amendment of the law

Rachel Reeves Excerpts

Tuesday 25th March 2014 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

Wednesday’s Budget was certainly dressed to impress, but at its very heart there was an admission of failure. Let us remember what the Chancellor told us in 2010: that the Government would clear the deficit during this Parliament. They laughed at Labour’s plan to halve the deficit by the end of the Parliament, yet last Wednesday the Chancellor had to admit that he will not meet his targets until 2018—fully four years late.

The Chancellor comes from a wealthy family of wallpaper manufacturers, and this really was the ultimate Osborne and Little wallpaper Budget: paper over the cracks, use a stunning design to mask the underlying structural faults, and repeat patterns from last year’s range. But the truth is that for all the patterns and effects, people are worse off by £1,600 per year under this Government. Energy bills are up by £300, and however he dresses it up, people will be worse off in 2015 than they were in 2010.

This Budget was an opportunity to tackle the cost of living crisis faced by hard-working people across this country, but, again, the Government have failed to do so. They failed to do anything for families struggling with the costs of child care this side of an election. They failed to do anything to address youth unemployment and long-term unemployment with a jobs guarantee. They failed to help those working two or three jobs but still struggling with not enough to live on. They failed to help older people struggling to pay their energy bills, and they failed to help the disabled people so unfairly penalised by their bedroom tax.

[Mr Dominic Raab (Esher and Walton) (Con)]

Before the hon. Lady gets into full flow, will she at least recognise that on elderly poverty, fuel poverty, child poverty and overall inequality, the situation under this Government is better than that left by Labour?

[Rachel Reeves]

The Government’s own figures show that the number of pensioners in poverty is set to rise, not fall, under this Government; that is the Chancellor’s legacy.

The Chancellor called this a Budget for the makers, the doers and the savers. The reality is that for the makers, over the past three years, manufacturing is down by 1.3%, infrastructure investment is down by 11%, and exports are falling, not rising. For the doers, real wages are down by 6% in this Parliament, energy prices are up by £300, and long-term youth unemployment has doubled. As for the savers, what has he done for them? According to the Pensions Minister, the hon. Member for Thornbury and Yate (Steve Webb), he is allowing them to cash in their pensions and buy a Lamborghini. How incredibly out of touch is that? The average pension pot is about £30,000. I checked on the internet this morning, never having looked at this before, and found that the Lamborghini Aventador costs £263,000. The Cabinet might be lucky enough to be able to afford to buy a Lamborghini with their savings, but ordinary people would be lucky to be able to afford the door of a Lamborghini.

[Mark Pritchard]

For the record, it is inaccurate to describe everybody on the Government Benches as having a wealthy background; that is clearly not the case. On helping hard-working families, does the hon. Lady’s party support the overall DWP welfare cap, and the individual welfare cap, given the views not only of Members in this place, including the hon. Member for Rhondda (Chris Bryant), but of 26 bishops in the other place, plus one other bishop who does not sit in the other place—Archbishop, soon to be Cardinal, Vincent Nichols?

[Rachel Reeves]

I am sorry if the hon. Gentleman cannot afford a Lamborghini with his savings. I will come on to the welfare cap. We have been clear that we will be supporting the welfare cap in the vote in Parliament tomorrow.

If the Chancellor really wanted this to be a Budget for the makers, he would have cut business rates, supported a British investment bank to help small businesses, and committed to build more homes—the 200,000 extra homes a year that Labour has promised. If he really wanted it to be a Budget for doers, he would cut taxes for millions of working people with a 10p starting rate of tax, freeze energy bills and reform the broken energy market, and expand child care for parents with three and four-year-olds, as a Labour Government would.

[Mike Thornton (Eastleigh) (LD)]

On cutting taxes for ordinary working people, surely the hon. Lady must concede that putting the tax allowance up so that they are paying nothing on their first £10,000 or £10,500 is better than their paying 10p on that amount?

[Rachel Reeves]

The hon. Gentleman will know that the Institute for Fiscal Studies has counted the costs of what this Government have done. Taking into account all the changes to taxes, including VAT, which he voted to increase from 17.5% to 20% despite what was in his party’s manifesto, changes to tax credits and benefits have cost the average family £891. It is a case of giving with one hand but taking much, much more with the other.

