‘Welfare Cap’ – another broken promise

Yesterday the Government had to come to the Commons for the second year in a row to explain how and why they have missed their own ‘welfare cap’.

Never has a Government been so adept at failing its own tests. Now we can add the Tories’ ‘welfare cap’ to their pile of broken promises. Another red-faced minister had to stand in front of the dispatch box and explain to us why it is that they will spend more than their self-imposed limit on social security in every one of the five years of this parliament.

This is a far-cry from 2014, when the former Chancellor, George Osborne, announced his welfare cap with such glee saying, “The welfare cap marks an important moment in the development of the British welfare state…and ensures that never again can the costs spiral out of control”. But the welfare cap only serves to highlight the failure of his own government on the economy and social security.

It is the failure to take a common sense approach that has led to the Tories’ welfare cap lying in tatters and an embarrassed minister making excuses in the Commons yet again. Their slash and burn economic strategy has failed. Instead we must tackle the structural problems driving social security spending to ensure that, like the NHS, the social security safety net remains there for us all in our time of need.

In my article for the New Statesman and my speech in the Commons yesterday, I outlined a better way to reduce social security spending by tackling the key drivers, including the ballooning housing benefit bill and insecure, low-paid work.

My full speech is below:

Debbie Abrahams (Oldham East and Saddleworth) (Lab): It is always a pleasure to be here when you are in the Chair, Madam Deputy Speaker.

As Members will probably gather, I take a slightly different view from the Minister, and I will go on to the details in a moment. However, as the Minister acknowledged, this is the second year the Government have been forced to come to the House to explain their failure not just in breaching their own social security cap but on the economy.

As a quick point of clarification, the Government spent £130 billion more between 2010 and 2015 than the previous Labour Government spent between 2005 and 2010. So this Government have spent more. That is absolutely—[Interruption.] It is very interesting that Government Members should take that approach, but I will go on. It turns out that the long-term economic plan is really nothing more than a slogan, and that probably “long-term economic failure” would have been slightly more apt.

The Lord Commissioner of Her Majesty’s Treasury (Guy Opperman): More jobs.

Debbie Abrahams: I will come on to the record number of jobs. The hon. Gentleman is trying to—

Madam Deputy Speaker (Mrs Eleanor Laing): Order. We cannot have sedentary interventions from the Whips’ Bench. [Interruption.] We just cannot, even when there is nobody else here.

Debbie Abrahams: That is fine, Madam Deputy Speaker —I have no problem with answering the hon. Gentleman. He said, “More jobs”, but 80% of the increase in employment is in self-employment, and half—[Interruption.] These are the facts. Half of those in self-employment are earning less than the living wage.

As we saw in the autumn statement, growth is down, borrowing is up—again—inflation is on the rise, deficit targets are hopelessly missed, and productivity is flatlining. The Office for National Statistics has described this as “unprecedented”, with the worst levels of productivity since the second world war. Of course, productivity is the driver of wage growth, so we are seeing stagnant wage growth as well as precarious levels of employment.

The Government have failed on every single one of their fiscal targets, so much so that at the autumn statement they had to define a new set. They promised us an economy based on high wages and lower social security spending where work always pays, but in over six years they have done nothing to deliver the high-skill, high-wage, productive economy that this country desperately needs to compete in the global market. As a result of their failures, the Government have once again breached their own welfare cap—not just last year, not just this year, but every year for a full five-year term. For the remaining years of this Parliament, the Government will miss their cap by £5 billion, £6 billion, £7 billion and £8 billion respectively—a record of the complete and utter failure of their economic strategy.

Instead of reforming the social security system to reflect the reality of today’s flexible labour market, the Government have sought to cover up their economic ​incompetence and take it out on the working poor, the sick and the disabled, raining down austerity on the most vulnerable in our society. We have had six wasted years while the poorest have picked up the bill, with a full four years of failure yet to come. This is a far cry from the former Chancellor’s proclamation in 2014 that

“The welfare cap marks an important moment in the development of the British welfare state”


“ensures that never again can the costs spiral out of control”.—[Official Report, 26 March 2014; Vol. 578, c. 374-381.]

