the House, wiped out 7.2% of our economy, worth £112 billion or £3,000 for every household in the country—it is still in denial—last week we learned that our economic recovery is now established and taking hold faster than originally forecast.

[David Wright (Telford) (Lab)]

Will the right hon. Gentleman give way?

[Mr Duncan Smith]

I will give way, but many Members want to speak, so first I want to make a little progress.

A year ago, the Office for Budget Responsibility predicted that growth in 2014 would be 1.8%. Now, the forecast is 2.7%, the biggest upward revision between Budgets for at least three decades. The deficit has fallen by a third in three years, and is forecast to halve by next year. By 2018-19, the OBR expects the public finances to move into surplus by some £4.8 billion for the first time in 18 years. Before that, in 2017-18, the fiscal mandate will be met a year early. Employment has been revised up and unemployment revised down in every year of the forecast.

[David Wright]

The right hon. Gentleman was talking earlier about the process under the previous Government, and he claimed that it was Labour’s recession. When he was leader of the Conservative party was there any point at which he did not agree with the spending plans of the then Chancellor of the Exchequer?

[Mr Duncan Smith]

I remind the hon. Gentleman that when one goes into government one is responsible for what happens. I know it is hard to take, but I have always believed that one wants to go into government to take responsibility for all the things that take place while one is government. He may not want to know it, but the reality is that the Labour was in government, the recession was very hard, and people have suffered.

There is still more to do—we have not done enough—if we are to secure Britain’s future. That is why the Budget set out further investment to ensure a resilient economy that delivers the promise for business that it can compete with the best in the world, and hope for families—this is important—about their prospects now, and for their children’s futures. From next week, corporation tax will be down to 21% from the 28% inherited from Labour, and will be down again to 20% next year—the joint lowest in the G20—making it competitive to invest in Britain, which is good for jobs and good for young people.

That will be matched by the best export finance, doubling direct lending to £3 billion and the investment allowance to £500,000, so that British business can take advantage of the best opportunities at home and abroad. Again, that is good for investment and good for growing jobs.

We are cutting tax not just for business but for Britain’s hard-working people, ensuring all can share in the benefits of Britain’s growth. By raising the personal allowance threshold to £10,500 next year, we are taking some 3 million of the lowest paid out of tax altogether and ensuring 25 million people pay less.

As a result of those changes since 2010, the typical taxpayer is £800 better off—something that Labour’s simple measure of real earnings fails to recognise. Similarly, through new child care support, we are helping families overcome prohibitive costs and ensuring that more parents find that it pays to get a job. Under universal credit, we have already invested £200 million to remove the 16-hour rule, so that 100,000 families in mini-jobs or part-time work receive help for the first time. Now, we are going further still, increasing child care support from 70% to 85% of costs so that work pays more for half a million families.

It pays to work, and now, finally, it pays to save, reversing the damaging trend whereby for too long Britain has borrowed too much and saved too little. The radical changes to retirement saving announced in the Budget are possible only because of the significant pensions reforms the Government have already delivered: a triple lock on the state pension; auto-enrolment to make saving the norm, helping up to 9 million save in a workplace pension—over 3 million are already saving, and I give due credit to the Minister of State, my hon. Friend the Member for Thornbury and Yate (Steve Webb) for that—and, vitally, the single-tier pension, for which I again give credit to my hon. Friend, set above the level of the means test, so that those who have contributed for 35 years have a secure basic income, without having to resort to additional state support in later life.

[Mr Mark Harper (Forest of Dean) (Con)]

I listened carefully to what my right hon. Friend said about incentives to work. Will he say a little about the 450,000 fewer workless households, and the 290,000 fewer children living in such households? Perhaps that has something to do with his welfare reforms.

[Mr Duncan Smith]

I am going to come on to that, but one of the great success stories is the fact that the number of workless households has fallen for the first time in 30 years. My hon. Friend is absolutely right, and I shall give a few more details about that in a second.