[Andy Sawford (Corby) (Lab/Co-op)]

My hon. Friend talks about a Budget for the doers. Yesterday I met three young people in my constituency aged 22, 24 and 23 who had never had proper long-term jobs because they had worked for agencies and on zero-hours contracts. If the Chancellor cared about doers and young people, his Budget would have addressed those issues.

[Rachel Reeves]

I thank my hon. Friend for that intervention. As he knows, Labour’s compulsory jobs guarantee would benefit people exactly like the young people he met in Corby. It would guarantee a job for every young person who has been out of work for a year, giving them real hope and opportunity and utilising their skills and talents.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

If things are going as swimmingly as the Government wish us to believe, is my hon. Friend as concerned as I am about the numbers of people getting into personal debt trying to make ends meet, and about all the evidence that shows that personal debt will rise, not fall, over the years ahead? Does she think that is a sign of an economy recovering, or of people scraping to make ends meet under this Government?

[Rachel Reeves]

My hon. Friend speaks knowledgably not only of what she sees in her constituency of Walthamstow, but of what she hears when talking to others about the impact of payday lenders and debt on many of our communities.

[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.

[Mr Jim Cunningham (Coventry South) (Lab)]

Does my hon. Friend agree that one of the biggest indictments of this Government and the Budget is the way in which they have adjusted taxation such that women will fund the bulk of the £14 billion the Government have to save? Women will have to save £11 billion—that is an indictment of this Government.

[Rachel Reeves]

My hon. Friend makes an important point: women are disproportionately hit by the changes introduced by this Government and are struggling with the rising cost of living more than anybody in this country. Moreover, the increasing costs of child care under this Government are making it harder for working parents, particularly working mums, to go back to work and make the contribution we need to the economy.

Four years ago, this Government said that debt would fall and that living standards would rise, yet the reverse has happened. They have broken their promise to balance the books by 2015 and they are set to borrow £190 billion more than they had planned. National debt is rising this year and it will rise next year and the year after that. There is more borrowing, more debt and more welfare spending under this Government.

[Mr Harper]

On the subject of debt and future spending—the hon. Lady will probably get to this later in her speech—will she answer the question asked by my right hon. Friend the Secretary of State about her remarks at a meeting last week? She is reported to have said that it would be better if she could reverse all of the changes and make benefits universal. That is a spending commitment of hundreds of billions of pounds. She needs to say whether she said it or not; otherwise no one will believe a word the Opposition say.

[Rachel Reeves]

We are the party who have said that we will cut the winter fuel allowance for the richest pensioners and means-test that benefit to save money, but Government Members do not support that. The reality is that we are the party who are willing to take tough decisions to get the welfare bill down, whereas it is rising, not falling, under this Government.

The truth is that social security spending is £13 billion more than this Government had planned. In last week’s Budget, the Chancellor had to revise up spending on social security by £1 billion more this year and £1 billion more next year than the Government had planned just six months ago. Was that what the Prime Minister meant when he said that he was cutting the cost of welfare? It is going up, not down.

The problem is that without addressing the cost of living crisis, it is not possible to control the costs of social security. Long-term youth unemployment has doubled since 2010, costing taxpayers £330 million a year. The number of people working part-time who want a full-time job is up to 1.4 million, costing £4.6 billion in extra social security. One in five workers are paid less than a living wage—up from 3.9 million in 2009—costing the Treasury an estimated £3.2 billion a year. Housing benefit is increasing and has been revised up again because house building is at a record low. The Secretary of State has also played his part, with his shambolic welfare reforms. Just one in five people who have been on the Work programme for two years have secured a job; £1 billion has been paid out, yet more people are ending up back in the jobcentre than getting a job through the Secretary of State’s failed Work programme.

[Mr Simon Burns (Chelmsford) (Con)]

I think I am grateful to the hon. Lady for giving way. Given that I have been listening for 12 minutes to her critique of my right hon. Friend the Chancellor’s Budget, why is it that her party has come out saying it will support so many of its measures? Why is Labour thrashing around with such difficulty to find what to vote against tonight? Will the hon. Lady share with the House what her party plans to vote against?

[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.