All the evidence is to the contrary. This debate is further testament to the Government’s complete failure to manage the economy or—and this is the most important point—to tackle any of the drivers of social security spending. It is incredible to watch the Government as they bound aimlessly from one broken promise to the next. Whatever their favourite slogan—“We’re all in it together”, “Fighting against burning injustices”, or “A Britain for everyone”—it is clear that gimmicks and grandstanding are all the Government are capable of.

In the motion, the Government claim that they could not meet their own rules due to spending on social security support for disabled people and higher than expected inflation. As ever, they are pointing the finger of blame at the most vulnerable rather than apologising for their own economic mismanagement. Let us examine the facts in a bit more detail. At the autumn statement, the Office for Budget Responsibility predicted that the Government will spend £120.5 billion in 2019-20 and £123.2 billion in 2020-21 on social security considered within the cap. Of this, the OBR estimates that changes in forecasts for CPI—consumer prices index—inflation will increase spending to 2021 by £0.8 billion in total. At less than a percentage point of total spending inside the cap, this can hardly be said to be the major driver of the Government’s failure to keep their promises. The Government have lost control of the economy, if they ever had control of it in the first place, and failed to tackle the key drivers of social security spending other than pensions—low-paid work and high housing costs.

Furthermore, the Government’s claim that increased disability spending will cause a breach of the cap at the end of the Parliament is just another attempt to point the finger at sick and disabled people. I admit—I am pleased about this—that there has been no language from Ministers around the “shirkers and scroungers” narrative that we have seen in recent years. That is a very welcome move. However, I am not clear whether this extends to press releases from Conservative Campaign Headquarters or to some of the coverage in less responsible sections of the media. We must be careful of our language in this respect. Even if derogatory terms such as “shirker” and “scrounger” are not used, what is implied by “incentivising” people who have been found not fit for work? Is the implication that they are at home avoiding work—that it is their choice to stay at home instead of being in productive work? That is offensive to very many people.

Instead of blaming everyone else for their mess, the Government should start taking responsibility. It is not just Labour Members who are making these points. The United Nations Committee on the Rights of Persons with Disabilities has described the approach of the past ​six years as a “grave and systematic violation” of disabled people’s rights. We have heard similar comments from our own Equality and Human Rights Commission, the Government’s Social Security Advisory Committee, and, indeed, Government Back Benchers. All have raised concerns about the lack of evidence in many of the Government’s social security policies, particularly regarding their punitive effects. I am pleased that the Minister said that the Government had taken the view that because of the implications that changes to tax credits would have for the working poor, they had decided not to proceed with them, but what about work allowances around universal credit? We are talking about the same people. The taper rate will make a difference of a couple of hundred pounds a year instead of the net effect of over £2,000 a year.

I want to explore some of the real reasons the Government have totally failed to meet their promises. They have failed because they have not tackled the drivers of social security spending. Rather than creating a strong economy with high wages, progression in the labour market, affordable housing and accessible childcare, they have starved the economy of much needed investment, leaving us all worse off after six wasted years of austerity. This is not just our analysis; in every regard, the evidence speaks for itself. On housing, under this Government we are projected to spend more than £20 billion a year, every year, on housing benefit, which, after pensions, is the second largest spending area of social security spending. This amounts to more than £100 billion spent over the course of this Parliament, with nearly half going straight into the pockets of private landlords.

All the while, the Government’s own figures show that the number of affordable homes being built has slumped to a 24-year low. Indeed, research by the Joseph Rowntree Foundation suggests that we need to be building 80,000 affordable homes a year to meet demand and keep the current spend on housing benefit stable. This year, we have managed to build just 30,000. Instead of focusing on reducing the housing benefit bill by building affordable homes, the Government have chosen to force the sale of the remainder of our socially rented stock, worsening the housing crisis and driving up housing benefit spend. This is one of the key reasons they have breached their own cap.

