My speech in the budget debate – cost of living, unemployment, childcare and taxes

Yesterday I spoke in the first day of debate following the budget. You can read the full debate here, but I’ve reproduced my speech in full below.

In June 2010, the Chancellor led his band of merry men, straw men and tin men on the yellow brick road towards his emerald city: the elimination of the deficit by 2015, the cutting of public sector net borrowing to £60 billion in this financial year—in fact, it will be £108 billion—and growth of about 2.5% every year during this Parliament. The trouble was that he fell off his yellow brick road fairly quickly and started wandering around in the wilderness of low growth and higher borrowing. Suddenly, after four years, he seems to have found himself back on his road, albeit not as far down it as he expected. Like all expeditionary leaders, he is quick to tell us that he always knew where he was, and where he was going, and that it was all part of his long-term plan, despite the fact that he has not gone as far as he expected.

Does all that matter? It does, for a number of reasons. We are being asked to believe that someone who gave us that fantasy journey can still give us something credible. It also matters very much to the people who had to accept the austerity measures that we were told were essential to get us down the road as quickly as possible. People have suffered, and to find out four years on that we have not actually made much progress is bitter gall for many.

What about the people left behind? The cost of living crisis is real. People’s real earnings have fallen. All the Treasury and Institute for Fiscal Studies figures show, slightly differently, that the people who have lost out most are those at the bottom and the top of the earnings scale. However, for someone to lose 5% when they are earning £3,000 or £4,000 a week is very different from losing 5% when earnings are £150 or £200 a week. The impact on everyday life in the latter case is far greater, because the issue is not about having to cut out a few little extra luxuries—perhaps not go out for a meal as often as one might otherwise have done—but about basic foodstuffs, heating the house and buying clothes for the children. It is not good enough to say that the situation is all right because the people at the very top have also seen an income drop, which makes it fair; in the real world, that is not fair.

The other group that the Budget has rather lost sight of is the unemployed. People often say that unemployment has dropped by such and such a percentage, but the number is still very high. In April to June 2010, 2.46 million people were unemployed; according to today’s figures, the number is 2.33 million. I make that only 130,000 fewer than in 2010. Unemployment, of course, went up between 2010 and now and has come down again, and that doubtless explains some of the percentage drops that people are talking about. However, 130,000 fewer unemployed people, although better than before, is quite marginal.

What are we doing for the 2.3 million unemployed people? There are still 700,000 more people unemployed than before the recession. Where are the measures to get those people into work and to help the young people about whom my hon. Friend the Member for Rotherham (Sarah Champion) spoke so eloquently? There are very few such measures. Talking about percentages going up and down as if we have solved the problem is no answer to people struggling on very low incomes who, in many areas, cannot find jobs no matter how hard they try.

On the child care proposals, at least one Government Member made a lot of the fact that child care costs for those on universal credit are now to be met by up to 85%. We have now had, or will have had, at least five years of this Government cutting help with child care costs from 80% to 70% for people on tax credits—the predecessor of universal credit. So for each of these five years, those people will have found things much more difficult. It is not clear when families in this situation will even be on universal credit, given how that is going at the moment. Will this provision start when the tax relief starts, or will it start only when these families finally get on to universal credit, if that happens? We have not been told.

Moreover, the proposal is to be paid for not by people who are better-off but by another group of people on universal credit. We do not know which group of people because we have not yet been told; apparently, we will know in the autumn. The change will be financed entirely out of the universal credit budget, so some families with children on universal credit will get a little bit more, but somebody else is going to get a certain amount less.

We always make choices in policies, and that is why debates about matters such as raising the tax threshold are exceptionally important for all of us. The 5 million people who are already below the tax threshold will get nothing out of this move. Some 10% of the total cost, which has already been about £10 billion, goes towards lifting people out of tax; 15% of it goes to people on median earnings of up to £26,000; and three quarters of it goes to people earning above the median. That choice has been made, but it could have been made differently. The money could have been used, and could still be used, to help people on lower earnings. If we want to help low-earning families, there are number of other measures that we might want to use, but we are not using them. This is a choice that the Government are making. Constantly portraying it as something that is there only to help low-earning families does a disservice to those families. They know the situation; they know that they do indeed have a cost of living crisis that is not being resolved by today’s Budget.