[Several hon. Members]

rose—

[Mr Duncan Smith]

I shall make a little more progress before giving way to the hon. Member for Edmonton (Mr Love).

As a result, for the first time, we can rethink the rules and trust people to use their own money as they see fit, not as the Government tell them. After the Budget, gone will be the prescriptive limits on how and when people can turn their pension pot into annual income, which, we all agree led, for too long, to inertia among consumers and risked locking people into low-yield annuities, with rates that have fallen by 15% since 2009. In countries such as the United States, Australia and Denmark, Governments do not impose restrictions. Now, that will be the case in the UK too, freeing people to shape their finances in retirement as they choose, which is absolutely right.

We are consulting on guaranteed guidance—an important feature of the Budget—asking the Financial Conduct Authority to work with the pensions regulator, consumer groups and others, to develop a robust set of standards and monitoring arrangements, with £20 million provided to kick-start that thinking. Whether people choose to buy an annuity as now, take the cash, or grow their pension pot, the reforms will increase the attractiveness of saving for retirement. That will pave the way for new financial products, increasing competitiveness in the market, driving innovation and a better service, as well as giving people new choice over their future.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

The OBR has forecast that under the Budget the savings ratio will fall to 3%. Is the Secretary of State concerned about that, and what action will he take to get savings back on an upward path?

[Mr Duncan Smith]

As I recall, the savings ratio under the previous Government fell to all-time lows, and under this Government it will be higher at the end of this Parliament than it ever was under Labour. When I take interventions from the Opposition they always fail to recognise that the economy crashed in 2009-10, taking 7.2% off gross domestic product, which had a staggering effect on savings and everything else. The reality is that we will have a better savings position, which will grow, given the fact that we are working to improve savings in pensions in the workplace, with a single-tier pension and giving people the right and responsibility to choose where their savings go.

[Mr Love]

rose—

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[Mr Duncan Smith]

I have given already way to the hon. Gentleman, and I just want to make another point about something that is typical of what has been going on.

On Wednesday, in his Budget response, the Leader of the Opposition did not mention pension reforms at all. Come to think of it, he did not mention any single measure in the Budget. On Thursday, the shadow Chancellor would say only of the measure that Labour would somehow look at the proposals. On Friday, in a panic, I think, the hon. Member for Leeds West (Rachel Reeves) said on “Any Questions” that she supported the reforms. On Sunday, when asked whether he supported the measure, the shadow Business Secretary began to backtrack and said:

“I’m not going to sign a blank piece of paper on your show”.

Later the same day, the hon. Member for Leeds West began to backtrack, saying that Labour supported the reforms but that they did not go far enough. Labour’s position on this policy is a complete shambles. It has struggled to reach a position and say that it may support the measures not because it believes in it but because it realises that it is popular. The reason Labour does something is all about popularity and nothing to do with values—that is the truth of it.

Over and above the radical changes to pensions savings, the Budget announced four further important measures to make saving pay, including abolishing the 10p rate for savers altogether, for the first £5,000 of savings. As my right hon. Friend the Chancellor said, when we abolish a 10p rate, we take it to zero; when the previous Government abolished the 10p rate, they took it to 20p. Those measures also included merging cash and stocks to create a single, simple new ISA, with an increased annual limit of £15,000; launching a new pensioner bond, paying market-leading rates; and introducing something that we have worked on in the Department with the Treasury and my right hon. Friend, the excellent Chief Secretary: a class 3A national insurance contribution, so that anyone who has reached state pension age before the single tier is introduced can top up their state pension.

The Opposition’s response is becoming chaotic. I want to press the hon. Member for Leeds West: normally by this point in the Budget debate, I understand, the Opposition make it very clear what resolutions they will vote against, but we have heard nothing from them at all. It seems that there is a row and chaos, so I will give way to the hon. Lady if she would like to tell us which ones.