On top of this, there is the squeeze on in-work support for people in low-paid jobs. We will spend over £50 billion on tax credits in the two years covered in this motion. Why? Because the Government have failed to ensure that wages keep up with the cost of living, leaving many working people relying on top-ups to get by. Real wages are now set to remain lower in 2021 than they were in 2008, yet the Tories still turn their backs on working people by trying to cut the amount of tax credit support available under their failed austerity plans.

Likewise, under universal credit the Government have weakened incentives to work by cutting billions—about £10 billion over the life of this Parliament—from the programme’s work allowance under their austerity plans. Their meagre reduction in the taper rate does not touch the average cut of £2,000 a year, as I have just mentioned, which will affect 2.5 million working people. If the Chancellor was serious about reducing the social security spend, he would follow Labour’s lead and implement a real living wage calculated on the basis of what ​people need. That would ensure that people get a fair and proper wage for a working day, while reducing the expenditure of the state.

Our Chancellor is apparently not capable of making such an obvious decision, despite the fact that the Living Wage Commission has shown that the Government’s national living wage falls well short of providing a decent standard of living. The Chancellor used his autumn statement to chop 1w0p an hour off the previously promised wage increase, at a cost of about £200 a year to the average worker. That is all in the context of flatlining pay, which leads to the average wage being £1,000 lower in 2020 than was predicted at the last Budget. How can we ever expect to reduce social security expenditure when the Government will not act on wages?

High wages alone will not clear up the mess, however. We also need to act on progression in the labour market if we are to tackle the drivers affecting social security spending. The JRF has shown that four out of five low-paid workers are still low paid 10 years later. There is no automatic progression to higher pay. That is further proof of the deep structural problems we face in our labour market.

Finally, we should turn our attention to the disability employment gap, which the Government claimed they would halve by 2020. I am grateful for the intervention from the hon. Member for Airdrie and Shotts (Neil Gray) on that point. The gap narrowed from the end of last year, but it is now back up to the level it was just before the general election last year. Perhaps the Government’s plan to force people into work before they are ready by cutting the employment and support allowance can be added to the mounting examples of the Government’s flawed strategy.

Why have the Government not acted to improve the retention of disabled people in their current jobs? The Resolution Foundation has shown that doing so could reduce the number of people transitioning from employment to health-related inactivity, which was 350,000 in 2015. Keeping disabled people in their jobs would surely be a better strategy to bring down social security spending than slashing support for those who are further away from the labour market. But no; sadly, the Government have not been able to see that far, and their record on supporting retention is very poor.

Jim Shannon (Strangford) (DUP): This is an important issue. The Office for Budget Responsibility has said that the Government will breach their target in each year of its forecast. Does the hon. Lady acknowledge that that means that the welfare cap is not working, because the Government cannot look after those who are genuinely ill and in need of benefits? An example of that is Concentrix, where lots of people were put on benefits and then taken off benefits. The number of such people, when it comes to the cap, is very difficult to forecast, and the Government need to forecast that better.

Debbie Abrahams: That is an interesting question, and I would have to look at the figures. I have tried to show that the high cost of housing is a real issue, as is low-paid work. There are a number of factors, but those are the key drivers. The Government really should have been more careful in their impact assessment when they set out their policy in the first place.​

To conclude, this breach of the Government’s self-imposed welfare cap every year for five years is further proof of their utter failure on the economy. They have refused to act on the fundamental areas that are driving the cost of social security spending, and they have made bankrupt attempts to meet their targets on the back of the most vulnerable. Only Labour has an economic strategy that will bring the costs of social security down without fraying the safety net that we all rely on. Now is the time to invest in the housing we need, offer a decent wage for a working day and support people to find a job, keep a job and progress in their chosen work. We will transform our social security system to ensure that, like the NHS, it is there for all of us in our time of need, as part of our plan to create a stronger, fairer economic settlement for all in our country.

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