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Press release: Sheila Gilmore MP backs Labour’s plans to tackle low pay

Edinburgh East MP and Work and Pensions Select Committee member Sheila Gilmore has backed Labour’s plans to raise wages for thousands of low-paid workers in Edinburgh.

Labour will introduce Make Work Pay contracts that will help businesses raise wages, and help the next Labour Government cut social security bills for the taxpayer.

Firms that commit to paying their employees the living wage, currently £8.80 in London and £7.65 elsewhere, in the first year of the next Parliament will be offered a 12 month tax rebate of up to £1,000 for each individual worker that receives a pay rise.

The money would be funded directly from increased income tax and National Insurance revenues. Additional savings in lower tax credits and benefit payments, as well as increased tax revenues in future years, will cut social security bills and help pay down the deficit.

Sheila Gilmore MP said:

I’ve spoken to hard-working people in Edinburgh who’ve told me that they go to work and do the right thing, yet they are struggling to pay their bills. It can’t be right that we’ve now reached the point where more of the people bringing up families in poverty are in work than out of work.

We need to make sure work always pays which is why I’m backing Labour’s plans to encourage more firms to pay their employees the living wage. This is a positive way of helping hard-working people on low pay and will also help local families cope with the rising cost of living.

Leader of the Labour Party Ed Miliband said:

Low wages aren’t just bad for working people and their families. They are driving up the social security bill too, as the country has to subsidise more low paid jobs with tax credits and benefits.

That is why the next Labour government, in our first year in office, will offer Make Work Pay contracts to employers.

The result: working people will get higher wages, employers will get support to help to make the transition to a living wage and the next Labour government will cut the cost of social security for the long term.

ENDS

Notes to Editors:

  • Sheila Gilmore is a member of the Commons Work and Pensions Select Committee. You can view the committee’s website here: http://www.parliament.uk/business/committees/committees-archive/work-and-pensions-committee/
  • For more information please contact Matt Brennan, Parliamentary Assistant to Sheila Gilmore MP, on 020 7219 7062, 07742 986 513 or matthew.brennan@parliament.uk.
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Press Release: Sheila Gilmore MP backs campaign to give voice to people supported by benefits

Edinburgh East MP Sheila Gilmore has given her support to a campaign which aims to give a voice to the millions of people supported by benefits at some point in their lives.

Polling by the campaign, Who Benefits?, has revealed overwhelming public support for the principle that benefits should be there for those who need them. 81 percent agree that ‘benefits are an important safety net to support people when they need help’, while two-thirds (64 percent) agree that ‘we all benefit as a society when support from benefits is available for those that need it’.

Sheila Gilmore MP at the Who Benefits? Parliamentary Launch

Sheila Gilmore MP at the Who Benefits? Parliamentary Launch

But despite widespread public support, more than a quarter (27 percent) of those who currently claim benefits say they have hidden this because of what people will think. This rises to half (47 percent) of 16-24 year olds who have been supported by benefits. And more than half (51 percent) of all those who had never been supported by benefits said they would feel embarrassed to claim.

Who Benefits? argues that the overwhelming majority of those on benefits really need the support, yet too often their voices are ignored, misrepresented or at worst they are blamed for their situation.  The campaign has been launched by more than 70 charities and community groups brought together by The Children’s Society, Crisis, Gingerbread, Macmillan Cancer Support and Mind.

Sheila Gilmore MP, who attended the launch of the campaign in Westminster, said:

None of us know what lies around the corner.

At the launch of this campaign I met a woman in her fifties, who had never had to claim social security benefits in her life until she was diagnosed with cancer. She had to give up the small business she had been running. The benefits she has been able to claim have been a lifeline.

Although she found the process of being tested and retested for eligibility stressful, she is now recovering. However even though she lives in an area of relatively low unemployment, because of her age and health she is struggling to find work.

Her story is an important reminder of why we need a system of social security.