I particularly want to ask her about resolution 43, which, I understand, is about the treatment of salaried members within limited liability partnerships. I wonder if she can tell us whether the Opposition will vote against that, given the fact that their economic policy is now fundamentally limited, that their leadership is a liability, and, after all their rows, that they are clearly not in a partnership? I will give way to her if she would like to tell us which resolutions she is going to vote against. Will she confirm or deny that she is voting against anything? I will give way to her if she wants. Well, they clearly do not know, Mr Speaker, so we will look forward to this evening with some relish.

It now pays to save. That is what is going on—I am glad that you enjoyed that joke, Mr Speaker; you are always a good test on these things—and so under the Government it pays to work, breaking dependency and getting people back into jobs.

[Mr Speaker]

For the avoidance of doubt, I should just say that I was happy to see the Secretary of State looking happy.

[Sheila Gilmore (Edinburgh East) (Lab)]

The Secretary of State will be aware that, for very many people, the average level of savings is in the hundreds, not the thousands. Do the Government regret abolishing the savings gateway as one of the first measures they took on coming into government?

[Mr Duncan Smith]

When the hon. Lady got up to make an intervention, I wondered whether she would take the opportunity to say how much she welcomes the fact that unemployment has fallen by 20% in her constituency—a very good thing. I know she does not want to say that, but I say it for her.

I have to say to that no, we do not regret that. What we have undertaken since we came into power is going to hugely incentivise and improve pension savings and the savings marketplace. The extra vehicles announced in the Budget will rapidly improve that and I believe, all in all, that we will have a much better savings position than we inherited, so I think I have answered that question.

I need to make the point about employment and unemployment. Let me get this right: when we came into power, we inherited a situation where unemployment rose by nearly half a million. At its peak, some 5 million were on out-of-work benefits—1 million for a decade or more—and in one in five households, no one worked. The number of households where no member had ever worked doubled under Labour, from 184,000 in 1997 on an upward trend to 351,000 by 2010. I do not recall Labour Members mentioning those figures, and they avoided them when they were in power.

Correspondingly, since we came to power, unemployment is down 168,000 since the election. The claimant count has fallen by almost a quarter over the last year, which is the fastest annual fall since 1997. Workless households have fallen to the lowest rate since records began, down 450,000—two percentage points—since the end of 2010.

At the same time, we now have record employment: more people in work than ever before, more women in work than ever before and more people in work in the private sector than ever before—up over 1.7 million since the election. Ninety per cent. of the increase over the last year has come from British workers, unlike before, and more than three quarters of the increase since the election is from full-time work, up over 1 million compared with part-time work, which is up only 300,000.

Here is the point: we hear a lot from Labour Members about what they would do if they were in government, but youth unemployment increased under the previous Government by nearly half from 1997 to 2010—up almost 300,000. Now, on what the shadow Work and Pensions Secretary called

“the failure of this government to get young people into work”,

youth unemployment is down 81,000 on the year and is lower than what we inherited. The International Labour Organisation long-term youth unemployment is also down 37,000 on the year. The number of young people out of work and not in full-time education is down 63,000 and the long-term youth claimant count is down 23,900 on the year, having fallen for the last 15 consecutive months.

I remind the Opposition, who are chuntering away from a sedentary position, that under them long-term unemployment nearly doubled in two years, from 400,000 in 2008 to 800,000 in 2010. While they were seeing that rise, they gerrymandered the figures on the claimant count: 80,000 were put on to training allowances so that they came off the measurement of whether they were long term unemployed. Even though they were back out of work or back out of training, they went back as though they had just started their claims.

The trend slowed and is now falling. ILO long-term unemployment is down 38,000 this quarter and is down 59,000 on the year. The number on the claimant count for 12 months, ungerrymandered, is down 74,000 on the year—a fall of 17%. That is down, I believe, to so many of the reforms and changes that we have made, improving the labour market and improving the process of getting people back to work. The latest labour market statistics are remarkable and nothing demonstrates more clearly the Government’s success in getting Britain working.