[Nick de Bois]

The hon. Lady may regret bringing the bishops and the moral case they were arguing into this. Perhaps she would like to reflect on what the position was of the bishops, and what Labour’s position was, when her Government kept people on benefits at a 95% marginal tax rate? Those people could not afford to take a job and Labour did nothing but trap them in a life on benefits.

[Rachel Reeves]

The employment rate reached a record high under the previous Labour Government and it has not risen to that level today. I believe that work did pay under the previous Government, and a flagship reform to make work pay under this Government has failed. The national minimum wage did more than anything under the previous Labour Government to make work pay, but that policy was opposed by the hon. Gentleman and his party.

If the Secretary of State really wants to get the welfare bill down, he must tackle the low wages and zero-hours contracts that leave too many people reliant on in-work benefits. If he really wants to get the social security bill down, he needs to build 200,000 extra homes a year to control the cost of the rising housing benefit bill. If he really wants to get a grip on the social security bill, he should introduce a basic skills test to help those who are unemployed to find and stay in work. If he really wants to control the cost of social security, he should introduce a compulsory jobs guarantee to get the young and the long-term unemployed back into work. The Budget failed to do those things. If we did them, however, we would gain control of social security. For those reasons, we will support the Government when we vote on the welfare cap tomorrow.

However, Labour would make different choices. We would get a grip on the failing programmes, such as universal credit and the Work programme, and focus on the cost of living crisis. We would scrap the bedroom tax, which is cruel and costs more money than it saves. We would take tough decisions, such as scrapping winter fuel allowance for the richest pensioners. We would get more people into work on decent wages that they can afford to live on. Different parties, different values, different priorities. Our priority would be to control the cost of social security; under the Tories, it continues to rise.

On pensions, I think that we can all agree that people need more help to save for their retirement. That is why I am pleased that the Labour Government legislated for automatic enrolment and that this Government have taken forward that Labour policy, based on the Turner consensus. We support greater flexibility so that people can get a better deal from the pensions market when they retire. We will continue to support reforms in the annuities market, which we have campaigned for and which the Leader of the Opposition called for in 2012.

The Government should go further than they did last week. Their figures show that savers are losing up to £230,000 from the value of their pension pots because of excessive fees and charges when they save. The Government should bring forward a meaningful cap on fees and charges to ensure that people’s pension pots are not drained by insurance companies. They should ensure that there is full disclosure of fund manager charges alongside that cap. They should ensure that, for those who want to turn a lifetime of savings into a secure and decent stream of income with an annuity, that is not made harder, and that brokerage is not just offered, but is taken up, so that people get the support they need to make the decisions that are right for them. We must not risk another Tory mis-selling crisis like the one that followed the personal pensions revolution of the 1980s.

To ensure that the Government get the reforms right, we will hold them to account with three tests. First, is there robust advice for people who are saving for their retirement? Secondly, is the system fair to those on middle and lower incomes who want a secure retirement income? Thirdly, are the Government sure that the changes will not result in extra costs to the state, either through social care or by increasing housing benefit bills? We will continue to push for the reform of pensions, but it must be reform that works for people who have saved all their lives, who deserve security and confidence in retirement.

We must be clear that the Office for Budget Responsibility has delivered a damning verdict on the Government’s record of getting people saving. The proportion of income that people are saving has fallen from 7.2% in 2012 to 4.1% this year, and it will fall to 3.2% by the end of the forecast period. More needs to be done to ensure that people have the confidence and the ability to save.

To conclude, whether you are a young person looking for work, a couple looking to buy your first home, a mum and dad trying to pay the bills and get decent child care, a pensioner struggling with rising energy bills or a business trying to access finance, you are worse off under the Tories. They have had four years to deal with the cost of living crisis and they have failed. They have had four years to help young people and the long-term unemployed, and they have failed. They have had four years to help those who are disabled and vulnerable, and they have failed.

There is a tax cut for millionaires, and beer and bingo for the working classes. George Orwell wrote of his nightmare vision of the world in 1984 that

“beer, and above all, gambling, filled up the horizon of their minds.”

Thirty years on in 2014, it seems that the Chancellor thinks that all he needs to do is to cut taxes on beer and bingo, and they will be happy. It is them and us, Mr Speaker—how patronising, how out of touch, how very Tory. The Tories cannot deal with the cost of living crisis; only Labour will.