Who Benefits? is asking people to share their stories through whobenefits.org.uk.  A thousand people who have been supported by benefits have already shared their stories through the website and through social media with the hashtag #WeAllBenefit.

Matthew Reed, Chief Executive of The Children’s Society, said:

Life is full of ups and downs, it can be unpredictable. But no one should go hungry because they lose their job or go into debt because they are on such a low wage. And it is reassuring to see that the public support this view.

At a time when families up and down the country are feeling the squeeze, it is important – now more than ever – that society supports those in need. The overwhelming majority of people who get benefits really need them; whether they are working, looking for work or unable to work.

Leslie Morphy, Chief Executive of Crisis, said:

At Crisis we see every day how support from benefits lifts people out of homelessness, or prevents them from ending up on the streets in the first place. With this support we see people moving into work and on to a better life. Yet all too often the realities of people’s lives and situations are just ignored. That’s why we want people to get involved with Who Benefits? – to ensure real voices are heard.

Fiona Weir, Chief Executive of Gingerbread, said:

None of us know what is around the corner for our family, which is why it can come as a huge blow to someone who’s already having a tough time to be labelled or stereotyped. It is great to see that the vast majority of the British public are behind giving support to those who need it, and we hope that our campaign will encourage more people to come forward to share their stories of how benefits have supported them.

Paul Farmer, Chief Executive of Mind, said:

Support from benefits makes a huge difference to the lives of many people with mental health problems, allowing people to stay well and retain their independence; or help with the additional costs that come from having a disability.

Lots of individuals with mental health problems face stigma and discrimination, as their condition is less visible than a physical disability. These new statistics suggest those who claim benefits experience double the stigma.

ENDS

Media enquiries

  • For more information on Who Benefits?, to arrange an interview or for details of case studies, please contact The Children’s Society on 020 7841 4422 or media@childrenssociety.org.uk
  • For more information on Sheila Gilmore MP please contact Matt Brennan, Parliamentary Assistant to Sheila Gilmore MP, on 020 7219 7062, 07742 986 513 or matthew.brennan@parliament.uk.

Notes to editor

  • The Who Benefits? campaign is giving a voice to people who have been supported by benefits at some point in their lives. It uses real stories to show the reality of who needs help, why they need it and the difference it makes. It was brought together by The Children’s Society, Crisis, Gingerbread, Macmillan Cancer Support and Mind. In addition, 75 charities, faith groups and community groups support the campaign.
  • To find our more about the campaign or to tell your own story please visit www.whobenefits.org.uk or follow us on Twitter @WeAllBenefit
  • All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 1,955 adults. Fieldwork was undertaken between 18th – 19th September 2013.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).
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Universal Credit – an empty bookcase?

Universal credit was the centrepiece of the Coalition Government’s claim to be ‘reforming’ welfare, not just cutting it. On 5 September the National Audit Office issued a highly critical progress report, stating for example:

It is unlikely that Universal Credit will be as simple or cheap to administer as originally intended. Delays to roll-out will reduce the expected benefits of reform.

When questioned on this in the House of Commons on 5 October the Secretary of State was eager to claim Labour support for the idea of Universal credit. In a way Universal Credit is the ‘holy grail’ of social security reform, offering simplification of application and administration and most importantly providing seamless a transition from being out of work to in work, and back again. However as Alistair Darling pointed out to Iain Duncan Smith, when he was Social Security Minister he had looked into just such a scheme and had been advised it would be too expensive to introduce.

Jobcentre PlusBut from the start IDS was convinced that he, and he alone, had found the magic formula. He was bullish too in answers to Labour Shadow Secretary of State Liam Byrne, and remains adamant that, despite the NAO describing the difficulties thus far as a ‘significant setback’, roll out would be complete by the originally stated date of 2017.

For months now the DWP had been making a virtue of a necessity in rolling out the scheme through very limited pilots (both geographically and in terms of claimant types). There is nothing wrong with careful testing, but an air of unreality hangs over the assertion that the overall timetable can remain in place. This was the thrust of my question to IDS last week.