[Mr Love]

In recounting all the figures going down, the Minister omitted to mention that living standards have gone down—according to the Institute for Fiscal Studies, by about 6% over the past four years. What is the Minister going to do about that figure?

[Mr Duncan Smith]

Again, I say to the hon. Gentleman that he really needs to address his question to those who were governing, because, as I said earlier, GDP fell by 7.5% under the previous Government during the recession. What does he think forced those economics for individuals and working households to fall? It was the fact that there was a massive recession—the biggest for 100 years —on Labour’s watch.

I want to make some progress. The latest labour market statistics are remarkable. The Work programme that we brought in is now helping long-term unemployed people dramatically: half a million people under the programme have started a job; 252,000 have now gone into sustained work; and 10 times as many people have achieved job outcomes now compared with the end of the first year.

Compared with the flexible new deal, one of Labour’s great flagship programmes, under the Work programme, twice as many people have gone into a job, and it costs £5,000 less per place according to all the estimates. So, too, with the work experience programme that we brought in, allowing young people to take a work experience placement for up to two months while still keeping their benefit. That has helped 50% of participants off benefits and into work. It has the same success rate as the future jobs fund, but at a 20th of the cost—£325 as opposed to £6,500 of wasted money. What is more, the majority of places are in the private sector, whereas the future jobs fund created jobs almost exclusively in the public sector.

This Budget has been very good for jobs but it is very good for apprenticeships as well. The Government have already committed to a quarter of a million more apprenticeships than Labour ever planned, with 1.6 million starts since 2010. The Budget announced £170 million more for another 100,000 apprenticeship grants and for developing new degree-level apprenticeships as well. It is important that the Government are not only finding and helping to find people work, but helping to shape their skills and experience.

[Nick de Bois (Enfield North) (Con)]

In the Secretary of State’s list of successes, rightly attributed to the businesses in this country and the Government’s policies, will he also make reference to those that are now being supported by the enterprise allowance and the start-up schemes? As we saw at my recent jobs fair, more people are seeking self-employment as well.

[Mr Duncan Smith]

I pay tribute to my neighbour and hon. Friend for his phenomenal work on the jobs fairs, on all the creation he has done and on the work he has done with local unemployed people. He is absolutely right: the new enterprise allowance has been a phenomenal success. Thousands of people have started their own businesses under it. It is one of the big success stories of this Government. It is going to grow and we are going to ensure that many more people, particularly young people who are more and more keen to start their own businesses, get the kind of support they want.

[Sheila Gilmore]

Does the Secretary of State not have any concern that even now there are 2.3 million people unemployed, and as his own statement made clear, the total has gone done by only some 160,000 since the election? The figure was 2.4 million before the election and now it is 2.3 million. What has gone wrong with getting those people into jobs?

[Mr Duncan Smith]

Of course I want to see more people back in work, particularly young people, but the hon. Lady must remember that we inherited from the previous Government an economy that had hit the buffers, with young people cascading out of work in the two years running up to the election. Youth unemployment rose over their whole period in office, which suggests to me that their policies were hurting young people long before the recession. What we are doing is aimed at getting more people back into work. We have been successful in improving the situation, as the figures now are better than those we inherited—more people are in work, including more young people—but of course there is more to do, and it is this coalition Government who are doing it.

We are also introducing our other programmes, including the Work programme and universal credit, with the pathfinders moving into the north-west and eventually rolling out by 2016. We know that 90% of claims for jobseeker’s allowance and other benefits are already being made online, which is a huge change—only about 10% or 12% were made online before—that is improving speed and accuracy. Some 78% of claimants are confident about their ability to budget with monthly payments, as a result of the programmes we have run. Two thirds think that the universal credit process offers a much better work incentive than jobseeker’s allowance. Even in its early stages, universal credit is having a significant impact on people’s work prospects: claimants are likely to spend twice as long looking for work; two thirds agree that it is easier to understand their obligations; and 86%—rising to 90%—are confident of gaining a job within three months, which is a much higher rate than for jobseeker’s allowance.

These are dynamic changes that we are making, improving the path back to work, the incentives and the choices that people make. We are improving their work prospects and helping them into meaningful, long-term jobs. However, I gather from the Chief Secretary that the Treasury received a submission from the Opposition in the run-up to the Budget for an alternative to our programmes, which they call a jobs guarantee. I thought that we should look at that, just to examine whether it was worth embracing. I think it only fair that we tell the House whether or not it would work. Having looked at the proposal in a completely ambivalent manner, I have to say that it is confusing. The first submission said that it was a six-month programme for young people. The second submission said that it was a year-long programme. The third submission said that it was a two-year programme for the long-term unemployed. I gather that there is now some suggestion that it might be a six-month programme for everybody.

Apparently the jobs guarantee is now a flagship policy for the Opposition, but I understood that it would be funded for only one year. Now we hear that the same funding they announced for one year is meant to last all the way through a full Parliament. We asked the Treasury to do some formal costings for that, which I hope have been made available to the Opposition. They said that their scheme would cost only £1.9 billion in its first year and £0.9 billion thereafter, but the Treasury’s formal costings—[Interruption.] I know that Opposition Members do not want to listen, because the last thing they want to hear is how they would pay for it The Treasury, which is full of decent people doing a hard day’s work, has shown that there is a massive gap of £2.6 billion per year between what the Opposition say their jobs guarantee will cost and what we calculate it will cost.

Not only have the Opposition underestimated the costs by £0.6 billion in the programme’s first year, and £1.7 billion in future years, but they have no robust means of funding it. They say that they will fund it with a bankers’ bonus tax that will raise £2.3 billion, which is questionable, but I understand that they have spent that 10 times over. Let me list a few of the things they have committed to spend it on: reversing the VAT increase, which would cost £13.5 billion; more capital spending, which would cost £5.8 billion; reversing child benefit savings, which would cost £3.1 billion; reversing tax credit savings, which would cost £5.8 billion; and more housing, which would cost £1.2 billion. They have made £30 billion of spending commitments, apparently to be paid for by a tax that would save them £2.3 billion.

[Charlie Elphicke (Dover) (Con)]

Does my right hon. Friend agree that the lesson of Labour’s crash is that more spending, more borrowing, more debt and more taxes do not work? Does this not show that the Opposition have not worked that out, because they have spent their bankers’ bonus tax more times than the number of sides on the new £1 coin?

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[Mr Duncan Smith]

My hon. Friend is absolutely right. The reality is that the Opposition are not very good at learning lessons. Were they in power again, I suspect that they would crash the car into the buffers, just as they did the last time.

At the same time, the Opposition’s proposal for restricting pensions tax relief has been called “extraordinarily complex” by the IFS and “unworkable” by the CBI. Labour needs a little reminder that make-work schemes are enormously expensive and, worse still, a mean attack on these pension proposals. The saving they expect to make from pensions tax relief is another mean attack on people who do the right thing by saving for their future. Labour has learnt nothing. Its proposal is even possibly a rehash of its old StepUp programme, which ended up costing a massive £10,000 per place before it binned it, rather than introducing it.

There we have it: a policy—the only one I have heard from the Opposition—that is full of flaws, unfunded and simply would not work. It is small wonder that when asked they said, “Okay, this will be about the private sector.” Actually, the future jobs fund, on which this proposal is based, never got jobs in the private sector. In fact, Barnsley council reported that only 7% of those jobs were in the private sector, and Birmingham council reported only 2%. It is small wonder that when asked to confirm whether that would be for private sector jobs, the shadow Chancellor said:

“But if not, you can do it through the voluntary sector. If not… you have to have a final backstop: public work scheme.”

If not one, then the other, but if not that, then another one. It begins to sound a bit like Vicky Pollard: “Yeah but no but yeah but no.” They have no policy for employment at all. To this date the private sector’s response has been unequivocal:

“Wage subsidies for employers are not the source of sustainable jobs… Government must focus on creating the conditions for growth”.