When faced with the realisation that critics of the timescale for rolling out another Government welfare change – replacing Disability Living Allowanec with Personal Independence Payment – had a point, the DWP extended the timescale to 2017, with ‘migration’ of existing DLA claimants not happening until after the General Election in 2015. But IDS is unwilling to compromise on Universal Credit, despite the fact that according to the NAO the IT – as currently configured – could not support a national roll out and won’t be able to cope with with overpayments or detect fraud.

The Work and Pensions Select Committee visited Ashton Under Lyme Job Centre, the first pilot area, in June. Most claimants in the pilot were successfully making the initial claim online, but after that first stage it was clear that there was not a seamless system in place. Like all pilots staffing was enhanced. For instance we saw 3 staff helping 4 people on computer terminals, not a ratio it would be easy to sustain with reduced staffing levels in DWP overall .

Our support for the concept of Universal Credit was tempered by our doubts over the implementation, which have proved right, but also by the fact that what will really matter in the end is how Universal Credit works in practice. Crucial for example is the level of the ‘taper’ – the rate at which benefit is withdrawn as earnings increase – and what level of income is disregarded before the tapering starts. UC is significantly less generous in these aspects than tax credits have been.

When we were debating the Bill in Committee – over two years ago now – on ‘our’ side we were concerned about all the talk of mini jobs. Tory members of the committee argued that UC would make it much easier to do small hour jobs (as little as 6 or 8 hours a week) without being worse off, and that this would help people get the first foothold into employment, providing very important experience. We pointed out that this ran the risk of simply creating a new trap for people to be stuck in low paid work and still be poor. In the light of all the recent publicity around zero hours contracts, we were right to have concerns. One of the impacts of UC will be that the ‘gainers’ (or is it ‘stand stillers’?) at the lower end of the earnings range are balanced by the ‘losers ‘ slightly further up the earnings/hours of work range because of the effect of disregards and tapers and treatment of second earners in a household.

When we were debating the Bill there was a huge amount of detail that still wasn’t available . How, for instance, would housing costs be administered? Or how would free school meals be provided for? What about childcare costs? Over two years on many of these questions remain unanswered. The then Minister for employment Chris Grayling (now Justice Minister who had his own bit of climbing down to do this week over criminal legal aid in England) was very fond of likening the Bill to a bookcase whose shelves would be filled as regulations and guidance developed. The trouble now is that not only have not all the books materialised, but even the shelves seem to have fallen off!

Update – 11 September 2013: the Prime Minister gave evidence to the Liason Committee yesterday (made up of the Chairs of the various Select Committees) and said he was ‘not religious’ about the timetable for introducing Universal Credit. This concession stands in stark contrast to what Iain Duncan Smith said last week.

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The Welfare Uprating debate – and what I would have said…

On the second day of ‘term’ after Christmas the Government scheduled the Second Reading of their Welfare Benefits Uprating Bill. This was the outcome of the Chancellor’s Autumn Statement on the Economy. He announced then that he was proposing to break the normal link between benefits uprating and inflation and impose three years of only 1% increase in many working age benefits. He also said then that he intended this to be put to an early vote. It was clear from the start that this was a political ploy , with Osborne sure he was setting a ‘trap’ for the opposition , convinced that public opinion would be in the side of yet another crackdown on benefits.

So on Tuesday 8 January the scene was set for the debate on what Andrew Rawnsley in the Observer dubbed the Welfare (Make Labour Look Like the Party for Skiving Fat Slobs ) Bill. The tone had been set by the Chancellor in his Autumn Statement in setting this firmly in the context of hard working people going out to work and seeing the curtains drawn in the next door house where no-one is working. This was followed by a set of adverts with images of a shiny hard working family contrasted with the overweight couch potato figure. During Tuesday’s debate some Tory and LibDem speakers tried to backpeddle from this language as if they hadn’t started by framing the debate in this way.

It quickly became clear that 60% of those affected would actually be people in work, mainly those in receipt of tax credits, but also maternity pay and statutory sick pay.