It is the same old Labour; the same old failed policies.

A little over a year before the next general election, this Budget sets out the choice now facing the electorate. On one hand we have an Opposition who every day are mired in confusion, who have voted against every reform measure and who have learnt nothing. After making welfare spending balloon by 60% during their time in government, they now want to spend more.

I want to ask the hon. Member for Leeds West what she meant by something she said when addressing a meeting of Christian socialists—perhaps they were just socialists, but I am not sure. She said:

“It will be much better if we can say all the changes that the Government has introduced we can reverse and all benefits can be universal.”

There we have the beating heart of Labour, and the public should know this—[Interruption.] They are cheering, because that is exactly what they want. Only now will they vote for the welfare cap—although I understand that a number of them will not—but they have no intention of sticking to it. That is only because, as the hon. Lady went on to say, to do what she wants to do would at the moment appear unpopular. They do something because it appears popular, not because they believe in it.

[Mark Pritchard (The Wrekin) (Con)]

I wonder whether my right hon. Friend can help me. Does he know whether it is now the policy of Her Majesty’s Opposition to have an individual welfare cap or a universal budget cap? It is not only hon. Members in this place who would like to know what their policy is; 27 bishops in the other place would, too.

[Mr Duncan Smith]

With respect, I have found in the past few weeks that I cannot really answer for bishops. They usually think they can answer for me, which is a fair response, but I am happy to avoid that challenge.

The Opposition have been quite confused about the welfare cap. They say that they are going to support it, but within the cap they have a policy they say they are going to change by ending the spare room subsidy. [Interruption.] Opposition Members call it a bedroom tax. I noticed that when they said last week that there were 24 tax rises under this Government, they did not schedule that as one of those tax rises. The truth is that they know it is not a tax, so, as ever, they are trying to fool the public. Let me point out that reversing that policy will cost them up to £500 million a year, and they have, they say, produced only one measure within the welfare cap that they will use to pay for that—means-testing winter fuel allowances for wealthier pensioners, but that will save only £100 million. Almost as soon as they vote for the cap tomorrow, they will be planning to break it. Perhaps the hon. Member for Leeds West can tell us—I will give way to her if so—what other elements she is going to change within the capped programme to reduce spending to bring it under the cap. Will she will intervene to tell me that? Of course not; she has no idea. There we have it—it is just a game for them. The only reason they might vote for the cap is that they are worried that it would be unpopular not to do so, but they do not intend at any stage to implement it.

On the other hand, this coalition Government are reforming welfare in the firm belief that it is the right thing to do, not only saving money but breaking dependency and restoring the incentive to work. We have record highs in employment and record lows for the rate of workless households. What is more, this Government are rewarding hard work and saving, in the belief that people have a right to take their own decisions on the money that they have earned, not dictating to them through high taxation or forcing them to buy poor yielding products as the previous Government did. This Budget delivers support for those who try, help for those who need it, and security for hard-working families up and down the land. I commend this Budget to the House.

[Several hon. Members]

rose—

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[Mr Duncan Smith]

The hon. Lady has mentioned her jobs guarantee, which Labour has said will involve the private sector. Which companies have actually signed up to it?

[Rachel Reeves]

The compulsory jobs guarantee, which will last for the full five years of the next Parliament, will be based on what we have seen with the jobs growth Wales programme, whereby 80% of the jobs are in the private sector. A couple of weeks ago, the shadow Minister for employment—my right hon. Friend the Member for East Ham (Stephen Timms)—and I visited a software company in Cardiff that had taken on 12 people through jobs growth Wales. It had made a huge difference to those young people, giving them hope and opportunity. The Government carp at our policies to get young people back to work, yet under them long-term youth unemployment has more than doubled. That is the Secretary of State’s record under this Government.

If the Chancellor really wanted this to be a Budget for savers, he would cap fees and charges on pensions and require insurance companies to provide free independent brokerage, as Labour has called for. Why did the Chancellor not do those things? It is because he is strong when it comes to standing up for the rich, but weak when it comes to standing up for the poor.

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[Rachel Reeves]

The right hon. Gentleman will not have to wait too long: at 7 pm, he will find out how we will vote on the different measures. Let us be clear: what matters most of all is what was omitted from last week’s Budget, including a compulsory jobs guarantee, a cap on fees and charges and cancelling the bedroom tax. Those things would make a real difference to the lives of our constituents, but the Chancellor did not even mention them in last week’s Budget statement.

The Secretary of State has not just failed with the Work programme; he is failing with universal credit as well. It is years behind schedule and £130 million has already been wasted on IT, yet the Secretary of State continues to say that his flagship reform is on time and on budget.

[Mr Duncan Smith]

indicated assent.

[Rachel Reeves]

He continues to do so now. If three years later and £130 million down the drain is on time and on budget, that says more about the Secretary of State’s grasp of mathematics than anything else.

The truth is that from Easterhouse—where the Secretary of State had his epiphany—to the Vatican, people are queuing up to tell the realities of this Government’s reforms. Rosemary Dixon, the chief executive of a charity on the Easterhouse estate in Glasgow—the Secretary of State might remember her—has said that the simple truth is that “things are going backwards.” A letter from 27 bishops stated that

“we must, as a society, face up to the fact that over half of people using foodbanks have been put in that situation by cut backs to and failures in the benefit system, whether it be payment delays or punitive sanctions.”

Archbishop Vincent Nichols has said that

“the role of food banks has been crucial to so many people in Britain today and for a country of our affluence, that quite frankly is a disgrace.”

The Secretary of State says that he is on a moral crusade. The people affected by his policies know what sorts of morals he has.

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[Hazel Blears (Salford and Eccles) (Lab)]

It is a pleasure to follow the hon. Member for Stourbridge (Margot James). I want to concentrate my remarks on the social economy. I draw the House’s attention to my—unpaid—entry in the Register of Members’ Financial Interests.

Since the crash of 2008, there have been a difficult few years for countries around the globe. Many companies have struggled to find investment and to grow. Ordinary people have very often been faced with redundancy and unemployment. That particularly applies to our young people, of whom nearly 1 million are struggling to find work. Public services have been cut quite dramatically, and many are facing increased demand at the same time, none more so than in the spheres of the national health service and social care.

Against that very difficult background, and as we enter what I certainly hope will be a period of better economic news of sustained growth and job opportunities, we have a real chance not to do business as usual, but to take a new path towards what many of us have talked about in this House—a more responsible capitalism. At the moment, it is still a fairly nebulous concept, but I believe that we can start to put some flesh on the bones and to invest in the social economy.

For the past 18 months, I have convened a group of local authorities, social enterprises and some large corporate firms to consider how we might come together to get the public sector, the private sector and the third sector to work in a much more integrated fashion. We have done that under the banner, “Doing good is good business”. Social enterprise has always been a passion certainly of mine, but it is now taking a much more central position in our economy. In this country, there are 70,000 social enterprises, which contribute £18.5 billion to the UK economy and employ about 1 million people. It is no longer a niche part of our economy, but is becoming absolutely mainstream. In Europe, one in four new businesses that starts up is a social business. Some 35% of people who left private sector employment last year have gone into the social economy. It is really moving on apace. There are now many brilliant social enterprises. I have Unlimited Potential and Social adVentures in Salford. In the constituency of every hon. Member, there will be social enterprises that not just provide jobs and opportunities, but bring into our economy the absolute gold dust of innovation and creativity.

I want us to give a real boost to social enterprise on a cross-party basis, but we also need to do something about public procurement. The Public Services (Social Value) Act 2012, which I helped to take through the House, empowers public authorities to take into account social, economic and environmental impacts, as well as value for money. That can be absolutely transformational, provided that we get behind it, give it teeth and really make it work.