Geprge OsborneThis turned into one of those occasions when I put in to speak but didn’t get called, since even with speeches limited to 5 minutes there were more people wanting to contribute than time (although the Tories and Lib Dems ran out of speakers an hour before the end. So here are my notes on some of the things I would have said if I’d had the chance:

  1. We heard a lot from Tory speakers about the alleged faults of the ‘welfare system’. But this Bill isn’t about this. Reforming the Welfare system was what the Welfare Reform Act passed last year was supposed to be all about. We may disagree with the way the Government has set about those reforms, but today’s Bill isn’t about any of that. It is only necessary because the Government’s 2010 deficit reduction plan has failed, and further cuts are deemed necessary.
  2. Much of this debate has followed a typical approach from the Government. They assert an exaggerated ‘truth’, usually about the previous Government and then proceed to argue that this justifies whatever they are proposing. So Labour is accused of trapping people on benefits – the so called dependency culture. But spending on out of work benefits actually fell between 1997 and 2010.
  3. The Government is arguing that since benefits rose by 20% since 2007 while wages rose only 10% it is only fair to reduce rises in benefits. It’s only right , said the member of the Vale of Glamorgan, that benefits shouldn’t rise faster than wages. A colleague intervened on him to ask (rhetorically) whether the Labour Government had done anything to bring benefits in line with earnings. The answer to this is indeed ‘no’ but not in the way these Tories were implying. Until the recession from 1997 to 2008 benefits continued to fall relative to earnings. This fall had been going on for some considerable time – in 1979 Unemployment benefit was 21% of average earnings, but in 2010 it had fallen to 11% of average earnings. So the increases since 2008 were starting from a very low base. (Several of my colleagues who did speak pointed out that in cash terms the amounts involved are relatively low – Job Seekers Allowance has risen from £59 per week to £71 per week over this period. )
  4. Labour’s policies were in fact designed to get people into work, including 350,000 single parents. Prior to the last Labour Government the UK had a very low level of single parents in work, in part due to the lack of childcare and in part due to the structure of benefits. Tax credits helped with both these issues.
  5. Following the Autumn statement at the beginning of December it became increasingly clear how many people in work were being affected by this . Perhaps in response to all the criticism Iain Duncan Smith launched into a bizarre attack on tax credits last week, claiming that the system encouraged dependency,. He then used figures for spending on tax credits which have been demonstrated by Channel 4’s Fact Check to be wholly wrong. For instance he claimed that tax credit payments rose 58% ahead of the 2005 General Election. In fact the rise was only 8%. Just before Duncan Smith’s own article an apologist for him wrote a piece in the Telegraph claiming that IDS was embarrassed by the Chancellor’s language. So maybe the IDS article with all its exaggeration was actually ghost written by the Chancellor? But perhaps the most bizarre aspect of this attack on tax credits is that the Secretary of State’s flagship policy of Universal Credit is based on the same fundamental policy of making payments to low paid employees to encourage them into work and help ‘make work pay’. So the Secretary of State appears to be rubbishing his own policy. Yes there are differences of detail which may prove significant – for instance the taper determining when credit is lost is less generous. There is a debate to be had about why there is indeed a growing reliance on tax credits (and also housing benefit) . Tax credits have grown in part because of changes in the labour market. Some of these changes may be temporary but some may be permanent. For instance in retail where the 7 day a week and late opening culture means that busy times are much more scattered and staffing adjusted accordingly, creating a greater need for short hour jobs.
  6. For working families this proposal builds on what has already been a period of payments being frozen. Working Tax credits have been frozen for the last two years, as has child benefit. In addition childcare tax credits were cut from 80% to 70% of eligible costs and the taper increased from 39% to 41%. This last is an effective 2% cut for the low paid and cost families with one child up to £400 and 2 children up to £500 each year.
  7. The old joke that on being asked for directions the answer is ‘well I wouldn’t start from here’. We are being asked to vote on this narrow issue in isolation, with no option to make other choices. The Coalition has already made those choices, on tax rates for example, or on tax relief for pension contributions (also part of the Autumn Statement) or on stimulating investment in affordable housebuilding to create jobs.
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