[Mr Duncan Smith]

I pay tribute to the right hon. Lady, whose work in this area has been really first rate. I told her that last time we met, over dinner at Apsley House, but I am just dropping names. Will she take her point a little further, because the creation of social impact bonds is a very big and important area? I know that she is a big supporter, but how does she see that rolling out, particularly now that the Budget will bring in tax relief for it?

[Hazel Blears]

I am absolutely delighted that social investment tax relief has been set at 30%. Some estimates suggest that that might liberate up to £500 million of extra investment into the economy. At a time of austerity and when there is very little public money about—whichever party is in power—we must absolutely seize the possibility of mobilising private capital for public good.

I pay tribute to the Secretary of State, because he has been a pioneer. He set up his social investment fund, which has catalysed the market in Department for Work and Pensions areas. I have spoken to the Secretary of State for Education to try to get something similar in relation to social mobility and educational attainment, and he is very interested. I said to him, “The Secretary of State for Work and Pensions is a bit of a pioneer, so why don’t you get involved in this as well?” I have also spoken to the Minister of State, Department of Health, who has responsibility for social care, to look at social investment bonds for the care of the elderly, particularly in relation to dementia, which is a huge issue for all of us and, indeed, countries across the world. Mobilising private capital to enable us to transform public services is an extremely exciting agenda.

I want to say a word about the Public Services (Social Value) Act, because a whole range of local authorities are now taking up the new powers, including my own in Salford, as well as Liverpool, which has declared itself a social value city, Birmingham, Wakefield, Hackney and Lambeth. People from all political parties and local authorities of all shapes and sizes want to commission in this new way. We now need transparency, through metrics and measurements, so that the people on this playing field can get some recognition.

One of the most exciting things is that some companies in the private sector want to do exactly the same in moving from traditional corporate social responsibility into using their mainstream business model to make a social impact. Companies such as Fujitsu, Veolia, Interserve and CH2M Hill are now looking at their supply chain to see how they can get social enterprises and small businesses to bring them the agility and creativity that such big global enterprises sometimes cannot put into the system. In particular, Fujitsu has done a report called “Collaboration Nation” about building a very different supply chain. It has told me that it absolutely sees the business case for doing so, because it is able to develop new products. It is also attracting the best talent, because these days young people want to work for an organisation that has values, and to go home at the end of the day being proud of what they do. All those private sector companies want to do that and be responsible capitalists in that way, but we must encourage them and recognise that this will be a long-term agenda.

I say to the Chancellor and the Secretary of State that if we could extend the Public Services (Social Value) Act to goods and infrastructure—that is where the big spend will be in the next 10 to 15 years, not necessarily on services and revenue expenditure—why can we not have social clauses in procurement for High Speed 2, for the possible new airport, or for regeneration projects that bring apprenticeships, get a better supply chain and make a social impact?

As I said, I am delighted that social investment tax relief is being brought forward. We now lead the world in that, and at the G8 meeting that I was privileged to attend we could see how much the United Kingdom’s creativity has taken that forward. There are now a whole range of new social investment bonds. We have just signed one off in Manchester to help young people come out of care, and to provide foster care and adoption, which is an amazing ability.

When I went to Brussels last week I met Commissioner Andor, who was hugely encouraging about social procurement and social investment. We are about to launch some local investment funds. The first was launched in Liverpool two weeks ago, and we would like to have 10 to 15 across the country over the next year. We are hoping to do that in Greater Manchester, bringing together European Union structural social funds with social investment, to provide unsecured loans to social enterprises of £50,000 to £100,000—exactly the kind of loans they need.

All that brings the social economy into the mainstream. We used to think about social enterprise as a niche or an add-on to the mainstream economy, but no longer. If we take what measures we can to make social procurement mainstream, including goods and infrastructure, and to support social enterprises to make social investment and the market grow in the long term, we can genuinely harness the innovation that is often in social enterprise, together with people who want to do capitalism in a more responsible way and the engine of the public sector. In doing that we will show that “doing good” really is good business.